Dáil Éireann debate -
Tuesday, 14 Dec 1993

Vol. 437 No. 2

Air Companies (Amendment) Bill, 1993: Second Stage.

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

I move:

"That the Bill be now read a Second Time."

Let me first set the policy background against which this Bill was drafted. When I was appointed Minister for Transport, Energy and Communications in January of this year it quickly became clear to me that Aer Lingus was facing a rapidly deteriorating financial situation. In response to this and following consultation with my Government colleagues, I announced the appointment of an executive chairman and gave him executive responsibility to take whatever action was necessary, with immediate effect, to restore the company to commercial viability.

Both the executive chairman and I felt that a partnership approach was essential in the difficult task facing him. In pursuance of that, a special task force was established, with almost 40 consultative working groups, to make recommendations on every aspect of the Aer Lingus system and operations. In addition, a company-wide open forum consultative process was initiated to facilitate input from staff. On 13 June last, the board of Aer Lingus presented to the Government, its shareholder, a strategy to return the company to commercial viability, entitled Strategy for the Future. The strategic plan submitted by Aer Lingus in June provided the Government with an accurate and up to date assessment of the scale and nature of the company's problems. It indicated that there were severe financial difficulties and that operating losses were running at unprecedented and unsustainable levels.

Group profits of £28 million in the year ended 31 March 1990 have been transformed into losses of £188 million including restructuring costs in the year ended 31 March 1993. Shareholders' funds have fallen from £443 million to £93 million in the same period. In the Strategy for the Future, they are forecast to fall to £36 million in the current financial year. In fact, the group has been losing over £1 million a week. The annual accounts for the year ended 31 March 1993, published in October, confirmed the picture painted in Strategy for the Future.

The groups's main problems have been in the air transport division which has had significant losses over the past four years. In addition, the profit performance of the other divisions in the group had deteriorated progressively as a result of increased competition and the international economic recession. This meant that they were incapable of supporting the losses in the core airline business and the full impact of the airline's losses was no longer cushioned by profits generated elsewhere.

The judicious disposal of a number of assets, which are not essential to the core business was also an intrinsic element of the strategy. In keeping with the partnership approach to which I referred earlier, the Cabinet sub-committee on aviation matters met the Irish Congress of Trade Unions on 22 June last to discuss the strategy. This meeting was a very constructive one. Both sides recognised that the underlying financial position of Aer Lingus was very grave and unsustainable and that the core airline business would have to be returned to operating viability. All sides were committed to achieving the essential reduction in employee numbers which this entailed through a voluntary scheme.

It was agreed that the question of 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 being asked of the workforce at present.

Finally, it was also agreed that a special enterprise development unit would be set up right away, to consist of representatives of the unions and Aer Lingus, together with the IDA, Fingal County Council, FÁS and the Department of Enterprise and Employment, to identify new employment opportunities within the Aer Lingus structure.

On 6 July 1993, the Government decided to endorse the broad strategy set out in Aer Lingus's strategic plan. I am pleased to say that very substantial progress has been made in implementing Strategy for the Future since it was approved by the Government in July.

I would now like to turn to the question of Shannon and where it fits into the Aer Lingus strategy. Aer Lingus and Shannon have grown up and developed together to such an extent that Aer Lingus accounts for 70 per cent of North Atlantic scheduled services through Shannon, despite the advent of other scheduled services in recent years.

However, for a variety of reasons such as seasonality and intensive competition over London, the economics of a transatlantic operation for Aer Lingus are very difficult. The company lost £12.9 million on its transatlantic operations last year. Without the changes proposed in its Strategy for the Future, it would have lost a further £20 million this year. This was clearly unsustainable. Aer Lingus would have been forced to pull off its transatlantic routes altogether if action had not been taken.

Without Aer Lingus, the future of Shannon would be very bleak indeed. However, as I have said before in this House, without Shannon, the future of Aer Lingus on the transatlantic route would also be bleak. Aer Lingus needs Shannon just as much as Shannon needs Aer Lingus.

The Aer Lingus package for Shannon is both imaginative and progressive and has the full support and approval of the Government. It has that support and approval because it represents a major commitment on the part of Aer Lingus to Shannon.

For the first time ever Shannon will have its own transatlantic operation based in and managed from Shannon; Aer Lingus transatlantic services will stop and start at Shannon. There will be a year round daily New York service and a dedicated Shannon-New York service and in the peak summer season. There will be no change in the current Boston service. Aer Lingus is examining ways of developing new business, including significantly lowering fares from the US, in order to extend the peak summer season and will work closely with local travel and tourism groups in the Shannon region. In addition, other marketing opportunities for the new low cost airline operation at Shannon will be exploited for other business in all markets, particularly in the off peak period. Aer Lingus will base an extra aircraft at Shannon to operate a new early morning Shannon to Dublin service, greatly improving the service out of Shannon by providing new connections to six European and three UK-provincial destinations.

Let me now turn to the renegotiation of the Ireland-US Air Transport Agreement. There has been some criticism that the amendment to the agreement heralded the end of Shannon as we know it. Such criticism is ill-informed. The opposite is the case. Had we not succeeded in getting the US authorities to agree to the amendment, there would have been a complete "open skies" regime between the US and Ireland with no requirement on US carriers to stop at Shannon ever again. This is because under the previous agreement signed in 1990, once one carrier operated a direct flight to Dublin, all carriers would be entitled to by-pass Shannon. Thus, if the transatlantic proposals in the Aer Lingus strategy had been put in place without the bilateral agreement having been amended, the Shannon stop would have disappeared completely and Shannon's status would have been eroded.

It is worth remembering here that the US Government's stated policy is one of seeking "open skies" agreements with all countries. When the amendment to the Ireland-US Air Transport Agreement was being signed in 1990, the then US Ambassador warned that, in the next air transport agreement between the two countries, the American Government would insist on abolishing the mandatory stop at Shannon. This was the position of the US authorities upon entering the recent negotiations.

No one should underestimate the difficulties which faced the Irish negotiating team in persuading the US authorities to forego the rights they automatically had under the old bilateral agreement. I personally travelled to Washington to meet the US Secretary for Transportation to impress upon him the importance for this Government of a vibrant Shannon Airport for the mid-west region.

Following my intervention, the US side agreed to an early resumption of talks, despite its very heavy schedule. We ended up with an agreement that fully meets the requirements of the Aer Lingus strategy and at the same time provides the basis for Shannon Airport to grow and prosper. Any US airline which operates a direct flight into Dublin must also put one into Shannon. It is widely recognised as a sound deal and I am heartened by the constructive attitude of tourism interests in the mid-west region towards the new agreement.

I am confident that the evident energy and commitment of the workforce in Shannon Airport and the people of the mid-west region will ensure that every opportunity for growth available to the airport and the region under the total Aer Lingus package for Shannon will yield significant benefits in terms of wealth and job creation.

On the question of alliances, the Strategy for the Future highlights the fact that Aer Lingus operates from a position of market strength on all its core routes. The airline has had discussions with a number of American and European airlines over the past year or so about the possibility of some form of joint venture or alliance. No proposals have been brought before me to date for a total operating alliance.

Aer Lingus is confident however that, when the route network is restored to profitability, the airline will be in a position to strengthen both its market and financial positions through alliances with other carriers feeding into the Aer Lingus system. This could be done in a number of ways such as cross-shareholding, costsharing deals or joint ventures.

Some marketing alliances have already been entered into. Earlier in the year, Aer Lingus concluded a memorandum of understanding regarding a worldwide interline feed agreement with British Airways on passengers and a similar agreement has recently been concluded on freight.

While continuing to search out strategic alliances, Aer Lingus believes it may have to wait until the strategy is fully opertional and the airline has achieved the necessary financial targets. Clearly, this will place it in a much stronger position in seeking a partner.

As the House is aware, any investment by the Government in Aer Lingus must be approved by the European Commission. I indicated in this House last July that I would personally seek, as a matter of urgency, formal clearance from the Commission for the Aer Lingus strategy.

The European Commission may decide in certain cases that aid may be granted to individual airlines which have serious financial difficulties provided certain conditions are met. One of these conditions is that the aid must form part of a programme, to be approved by the Commission, to restore the airline's financial health so that it can, within a reasonably short period, operate viably without further State aid. In other words, the financial assistance must be once-off in nature and must form an integral part of a restructuring programme to restore the financial viability and competitiveness of the airline. With this in mind, the Government forwarded the formal notification of the proposed investment in Aer Lingus to the European Commission in August of this year. Prior to that, I had met with the relevant Commissioners. Officials from my Department also had and continued to have a series of meetings with the Commission officials.

We have repeatedly explained to the Commission, at both ministerial and official level, the importance of having this matter finalised in order to enable the first tranche of equity to be invested before the end of the year. The Commission has indicated to us that it fully appreciates the urgency of the matter and has assured us that it is doing everything possible to expedite its examination.

The Commission formally considered the notification at its meeting on 13 October 1993 and, as expected, decided to open the procedures under Article 93 (2) of the Treaty of Rome with regard to the proposed investment. The Commission invited the Government to submit its response to the Commission's comments on the matter within 30 days. Other member states and interested parties were invited, by means of a communication published in the Official Journal of the European Communities to submit their comments on the proposed restructuring. These are now being considered by the Commission.

The Government remains confident that its investment in the airline will take place within the planned timescale and that Aer Lingus will be able to carry out its future operations in a commercially viable manner as envisaged in the Strategy for the Future. It would be inappropriate for me to comment on the details of discussions between the Government and the Commission. However, I can assure the House that the Government is vigorously pursuing the matter with the Commission with a view to ensuring a satisfactory outcome.

An integral part of Aer Lingus's strategy is that the airline's annual operating costs must be reduced by £50 million in order to restore it to commercial viability. The Government made this a condition of providing £175 million in equity. The Government did not stipulate how the savings should be achieved. We clearly stated that this was a matter for negotiation between the management and unions. To achieve these cost reductions the strategy envisaged a significant level of redundancies, both in the airline and in TEAM Aer Lingus, as well as other internal cost savings. Negotiations took place between Aer Lingus management and the unions on the implementation of the cost cutting measures in the strategy. These negotiations were vigorous and forceful on both sides. I would like to take this opportunity to pay tribute to the negotiating teams who worked long and hard to achieve agreement in a fair and reasonable way. I would also like to commend the Labour Relations Commission staff on the very professional facilitation they provided in the negotiation and conciliation process.

