Seamus Brennan
Question:1 Mr. S. Brennan asked the Minister for Transport, Energy and Communications if he intends to sell shares in Aer Lingus in the near future; and if he will make a statement on the matter. [11008/97]
Ceisteanna — Questions. - Priority Questions. Aer Lingus Group.
Ivor Callely
Question:12 Mr. Callely asked the Minister for Transport, Energy and Communications if he will clarify his reply to Deputy Callely's Parliamentary Questions Nos. 24 and 170 of 12 March 1997 in relation to Aer Lingus; if he will give details of his references to adapt to market realities; the implications in this regard; and if he will make a statement on the matter. [10951/97]
Desmond J. O'Malley
Question:17 Mr. O'Malley asked the Minister for Transport, Energy and Communications the discussions, if any, he has had with the management of Aer Lingus on the possible sale of equality or strategic alliance agreements with a third party; and if he will make a statement on the matter. [10855/97]
Ivor Callely
Question:147 Mr. Callely asked the Minister for Transport, Energy and Communications the issues, if any, he has considered in relation to developments in the national airline; and if he will make a statement on the matter. [10982/97]
Ivor Callely
Question:149 Mr. Callely asked the Minister for Transport, Energy and Communications the current position regarding Aer Lingus; the likely develoopments over the next five years; and if he will make a statement on the matter. [10984/97]
I propose to take Questions Nos. 1, 12, 17, 147 and 149 together. I welcome the opportunity afforded by these questions to clarify the Government's position on the future development of Aer Lingus. My predecessors, in response to similar parliamentary questions dating back to March 1994, indicated that the Government has continued to encourage Aer Lingus to develop appropriate strategic alliances with other airlines as part of its overall development strategy.
This approach was set out in the Irish Aviation Policy Document published in February 1994 and more recently in my Department's Statement of Strategy launched in March of this year. This approach is fully consistent also with the programme for Government.
The statement of strategy identifies two key strategies for Aer Lingus which were formulated against the backdrop of the many challenges facing the Aer Lingus Group as we approach the 21st century. These are: to continue to operate in accordance with strict commercial criteria and to ensure that, within a three to five year timescale, the operational resources employed by the group and the commercial results achieved, including the return to the shareholder, are such that they benchmark favourably with any comparable private sector airline against which they compete; and to explore the possibilities of entering into a major strategic alliance, with or without the transfer of equity, and to submit proposals to the shareholder by the end of 1997.
The first strategy is necessary to ensure that the strongest possible commercial focus is upheld within the group. This will allow the airline to sustain profitability going forward to the next century which is essential to ensure its future.
The second strategy is necessary to allow Aer Lingus the freedom to examine if there are advantages in an appropriate alliance having regard to trends in the global aviation market. Whether this should be an alliance involving the transfer of equity is a matter which will arise as the examination proceeds and on which the Aer Lingus board must, in the first instance, form a view. Any decisions arising from this process will be taken by the Government in due course. This is the position as I conveyed it recently in discussions with the chairman of Aer Lingus.
It is important to remember the ongoing challenges and market realities Aer Lingus will face. These include increasing competitive pressures on all routes; Ireland's peripherality and the small size of its domestic market; the anticipated cyclical downturn in the aviation industry; and global trends towards consolidation and alliances.
Allied to this is the position of the Government and the European Commission that further State aid for Aer Lingus is ruled out. In these circumstances, it would be wrong to deny Aer Lingus the opportunity to explore the possibilities for developing a major strategic alliance, even if that means denying Deputy Brennan a chance to buy Aer Lingus shares on the stock market here.
The Minister should be nice to me today because this is probably the last occasion when he and I will do battle under this heading before we will change sides of the House. The Minister's closing remark is interesting in that context.
The Deputy should not hold his breath.
Will the Minister release the mandate he gave to the board of Aer Lingus? Will he outline what is in it and make a copy of it available to this House? As taxpayers have put £175 million into this company, it would be disgraceful if the Minister were to sell off shares in that company to overseas interests in the same way as he did with shares in Telecom Éireann. Will he give the House an assurance he will not go down the route he followed with the sale of Telecom Éireann shares on the cheap to overseas investors who have now got back most of their investment?
