14th Nov 2005 17:22
Irish Continental Group PLC14 November 2005 IRISH CONTINENTAL GROUP STOCK EXCHANGE ANNOUNCEMENT Irish Continental Group Plc confirms that its subsidiary Irish Ferries hastoday received the Recommendations of the Irish Labour Court in relation to thecost reduction programme announced to staff on its Irish Sea vessels onSeptember 16th . This cost reduction programme envisages the outsourcing ofcrewing on the three Irish Sea vessels at international terms and conditions.90% of staff elected to accept the voluntary severance package on offer. Thebackground to this cost reduction programme is set out in a media statementdated 3rd November 2005 a copy of which is set out in Appendix 1. There are two separate Labour Court Recommendations, one in respect of each ofthe unions involved, SIPTU ( approximately 220 members ) , and The Seamen'sUnion of Ireland. ( "SUI" , approximately 323 members). : In relation to SIPTU the Recommendation is as follows " the Court recommendsthat the company continue to honour the Agreement of 2004 and that the partiesresume negotiations on such modifications in its terms as are necessary in orderto address the changes in circumstances which have occurred since its conclusion" . ( The Agreement of 2004 expires in mid 2007. The full text is at Appendix2.) In relation to the SUI the court recommended that "the claim (of the SUI ) .. (that those of its members who wish to remain with the company retain theirexisting rates of pay and conditions ) be conceded" The full text is atAppendix 3. Irish Ferries considers that these Recommendations are incapable of acceptanceand implementation given that the Company cannot incur the substantial cost ofaccommodating the overwhelming majority ( 90% ) of staff seeking to avail ofthe voluntary severance package on offer without clear prior knowledge of anacceptable cost of replacement staff. Irish Ferries is facing unprecedented adverse trading conditions. At currentrates, fuel costs will increase by 85% from Euro 13 million in 2004 to morethan Euro 24 million in 2006. The car tourism market is in decline ( IrishFerries car carryings on the Irish Sea were down 12 % in October versus October2004 while foot and coach passengers were down 21%). Freight , which representsone third of Irish Ferries revenue, was up 5% in the same period but this ismaterially outweighed by the decline in tourism . Our labour costs aresubstantially higher than those of our competitors who use outsourced agencycrew. Unless the company takes action to reduce its labour costs via asubstantial voluntary severance and outsourcing programme the outlook forIrish Ferries in 2006 and beyond is for a material reduction in earnings. 14 November 2005 Appendix 1 Media Statement of 3rd November 2005Appendix 2 Labour Court Recommendation 18389Appendix 3 Labour Court Recommendation 18390 APPENDIX 1 MEDIA STATEMENT Irish Ferries responds to SIPTU march - "We have no choice - changes must be made" Irish Ferries understands the concerns being expressed by Unions at today'smarch to Dail Eireann, in particular as they relate to the economy as a wholeand to developments taking place at EU level. However the Irish Ferries case isone that is unique in the Irish context and should be viewed as such. Irish Ferries is a company struggling to compete with a domestic cost base whichis wholly out of line with its international competitors in the shipping sector.Rather than accepting that this cost base is impossible to sustain, the Unionshave spent years using every possible means to block, stall and preventnecessary change. Time has now run out for Irish Ferries. Change is needed now to bring thecompany's cost base into line with its sea competitors, allow it to compete withlow-cost airlines and ensure a future for the company. The following are the facts relating to Irish Ferries' market, the environmentin which the company is competing and the efforts which it has made with theUnions in its attempts to become competitive : The market for Car Ferries is in decline • The number of people using ferries is down by over 10% in the last 2 years. Increased competition from low-cost airlines is the main reason for this decline. • Many ferry routes have closed in the last year including : - Irish Sea Express ( Dublin / Liverpool ) closed last month with the loss of 150 jobs. - P&O Ferries closed 5 routes with 1,200 redundancies. Routes closed included Dublin / Mostyn, Dublin / Cherbourg and Rosslare / Cherbourg. - Seacat closed Dublin / Liverpool and Belfast / Troon. 