Aer Lingus airline withholds 7.5 percent pay raises

Irish airline Aer Lingus will withhold pay raises until union leaders accept a new company plan for cutting costs, the company announced Tuesday. Ireland's largest union called the move tantamount to blackmail and threatened to retaliate.

Aer Lingus Chief Executive Dermot Mannion said the airline would refuse to deliver a series of salary increases because unions were refusing to accept a plan reforming work practices, including overtime pay, designed to save the company EUR20 million (US$28.5 million) annually.

"We're doing this because we've reached the end of the line. We're not trying to provoke anyone," said Mannion, whose airline is already facing a possible pilots strike over its plan to open a new hub - beyond the reach of Irish unions - in the British territory of Northern Ireland.

Jack O'Connor, president of Ireland's largest union, the Services, Industrial, Professional and Technical Union known as SIPTU, accused Aer Lingus of seeking to force unions to accept its cost-cutting plan without proper negotiations.

"If we're going to have a situation where a company part-owned by the state can make it up as they go along, and seek to blackmail the workers, then what's good for one is good for the other," O'Connor said.

He said Aer Lingus had no right to withhold the pay raises, which are part of a national wage-pact agreement called Towards 2016.

Such agreements have been in place in Ireland since 1987 to deter strikes, control salary inflation and make Ireland's economy more competitive. But the current deal is fueling discontent because it barely keeps salaries in line with Ireland's 5 percent rate of inflation.

The government-mediated deal commits Aer Lingus to raise workers' pay 2.5 percent this month and 2.5 percent more in the spring. The airline is also committed to a further 2.5 percent of raises because of internal agreements.

Mannion said the company would execute these raises as soon as union chiefs accepted its cost-cutting plan. The program is designed to lower Aer Lingus' operating costs closer to those of its major competitor, the ruthless no-frills leader Ryanair Holdings PLC, which doesn't recognize unions.

He said Ireland's wage-pact agreement does allow companies to withhold pay raises if unions do not honor their end of the bargain, which includes the acceptance of workplace reforms.

Mannion said he remained optimistic that union negotiators would accept the cost-cutting program by the end of the year.

"Our existing staff cost base leaves us at a serious competitive disadvantage" to Ryanair and U.S. trans-Atlantic carriers, the airline said in a letter to its 3,600 employees Tuesday.