From Red Barron's blog today:
Thank you for your comments in which you raise a number of issues that I will try to deal with as follows.
As you can imagine, we have talked to the Government about what was said around the time of the PPP and the guarantees regarding the pension related to the Trust of a Promise. This guarantees that employees at that time would have continued membership of CAAPS, or the same benefits as if they had been in CAAPS. If the company is in financial distress then it says that we should use “best endeavours” to provide those benefits. Ian, if the company became insolvent, the Government would appoint an administrator whose role it would be to keep Air Traffic operating but also to refinance the organisation. It is highly unlikely that this would be achieved if the administrator kept in place the very vehicle that brought the company down in the first place, namely the pension scheme.
Whilst I was not around at the time, I can fully understand your frustration that the Government made a guarantee that they now appear to be reneging on. This is in fact not the case. The proposal still maintains your membership of the scheme so the Governments Trust of a promise is still in place. The amount and type of pensionable salary were always the employer’s decision and outside of the guarantee. What I know is that we are members of the best protected scheme in the UK, but unfortunately the protections cannot deal with the underlying cost which the company has to pick up. It is this cost that will in fact bring down the company together with the scheme and its protections if we do not do something about it.
In terms of your suggestion that investments will go up and down so why not wait, the answer is quite straightforward. We know that the underlying cost is going to be with us for years irrespective of what happens to the markets in the short to mid term and we have to deal with that threat now. I have been telling people on my roadshow that I am also a member of this scheme and in fact put my entire pension from my previous employment into CAAPS so, like you, I am worried about its future and desperate to protect it.
As the Chief Executive, my sole purpose is not to destroy the scheme, it is to maintain the health of the company which is in fact the only way we can protect our pension scheme.
Be in no doubt that if we had not generated profits in the last four years, which we have largely ploughed back into the refinancing of the company and the paying down of expensive loan notes (11%) set up after 9/11, then we would not be in the shape we are today to tackle both the threat of the pension scheme and the fall in revenues as a result of traffic downturn. The senior management of this company are also hard working and dedicated professionals who are as desperate to save this scheme as you are and the proposal that you have before you, which has taken 18 months to negotiate with the unions, is the best that either side can find to do just that.
With regard to the CP3 pass through, we have no guarantee that the regulator will allow existing pass through which I am sure you know only currently applies to those employees in the company before 1 January 2006 and it does not include the proportion of employees employed by NSL. We estimate that by 2010 almost 40% of our employees (not the employees themselves but the cost of them to the company) will not be covered by any potential pass through.
I am not sure about the scenario we are damned if we do and damned if we don’t. I agree, we are certainly damned if we don’t, but capping pensionable pay at rpi +0.5% and starting a new scheme for new employees to protect a final salary scheme with only a 6% employee contribution would not, I imagine, for most people in the country be viewed as being damned.
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Neither the management nor trade unions want to be in this place, but we all recognise that the best way we can protect our scheme is to make the changes we have proposed. This is why, for the sake of all of our pensions, we hope that you will support the joint proposals.