95% of competitors already do what Irish Ferries is proposing • 95 % of all ships using Republic of Ireland ports are manned by outsourced crews. • In February 2005, the Labour Court stated "the type of arrangements proposed by the company are now commonplace within the shipping industry internationally". For years, Irish Ferries has been trying to negotiate change • Irish Ferries' crewing costs have been out of line with all of its competitors for many years. In July, a Government agency, the Irish Maritime Development Office, stated "Irish seafarers ... are between 50-60% more expensive on a positional basis than other seafarers". • Over the last 3 years, Irish Ferries has attended 40 meetings at the Labour Relations Commission, the Labour Court and the National Implementation Body in efforts to agree change. • Projections confirm that, without change, Irish Ferries will be loss making by the end of 2007. These projections have been independently audited. Outsourcing is the only realistic option • Despite having all of this information presented to them, the Unions have refused to accept the seriousness of the situation. • Both SIPTU and the Seamen's Union of Ireland have argued that the necessary savings being sought were unacceptable yet neither produced any workable solution. • Having failed to find any realistic alternative through negotiations with the Unions, Irish Ferries sees outsourcing as the only way to achieve the level of savings that the company requires. Irish Ferries crew are being offered a very generous package • Recognising the scale of the change that would be required, and the long service of the staff involved, a generous voluntary redundancy package has been offered. For those who wish to stay, compensation for change will also be paid. • Over 90% of the crew concerned have already applied for this redundancy package. Significant numbers will leave with payments of over €100,000 and some up to €300,000. Outsourcing arrangements • Like their competitors, Irish Ferries proposes to contract with a reputable international agency to provide services for its ships'operations. All services will be provided by EU citizens only. • Pay and conditions will be at, or above, published International Transport Federation (of which SIPTU is an affiliate union) rates. • Given that all will live on-board with accommodation, food, travel and other living expenses paid for, coupled with favourable income tax treatment, even the lowest paid will be financially better off than those working and living in Ireland for the minimum wage. "Only by making these changes can we compete with low cost carriers, protectthe jobs of our remaining 250 employees and ensure a future for the company."Eamonn Rothwell, Chief Executive. END 3rd November 2005 : 15.00 hrs APPENDIX 2 THE LABOUR COURT AN CHUIRT OIBREACHAISTOM JOHNSON HOUSE TEACH THOMAS MAC SEAINHADDINGTON ROAD BOTHAIR HADDINGTONDUBLIN 4 BAILE ATHA CLIATH 4 TEL : (01) 613 6666 E-MAIL: [email protected] : (01) 613 6667 WEBSITE : WWW.LABOURCOURT.IE CD/05/1015 RECOMMENDATION NO. LCR 18389 INDUSTRIAL RELATIONS ACTS, 1946 TO 2004 SECTION 26(1) INDUSTRIAL RELATIONS ACT, 1990 PARTIES: IRISH FERRIES -AND- SERVICES INDUSTRIAL PROFESSIONAL TECHNICAL UNION DIVISION: Chairman.: Mr DuffyEmployer Member: Mr DohertyWorker Member : Mr Nash SUBJECT: 1. Company's Irish Sea Review. BACKGROUND: 2. The dispute before the Court arises from Company'sproposals, (Irish Sea Review) to outsource labour on its Irish sea vessels. In2004 an agreement was concluded between the Company and the Union in relation tothe pay and terms and conditions of its members who are employed as Officers andRatings on the ships. This agreement, which would give the Company large savingsper annum, is due to expire in 2007. The Company subsequently put forwardproposals to staff, which would involve the manning of its vessels withagency-supplied crew. Staff could remain as Company employees on varied(reduced) pay and conditions, which the Union contends is in breach of theagreement. The Company contends that Clause 19 of the agreement allows it tomake amendments to the original agreement: "The Company retains the right,subject to economic competitive threats, to seek to amend the Agreement whenappropriate, in accordance with relent provisions of the Collective Agreement".The Union rejects the Company's contention. The dispute could not be resolved at local level and was the subject of aConciliation Conference under the auspices of the Labour Relations Commission.As agreement was not reached, the dispute was referred to the Labour Court onthe 21st October, 2005, in accordance with Section 26(1) of the IndustrialRelations Act, 1990. A Labour Court hearing took place on the 7th November,2005, the earliest date suitable to the parties. UNION'S ARGUMENTS 3. 