asked the Minister for Public Enterprise the Government's response to the rejection of the proposed sale of TEAM Aer Lingus to FLS Aerospace by the employees; the proposals, if any, she and the Government have to secure the future of the company; if she will meet management and union to ascertain if a revised deal can be secured; and if she will make a statement on the matter.
Private Notice Questions. - TEAM Aer Lingus.
asked the Minister for Public Enterprise the steps, if any, she proposes to take following the decision by a majority of workers in TEAM Aer Lingus not to accept the buy-out offer for the letters of guarantee from Aer Lingus; the plans, if any, she has to meet the company, the union or the representatives of FLS; and if she will make a statement on the matter.
(Dublin West) asked the Minister for Public Enterprise if she will advise the Aer Lingus board that privatisation of TEAM Aer Lingus should not now take place and instead that the company should now be developed as a vibrant State-owned enterprise with the workforce involved at all levels in view of the rejection by TEAM Aer Lingus workers of proposals which envisage the sale of the company to a multinational corporation.
asked the Minister for Public Enterprise if the Government will ensure the commercial future of TEAM Aer Lingus is not jeopardised; if the Government will also ensure no action will be taken by the Government which would in any way threaten the future of TEAM Aer Lingus, including the withdrawal of loans; and if she will explore all other options or combinations of options for the future ownership and management of TEAM Aer Lingus.
I understood there were five questions and I thank the Deputies for tabling them. Deputies are aware of the response of the TEAM workforce, announced last evening, to the proposals for the transfer of their employment to FLS Aerospace. The response was 41 per cent which was determined by members replying if they were in favour and not replying if they were not. I had meetings earlier today with the executive chairman of Aer Lingus and senior management of the Aer Lingus Group and TEAM and I will deal later with those discussions. I have written to the various unions indicating I would like to meet them and I hope that will happen tomorrow or the day after.
Aer Lingus management has acknowledged for a number of years that TEAM, which has incurred losses totalling £100 million in the period 1991-97, needs a strategic investor to underpin its existence in the third party maintenance industry. That is particularly relevant now since the industry is consolidating in anticipation of the next downturn.
Last October the chairman of Aer Lingus, Mr. Cahill, proposed that Aer Lingus should seek to identify companies which would be interested in purchasing TEAM outright. I indicated my agreement, in principle, with this strategy subject to a process of full consultation with staff interests and to my and the Government's consideration of any concrete proposal which might be put to me by the board of Aer Lingus following such a process.
In late 1997 Aer Lingus conducted a review of players in the aircraft maintenance industry to identify a range of potential investors in TEAM. Five players initially expressed interest. Two parties withdrew from the process at an early stage leaving three parties, BF Goodrich, FLS and Allied Signal. Proposals emerged from BF Goodrich and FLS, but Allied Signal was unable to formulate a proposal. Management undertook a formal evaluation of the two proposals received using a number of criteria. Its view was that the FLS proposal was the optimal proposal, particularly since it believed BF Goodrich was not sufficiently committed to TEAM at that time to conclude a deal.
On 18 December last TEAM signed a letter of understanding with FLS to enter exclusive negotiations to agree the terms of a deal in which FLS would purchase TEAM outright. At that time I met separately with the unions and Aer Lingus management to discuss the FLS proposal and the staff issues. I discussed the manner in which consultations would take place between unions, Aer Lingus and the employees. I also stated in this House the deal would be subject to the agreement of the TEAM workforce.
I took that position for very good reasons. As we all know when TEAM was being established in 1990 letters were issued to all staff then transferring from Aer Lingus to TEAM which provided for security of employment within Aer Lingus. At that time also Aer Lingus management indicated to the TEAM unions that in the event of an external investor being found for TEAM, Aer Lingus would retain at least 51 per cent ownership of TEAM. Given those undertakings and agreements, I felt any deal which sought to supersede those undertakings could be concluded only with the backing of the workforce.
