Vol. 433 No. 5
(Limerick East): I move:
That Dáil Éireann calls on the Government to reject the future strategy plan put forward by Aer Lingus; condemns the Government for its lack of an air aviation policy; and urges it to bring forward a fully costed alternative plan to put Aer Lingus on a sound footing.
I would like to share my time with Deputies Alan Dukes and Donal Carey.
Is that satisfactory? Agreed.
(Limerick East): Fine Gael rejects the Cahill rescue plan for Aer Lingus because it believes it will not work. If implemented as presented it will be a botched affair and in less than two years time we will be back in this House debating a further rescue plan which will inevitably close down Aer Lingus or confine its activities to that of a minor commuter air service. Aviation in Europe has developed on the basis of national carriers — Air France, Iberia, Lufthansa, KLM, Alitalia and so on. It is in this league table of national carriers that Aer Lingus had a proud place. These airlines became synonymous with national pride. They were a symbol of a country's sovereignty wherever they flew. Aer Lingus fulfilled a similar role in Ireland. Not only did it provide an efficient, courteous and good value service, but for generations of Irish people, especially our emigrants and tourists visiting our shores, the shamrock on the tail of the plane was synonymous with the national flag.
The days of the national carriers are over. There is now a web of new partnership arrangements in Europe and it is in this context that a commercially sound Aer Lingus must find its future. I will return to this theme later in my speech but first I would ask how such a proud company as Aer Lingus, in which the pride and money of Irish people was invested and in which a job would secure the future of any young man or woman in high status employment, could have sunk so low that now even in the speeches of Government Ministers and the Taoiseach, Aer Lingus has become synonymous with bad management, colossal losses, unsustainable debt and questionable work practices?
The descent into bankruptcy has been quite recent. Fine Gael, in partnership with the Labour Party in the 1982-87 Coalition, took on the task of restoring the commercial State sector to viability. Aer Lingus was put on a sound footing by that Government. The company was prepared for the many challenges it would face as world aviation changed in the late eighties. When we left Government Aer Lingus was in profit. This year it will lose £116 million and the total accumulated debt is now £540 million. There is no doubt that if Aer Lingus was a United States aviation company it would be now in Chapter II and if it was a private European company a liquidator would be already installed. How did a company which was profitable so recently decline so far so rapidly? What were the key decisions that led to its decline? Will anybody at management level in Aer Lingus, in the Department of Transport, Energy and Communications or sitting around the table in Government be held responsible for this debacle?
In the late eighties the measures taken to cut the cost base of Aer Lingus were reversed by the then management and the then Minister. Large numbers of extra staff were employed and the seeds of today's disaster were sown. The shorthaul fleet was replaced at enormous cost and the Aer Lingus Holiday fiasco, which resulted in a book loss of of £17 million and an actual loss in excess of £20 million, took place. The company tried to restore its monopoly on the Dublin-London route by cutting fares to a point at which it believed its competitors, Ryanair and British Midland, could not stand the heat. By last year it had ended up in the totally ludicrous situation of selling every seat on every plane from Dublin to London below cost, incurring losses in excess of £23 million on the route. The company got involved in the politics of the Shannon stopover, encouraged the Government to renegotiate the bilateral avaiation agreement with the United States to fly Dublin-Los Angeles, leased two 767s at a cost of $750,000 a month but never flew the route and has continued ever since to pay the monthly leasing charge for planes parked in Dublin Airport. Yet nobody has been held accountable. The then Minister, Deputy Seamus Brennan, presided over most of these decisions. Neither he nor the then management or board have been brought to account. Deputy Brennan's procrastinations, political interference and managerial incompetence have more than any other factor helped to sink Aer Lingus.
Deputy Máire Geoghegan-Quinn, the present Minister for Justice, when Minister for Tourism, Transport and Communications, analysed the problems correctly and re-affirmed the status of Shannon Airport, but she did absolutely nothing to remediate the difficulties of the company. Mr. Bernard Cahill, under whose chairmanship the present rescue plan has been brought forward, is no stranger to the Aer Lingus board. He has been chairman of the board since August of 1991 and was a member prior to that. During all the period since 1987 the present Taoiseach, Deputy Albert Reynolds, was either Minister for Industry and Commerce, Minister for Finance or Taoiseach — all offices relevant to the future of Aer Lingus — but he did nothing. Is it reasonable to expect that those who contributed most to the fiasco at Aer Lingus are now especially endowed to rescue it, or must we rely on the business acumen of the new bornagain market-led Labour Party to restore commercial sense to the company?
The Cahill plan proposes an equity injection of £175 million. It makes no attempt to justify this injection or to reconcile it with the demand made by Aer Lingus last November, when Mr. Cathal Mullen was chief executive and Mr. Cahill was chairman of the board, that the appropriate equity injection was £400 million. If Mr. Cahill felt last November that the company could be rescued only by an injection of £400 million, how can he make do with £175 million a couple of months later? Forty three million pounds of the equity now proposed is earmarked for a redundancy package. A total of 1,530 employees at Aer Lingus will be made redundant. Is it not extraodinary that a Government that claims that its top priority is job creation is using £43 million of taxpayers money to destroy so many jobs? It is quite clear that some equity is needed. No case has been made by anybody for any particular amount of equity greater or less than the amount proposed. As it stands it is a figure plucked out of the sky, and any figure from £50 million to £400 million would have equal validity on the basis of the arguments put forward in the plan.
The plan proposes to divide Aer Lingus into four business centres: the first to serve Britain and the Continent, the second Aer Lingus Express to the UK, the third Aer Lingus-Shannon for the transatlantic routes, and the fourth to manage ancillary services such as catering and baggage handling. The proposers of the plan have produced neither market research nor financial projections to indicate how this proposed new format will rescue the company. It is quite clear that the company hopes to carry extra passengers on both its transatlantic and UK Express routes, otherwise these services will not work. Yet there is no information provided to suggest that the projections for increased load factors are based on other than a hunch. It seems from published material that the new arrangements on the transatlantic route are expected to increase the number of passengers carried by 13 per cent. A totally new company unit is proposed for shuttle-type flights to the United Kingdom. Yet the expectation in the plan is that the number of passengers on all routes to the UK will increase by only 1 per cent. How can a plan based on such flimsy projections ensure financial viability? These figures simply do not stand up and it is difficult to project where Aer Lingus will be in two years time on the basis of the information provided.
The proposal in respect of the ancillary services is quite clearly to prepare them for privatisation. Baggage handling, catering and some other unspecified services will be distinct cost units. Initially, Aer Lingus will avail of their services, but after three years they will have to compete with other service providers. It is clear that if this is carried to its logical conclusion these services will be privatised and further substantial redundancies will be added to the 1,500 projected.
All Aer Lingus assets other than the core business and TEAM Aer Lingus are for sale. The only asset which could make a significant impact on the balance sheet is the Copthorne Hotel Group. This has a book value of £215 million, and even though its market value is significantly less, its sale would have a significant impact on the balance sheet.
The plan is particularly dishonest in its treatment of smaller subsidiaries such as CARA and PARC. It is clear that these are for sale as soon as a buyer is found, and statements that they are not are extremely unfair to the workers of these companies. In the case of CARA its privatisation will, I have no doubt, lead to redundancies which we can add to the total projected.
