(Mayo) asked the Minister for Public Enterprise the reason the Government has decided to support the axing of 2,026 jobs at Aer Lingus; the consequences for the future of the airline and the welfare and livelihoods of the workers involved; and if she will make a statement on the matter.
Private Notice Questions. - Aer Lingus Viability Plan.
asked the Minister for Public Enterprise the financial package which the Cabinet has approved for assisting Aer Lingus overcome the exceptional fall in business since 11 September 2001; and the basis on which she will sell shares in Aer Lingus despite the withdrawal of legislation for that purpose by the Government.
asked the Minister for Public Enterprise the details of the Aer Lingus viability plan; and the way in which she will make the necessary resources available in order that the plan is implemented with the least possible number of job losses.
asked the Minister for Public Enterprise the funding that will be made available from the shareholder to Aer Lingus in order that meaningful negotiations may take place between the management and trade unions within the company.
asked the Minister for Public Enterprise the decisions taken at the Cabinet meeting held on 23 October 2001 to ensure the survival of Aer Lingus and the retention of the maximum number of jobs; and if she will make a statement on the matter.
I thank the Deputies for tabling the questions. We said last week that we would debate the matter today. As I indicated in the House last week, the survival plan broadly confirmed the key details already known to the House in relation to the financial crisis in Aer Lingus, including the cash crisis it faced in
January 2001.
The company is losing £2 million per day, forecasting losses of over £60 million in 2001 and £120 million in 2002, and likely to run out of cash in January 2002. The survival plan sets out to build a robust, flexible business model to ensure long-term viability. The new model will be capable of competing successfully in a fundamentally changed marketplace, taking account of the 25% reduction in its scale of operation. Its focus will be to retain the premier business service together with the simplified economy and leisure product.
Aer Lingus has also indicated that it does not have the cash to pay for a redundancy programme and, accordingly, an external source of non-repayable funding is required. Aer Lingus management held a series of briefings with union representatives and staff last Friday, 19 October. The staff were advised that, following the actions taken to date which include the scaling back of operations by 25%, the reductions in temporary staff numbers, the elimination of non-essential capital expenditure, and the significant reductions in overheads, the new business model would require the full implementation of the plan to ensure a successful future for the airline.
Last week in the House I dealt in detail with the outcome of the Transport Council and the minimalist emergency aid being provided for airlines to compensate for the four day closure of US air space following the events of 11 September. I also mentioned that a team of officials from my Department was to meet the European Commission to brief it on the general aviation situation as it pertained to Ireland and on the Aer Lingus restructuring package.
Arising from that meeting, it is clear that, as of now, the European Commission is opposed to the State providing support in any form to Aer Lingus. The Commission officials were unyielding in their restrictive view of state aid rules. Any funding by the State for Aer Lingus would be considered a state aid and the Commission would open the necessary investigative procedures which could take a minimum of 12 months to complete. The Commission was also quite clear that only private sector investment could be contemplated to secure the future of the airline.
I reported to Government again this morning on the current situation in Aer Lingus. The Government decided in principle that, provided the survival plan is agreed rapidly and implemented in all its essential aspects, it will facilitate private sector investment in Aer Lingus to provide a source of funding to support the survival plan. The Government also decided that it would be open to the staff of Aer Lingus to invest further in the airline.
The Minister is going to sell it. Why does she not say what she means?
Order, please. The Minister should be allowed to reply. There will be opportunities for supplementary questions.
I wrote to the chairman of Aer Lingus this afternoon conveying those decisions and requesting him to pursue them as a matter of urgency with all appropriate airlines and with the staff of the company. I also requested him to urgently arrange for negotiations between management and unions on the measures in the survival plan. Central to those negotiations will be the matter of the necessary redundancies and the compensation payments to be made by the airline in this regard.
While I wish to see negotiations on these matters begin and proceed with all urgency, the scale of redundancy payments cannot be finalised without reference to the stake in Aer Lingus which external investors may be interested in purchasing and on what terms. The focus of the Government is to secure the future of Aer Lingus and as many viable jobs going forward in the airline as possible.
That is despicable. It is a sell-out.