In February 1998 an external facilitator, Mr. Gerard Durkan, senior counsel, was appointed to chair discussions between the unions and Aer Lingus. Those discussions were very detailed and complex ranging over a wide number of issues. Such issues included the letters to which I referred and the 51 per cent ownership issue, but also addressed other important ones such as job security, pay and conditions, pension arrangements, travel concessions etc.
In this process management made a number of proposals, all subject to the approval of the Aer Lingus board and the shareholder and to an acceptable final offer for TEAM being made by FLS, to address the range of issues involved. The final proposals, which were presented to the unions at the end of March, would involve payments totalling £54.6 million to employees in return for the resolution of all outstanding staff issues and their agreement to the sale of TEAM to FLS.
During April further clarifications of the overall offer were teased out. Finally, earlier this month forms were issued to every member of the 1,540 TEAM workforce on which he or she was invited to indicate acceptance of the offer made and we are all aware of the result that emerged last night.
Where do we go from here? The first point is that recriminations would be of no use whatsoever at this juncture.
The Minister does not want to remind herself of the shame of it all.
We must deal with the reality we face now. At all times, my overriding concern was to maximise sustainable employment in TEAM, whether in Aer Lingus ownership or otherwise, and I am on record in this House on several occasions to that effect.
The business environment within which TEAM is working is extremely competitive and only likely to become more competitive as consolidation in the industry takes effect in the years ahead and the position of smaller independent third party maintenance companies, like TEAM, becomes more difficult.
I am aware TEAM has made progress in recent years in efficiency terms and in financial performance, but losses were still made in 1997 notwithstanding virtually full order books. There has been some slippage in the projected financial performance as laid out in TEAM's five year business plan of 1995. Moreover, TEAM's recent performance has been based on a tight control of costs, including wage costs and a stable industrial relations environment. If either of those latter two conditions were not to hold, particularly in the current difficult climate surrounding the FLS proposals, then the prospects for TEAM's future viability in the short and long-term under Aer Lingus or any other ownership would be bleak. I can illustrate this by saying that, according to Aer Lingus management to whom I spoke this afternoon, to concede on the cost base issues raised by staff in the context of the 1990 letters would add about £20 million annually to the TEAM cost base. Clearly, this would be completely unsustainable and could not be contemplated.
I referred earlier to meetings I had today with the executive chairman and senior management of Aer Lingus and TEAM. I stressed to them the importance of assessing, in a calm atmosphere, the implications of last night's outcome. I asked the chairman to submit to me at an early date his assessment of the future direction of TEAM in light of the current circumstances. I will be conveying essentially the same message to the TEAM unions when I meet their representatives.
Will the Minister acknowledge that her failure not to support actively or in any way the proposed deal was extremely unhelpful to the board of management and undermined its position in trying to secure a "yes" vote? In view of the bleak prospect she outlined in her reply, will she acknowledge her share of responsibility for the current crisis? Will she also acknowledge that a plan B has not been put forward by the board, management or the Government to deal with the present situation and there is no indication the Government has any idea how it wishes to proceed? Will the Minister clarify whether the recent resignation of the chief executive, Mr. Gary McCann, resulted from months of disillusionment because of her procrastination and inaction on this and other issues which totally frustrated the management of Aer Lingus?
Deputy Yates has asked many questions and I will address them one by one. I am politically responsible in Dáil Éireann for all the companies under my remit and I have never sought to say otherwise. The Deputy asked if there is a plan B. I have just come from a meeting with the chairman and group management. As of now FLS is still interested and management intends to press ahead by talking to the workforce again. It intends to spell out to the workforce individually exactly what the situation is.
The Deputy asked if the Government had any plan as to how we should proceed. Immediately on finding out the results of the vote last night I contacted the chairman, who is now the executive chairman, and arranged a group of meetings this afternoon which I have had and more for tomorrow. That is how we intend to proceed. We had a good productive meeting with them. They clearly told me they felt there were still issues they could clarify for the greater comfort of members and that they would do so.