The only reason TEAM Aer Lingus is not for sale is because it is not worth anything. The Cahill plan projects 250 redundancies in TEAM, but this figure is very hard to reconcile with the industrial relations shambles at that concern over the past few weeks. The announcement on Friday last that 300 workers were being let go on a so-called temporary basis and that a further 150 will be let go shortly is difficult to reconcile with a claim that redundancies at TEAM will be held at 250 when the plan is put into effect. When we take into account the stated redundancies in the core airline business and at TEAM, the difficulties TEAM is experiencing now, the privatisation of ancillary services and subsequent redundancies, the sale of the subsidiaries and the redundancies that will occur as they are privatised, it is clear that the projection for redundancies is nearer 2,500 than to the 1,500 in the plan.
It is difficult to understand how the Labour Party in Government can preside over the wiping out of solid jobs in a State company. It is difficult to understand what motivates Labour backbenchers when they can stand idly by and watch the destruction of industrial jobs. One would have to go back to the clearing out of the Highlands in Scotland or the rush from this country after the Famine for any destruction of similar proportions. Yet, the Labour Party will be sanctimonious and its members will say, "we are in Government now and the promises we made at election time are null and void and redundant", like the 1,500 Aer Lingus workers.
The decision to change the status of Shannon will have a very adverse effect on the west of Ireland. Tourist traffic will be transferred from the mid-west region to Dublin, and the main plank of regional policy in the west of Ireland, will be removed. The plan is quite ambiguous on its intentions in regard to the transatlantic fleet. The Minister originally informed Deputies that the three 747's would be based at Shannon Airport, and that direct flights would be provided between Shannon and New York all the year round. It is clear that one of the 747's will be based in Dublin and there will be no direct flights from Shannon to New York for eight months of the year. It is clear that the Government has accepted this recommendation, and it is a sad day for the west of Ireland that such a momentous decision has been taken by the very people in which the electorate placed their trust in the last election.
Last November the then Minister, Deputy Geoghegan-Quinn, announced that she was maintaining Shannon's transatlantic status after a thorough economic analysis of the benefits the status conferred on the country as a whole.
The Government's announcement tonight will be greeted with dismay in the Shannon region, and those Deputies whose electoral success has been largely based on the commitments they made to preserve the status of Shannon, will have to make their position clear in the course of this debate. I refer in particular to Deputies Killeen of Fianna Fáil and Bhamjee of the Labour Party.
The last published accounts of Aer Lingus show the company's position up to March of 1992. The transatlantic service was the only section of Aer Lingus then showing a profit, and in that financial year the profit was almost £10 million. The Cahill plan claims that the trans-atlantic route is now a major loss maker. I hope the rest of the plan is more soundly based than this claim, as the accountancy devices used to show losses on the route are such that no respectable accountant would put his name to them. The substantial earnings on baggage handling for Virgin Airways at New York and Aeroflot at Shannon are not shown as revenue on the transatlantic route. The £2 million revenue from fares on Shannon/Dublin and Dublin/Shannon on the 747s is not shown, even though all costs on this route are put down to the transatlantic. The $9 million per annum leasing costs on the 767s, bought to serve Dublin/Los Angeles but which have never left the ground, is assigned to the transatlantic costs. The 747s which now constitute the trans-atlantic fleet were sold and leased back, the leasing costs are assigned to the North Atlantic, but none of the benefits to the group from the proceeds of the sale are so assigned.
The bilateral agreement between Ireland and the US controls all trans-atlantic air traffic. All airlines may fly to Shannon but no airline may fly direct to Dublin. If the Irish Government allows Aer Lingus to fly direct to Dublin, then all US carriers may fly direct to and from Dublin. It has so decided tonight, and now we have an open skies policy under which any US carrier is free under the terms of the bilateral agreement to fly into Dublin. The Minister is shaking his head in disagreement. Does he intend renegotiating the bilateral agreement? It took 18 months to re-negotiate the bilateral agreement to allow Aer Lingus fly Dublin-Los Angeles. It will take as long to re-negotiate the Shannon agreement and in the meantime there will be many opportunities for the American carriers to come in. Two years ago 40 per cent of all US visitors to Ireland came through London and this year 60 per cent will do so. American air travellers are voting with their wallets and Aer Lingus cannot compete with the low cost fares to London. How does the Government expect Aer Lingus to compete with the low cost US carriers who with the experiences of deregulation for the past ten years have cut their cost base? How can Aer Lingus compete with those carriers if they decide to fly Dublin direct as is their right under the terms of the bilateral agreement?
The Government has no aviation policy. In an article I wrote for the Irish Independent two weeks ago, I set out my position on this matter and also on the necessity of Aer Lingus entering into a partnership arrangement with other European carriers. I will repeat those arguments. The decisions taken recently on aviation matters show clearly that we have no aviation policy. SFADCo, whose statutory function is the development of Shannon Airport, was asked on behalf of the Tánaiste and Minister for Foreign Affairs to promote Kerry Airport. Gillian Bowler was appointed to head up a task force to promote Shannon Airport and the Cahill plan has proposed major changes in the status of Shannon, and action to reduce Aer Lingus' cost base. Aer Rianta announced about 6 weeks ago that it would increase that cost base by raising landing fees by 6 per cent next year while the ESRI warned against spending any further Structural Funds on regional airports. Aer Lingus cancelled 25 transatlantic flights from New York to Shannon and Dublin and reduced their transatlantic fares in the past 3 weeks but forgot to announce this. The company increased its Dublin/London fares in the same period by £20, but forgot to announce this also.
Does that add up to an aviation policy when so many decisions about air travel are being taken, many of which are contradictory? There is no pattern to that kind of decision-making. We had also the spectacle of the Government tonight accepting the Cahill plan in total when it is clear that even Mr. Cahill, Mr. Owen and the other architects of the plan had padded it in the expectation that the Government would turn it down. Is it any wonder that Aer Lingus is in trouble when that is the kind of management it has and those are the type of ministerial decisions that are being taken and when the people around the Cabinet table will wave it through without adequately studying the issues? We are a peripheral EC country. We need an integrated transport policy and in that context a fully developed aviation policy is essential.
As I said, the aviation business in Europe has grown on the basis of national carriers. Deregulation of the air industry in the United States has completely changed everything. Europe must follow and is following and even though it hopes to avoid some of the trauma which deregulation brought to the aviation industry in the United States it cannot avoid the inevitable competition which is coming with a vengence. Airlines will close down — 22 airlines closed down in America last year — new airlines will open — 30 airlines opened in the United States last year — and national governments as the champions of national carriers are now in the "Last Chance Saloon".
It is in this new world that Aer Lingus must survive and, we hope, grow and prosper. The European Community will allow one last restructuring of the balance sheet but only one. It is in the new Europe that Aer Lingus will have to find its way and it needs a partner other than the Government to help it survive and return to prosperity. A rescue plan which does not address the issue of a suitable partner for Aer Lingus is not a rescue plan; it is a trap for the company.
Before the turn of the century Europe will have only five large carriers and as arrangements are already being made to organise these, then Aer Lingus, in order to survive, must move quickly. It now looks like the carriers will be British Airways, Lufthansa, the SAS Group and Air France. There will probably be a fifth with Alitalia or Iberia providing the anchor. It is clear from the network of partnership arrangements already made that this will be the pattern of air carriers in Europe in the nineties. Does anyone reasonably expect that Aer Lingus can go it alone against this web of relationships? Again, the procrastination of Ministers, before the present Minister, Deputy Cowen, has all but undermined the company's position. No-one wants a bankrupt company for a partner and if Aer Lingus had been put on a sound footing two years ago it could now be actively seeking a partner.