(Mayo): What does the Minister have to say to the 2,026 Aer Lingus workers and their families who are facing into the bleakest possible Christmas? They will be out of a job but their redundancy payments will be undecided. Many will have mortgages and an uncertain future. Can the Minister give any word of consolation to those 2,026 workers?
On the facilitation of private sector investment in Aer Lingus to provide a source of funding to support the survival plan, are talks ongoing or have they taken place with British Airways or American Airlines? What is the asking price for such a part-ownership? Is it £150 million, £200 million or £300 million? What percentage of the company does that entail? Is there a guarantee that the bulk of this money will be put towards adequate redundancy payments for those unfortunate 2,026 workers?
I wish I had some words of solace which could magically make everything all right in Aer Lingus and make the survival plan disappear, but there are no such words. The company will close if the survival plan is not accepted. If it is not accepted and everything cannot be worked out with decency and respect, which I hope it can—
If the Minister gave them the money, it would work out.
—it will close. There is no point in my trying to mask it, make it sound better or try to smooth it over. The situation is as I have described. We are trying to keep 4,000 plus jobs.
The Minister should give them the money and meet the Commission in court.
Order, please.
It appears she does not have the courage to do that.
Deputy Higgins asked if BA or any other airline had contacted Aer Lingus. The chairman told me that the companies within the One World Alliance have been in touch with Aer Lingus in recent days.
As regards the percentage of the company that would be sold and at what price, the Government would retain a majority holding. This means the percentage sold would be up to 35%. As for the price, this matter is only beginning to be negotiated now.
Is the Minister going to walk away meekly and accept this distorted EU interpretation of state aid rules? There is provision for rescuing and restructuring aid. Is she going to lie down meekly and allow a company which had profits of £60 million just 12 months ago go to the wall? Is she saying that the only future for this strategic national asset, which she described eloquently in the House last week, is to sell it in a car boot sale and when it is on its knees to anyone who will produce a few pounds to keep it going? Is that what we are reduced to? Are we going to see the company decimated in employment and sold at a bargain basement price to any taker resulting in the classic asset stripping arrangement we have witnessed in other areas? Is that the future the Minister offers to Aer Lingus workers and this strategic asset?
I believe the judgment of Europe is a distortion of EU rules.
The Minister should not accept it in that case.
Order.
The fact remains that this is the European position. Deputy Bruton knows the rules because he was in Government and dealt with Irish Steel.
I know the rules backwards. There is an option of rescue and restructuring aid.
Order.
Exactly.
We made the case to Brussels on the Minister's behalf.
Order, please.
If they made the case, what did they bring home with them?
We are not the Minister.
I do not accept that this is a car boot sale. Deputy Bruton knows in his heart that what we are trying to do is save the airline.
The Minister is destroying it.
It will be destroyed if it cannot be saved. I must repeat that. It may sound tiresome and dull but it is the truth. If Aer Lingus is to be kept in operation, there must be a method of external funding which can be found to enable it to pay adequate redundancy payments and continue its operations. Europe has been adamant that it will not allow state aid in current circumstances.
Does the Minister not accept that she has failed dismally to make the case in Brussels, as was reported to me by people who were in Brussels and who were very disappointed by the level of knowledge available to European Commission staff on how Aer Lingus might be saved? Does she also agree that she has failed the country, the House and the workers who will lose their jobs? Will she return to the EU and reopen negotiations and not lie down meekly as she appears to be doing and accept the answer she has received? I appeal to her to fight for the survival of our airline.
What power does the Minister have to allow a percentage of the company to be sold? Will she have to introduce legislation? What regulation under EU rules allows her to match any third party investment, something she said to one of the newspapers? Will she spell that out in detail?
Is it true that there is a reference to outsourcing in the viability plan which management says will not contribute to the viability of the company? Will the Minister insist that that element of the plan be removed because it is giving rise to great concern among those members of staff who will see their jobs outsourced without any improvement in the viability of the company? Will the Minister give a commitment that the assets of the Aer Lingus pension fund will not be sold to whoever might buy part of the airline? They should remain available to provide just and humane pensions to existing and future pensioners of Aer Lingus.