The Deputy asked about the departure of the chief executive, Gary McGann. This is a strange story and I have yet to get the facts. The chairman met me last Tuesday morning and told me the chief executive was resigning. It was a difficult occasion. I could not quite understand why it has happening on that day. He asked me to bring the matter to Cabinet, which I did. While the Cabinet was meeting the press release was issued by Aer Lingus. Conflicting reports have since emerged. I thank Mr. McGann who gave excellent service to the State during this time with Aer Lingus and I have written to him to that affect. I had excellent relations with him, but it is difficult for somebody to refuse an offer of £200,000 more than they are earning.
Would the Minister accept such an offer?
I would, but I am unlikely to receive one. It is difficult to refuse an offer of that magnitude, but the circumstances in which it happened were difficult to understand.
Given that the letter of guarantee on which yesterday's vote was based was endorsed by Deputy Brennan when he was Minister, does the Minister accept that her handling of the situation has misled the workforce in TEAM Aer Lingus? Will she clarify what the letter of guarantee means? Does it mean, as many TEAM workers believe, that no matter what happens the company, individual workers will have a job for life with Aer Lingus? Alternatively, does it mean that if the worst comes to the worst and TEAM goes to the wall, individual TEAM workers will only be entitled to two letters of dismissal, one from TEAM transferring them to Aer Lingus and another from Aer Lingus with the redundancy notice, saying that because there is no maintenance work in Aer Lingus they have no job? What is the bottom line in the letter of guarantee?
There are three letters of guarantee, but for the purposes of the debate it is sufficient to refer to one, dated 29 June 1990, which encapsulates the others. It states:
I refer to the establishment of TEAM Aer Lingus and the question of your present Aer Lingus status, working conditions and privileges. The purpose of this letter is to advise you on a personal basis [the letter was addressed individually] that while you will be required to work within TEAM you will, however, remain a member of Aer Lingus staff and will retire as a member of Aer Lingus staff, retaining full Aer Lingus retiree conditions. Your rights, privileges and seniority as a staff member of Aer Lingus will be continued on the same basis as applied to all other Aer Lingus staff. Your present seniority will also accumulate within TEAM. If promoted in the future within TEAM you will not be required to resign from Aer Lingus and you will still retain the guarantees within this letter. This letter is a personal guarantee to you from Aer Lingus.
Does that mean employees have a job for life in Aer Lingus?
What does the letter mean?
What is the Minister's legal advice?
I do not have a legal background. Therefore, anything I say will not be based on the provisions if there should be court cases about the matter. It seems to me and many of my colleagues that the letter is a clear guarantee of employment and rights within Aer Lingus.
The Deputy also asked about having a job for life. I do not think anybody has a job for life. That is the rhetoric of some years ago. I see no situation in which I can say hand on heart to a person that he or she has a job for life because life changes. I cannot guarantee anybody a job for life.
Will the employees be made redundant by this?
(Dublin West): Will the Minister now take steps to halt the shameful rush to privatise a very valuable State owned company, built up by the tremendous skills, dedication and ability of thousands of workers over many decades? Will she admit, in view of the workers' rejection of the proposal, that FLS is totally unsuited to taking over TEAM? It has less aviation experience, has incurred financial losses and has a history of redundancies. How can the Minister justify allowing between 2,000 and 4,000 workers in direct and indirect employment, to be handed over to the tender mercies of a multinational with no guarantee for their future employment? Will she take steps in the context of TEAM and other publicly owned companies to ensure that people appointed to sensitive and responsible positions of management and with big incomes are pledged to the ideals and practice of public ownership and do not look over the fence to big corporations for the best offer they can get?
There are many employees in TEAM who have great creative ability and who have worked hard for the company. I have no reason to doubt this. The Deputy spoke about the Minister ensuring that those appointed to managerial positions are committed to publicly owned companies and pledged to the ideals of public ownership. I respect the Deputy's views, but because of the clear need for competitiveness in all industries within Europe, a guarantee cannot be given to a public company that it will forever remain a public company. I say this, as I prefer to be straightforward.
Our manifesto included a promise to look at companies on an individual basis to examine their needs and future direction. Increasingly, if they want to participate in the marketplace they must be competitive and open to partnership and new ideas. Holding fast to what was a very good strategy for an emerging period in Irish history is not the current universal strategy.