I welcome the outcome of the staff union/ballot which by an emphatic majority accepted the Aer Lingus Strategy for the Future package. The acceptance of this package provides a springboard for sustained viability and enhanced prospects for additional profitable business. In particular, I acknowledge the very substantial efforts made by the company and staff to overcome the very considerable difficulties which have confronted them.

Since the early 1970s, Aer Lingus pursued a strategy of investing in a range of diversified businesses as a means of underpinning the notoriously cyclical airline business. These businesses had provided profits in buoyant market conditions, However, these ancillary businesses, particularly hotels, have increasingly been subject to the same cyclical downturns as the airline itself, thus weakening their ability to cushion the airline in recessionary times. They also tend to have large capital requirements which compete with those of the airline and which can no longer be met from group resources.

In the current circumstances, it is time for Aer Lingus to divest itself of many of these businesses, so that the group can strengthen its currently weak balance sheet and management can concentrate its energies and attention on the core air transport business. Accordingly, the judicious disposal of a number of assets which are not essential to the core business is an essential part of the Strategy for the Future. This programme of disposal of non-core assets will be an orderly and not a fire-sale one. I must emphasise that the sale by Aer Lingus of any of its subsidiaries is primarily a commercial matter for the company. Some subsidiaries, such as TEAM and Airmotive, have considerable synergy with the airline. In these cases, joint venture partnerships, to assist with the development of the companies, are the preferred option of Aer Lingus.

The Bill has three principal objectives: to authorise the Minister for Finance, as shareholder, to inject £175 million equity into Aer Lingus; to organise the group's corporate structure; and to allow for employee profit sharing schemes.

The Aer Lingus Group does not exist as a legal entity. Aer Lingus, the airline, comprises two separate legal companies. Aer Lingus plc was incorporated in 1936 and operates air services within Ireland and between Ireland and Europe. Aerlínte Éireann plc was incorporated in 1947 and operates air services between Ireland and the United States. Although separate legal entities, the two companies share a common management and board of directors. The services of both companies are integrated under the marketing name of "Aer Lingus" and the annual accounts of the two companies are published in combined form.

The existing corporate structure of the group, with all its subsidiaries, has developed largely for historical reasons. While it may have been convenient in the past, it is now more of an encumbrance which causes confusion. There are significant disadvantages in the existing corporate structure. The audited accounts of the two companies, Aer Lingus plc and Aerlínte Éireann plc, suffer greatly from a lack of transparency. This causes difficulties for the airline in its dealings with financial institutions.

In addition, there is no rationale for the present distribution of the various subsidiary companies between Aer Lingus plc and Aerlínte Éireann plc. Ownership of the subsidiaries was largely determined by tax considerations at the time each company was established. The pattern of ownership of subsidiaries has the effect of adding to the confusion about the group structure. The need to simplify the structure and to make the relationships between the companies in the group more transparent is all the more urgent now due to the present financial difficulties. In fact, the Strategy for the Future could not be successfully implemented without a corporate restructuring.

In recent years, an exhaustive examination has taken place of options which would address the serious shortcomings of the present structure with a view to identifying the most appropriate corporate structure for the group. The Strategy for the Future proposed significant changes in the group's structure.

The strategy envisages a reorganisation of the group into four separate companies: Aer Lingus, Aer Lingus-Shannon, Aer Lingus Express; and a holding company for support and subsidiary companies. Aer Lingus will serve Ireland, the UK and Continental Europe. Aer Lingus-Shannon, based at Shannon, will provide direct services to the US from Shannon directly and from Shannon through Dublin on current routes.

In keeping with its strategy of competing in all segments of the market, Aer Lingus intends to develop the concept of a low fare-low cost carrier, separately branded as Aer Lingus Express, to compete mainly in those segments of the UK market which are purely cost driven. I will refer to this later.

Subsidiary and support companies within the Aer Lingus Group will become independent profit centres responsible for their own cost structures.

This Bill provides for the restructuring of the group by the establishment of a new company, Aer Lingus Group plc, as a holding company for the Aer Lingus group of companies. This holding company will be designated as an air company for the purposes of the Air Companies Acts. The Minister for Finance will transfer his shares in Aer Lingus plc and Aerlínte Éireann plc to Aer Lingus Group plc in exchange for shares in Aer Lingus Group plc. Aer Lingus and Aerlínte will then be wholly owned subsidiaries of Aer Lingus Group plc. Aerlínte will effectively become Aer Lingus-Shannon.

The restructuring will preserve the essential character of the group, including the primacy of the airline business. According to the Memorandum of Association of the new holding company, Aer Lingus Group plc, the first object of the company will be "to carry on and foster the business and pursuit of air transportation in all forms, both within Ireland and internationally".

The matter of Aer Lingus Express has been a source of some comment. There have been concerns expressed that Aer Lingus might use part of the £175 million to establish Aer Lingus Express. I want to reiterate what I said in this House during Question Time on Thursday last. It is envisaged in the strategy that Aer Lingus Express will be a stand-alone company operating on a fully commercial basis. The Government will ensure that the Aer Lingus Express operation will be put in place only when the company can demonstrate in full detail, on both costs and revenues, that such a low cost operation can operate profitably in a competitive market. Aer Lingus will be required to submit a comprehensive business plan as part of the approval procedure.

I have consistently made it clear that the Government's proposed investment in Aer Lingus is an essential part of a once-off financial restructuring package designed to restore the airline's commercial viability within a short period. There is no question of the investment of £175 million being used to subsidise lossmaking routes.

The Bill provides for the Government's proposed equity investment in Aer Lingus. The Minister for Finance will be authorised to take up shares to the value of £175 million in Aer Lingus Group plc. As stated, the capital investment will be made on a staggered basis, with £75 million in 1993, £50 million in 1994 and £50 million in 1995. Section 2 provides that the share capital of Aer Lingus Group plc shall be such amount as may be determined from time to time by the Minister for Finance after consultation with the Minister for Transport, Energy and Communications. Section 3 enables the Minister for Finance to exchange his shares in Aer Lingus plc and Aerlínte Éireann plc for shares in Aer Lingus Group plc. It also provides that Aerlínte Éireann's shares in Aer Lingus plc shall be exchanged for shares in Aer Lingus Group plc. These shares will then be redeemed by the holding company. Section 4 enables the Minister for Finance to subscribe for further shares in Aer Lingus Group plc up to £175 million.

The other main elements of the Bill include section 5 which provides for employee profit sharing schemes. Sections 6 and 7 provide that Aer Lingus Group plc shall be an air company within the meaning of the Air Companies Acts, 1966 and 1976, and that Aer Lingus plc and Aerlínte Éireann plc shall no longer be statutorily designated as air companies. Section 8 provides that the number of directors of Aer Lingus Group plc shall be 12 of whom four shall be worker directors elected under the Worker Participation (State Enterprises) Acts.

Section 9 provides that the chairman and directors of Aer Lingus plc and Aerlínte Éireann plc and any other such subsidiaries of Aer Lingus Group plc as the Minister may direct, shall be appointed by the Minister or by the Chairman of Aer Lingus Group plc with the consent of the Minister. This also applies to Aer Rianta which is the second designated air company.

Section 13 amends the Worker Participation (State Enterprises) Acts, 1977 and 1988, to ensure that the provisions of those Acts apply fully to Aer Lingus Group plc. Provision is also made to ensure that the parts of the Worker Participation (State Enterprises) Act, 1988, dealing with worker participation below board level, continue in Aer Lingus plc and Aerlínte Éireann plc.

Section 14 provides for the extension to air companies and their subsidiaries of control on (1) the establishment or acquisition of subsidiaries; (2) the amount of investment in undertakings other than subsidiaries and (3) borrowing, by specifically extending the control to subsidiaries.

Finally, section 16 provides that all moneys required by the Minister for Finance to meet sums payable under this Bill shall be paid out of the Central Fund. The Bill provides that the money shall be paid to a special account and issued from that account subject to such terms and conditions as the Minister for Finance may determine.

In accordance with the Government's decision in the matter, the payment of the second and third tranches will be subject to satisfactory progress being made by Aer Lingus on the implementation of the Strategy for the Future. Some commentators have claimed that the equity investment of £175 million is insufficient to secure the future of the airline. Such claims are unsubstantiated. The figure of £175 million is based on detailed financial projections and market analysis. It is an integral part of the Strategy for the Future which has been formulated by the management of Aer Lingus and approved and submitted to me by the board.

As I stated, following a meeting between the Cabinet Sub-Committee on Aviation Matters and the Irish Congress of Trade Unions on 22 June 1993, the Government announced that the question of participation by Aer Lingus employees in the future success of the company should be dealt with as a tangible form of recognition for the additional contribution being asked of the workforce. The employees of Aer Lingus have contributed greatly in the past to building up the airline. The Government is aware that a stronger commitment than ever before will be required from all of the staff of Aer Lingus, throughout the organisation.

On 17 November 1993, agreement was reached between the Government, the Irish Congress of Trade Unions and affiliated unions representing employees in Aer Lingus on an imaginative arrangement for participation by employees in the company. Under this agreement, 10 per cent of the profits before tax will be allocated to the employees so that the employees can receive the equivalent of 10 per cent of the issued share capital of the company, split 50:50 between shares and cash.

The Government has agreed to issue 5 per cent of the shares of the company in issue to the employees up front, on a partly paid up basis in return for a nominal payment. The balance of the payment for the shares will be paid out of the annual distribution of profits. At the discretion of the employees, some or all of the 5 per cent cash payment may be used to accelerate the payment of the balance of the share price. Distribution will cease when the threshold of 10 per cent of the issued share capital has been reached. The Bill gives effect to this agreement by providing for employee profit sharing schemes.

The opportunity is being taken in the Bill to provide for the statutory application to the two air companies, that is, Aer Lingus Group plc and Aer Rianta, of controls which it has become the practice to insert in recent legislation establishing semi-State bodies. These controls are, for the most part, already being applied to the air companies under the guidelines for semi-State bodies approved by the Government. These relate to the establishment or acquisition of subsidiaries, the investment in undertakings other than subsidiaries and borrowing by subsidiaries.

The House will be aware from my period as Minister with responsibility for the Labour portfolio of my full commitment to a partnership approach in the governance of our semi-State bodies. As I said in my opening comments, I felt a partnership approach was particularly important to address the major challenges facing the airline. I have never believed that either the Government or the management of the company had a monopoly of wisdom. I am a firm believer that people at operative level have a vital contribution to make on how the company should, and must, meet the competitive challenges in aviation. I am, therefore, complying in full with the Worker Participation (State Enterprise) Acts of 1977 to 1991. Section 8 of this Bill provides that at group board level, where all the strategic policy decisions for the business will be taken, the provisions of Worker Participation Acts will apply. Not only that, but the section also provides that existing worker directors appointed by virtue of the relevant Acts will be appointed to be directors of the group board for the remainder of their terms.

