We start with amendment No. 1 in the names of Deputies O'Malley and Michael Noonan (Limerick East). I observe that amendments Nos. 7a and 7b are related. I suggest we discuss amendments Nos. 1, 7a and 7b together if that is satisfactory. Agreed.
Air Companies (Amendment) Bill, 1993: Committee Stage.
SECTION 1.
(Limerick East): I move amendment No. 1:
In page 3, subsection (1), lines 25 and 26, to delete "and Aer Rianta cuideachta phoiblí theoranta".
The principle of this Bill is to enable the Minister to put £175 million of equity into Aer Lingus. He has taken the opportunity to restructure Aer Lingus because, in effect, there was no such corporate identity. Aerlinte is one company and now the Minister is seeking to establish a holding company. I do not know why he should use the opportunity of this Bill to pull Aer Rianta into the mix as well. If the Minister wants to make corporate arrangements affecting Aer Rianta, I suggest he bring in a different Bill and allow us to debate it on its merits.
Aer Rianta runs the airports. It is not an airline company, it is an airport company and yet it is being brought in under the definition of an airline company. The restrictions which are being imposed in a variety of sections on airline companies will also be applied to Aer Rianta. I cannot see the justification for it and it smacks of opportunism. Somebody decided they wanted to put certain restrictions on Aer Rianta and they have used the opportunity of this Bill to do so. It is irrelevant to the main thrust of the Bill and in my view it should not be included. I should like to hear the Minister's justification of it before I press the case further.
I support Deputy Noonan's point. When speaking on Second Stage yesterday I said I could not understand why Aer Rianta had been included in the various sections. I still do not understand the reason. Essentially the purpose of the Bill is to provide the equity for Aer Lingus arising from the recovery plan. The question of the restructuring of Aer Rianta and different arrangements for the establishment of subsidiaries and the appointment of boards was never raised. I am surprised to find it included here. The effect of this Bill would be that subsidiaries of Aer Rianta would have their boards appointed either by the chairman of Aer Rianta, with the approval of the Minister, or directly by the Minister. This is a new provision in relation to Aer Rianta and I do not think it should be included.
I am sorry for being late. I only discovered, less than five minutes ago, that the House was to debate this Bill and, unfortunately, my office is a long way from this Chamber. I understood this debate was to start at 3.50 p.m. and I was taken by surprise.
The Deputy can thank the Minister that we are having a discussion at all. It could have been passed.
He could have used the off-side track like one of his predecessors but he very kindly decided not to.
I do not think one amendment would have made that difference. This Bill is described as an Air Companies (Amendment) Bill. Normally one would assume, then, that it would be dealing with air companies. Aer Rianta is included in this definition although selfevidently Aer Rianta is not an air company but an airport operating company. There is a very substantial difference and the two companies really have nothing in common. Operating an airline is totally different from operating an airport. I do not know why the two companies are run in together in this legislation. In a previous Act, the companies may have been put together for some reason, I am not altogether clear on that. I had hoped to look up these things this morning but unfortunately I did not have that opportunity. On the face of it, there is absolutely no reason why an airport company should be defined in exactly the same way as an airline.
In other countries the distinction between the two is very clear and indeed frequently there is quite a bit of conflict between them. There has been some conflict between Aer Lingus and Aer Rianta but it is more marked in other places. To have two companies that are so different and whose interests are quite contrary to one another defined together in the same way and governed by the same legislation appears to be entirely wrong. I wonder if there is some hidden reason for this because there does not seem to be a logical reason for it.
It is frequently the case that Aer Rianta, as an airport operating company, must be at loggerheads with air companies in the normal sense, whether Aer Lingus, Ryanair or a foreign airline company. Obviously, Aer Rianta is trying to get as much money as it can from airlines for the use of the airport whereas the airlines in their own interests and in their passengers' interests try to keep down the payments as much as possible. Therefore, to include both companies in the definition of "air companies" seems to be rather unusual, to say the least and, I would have thought, rather unwise. I do not see any logic in it. Perhaps the Minister will explain why this is being done and whether it has been done before. In view of the nature of this Bill, the primary purpose of which is to pay £175 million into Aer Lingus, what is the point of dragging Aer Rianta into it?
I have had contact with some people in Aer Rianta and basically they are querying why Aer Rianta is included in this Bill. Aer Rianta is a separate semi-State organisation. Indeed, in the very real controversy on the Shannon stop-over, Aer Lingus took a distinctly different attitude from that of Aer Rianta. I look forward to hearing the Minister's justification for including Aer Rianta in this Bill.
I join other Deputies in expressing concern at the way Aer Rianta has been included in what is essentially an Aer Lingus Bill. My suspicions are that, because of the ongoing difference of opinion on aviation policy between Aer Lingus and Aer Rianta, the Minister decided to put both together. I do not know whether that is fully justified.
The Cahill plan has brought about dramatic changes in previously established aviation policy and I would have thought the Minister would have had another look at the idea of separate airport authorities rather than trying to roll Aer Lingus and Aer Rianta together. I would like to hear the Minister's explanation for this. He seems to have formed the view that Aer Rianta did not have the proper attitude to the Cahill plan. Some employees who expressed strong opinions about the veracity of the Cahill plan, as it affected Shannon airport, had their opinions well dampened by edicts from the Department, whether they came directly from the Minister's office or from some other section. People felt badly done by, and although I cannot expressly name any individual who got swamped or lost his job over it, people were very irate at the dictatorial attitude. If people do not accept Government policy, in a democratic state, they are entitled to express their opinion.
First, I will address Deputy Carey's allegation of a hidden agenda. In passing, let me say, and this is not relevant to the section or the amendment, it bemuses me that an agent of the Minister, as is Aer Rianta, would have a different policy from Government policy. Its job is to pursue Government policy. That is the past tense and I intend rectifying it.
Democracy in action.
Exactly.
I thought he had been fired.
Who?
The man who said he did not agree.
He was not fired, Deputy.
Let us not become involved in personalities.
He was encouraged to resign.
Not at all. I am talking about Aer Rianta itself. As the Deputy as a former Minister well knows, you expect companies or agents under your aegis would pursue the policy that you dictate. This very simple principle should be followed by all companies. What I am saying is that if there was confusion on that issue before my tenure I intend to rectify it. In relation to the amendment and the amendments put down by Deputies O'Malley and Noonan (Limerick East)——
It is a red card——
I would not like to go into too much detail on that issue——
——not a yellow card.
I would not like to embarrass anybody in the House——
Let us hear the Minister. Deputy Carey has had his say.
That issue should be left aside. I have not gone public on it and I have no intention of doing so.
(Limerick East): On a point of order, Sir, there is an allegation in what the Minister has said. A document was leaked by persons unknown and it is supposed to have come into this House. My name was associated with it as it was supposed to have been faxed to me. It was not faxed to me and I never saw such a document. That is the inference of what the Minister is saying.
Quite frankly, that is not a point of order. This is Committee Stage and the Deputy may speak again and again as much as he likes. The Minister is in possession and let us hear the Minister.
(Limerick East): In terms of the order of the House, is there not a procedure whereby one can object to untrue allegations?
I did not hear the Minister make any personal imputation against any Member of this House.
I made no allegations.
The Minister rumbled.
I simply indicated that I did not want to go into issues that are irrelevant to this section. I also made the point that I would not seek to embarrass anybody.
(Limerick East): It is a lie, Minister.
Let us have an orderly debate.