Does the Minister accept, given her failure to provide the leadership necessary to achieve agreement on the future of TEAM, that the issue now is how to secure the future of the company and the 1,500 skilled workers who have an unsurpassed safety record in aircraft maintenance and who are an invaluable resource? Given the overwhelming majority of staff rejected the proposed sell-off of 100 per cent of the company, does the Minister accept it was a mistake on her part to instruct management to sell off TEAM? Will she now instruct management to examine other options in place of the 100 per cent sell-off, including employee shareholding, an outside joint venture with a private company and continued Aer Lingus participation in the company? Will she also agree that it is incomprehensible for Aer Lingus and the Minister to seek to sell its own maintenance company when its maintenance bill is set to increase from £25 million to £65 million?
The first issue raised by the Deputy bears out an earlier point made by Deputy Yates to which I neglected to reply. Deputy Yates intimated I should have intervened to ensure workers complied with my diktat. If I had done that, there would have been uproar in this House and elsewhere. With respect, the Northern Ireland agreement was a very special one and that is why the Government intervened in respect of it.
Is TEAM not special?
It is.
It is sometimes necessary to roll up one's sleeves and show some leadership.
I would have needed some kind of divine intervention to make the leap from 40 per cent to 100 per cent.
We thought the Minister had that.
I have not, although the Deputy may have some when he moves to his new position.
I agree that the term "overwhelming majority" is appropriate in relation to the current rejection of the plan. The Deputy asked whether the company would be retained in public ownership or whether the process would be a participative one whereby TEAM would work in liaison with another company. The management and chairman of TEAM today indicated that, as of now, FLS is still interested. The chairman is due to meet representatives of FLS in the morning. TEAM's management and I also intend to meet the unions. We hope to clarify further issues which emerged today and I am hopeful a greater measure of agreement will be achieved than heretofore.
Will the Minister cast her mind back to the occasion on which she met the chairman of the board and he outlined the board's proposals to sell TEAM? Given that the Minister has political responsibility for TEAM, did she at that time ask the chairman whether the potential existed for a minority shareholding deal to be entered into rather than the one which was offered today? The Minister stated she felt that any deal which sought to supersede the undertakings given could only be concluded with the backing of the workforce. Is that still her position?
Yes, of course it is still my position. The force and import of the letters make it clear that any agreement would have to be reached with the backing of the workforce. The Deputy holds his seat in this House as a result of a recent by-election and I note that the point of view he outlined in his election manifesto in regard to TEAM was exactly that which I put forward in this House.
The company is in crisis.
I am replying to Deputy Ryan who asked whether I inquired about the potential for minority shareholding. I did. I reminded the chairman of the agreed 49 per cent figure and asked whether management would consider that course of action. He was of the opinion that there would not be any takers in a shareholding of that nature. It transpired that only one firm proposal was received from FLS.
In all the meetings which the Minister had with the chairman and management of Aer Lingus, have they expressed to her — as they have to me and others on numerous occasions — their view that TEAM does not have a future as a wholly owned subsidiary of Aer Lingus? Does the Minister share that view?
Is the Minister, in effect, saying that TEAM's future depends solely on FLS? Has there been any discussion about an ESOP within the parent group of FLS?
Will the Minister confirm that FLS's cash offer for TEAM was of the order of £25 million? That is less than half of what the employees stood to receive and, therefore, any increase will either have to come from taxpayers or from shareholders' funds.
I had two meetings with Aer Lingus management, one in December and one today. I have had other discussions with its chairman on many occasions. It is management's opinion that, as a wholly owned subsidiary of Aer Lingus, TEAM is not viable. They have conveyed that opinion to me very strongly and it is one which I share.
An opinion at last.
FLS is the only company which made a firm offer which stood up to scrutiny. If FLS's parent group has considered an ESOP, that information has not been conveyed to me by management.
The £25 million gap between what is offered and the final cost would be paid by Aer Lingus from its operating profits.
