Ceisteanna—Questions. Oral Answers. - Team Aer Lingus.

Seamus Brennan

Question:

12 Mr. S. Brennan asked the Minister for Transport, Energy and Communications the contents of his discussions with EU Competition Commissioner, Mr. Neil Kinnock, on his visit to Dublin last week; and whether he sought assurances from the Commission as to the outstanding £50 million investment committed to Aer Lingus. [9033/95]

Síle de Valera

Question:

46 Miss de Valera asked the Minister for Transport, Energy and Communications if he has received a new recovery plan from Aer Lingus in recent weeks; and the changes, if any, that are proposed. [8969/95]

Martin Cullen

Question:

49 Mr. Cullen asked the Minister for Transport, Energy and Communications if he has assessed the impact on TEAM Aer Lingus of the Government's decision to grant-aid Shannon Aerospace; and if he will make a statement on the matter. [8966/95]

Ivor Callely

Question:

93 Mr. Callely asked the Minister for Transport, Energy and Communications the views, if any, he has on the future of our national airline, its subsidiary TEAM Aer Lingus and its employees; and if he will make a statement on the matter. [8918/95]

I propose to take Questions Nos. 12, 46, 49 and 93 together.

On 21 February last I informed the House of my serious concern about TEAM where, despite implementation of the Labour Court recommendations, the targets under the restructuring programme were not being met. If the situation had been allowed to continue unchecked, the company would have had no future.

In a more immediate sense, I was concerned, in particular, about the impact the situation in TEAM might have on the European Commission's decision in relation to the critical third tranche of £50 million in equity which is due for payment to Aer Lingus later this year.

The commission sought a report from the Government by 30 June next on the progress of the restructuring programme at TEAM and on proposals for resolving the current difficulties in the longer term. In the light of my analysis, I had requested the executive chairman of Aer Lingus to furnish me with a five-year business plan for Team Aer Lingus which would provide a basis for returning the company to commercial viability, in the context of current market conditions.

Subsequently, I received a letter from the European Transport Commissioner, Neil Kinnock, in which he indicated that he shared my concern and that the continuing losses at TEAM Aer Lingus were particularly worrying. He cautioned that if decisive action was not taken very quickly the Commission might find it difficult to take a positive decision on the final equity tranche.

The executive chairman of Aer Lingus has recently complied with my request for a five-year business plan. This plan was prepared in collaboration with expert business and aerospace industry consultants. I have had a thorough assessment of that plan carried out, which has involved both my Department and the Department of Finance. This assessment concludes that the measures proposed have been formulated in a manner which takes account of the market realities, where overcapacity and resultant low rates are expected to continue into the foreseeable future.

It is important to point out that in the absence of an agreed corrective plan projected TEAM losses would amount to more than £9 million in 1995, £11 million in 1996 and £13 million in 1997. In other words, over the next five years losses would amount to an unsustainable £60 million without a corrective strategy. It must also be remembered that Aer Lingus has already injected approximately £100 million into TEAM. The plan provides a means of returning TEAM to profitability on a phased basis. It does so by achieving further reductions in the cost base; mounting an aggressive, carefully co-ordinated marketing and product development programme; and restructuring TEAM's finances.

Specifically, the TEAM plan provides for a cost reduction programme, yielding at least a permanent £8 million annually, affecting all areas of the business including: payroll, overheads and materials.

The plan calls for a reduction in the workforce to approximately 1,500. This reduction in staffing, amounting to approximately 200, will be effected at all levels from management to shop floor. The plan also provides for financial stability for TEAM during the early stages of the plan when TEAM's earnings are not sufficient to meet its costs. This will be done by way of interest-free loans to TEAM from the Aer Lingus Group, which will be conditional on TEAM achieving the targets set out in the plan.

The implementation of the plan will require major adjustment and extraordinary effort. It must be clearly understood, however, that this is an integrated strategy which must be implemented to protect the future of TEAM and the entire Aer Lingus Group generally.

The plan provides for achieving profitability on a phased basis within this timeframe. I stress that this is a business plan, not a cost reduction plan. In short, it offers a future to the workforce of TEAM, provided all the measures are implemented in a committed manner. I have, accordingly, asked the executive chairman to proceed immediately with implementation of the plan.