I have not indicated the basis for the embarrassment.
(Limerick East): That is the most treacherous kind of allegation.
The Deputy is not too bad at them himself.
(Limerick East): You will whisper it outside the House.
I never did that and I never will.
(Limerick East): The Minister should mend what he says.
Excuse me, Deputy. I will clear it up very quickly.
Excuse me, Minister, let us get down to the subject matter of this amendment and keep personalities out of it.
I agree totally. That has always been my position and the Deputy can check it out. If I accepted the amendments it would mean that sections 9, 10, 12 and 14 would not apply. There is a fundamental misunderstanding here. This is an air companies Bill and Aer Rianta is an air company under the 1966 and 1977 Acts. An opportunity is taken in this Bill to provide for the statutory application to 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 Governenc ment. They relate to the establishment or acquisition of subsidiaries, to investment and undertakings other than subsidiaries and borrowing by subsidiaries. These controls are contained, for example, in the Irish Aviation Authority Act, 1993 and the Forestry Act, 1988. Section 14 of the Bill provides that these controls shall apply to the air companies. The Government would want them to apply to Aer Rianta in the same way as they apply to other State companies.
Section 18 of the Bill repeals section 6 of the Air Companies Act, 1976, which provides for the remuneration and allowances paid by an air company to its chief officer, subject to the approval of the Minister given with the consent of the Minister for Finance. Section 10 reenacts this provision and extends it to any subsidiaries of an air company which the Minister may specify.
If Deputy O'Malley's amendment were accepted, this control would not apply to Aer Rianta. If Deputy Noonan's amendments were accepted it would mean that Aer Rianta would no longer be an air company within the meaning of the Air Companies Acts. I could not accept those amendments.
(Limerick East): I will deal first with the item which has caused controversy. In the course of the year an Aer Rianta internal document was published in The Irish Times. The document took a policy line contrary to the Minister's line, that a change in the status of Shannon Airport was in the best interests of the country. The Minister ordered an investigation in the course of which a list of fax numbers to which faxes had issued from Aer Rianta offices, particularly in Shannon, was acquired. One of them was a fax number in this House. Somebody close to the Minister began to spread the story that the fax was received by me and that I had given it to The Irish Times. That is not true. A fax was not received by me from any Aer Rianta employee. When the Minister rose to his feet today he made the same hidden allegation. The innuendo was that if this issue was raised in the House many of us would be hanging our heads and would be afraid to debate it.
We might dirty our bibs.
(Limerick East): I raised this with the Minister in Committee and he has a damn cheek to come in here today and repeat the innuendo. I did not seek or get a fax and the Minister's inquiry into the activities of Aer Rianta staff was disreputable in the way in which it was carried out. Officers of Aer Rianta rang me at my private home number and here in Leinster House asking if I was the source of the leak and if I would confirm that I had got a fax because a Leinster House number came up on the list of outgoing faxes from Aer Rianta in Shannon and in Dublin Airport. We are not dealing here with the KGB. I do not know the officer in question but I understand that he is no longer employed at Aer Rianta and that he was treated very shabbily by both the Minister and the Aer Rianta authority. If we want to have a debate on the leaked document, we can have it without making sly allegations. I will now get back to the proposed amendments.
Hear, hear.
(Limerick East): I hope the Minister will not repeat the allegation.
I am not a bit intimidated.
(Limerick East): I am not trying to intimidate the Minister.
The Minister is trying to intimidate us. He does not want any democracy.
(Limerick East): I am trying to get a little bit of respect for the truth. The Minister has waved the big stick at Aer Rianta employees and has stood up here to say that whatever the practice was in the past he will make sure that in future they will toe the line.
Correct.
(Limerick East): The Minister will intimidate everyone and will have Aer Lingus and Aer Rianta employees in fear and trembling having given them the red card. The Minister might try that with his flunkies but not on any deputies in this House.
(Carlow-Kilkenny): Let us get back to the amendment.
(Limerick East): The definition of an airline company is being extended to Aer Rianta and, apart from the fact that it is an abuse of language, it gives the Minister power over Aer Rianta which he did not have before. Section 9 allows the Minister to appoint the boards of all companies defined as air companies and to appoint the board of every subsidiary company. There are further restrictions in sections 14 and 15 in that no air company or any subsidiary thereof shall establish or acquire a subsidiary without the prior written approval of the Minister, with the consent of the Minister for Finance. Then there is a limitation on the aggregate at any one time of the investment of an air company or subsidiary thereof in undertakings. It shall not exceed such amount as may be determined from time to time by the Minister with the consent of the Minister for Finance. Borrowings by a subsidiary shall be subject to the consent of the Minister for Finance. In section 15 there is a list of obligations imposed on Aer Rianta. It will have to bring its memorandum and articles of association into accord with this Bill.
The Minister made a case that, because he has included section 18 to repeal section 6 of the Air Companies Act, there are certain consequences for Aer Rianta and this redefinition is necessary. If the Minister did not repeal the section it would not be necessary. The repeal of the section in section 18 is a consequence of the Minister's redefinition in the definition sections, not a justification of it. He is ensuring that he will be able to appoint every board member in all of the subsidiaries. He already has the right to appoint the main boards and now wants to control in a political way the directorships of the subsidiaries right along the line. The Minister is doing that in respect of the four new subsidiaries into which Aer Lingus will be reorganised and any other subsidiaries which they have. Not being content with that, he is extending it to Aer Rianta as well by the backdoor. Knowing the record of the Government, the appointments will be made on a party political basis and there will be little relationship between those appointed and their experience in running either airlines or airports.
Section 14 is quite restrictive and is very detailed in the powers given to the Minister. Commercial semi-State bodies must run on a commercial basis. Once the commercial mandate is laid down there should not be interference in normal commercial decisions by the politician who heads the Department to which it must report. Under section 14 commercial decisions will have to be referred to the Department and will need the permission of the Minister. These restrictions could have serious commercial consequences for Aer Rianta.
The problem with semi-State organisations is not the lack of political control but the prevalence of political interference. Commercial State bodies should be allowed to act in the best interests of the company. This is a backdoor method to extend to Aer Rianta provisions which because of the record of Aer Lingus the Minister might seek to justify. Aer Rianta has had an exemplary record over the years.
I want to comment on a point made by the Minister, namely, that it is the function of semi-State bodies to carry out Government policy. I have always believed it to be the function of the semi-State companies to carry out the functions set down in the Acts establishing them. Government policy is a fairly wide term and a movable feature even within a Government. This raises the question as to the Minister's accountability to this House for semi-State bodies. If I table a Dáil question about a decision taken by a semi-State body I will receive a letter from the Ceann Comhairle informing me that the Minister does not have responsibility to the House for such a decision. The Minister's statement today throws new light on that and prompts me to phrase my questions differently in the future. For example, let us take a very recent decision in regard to the sale by Telecom Éireann of its Ballsbridge site at a loss of £3 million. Was Telecom Éireann pursuing Government policy in losing £3 million on the sale of that site? Did it have the Minister's approval for the sale? This provision puts a whole new perspective on the Minister's accountability to this House for the activities of semi-State companies, especially those under his control.