I want to pursue the position of the individual TEAM worker whose livelihood, mortgage payments and so on are dependent on TEAM. If the day comes when such a worker is transferred back to Aer Lingus, will the letter of guarantee prevent Aer Lingus from making such a worker redundant? That point must be clarified as it is one which has given rise to much difficulty. The Minster should clarify it, particularly when the agreement was endorsed by Deputy Brennan in a previous Government.
I am unable to provide the clarity which the Deputy seeks. I expressed my non-legal opinion that it appears to me the letter is a strong endorsement that an individual TEAM employee is an Aer Lingus employee. Over the years since 1993 and 1994, a series of voluntary redundancies have taken place in Aer Lingus and we are all aware of the difficulties which existed there. However, there were no compulsory redundancies at any stage. I understand that if a TEAM worker reverts to being an Aer Lingus employee, there would be a clear onus on the company to adhere to the manner in which it has operated heretofore, namely through the provision of voluntary redundancies. The letter is quite clear in its statement that a TEAM worker will continue to enjoy guarantees and rights as a staff member of Aer Lingus on the same basis as all other Aer Lingus staff. However, that does not seem to me to be a blank cheque for a job for life. The reality is that such jobs are simply no longer available.
Does that mean compulsory redundancies?
No, I said voluntary redundancies.
Does the Minister agree that the decision by the workers in TEAM Aer Lingus, particularly the Aer Lingus employees, is a clear indication that they are not prepared to sell, even for a high price, the letters of guarantee they were given by the Minister's colleague, the Minister of State, Deputy Séamus Brennan? If FLS is the only option available, a mechanism will have to be found to leave——
A brief question, Deputy. This debate will be concluded shortly.
——the guarantee with the staff in whatever other possible new arrangement that might be made. Will the Minister guarantee that the £65 million in loans from Aer Lingus to TEAM will not be withdrawn and will she instruct the management of Aer Lingus not to threaten the withdrawal of these loans as a weapon during discussions, as it has done in the past?
That matter arose both recently and some time ago. The Deputy is asking for an assurance that the £65 million loans will not be used as a charge——
Bludgeon.
——against the workers. We discussed that this afternoon. The loans are for a term of three years and they come up for review in the same month as the annual results are issued, which will be quite soon. The board — as it said it would do — must examine the loans but it is my belief that they should not be used as a force of compulsion against anybody.
Deputies Joe Higgins, Sargent, Owen, Dukes and Richard Bruton wish to ask questions and I am anxious to facilitate them. I will ask the Deputies to put their questions and the Minister can give a final reply. Is that agreed? Agreed.
(Dublin West): Why does the Minister accept without argument that TEAM Aer Lingus has no future as a wholly owned subsidiary of Aer Lingus? Does that not indicate a bankruptcy of imagination and management skills both on the board of Aer Lingus and at management level in TEAM Aer Lingus, a company with premier workforce skills and order books that are constantly full? Will the Minister try to use her imagination and see if, with this background and a management that would involve the workforce at all levels, it would be possible——
The Deputy must be brief.
(Dublin West): —to make this an employment secure firm of the highest standard? That is the direction she should take and in which she should encourage the board of Aer Lingus.
Does the Minister see valuable comparisons between her hands-off approach in the matter of TEAM Aer Lingus and the clear support she gave to the employee shareholding scheme which was approved for Telecom Éireann? In light of this comparison and her request to the chairman to submit his assessment of the future direction of TEAM, will she convey the same message to the unions in TEAM Aer Lingus? When will the meeting with the union representatives take place? Is she now prepared to be decisive and vigorously support an agreed formula to ensure that TEAM Aer Lingus continues to be viable, as the indications are that it should be?
In view of the devastation that will ensue in the north Dublin area if this company closes down, will the Minister become a persuader in her meeting with the trade unions and ask them to ballot their workers again?