I do not accept that I have failed the country. I would fail if I allowed Aer Lingus to close down. That would be a failure for the country, the workers and the future. New legislation will be necessary. The legislation that has already passed the Seanad and was approved by all parties was for a complete IPO. Different legislation would be necessary.
Reference was made to a newspaper article. I do not know the source of the article mentioned but I did see it.
I heard the Minister was the source of it.
There is no such proposal for matching private funding to public funding. That may be reported in the newspaper but I do not write the news. I am aware the proposal on outsourcing in the survival plan has raised concern.
Did the Minister agree to it?
I received the plan, as the Deputy knows. The Deputy asked that the assets of the pension fund should not be sold on and I will bring that matter to the attention of the chairman. I have not gone into that in depth but I will and inform the Deputy directly on the matter.
This is a sad day and this is a despicable report by the Minister. She must agree that Seán Lemass and the Fianna Fáil people who built up the party would turn in their graves if they heard this report today. Does she accept that in the context of this reply the Government has taken no decision? It acted like Pontius Pilate when it agreed the survival plan in principle provided it is rapidly agreed and implemented in all its essential aspects by the staff. This plan, which envisages 2,036 redundancies and the outsourcing of the catering and cleaning section and of 800 employees, will have no effect on the viability of Aer Lingus. Staff are requested to accept this plan. What is the alternative if they do not accept it? Is the Government prepared to do what it should have done already? Is it prepared to take on European bureaucrats particularly since the effects of the events of 11 September? Will the Minister confirm the names of the officials who negotiated on her behalf? Is one of those the senior official from the Department who said on public record that he was in favour of the privatisation of Aer Lingus and that was the direction it should go? If this Government is so concerned about Aer Lingus why was the matter not raised by the Taoiseach at Ghent last Friday? The least he could do is deal with the issue and take on the bureaucrats rather than selling Aer Lingus for such a small amount. He must take on the issue and respond to the need instead of doing a Pontius Pilate act and leaving it up to the workers. He must accept his responsibility. Aer Lingus and its staff have been let down by Fianna Fáil and the Government should accept that.
The Taoiseach did raise the matter at Ghent.
He did not get very far.
It was not mentioned in the communiqué.
The Minister without interruption please.
Deputy Ryan said that Seán Lemass would turn in his grave. If Aer Lingus had to close he certainly would.
He would take on the bureaucrats which the Minister is not doing.
Order.
I was asked what would happen if the plan is not accepted or if the money does not come forward. This is a serious monetary issue. If we cannot all agree to the survival plan the airline will close and of that there is no doubt. People still do not believe that but it is a fact and such a day would give this House cause for mourning. Nobody wants Aer Lingus to close but the harsh financial facts face all of us and no amount of shouts or demands to Europe will secure a viable future for Aer Lingus.
The Deputy asked for the names of the public officials who travelled to Brussels. The secretary general of the Department of Public Enterprise, Brendan Tuohy, the assistant secretary, John Lumsden—
He is the individual I was talking about.
Order please. We cannot refer to people who are criticised.
—and the principal officer, Doreen Keaney. As officers of my Department are being attacked in this fashion, the Deputy is entitled to make his remarks but I stand by their veracity, good character and negotiating skills. All civil servants work to the public service ethos and not to any personal agenda.
Does the Minister recall supporting and voting last week for a motion that contained the words, "recognises that a change in the ownership of Aer Lingus is not now an issue in the current circumstances"? What has changed her mind since then? She withdrew the Bill for the privatisation of Aer Lingus last week. Now she tells us that Aer Lingus has to be privatised to pay for redundancies. How much does she expect to get for 35% of Aer Lingus in what could only be described as a fire sale – damaged goods arising from the Minister's inactivity and actions against Aer Lingus and its interests over a long time? Given that she wanted to privatise Aer Lingus the week before last, to retain it in public ownership last week and to privatise it this week, will she confirm that she does not know what she is doing and has not a clue what is happening in Aer Lingus or at the European Commission? Would she have Government support for taking definite clear action to provide Government funding for a redundancy plan for Aer Lingus to allow the survival plan be put into place? Would she do so in defiance of the European Commission, if necessary? Will she take on the Commission in court, where the Government would win? Would the Government support the Minister in taking that positive action to save Aer Lingus? Does she agree that if she now has a fire sale for Aer Lingus, it will no longer exist?