At the Deputies are aware, the worker participation legislation extends far beyond representation at board level. I am equally committed to participation within the company and notably effective participation right down to operative section levels. In my discussions with employee representatives, under the auspices of ICTU, on participation by staff in the equity of the company I specifically undertook that structures for participation by employees within the company would be strengthened. The work practice changes and flexibility so essential for the development of the company and keeping it competitive will require increasing input by the company's employees.

Clearly, there must be substantial overlap between the group board and the composition of the main operating company boards. This is important both for consistency of policy approaches and for the necessary continuity required at present in the company. Even though it is my intention that this substantial overlap in the composition of the boards of the company will apply, it will also allow me the discretion to appoint other members to the main operating subboards and notably professional representatives of employee interests. I had always intended that representative employee interests would have a part to play on the boards of the main airline operating subsidiaries.

I want to turn now to the issue of the Government's aviation policy. The direction of change in world aviation is irreversibly towards greater liberalisation and free trade. The rate at which this will be achieved is still uncertain. The general thrust of the Government's aviation policy has been and will continue to be to seek the maximum possible opportunities for Irish airlines to benefit from this movement towards free trade.

The Government's objectives for Irish aviation have been and will remain fixed for some time. However, as already indicated, Government policies for achieving them have been continually adapted to changes in the international aviation market. Further changes will be necessary but these will be implemented within the current consistent policy framework which should allow Irish operators in the aviation sector to plan ahead with some certainty.

The Government, in adapting and developing its policy framework, will ensure that it is sufficiently flexible to cater for the continually changing needs of the industry's customers and the range of services provided to meet these needs, and provides opportunities for public and private sector operators to earn an adequate return on capital invested, both as a reward for risk taking and to finance the continuous increments in investment needed to maintain the competitiveness of the industry vis-à-vis our competitors.

As I have stated in this House before, it is in Ireland's interest to have Aer Lingus as a substantial airline to serve trade, tourism and overall national needs. An efficient system of access transport is so crucial to the economy that we cannot risk becoming dependent on airlines based abroad for air services linking Ireland with our European partner and the rest of the world. Airlines which are not based here in Ireland are less likely to be willing to provide the services required with a frequency and convenience which could replace a national carrier. Furthermore we need a critical mass of aviation based in Ireland if the sector is to achieve its full development potential.

In conclusion, I wish to say that the board, management and staff of Aer Lingus have demonstrated their commitment to the company and their co-operation in reaching agreement on the implementation of the Strategy for the Future. With this Bill before the Oireachtas, the Government is implementing its commitment to the process. We stated that, once the necessary decisions were taken by management and the workforce, we would support the company in so far as we could contribute. The sum of £175 million represents a major injection of scarce taxpayers' funds. The Government is, as shareholder, now making its contribution to returning the airline to profitability and helping to secure its long term future. In doing so, we will be fulfilling our commitment in the Programme for a Partnership Government to ensure the commercial future of Aer Lingus as part of overall air transport policy.

I commend the Bill to the House.

Mr. Noonan

(Limerick East): I thank the Minister for explaining fully the intent of the Bill, setting it in the context of the Government's aviation policy as he sees it and referring to the history of Aer Lingus. He has brought a Bill before the House which will allow the Government to invest £175 million by way of equity in the company this year, next year and the year after.

I should like to share my time with Deputy Nora Owen.

An Ceann Comhairle

Is that satisfactory? Agreed.

Mr. Noonan

(Limerick East): I am glad the Minister set the Bill in the wider context of both aviation policy and the history of the disaster which almost occurred in Aer Lingus. This is really an enabling Bill which has been signalled for a long time. I am sure Deputies will be pleased to hear that I will not be calling a vote at 10.30 p.m. to oppose the Second Reading of the Bill. I have no objection to the principle of it. However, on Committee Stage I will tease out in greater detail the implications of some of the sections.

It is unfortunate that we have arrived at the point today where the taxpayer is being requested again to dig deep into his or her pocket for £175 million. The crisis in Aer Lingus has been predictable since at least 1989. A combination of procrastination by Ministers with responsibility for transport and the management of Aer Lingus has brought about a situation where Aer Lingus, if it was a private company, would be bankrupt. It had accumulated debts of £540 million and the last posted losses for a full year period were £188 million. That is catastrophic. The Minister has mentioned other unsustainable aspects of the balance sheet also which are equally catastrophic.

It is worth saying once more that those responsible were the Minister's immediate predecessors and the management of the day of Aer Lingus. Neither has been held accountable. If they are not accountable in any real managerial sense, at least they should be brought to book at the court of public opinion. It should be said again they did not do their job and the inadequacies were both political and managerial.

When I left the Labour-Fine Gael Government in 1987, Deputy Jim Mitchell had been Minister for Transport. Measures had been taken to rectify some problems in Aer Lingus. The company was trading profitably and it was a reasonably sound commercial operation. The tradition of political interference in the company had ceased. It was given commercial guidelines on which to operate and it was running smoothly. I realise external circumstances changed and that world aviation changed dramatically but there was no response from the Department of Transport when Deputy Séamus Brennan was Minister. I blame him substantially for what has occurred. The Minister's immediate predecessor, Deputy Geoghegan-Quinn, is less to blame; she was Minister for a very short time. She did begin to take action but then the election was called. In terms of criticism I am pointing the finger directly at the Minister of State, Deputy Brennan, because I do not think he did his job.

I do not believe the then management of Aer Lingus did its job either. This was a company of which we were all proud, a company whose workers had given great service over the years, a company that was almost synonymous with the national identity. The shamrock on the tail of the plane was as much a symbol of Irish identity as the national flag or the national anthem. Yet in a very short period of time that company was brought to a position where if it was not supported by the State, and if it had been a private company, there was no doubt the creditors would have foreclosed and it would have gone under. That is a disaster. We do not yet know precisely who is ultimately to blame because there has been a kind of tennis match going on between the Department of Transport, Energy and Communications and the then management of the company, each blaming the other.

The crunch issue was not the transatlantic service, nor the fact that Aer Lingus was over-manned or its productivity was low. These, of course, were important issues but the crunch issue was that Aer Lingus decided it would operate a monopoly on the Dublin-London route and that it would wipe out its competitors by below cost selling. It was going to take British Midland and Ryanair out and it operated a policy which made no commercial sense. There must be a schedule of fares on any aeroplane that leaves the ground. The company will make a profit on some of the seats and make losses on others but it is not possible to run a profitable air company if every seat on every plane on the dominant route is being sold at a loss. That is what took place over a significant period.

It has never been adjudicated by the Minister or anybody else whether it was the management of Aer Lingus or his Department which caused the problem. The then management of Aer Lingus is openly briefing people in this House that the Department would not allow it raise the fares. The Department is saying the exact opposite and in reply to a parliamentary question last week the Minister said that Aer Lingus got every fare increase requested since 1991 and that it got the bulk of the fare increases requested between 1989 and 1991.

This matter needs clarification. I am not looking for scapegoats but when so much money was lost over such a short period of time, when a national asset such as Aer Lingus was put at risk, when the jobs of so many people were put at risk and when so many people had to take a redundancy package, in terms of accountability — and ultimately a commercial State company must be accountable to this House in one way or another — somebody must inform the House why this situation occurred.

Equally scandalous were the promises made, particularly by the Labour Party in the course of the last election, which was only 12 months ago. I can remember the television pictures of the Tánaiste in a hangar in Dublin Airport assuring everyone who wanted to listen that unlimited equity was available, that there would be no cost cutting, no need for redundancies and that everything in the garden was rosy. Unfortunately, the Aer Lingus workers, under the stress of the pressure that was on them at the time, believed the promises. Of course, the promises were never met.

I complimented the Minister previously for taking action when he realised the seriousness of the problem. Unlike his predecessors, he did not procrastinate. He at least addressed the matter and appointed Mr. Cahill. I do not intend criticising Mr. Cahill, who had a difficult job to do, but I would like to compliment the negotiating teams who operated for such a long time and came forward with a result. That result is, first, large scale redundancies. People have lost their jobs. They got a reasonable package but they have lost their jobs and many of them have a long working life ahead of them. Their families have all the expenses of ordinary families in this city or in Shannon where redundancies are occurring and they have the mortgages, the school fees and so on to cope with. That should not be forgotten because when we are looking at balance sheets we very often forget the stress and the human tragedies that are behind them. A huge number of good jobs will go in Aer Lingus. They were the jobs of hard working, decent, honest citizens. It is unfortunate that it came to the point where those jobs had to go.

There is uncertainty about the future of TEAM Aer Lingus and it is a weakness in the Minister's speech today which I hope he corrects when he concludes the debate tonight. What is the precise future of TEAM? Are the jobs safe? Is there sufficient business in the order books to sustain employment? What does the future hold? Will the Minister come back in the spring to explain to us that there are difficulties in TEAM Aer Lingus through lack of work and that further action must be taken?

One of the major weaknesses in the Minister's contribution today is that he almost ignores the position of the subsidiaries in the company. I signalled to him last Wednesday that I would be raising this matter today and I would prefer to be given better information. I am not springing this on the Minister, he got a week's notice of my intention to raise the matter. He said that the package would consist of £175 million of equity to restructure the balance sheet and the cost cutting arising out of Mr. Cahill's plan but also that the ordered sale of the subsidiaries would be an integral part of the package and that the company would not be financially viable without it. He has developed that today to say that it will not be a fire sale; if it was, it would be over a long time ago.

What assurance can the Minister give to the people who are working in SRS in Shannon, for example? What assurances can he give to the people in Cara? What assurances can he give to the people in the Copthorne group? Many of them are based in the United Kingdom but the company has a responsibility towards those employees. The Minister has responsibility for their future. If we are to adopt a restrictive attitude, many of them are Irish citizens and they need assurances. It is not enough to be transparent in terms of what has been negotiated for the transport company. One must be transparent also in what is the intention in respect of the subsidiaries and of those employed in the subsidiaries. That transparency is not in the restructuring plan nor in the Minister's introductory remarks today.