Do people realise what is going on? SAS, originally a combination of Danish Air, Swedish Air and Norwegian Air, has now taken on British Midland as a partner and it has an arrangement with Swissair and KLM. British Airways has a network of arrangements across Europe and has a 25 per cent share in Qantas in Australia, while in the United States it has acquired a 25 per cent share in US Air. Do the Minister and his officials realise what is happening in Europe and how can they accept a plan which does not address the crucial issue of a partner for Aer Lingus? Aer Lingus will become a company providing a commuter service serving Dublin-London Heathrow and feeding into a major carrier unless the Minister moves quickly.
Why should we accept this plan tonight when it has not been costed properly, there are no financial projections available to the House to reassure us and there is no market research available to show that there will be extra passengers on the transatlantic and United Kingdom routes? There is no aviation policy and it is clear from the piecemeal decisions taken during the past five or six weeks that the first elements of an aviation policy do not exist. The key European issue of who we link up with and what partner should we have to secure our future in circumstances where the Government can no longer be a partner, has not been addressed. The Minister knows that the European Commission has told him that this is the Government's last opportunity to put Aer Lingus on a sound footing.
This is a shambles and I am amazed at the lamb-like behaviour of Government backbench Deputies in north Dublin and in the west, particularly the mid-west, who know that this plan will have adverse effects on their constituencies. We have heard about the "Silence of the Lambs" and we know what the theme of that film was, but at least Hannibal Lecter did not eat his own. We have the "Silence of the Lambs" from the Government backbenchers while the chairman of the Labour Party on the 5 p.m. radio programme did a mea culpa in explaining why it is so hard to be in the Labour Party at present because one has no choice but to whistle a happy tune and support the awful decisions taken by Ministers in the lobbies. The danger to Aer Lingus is imminent and I ask the House to reject this plan when it comes to the vote at 8.30 p.m. tomorrow night.
As Deputy Noonan said, this plan cannot be described in any way as a survival plan for Aer Lingus. It does not contain one new thought or a reaction to the reality that surrounds us. Only today I was presented with a particularly worrying illustration of this. Recently a number of my colleagues left this country on business. They flew from Dublin to London by Aer Lingus and onwards by another airline on a route which Aer Lingus does not serve. They are due to return in a few days time on a long flight via London. They booked the most convenient flight from London. This is not an Aer Lingus flight. When they checked in at Dublin Airport somebody in Aer Lingus decided that they should ring the headquarters of my party in Mount Street to complain that they were not travelling by Aer Lingus. This is an airline which hopes that people in other countries will choose Aer Lingus rather than an airline of their own country, in order to expand its business, but that is the attitude it is taking to the market place which the company has to compete in today.
This is symptomatic. We see the same thinking in the plan which has been put forward. I do not know who put this plan forward. Was it Mr. Cahill or the Minister who engineered the plan, or who is behind it? This plan is not going to ensure the survival of Aer Lingus; far from it. Even if the world aviation scene was not changing rapidly, as it is, this plan would still fail because it does not address any of the crucial issues which Aer Lingus has to face if it wants to survive. There is no description in the plan of how Aer Lingus fits into the world aviation network.
I do not know if the briefing document which we have received is a fair summary of the plan. We had to wait a long time and kick up a row in this House to get this briefing document from the Minister. Certainly, Deputies on this side of the House were going to be kept out of the loop. If this is a fair or accurate summary of the full plan it is doomed to fail because, as I said, it does not address any of the major issues which face Aer Lingus. It seems to assume that the world is going to remain exactly the same as it is today and does not take account of the fact, as Deputy Noonan said, that all over the world airlines are in difficulty and that there is an increasing trend towards concentration, specialisation and agreements between airlines in order to find a place for themselves in the market. This plan does not address that issue.
There are a few ritual obeisances. For example, in paragraph 22 of the plan we find the blinding revelation that Aer Lingus will face even more intense competition on all its routes in coming years, but it does not state how this is going to be dealt with. In paragraph 24 we have another blinding revelation, that Aer Lingus operates from a position of market strength on all its core routes. What does this mean? If that is the case, why is the company going to lose £116 million this year? If that is what operating from a position of market strength means I would hate to look at what the Minister might produce if he thought there was the slightest difficulty in the market. This plan is fairyland stuff.
As I said, the trend towards concentration is going to become increasingly pronounced in future years. There are agreements, cross-shareholdings, the pooling of capital resources and co-operation agreements between airlines in order to survive. One expert reckons that in about a decade there will be about 20 major airlines in the world and that smaller airlines will follow in squadrons, specialising in various niche markets. There is no definition in the plan of where Aer Lingus will fit into that complex.
The plan seems to assume that Aer Lingus can and should continue to be the airline it has been up to now and that nothing will change; the world is going to stand still while we deal with this problem in Aer Lingus, but this is not true. Small airlines — Aer Lingus is a small airline by world standards — can survive but only if they clearly define their place in the market and act accordingly. All those that will survive will need a close working arrangement with at least one of the mega carriers. To do that they have to become attractive, serve some function and in some way fit into the scheme of the megacarrier airlines which are going to emerge. However, there is nothing in this plan that even begins to do that. There is nothing in this plan which will structure Aer Lingus in a way which will fit it for the kind of arrangement it needs to survive. There is nothing in this plan which will make Aer Lingus an attractive partner for any other airline operating at either a European or world level.
There is a reference in the plan to alliances, but all it deals with is alliances with other carriers feeding into the Aer Lingus system. It refers to code sharing deals which exist already and which many airline users know are another way in which airlines rip them off. It also refers to joint ventures and to interline arrangements, another means by which airlines can in a hidden way, produce a service for consumers which they do not actually want or which they think is something different. If this plan is put into effect will Aer Lingus be in a position to enter into a joint venture or bring equity of any kind to a joint venture? If it is not, will anybody else be interested in a joint venture? I doubt it very much.
The generation of extra traffic between Ireland and North America and the future of Aer Lingus in that market depend on the opening of crucial extra routes. Without extra routes we will not win back transatlantic traffic from London or Manchester. Success in winning extra routes depends on vigorous action by the Government to secure the necessary changes in the US-Ireland Bilateral Air Service Agreement. There is no indication in this plan or in anything that has been said by the Government that it has even begun to understand what is involved in this. There is reference in the summary plan to that issue in three lines in paragraph 10 on page 28: "The strategy requires a change in the Shannon stopover policy which will require negotiations with the US authorities to amend the Ireland-US air agreement". There is nothing about new routes, any agreements with American airlines or the way in which extra traffic will be generated.
I have to confess that I am not a bit happy at the prospects of this agreement being renegotiated. On the last occasion the agreement was negotiated, in 1990 it was signed by "Mr. Gerard Collins, TD, Minister for Foreign Affairs for Ireland." All that modification did was simply to update the provision to which Deputy Noonan has referred that all scheduled flights on the north Atlantic routes shall serve stating Shannon and "This requirement shall terminate if any other airline inaugurates scheduled services between Dublin and the United States in either direction without a traffic stop at Shannon." If we are to get out of this renegotiation of the agreement anything which will produce extra business either for Aer Lingus or any other airline or extra traffic in terms of people coming in here, we will have to have more service routes between North America and Ireland. The Government has said nothing about that. If this does not happen we will not regain any of the traffic which has been lost to London and Manchester. If the Government does not move quickly on this it could very well be too late.