As the Minister insists on tying the activities of Aer Rianta into this Bill and to the fortunes of Aer Lingus, there is an issue I would like to pursue with him. Yesterday we had some discussion about the question of competition and the desirability of fair competition between airline companies here. I am sure most Members would agree that there should be a level playing field for airline companies competing for business here, but the history of that deserves some examination. A matter in that regard was brought to my attention recently, although I did not receive a fax about it; perhaps the source might be better protected as a result. The point was made to me that Aer Rianta's landing charges for Ryanair are lower than those for Aer Lingus. I am not sure if that is true, but I would like to know if that is Government policy, as Aer Rianta is now pursuing Government policy. If it is true it would put a completely different complexion on the level playing field concept in regard to competition.
I listened with some disappointment to the tone of what the Minister said, which would not come across in writing, but came across rather forcefully for those in the House. I agree with Deputy Gilmore that the relationship between the Minister and the State company espoused here this morning is new and rather dangerous. I agree with the examples given by Deputy Gilmore with the exception of his reference to Telecom Éireann who incurred a loss of £7.5 million on the sale of its Ballsbridge site, not £3 million.
I have considerable experience as a Minister in a number of Departments, primarily in the former Department of Industry and Commerce and related Departments, during which time I had dealings with many semi-State bodies. I never saw their function as simply carrying out Government policy at all times and in all circumstances. A similar approach was adopted by the Minister's immediate predecessor because last year Aer Rianta issued a formal official statement in regard to the position of Shannon Airport in which it expressed a particular view that was not materially different from that expressed in the document to which Deputy Noonan referred. It may have been expressed in different words, but essentially it was the same view. Aer Rianta is entitled to express such a view. If it was not, the Minister's predecessor or officials in the Department would have said so. That was not the case. Semi-State bodies and various boards frequently expressed views with which I did not agree. Nevertheless. I did not think any less of them. I asked them to justify their views, I expressed mine and frequently we reached a view that suited us both.
The Acts setting up many of those semi-State companies state that part of their function is to advise the Minister. I am not sure if that is stated in the Acts relating to Aer Rianta, but it is certainly stated in a number of such Acts. Apparently, that will now go by the board and State companies will not be entitled to express a view unless they express "Big Brother's" view. That was the case in the former Soviet Union and places under its control but it is not the case at present. However, there is a danger it might be the case again. It is not healthy for that to be the case here. Whatever about employees, who do not have much choice, people who want to act as conscientious board members may think twice about becoming involved if they are not entitled to express a view they have not cleared in advance with the Minister for Transport, Energy and Communications. That is outrageous.
Having listened to the debate on this amendment and the venom with which the Minister attacked Aer Rianta and told the House how he would put it in order, clamp down on it and ensure it did not say anything with which he did not fully agree in the future, I am somewhat clearer about the hidden agenda. When I first spoke to this amendment I wondered what was the hidden agenda. It is the episode about which Deputy Noonan and the Minister have exchanged comments in the past few minutes. It is the Minister teaching Aer Rianta, who stepped out of line, a lesson so that it will not do so again.
This Bill was supposed to deal with Aer Lingus, its associated problems and the fact that it lost £188 million in the 12 month period up to 31 March last. Many controls and restrictions are being introduced under this Bill which, ideally, one would not wish to have introduced. However, it is understandable in the case of Aer Lingus because of what has happened, but why impose all those unusual restrictions and controls on Aer Rianta? Aer Rianta did not lose £188 million. So far as I am aware it never lost any money, it makes a substantial profit every year and remits almost all of that profit to the Exchequer. It is recognised as being commercially successful and runs its affairs in a sensible and successful commercial manner. I am sure most Members welcome the fact that it has extended its operations beyond Ireland in recent years and has been successful in, among other places, the former Soviet Union where it has set up approximately five commercially successful establishments. It is considering the possibility of setting up other establishments in Malaysia and a number of other countries in South East Asia and perhaps further afield. It should be encouraged to do so. I do not know of any major mistakes it has made that would lead us to clamp down on it and impose additional controls.
The Minister said that if my amendment were accepted all the controls which have been inserted specially in four or five sections of the Bill which he listed would not apply to Aer Rianta and that this would be unthinkable. I do not accept this. My attitude to State companies is that one should be reluctant to impose unnecessary controls and anxious to give them as much commercial freedom as possible. Unfortunately, our experience during the years in respect of a number of them has not been great. Like other Ministers, I was forced to impose additional controls. Unhappily for us, that is the case with Aer Lingus.
I have no objection in principle to the proposal that the controls outlined in the Bill should be imposed because of the recent history of the company but it is most unfair to lump in another company which did not have these problems or make these policy and other mistakes.
So far as I am aware, Aer Rianta never got into the difficulties which, for example, Aer Lingus Holidays Limited or Sunbound got into. Is it right therefore that it should be subjected to these controls? I do not see any reason it should be and do not accept the Minister's attitude to State companies generally which, if it were analysed, would be shown to be very dangerous.
As Deputy Gilmore rightly said, the Ceann Comhairle will have to review all his rules relating to parliamentary questions because I, like other Members, constantly receive letters from him stating that a Minister does not have any responsibility for a certain matter, that it is a matter for the company concerned, even where major decisions, which would have national implications are to be made. Nonetheless a Minister is able to convince the Ceann Comhairle that he does not have responsibility. The Ceann Comhairle had better study what the Minister said this morning because it was a totally new concept. The Minister will have to answer for every minor decision made by these companies if he implements it. I will not encourage him to implement what I think is his wrongheaded attitude to State companies by extending these controls unnecessarily. That is the reason I ask him to accept this amendment to ensure we will not tie up companies unnecessarily.
In his reply the Minister did not indicate the way in which Aer Rianta surpluses will be dealt with in the future. I recall that Aer Rianta dealt effectively with each of its subsidiaries, whether in Shannon or Cork, and asked them to deliver, with the result that surpluses were recorded through the years in each area. This money was paid directly into the Exchequer. Is the Minister saying that he is going to change the system, that in future there will be a new control system? Will the officers of Aer Rianta, especially those who want to plan for the future, be restricted? Due to the new imaginative system put in place under the bilateral agreement there is an urgent need to provide extra accommodation at Shannon, given that the 747s will be based there, and to extend and modernise the facilities. Is the Minister saying that all these decisions will be taken centrally, that both he and the Minister for Finance will make the major decisions about how Aer Rianta in Shannon and Dublin is to be run? I would have thought that if one wanted to change the system one would have done so in another Bill instead of dealing with the issue in this one. Because of the restrictions that will be imposed as a result of this Bill, will the company's own efforts to expand be dampened?
Aer Rianta has played an important role in my constituency and I would like to see this continue but it appears there is a hidden agenda. When the Department adopted a hands-on approach I could have complained legitimately in respect of some of the developments which had been sought, such as an additional cross runway, that we had to bow to the wishes of Aer Rianta in Dublin which wanted to extend that airport. Aer Rianta in Shannon was not able to expand as more and more money was required for developments in the capital city.
Is the Minister saying that Aer Rianta will have greater latitude or that he will, as a result of his decision on the bilateral agreement, look more benignly at Shannon and accede to its request for an expansion of the terminal building, the bays, the fuel farm and all the other items mentioned in the list compiled by the company because the decisions will be taken centrally?