1. The parties are currently less than halfway through a threeyear agreement. This agreement should continue and any variation of that agreement should be thesubject of discussions and must be mutually agreed between the parties. TheUnion has always been willing to engage with the Company for further costreductions if required. 2. The Union showed its willingness to co-operate by agreeing to theappointment of independent assessors to deal with the issue. Normally it wouldbe expected that the parties would be willing to accept the advice of theassessors and work to resolve the issues. In this case the Company has embarkedon its plan to replace Irish seafarers before assessors had issued their finalreport. 3. The Union is requesting the Court to rule on the interpretation of thefinal clause of the Registered Employment Agreement and that the Companycomplies with the terms of the Benchmarking Agreement and use the procedures setout in the Comprehensive agreement to agree further change if required. COMPANY'S ARGUMENTS 4. 1. The economic and competitive case is compelling for thechanges the Company requires to make if it is to continue to run vessels successfully on both theIrish Sea and Continental Routes, especially as the Unions cannot provide thenecessary cost reductions of •l5 Million per annum by means other than thoseproposed by the Company. 2. The Company must be allowed to compete on a level playing field withits indigenous and other competitor companies, all of which have lesser paycosts, ratios and leave than Irish Ferries have. The Unions threats ofIndustrial Action actually worsen the situation for both the Company and theSeafarers, its own members. 3. There is nothing illegal in the Company's proposals. The proposalsrepresent the norm in the maritime industry e.g 95% of vessels into and out ofDublin Port are outsourced. The only real choices available are those presentedby the Company. A fudge or a half-way house outcome will not work and cannot beacceptable given the fiduciary responsibilities which must be discharged by theBoard of the Company. RECOMMENDATION Both parties made detailed and lengthy submissions to the Court in which theyprovided comprehensive information on all aspects of their respective positions.The Court has fully considered all of the information with which it was providedand has carefully evaluated the submissions made by the parties in formulatingthis recommendation. In June, 2004, the parties concluded a collective agreement dealing with the payand conditions of employment of the categories of employees associated with thepresent claims. That agreement was for three years duration and is due to expirein June 2007. The net issue for consideration in this referral is whether,having regard to all of the circumstances relied upon by the Company, thatAgreement should now be terminated or whether the parties should continue to bebound by its terms for the remaining part of its duration. Clause 19 of the Agreement did leave open the possibility of a review. Thisclause provides as follows: "The Company retains the right, subject to economic and competitive threats, toseek to amend the Agreement when appropriate, in accordance with relentprovisions of the Collective Agreement". Moreover, in LCR18116 the Court recommended that the parties conduct a jointreview of the Irish Sea service, involving independent consultants. That reviewhas since been undertaken but has not resulted in agreement between the parties.However, the proposals now put forward by the Company go significantly furtherthan merely seeking to amend or review the Agreement and if implemented wouldamount to its complete abrogation. During the currency of any collective agreement circumstances may change whichmakes its terms more or less attractive, to one or other of the parties, thanwas originally anticipated. Nevertheless this could not relieve either partyfrom