In spite of Deputy Brennan's plea for understanding, and I can understand why he might make it but I would not advise him to hold his breath waiting for the events he is so happily expecting, I regret I cannot agree with him. It would be interesting if Deputy Brennan were to put on record the opinion I discern is underlying the questions he put forward. It is that we should not take any action to secure the future of Aer Lingus in view of the market realities and that we should not contemplate the type of action on the part of Aer Lingus which most other airlines in Europe have been forced to contemplate, even those which have been the recipients of very large amounts of taxpayers' money in their respective countries.
Regarding the mandate to the board of Aer Lingus, I will happily send the Deputy this afternoon a copy of my Department's statement of strategy where the mandate is clearly set out. It will not surprise the Deputy to hear that I will not give him a verbatim account of my conversations with the chairman or chief executive of Aer Lingus. The taxpayer has put a large amount of money into Aer Lingus in recent years. If we do not take action of the kind I set out here in broad terms, Aer Lingus will find itself again in very great difficulty, but this time without the possibility of another rescue package being put in place.
On the Deputy's remarks about Telecom Éireann, he has consistently refused, because it suits him politically, to acknowledge the full meaning of the Telecom Éireann strategic alliance. We have brought in two major strategic partners which will greatly strengthen that company.They have paid an entry fee of £180 million and a final addition to that will be 60 per cent of the increase in the value of the company between the date of the shareholder's agreement and a valuation date of some time around the third anniversary of that agreement. If Aer Lingus chooses to go a similar route and the Deputy chooses to oppose it, he would condermn Aer Lingus to extinction.
I will oppose it if the Minister tries to do what he did with Telecom Éireann because I am on the record as predicting that will turn out to be a disastrous deal. So far the figures available in the public arena show it is heading in that direction.
If the partners have made as much money from it as the Deputy thinks, the principal shareholder has made much more.
They paid £183 million for that company, got 20 per cent back the day they put it in and will get the rest of it when Cablelink and the other companies are sold.
That is extra.
It is coming out of the profits. Within a year and a half the overseas interests who bought that company will get their money back. Meanwhile, the Minister has seen to it that nobody in this country can buy a single share in Telecom Éireann.
If a 20 per cent shareholder has got their money back in a year and a half, then the Irish taxpayer has benefited by four times that amount.
The Dutch and the Swedes are the only people benefiting from the Telecom deal and the Minister knows that.
On Aer Lingus, will the Minister comment on the statement by SIPTU that the Minister has broken key commitments contained in the PCW, Partnership 2000 and those given by the Government? SIPTU seems to feel that what it calls the Minister's "adversarial" approach is unacceptable.
I have not broken any commitment in the context of the PCW. I am not directly involved in industrial relations in the company and, therefore, have not given commitments which I could break. As far as plans for the development of Aer Lingus are concerned I am happy to say we have put in place a partnership and consultation arrangement between the unions and management. This has been carefully looked at. All the matters we have spoken about in relation to the development of Aer Lingus will go through that same process. Everyone in the company will know what is proposed and will have an opportunity to contribute to ensure the future development of the company.
Does the Minister agree with Deputy Derek McDowell who said he will oppose the sale of shares in Aer Lingus? The Minister is saying there is a real possibility he may sell shares in Aer Lingus in the short-term, given the mandate he gave to the board.
Deputy Brennan persists in misunderstanding me. I will not repeat my answer. I said I asked the board of Aer Lingus——
It is great to be so bright.
—— to consider a strategic alliance with or without the transfer of equity. Like Deputy Brennan, who is a rash young man——
Can the Minister sign that?
I do not need to, it is plain for all to see. Anyone who rules out any possible avenue by which this company can develop is doing it and the workers there a great disservice.
The Minister earlier indicated he was grouping replies to Priority Question No. 1 with Questions Nos. 12, 17 and some written questions. In accordance with our new procedures, Oral Questions Nos. 12 and 17 cannot be grouped with a priority question and must be dealt with in the ordinary way.
I apologise to the House.
Mea culpa, mea maxima culpa. Written Questions Nos. 147 and 149 cannot be grouped.