Somewhere in the depths of the Government machine there is someone who knows that the US and UK authorities are now discussing an open skies arrangement. They want to renegotiate the bilateral agreement between them and they are looking at an open skies arrangement. If we are not careful and they manage to put that open skies arrangement into operation before we do anything else, then all the north Atlantic traffic will go from north America to the UK and we will be lucky to get people backtracking here. This will happen regardless of what this plan does or of the number of jumbos based at Shannon. It is laughable to hear an airline which says that landing in Shannon is the cause of part of its problems proposing that instead of flying Dublin-Shannon-New York, the airline will fly Shannon-Dublin-New York. Who put the proposal together? He should not be let next or near any airline. That says much about the approach of this plan. The EC Commission has approved new regulations for competition between European airlines which should open up possibilities for an Aer Lingus which is restructured, not for an Aer Lingus which is half bailed out by an arrangement of this kind.
The record of Aer Lingus in terms of management has been very bad; it has always been slow to move. Its reaction to the emergence of any new service has been to try to kill it. The reaction to the emergence of any kind of new service has been to follow the lead of other people. It was behind everyone else in serving regional airports and in acquiring commuter aircraft. It has also been behind everybody else in fare wars and it has paid the price of being the last one in in those wars. It is stated in this so-called plan that it diversified into the problem because it diversified into activities which are pro-cyclical with the airline business. This plan will not save Aer Lingus. This is a time of severe trauma for everyone working in Aer Lingus and the only result of this plan is that the Government will have let those people down by engineering all this pain without the slightest gain.
I oppose this plan, which I believe was put together by the Department, the Minister and Mr. Cahill. Like my colleagues, I do not think this plan will work. I say this mainly from my experience of the Department. Deputy Dukes referred to the prospects of Aer Lingus getting additional routes. On one occasion I visited the Department to see if the Minister would meet a group representing the Phoenix, Arizona, hub airport which was being developed. They wanted to set up a route which would be serviced by an American airline directly into Shannon provided Aer Lingus flew from Shannon into Phoenix. The Department looked at the plan and said that the Minister was prepared to meet the delegation. However, when the people from Phoenix arrived in Dublin the then Minister, Deputy Brennan, refused to meet them. I next visited the then Minister for Industry and Commerce, Deputy O'Malley, who said he would see them. However, he was told by the people in his Department that Aer Lingus wanted to fly into Los Angeles and to forget about Phoenix. Finally I was reduced to visiting a former Minister of State, Denis Lyons, who obliged me and met these people. This plan was examined by a number of other people, including Dr. Garret FitzGerald, who called himself an expert in this area. While he was not satisfied with the plan initially, he is now satisfied that it is a good plan. However, its details never reached anyone's ears.
So far as the Department is concerned, I believe it was decided that once the personnel in the Department was changed this plan would follow certain lines and would be anti the Shannon region. The people of Shannon will be dismayed at the proposals in the plan, particularly as they are being put forward a few months after the then Minister, Deputy Máire Geoghegan-Quinn, answered them that the Shannon stopover would remain. The people in my constituency, in particular, took out insurance: they elected Deputy Killeen — who had better credentials on this issue — instead of re-electing the former Deputy Daly who was supposed not to be as strong on the Shannon issue. Of course, Deputy Bhamjee had the support of Deputy Spring and his party's policies.
I would be grateful if the Deputy would bring his speech to a close.
It was your party's policy on Shannon.
I will get my chance and Deputy Bhamjee will know all about it.
Deputy Kemmy had the virtue of looking a bit uncomfortable about it but the Deputy does not even know what is going on.
The time has come to call another speaker.
I move amendment No. a1.:
a1. To delete all words after "That" and substitute the following:
"Dáil Éireann
—notes the Government's commitment in the Programme for a Partnership Government to ensuring the commercial future of our national airline as part of our overall air transport policy;
— notes the serious financial position of Aer Lingus;
— notes that the airline's annual internal operating costs must be reduced by £50 million in order to restore it to commercial viability and the urgent need for a full and comprehensive agreement between management and unions in this regard;
— notes the discussions between management and unions to explore means of financial participation by Aer Lingus employees in the future success of the company as a tangible recognition of the contribution required from the workforce to overcome the crisis;
— notes that the Government, as shareholder, will make a major contribution to returning the airline to viability;
— endorses the Government's approach and the general thrust of the Aer Lingus strategy to restore the company to a strong and viable position at the core of Irish aviation, having consulted with the Irish Congress of Trade Unions; and
— supports the further development of the Government's aviation policy as being in the best interests of the Irish economy."
In moving this amendment I recognise very clearly that everyone in this House and indeed anybody who has been involved in the wider debate on the Aer Lingus situation broadly shares the same aspiration that we must do everything required to ensure that the national airline not only survives but has a firm basis for successful operation in the future. In this spirit I am coming to the House not only to participate in the debate but to share as much information as possible to help people understand the basis for the Government's decisions taken today.
When I took over responsibility for the Transport, Energy and Communications portfolio in January it became clear within days that Aer Lingus was facing a rapidly deteroriating financial and operating position. At the very outset it became an urgent priority for me to get an accurate and up-to-date assessment of the scale and nature of the company's problems. I believe that in the strategy plan submitted in recent weeks by the company we have, for the first time, an accurate fix on the full magnitude of the company's problems. The operating losses of the company are running at unprecedently and unacceptably high levels. It was precisely because of the obvious gravity of the company's financial problems that I, equally, took unprecedented measures to share as much information as I could with the House short of releasing strategic commercially confidential information. In addition, I also insisted on consulting with a wide range of interests concerned with the solution to the company's problems and told them in a straightforward way the problems with which I was confronted. This has been my approach from the outset in seeking solutions for the company's problems.
The very magnitude of the company's problems swept aside a lot of hopes many people had to avoid difficult choices. Regrettably we no longer have the luxury of choice. In particular, one area where choice has been closed down very rapidly since earlier assessments of the company and its related problems is that of time. The massive drain on the company's cash resources which the operating losses are imposing imperil its very survival. Time is now of the very essence and decisions must be taken now to ensure the company can be repositioned in such a way as to ensure its future.
The Deputies will already have received essential information on the company's financial position. I do not think it would be helpful tonight to go into a line by line analysis of these underlying trading and financial difficulties but to repeat that I cannot overstate the gravity of the situation. I want everybody to understand that there is not a menu which would afford us the ability to pick and choose solutions. Suffice it to say that committed credit lines to the company have already been fully used up and the company's emerging cash position is one where the company may not have the cash resources to pay any of its bills including wages, as early as the end of next month. It calls for courage to face the magnitude of this problem, courage in particular for the employees of the company to take on board the problems that they will have to solve in conjunction with company management. I intend that the Government as shareholder will play its part to the maximum to facilitate the necessary solutions and adjustments to enable the company to be competitive once again.
The motion put down by Deputy Noonan calls for the rejection of the strategy plan put forward by Aer Lingus, despite the general acceptance that the main strategy put forward by Aer Lingus must be implemented if we are to save the national airline. There is general acceptance that the starting point of any action plan must be a reduction in the company's operating costs. There is a gap of £50 million between company's revenue and its costs which must be reduced if the company is to remain in business. That is an inescapable fact which must be addressed.
