Vol. 451 No. 3
2 Mr. S. Brennan asked the Minister for Transport, Energy and Communications if he will reconsider his decision not to make the strategic report on Team Aer Lingus recently received from the Chairman of Aer Lingus available to the public and staff; and if he will make a statement on the progress at the Aer Lingus Group generally. [6598/95]
16 Mr. Foley asked the Minister for Transport, Energy and Communications if he intends to complete the Government's commitment to invest £175 million into the Aer Lingus group; and if he will make a statement on the matter. [6527/95]
18 Mr. L. Fitzgerald asked the Minister for Transport, Energy and Communications his expectations for the future performance of Aer Lingus; and if he will make a statement on the matter. [6525/95]
77 Mr. Callely asked the Minister for Transport, Energy and Communications the present position regarding Aer Lingus and TEAM Aer Lingus; the views, if any, he has on the employees and the future and possible development of these companies; and if he will make a statement on the matter. [6604/95]
I propose to take Questions Nos. 2, 16, 18 and 77 together.
I answered parliamentary questions on the matter of TEAM Aer Lingus on 21 February 1995 and it was also the subject of Adjournment debates on 28 February and 23 March last. The background to the problems at TEAM Aer Lingus and the reasons for my decision to address those problems directly have, accordingly, been fully explained in recent weeks.
The House will be aware that following receipt of a report prepared at my request by the executive chairman of Aer Lingus, I have requested the executive chairman to submit a five year business plan which will provide a basis for developing an assured commercially viable TEAM Aer Lingus.
I have acknowledged that significant progress has been made in introducing improved work practices and flexibility in TEAM Aer Lingus, but further substantial progress is required in order to establish competitiveness.
I am awaiting the submission of the five year business plan which is being prepared by Aer Lingus at present. When received, it will be examined thoroughly and carefully, in consultation with the company if necessary. As I have indicated in the past, I will not rush this examination, nor will I allow myself to be rushed. It would be irresponsible to act in such a matter.
For reasons of commercial confidentiality, as is common practice with reports of this nature, I will not be publishing details of any reports to me on TEAM Aer Lingus. Clearly, it would not be in the interests of the company to do so.
As I have already explained, it is the responsibility of the board and management of TEAM Aer Lingus to brief the company's employees and, in particular, to take the necessary steps to inform staff of the nature of the difficulties which face the company. I will not interfere in management's responsibility in that regard.
The resolution of the difficulties at TEAM Aer Lingus is a matter for the board and management of the company. The future of TEAM Aer Lingus cannot be assured by actions of the shareholder.
As regards the overall position of the group, the Government approved a restructuring programme in July 1993 which was designed to restore Aer Lingus to self-sustaining financial viability. As part of the restructuring programme, the Government decided to invest £175 million in the company over the three years 1993-95. A total of £75 million of that equity was paid in December 1993, £50 million was paid in December 1994 and the remaining £50 million is due for payment in 1995.
As I indicated in replies to previous parliamentary questions, substantial progress has been made at the airline under the restructuring programme and the airline core business has benefited from the general uplift in world aviation. Regardless of the world aviation backdrop the airline is continuing to make the sort of progress envisaged in the restructuring programme.
Payment of the final tranche of equity is subject to the provision by the Irish Government of a report to the European Commission confirming that satisfactory progress has been made by Aer Lingus in achieving the targets set out in the restructuring programme. My immediate expectation of the Aer Lingus board and management, therefore, is the satisfactory implementation of the restructuring programme. That programme provides focusing on the core airline activity and, inter alia, the disposal of non-core assets. The implementation of the asset disposal programme is the responsibility of the board and management of Aer Lingus and I do not have a function in the matter.
I thank the Minister for his comprehensive reply although I am staggered to hear him say the Government does not have a role in the disposal of State assets. Even if they are subsidiary companies they are still State assets.
The Minister refused to publish the chairman's report on TEAM Aer Lingus — I understand that from the point of view of commercial confidentiality and I do not wish to be awkward in that regard — but is it realistic to ask for a five year plan, the way aviation is today? Is it a way of postponing the issue? Would the Minister not have been better to ask for a 12 month plan in the first instance and publish it so that we could discuss it in this House?
