Batt O'Keeffe
Question:24 Mr. B. O'Keeffe asked the Minister for Transport, Energy and Communications his views on the performance of TEAM Aer Lingus; and whether the company is likely to achieve the targets set for it in the Cahill Plan. [4258/96]
Ceisteanna—Questions. Oral Answers. - TEAM Aer Lingus.
Seamus Brennan
Question:25 Mr. S. Brennan asked the Minister for Transport, Energy and Communications the concerns, if any, he has regarding the resurgence in industrial relations difficulties at TEAM Aer Lingus; and if he will make a statement on the matter. [4946/96]
Máirín Quill
Question:36 Miss Quill asked the Minister for Transport, Energy and Communications his views on the future of Aer Lingus, its subsidiary TEAM Aer Lingus and its employees; and if he will make a statement on the matter. [4996/96]
Ivor Callely
Question:248 Mr. Callely asked the Minister for Transport, Energy and Communications the financial position of Aer Lingus on 31 December, 1995; the consideration, if any, given to this position; and if he will make a statement on the matter. [4995/96]
I propose to take Questions Nos. 24, 25, 36 and 248 together.
The annual report and accounts of the Aer Lingus Group plc for the period ended 31 December 1995 are expected to be published in the near future. Prior to publication, they will be presented to Government and copies will be laid before both Houses of the Oireachtas.
While it would be inappropriate for me to discuss specifics at this stage, I understand Aer Lingus has performed well in 1995, following the successful implementation of the group's restructuring programme.
Aer Lingus is just emerging from one of the most traumatic periods in its 60-year history. The early 1990s saw the company in such a perilous financial situation that, in the absence of strong corrective action, its very existence would have been threatened.
In June 1993, the board and management of Aer Lingus put together a radical restructuring programme entitled "Strategy for the Future". This was intended both to save the company in the short-term and to alter its commercial outlook in the longer term.
To implement the restructuring programme with any degree of success, Aer Lingus had to embrace radical change. Substantial cost savings were achieved. Changes in work practices and employment were implemented. The disposal of non-core assets refocused the efforts of Aer Lingus on the core business of air transport.
Among the priorities I set when I came into office at the end of 1994 was the need to ensure the future viability of Aer Lingus. My most immediate task was to ensure that the Aer Lingus Group was positioned correctly to achieve European Commission approval for the payment of the balance of the £175 million equity pledged by the Government as part of the restructuring programme.
I am pleased this objective and the targets set out in the restructuring programme have been achieved in full and that the outlook for the coming years is encouraging. Future success will only be achieved, however, provided the airline's growth is pursued in a prudent and cost effective manner.
This is a fundamental lesson which cannot be repeated too often. The disciplines imposed and the lessons learned in recent years must not be cast off now that the airline has achieved the objectives set out in the restructuring programme. That was only the beginning of the process.
The Aer Lingus of today and tomorrow must operate in a resolutely commercial manner, concentrating on its core business. The secret of continued profitability in the liberalised airline world of today lies in commitment to quality of service and value for money, allied to an ever present focus on reducing costs.
This is the world in which Aer Lingus now operates. State aid and the protection of flag carriers are things of the past. I am confident that Aer Lingus and its people have the ability to take on the challenges ahead.
I will now turn to TEAM Aer Lingus. In reply to a question on TEAM in May 1995, I advised the House that, following my request, a five year business plan was developed for TEAM Aer Lingus for the first time in the history of the company. The plan was formulated in a manner which takes account of market realities. It provided a means of returning TEAM to profitability on a phased basis through a combination of achieving further reductions in the cost base through savings on payroll, overheads and materials; mounting an aggressive carefully co-ordinated marketing and product development programme; and restructuring TEAM's finances. I am informed by Aer Lingus that the TEAM five-year plan continues to be implemented and the projections and assumptions underlying the plan remain valid.
Industrial relations issues are company matters which should be handled through appropriate internal TEAM Aer Lingus channels and procedures involving management, staff and trade union officials. It would, therefore, be inappropriate for me to comment on specific industrial relations issues. I would like to emphasise, however, that any difficulties which may be encountered in implementing the TEAM plan should be resolved within the proper industrial relations structures in place for that purpose.