The amendments to section 1 relate to the question of whether Aer Rianta should be included in the Bill in terms of the controls specified in the Government guidelines relating to semi-State bodies. I reiterate, for the benefit of Deputies, that Aer Rianta is not a semi-State company, it is an agent of the Minister. I assure Deputy O'Malley, a former Minister for Industry and Commerce, that I have an open mind on a range of issues affecting semi-State companies under my aegis. The record will show that since I took charge of my Department I have not got involved in the day-to-day management of those bodies. The Government, as shareholder, sets the policy, but there is nothing new in this. I am surprised that Deputy O'Malley who has long experience considers this to be a new phenomenon. As Minister there was no one better than he at laying down the law to certain semi-State bodies which he believed were not pursuing Government policy. I find it amusing, to say the least, that he regards it as a new phenomenon in political life, that the shareholder should dictate policy. I am sure if the Deputy were a member of a private company with a 51 per cent shareholding or even a 100 per cent shareholding he would accept that the people who are putting up the money should in some way dictate the broad policy.
Deputy O'Malley will find, if he looks at my record since I became Minister, that I do not have a hands-on approach, very much the opposite. However, in deference to the fact that I represent the shareholder, I do have strong views on the general policy objectives being adopted by semi-State companies. It would be a dereliction of duty if I did not ensure that they were in line with accountable decision-making by Government as shareholder and I make no apology for that. I do not accept for a moment that this is a new phenomenon.
The inclusion of Aer Rianta is about what Deputy O'Malley often spoke of during his long and distinguished career. It is about accountability. Does he want to see another Aer Lingus Holidays where we do not have a say in what is going on at the relevant time in relation to acquisitions, to remuneration of chief officers of subsidiary companies that may go outside the Gleeson recommendations? It is simply implementing the recommendations laid down by the Cromien committee in relation to semi-State bodies and giving them legislative effect when the opportunity arises. In response to issues Deputy O'Malley raised, were those recommendations followed we might not have ended up as we did eventually.
The Department does not have a hands-on approach. It simply wants to be kept informed of major policy decisions and, on behalf of the shareholder, to have an input at the relevant time in relation to those decisions. In regard to the specific company mentioned, the extraneous matters which I agree are totally irrelevant were not raised by me. I am simply explaining that I would be aware of them and of the position. Aer Rianta is not a semi-State company but an agency. It is being treated substantively as a semi-State company to ensure that we do not delve into what are strictly management matters but we delve into major policy decisions on the basis that the taxpayer, as shareholder, should have some say.
There are always accusations of political interference on the part of Ministers; I do not interfere politically. That charge was laid by Deputy Noonan before the setting up of the Telephone Users Advisory Group, the composition of which will show that its independence is beyond question. Opposition Deputies usually level that charge when they have no substantive argument to make. What is proposed here is to ensure that Aer Rianta, which is already an air company under previous Acts, will be subjected to the same guidelines as other semi-State companies decided upon by the Government of which Deputy O'Malley was a member. There is no hidden agenda. This is simply giving legislative effect to issues which are agreed, which are proper and which are in the domain of the shareholder and about which the shareholder should have some say at the appropriate time rather than have to react to situations which have led in the past to some of the problems mentioned by Deputies.
The Minister did not deal with the changes he is proposing for Aer Rianta's surpluses. What does the Minister intend to do in regard to that surplus? Is he changing policy in that regard? How will the surpluses be affected by the legislation? I would like an explanation.
With respect, these issues are best dealt with at Question Time. I explained the context in which Aer Rianta is included in this section and its relevance to the Bill. Questions about surpluses, dividends and general policy issues are not relevant to the section under discussion.
They are very important to Aer Rianta employees.
I would be delighted to discuss the matter by way of supplementary question and answer at the appropriate time. I explained the reason for Aer Rianta's inclusion in this section. There is no hidden agenda. It is simply giving legislative effect to Government guidelines for semi-State bodies. Further, the organisation in question is not a semi-State body but an agent of Government. Until such time as it is a semi-State body the "arm's length" relationship does not apply. The commercial freedom given to Aer Rianta as an agent of the Minister has been such that there could be no question of the heavy hand of bureaucracy applying to the company. As Deputy O'Malley and others noted, the company has shown a degree of innovation by seeking out opportunities far from Ireland which have proven to be productive in terms of the profitability to which Deputy Carey refers. Those general areas would be more informatively dealt with at Question Time rather than in the context of section 1.
I listened closely to the argument and, on balance, I would come down in favour of the Minister.
Surprise, surprise.
(Limerick East): I thought Deputy Costello was going to vote against it.
Does Deputy Costello's conscience ever win any of these awful struggles?
Not just yet. However, if Aer Rianta is not a semi-State body but operates as an agent, why is it in legislation dealing with Aer Lingus, a semi-State body, and various existing subsidiaries and ones to be created from time to time? The Minister's argument could be taken either way. It could be an argument for dealing with Aer Rianta under separate legislation or for extending this legislation to incorporate Aer Rianta as a semi-State body which, I think, is what it should be. If it is operating as an agent, it has operated extremely widely and has done tremendous work. It has been a first-rate commercial success and has carried the flag of Irish entrepreneurial skills around the world. That was done without restrictions and I would not like to see restrictions imposed today although they are being imposed in the context of accountability, limiting that successful operation.
As to the vexed question of who is determining authority, the Government, through the Minister for Finance and the Minister for Transport, Energy and Communications has responsibility to ensure that any semi-State body operating with shareholders' money is accountable, and must monitor that company closely, but that should not extend to interfering with policy decisions on operational capacity. It may relate to policy decisions relating to direction but regarding operational capacity there must be a considerable degree of leeway. The provisions in this Bill assist that process.
This legislation clarifies the position and provides transparency. It provides for the restructuring of Aer Lingus. Hopefully, new subsidiaries will be established. We must ensure that there is transparency in relation to each body incorporated in the company in terms of its board membership. The staff of Aer Lingus at every level should be represented on the various boards, for example, those of the holding company, the existing companies, Aer Rianta or any new subsidiaries established through consultation with the Minister. I would like that matter teased out further.
If representation is provided on the boards of those bodies they may make decisions and we will not find ourselves in the position that has been the subject of controversy across the floor today, about who made decisions, how they were made or whether there is uisce faoi thalamh — other agendas in the context of Aer Lingus or its associate companies. That is the kernel of the problem.
This legislation will not restrict the existing commercial activity of any of the bodies to which I referred. It represents the final stage of a package of proposals which will allow Aer Lingus to progress and develop in an open fashion, with sufficient monitoring functions and with its staff represented to ensure that a crisis similar to that which we are facing will not arise in the future. We are debating this matter today because of that crisis and we cannot simply wish it away. We must face reality. The provisions of this Bill address that reality.
(Limerick East): Arising from the powers which will be conferred on the Minister under section 9 in respect of airline companies, including Aer Rianta, will the Minister inform the House what is the current procedure for the appointment of directors of subsidiaries of airline companies and Aer Rianta?
In relation to Deputies' contributions, including that of Deputy Costello, I acknowledge the excellent work being done by Aer Rianta. I seek to set out its precise relationship by giving legislative effect to guidelines laid down for semi-State companies. I seek also to ensure that existing air companies — this is the Air Companies (Amendment) Bill, not the Aer Lingus (Amendment) Bill — are consistently dealt with in relation to accountability. The Bill provides for the type of issues that should be referred to us in terms of having an input.