So far as I can see the Minister has been totally silent on the ancillary services. What is the position with regard to them, on sales and catering and on baggage handling? I understand that at the end of the day the one group that voted against the restructuring package were the baggage handlers. Have they now come on side, what arrangements exist, what guarantees can be given that the ancillary services in their entirety will not be tendered out? I understood from the original terms of the restructuring package that they would stand alone from an accountancy point of view, that their costs and transactions would have to be transferred in a commercial sense. If I recall correctly, the Minister's promise extended to three years, but that then there was a suggestion that they would have to compete with other service providers tendering in. What is the position today? Where does that stand? Again the Minister was silent on that.

The Minister was quite lengthy in his explanation of the changes in the status of Shannon. I consider that whole business to have been politically inexplicable. We know the pressures that had come on from Dublin, we know of the counter pressures from Shannon. Nonetheless, it is just 12 months since the Minister's predecessor, Deputy Geoghegan-Quinn, said that, after an economic audit, it was quite clear that the balance of advantage lay with continuing the Shannon status as it was then. The present Minister, having appointed Mr. Cahill to be the supremo in Aer Lingus, came into the House for an Adjournment debate one evening in May and indicated that Mr. Cahill was to be allowed the full range of action with one exception — that he could not examine the status of Shannon. The two commitments frittered away over the summer. We were left in the position in which the arrangements for Shannon were changed dramatically. That was unfortunate. I do not intend going over that ground again. It has been said, and there is hardly any need to repeat it — that the changed status was a serious blow to the region I represent. But, when the Shannon status became part of the range of Aer Lingus activity that Mr. Cahill could examine, the commitment was that one flight in three would go direct to Dublin but, in the negotiation of the bilateral agreement, it ended up being one flight in two. Therefore, we have moved from a position in which last November the Minister's predecessor had an economic audit undertaken which indicated that the balance of advantage for the country as a whole was to keep the Shannon status as it was. When the present Minister appointed Mr. Cahill the balance of advantage was still the status quo. Then, some time during the summer, the balance of advantage was to have one flight in three go into Dublin directly but, by the time the bilateral agreement had been negotiated, it transpired that every second flight could go directly into Dublin. There does not appear to be much consistency of policy in that particular arrangement.

I note that the Minister today has given a kind of list of half promises to the people in Shannon because he knows, as well as I do, that Shannon has been relegated to the status of a seasonal airport. We know that, at best, it will be a very busy tourist airport for four months of the year and that, for the remainder of the year, there will be no direct flights to the United States from there. Of course, Shannon depends on Aer Lingus, it is tied to Aer Lingus like an umbilical cord, it would not survive without Aer Lingus, but the tourist industry in the west of Ireland would not survive without Shannon or without Aer Lingus either. Of course, there is another change afoot: as the Structural Funds are being spent on our roads network nationwide it is becoming quite clear that the catchment area of places like Shannon is becoming ever smaller.

If the direct flight to the United States is from Dublin people will drive from anywhere between Nenagh and Roscrea in the south and embark on the place at Dublin rather than at Shannon. I am glad the Minister has addressed that matter again but he has not answered any of my questions. There will be another day to rerun that issue but, as far as I am concerned, the status of Shannon has been relegated to that of a seasonal airport. At least I hope the Minister will give sufficient funds to the Shannon Task Force, who have been extraordinarily silent in recent times, to generate new business through that airport, a task which is very difficult at present.

I am glad the Minister set this Bill in the context of what is happening in world aviation. I am sure he is familiar with an article published in the Financial Times of 8 December 1993, under the caption, “Dinosaurs on the runway”, and above which appeared the following: “Small no-frills airlines are forcing the bigger, lossmaking US carriers to rethink their strategy, writes Richard Tomkins”. The article is quite interesting and I should like to quote briefly from it.

US airlines carried a record number of passengers last year: they also lost more than $4 billion. In the past three years, the industry has lost nearly $10 billion — in nominal terms more than all the profits it has made since the Wright brothers achieved the world's first powered flight in 1903. Despite windfall gains from a recent fall in jet fuel prices, the industry is heading for more heavy losses this year.

That demonstrates that the losses in Aer Lingus are not unique, when one sees what is happening in the United States and in Europe. It is also interesting, from an aviation point of view, that the argument being advanced is that the main reason for the losses now and lack of competitiveness with new, small airlines is that the hub and spoke method of air transport is proving to be highly costly and is no longer able to compete with the small carriers who fly kind of shuttles of high frequency on a particular route. I consider the Minister would be well advised — if there is an intention of hubbing Dublin Airport — to take a look again because the arguments of hubbing which were so fashionable over the past four or five years no longer withstand scrutiny. In terms of the productivity of airline staff, the fact that flights must arrive so close in time to each other and must depart again in different directions, means that the productivity is non-existent. What is now happening is that companies like the very small ones, such as South West Airlines, which operate south of Texas, are whacking the big companies and showing a profit, on a high frequency shuttle where there is no pre-allocation of seats, no pre-purchase of tickets, nothing except peanuts and a glass of 7Up served on the flight, yet getting people there. These companies are selling tickets at about a third of what their competitors are charging. If it is the intention of Aer Lingus Express to do likewise, certainly they will be able to take on the competition but I do not believe the restructuring package gets the company to the point at which they can do that in terms of the very few people who would be employed in such an operation.

It might also console the Minister — who had a very hard negotiating position in terms of profit-sharing in the company and has capped it at 5 per cent — to know that the business is in such a bad way in the United States that private air companies have entered into negotiations as well. Again, I should like to quote from the Financial Times article:

One strand of the reappraisal common to all carriers is their desperate need to cut costs — particularly labour costs, which typically account for at least 35 per cent of the total. Some airlines have shown themselves willing to trade massive equity stakes in return for concessions from their employees, as a result of which the labour unions now own 37.5 per cent of Northwest Airlines, 45 per cent of Trans World Airlines, and are negotiating for 60 per cent of United Airlines.

The Aer Lingus unions are absolute pussycats to settle for 5 per cent against that background.

Mr. Gilmore

Either that or Ronnie Reagan is more of a socialist than Dick Spring.

Mr. Cowen

What was the State equity in those companies?

Mr. Noonan

(Limerick East): Of course there was not a State equity injection because they are private companies.

I should like to refer the Minister to another article that appeared in the Financial Times of Thursday, 2 December 1993 referring to the wise men requested to examine the European air industry and which looks at their report. As the Minister did in his introductory remarks, the wise men looking at the European airline industry have come out in favour of an open skies policy, irreversibly towards free skies and a free market position. We have witnessed the trouble Air France got itself into. Anybody casually watching television will have seen the riots on the runway by the workers in Air France, noting that those who favoured liberalisation, centred mostly around British Airways and their allies, seemed to be winning the case with the wise men. Their comments are interesting:

"The European airline industry can no longer afford selling a product, produced at European cost levels, at world market prices".

When summing up, the former Belgian transport minister, Mr. De Croo, said the options are major cost-cutting on all fronts or declare bankruptcy, or to let the taxpayer pick up the bill through state aids.

The Minister has the major cost-cutting exercise in place and I hope it is sufficient to guarantee the future of the company. He is also putting a charge on the taxpayer as the £175 million will ultimately have to be picked up by the taxpayer. I hope he can avoid the bankruptcy of the company. He may have to go further and get into strategic alliances as other European airlines are doing if he is to secure the future of Aer Lingus as a national carrier in the medium and long term.

Mrs. Owen

I thank my colleague, Deputy Noonan, for sharing his time with me. He has dealt with a number of points which are essential in this debate. I want to start my contribution by paying tribute to the staff members of Aer Lingus, Mr. Paul O'Sullivan and the many other trade union personnel who were involved in the negotiations and all the staff. You would have to be living in the constituency of Dublin North — the heartland of the employees of Aer Lingus — to understand the damage the uncertainty about the future of Aer Lingus had done to many lives in my constituency, not only to those working in Aer Lingus but in the many other businesses and services affected in north Dublin. The area north of the Liffey is one of the areas of high unemployment. Aer Lingus was an enormously important employer in my constituency and in other north Dublin constituencies. The pain and suffering endured by the staff will never be understood by people living outside the constituency.

I am glad an agreement has been reached with the staff and I welcome the fact that a system has been worked out. As Mr. Paul O'Sullivan recently said, they want to share the gain as well as the pain. I hope that element of the agreement will work for the staff. There is no point in having a 5 per cent share in nought; a 5 per cent share in nothing is nothing. It is in everybody's interest that the company becomes viable and remains viable into the future.

I am disappointed in the Minister's speech in that he has left many areas still uncertain. I do not know the answers to the questions that some of the staff of Aer Lingus are asking me as an Opposition Deputy. The same staff members are afraid or are unwilling to go to members of the Government parties, particularly Labour members, to find the answers, because they know the answers they got prior to the last election. Without the kind of case made by the Labour Party and by the Minister's party in an attempt to gain votes at the last election the pain would not be as bad. So many promises were made prior to the election that the staff took them on board. All that had to be undone. They had to recognise that they had to sit down with management and work out a strategy for the future of Aer Lingus. Those staff are coming to me seeking answers. I do not know the answers. For example, I do not know what conditions will be attached to the £175 million. I note from a line in the Minister's speech that the second tranche of subsidy will not be paid unless the Minister is satisfied that the strategy and the plan is working. That is a slight worry for the staff.

I do not see any mention in the Minister's speech of his new word, "outsourcing". There is nothing in his speech that tells me how to answer the questions of my constituents who are working in baggage handling and catering. What will happen to their jobs? Is the Minister saving that for down the road when more equity is needed and the Government will be unwilling to provide it? Is that "outsourcing" to be done then so that some money can be saved for the company? I do not know the answers to these questions and the Minister has not given them. Deputy Noonan is also uncertain about the answers to those questions.

What about the non-core assets? The Minister said that those will probably be considered for sale. People working in companies like Cara also live in north Dublin and do not know what will happen to their jobs if that company is sold off. Will the new buyers be prepared to retain the staff or will they cut down on staff? Despite the fact that agreement has been reached, there are still many unanswered questions. When the Minister obtains the information from the Commission I hope the conditions, if any, on the giving out of that equity will be such as to allow Aer Lingus to operate competitively and viably in the marketplace. I hope that the Minister's assurances today about Aer Lingus Express will allay the concerns expressed to me by another group of airline workers in Ryanair and that we will not see the demise of the 500 jobs in that company.

The Minister has not referred to the Government's policy in regard to having two Irish airlines. We need to know that the Minister will not do what the former Minister, Deputy Seamus Brennan, did in giving to another company routes Aer Lingus had developed. Ryanair wants to be sure that business they have built up will not be undermined by this equity payment.