In any company it is the responsibility of the board to ensure the continuing viability and development of that company. The board of Aer Lingus has fulfilled its obligation in this regard by presenting to Government, as shareholder, a strategy to return the company to commercial viability. The specific proposals contained in this strategy are the produce of work by the senior management of Aer Lingus and especially, benefited from a series of recommendations which came from a special task force — with almost 40 consultative working groups — set up to make recommendations on every aspect of the Aer Lingus system. They have also had the benefit of the input from staff through the company wide open forum consultative process initiated towards the end of March. To suggest that the results of all this work be rejected out of hand is in my view irresponsible.
In our Programme for a Partnership Government, we gave a specific commitment that we would ensure the commercial future of our national airline as part of our overall air transport policy. I want to assure the House today that we have taken specific action to fulfil this commitment. The Government at its meeting this afternoon decided to: (a) endorse the broad strategy set out in Aer Lingus's strategic plan for the future of the company; (b) authorise an injection of £175 million in equity into Aer Lingus: £75 million in 1993, £50 million in 1994 and £50 million in 1995; (c) authorise me, as Minister for Transport, Energy and Communications, to bring forward legislative proposals, in the context of the further development of Government's plan for the Irish aviation sector, to make whatever amendments are necessary to the air companies Acts to give effect to this; (d) authorise the management of Aer Lingus to explore with the unions in the company means of financial participation by Aer Lingus employees in the future success of the company; (e) authorise me as Minister for Transport, Energy and Communications to enter into discussions with the United States Authorities with a view to amending the Ireland-US bilateral Air Transport Agreements.
The Government also agreed that the timing and amount of equity injections proposed be subject to the following conditions: (1) a full and comprehensive agreement having been reached between management and unions in Aer Lingus on the necessary £50 million annual reduction in cost essential to return the company to commercial viability; (2) production of satisfactory evidence that the necessary measures proposed are being implemented in full; (3) formal acceptance by the European Commission of the Aer Lingus strategy and the proposal for State equity injections.
I would like to assure the House that I will seek, as a matter of urgency, the formal approval of the EC Commission for the strategy.
One element of the Aer Lingus strategy which the Government carefully considered and analysed was the proposal for a change in the Shannon stop policy. The Aer Lingus board advised the Government that if the financial crisis facing the company was not addressed it would force closure of its transatlantic operations which account for 70 per cent of scheduled services through Shannon. In support of this, the board pointed out that Aer Lingus's transatlantic operations lost £14.4 million in 1992-93——
Another con.
——before interest, which is expected to increase to £22.8 million in 1993-94. Excluding the B767 operations, the losses, before interest, in 1993-94 will be about £12 million as compared with £9 million in 1992-93. Aer Lingus have verified that these results are based on a uniform pro rata allocation of both costs and revenues on its transatlantic routes, and is in line with similar practice for all its other routes.
(Limerick East): Not true.
Not true.
Aer Lingus maintain that they must tackle losses on all routes if the company is to be returned to viability. A change in the Shannon stop policy is an integral part of their strategy to return the transatlantic operations to profit. They state that their transatlantic strategy has been specifically designed to protect their interests in Shannon and emphasise their commitment to the Shannon region.
Despite these assurances, Shannon interests expressed their opposition to the Aer Lingus proposals. I wanted to hear why and carefully consider their concerns before making any recommendation to Government on this very important issue. Both I and my officials have met delegations representing public representatives in the region, the STATUS/SIGNAL groups and have had discussions with Shannon Development, members of the Shannon Task Force and Aer Rianta and members of local Chambers of Commerce and tourism and manufacturing interests in the region.
The Government carefully considered these strongly-held views before deciding on a change in policy. However, there were other considerations which had to be taken into account also, principally developments in world aviation. While we have decided to seek a change in the Shannon stop policy, I want to specifically reassure the people of the west and mid-west that this Government's commitment to the development of their regions is firm and resolute.
A sham.
I would like to emphasise that the Government's decision to seek a change in the Ireland-US Bilateral Air Agreements to modify the current Shannon stop policy was made in the context of developments in European and United States' aviation policies. In addition, there is an increasingly strong movement within the International Civil Aviation Organisation — ICAO — the international organisation responsible for the regulation of world aviation — for a much more liberal regulatory regime worldwide for civil aviation in line with a freer trade regime for goods and services under the GATT.
However, because of our commitment to the people of the west and mid-west we will manage the change proposed in a constructive manner by seeking to ensure that: Shannon will be sufficiently developed to a point where it can stand alone as an Airport operation; and the existing level of air services to the region will at least be maintained; we have already set up a Special Traffic Development Task Force for the airport with a budget of £1 million over the next two years.
And Aer Lingus are not represented on it.
We will also ensure that the proposals in the Aer Lingus strategy concerning the maintenance of its trans-atlantic fleet at Shannon are honoured.
I would also like to assure all the representatives that I met, that in negotiating the Bilateral Air Agreements with the USA, I will seek to ensure that traffic through Shannon can be developed to the maximum extent possible.
Many of the misgivings expressed to me revolve around access transport to the mid-west region and to the west in general. However access is not confined to air travel. In this connection, I want to state the clear commitment that the Government will substantially increase investment in other transport infrastructure in the region. Details of such investment will be announced in the National Development Plan, financed by EC Structural and Cohesion Funds, which will be published shortly.
But let me return to the area of most concern, that is the future of Shannon airport. The Aer Lingus survival plan is particularly strong on its commitment to Shannon. The Government would not have had it otherwise. Whatever about the past there is an absolutely clear commitment by the company to the further development of their operations at Shannon.
That is what they said in March last.
This is best underlined by the fact that, for the first time, Aer Lingus will have a separate business unit to run its transatlantic services. This unit will have its own management team based in Shannon whose absolute priority will be the championing of trans-Atlantic business in and out of Shannon. As a substantial down payment of the company's new strategy Aer Lingus is committed to the location of the B747 fleet at Shannon as well as accompanying technical and cabin crew staff, where operations and marketing will be centred also.
In focusing on our aviation problems it has often been easy to forget the wider canvas in which our national airline has to compete. There has been a dramatic change in the aviation business worldwise with increasing liberalisation shaking major aviation companies to their very foundations. While this problem has been noticeable for a number of years it has been exacerbated in recent times and for the first six months of this year airlines worldwide are digging deeper into their cost bases as never before. Indeed this is one of the reasons the whole question of managing change now rather than have change forced upon us later is uppermost in my mind.
In that context Deputies will be well aware that the pace of liberalisation has picked up even more so in the last year and that, increasingly, there is a movement towards the EC taking over competence in the area of air agreements rather than individual EC member states. It is also the stated intention of the United States to negotiate with the European Community on air agreements rather than deal with individual EC member states. If we were to allow that to happen we would certainly be foregoing the sort of flexibility that is required in our dealings with amendments to existing bilateral agreements with the United States. This we are not prepared to do. I am proposing that we take an active "hands-on" early action to manage the necessary change rather than have unilateral and abrupt change thrust upon us. Far better that we have control of our negotiating destiny than to accept what comes out of EC negotiations over which we would have very considerably less control. Here again time is of the essence. My Department will be starting this process of negotiations with the United States authorities as a matter of urgency.
Let me now allay Deputy Noonan's concern that we do not have an aviation policy in Ireland. I have said before in this House and repeat that this is a myth. We have an aviation policy and I have clearly articulated what it is. I acknowledge that it may not be the type of aviation policy for which some people hanker, which is basically a return to the preliberalisation era in Europe and elsewhere. We cannot turn the clock back. Times have changed, so must we.