the obligation to honour the agreement for its duration or until it isvoluntarily renegotiated. Were it otherwise the conduct of orderly industrialrelations would be made significantly more difficult. Having regard to all the circumstances of this case the Court is not convincedthat the Company has made out a sufficiently compelling case to justify aunilateral termination of its agreement with the Union. Nor is the Courtsatisfied that all possibilities of renegotiating aspects of the Agreement toaddress the issues of current concern to the Company have been exhausted.Accordingly, the Court recommends that the Company continue to honour theAgreement of 2004 and that the parties resume negotiations on such modificationsin its terms as are necessary in order to address the changes in circumstanceswhich have occurred since its conclusion. Finally, reference was made in the course of the hearing to the RegisteredEmployment Agreement for Ships Officers. The terms of that Agreement are clearand are binding on both sides. The Court would strongly urge both parties toadhere strictly to the terms of that agreement in all their dealings with eachother in the future. Signed on behalf of the Labour Court Kevin Duffy 11th November, 2005 ______________________ JO'C Chairman NOTE Enquiries concerning this Recommendation should be addressed to Joanne O'Connor,Court Secretary. APPENDIX 3 THE LABOUR COURT AN CHUIRT OIBREACHAISTOM JOHNSON HOUSE TEACH THOMAS MAC SEAINHADDINGTON ROAD BOTHAIR HADDINGTONDUBLIN 4 BAILE ATHA CLIATH 4 TEL : (01) 613 6666 E-MAIL: [email protected] : (01) 613 6667 WEBSITE : WWW.LABOURCOURT.IE CD/05/1016 RECOMMENDATION NO. LCR 18390 INDUSTRIAL RELATIONS ACTS, 1946 TO 2004 SECTION 26(1). INDUSTRIAL RELATIONS ACT, 1990 PARTIES: IRISH FERRIES -AND- SEAMEN'S UNION OF IRELAND DIVISION: Chairman : Mr DuffyEmployer Member : Mr DohertyWorker Member : Mr Nash SUBJECT: 1. Company's Irish Sea Review BACKGROUND: 2. The dispute before the Court arises from the Company's proposals,(Irish Sea Review) to outsource labour on its Irish sea vessels The Union isseeking that the small number of members who wish to remain in their positionswith the Company, be entitled to do so on a Red-Circled basis. The Companycontends that the current business model and cost base on the Irish sea, ifcontinued, will see the Company making losses by the end of 2007. The dispute could not be resolved at local level and was the subject of aConciliation Conference under the auspices of the Labour Relations Commission.As agreement was not reached, the dispute was referred to the Labour Court onthe 21st October,2005, in accordance with Section 26(1) of the IndustrialRelations Act, 1990. A Labour Court hearing took place on the 7th November,2005, the earliest date suitable to the parties. UNION'S ARGUMENTS 3. 1. The Company is not being asked to keep all its staff but to allow thesmall number who wish to remain with the Company to do so while retaining theircurrent pay and terms and conditions of employment. COMPANY' S ARGUMENTS 4. 1. Profits and RoCE (Return on Capital Employed) based on thecurrent business model are trending downwards from 7.4% in 2003 to 5% in 2005, and to 1.2% at endof season 2007. The current and future negative returns do not meet the cost ofcapital. The rate of profitability necessary to allow the business to recoverand renew its assets (ships) is 15% RoCE per annum. Corrective action must betaken immediately to reduce the seafaring cost base to match and beat theCompany's major competitors and to use the savings to compensate staff who wishto leave voluntarily. Enabling price reductions to be made to attract andrecover business, thus boosting profitability and saving the business. RECOMMENDATION It is noted that the only matter on which the Union wish the Court to recommendis its claim that those of its members who wish to remain with the Companyretain their existing rates of pay and conditions of employment. In itspresentation the Union assured the Court that the numbers likely to be affectedby its claim is minimal in overall terms. In these circumstances the Court recommends that this claim be conceded. Signed on behalf of the Labour Court Kevin Duffy11th November, 2005 ______________________JO'C Chairman NOTE Enquiries concerning this Recommendation should be addressed to Joanne O'Connor,Court Secretary. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Irish Cont.