Can the Minister tell the House how the Government proposes to continue having the two Irish airlines in operation? Do they propose to continue to dictate exactly what airports and which routes those airlines will be allowed to use or will they allow commercial decisions to be made by both those airlines? I hope the answer is that he will allow them to be commercial, that there will not be undercutting on either side and that the jobs in each of these companies will survive.

I commend the work put into these negotiations by members of the Minister's staff and by the staff of Aer Lingus.

Mr. O'Malley

It is crucial that this Bill should mark a new beginning in Irish aviation. If we cannot introduce an entirely new corporate spirit into Aer Lingus the £175 million proposed in this Bill will be a waste of money. Aer Lingus will fail without a new corporate culture. There must be great fears that without radical change in Aer Lingus the main impact of this Bill will be to destroy Ryanair and to end the one set of reasonable air fares we now enjoy, those to most parts of Britain.

Senior Aer Lingus management were no strangers to this House from 1984 to 1986 when they lobbied for the infamous Air Transport Bill, 1984, which proposed prison sentences and huge fines for those selling airine tickets at prices below those decided by the IATA cartel. I was happy to lead the Opposition to such policies in this House and I welcomed the major change of heart when the then Minister, Deputy Jim Mitchell, licensed Ryanair to begin operations in May 1986. Thus a legal measure intended to criminalise and eliminate low cost airline tickets was turned by public opinion and opinion in this House into a measure which has been one of the most successful deregulations in the world.

From stagnation between 1979 and 1985 when air travel between Ireland and Britain fell by 171,000, we saw it double between 1986 and 1990 to 4.2 million from 2.1 million. Real air fares between Ireland and Britain fell by an average of over a third. The rightly criticised then standard £208 fare to London from Dublin can now be obtained for as low as £59.

Let us remember that a 28 day apex fare before May 1986 cost £95 and the infamous Saturday night fare, of which we heard so much at that time, was £159. Comparing 1985, the last full year before deregulation and 1987, the first full year under the new policy, we see that the increase in traffic on the Dublin-London route was 65 per cent. The highest increase was in August when 91.7 per cent more people travelled on the route under deregulation in 1987 than under the cartel in 1985.

The airline cartels were the greatest Government backed threat to the development of Irish tourism. The great revival of tourism since 1986, including the addition of 31,000 extra jobs, according to the Tansey-Webster report is down to the success of public and parliamentary opinion in changing the 1984 Air Transport Bill. The Central Statistics Office series on tourism and travel shows that in 1992 we had 1,561,000 overseas visitors to Ireland compared with only 641,000 in 1986. I question the basis on which some of these figures are calculated but at least I am quoting the same source in both instances so that if they are wrong, they are equally wrong on both occasions. What is important is not the overall number but the proportion which shows a two and a half fold increase in six years.

The recent NESC report on a strategy for competitiveness in employment found that Irish tourism receipts in real terms in 1991 were 56.3 per cent higher than in 1986. The European average was 16.7 per cent and the OECD average was 33.6 per cent, only North America and Australasia-Japan had a higher growth rate than Ireland.

The reaction of sea carriers to the new airline competitors was most encourging. Stena Sealink introduced new ships and the Sea Cat. The B & I Line was privatised and became a highly recommended share on the Stock Exchange. It also introduced new ships. The entire access transport sector has been revitalised by airline deregulation and the economy has gained hugely.

In the traditional airline thinking, "business class" was treated as "mug class". The business passenger paid by far the highest fares. This obviously suited the mentality of the cartel airlines but was economic nonsense.

In a small open economy like Ireland business means competitiveness, not running large expense accounts. Central Statistics Office data indicates that Irish residents made 220,000 outward business trips in 1985. Under deregulation this increased to 352,000, an increase of 60 per cent. We do not have any easy formula for converting these extra business trips into jobs but the impact must be significant. The firms which were blocked out of business journeys abroad would have been the small enteprises. These are the firms which have the highest rate of job increase.

We have had a new aviation policy from 1986 onwards and we should now ask how Aer Lingus has responded to it. In view of the huge gains to the Irish economy from competitive aviation, it must be a matter of regret that this Bill is required at all. We now know that Aer Lingus cut its fares to meet competition but failed to cut its costs in line. It has run up over £550 million in debts. Much of the money was frittered away in mindless targeting of Ryanair. Some £17.5 million of public money seems to have disappeared out of Aer Lingus Holidays Limited without any criminal charges or other sanctions. Aer Lingus was heavily fined by the EC Commission for its treatment of British Midland. Recent surveys have shown that the company's productivity is among the lowest in Europe.

Aer Lingus' fares on the North Atlantic are frequently as much as $400 dearer than fares via London. More than half the North Americans visiting Ireland now come via Britain for that reason and not for anything to do with Shannon. The airline made no attempt to revive its Chicago or Montreal routes. When the Department of Transport negotiated a licence to fly to and from Los Angeles, Aer Lingus delayed so long that it deliberately lost the licence, which was eventually taken up by a small Irish company.

The Aer Lingus fares to the mainland of Europe are as high as £500 to £600 return for journeys of as little as 90 to 100 minutes. Where Aer Lingus drove out its competitors from UK provincial routes they usually then contracted the routes by using computer yield programmes and smaller aircraft to reduce the numbers of low fares available.

Most bizarre of all was the decision to buy the latest aircraft for the London route but to price the seats closer to Ryanair fares on older planes. This was coupled with the decision to serve food to all passengers because British Midland made service a selling point although the journey was not much more than 50 minutes. British Midland had a far lower labour cost base than Aer Lingus and the latter should never have tried to match British Midland service and Ryanair fares from a cost base which was too high. Its losses on the Dublin to London route are estimated at as much as £20 per passenger per flight.

Last year, the then Minister for Transport. Deputy Geoghegan-Quinn, told this House that she had advised the airline not to go ahead with a large aircraft purchasing programme in the expectation of any Government equity. They foolishly spent over £399 million on the new aircraft between 1990-92. Why should anyone invest public money in a company with such a track record of ignoring what the sole shareholder, the Government, told it in regard to new aircraft purchases?

Why is the Cahill-Owen plan for the airline still not published? The Irish taxpayer is forced to stump up £175 million in a so-called equity injection and the same taxpayer is not even to be shown the prospectus? Why can we not be told that the money under this Bill is to be used to cut the fare differential between North America and Ireland compared with the better value available in Britain? Why can we not be told that the aid in the Bill will be used to cut the very high fares charged on the routes to mainland Europe? I would hope that the European Union, the Commission of which has to back this measure if it is to become effective law, is aware that it can be up to ten times the fare per mile to the European mainland as it is to London. We have no competition to the mainland of Europe and full competition to London. Why can the aid in this Bill not be tied to reviving traffic on UK provincial routes? Such routes contract and fares rocket upwards when Aer Lingus drives off its competitors. If the money in this Bill is to be used to fund Aer Lingus Express, then both Ryanair and British Midland will be the targets with the same results as we had before.

If Aer Lingus succeeds in the Aer Lingus Express proposal we will lose competition to London and fares will rise. We will still have an excess fares differential on the North Atlantic compared to Britain and our fares to the mainland of Europe will continue to be among the highest in the world.

By last autumn its management and board had driven Aer Lingus into bankruptcy. Airlines such as Singapore Airlines, serving as small a home base as Aer Lingus, became profitable enterprises. British Airways, widely decried by economists in the late seventies and early eighties, transformed itself to become one of the most profitable airlines in the world. Other airlines formed global and regional alliances. Sadly Aer Lingus failed.

The Aer Lingus response to any crisis was always to lobby politicians. The equity in the Bill today bought the Labour Party six seats in north Dublin at the last election — the so called "Santry six", the group of north Dublin TDs who promised public money to the airline in return for votes. The Tánaiste did likewise in the famous "sermon on the ramp"— the words of my colleague. Deputy Ray Burke. The Tánaiste's famous antiprivatisation speech in Cork made this Bill inevitable. Private sector finance could have transformed Aer Lingus as it did British Airways, but that option apparently is open neither to Aer Lingus nor the Government now because of the Tánaiste's ideological preferences.

I note that the EU Commission must agree to this Bill and must hope that the funds it provides will not be used to eliminate competition. This kind of Bill in Ireland, France, Spain and in other countries can bring little satisfaction to Europeans. If Europe's state airlines continue their present high cost, high fare operations, no amount of "Fortress Europe" policies will save Europe's scheduled airlines from an ever falling share of world aviation and loss of market share to North American and Asian-Pacific airlines.

I mentioned at the outset that what was vital to save Aer Lingus was a change in its corporate culture not just an injection of money and an acceptance of the realities of the commercial world in which we live. The need for this outlook is recognised in other airlines. Perhaps the outstanding airline person in Europe today is Jan Carlzon, who recently retired as President and chief executive officer of SAS because that airline's merger plans with other European airlines were thwarted. Writing in the SAS newspaper, called Scanorama, for October 1993, Mr. Carlzon said:

Those in the airline business who persist in harbouring protectionist leanings will clearly expire and possibly take other potentially competitive airlines with them. It's only a question of time.

That quotation admirably sums up the position in Ireland today and the position that exists under this Bill.

He went on in the same article to say:

We need a level competitive playing-field; unsubsidised carriers like SAS cannot compete with European airlines that can still lean heavily on taxpayers' support.

The European carriers need incentives to re-structure and to cut costs. Continued public funding robs them of this incentive. We even have to allow bankruptcies in European aviation. There can be no salvation for those who cannot compete, no matter whose flag they carry.

These views of Mr. Carlzon sum up the current dilemma of many European countries, not least Ireland, where aviation is concerned. The truth is that the man is absolutely right and if the Government, this House or the European Commission fly in the face of that truth by allowing all kinds of surreptitious crosssubsidies from this taxpayer investment, then we are undoubtedly headed for disaster, both in Aer Lingus and in its competitors. In particular, we cannot have a continuation of the policy pursued since 1986 by Aer Lingus, of a paranoid pursuit of Ryanair regardless of the cost to the Irish taxpayer. It is in this Bill that the Irish taxpayer is picking up the tab for the lunatic policies followed by the board and senior management of Aer Lingus since 1986 in particular. Today's Bill is the price which the Irish taxpayer has to pay for that collective foolishness with which Aer Lingus was run.