I feel it would be useful to remind Deputies how successive Irish Governments have managed changes in Irish aviation in recent years and how our current policy has evolved. Aer Lingus has consistently maintained that its development was being constrained by the small size of the air transport market to and from Ireland. Accordingly, it requested successive Governments to seek new opportunities to expand into new international markets. Therefore Irish Governments have consistently supported moves for much greater international liberalisation in air transport with the specific aim of opening up new market opportunities for Irish operators. That is the upside of liberalisation, the downside is that we must accept greater competition in our domestic market.
I do not intend to repeat the full details of our plan and policies for Irish aviation. These are already on the record of this House. However, in summary, let me reiterate that this Government's aviation policy is to gain access for Irish operators to as many international markets as possible and ensure that they can compete on an even pitch with other competitors in those markets. That not only applies to air services but also covers the whole spectrum of aviation activities in which Irish operators are involved.
In so far as aviation infrastructure is concerned, we have backed this policy with resources. In recent years we have provided substantial resources to maintain and develop the infrastructure for Irish aviation to the highest international standard.
It has been gratifying to note that our efforts in this sphere have been publicly acknowledged by very reputable people in Irish business and commerce. I would remind the House that the Government's plans and policies for Irish aviation have been unreservedly endorsed by both the Culliton and Moriarty Committees. I have no doubt that these endorsements are due to the significant benefits for Ireland, in terms of wealth and employment creation, which have accrued from these policies.
Let me give the House a few relevant statistics; visitor numbers to Ireland rose to 3.1 million in 1992, an increase of over 50 per cent on 1987.
How much will that figure increase this year?
Over 27,000 jobs have been created in tourism between 1987 and 1992; increased income generated in both the tourism and air transport sectors amounted to over £500 million since 1987; travel by business travellers has increased by almost 50 per cent which undoubtedly has helped our merchandise export drive and at least 3,000 direct jobs have been created in the air transport and related industries since 1987. Is the House being asked to assume that these all happened by chance?
The basis for action by this Government is one of partnership. In this context an essential element in this process was to consult with the Irish Congress of Trade Unions on the emerging solutions to the problems of Aer Lingus. As the House knows a meeting was held on 22 June between the Cabinet sub-committee on aviation matters and the Irish Congress of Trade Unions. This meeting was an exceptionally constructive one when the willingness of both sides to look at what was in the best interest of the company was clearly evident.
The Government accepted that the question of possible participation by Aer Lingus employees in the future success of the company should be explored as a tangible form of recognition for the additional contribution required of the workforce to save the company. Equally, the Government accepted a proposal put forward by Congress for the urgent establishment of a special unit to identify new employment opportunities to counteract the inevitable job losses which is an intrinsic part of the company's survival strategy. It was agreed that a special enterprise development unit would be set up right away with a mandate similar to the taskforce for Shannon Airport recently established by me.
Another task force, God help them.
The spirit and constructive nature of this meeting can translate into effective negotiations between the management and the employees and find the necessary solutions to the company's problems of competitiveness. The Government as shareholder, as I have already stated, will be playing its part to the greatest possible extent in underpinning any such agreement with injections of equity amounting in total to £175 million.
I ask the House to acknowledge that the crisis facing our national airline is the gravest in its history. When the company was established in 1936 it took a rare form of courage and vision by Seán Lemass and his Government colleagues of the day and by the employees of the embryonic Aer Lingus. That courage and determination led to the company which caught the imagination of the people who regarded it, justifiably, with pride. The post war era which assured route exclusivity to national airlines in now over. We are now faced with a rapidly changing era where there will be no such predictable constancy but the permanent challenge of change. National airlines of other countries have also faced this challenge and have dealt with the problem now presented to us. All the main stakeholders in our national airline, the employees, the company's board, management and the Government can draw from the inspiration of the past and match the best efforts of our country's airlines. We must take the measures necessary to ensure that Aer Lingus not only has a past of which we are proud but a future which should be based clearly on competitive commercial success. Such a courageous and imaginative attitude, based on a collective self confidence, will be the best antidote to the current threat to our aviation industry.
I have approached this important debate in a deliberately non-contentious way as I am convinced that a partnership and consensus approach is the best way forward. I appeal not only to Deputies but to all the interests affected by today's decisions to work together to build the aviation sector best suited to meet the challenges Ireland faces into the next century.
I seek permission to share time with my colleague, Deputy Harney and with a member of Fine Gael.
Is that agreed? Agreed.
What the Minister said in seeking support from all sides of this House to adopting a constructive attitude is rich in the absence of the plan presented to him being made available to members, notwithstanding that he could, if he wished, have deleted specifically sensitive information. That has been a most unsatisfactory feature of this debate and it has frustrated us in trying to come to terms with a very serious situation. It is ridiculous and totally unsatisfactory that the Cahill plan — as it has become known — has not been made available. It would be laughable if it were not so serious for the future of Aer Lingus, for the thousands of people it employs and, in particular, the implications for the west which is facing an uncertain future.
Despite the failure of the Minister and the Government to publish the Cahill plan and if the reports are correct — and we have to believe they are — that Aer Lingus is losing in excess of £1 million per week, then it is clear that major corrective action is required. Indeed, this may be the last chance to rescue the airline and restore it to operational profitability. If Aer Lingus is to be turned around and be capable of operating in a deregulated market than there must be comprehensive and meaningful negotiations with the workforce representatives. In this regard the recent agreed strategy involving the Government, the Aer Lingus unions and the Congress of Trade Unions establishing a framework for dialogue is indeed welcome. It is clear that the workers in Aer Lingus not only face a very worrying time but will also have to make many sacrifices if the airline is to be returned to viability and profitability. In that context the Progressive Democrats support the suggestion from the trade union movement that the workforce be afforded some form of equity participation in the airline. It would be a positive way of encouraging solidarity and a positive attitude and would, as one of the trade union leaders stated, mean that if the workforce is to share in the pain of restructuring — there will inevitably be severe pain — they should also share in the gain of an efficient competitive Aer Lingus down the road. It is clear that if the workforce feel it has a direct stake in the future of this company as part shareholders then it will have the incentive to see a future over which it can have some control in developing Aer Lingus.
Second, Aer Lingus must concentrate on its core business and organise an orderly sale of some of its non-airline ancillary services. This would allow the airline's management to apply its energies to its main business and would bring in much needed equity to reduce the mountain of debt that is such a drain on its annual interest costs. The general taxpayer cannot come up with all the funds necessary for the rescue plan. I also accept that the timing is an important consideration in the disposal of any particular asset. For instance, it is reasonable that a virtual fire sale of the Copthorne hotel chain should be avoided. It must also increase its revenue and reduce its costs. If, as we have learned, 70 per cent of Aer Lingus costs are outside its control and 80 per cent of the remaining 30 per cent of the costs are, as reported, devoted to payroll costs, there is simply no way of avoiding significant redundancies. It is obvious that the airline is top heavy with management personnel and that the staff restructuring and reductions must take full account of this factor. I also hope that the necessary redundancies can be secured on a voluntary basis to the greatest extent possible.
The provision of Government equity is obviously essential in helping to reduce the airline's debt mountain and to fund the redundancy programme. However, banks must also carry some of the restructuring costs involved. The provision of State equity on the scale proposed of £175 million, which is a major imposition on the State and the taxpayer, must be made conditional on the implementation of a comprehensive restructuring plan and the reduction in its costs to sustainable levels.