No one should lose sight of the fact that TEAM Aer Lingus' financial position remains very difficult. It continues to be dependent on financial support from the Aer Lingus Group. While I acknowledge that significant progress has been made in introducing improved work practices and flexibility in TEAM, a continued unremitting effort from all concerned is required to assure TEAM's future viability.
I am interested in the Minister's comments on the performance of Aer Lingus and note that the word processor is regurgitating what was issued to us last May. The Minister is coming out of hibernation and has been taking it easy following the strain of his strenuous activities in previous months. Anticipated losses for TEAM Aer Lingus last year are of the order of £6.8 million but the dogs in the street know they will be £9 million or £10 million. Obviously that will have a significant effect on the five year plan which was assiduously put together by the new management group in the company. Irrespective of what the Minister said about industrial relations, they are a factor in terms of the cost base and competitiveness. This must be a matter of considerable concern.
A question please, Deputy.
Would 400 people meet on the shop floor without the trade union being represented? Will the Minister confirm that the figure is likely to be £10 million rather than the forecasted £6.8 million? How will that impact on the five year plan?
I am not in a position to comment on the exact detail. However, the company is implementing the five year plan which involves further reduction and rationalisation in the cost base of the company. That matter is ongoing. Some elements of the plan are the subject of further discussion between the management and unions. I am conscious that TEAM Aer Lingus is operating in a difficult market where there is over capacity. I am satisfied that significant progress has been made which involves changes in work practices and sacrifices by employees. Management is conscious of the necessity to make changes after consultation with the work force and the procedures in the company for consultation and discussion are adequate and are being adhered to.
Can the Minister imagine the impact, his statement that there will be further job losses, will have on Forbairt which cites TEAM Aer Lingus, which created 245 jobs, as its star performer last year? Are the figures accurate? Do I take it that there were significant job losses last year and that the figures given by Forbairt for the Aer Lingus subsidiary are erroneous? In view of what is happening in TEAM Aer Lingus, is the Minister satisfied and can he categorically state that the targets set last year will be met and that the targets set for the five year plan are accurate and realistic?
The Deputy will recall that I am not saying anything different today from what I said on 17 May 1995.
The Minister is not saying anything.
The Deputy would like to think I am saying something different but I am not.
The Minister is still in hibernation.
He is getting ready for the Fine Gael Ard Fheis.
The agreed plan is that there will be further reductions in the cost base of the company over a period of time.
Should there be a monitoring structure in place?
I will refresh the Deputy's memory.
It is quite fresh.
Mounting an aggressive, carefully co-ordinated marketing and product development programme, restructuring TEAM's finances and the plan——
Forget the word processor, just talk of us.
The Minister, without interruption.
The Deputy asked a question. Cork is not as good at hurling as it used to be but I am sure people there know how to use a word processor.
We will have another day at hurling but the Minister should forget about the word processor today.
The TEAM plan provides for a cost reduction programme yielding at least a permanent £8 million annually affecting all areas of business, including payroll, overheads and materials. The plan calls for a reduction in the work force to approximately 1,500. This amounts to a staffing reduction of 200 people which will be effective at all levels from management to the shop floor. That is the same number announced in May last year. The plan also provides for financial stability for TEAM during the early stages when its earnings are not sufficient to meet its costs, conditional on the satisfactory implementation of the plan. It requires major adjustment and extraordinary effort. It must be clearly understood that it is an integrated strategy which must be fully implemented to protect the future of TEAM and the Aer Lingus group.
As I stated in May, the plan provides for achieving profitability on a phased basis within its five year time frame. I am satisfied that the company is adhering to the plan and that the measures agreed after publication of the five year plan in May will be implemented in a phased way. Subject to the complete implementation of that plan Aer Lingus will be a viable and profitable company.