Lest the House think that it was only in relation to Ryanair that Aer Lingus sought to maintain its monopolistic outlook and its paranoia towards all competition, it is worth recalling what happened in respect of the award of the sea-air rescue helicopter contract in 1990-91 to operate out of Shannon airport This contract was awarded by the Minister for the Marine to Irish Helicopters' Limited, a wholly owned subsidiary of Aer Lingus even though a private Irish competitor had, according to the report on the 1992 Appropriations Accounts by the Comptroller and Auditor General, tendered a figure which was £4.7 million lower than Irish Helicopters. The Irish competitor would have been satisfied with the significant profit which its tender would have given it. The figure eventually settled with Irish Helicopters before the contract was signed was higher than its original figure by a substantial amount. The House can well imagine therefore, the magnitude of the profit made by Aer Lingus on this arrangement, which was so cosily come to.

The result of that huge profit is that, since the award of that contract, no other helicopter company, Irish or foreign, has been able to get any contract in Ireland for helicopter work other than short term ad hoc jobs, because the cross-subsidisation operated by Aer Lingus through Irish Helicopters enables it to quote at or below cost for every contract that comes up, in the hope that all competitors, or potential competitors, will disappear. The Irish and European taxpayers are paying for this excess profit and this cross-subsidisation just as the Irish taxpayer is paying for the efforts, over many years, to put Ryanair out of business.

Happily DG VII of the Commission, which is the Directorate-General for Transport, is looking into the matter and in a letter written late in October, it said:

Following our preliminary examination of this case, it appears that these circumstances could well involve State aid under Article 92 of the Treaty.

It went on to state that it has begun a thorough examination of the case.

It is, therefore, totally unsatisfactory that up to the beginning of this debate, at least, today, the House has not been informed of the Commission's view on the legitimacy, or otherwise, of the Cahill plan for the restructuring of Aer Lingus. The Minister, in his speech, did not inform us either of the Commission's view, although we learn that the Commission has had this proposal before it for almost six months and has not yet made a decision. According to the Minister, it is under constant pressure from the Government, both at political and official level, to make that decision. It seems an extraordinarily long time and it implies that the Commission is having great difficulties with the matter.

It seems inappropriate to bring in this Bill, that is completely dependent on the agreement of the Commission, if that agreement has not been forthcoming or if it is only forthcoming subject to conditions of which we are not yet aware.

This Bill makes no reference to the four separate businesses into which it is intended to divide Aer Lingus. Why is this so? Why are these four divisions not formed as subsidiaries? How can they trade and act transparently, without any danger of cross-subsidisation, if they are all lumped together under the heading of Aer Lingus Group plc? Is there not a virtual certainty of cross-subsidisation, given the record of this in the past, particularly with regard to Aer Lingus Commuter, who never kept proper separate accounts and who flagrantly used the main airline to subsidise its operation, put its competitors off domestic provincial routes in Ireland and off routes from provincial Irish airports to Britain?

Why is Aer Rianta included in this Bill? It is an airport company, not an air company. It is generally accepted as being commercially successful and both the Exchequer and the company would benefit from Aer Rianta being sold off in part or in whole. Is its inclusion in this Bill an effort to thwart that possibility?

I find section 5 confusing. We were told some weeks ago that negotiations between the unions and Aer Lingus and the Government had resulted in an agreement to increase the employee shareholding from 5 per cent to 10 per cent. Section 5 states that the employee shareholding shall not exceed 5 per cent. On what basis will the shares in Aer Lingus PLC and Aerlinte PLC be exchanged for shares in the holding company? The existing shares are valueless because the airline owes £550 million. Will the shares held under section 5 be held on the normal basis of shareholdings or will special privileges be given which will effectively have the result of preventing any other investors coming into the airline? Is that the real purpose of the section? I have no objection to employee shareholdings. They are successful in many companies, both for the employees and the companies concerned. Is that the intention of this section or has it some other purpose?

Why are the moneys payable under section 4 to be paid out of the Central Fund under section 16 and why are they to be paid into a special account with the Paymaster General? Why are the general provisions in section 16 necessary? They do not appear to have been used in respect of other equity investments by the State.

I welcome section 14 which, strictly speaking, should not be necessary but obviously is, given the history of Aer Lingus and certain other State companies. Equally, I welcome section 11 which enables the Minister to get accounts of subsidiaries. One is entitled to ask why these were not available before. I believe the truthful answer is that it was through the use of subsidiaries that various things were hidden within the Aer Lingus Group up to now. The non-publication of subsidiary accounts made it all the easier for the company as a whole to engage in cross-subsidisation to the detriment of its competitors and the ultimate detriment of the consumer. It made it easier to conceal its real activities and resulted in the company producing for years accounts that were largely meaningless.

If, under the section 11, the subsidiary of an air company has to produce accounts to the Minister, why has the division of an air company not to do the same if, as we are told in the Cahill Plan, they will all be run independently? As I have asked before, why are these divisions not formed as subsidiary companies? Is it to allow further concealment?

When this Bill is passed by the House, the Minister will be given carte blanche to invest £175 million of taxpayers money in Aer Lingus at any time and subject to any conditions he likes, irrespective of how abundantly foolish it might become in six months or a year's time. The Bill is inadequate for that reason.

There are those who would suggest that there is a major difference between ordinary Government spending and the voting of this £175 million which we are told is in a different category as it is equity or capital investment. The reality is otherwise. Borrowing this money to fund the accumulated losses of Aer Lingus — because that is all it is, in spite of all the rhetoric — will, at an average interest rate of 10 per cent, cost the taxpayer £17.5 million a year in perpetuity. Trade union or other rhetoric does not change that reality.

It is interesting to note the extraordinary concern of the unions and Congress for jobs in Aer Lingus. They appear to have no concern for jobs in any competitor.

Mr. Gilmore

They are not unionised.

Mr. O'Malley

As the trade union movement gradually contracts into a group of unions that predominantly represent public sector workers, it is easy to understand why it should become so obsessed with what it perceives as the paramount need to retain as many undertakings as possible in public ownership. This may be in the interests of trade unions and their officials, but there is no indication that it is in the interests of the economy or of workers. Nonetheless, for too long they have been allowed to set the parameters of the debate. Anyone who disagrees with them is portrayed as being somehow nationally disloyal or at times almost traitorous.

Nowdays every country in the world is seeking to unload what it does not need to own. For Ireland once again to bury its head in the sand and to pretend that we are somehow ring-fenced from the realities of the world around us is plainly stupid. The board and senior management of Aer Lingus did a huge disservice to the company and to its thousands of employees by trying to pretend for years that they could live in the old world of cartels and no competition. They brought the company to its knees and bankrupted it by doing so. They caused huge concern for their employees unnecessarily and caused 1,000 or more of them to lose their jobs. They are continuing their disservice to their own employees if they think that a prolongation of that policy will be of any help to them. Using the taxpayer to put your competitors out of business is not just foolish. It is also illegal and a corporate culture founded on that misconception of commerce will not succeed.

As I said in 1984-85, Aer Lingus does not need to have a permanent self imposed inferiority complex. If it were run properly, and had been run properly in recent years, it could face the world with its head high. Many of its employees know that well and that is why they are so frustrated by what has been happening. The disaster is not its fault. Nor is it the fault of the handful of us who told their bosses they were wrong.

I had hoped this Bill would be a turning point in Aer Lingus's affairs and in its outlook. Sadly, I am not convinced that will be so. This House is being asked to put £175 million of taxpayers money into an investment, in respect of which the prospectus has never been published. Most investors would laugh out of court a company, a Minister or a Government who tried to do that. Sadly for Ireland, that does not appear to be the case here. The unspoken, underlying feeling which we are suppposed to share is that this is not real money; it is only taxpayers' money and therefore it does not matter. What is more, it is only compliant taxpayers' money and does not this Government know well that compliant taxpayers are only fools and that "the lads" who do not pay up will be looked after by "Mighty Mouse" Kemmy, Fianna Fáil and the Santry Six".

Mr. Gilmore

I would like to share my time with Deputy Sargent.

An Leas-Cheann Comhairle

Is that agreed? Agreed.

Mr. Gilmore

It is just over six months since the general terms of the so-called Cahill rescue plan for Aer Lingus were outlined to us. That included State investment of £175 million, less than half the £400 million the chairman, Bernie Cahill, requested only four months previously. The company was to be restructured, established in the form of four divisions. The Shannon stopover was to cease although that was never stated; it was to be done by the inventive device of putting a Shannon-Dublin leg on what would be, in effect, direct Dublin-US flights. A total of £50 million was to be saved by cost cuts, 80 per cent of which was to come from the workforce in the company mainly in the form of redundancies; a figure of 1,500 was mentioned at that time. There was no doubt it was the staff of Aer Lingus who were to bear the burden of the entire package since the bulk of the cost cuts were to come in the staff area.

The Government whose policies, or the lack of them, caused the problem in the first place washed its hands, stood back, and told Aer Lingus unions and management to take the centre of the ring in what many believed would be an impossible and possibly self-destructive industrial relations battle. Never in the history of the State had any group of employees been asked to take such severe cost cuts or negotiators for employees been asked to negotiate job losses of such a magnitude. It is to the credit of all those involved in the negotiations that an agreement was concluded. In particular, it is to the credit of the outstanding leadership of the trade union officials who represented the staff in Aer Lingus, the SIPTU branch secretary, Paul O'Sullivan, and the CRC secretary, Joan Carmichael, and their teams of negotiators that they succeeded in negotiating a shareholding in the company for their members for the first time in the history of a State company. They succeeded in reducing the number of job losses by 500 and gave the company massive cost cuts, in the order of 20 per cent, without any disruption of service or industrial action. This is in contrast with the position in Air France to which Deputy Noonan referred where a cut of 6 per cent in costs was sought but which according to a report in today's Financial Times, has now been abandoned.

This Bill is being presented as the final chapter in the Aer Lingus crisis. The Minister sees it as an opportunity to clap himself on the back while the Labour Party heaves a collective sigh of relief that so far there have been no compulsory redundancies. However, the Aer Lingus crisis is far from over.

The only people to emerge with credit from the sorry story of Aer Lingus are the diligent staff and their outstanding trade union representatives. While the Aer Lingus unions led by SIPTU's Paul O'Sullivan can take credit for having saved 500 of their members' jobs, for having agreed to massive cost cuts and having secured the first ever shareholding for workers in a State company, the Government must hang its head in shame for failing to honour its part of the bargain.

