AER LINGUS is set to bow to pressure to reduce the annual fees paid to its board of directors.

This follows a letter sent to Aer Lingus chairman Colm Barrington yesterday by Julie O’Neill, secretary general of the Department of Transport, indicating that Minister for Transport Noel Dempsey wanted the airline to reduce the fees paid to the board in light of the current economic slump and the company’s stated intention to seek further cost-saving measures from staff.

“He [Mr Dempsey] has asked that I convey to you his view that it would be desirable if the board were to review the level of such fees having regard to current norms for companies with similar market capitalisation and in similar circumstances to Aer Lingus,” Ms O’Neill stated.

Her letter added that the Minister felt that it would be “appropriate in the context of the continuing difficult economic climate and the ongoing need to tackle the company’s cost base to remain competitive in the challenging environment in which Aer Lingus operates” to review the directors’ fees.

In response to Ms O’Neill’s letter, Mr Barrington said: “I wholeheartedly agree with the suggestion that a review be carried out of the level of directors’ fees, having regard for current norms for companies with a similar scale as Aer Lingus and having regard to the responsibilities of directors of a publicly listed company.

“In this regard, I am pleased to advise that such a review is already under way within the context of our overall cost-reduction programme, which we intend to announce shortly.”

This latest reduction in fees will be in addition to a 20 per cent cut in payments that Aer Lingus directors agreed to take in February.

As a result of that reduction, Mr Barrington’s fee went from €175,000 to €140,000.

Payments made to non-executive directors were reduced to €36,000 annually from €45,000.

Aer Lingus’s decision to review its directors’ fees is sure to be trumpeted by Ryanair as a victory for its campaign to have the payments slashed.

Ryanair had called for the chairman’s payment to be cut to €35,000 with non-executive directors fees capped at €17,500.

Ryanair owns 29.8 per cent of Aer Lingus and has tabled two motions for the airline’s annual general meeting in Dublin today relating to cutting directors’ fees and allowing shareholders the opportunity to vote on any compensation payments that might in future be offered to executives in the event of a change of ownership at the airline.

Ryanair offered to nominate Mr Dempsey as its proxy at the Aer Lingus meeting, which would have given the Minister 54.9 per cent of the votes and enabled him to carry the motions tabled by Ryanair.

Mr Dempsey has declined Ryanair’s offer.

Ms O’Neill’s letter to Mr Barrington states that the Minister has appointed the Aer Lingus chairman as his proxy to vote on his behalf on resolutions at the agm.

Ms O’Neill said the Minister has “indicated” that his vote “should be cast with the board against these [Ryanair] resolutions”.

The Government has three representatives on the board of Aer Lingus – financier Colin Hunt, lawyer Francis Hackett and businessman Lesley Buckley.

Aer Lingus paid its board €1.7 million in 2008 and €2.2 million in 2007. These figures included salaries and bonuses paid to executives.

In total, non-executive directors were paid €730,000 last year, an increase of 27 per cent on 2007.

Ryanair chief executive Michael O’Leary has argued that the fees which are paid to Aer Lingus directors are excessive in light of the company only being valued at €368 million.