The Aer Lingus unions regard the proposed equity injection as inadequate for the needs of the airline. Clearly, one matter which the Government should explore is the question of the banks also sharing some of the financial pain to be endured by the general taxpaying public and the workers who will lose their jobs.
I find it most peculiar that if a private sector blue chip company — of which we have plenty of examples — was in difficulty, the banks would restructure loans and make substantial changes in how payment was to be made and, indeed, would share in a substantial part of the cost reductions and in the pain that would have to be borne. I do not see any pressure or public pronouncements being made by the Government with regard to the attitude of the banks who, for many years, have dealt with a blue chip company and have been paid handsomely for their investment in that company over the years. In regard to the present situation in Aer Lingus, where the debt amounts to £0.5 billion it is legitimate to ask what role the banks will play in regard to future restructuring and what pain they will be asked to bear. It is extraordinary that a Government, with a Labour Party in partnership, failed to ask any of those legitimate questions. If it is legitimate in the private sector for the banks to take a particular attitude, it is equally legitimate for companies in the commercial and semi-State sectors to take a similar attitude. I would like the Government to play a more up-front role in regard to its consultations with the banks.
Nothing the Minister said tonight will allay any of the legitimate fears held by people in regard to the Shannon stopover. The Minister is further compounding the Shannon stopover question by the manner in which he dealt with it this evening. Tens of thousands of people are genuinely fearful about their future arising from any alteration in present policy and those fears will be seriously compounded by the apparent chopping and changing of the elements of the Cahill plan affecting Shannon Airport. For example, on Monday last the Taoiseach stated at Shannon that the Aer Lingus proposals will involve basing a fleet of three jumbos at Shannon. A few days earlier, Messrs. Cahill and Owen of Aer Lingus circulated a document in Shannon stating that only two such aircraft would be based at Shannon. As well as being at variance with what the Taoiseach stated, it is also at variance with what Aer Lingus told the Minister for Transport, Energy and Communications three weeks ago.
I do not accept that Shannon is the essential problem dogging Aer Lingus. Yet it appears that the Government is intent on doing a U-turn in regard to its policy on that airport. If so, it must be in a position to offer legally binding and meaningful guarantees on future operations and agreed practice. It appears to be assumed also, from much of the comment on the Aer Lingus proposals, that making changes in regard to Shannon is simply a matter that can be decided unilaterally and then enforced by the Government. That, of course, is not the case. The 1945 Ireland-US bilateral aviation agreement, as amended by a 1990 annex, makes it clear that the present arrangements about Shannon will be terminated if any airline inaugurates scheduled services between Dublin and the United States in either direction. That could, and would in my view, mean a transatlantic free for all involving a number of US carriers, irrespective of the consequences for Shannon, Dublin or Aer Lingus generally.
It is regrettable that the Minister did not spell out whether there will be a free for all now while he goes off to negotiate a new bilateral agreement. Will he state unequivocally that there will be no change in the Shannon stopover position until such time as a satisfactory bilateral agreement has been reached with the United States of America? The Minister must give us some answers because at present he is sending signals into the marketplace and whetting the appetites of a number of American airlines in regard to opportunities if he is unable to control events as they unfold.
In this context, for Aer Lingus and the Government to give assurances regarding continuity of services to and from Shannon is meaningless, if the agreement under which they are operating allows free and unrestricted access to Dublin to all airlines, including those not serving Ireland at present. The position, therefore, is that if the Government is determined on change, it is obvious that any change in the present stopover policy must be done on a controlled basis, necessitating detailed renegotiation and agreement with the Americans in advance of any changes being made.
Apart from the transatlantic issue, it is essential that any Aer Lingus rescue plan must underline its commitment to Shannon Airport by developing an effective business service to London. The airport needs a much earlier departure time to London than the present flight, which is too late for people planning a day's business. Shannon should have a direct service to northern Europe. Given, for instance, that 870,000 Germans came to Ireland last year, and that most of those want to go to the west of Ireland, a direct service to Shannon is the most sensible way of servicing this market.
The Minister did not outline a cohesive development plan as to how Shannon, given that there may be changes, is to sustain itself, grow and compete on an international market. I fail to understand, if the Shannon stopover policy is wrong, how reversing it and creating a Dublin stopover policy will improve the position. That is an illogical statement for the Minister to have made this evening and it is not something he will be able to sustain and get away with. The Minister and Aer Lingus must examine the precise objective in reversing a stopover policy to Dublin instead of Shannon. In effect, that is what the Minister is stating. In a broader context, nothing was said about the opportunities that should be opened up for Shannon as an important airport.
Aer Lingus needs to secure a partnership arrangement with another international airline. Given worldwide trends in aviation and the general trend for airline amalgamation and partnership, it is essential for Aer Lingus to obtain a partnership arrangement that will allow it develop new markets. Because of an ideological problem with the Labour Party, the Minister will not go the whole distance on this debate. It is clear by any yardstick that if the plan is put in situ and agreed by all sides that Aer Lingus can survive, that that would only be the beginning in regard to the development of Aer Lingus. It will immediately have to seek a cross-over relationship in terms of sharing with another airline or a partnership arrangement, a deal with international consequences. That will immediately have to be put on the table.
Are we to put the Aer Lingus workforce through the same trauma they experienced in the past few weeks and will continue to experience in the next few weeks and months? That is a legitimate follow-on from this discussion but not necessarily in the context of this debate because who would want to form a partnership with Aer Lingus in its present circumstances? However, that issue is relevant in terms of the development strategy of Aer Lingus as an airline and the Minister failed to deal with that issue. He is running away from the issues involved.
I thank Deputy Cullen for allowing me to share his time. Aer Lingus has an accummulated debt of £540 million, more than £.5 billion and is losing approximately £1 million per week. The most serious indictment of its problems is that even on its busiest route — Dublin-Heathrow — which carries 1.5 million passengers per annum, it loses more money with every additional passenger it carries. That illustrates clearly the seriousness of the company's problems. If it were a private company it would have ceased operations long ago. The present state of Aer Lingus is a dreadful indictment of all those who have had responsibility for it recently. If we are to solve the problems of Aer Lingus we can only do so from a national interest point of view. It should not be a question of whether one is pro-Dublin, pro-Shannon or pro anywhere else. If Aer Lingus goes under, Shannon will go under; if Aer Lingus goes under it will be a question of whether or not we can fly Ireland direct, not to mention fly Dublin or Shannon direct. There are a number of matters which should be stated clearly in this debate.
I regret that the Cahill plan has not been published, but I welcome the fact that at last a plan is being formulated. To be fair to the Minister, he has the capacity and determination to see that plan through and it is important that we realise that this may be the last opportunity to sort out that airline's difficulties. If we miss this opportunity, we will pay a heavy price for doing so.
I am no aviation expert and I do not intend to repeat much of what has been said. However, there is an onus on all of us not to play party politics on this issue and where we disagree we should put forward alternative points of view and make alternative suggestions. I acknowledge that in respect of some sensitive commercial information — although I believe that is widely available — it may not have been possible to publish the plan in full, but otherwise it is regrettable that the Cahill plan has only become available by way of leaks of one kind or another or through a careful synopsis drawn up by the Minister.