Aer Lingus will no longer exist if the survival plan is not adopted and implemented.
What has that got to do with ownership?
The Deputy asked if the Government would support a package in defiance of Europe. Neither the Government nor I would support such a package.
The Government and the Minister are compliant with Europe.
The Government does not support the Deputy's proposal to confront the Commission.
Did the Minister put this proposal before the Government?
The matter was laid out in our paper today.
Did the Minister seek approval?
Various options were put, but the Government would not support such a package.
The Minister did not seek such support.
The Bill, as put forward in the Seanad and agreed by all parties there, was for the complete sale of Aer Lingus. However, different legislation is now needed. Prior to 11 September Aer Lingus was going to have a loss of £25 million at the end of 2001.
Arising from the Minister's interventions which created uncertainty she kept shifting from selling off the company to not selling it, with the result that management did not know if it was coming or going.
The world changed after 11 September, and there is no going back.
The Minister did not change her mind about privatising it.
Almost every airline in the world, especially the most well known, has experienced huge staff reductions and great turbulence in its business, while the flying public has not returned, particularly on transatlantic routes. The forecast is that it will be the last quarter of 2002, or even later, before the American public takes to the air again.
I raised this matter with the Taoiseach earlier and welcome the opportunity to raise it with the Minister for Public Enterprise. Does she agree that this issue between the Government and the European Commission is as least as important as corporation tax and the Minister for Finance's own concept of good budgetary practice or at least his ego on the matter? Is there not now more of an argument to twist the Commission's arm on allowing State aid for Aer Lingus, given that she can cite Article 87.2B of EU regulations which allows for state aid in exceptional circumstances? Is she prepared to defy the Commission over this? As has been asked already, would she go to court over it? The USA precedent should be tested, even in a free trade area like the European Union. Will she defy the Commission, or will she roll over and accept that it has a different point of view? That is what it comes down to. There will be no redundancy payments unless she pushes the Commission, as she has admitted. She must answer this.
Has she advised management of Aer Lingus, in discussing redundancies, to consider the measures adopted by Delta and KLM? They are not so drastic in terms of redundancies, but offer a shorter working week, job sharing and other proposals which address the humanitarian and human dignity aspects of this crisis, which is having a devastating impact in the Dublin, Cork and Shannon regions.
Many Aer Lingus and Aer Rianta pensioners are worried about the pension funds. Are these separate funds outside the arguments raised by the Commission? As the pension funds need extra funding, will the Minister argue that they fall outside the State equity issue affecting Aer Lingus? Can the pension funds be augmented without regard to the free trade or other neoliberal agendas? Will the Minister reassure pensioners on this point so as to save them further cause for concern apart from their low incomes?
The Deputy asked whether the Government was prepared to defy the Commission.
Challenge it.
As of now, Brussels and the European Commission—
The Government did it before.
—are not prepared to entertain any of our proposals. That is the situation as of now.
What does the Minister mean by "as of now"?
I understand—
The Government challenged it before.
Will the Minister explain what is meant by "as of now"?
It means "now".
The Minister should not respond to interruptions.
Does it mean that the Minister will return to Brussels?
Of course, the Government will continue to argue its case.
I ask the Minister not to respond to interruptions.
"As of now" means "now".
I ask the Minister not to respond to interruptions.
I must answer Members' questions.
They are out of order except when called by the Chair to ask a question, otherwise the Minister should not respond.
Very well.
The Minister cannot hide behind that.
I do not object to staying until 9 p.m. to answer the Deputies' questions. It used to bother Deputy Owen, when she was a Minister, to come into the Dáil.
As Deputy Sargent stated, different ideas have been suggested to ameliorate the situation. I informed the chairman last week of suggestions from the trade unions and others. He indicated that the team dealing with the matter would examine any sensible proposal.