My party fully supports the Minister in his efforts to achieve his stated objective of making the Aer Lingus group of companies, in their core activities, a lean, fit and successful commercial company capable of meeting competition. His statement today on the need for prudent and cost efficient management is critical to achieving that objective. What is the Minister's opinion on the recently stated expenditure of £7 million-£8 million on launching the Aer Lingus corporate image? He will be aware of the public's concern and alarm at such expenditure shortly after the company received massive capital injection from the EU and the Exchequer.
Consultants appointed by the EU Commission examined the progress of the Aer Lingus group's restructuring programme, including TEAM's five year business plan, before approving in December 1995 the Government's final equity tranche. Based on their findings the EU perceived the five year plan as realistic given the present position of TEAM and market conditions. They also noted that it had already resulted in a significant improvement in the company's overall performance. It is important to recognise that in the context of moneys being approved by the European Commission.
The implementation of the five year plan is a matter for the board and the management of TEAM Aer Lingus. How precisely the cost reduction measures in the five year plan are achieved is a matter for the company. Similarly, issues relating to the launch of the new Aer Lingus corporate identity are matters for the Aer Lingus group. Financial provision for TEAM Aer Lingus remains difficult and it continues to be dependent on the Aer Lingus group for financial support.
The new logo attracted much adverse comment from the media. In my discussions with the group I asked why it was necessary and was informed that in terms of its marketing strategy this decision was in keeping with the company's objective of being commercially viable and that it would pay dividends, it was necessary and well considered and the board had approved it. Obviously, it is a matter for the board and the management of the company to make such decisions.
Did the new corporate image plan cost £6 million, £7 million or £8 million or are these figures pie in the sky? The Minister will recall that he launched this plan. Is there not an implication that it had his full support? In view of his earlier strictures as regards prudent management and the necessity for cost efficiency, how does he relate that to considerable expenditure on such an item?
Such day to day decisions are a matter for the management of the company to bring before the board. The board consists of people with expertise in a wide range of areas and it approved this new corporate image. I understand it will be on a phased basis and that the initial cost will be approximately £8 million.
On industrial relations, which was the subject of my question, I got the impression from the Minister's reply that there was not really a problem. I have information that large meetings have taken place in TEAM Aer Lingus and that 400 people attended one such meeting a few days ago. I am not sure whether the unions attended. The Minister is misinformed if he was told there is not substantial industrial relations problems in TEAM Aer Lingus. I have been told about a number of large meetings and about the serious situation developing in TEAM Aer Lingus. While the Minister might not want to get involved, I suggest that he looks at the situation.
The situation is far from that which I inherited. The Deputy will recall that when he was in Government the workforce protested and disrupted traffic at the roundabout in Dublin Airport. There has been a dramatic improvement in industrial relations in TEAM Aer Lingus. There may be problems. In a company that size and with the issues that must be tackled and addressed and the sensitivity of some of the decisions which had to be taken, it is obvious that there is a need for ongoing discussions. I am concerned that the procedures in place will be adhered to and that management, unions and those involved in TEAM Aer Lingus will comply with them and difficulties can be resolved.
It is in the interest of the workforce, the TEAM Aer Lingus company and the Aer Lingus group that this five year plan is implemented as envisaged. Without implementation of this plan, there is no viable future for TEAM Aer Lingus. It is in the interest of those involved to resolve whatever minor difficulties have arisen. I have confidence in the management and in the trade union leaders to resolve outstanding matters.
If the investment of £8 million in fashioning the new corporate image is a marketing strategy, will Aer Lingus open up new routes in 1996? What additional volume of business will accrue to the airline as a result of the £8 million investment of taxpayers' money?
Aer Lingus is conscious that it needs to expand its business and to develop new routes and it has been particularly successful in doing so. I have a further proposal on my desk on the approval of a lease for an aircraft for a new route into Stanstead.
I hope it is from Galway.
We have already announced improvements in respect of Shannon Airport. I have no doubt Aer Lingus is conscious that there are opportunities in the market and that it is well placed to take advantage of them. I expect to see an increase in the numbers travelling with Aer Lingus this year and in the future.