We do not seek to delay or inhibit the entrepreneurial skills which we all acknowledge Aer Rianta has displayed down the years. However, there is a need for consistency and that is why Aer Rianta is included in this section and why the various sections to which I have alluded will apply to it in the same way as they will apply to the restructuring of Aer Lingus. On the basis of consistency, it is important that Aer Rianta be included in giving legislative effect to guidelines which apply to semi-State bodies. Those guidelines have been drawn up so that lessons may be learned in terms of what may be perceived to be non-accountability in the past and matters about which the shareholder should have known about and would have known about had the guidelines been implemented. We seek to ensure that consistency is applied to air companies which for the purposes of the legislation, when enacted, will mean that the same guidelines will apply to Aer Lingus Group plc and Aer Rianta and that they will be given legislative effect——
The same hymn sheet.
The same hymn sheet to which Deputy Carey chorally alluded. The hymn sheet from which they will sing will be clear and unambiguous. Despite interpretations that have been put on this matter by Opposition Deputies, this provision in no way dilutes the proper relationship that exists between the Minister and semi-State bodies generally.
Semi-State bodies must be given commercial freedom to operate with Aer Lingus in this difficult period and the same freedom should apply to other semi-State bodies. It is important that commercial freedom be given to the management and staff of companies to enable them operate commercially, compete in competitive sectors where monopolies exist at present and for those sectors to become more competitive in future. That is all the more reason to insist that in the future, and certainly during my tenure of office, commercial freedom will be given to semi-State companies so that they can deal with the increasingly difficult commercial and competitive environment in which they must operate.
Commercial freedom does not mean non-accountability. It means that, in respect of day-to-day management and the carrying out of bread policy objectives, operations should not be interfered with by the shareholder or for political considerations. Hopefully, for the remainder of my tenure of office, while I have responsibility for many State bodies, that policy will continue. The shareholder in this case has submitted substantial funds in terms of an equity investment or, in many other cases, has acted as guarantor for large borrowings in respect of development undertaken by semi-State companies. At the direction of the Government as shareholder and in the national interest in terms of development and regional policy, I will insist that those broad policy objectives of Government be adhered to. Decisions in terms of input which impinge upon the direction of those broad policy objectives will be referred to me. I will ensure that situations, similar to those referred to by Deputies where, because of non-accountability and the lack of information given in time, calamities occurred which might have been avoided had the shareholder been aware of the position, will be avoided. That is the extent of the agenda.
I have explained the intent of the legislation and my intention in that regard. It stands up to scrutiny. Having regard to recent experience in respect of matters which have arisen in semi-State companies, if the guidelines had been adhered to those situations might not have developed. There are reputable reasons why Aer Rianta as an existing air company should come within the ambit of the controls which will be imposed upon Aer Lingus. We, as the shareholder, are making a substantial investment. We want to make sure we get a return on our investment. The taxpayer is entitled to that and the issues over which we seek control and prior notice are within the broad policy area as distinct from day-to-day management positions.
(Limerick East): How are the boards of subsidiary companies of Aer Lingus and Aer Rianta appointed at present?
At present sub-boards are appointed in respect of subsidiaries by the boards. In order to rectify problems that have arisen in the past it is my intention to ensure that some ministerial control will be imposed so that we will be satisfied that there is accountability. Under this system the new accountancy arrangements will provide for transparency in respect of the stand-alone operations. This will ensure that the full position will be immediately obvious to shareholders. It is my intention to ensure that the composition of the boards is such that accountability will continue.
(Limerick East): I will return to this matter on section 9.
Question put: "That the words proposed to be deleted stand."
The Committee divided: Tá, 60; Níl, 36.
Tá
- Ahern, Michael.
- Ahern, Noel.
- Aylward, Liam.
- Bell, Michael.
- Bhamjee, Moosajee.
- Bhreathnach, Niamh.
- Bree, Declan.
- Brennan, Matt.
- Brennan, Séamus.
- Broughan, Tommy.
- Byrne, Hugh.
- Callely, Ivor.
- Connolly, Ger.
- Costello, Joe.
- Coughlan, Mary.
- Cowen, Brian.
- Davern, Noel.
- Dempsey, Noel.
- Doherty, Seán.
- Ferris, Michael.
- Fitzgerald, Brian.
- Fitzgerald, Eithne.
- Foley, Denis.
- Gallagher, Pat the Cope.
- Gallagher, Pat.
- Haughey, Seán.
- Ryan, John.
- Ryan, Seán.
- Stagg, Emmet.
- Taylor, Mervyn.
- Higgins, Michael D.
- Hilliard, Colm M.
- Howlin, Brendan.
- Hyland, Liam.
- Jacob, Joe.
- Kenneally, Brendan.
- Kenny, Seán.
- Killeen, Tony.
- Kirk, Séamus.
- Kitt, Michael P.
- Kitt, Tom.
- Lenihan, Brian.
- McDaid, James.
- Morley, P. J.
- Moynihan, Donal.
- Moynihan-Cronin, Breeda.
- Mulvihill, John.
- Nolan, M. J.
- O'Dea, Willie.
- O'Keeffe, Batt.
- O'Leary, John.
- O'Rourke, Mary.
- O'Shea, Brian.
- Penrose, William.
- Power, Seán.
- Ryan, Eoin.
- Treacy, Noel.
- Wallace, Dan.
- Wallace, Mary.
- Walsh, Eamon.
Níl
- Ahearn, Theresa.
- Barrett, Seán.
- Boylan, Andrew.
- Bradford, Paul.
- Browne, John (Carlow-Kilkenny).
- Bruton, Richard.
- Carey, Donal.
- Clohessy, Peadar.
- Connaughton, Paul.
- Deenihan, Jimmy.
- Doyle, Avril.
- Dukes, Alan M.
- Durkan, Bernard J.
- Finucane, Michael.
- Fitzgerald, Frances.
- Flaherty, Mary.
- Flanagan, Charles.
- Gilmore, Eamon.
- Higgins, Jim.
- Hogan, Philip.
- Kenny, Enda.
- Keogh, Helen.
- McCormack, Pádraic.
- McDowell, Michael.
- McGrath, Paul.
- McManus, Liz.
- Mitchell, Jim.
- Molloy, Robert.
- Noonan, Michael. (Limerick East).
- O'Donnell, Liz.
- O'Malley, Desmond J.
- Quill, Máirín.
- Shatter, Alan.
- Sheehan, Alan.
- Timmins, Godfrey.
- Yates, Ivan.
Tellers: Tá, Deputies Dempsey and Ferris; Níl, Deputies E. Kenny and Boylan.
Question declared carried.
Amendment declared lost.
Section 1 agreed to.
SECTION 2.
I move amendment No. 2:
In page 4, line 12, after "amount" to insert "not exceeding £400 million".
I had to draft my amendments last night before the Minister replied to the Second Stage debate and the Bill was given a Second Reading and I had no opportunity to check the figures. This amendment proposes to put an upper limit on the share capital of the holding company, Aer Lingus Group plc. It seems to be very unusual to allow the Minister for Finance, after consultation with the Minister for Transport, Energy and Communications, to fix the amount at any figure he likes at any time in the future, which will be the effect of this section. I imagine — I am subject to correction because it is very hard to check — that the present share capital of the company is close to £200 million. Allowing a bit of leeway to add on the £175 million, this would give approximately £400 million.
