Dáil Éireann debate -
Wednesday, 10 Feb 1993

Vol. 425 No. 7

Adjournment Debate. - Financial Position of Aer Lingus.

Proinsias De Rossa

I appreciate the Chair affording me the opportunity to raise this matter this evening. Like many other Deputies, I attended a meeting last evening attended by up to 700 Aer Lingus staff when serious concern was expressed about the future of that company, not only the airline but also Team Aer Lingus. It seems from the approach of this Government that when it talks about the viability and profitability of Aer Lingus it is taking an unnecessarily narrow view of the role and function of Aer Lingus in our economy.

Aer Lingus is one of the success stories of Irish public enterprise. It is our fourth largest employer and is larger than Smurfits or Cement Roadstone. It has 14,000 employees, more than 7,600 of whom pay tax to the Exchequer. Its contribution to the economy is enormous and it has played a central role in the development of our tourism industry. It has created a skill base second to none and its spin-off industries and subsidiaries make a major contribution to the economy.

It is essential in the future deregulated market in Europe that we have an airline which is capable of originating its business in Ireland and whose commitment would be to this country. It is estimated that no more than two, possibly three, major airlines will survive in Europe in 1997. It seems that, unless Aer Lingus is enabled to survive, those airlines will not have the same commitment to servicing the Irish market that an Irish airline would have. That is not to deny that for Aer Lingus to survive it must have some arrangements with other European airlines, but in order to do so it must have equity to make it possible to enter such arrangements.

We have spent billions of pounds on industrial development over the past few decades with relatively poor returns in terms of jobs created. It costs the IDA around £17,000 in direct grants to create a single new job in the services and engineering sectors. The amount of money that Aer Lingus needs is not that substantial compared to the sum spent on industrial development. It would provide Aer Lingus with adequate equity and make social and economic sense.

Of particular concern to me, in relation to the question of equity for the airline, is the survival of the Team Aer Lingus company. There was considerable staff criticism last night of the management of Aer Lingus and of Team Aer Lingus. The difficulties of Aer Lingus have been compounded by the problems faced by Team Aer Lingus. When that company was started it raised great hopes for the kind of enterprise that public companies could get involved in here and could be successful at. I understand that potential business, worth up to £60 million and involving the overhaul of 11 aircraft, which would have guaranteed the jobs of 100 workers in Team Aer Lingus for two years, has been blocked by the Government on political grounds. The proposal, it appears, was for the overhaul of 11 civilian aircraft from Libya two of them former Aer Lingus planes. I am informed that the Department of Industry and Commerce only last month refused to allow Team Aer Lingus even to consider the business and the Irish businessman who tried to set up the deal was warned that he would be liable to prosecution if he attempted to set up the deal, which, the Government claimed, would be in breach of international sanctions against Libya.

What puzzles me is that only last week considerable publicity was given to the resumption of the live cattle trade from this country to Libya, which is considered to be a great boom for farmers and the economy. How is it that we are prohibited from providing jobs for Irish workers through the servicing of civilian planes from Libya but that exporters are quite free to export cattle to the same country? It has also been suggested to me that aircraft companies in France in Germany are trading with Libya without any interference by their Governments. I want to make it clear that I do not approve in any way of General Gadaffi or his regime, but I wonder why they are singled out for particular attention. Their record is no worse than many other countries with which we are trading freely. In addition, they now seem to have severed the links they had with the IRA.

Given our appalling levels of unemployment, can we afford to be so cavalier in refusing potential business for companies such as Team Aer Lingus? Can we be so cavalier in allowing Aer Lingus to sink, as we did with other State enterprises, by not providing the equity that is essential to enable it to survive?

Minister for Transport, Energy and Communications (Mr. Cowen)

I am equally concerned about the future of Aer Lingus as Deputy De Rossa. This concern is shared by my Government colleagues and by my colleagues on these benches, representing both Government parties.

As the House is aware, the Programme for Government contains a commitment to ensure the commercial future of our national airline as part of our overall air transport policy. The critical financial position of Aer Lingus was my first priority on taking office as Minister responsible for civil aviation. I have already had two meetings with the chairman during which he briefed me on the financial position of Aer Lingus.

It is important that the House clearly understands the proper chain of command procedures for dealing with matters of this nature. It is management's job to manage the company and make proposals to the board. It is the board's responsibility to assess these proposals and satisfy themselves that they are the best available. Proposals, when approved by the board, are forwarded to me as Minister and I then have them assessed by my Department. When this process has been completed to my satisfaction, I will bring proposals to the Government, who have the final say in such matters.

The present position is that the board, in conjunction with management, are finalising detailed proposals to address the financial problems. I expect to have the board's proposals very shortly and they will be carefully considered both by myself and by the Government.

Clearly, the Government will have to look at the position within the context of the overall budgetary constraints, which have recently been exacerbated by the devaluation of our currency. Exchequer support will be conditional on the board producing a plan acceptable to the Government which will return the airline to sustained operational profitability and which will ensure that the group as a whole is returning sufficient profits to meet future needs.

One of the main objectives of our aviation policy is to promote direct job creation in the Irish airline and aviation industry. Aer Lingus has been a substantial employer over the years and its services have facilitated job creation in other sectors, notably in tourism.

Aer Lingus now has one of the most modern European fleets with associated high interest charges. This, combined with the heavy losses which continue to be sustained by the airline, places a strong onus on Aer Lingus to ensure that its costs are at least as good as, if not better than, best industry practice. If costs are not tackled aggressively the airline will not have a viable future.

Along with reducing costs the airline must ensure that its yields are at sustainable levels. The resolution of Aer Lingus's current difficulties and its future prosperity dictate that its fares must not only be competitive but also economically sustainable. Failure to do this would simply mean that accumulated losses would keep mounting and any new capital invested would quickly disappear.

The Government values the contribution which has been made by Aer Lingus to the economy over the years. It has provided the critical mass, expertise and range of products which have helped spawn our national aviation industry.

The Government wants to see Aer Lingus's contribution continue into the future. The company is presently going through an exceptionally difficult period in its history. I believe, however, that Aer Lingus can have a strong future if the right actions are taken now.