As I have said on a number of occasions in the past, it is not appropriate to publish the details of the plan, as it contains commercially sensitive information. Given the gravity of the situation in TEAM and its potential impact on the Aer Lingus Group, it is vital that implementation moves ahead with all speed. As I speak, the company has already commenced the process of communicating with staff.

In summary, on taking up office I identified a serious problem in TEAM Aer Lingus and took decisive action. On my initiative, for the first time a total business plan has been developed for TEAM Aer Lingus. The plan demands technical excellence at competitive prices, which will require state of the art work practices. It contains aggressive targets and is realistic in that it takes account of continuing market difficulties.

On the basis of the best advice available to me, this plan can be achieved. It is therefore the first plan that realistically offers TEAM the prospect of viability and thereby offers a future for, and saves the jobs of, 1,500 people.

The only chance for TEAM's future is the full implementation of the plan and it is only on that basis that the Government can make a positive report to the European Commission in June.

The length of the Minister's response was unprecedented. I share his concern for the company. He will have my support in practical measures. Does the Minister really think he has been decisive on this issue when the matter is getting worse? He is five months in office and if he had been decisive surely the position would be getting better, not worse. Will the Minister ensure that the £50 million is made available without unnecessary strings attached in regard to Aer Lingus routes? I have heard disturbing reports that route conditions will be attached to that £50 million. I again urge the Minister to publish the plan for TEAM. He has refused to publish the plan for Telecom and he will not publish the plans for CIE. Is the Minister telling the House he wants £8 million per year taken out of Aer Lingus and that he will get cuts of £8 million per year by taking 200 people out of the company entirely? That is what I understood the Minister to tell the House. He said he would reduce the workforce by no more than 200. I have heard disturbing reports that the 200 people he plans to let go from Aer Lingus have been offered consultancy assignments with the company after they get their redundancy money. Is the Minister satisfied that this is the case?

The question is over long. The Chair has a responsibility to other Deputies who have put priority questions.

Is the Minister telling the House he wants to save £60 million potential losses at TEAM Aer Lingus with no more than 200 people being taken out and hired back?

I remind the Deputy that I inherited the problem. He was very much involved in the creation of the problem. During his time as Minister he compounded the problem.

That was four years ago.

I ask the Deputy not to display false indignation. The reality is that he himself showed exceptionally poor judgment. He showed exceptional indecision——

TEAM Aer Lingus was making money in my time. It is losing money since the Minister took over.

——and exceptional failure to confront the issues. He dodged, he ducked and side-stepped the issues.

That is the PR line the Minister gave toBusiness and Finance. Look at it.

Displays are not permitted in the House, Deputy.

The Deputy failed in his responsibility as Minister to deliver to the workforce, to the company and to the taxpayers.

Answer the question.

I will answer the question because I am in a position to do so as I have analysed the problem. I have taken decisive action and I have outlined the course of action which will be taken. The Deputy referred to the £8 million. The approval of the £50 million final equity tranche from Europe will not be connected or tied to any other issue regarding routes in or out of Ireland.

Deputy Brennan gave away the routes.

The Minister to continue without interruption from any side of the House.

By the time the Tipperary slashers finish with the Deputy——

Deputies will be disappointed because their questions will not be reached owing to these interruptions. The Minister to continue without further interruption from any side of the House.

I reiterate this is a business plan, not a cost reduction plan. It is an integrated strategy which must be implemented to protect the future of TEAM and the entire Aer Lingus group. An essential ingredient in the plan is that the company must drive down costs in all areas, including payroll, materials and overheads.

£60 million in five years.

The Deputy has asked a question. If he gives me an opportunity I will answer it.

Can the Minister quantity?

I am in the process of doing that and perhaps I could be allowed do so without interruption. Due to the continuing weakness of the market, the company has stated that further cost reductions amounting to a minimum of £8 million per annum are needed. How precisely these savings are to be achieved is a matter for negotiation between the relevant constituencies, the companies and the unions.

Question No. 13 please.