It is very unsatisfactory to have to deal with the Committee Stage of a Bill which was only given a Second Reading at 10.30 p.m. the previous night. If one does not put down amendments before the Bill is given a Second Reading there will be no amendments. I do not propose tying the Minister to an exact figure. What is important is the principle of putting some limit on the amount and not leaving it wide open to the Minister to change or increase it any time he wants. It is normal in legislation where the share capital of a company is determined by the Oireachtas for some figure to be stated rather than leaving the amount entirely at the discretion of the Minister. If this section is passed in its present form, there will be nothing to stop the Minister or some future Minister deciding that the share capital of the company should be £2 billion or £3 billion, even though the Oireachtas might be unwilling to agree to such an enormous amount. The amount of the share capital should be fixed. It is not normally possible in an ordinary company to have open ended share capital which can be increased at any time. The amount of the share capital has to be stated in the memorandum and articles of association of the company.
The authorised share capital of the companies concerned, as at present constructed, is £80 million. I do not see the necessity for this amendment because in any event the Minister for Finance can only subscribe to a maximum of £175 million in shares. The section, as drafted, is in accordance with similar provisions in recent Acts, for example, the Irish Aviation Authority Act, 1993. As I understand it, the Deputy is concerned that the Minister for Finance could willy-nilly go beyond the figure of £175 million if the Government felt that that was necessary, without any upper limit specified in legislation. The fact is that it is State aid which is now subject to EU competition rules and, therefore, any further amount, which cannot be given in any event because this is a once off equity injection under the State aid rules, would require approval by this House. I do not see the necessity for the Deputy's amendment. I understand his concern but in practical terms the issue does not arise.
The Minister said that the existing share capital is £80 million. Is that the capital of what are described in the Bill as the two existing companies?
That is correct.
Adding £175 million to that gives a figure of £255 million and, therefore, my suggestion of £400 million was not far wrong. Does the Minister agree that any company has its share capital stated and there is a limit placed on it? One does not have to issue all the shares in respect of the capital but at least there is some limit. It may not be possible for the Minister for Finance to subscribe to a higher figure without the consent of the Dáil but he can fix it. It is unusual to have a company which, in effect, has no limit on its share capital, in which the shareholders can fix the capital from time to time as they see fit. That is not the practice in the great majority of companies; in fact, I know of no company where it is the practice.
I am not sure I agree with the Deputy on that point. I am not aware that legislatively one imposes a limit on authorised share capital in that one cannot foresee circumstances in other cases where it would not seem appropriate to do so. The Bill simply enacts general principles of modus operandi in terms of the share capital that can be issued. The practical point I am making is that no further injections of equity can be made by the State without referral to the Oireachtas. We do not see the necessity for imposing the upper limit on the basis that that control exists. I can see what the Deputy is getting at but in practical terms it does not present a problem. The Minister for Finance cannot surreptitiously, without accountability to the House, issue further share capital over and above what is agreed and is publicly announced.
Is Deputy O'Malley pressing his amendment?
I am not pressing it, Sir, but one practical problem that arises, for what it is worth, is that when someone is instructed to form this holding company — obviously it has not been formed yet — the first question that will be asked is, what is the share capital? How will that person pay stamp duty on a figure that does not exist?
He will simply look at the accounts which will show the share capital at any given time. It will not be £255 million up front, it will be £75 million plus £80 million. Therefore, depending on the year one is looking at it will be different for each year, subject to an additional ceiling of £175 million.
The authorised capital does not change.
That is true.
But the stamp duty is paid on the authorised capital on the formation of the company.
In that regard the Deputy's amendment is substantively about a fear that there is a requirement for a limit to be imposed on the basis that over and above £175 million would be authorised. I take the point that in various years the issued share capital will be a different figure but nothing in addition to the £175 million can be granted without the authority of the Oireachtas.
Amendment, by leave, withdrawn.
Section 2 agreed to.
SECTION 3.
Question proposed: "That section 3 stand part of the Bill."
I pointed out yesterday on Second Stage that it was not clear on what basis these shares will be exchanged. The existing shares are valueless because the company has no value at present. Are they exchanged on a one-for-one basis? In particular what happens then to Aer Lingus plc and Aerlinte Éireann plc? If those shares are redeemed, who will be the shareholder? Will it be the holding company only and will those two companies remain in legal existence? That seems to be implied, at least, by the section. Will Aerlinte Éireann plc operate as the Aer Lingus-Shannon division and what will Aer Lingus plc operate as? Will Aer Lingus Express be separate from Aer Lingus plc and under what name will the ancillary companies operate?
The shares are exchanged on a one-for-one basis. The existing companies, Aerlinte Éireann and Aer Lingus plc, remain as subsidiaries. Aerlinte becomes Aer Lingus-Shannon and Aer Lingus plc becomes Aer Lingus with responsibility for the European routes. Aer Lingus Express, obviously, will be set up separately and provision is made for that in the Bill. Therefore, the share arrangement is that it all goes to the holding company and Aerlinte and Aer Lingus become subsidiaries of the holding company on a one-for-one basis.
There is no provision in the Bill in respect of Aer Lingus Express other than that there is provision to create subsidiaries generally. There is no specific reference to Aer Lingus Express and, of course, that is the one that is causing most concern among the subsidiaries. Last evening the Minister said it was not envisaged that the existing Aer Lingus company would be divided into four divisions. I would like him to confirm that there will be four separate companies and, if that is the case, it appears to conflict with what was announced by Mr. Cahill in June or July. He specifically referred then to divisions, not to companies. I welcome the fact, if it is to be the case, that there will be four separate operating companies. Presumably they will have separate accounts, will have to act independently and transparently, and will be unable to continue the subterfuge that went on in relation to Aer Lingus accounts for so many years. For example, they used to charge things against the Atlantic division in order to make it look worse and render Shannon less defensible in order that they could get their way. We want an end to all that. People are sick of all that subterfuge and deception. When Aer Lingus foolishly bought two 767s some few years ago they charged the lease payments of those aircraft against the Atlantic division even though the planes were never used on the Atlantic. As a result they gave false figures in relation to the economics of their operation on the Atlantic division. That was indefensible but they seemed to regard it as fair to cod the public. I hope the Minister does not take that view and that we will have transparency in the future.
It was also noteworthy that when Aer Lingus sold their three 747s, as they did some years ago, they credited the capital sum to the main holding company of the airline, what is referred to here as Aer Lingus plc, but they charged the payments on the lease back against the Atlantic division. If they want to credit the sale price to the main company they should also charge the lease back payments against the main company.
Those are two examples of the kind of activity that took place. It is one of the reasons many of us are so suspicious in relation to the way this airline has been run over the years. I gave another example last evening, when speaking on Second Stage, in relation to Irish Helicopters Limited. When a huge windfall profit was acquired by them in 1991, it was used by way of cross-subsidisation against other contracts. The sooner that Aer Lingus desists from that kind of activity the better.
Under the provisions of this section — where all the shares are being exchanged from the existing companies — I would like the Minister to give the House an assurance that there will be full transparency, that we will have no further repetition of the deliberate misleading of the public and of the Dáil in this respect in the future.
I too welcome the establishment of the four separate companies. When Aer Lingus Europe is established, I would be happy if Aer Lingus were to discover they needed routes to Europe out of Shannon. At least that would be something to which we could look forward in the future.
When I spoke last evening I expressed my abhorrence of the accounting system adopted by Aer Lingus. It would appear they were postponing the evil day. I do not know what was their intention in resorting to such methods. Last evening I made the charge that it had been politically motivated, that the people in charge avoided taking a serious decision, not wanting to take on board the bad news that Aer Lingus was in deep trouble, that it had been like a loose cannon on the Cabinet table for three to four years.