In his contribution to this debate the Minister told us that this Bill and package is subjected to approval by the EU Commission. It is a remarkable commentary on what is supposed to be a sovereign Parliament that this legislation is subject to approval not just by the other House and signature by the President but also to approval by the EU Commission. As we discuss this Bill the trade union representatives of the staff in Aer Lingus are in Brussels to petition the EU Commission to lift the restriction that it intends to impose on this package; in effect they are doing the job that the Minister should have done during the past six months.

The Government is allowing the EU Commission to impose conditions on the Aer Lingus package in such a way as to seriously undermine the agreement negotiated with the unions and open up a new phase of crisis for the airline company. In this Bill the Government is effectively reneging on its understanding with the Aer Lingus staff and unions.

The EU Commission intends to impose severe conditions on the Aer Lingus package. These conditions were reported in the EU Official Journal on 28 October last. As I understand it, the Commission is due to make a final decision on these conditions on Thursday next, by which time the Government will have whisked this Bill through the Dáil. The debate on all Stages is to be guillotined with the final guillotine at 10.30 p.m. on Wednesday night. It is the Government's plan to have this Bill through the Dáil before the bad news comes from Brussels that the EU Commission intends to impose seven restrictions, seven severe conditions, on the package before us. This is remarkable in what is supposed to be a sovereign Parliament. The best the Minister can do today is to make a Francis Urquhart comment that he may well think it but he cannot comment on what the EU Commision may do.

The conditions are unprecedented. The £175 million is taxpayers' money. not EU funds. The EU has never before required a national Government to provide such servile assurances regarding investment of its own money in one of its own companies. The EU imposed no such conditions on the Governments of Belgium, France or Portugal when these countries injected large sums of money into their national airlines — Sabena which received £1.1 billion, Air France and TAP. The Government has failed to protect public investment in its own company, Aer Lingus, from excessive interference by the EU Commission. Indeed, it appears that the EU Commission is trying to impose on the Aer Lingus package its own precedent in relation to liberalisation. For example. conditions are being imposed in relation to ground handling at a time when a directive on ground handling is under consideration. What is the reason this condition is being imposed when they could have awaited the emergence of the directive?

The conditions being imposed put in serious doubt the investment of the second and third tranches of the £175 million equity, set aside the Government's position on Shannon, could effectively prevent the establishment of Aer Lingus Express and undermine the excellent agreement made between the unions and management regarding ground handling.

The unions in Aer Lingus concluded their agreement with management on the understanding that the Government would deliver on its part of the bargain. The conditions being imposed by the EU Commission mean that the Government is either unwilling or prevented from honouring its side of the deal. A broken agreement is the cue for a serious industrial relations disaster.

In relation to the first condition, the achievement of £50 million in cuts, the Commission needs further assurance that the cost reduction will be realised as envisaged. In relation to the injection of £175 million the Commission would like to see the payment of the second and third tranches subject to the company achieving well specified and quantified targets. It insists that this should be the last investment in Aer Lingus and questions the policy on the Shannon stop-over. The fifth condition effectively torpedoes the idea of establishing Aer Lingus Express, while the sixth condition refers to ground handling and the seventh to stamp duty and capital duty.

Some of the conditions, especially condition No. 5, bear a remarkable similarity to the case being made by both Ryanair and British Midland, Aer Lingus's main rivals on the UK route both of whom have been lobbying the EU Commission since the recovery plan was announced last June. Both British Midland and the Ray MacSharry-led Ryanair have been camped in Brussels since last June pushing for restrictions on Aer Lingus. It appears that they have won the day.

Instead of matching the British Midland and the Ryanair lobby Aer Lingus was grounded, apparently instructed by the Government not to engage in direct lobbying of the Commission. Amazingly, it was not until mid-October that Aer Lingus executives went to Brussels, one week after their own unions had embarrassed them into it having beaten the company to the door of Commissioner Matutes. Did the Minister instruct Aer Lingus management not to lobby Brussels directly but to leave it to him? If not, can he explain the reason Aer Lingus gave its rivals a four month head start with the Commission? If he did instruct Aer Lingus to stay away from Brussels, can he explain the reason Ryanair, apparently assisted by a confidential Government memorandum, was able to have its wishes——

Mr. Cowen

I answered that question.

Mr. Gilmore

The Minister went to great lengths to answer it; I was very impressed by the answer.

Mr. Cowen

The Deputy should not lay that at the door of my Department.

Mr. Gilmore

The document was a signed top copy rather than a copy which is retained in the Department. Photocopiers are plentiful.

Mr. Cowen

The Deputy should not lay that at the door of my Department. If he does so, he should substantiate it quickly.

An Leas-Cheann Comhairle

Deputy Gilmore to continue without interruption.

Mr. Gilmore

It is a pity that the Minister did not reserve some of his aggression for the Commission——

Mr. Cowen

I have my own way of doing things.

Mr. Gilmore

——when he would have been serving Aer Lingus much better.

An Leas-Cheann Comhairle

Deputy Gilmore to continue without interruption.

Mr. Gilmore

It is easy to come into this House and act the tough guy. The Minister should act the tough guy in Brussels.

Mr. Cowen

I am not. The Deputy should substantiate it or else leave it alone.

Mr. Gilmore

The facts are there——

Mr. Cowen

They are not.

Mr. Gilmore

——that a lobby led by a former Government Minister and EU Commissioner went to Brussels——

Mr. Cowen

The Deputy is changing tack.

Mr. Gilmore

——where they have been camped since the Cahill plan was announced and have succeeded, either with the Minister's complicity or through his negligence, in ensuring that conditions will be attached to the Aer Lingus package which will effectively undermine it.

The Bill itself is remarkable for the restructuring it proposes. An Aer Lingus holding company has been established and Aer Lingus, the trading company, the company operating the core business activities of the company, is being established as a subsidiary. The first effect of that — and a whole page of the Minister's speech was devoted to trying to talk his way out of this — is to shift the worker-directors of the company. It puts them on the board of the new holding company——

Mr. Rabbitte

The Labour Party would not agree with that.

Mr. Gilmore

——the subsidiaries of which have the real power but no worker-directors. The subsidiaries of the companies, Aer Lingus, Aer Rianta, the subsidiaries dealing with Copthorne Group and the other various activities of Aer Lingus, will not have worker-directors on their boards under this Bill and they are the bodies that will be making decisions on disposal of assets and so on. That is a remarkable change from, for example, the legislation in relation to CIE, which guaranteed to worker-directors a position in the subsidiary companies. The chairman of the holding company, presumably Mr. Bernie Cahill, or the Minister will have the right to appoint the chairman and board members of all the subsidiary companies, including the airline company itself, which under this Bill will be relegated from parent company to subsidiary. This is concentrating excessive power in the hands of the Minister and the chairman of the holding company. It is a recipe for croneyism, it is a recipe for political appointments. This Bill, in effect, is doing for Bernie Cahill what the new Russian constitution is doing for Boris Yelstin. It is remarkable that this Bill not only covers Aer Lingus but also Aer Rianta and the same position will apply in Aer Rianta in relation to subsidiary companies.

The 5 per cent shareholding for Aer Lingus employees was certainly a welcome achievement by the Aer Lingus unions but it is only a miserable concession by a Government which includes the Labour Party.

Mr. S. Ryan

I thought you were forgetting about us.

Mr. Gilmore

I am not forgetting about Deputy Ryan because I would have thought, given the amount of pain that the staff in Aer Lingus have suffered——

Mr. S. Ryan

I know more about it than you do.

Mr. Gilmore

You will know a lot more about it yet. The Deputy might yet be invited to share some of the pain because the Aer Lingus employees might have memories which are a lot longer than the Deputy would like them to have.

Mr. S. Ryan

I am prepared to accept the democratic process. I wonder are you?

Mr. Gilmore

The democratic process also means telling people the truth, and the staff in Aer Lingus were told very little truth——

Mr. S. Ryan

Maybe by you.

Mr. Gilmore

——before the last election by Deputy Ryan and his party. The 5 per cent staff share in Aer Lingus contrasts unfavourably with the arrangements which were made in similar circumstances in a number of United States airlines. For example, United Airlines got 60 per cent staff shareholding; TWA got 45 per cent; North West Airlines got 37.5 per cent; but the best the Labour Party could do for the staff of Aer Lingus is a miserable 5 per cent. I congratulate the union which managed to secure a breakthrough on employee shareholders generally but I say shame on the Labour Party for being able to deliver so little to the staff of Aer Lingus.

Mr. Sargent

We must all realise that it is necessary that this survival package should work. This is a question not just for Dublin North but for the whole of Ireland and it must be seen in that light. My interest in this question is both local and national. I know many of the Aer Lingus workers, and the pain they are experiencing must be witnessed to be believed. I have never been called on so late at home as I have been by Aer Lingus workers, particularly those in TEAM Aer Lingus, expressing concern about measures being taken without their knowledge which will end their careers. This awakens particular emotions in many Deputies in Dublin North.

I appreciate that the rescue must be sustainable, as must life itself, but I must question the Minister's judgment in this regard and ask if this is a sutainable package. Many references have been made to the meagre nature of the subvention, although it is enough money to keep anybody happy for a long time if they were left to spend it.

To put the company on a commercial basis there is a need for State support. This is not just a company but a public transport system and that has not been brought home to the public. One aspect of commercial viability is the removal of political interference, which has been a feature of the airline's sorry history. I thought the Minister was fully in agreement with this when I met him with other representatives in Dublin North. The cabin crews suspected that politics may have had a part to play in the negotiations to relocate them to Shannon in spite of commercial aspects they were able to identify which indicated that their relocation was not a very good idea. The Minister was adamant that it was not a question of politics. However, reading the Bill, it seems that politics plays a very big part in the workings of the company.

The Minister is a shareholder of the company. He takes power to appoint directors to the board and all the subsidiary companies. I would have thought that the boards of subsidiary companies ought to be answerable to the parent board, but the Minister has retained powers in this area. The Minister has many other powers, including the right to approve salaries of chief officers. No company is free to acquire a subsidiary without his approval and, ironically, borrowings must be subject to his consent. However, the history of political involvement in Aer Lingus would indicate that in the past the borrowings were created by political factors, to replace fleets or take money out of the company when it was profitable.

I welcome the move towards more worker involvement, which is a positive move. Too often the workers have had to carry the can and they continue to carry the main burden. They have also the biggest interest because their whole livelihood is at stake. I sympathise with the workers when I hear about some of the acts that have been perpetrated on the company. The wild geese come to mind because the search for viability in the past has seemed like a wild goose chase.