Stories circulating suggest that TEAM Aer Lingus does not have enough work to keep going for the next few months — I would not want to make life there any more difficult than it is but if that is true, it would be as well that we know about it.
I appreciate that the Deputy understands why I cannot make the report public and there is obviously commercially sensitive information included in that report. As indicated in my reply, TEAM Aer Lingus is being restructured and has received a £25 million injection from its parent company, Aer Lingus. The necessary changes in work practice have proved very difficult to achieve and have involved a lengthy and costly industrial relations process. The trading position of the company remains difficult in an extremely competitive international environment. With the difficulties in TEAM Aer Lingus, it is not possible to turn the company around and make it commercially viable in a short time. The European Commission is obviously looking at the restructuring and it has its concerns. I have my concerns as Minister and I want to ensure that the £50 million tranche, which is of crucial importance to the Aer Lingus group, is available and that the Government will have approval from the Commission to invest it. It is absolutely essential for the core airline business that that is done.
I requested management to increase its efforts, get out into the market place and generate sufficient work to ensure that the situation which arose last year — when there was a substantial number of layoffs during the summer months, industrial unrest and people blocking public roads — would not happen again.
In response to the Deputy's question on layoffs in TEAM Aer Lingus, I have been urging Aer Lingus, pending completion of the preparation of the five year business plan to seek to ensure there is adequate work available for those employed in TEAM Aer Lingus. I understand from Aer Lingus that work covering the bulk of budgeted hours up to the end of August has been already secured. Accordingly, the company has informed me and my Department that there is unlikely to be any requirement for layoffs at TEAM Aer Lingus this summer.
I stress, however, that the future security of employment in TEAM Aer Lingus can only be assured with the implementation of a business plan which demonstrates the establishment of commercial viability. That has to be done in the long term and that is why I have sought a five year business plan which will indicate progress in terms of the viability of the company. As a result of this business plan I hope to convince the European Union to allow this Government to invest the £50 million equity needed.
I am glad the Minister is confident that there is enough work there up to the end of August and he does not envisage temporary layoffs this year. The workers in TEAM Aer Lingus will be glad to hear it also. Newspaper reports in recent weeks suggest that TEAM Aer Lingus have sought £100 million from the Government specifically for itself. If that is not true, will the Minister put that rumour to bed?
I have received no specific request from Aer Lingus in respect of equity nor did I expect it against the background of the discussions I had with the chairman and chief executive of the company. At an early stage I indicated to the company that a resolution of its problems must come from its own resources and should not revolve around further State equity. I made it quite clear to the company that no further State equity would be available. One of the difficulties that TEAM Aer Lingus has faced is that the international market for maintenance has declined at an alarming extent. The Cahill plan was structured originally on the basis that it could command $50 an hour but international competition has forced those rates down to an average of $30 per hour. There is considerable work at TEAM Aer Lingus but there is not profitable work available to TEAM Aer Lingus. This has to be taken into account in the context of the five year plan, which I am awaiting.
The Minister quite rightly pointed out that the Government agreed a £175 million injection in Aer Lingus of which £125 million has been invested. Can he assure the group that the remaining £50 million will be delivered, or is he telling the group that it is outside his hands and it is a matter for the European Union? Is the Government committed to securing that additional £50 million and when might it be paid over?
The Government is committed to providing that £50 million tranche of funds but the reality is that to enable the Government to make that decision it must first seek the approval of the European Commission. We had some difficulty in convincing the European Commission that the last tranche should be paid. I fear — and this is why I moved earlier — that the European Commission will take a negative view of the declining fortunes of TEAM because TEAM does not conform with the proposals within the restructuring programme which was submitted previously to the European Commission.
It was necessary to review the restructuring plan which was submitted to the EU Commission in light of TEAM's preformance at present. The basic criterion on which the restructuring at TEAM was based has changed dramatically because of competition and the drop in the hourly rate they can command for work undertaken. My concern is for TEAM to produce a singular business plan which will indicate to me and the Commission that the problems are under control and that it has a viable future. That is the responsibility of the executive and management of TEAM Aer Lingus. As soon as I receive the plan, it will receive immediate and careful attention.