The Minister says there will be greater transparency in the future. When the reports of these four separate companies are available, at least we will be able to ascertain who is making progress and whether there is any real intention to adhere to the Minister's claims about there being a bright future for them, with members of the Labour Party contending that the worst is over and a bright future is on the horizon. I hope it will materialise to the extent they predict.
I am concerned that the Minister has not really alluded to his disappointment at the manner in which the accounting system evolved within the company. He appears to have no regrets about what has happened. I am disappointed he has not availed of this opportunity to say something about that.
Quite clearly I look to the future. I do not become involved in the apportionment of blame. The requirement of the European Commission will be full transparency and accountability, which will be in the interests of shareholders given our experience to date. There is no problem whatever at departmental or Government level in ensuring that that will be the case. It is important that cost transparency in all these operations be obvious so that one can ascertain the precise performance of each subsidiary company. I can confirm for Deputy O'Malley that these will be subsidiary companies.
In relation to the Cahill plan, all I can say in regard to the terminology used is that they could not anticipate the restructuring decisions of Government in regard to the new arrangements. The Cahill plan sets out the broad strategy but could not anticipate a decision of Government in ensuring that there would be cost transparency. I confirm that the provisions of this Bill will ensure cost transparency. As Deputy O'Malley said, there is not specific reference to Aer Lingus Express but obviously that subsidiary will be established on the same basis as a cost transparent subsidiary company. I outlined in my introductory remarks on Second Stage the procedures that will be adopted before Aer Lingus Express starts up. That is in the interest both of Aer Lingus Express, as a prospective lowcost airline, and of the group itself, in ensuring that it will be a success and will operate on the basis of profitability and internal viability.
Question put and agreed to.
SECTION 4.
I move amendment No. 3:
In page 4, line 37, after "Finance" to insert or any other person.
This is the principal section of the Bill in as much as its provisions authorise the Minister for Finance to subscribe the sum of £175 million, more than double the existing share capital of the company. The Minister has just told us that the authorised share capital of the two existing companies, Aer Lingus and Aerlinte, is of the order of £80 million. I presume all of that is subscribed. Aer Lingus has been in existence for upwards of 50 years. It is a great pity that, virtually in one fell swoop, its share capital has to be more than trebled because of the losses it has sustained.
My concern in this amendment is to seek to give an opportunity to people other than the Minister for Finance, to subscribe to shares at some time in the future in the holding company that will be formed after this Bill is passed. There would be no point offering shares in Aer Lingus because nobody would subscribe to them or wish to make any investment in it but hopefully the position will improve. Management has already changed significantly and may change more. I hope in future the policies pursued by the airline and the holding company will be different and will be commercially successful.
We are entitled to be optimistic in the midst of all the gloom associated with Aer Lingus. If we were optimistic we would say that in five, seven or ten years time the holding company may be profitable and it may be possible to get people to invest in it and thus relieve the Exchequer of some of the burden it will incur, following the passage of this Bill. If the Minister for Finance could get back some of the money invested that would be all to the good or if further funds which were needed could be obtained from other sources that would be all to the good. At present that cannot be done. Under the provisions of section 4 only the Minister for Finance can subscribe to the shares. There is an arrangement in the listing companies where people hold one share each but they are purely nominal for the purpose of being directors. It has nothing to do with the reality of financing the airline through share capital.
It is desirable that Aer Lingus should be, at least, partly privately financed as soon as possible. It is generally true to say that the State owned airlines in Europe are a disaster. They have been a disaster from two points of view, first, most tend to lose money and some tend to lose very large sums of money and, second, they engage, between themselves in all kinds of restrictive practices. In particular, they operate cartels which keep air fares very high in different parts of Europe and the consumer suffers very severely. Aer Lingus were to the forefront of operating cartels in the past, particularly in the days when British Airways was a State-owned airline and in a loss-making position. It is a different matter now as British Airways has been privatised and it has been transformed from one of the least efficient in the world to one of the most efficient and profitable airlines. There are other examples throughout the world where that has happened successfully.
The Commission is being approached — and has been during recent years — not only by Aer Lingus, but also by Air France, by Iberia and by TAP Air Portugal — all of which are State-owned. Generally the State-owned airlines, both in Europe and throughout the world, are the least successful while those privately-owned are the most successful. We have an example here of a privately-owned airline which, in spite of the practices used against it during the past seven or eight years, has been able to survive and I hope will continue to survive. I hope, following the passage of this Bill, that the kind of practices carried out against it will not be repeated in the future.
I do not see any prospect in the foreseeable future of anybody, other than the Minister for Finance, wanting to subscribe to shares in the holding company, but I am optimistic and hope they will want to in five, seven or ten years. If that was the position other investors should not be precluded from making that investment. It would be a huge benefit to Aer Lingus and to the State as well as to the economy and, in particular, to the Exchequer.
This is where I would disagree most profoundly with Deputy O'Malley. The provision as expressed in section 4 is correct and I would be totally opposed to amendment No. 3. It is a strange irony that we have established, through the European Union, deregulation, an open skies policy. That is what we are responding to and, indeed, we should have responded to it five or six years ago in terms of air transportation in Ireland.
There is no longer any monopoly in air transport. I would be more concerned about private monopolies being established. If one considers just how tiny is our air transport industry one would realise how easily we could be swamped if any person with enormous backing could come in and, in a private capacity, take over an established monopoly. We have seen this happen in the newspaper industry where large moguls with huge funding have been able to control large sections of the so-called free and open media in various parts of the world. Indeed, we have seen it here in Ireland. I do not see this amendment as being the answer to any of our problems.
We are going down a much safer road when we talk about providing a 5 per cent equity to the employees of Aer Lingus and in section 5 where we provide for 5 per cent profit-sharing for the employees. We should give the staff a stake in the actual industry in which they participate, which they will be proud to be part of and will do their best to ensure that its future is maintained and expanded for the good of all concerned.
If we need to expand in the future there will be many question marks. What we are doing today and what we have done during the past number of months will not solve all the problems. Anybody who thinks so would be very unrealistic. We are a small part of the overall air industry. Because of competition in recent years and the problems facing so many other air companies throughout the world, we have to recognise we are in a very large playing field. Rather than think in terms of allowing ourselves to be taken over by some of the bigger players it would be more expeditious and in the interest of this country that we think in terms of joint ventures with other players in the field.
For that reason I do not regard Deputy O'Malley's amendment as being helpful. It would further dilute the strength of our holding, the extent of power in Aer Lingus and would weaken our hand in arriving at a deal on an international basis whereby we could co-operate and work in a strategic fashion, through a joint venture, some time in the future. I am not saying that will happen but in order to look ahead we must be prepared to identify our strengths and weaknesses.
I believe the section as formulated is correct and I would not like to see it amended as proposed by Deputy O'Malley.
As I stated on Second Stage, one of the principal objectives of the Bill is to authorise the Minister for Finance as shareholder to inject £175 million equity into Aer Lingus. It is the Government who will make this investment as its contribution to securing the future of Aer Lingus. Deputy O'Malley's amendment seeks to suggest that someone else should make an additional investment in the future.
On Second Stage I spoke about the question of strategic alliances, joint ventures, marketing alliances, cross shareholdings, matters that can be looked at on their merits in terms of the future commercial interests of Aer Lingus. If the suggestion he raises were a reality, it would arise in the case where the Minister for Finance was selling off his shareholding in the company. That is not on the immediate horizon in commercial terms. It would not be a question of requiring in this section that a person be allowed inject equity in the company. If the Minister for Finance were to sell his shareholding — I am not saying it will arise — the amendment would not be appropriate. A requirement that some third party, corporate or otherwise, inject further equity into the company would happen only in terms of the sale or some arrangement of cross shareholding and would not require an amended section as proposed by Deputy O'Malley.