A number of factors caused Aer Lingus's difficulties — in the first instance, bad management. In the late 1980s Aer Lingus became paranoid about Ryanair. It followed Ryanair into the regional airports and made sure neither of them succeeded. Aer Lingus became paranoid about Ryanair flying passengers to London and started serving meals on the flight. The Dublin-Heathrow flight takes exactly the same length of time as it does for my family to make a bus journey from Newcastle to Dublin centre city and not even the most left wing Deputy would suggest that the passengers travelling from Newcastle to Dublin should be given a meal en route. The obsession with trying to get rid of Ryanair caused many of Aer Lingus's problems and I regret that very much.
Aer Lingus flies into the premier hub in the world and still loses money on every single passenger. That begs many questions. We should not forget about the Aer Lingus Holidays disaster and so on. If we are to put this company right we must look at what has caused the problems and ensure that the mechanisms are in place to prevent such disasters recurring. A total of £17.5 million of taxpayers' money went astray in that Aer Lingus Holidays disaster and nobody has been prosecuted. Why not?
The decision to lease two aircraft, which were to fly to Los Angeles and that are sitting at Dublin Airport costing $750,000 a month, is another disgrace, another example of bad management and of the company going down the tubes. We have to address these fundamental problems. While there have been substantial changes in the management of Aer Lingus we cannot expect the workers to make all the sacrifices. One group of people not responsible for the problems of the company are the employees. If there are bad work practices, if there is gross over-staffing, that is the responsibility of those charged with looking after Aer Lingus.
There has been much play by the Labour Party about selling the family silver. However, a family that cannot afford bread and butter cannot afford the obscenity of having silver. It is as simple as that. We cannot expect the taxpayer to put in all the equity. I know that distress sales, fire brigade sales, never make much money. However, we have to organise the orderly disposal of Aer Lingus's non-airline assets and that is where most of the equity will have to come from for the future. I see no great advantage to the Irish taxpayer, or to the average Aer Lingus employee, in holding on to the Copthorne Hotels which have a book value of £216 million, apparently a real value of £96 million. If that money had been put in the bank last year it would have made more for Aer Lingus than it did by operating and running the hotels. In addition to providing much needed equity, the disposal of such assets would allow the management to concentrate on the core business which is air transport. The management will need all its time and energy to turn this company around. If it is to do that it will have to concentrate exclusively on its core business.
The Minister did not say much about redundancies. I understand that there are 4,000 people employed in the airline. As only about 100 redundancies are to be made in the United States, we are expecting more than 1,200 redundancies in Ireland out of the 4,000 employees. That is more than 25 per cent of the total staff in the airline. I wonder how realistic it is to hope that we will get these as voluntary redundancies. Just over 400 employees in Aer Lingus are over the age of 50. I do not believe the management will be able to get the redundancies by way of voluntary agreement. Many people have compared Aer Lingus to Waterford Glass where the trade unions said one thing while the employees were queueing up for the redundancy package. The Aer Lingus workers are far more realistic. They realise that there are no alternative job opportunities available. I do not believe it will be possible, never mind easy, to get these redundancies through voluntary agreement. I wonder what the Minister's attitude to that will be?
I agree with Deputy Cullen in regard to the role of the banks. When it came to the Goodman company and GPA the banks were forced to restructure the loans. Why can the banks not be forced to restructure these loans? Is it good enough that the banks should walk away from their responsibilities here. They took the risks. As I understand it only £23 million of that £540 million debt is secured; the rest was not given on the basis of any security. The banks are in a high risk business and they too will have to be part of the restructuring proposals. We cannot expect the taxpayers to continue to dip into their pockets for more money. In the case of the ICI debacle a few years ago, I did not object to the money being provided but it was regrettable that the State took no equity in that bank at the time having put in more than £200 million.
In regard to a partner for Aer Lingus, I believe a partner will only come the way of the company when it gets its house in order. The Malév airline in Hungary, emerging from communist rule, attracted huge private sector interest because it was well run and had a strategic plan. Aer Lingus does need an international partner if it is to have opportunities to develop into the future.
The way the Labour Party played politics with Aer Lingus during the last general election was a disgrace. When the leader of that party addressed the workers of Aer Lingus in the hanger he knew the consequences of what he was saying. He should realise that the difference between a halo and a noose is a mere eight inches. The Aer Lingus employees were betrayed and I do not say that in any party political sense. I went to a meeting recently where, as those who were there will agree, I probably said more difficult and unpalatable things than any members of the Government party who spoke on that night. I am not trying to play politics or be all things to all men, but an air of unreality was brought into this whole debate by the carry on of the Labour Party during the general election. It is not good enough for the Labour Party to keep their heads down and their Members to tell us that if a free vote were allowed, they would do one thing while they let the present Minister carry the can for everything. That is not fair or appropriate. I would like to hear from the Labour Party in relation to that. It is not good enough that they should keep their mouths shut and bury their heads in the sand. This problem could have been sorted out a long time ago if there had been more honesty and realism in relation to this.
The Deputy's party had an opportunity to do something about this matter.
The Deputy in possession, without interruption.
The Minister mentioned courage. He has the determination and the capacity to turn Aer Lingus around. I wish him well in that task which will not be easy. He will have to bite the bullet. If redundancies do not come through voluntary agreement, I wonder what the Minister's alternative will be. How will he achieve the £15 million reduction in operational costs if he does not get the £34 million pay-roll reduction annually? Will the Minister clarify that when responding? By the time this House returns after the summer it will be too late. Time is running out and all the parties to this dispute must play their part. I know the employees are more than anxious to play their part. Their request for preferential shares should be granted. I agree with worker participation but, more important, if the morale of the workforce remaining after the redundancies are obtained is to be such as to allow the airline to succeed and thrive, we will have to allow the workforce to gain from any profit which might come the way of the airline as a result of the restructuring and reorganisation.
In my brief contribution I wish to point out that in recent times the workforce of Aer Lingus has been exploited cynically by the Government parties for political reasons. In the recent past the greatest offender has been the Labour Party who promised the sky and delivered hell for the employees and their families.
The Deputy does not know what was promised.
Plenty was promised. This was matched in the recent past by the negligence of the two previous Ministers, Deputies Geoghegan-Quinn and Séamus Brennan. While I agree with much of what Deputy Harney said, I would remind her that her party was in Government for much of the time Aer Lingus was going into decline and cannot exempt themselves from responsibility. I agree with the Progressive Democrats that the banks must assume some of the burden. The taxpayer is being asked to put £175 million into Aer Lingus in the next few years, £43 million of which will go to pay for redundancies and the remainder going straight to the banks by way of repayments. Therefore, the banks have a responsibility to shoulder some of the burden of salvaging Aer Lingus.
There will be 1,200 redundancies in Aer Lingus and that will mean approximately 6,000 human beings here facing hardship, worry and despair in the next few months. In attempting any rescue package consideration must be given to Aer Lingus's present operating costs. The amount of money paid to Aer Rianta by Aer Lingus must also be questioned and I would ask the Minister to consider this position. Aer Lingus pay in excess of £20 million per year to Aer Rianta; indeed, the figure is nearer £26 million. Aer Rianta pay the Government in excess of £15 million per year by way of investment.
There is no domestic aviation strategy at present. Tomorrow night I will ask the Minister what is the strategy for regional development. At present Shannon is being downgraded, Farannfore is being upgraded and jobs are at risk at Cork Airport. There was a full meeting of Cork Airport staff this morning.