It is important to look at how decisions taken without reference to the needs of a company like Aer Lingus have impacted on the company. When people were circulated with one-sided information, paid for by the taxpayers, asking them to vote for Maastricht, there was little mention of how EU restrictions would involve us in the convoluted begging bowl type politics in which we are now engaged.

It is forecast that those involved in agriculture will suffer under the proposed GATT agreement. Aer Lingus will feel the effects of the Maastricht Treaty on its fortunes. There is not much point in talking of billions of pounds if in the long run the funding of the company is blocked by sharks in the EU or by British Midland or other lobbies ranged against the company. It is fine to talk of restructuring if it is proposed to impose a high level of hardship, but I would consider such an imposition obscene. It is unreal to allocate a certain amount of State aid to a public transport company and then leave it to whistle. If State aid is forbidden under the provisions of Maastricht, except in the short term, we are asking Aer Lingus to swallow an extremely bitter pill, the effects of which has not been felt yet.

I know the expertise and resilience of the Aer Lingus staff. I know many of the staff personally. I pay tribute to Paul O'Sullivan, Joan Carmichael and members of the unions who have spent many long hours and made many concessions in going along with whatever plans had to be put in place. They can overcome many of the political botched policies but it behoves the Government to face the facts and make sure, as Deputy Noonan said, that partnership is ensured. While opportunities in the past were missed, if partnership is not achieved the position of Aer Lingus will need to be reconsidered.

Will the Minister indicate why the group is not a legal entity? The Minister referred to synergy and Deputy Owen to outsourcing. There is a need to provide not only the staff of Aer Lingus but the public, who have a vested interest in the company because it is now proposed to invest £175 million in it, with relevant upto-date information, not gobbledegook. That investment is vital for our economy and is not just a measure to assist one company.

Freedom of information has been mentioned in this House as a way of ensuring that environmental law is not hidden from public view. Freedom of information is badly needed in the area of aviation and public transport generally. The public are not aware of what measures need to be taken or the role played by successive Governments in tolerating management that was far from good for Aer Lingus. In some cases the measures taken could be described as vandalism especially in relation to how profits were siphoned off, all of which have resulted in the present crisis in Aer Lingus.

Details of information relating to any investment in Aer Lingus should be divulged to the public as well as to members of its staff and the unions who in the past have been kept very much in the dark in relation to decisions affecting the company. The Maastricht Treaty should not have been ratified by Ireland without the inclusion of amendments which would have afforded some measure of protection for a company such as Aer Lingus. I hope the Minister will be able to come up with the required remedy to ensure that the negative effects of that treaty, which are becoming more visible, will be countered. At present Aer Lingus is vulnerable and I hope the Minister recognises its position and informs the public how important it is for that company to flourish.

Mr. Haughey

I propose to share my time with Deputy Seán Ryan.

An Ceann Comhairle

That is satisfactory and agreed.

Mr. Haughey

Aer Lingus is one of Ireland's leading State companies and has made a major contribution to our national and economic life. Nevertheless, it is indisputable that the company is experiencing serious difficulties. The completion of the Single Market in the air transport industry earlier this year, the worldwide recession in the airline industry, the collapse of the GPA flotation, the high cost base experienced by Aer Lingus together with a declining average yield per passenger, have all contributed to the crisis. Some of those factors could have been predicted and successive Governments and managements must share some responsibility for allowing the crisis to develop. Nevertheless, I congratulate the Minister for Transport, Energy and Communication, Deputy Cowen, the management and the unions for the cool and calm way in which they have dealt with this matter and on their realistic and positive approach, albeit at the eleventh hour.

I want to pay tribute to the workforce of Aer Lingus who have now accepted the revised Cahill plan. The workforce and the unions, despite initially being kept in the dark and living with rumour and uncertainty for many months, have behaved at all times in a responsible and constructive manner. They have made tremendous sacrifices and that should not be forgotten. It is regrettable that so many people decided to take voluntary redundancy for whatever reason as this will effect the day-to-day running of the airline. Those people will be a loss to the airline. Those remaining in the company have accepted new work practices, income restraint and so on. Those unprecedented sacrifices should not be lost sight of. It is entirely appropriate that new arrangements have now been put in place to allow the staff share in the profits of Aer Lingus and I welcome that new and novel development. In addition, mechanisms to increase the input of employees are now being put in place and this too will benefit the company. As the Minister stated, nobody has a monopoly of wisdom on how to run the company and I have no doubt that the input from employees will greatly benefit the company. A Government commitment that there will be no compulsory redundancies and that job losses will be kept to an absolute minimum has now been honoured. The generous voluntary redundancy package played an important role in that regard.

The restructuring process, as outlined in "Strategy for the Future", is the best chance for the survival of Aer Lingus. It involves the establishment of four divisions, the reduction of the cost base, the disposal of non-core assets and the operation of transatlantic services in a less restrictive environment. I have no doubt that Aer Lingus will become efficient and competitive. It can now focus more carefully on each market segment and adapt quickly to changing environments. It can now concentrate on its core business.

In particular, I welcome wholeheartedly the renegotiation of the transatlantic bilateral agreement, which in effect allows direct flights to Dublin from the US. This decision was made in the national interest. Our tourism industry can now develop in an unrestricted environment. As a result of this decision there will be increased access to this country, decreased costs, increased marketing activity and, most importantly, more jobs in the country as a whole. The reports from Bord Fáilte are available to substantiate what I have said.

I welcome this Bill particularly in that it enables the Government to inject £175 million into Aer Lingus. This is a significant step by the Government and the taxpayer and contrasts sharply with rescue packages put in place for some other semi-State companies. I would like the Minister to tell us if EU sanction will be forthcoming for the equity injection, when such a decision will be made and if conditions will be attached. This is of fundamental importance and other speakers have also referred to it tonight. It seems from reports that other flag carriers receive more favourable treatment from the European Union. Perhaps the Minister will clarify whether plans adopted for Air France, Sabena, Iberia and TAP received sanction with no restrictive commercial conditions imposed. Ireland must fight its corner on this matter, and I have no doubt we will do so.

Ryanair is concerned about the establishment of Aer Lingus Express. That company has made a significant contribution to the development of the Irish aviation industry. Were it not for Ryanair, low fares would not have been introduced on the Dublin-London route. Ryanair proved to be a catalyst in introducing the concept of lower air fares to Ireland. This fact should be taken into account. I hope the Minister can assure me that Aer Lingus will operate on a competititive and commercial basis on this route and that EU competitior, rules will prevail. In addition, will the Minister give an assurance that there will be full cost transparency on this route? This is a vital question, given that Ryanair directly employs up to 500 people.

I would like to ask the Minister the Government's position on the future of Aer Lingus. The days of close regulation are gone and we are now moving into an era of airline alliances and domination by mega-carriers. Has the Government given any consideration to a major joint venture or alliance proposal for Aer Lingus? The people have a right to know what proposals are under consideration in this regard for the national airline. Now that recovery of Aer Lingus is in sight, this becomes a crucial issue and more public discussion is needed on the matter.

I welcome the Minister's concluding statement on the strategic importance of Aer Lingus as the national airline and that we cannot rely on other airline companies with no base here. Other issues which arise under this discussion include the question of employment. I welcome the establishment of the enterprise development unit. It would be appropriate that a progress report be given in that area. I have no doubt that, using the expertise in Aer Lingus, many new jobs can be created in that company. Some speakers suggested that little reference has been made to TEAM Aer Lingus. A plan is necessary in this regard so as to establish the role it will play. TEAM Aer Lingus should be given every encouragement in the years ahead.

Finally, I wish to praise the unions and industrial relations mechanisms in bringing forward a rescue package for Aer Lingus. The company can look to the future with some hope and I have no doubt the national airline will go from strength to strength.

Mr. S. Ryan

I wish to compliment all concerned on bringing the revised Cahill plan to its present stage. I pay tribute to the Minister, Aer Lingus management, trade union officials and workers, particularly Paul O'Sullivan and Joan Carmichael.

During debate on the Private Members' motion on 7 July last I listended to charges and allegations from the Opposition benches regarding the Labour Party position on Aer Lingus. We heard similar allegations this evening from Deputies Owen, O'Malley and Gilmore. These charges are rather hollow given the stated policy position of the Opposition parties. For example, the Progressive Democrats Party was in Government between 1989 and 1992 when the extent of the problems in Aer Lingus emerged, but no action was taken. The Fine Gael solution was privatisation. The Labour Party put Aer Lingus on top of the political agenda during the last general election, and rightly so. I and my colleagues promised the workers we would stand by the company and the workforce. On election platforms and in our party manifesto we promised substantial Government equity——

Mr. Carey

Five hundred million pounds.

Mr. S. Ryan

——to strengthen Aer Lingus and to equip it for the future. This was in line with the Aer Lingus equity campaign, ALEC.

Mr. Carey

Was it not £500 million——

An Ceann Comhairle

Deputy Carey should desist from interrupting. Doubtless he will have an opportunity to speak on this item.

Mr. S. Ryan

There was no reference to this vital issue in the manifesto of the main Opposition parties. When speaking during the debate on 7 July I described the Cahill plan as a brutal, heartless prescription and I called for it to be replaced by an agreed union-management strategy. Furthermore, I put down a marker on behalf of my Labour Party colleagues in the north Dublin constituencies that we would never accept compulsion or involuntary redundancies.

The Cahill plan provided for a concept of privatisation or outsourcing of certain sectors of the company. This was always unacceptable to me and to my colleagues and we made this known to the Minister and the Government. The commitments made by the Labour Party that a substantial equity injection would be made into the company, that there would be no involuntary redundancies and no outsourcing or privatisation have been honoured. I am very pleased that the influential role played by the Labour Party in Government and by our Government colleagues has been acknowledged by the trade union officials, shop stewards, negotiators and staff. The decision of the workforce to accept the plan, particularly given the changes in work practices which were inherent in it, represents a vote of confidence in the future of Aer Lingus as Ireland's national airline and this must be built on.

The agreement reached between the Government, the Irish Congress of Trade Unions and Aer Lingus trade unions for the provision of equity shares for the staff is a very welcome and innovative development. This will have long term benefits for the staff as it will be taken into account on any future proposals for the company, especially in the event of any future Government or Aer Lingus management putting forward plans for the privatisation of the company.

Given the difficult negotiations that have taken place, real progress has been made, as has been acknowledged, but there are two outstanding areas that need to be addressed. The first relates to the Government's submission to Brussels. From media reports the Commission appears to be considering imposing commercial restrictions on the airline.

Debate adjourned.