I am not sure that what the Minister has said is right. What I have suggested is the insertion of the words "or any other person" so that the Minister for Finance or any other person may subscribe to further shares if they are prepared to do so in lieu of the Minister for Finance. He is not going to take up the whole £175 million of equity at once. If any other person is prepared to do so at some time in the future there should be legal power to enable him to do so. If we were fortunate enough that some fairy godmother arrived in the morning with £50 million in her hands and told Aer Lingus management that she wanted to invest it in their airline they would legally have to turn her away.
Section 2 governs that:
The share capital of the Holding Company shall be such amount as may be determined from time to time by the Minister for Finance after consultation with the Minister.
Even in that notional situation, section 2 covers it.
I do not think it would. Section 2 relates to the authorised share capital. I do not think——
There is no limit to that.
——anybody is authorised to subscribe, other than the Minister for Finance. I think as a matter of principle that others should be authorised to subscribe. If the words I suggest, "or any other person", are inserted I do not think it will cause problems. I do not see a queue of people willing to subscribe out at Dublin Airport. Deputy Costello in his speech on this amendment seems to think that it would be entirely wrong that anyone other than the Minister for Finance should hold any shares in the company.
Or the employees.
Anyone other than the Minister for Finance and the employees. He thinks the section should be left as it is to ensure that nobody other than the Minister or the employees would be able to hold shares. I do not agree. I have a fundamentally different point of view and I think the view I hold is common sense and followed throughout the world, not just in Europe. We are very foolish to bury our heads in the sand and try to run a limping post-socialist economy by codding ourselves into believing that only the State is a worthy shareholder in an airline. The transformation in the well-being of British Airways is an example near at hand and there are plenty of others. If British Airways had continued as a State-owned airline it would have continued to limp along with State subsidies. Now it is a major airline, one of the most profitable in the world, and is a major contributor to the British economy and its Exchequer. I would like to see Aer Lingus becoming the same rather than remaining a drain on the Exchequer.
This House should not deprive people of the opportunity to take up shares in the company in the future. The sooner we accept the necessity as well as the validity of privatising as many State companies as we can, the better. We are living in some kind of post-socialist cloud cuckooland. We are trying to hang on to so-called old principles but the sooner we ditch them the better.
I am opposed to this amendment. Deputy O'Malley has articulated a different attitude from that which prevails in Government and in the Labour Party. I am very pleased that he has outlined his views and the public are entitled to assess the situation as he sees it. He has articulated clearly that he wishes the legislation to leave the company open to privatisation. He suggests that a fairy godmother may come along with a sum of money which she wishes to invest in the company. As far as I am concerned, however, there is no free lunch and if someone wants to inject a large sum of money in the company he has another agenda.
There are a great many problems in Aer Lingus and the Bill and the amended Cahill plan attempt to deal with them. There is a commitment by staff, mangement and the Government to try to bring that about. One of the main problems in Aer Lingus was the lack of equity over the years. In the 53 years of its existence, Aer Lingus got approximately £73 million from its main shareholder which is perhaps indicative of Government's lack of commitment to the national airline over the years. It has been very obvious in recent years as deregulation emerged in America and Europe that there were problems which had to be dealt with. Obviously, that information was available from the mid1980s onwards but nobody was prepared to grasp the nettle and deal with the problem. Deputy O'Malley was in Government for some of that period and perhaps his attitude as outlined this morning was in many ways responsible for the Government not dealing with it until recently when it came to public attention.
It is all very fine for Deputy O'Malley to say that we want freedom and choice, but national airlines have received support from Governments in Europe with approval from the Commission. The Minister, and speakers last night, referred to the sums of money injected into companies with the support of the Commission.
While in the past the private sector has been reluctant to invest in Aer Lingus I have no doubt that on the basis of this proposal individuals will see the opportunity that was provided on the backs of the management and workers who made major sacrifices to produce this package which I hope will secure the future of Aer Lingus. I am confident that the proposed package will bring Aer Lingus back into profitability and the private sector will consider investing in Aer Lingus. In the past when the State made companies profitable only then did the private sector consider them seriously. If we accept this amendment Aer Lingus will be open to privatisation.
The Minister, in many contributions in the past year, suggested that joint ventures should be considered in order to ensure the future of the company, but we should not prepare for privatisation which is what would happen if this amendment was included in the Bill.
Even if one accepted the principle of Deputy O'Malley's amendment, the company can issue shares only under its memorandum and articles of association with the consent of the Minister for Finance. The question of future restructuring in terms of joint ventures, strategic alliances for cross-shareholding must be decided by the Government as the main shareholder in broad policy terms. It is not possible to accept Deputy O'Malley's amendment under the memorandum and articles of association but, even from a broad policy objective, it is not right that a semi-State company in which the Government is a 100 per cent shareholder should be allowed to take equity from a third party without the Government having a say. That is not to predetermine the attitude of the shareholder in any given circumstances. We are talking here in national terms. Whatever is in the best commercial interest of the company must be the primary consideration.
We agree also that in practical terms it will not arise in the foreseeable future. It is not possible under the memorandum and articles of association, as at present constituted, nor will it be possible under the new memorandum and articles of association of Aer Lingus plc to accept Deputy O'Malley's amendment and comply with the Bill. Apart from that no such decision can be taken by the company without the shareholder having a determining say in policy terms. It would be a major strategic decision which would change the corporate status of the company and will not arise in the foreseeable future, as the Deputy has acknowledged. Even if it does the shareholder will have prior notice and a determining position on it.
The argument that this would not be in compliance with the memorandum and articles of association and that, therefore, the Minister cannot accept my amendment is wrong on two grounds. We are talking about the holding company, the memorandum and articles of association of which have not yet been drafted.
I acknowledge that.
If it was in conflict with the memorandum and articles of association of one of the existing companies or if the holding company memorandum had been drafted, section 15 of the Bill clearly would cover that. It states that if there is any conflict between the provisions of the Bill and the memorandum and articles of association of any of the companies the provisions of the Bill prevail because it is public law and the memorandum and articles of association have to be amended to comply with the provisions of the Bill.
I accept that point.
The Minister's argument is not correct. The Minister then stated that, apart from that, he sees a difficulty because if this amendment was accepted management could go out and make a deal and the shareholder would not know about it. The management of any company cannot bring in a new shareholder without the consent of the existing shareholders. That is not a real argument. What is important here is not just the legal objections that the Minister is putting up, which do not stand up, but the principle of whether or not we want to have investment by somebody other than the State. That is what I am in favour of.
I accept that that is Deputy O'Malley's stated position, but even if that was to arise, the non-acceptance of his amendment does not preclude that possibility in the future on the basis that the Minister for Finance, as shareholder, will be selling a percentage of the shares of the company. I am saying that it is not envisaged.
When Deputy O'Malley and I are no longer Members, I hope there will be an Aer Lingus to talk about which is the whole purpose of the Bill. I am saying that to suggest that non-acceptance of his amendment precludes that possibility is not correct as the Minister for Finance would be selling shares, not buying them.
Progress reported; Committee to sit again.
Sitting suspended at 1.30 p.m. and resumed at 2.30 p.m.