Deputy Yates has succeeded in eliciting opinions on two issues from the Minister, which is an advance for this Minister. Am I right in assuming that the Minister is familiar with the link between the TEAM Aer Lingus strategy and the Aer Lingus strategy, if she agrees that the future of Aer Lingus is contingent on getting the right solution for TEAM Aer Lingus and if she is now prepared to involve herself actively in bringing about the resolution to this issue which has been outlined? On this occasion is the Minister conscious that any proposal for an ESOP that involves an immediate net loss in cashflow to either company is the last thing that should be proposed?
The Minister said she shares the opinion of Aer Lingus management that TEAM Aer Lingus has no future——
As a wholly owned subsidiary.
——standing alone. Is this a recent discovery by the Minister? What does she now intend to do to carve out a future for TEAM Aer Lingus? Will the Minister agree that despite all the questions that have been asked, she has left everything in the air at the end of this debate and that the worker in TEAM Aer Lingus is no better informed as to the Minister's strategic direction? Can she clarify what she now envisages to be the solution for a company which is not viable?
Given that TEAM Aer Lingus was established with a fanfare of publicity following four ballots of the workforce in Aer Lingus to secure their agreement to joining TEAM Aer Lingus and given the Minister's statement that FLS is still interested in the company, will there be further ballots of the workforce until the right decision is reached?
Deputy Higgins implied that I should rid myself of right wing ideology and maintain TEAM Aer Lingus as a wholly owned subsidiary of Aer Lingus since it is trading satisfactorily and has full order books. It is true the order books are full but TEAM Aer Lingus is losing money.
(Dublin West): There is something badly wrong.
That must be made clear. There is also no doubt that the company has committed and highly skilled workers——
(Dublin West): What is wrong then?
In 1997 the loss was £1.7 million. The loan of £65 million was agreed in December 1994 and implemented in January 1995. That £65 million of operating moneys will be gone within a year. The company is full of creative people and the order books are full but it is not making money.
(Dublin West): A multinational can do it but a publicly owned company cannot.
The Deputy must allow the Minister to answer without interruption. The Minister should not answer questions that are put to her by way of interruption.
Deputy Sargent sought to draw comparisons between my "hands-off" treatment of Aer Lingus and TEAM Aer Lingus——
Hot potato syndrome.
——and my approach to Telecom Éireann. There was no hands-off approach.
There are no fingerprints.
The Chair has instructed me not to respond to interruptions.
The Minister must go to the back of the class.
It will come back to haunt her.
We must proceed to the Order of Business. Deputies must allow the Minister to conclude.
The chairman brought his proposal to me last October, a proposal that apparently had been shirked previously. He said the board would opt for the sale of the company and I agreed. If that is not a hands-on approach, I do not know what is. I am proud of my role in the Telecom Éireann ESOP arrangement, as is the Labour Party. I received many letters of thanks from its members.
Read them into the record.
Ghosted again.
I will not read them into the record. I also received letters from members of Democratic Left.
They want to privatise as well.
Clearly this issue is of great interest to the deputy leader of Fine Gael and I understand her concern for her constituency. Closure of TEAM would be utterly devastating to north county Dublin and we are working to prevent that from happening. Deputy Dukes asked about the perusal of the Aer Lingus strategy and whether this is a latter day conversion. The answer is no. The Deputy asked about ESOP?
Has the Minister an opinion on it?
The matter of employee share ownership has not come up. There was a fine answer, far better than I could give, in last week's Irish Independent about Telecom and ESOP.
I will be dealing with that next week.
Deputy Richard Bruton asked me to carve out a future for TEAM. It is my hope that TEAM will be employable, productive and will make a profit.
Has the Minister a plan?
Deputy Sean Ryan asked if there would be four votes so that employees would come on board. The fact that the Deputy referred to four votes shows the difficulties involved. The management team told me today the plan is that they will again go to the workforce and ask them to put their plan to me. Deputy Yates asked if it is the only plan in town. As of now, the answer is yes. Management intends to put to the workforce issues of clarification and will make clear they have been to see me. I hope to meet the unions tomorrow and I will repeat the same message as I gave today. The board has told me that is what it hopes to do. I will return to the House at any time to discuss the matter further.
The Minister has no plan.
Written Answers follow Adjournment Debate.