I explained to Deputy Owen earlier that I did not have all the information on the pension funds, but I will contact the Deputies concerned about them.
It is an issue separate from the company.
Part of the funds is owned by Aer Lingus.
I am aware of that. I will convey the relevant information to the Deputies.
Is the Minister concerned by IBEC's statement that the western half of the country is facing job losses because of the massive cutbacks in air services to Shannon, and that job creation and investment in the mid-west will be severely affected unless the future of Shannon Airport is secured? Is she concerned that one company employing 500 people in the mid-west indicated that cuts in Shannon air links will result in its parent company seeking an alternative location in Europe with reliable air access?
The domino effect.
I am aware of the IBEC statement which I saw in the press. I have talked with members of IBEC about this. Naturally, they are concerned about Shannon and industries in the mid-west region. I will meet a deputation from the organisation soon. At today's discussions the Government decided to adhere to the Shannon stopover.
When we had the opportunity to raise questions with the Minister here approximately two weeks ago, my colleagues and I asked if an agreed written Government position would be taken to Europe. If a strong agreed written Government position had been put to Europe we would have a very different result from that with which the Minister has come home. Does she regret that the case was dismally made in Europe? Did she make any case regarding the fact that 60% of the profits of Aer Lingus in 2000 were based on the transatlantic routes and that the circumstances of 11 September specifically affected the transatlantic routes? Did the Minister argue that the Government should be allowed to provide cash to Aer Lingus specifically in relation to its losses on the transatlantic routes as the American Government did to the American airlines, where $5 billion in cash and $10 billion in loans was provided, including to those which compete directly with Aer Lingus on the transatlantic route?
I put it to the Minister that a very good case could have made to put cash into Aer Lingus, specifically regarding the losses directly related to 11 September and with regard to competition with American airlines on the transatlantic route. Did she make the case to the Commission that Ireland is an island nation and that strategically Aer Lingus is hugely important in that regard? From what we have heard it seems the case was dismally made in Europe. A very strong case directly related to the conditions laid down by the Commission with regard to the exceptional circumstances of 11 September, which resulted in the loss of transatlantic business, could have been made on the basis of figures on profits with Aer Lingus in previous times. A case could have been specifically made for a cash injection for the company as happened with American airlines on the transatlantic routes.
It appears what the Minister has come back with is a rubber stamping of a plan brought out by Aer Lingus management without consultation with workers and without real consideration for the conditions that the Commission had asked Governments to address. Following up on questions from other contributors, will she go back and make a proper case to have cash put into our national airline so that she does not have to do a complete U-turn on what she said last week when she said she would not privatise? Now she has come in here and said she is going to privatise. There is a case to be made and the Minister, the Taoiseach and the Government should make it properly to Europe. They have not done so and it is about time they did.
This is Question Time and remarks should be confined to questions.
In reply to Deputy O'Sullivan, I was at the Council of Ministers meeting for 13 hours from 9 a.m. until 10 p.m.
The Minister—
Let me finish. I gave the Deputy a hearing and I expect she will give me a hearing. I spoke on seven separate occasions during the course of that day. This was on top of the earlier meetings when I had been in Brussels and my meetings with Ms de Palacio. I made my major intervention. I had a written case. I do not read everything absolutely word for word but I had a strong written case. When I met the Commissioner at 9 a.m. I went through four points, namely, that we are an island nation, the only one in Europe; America had given direct aid to two direct rivals of Aer Lingus on the transatlantic route, therefore there was a huge distortion of competition; Aer Lingus's main money, when it makes money, is from the transatlantic route; and that the Government wished to put cash into Aer Lingus. Those were the four main points but they were all expanded. The Deputy may check with any Minister she may know from her affiliated party in any of the other countries that I made a very strong case.
But the result was a total and abject failure.
Order, please.
The follow up is that we will continue to make the case to Europe. As I said to Deputy Owen, as of now the Commissioner does not agree. The Taoiseach has made a strong case to Europe on three separate occasions and as of now that is the result. We will continue to make the case.
The Minister should do something.
I emphasise time is certainly not on our side in this matter. I understand the concern of Deputies. If I was on the Opposition benches I would have similar concerns as the Deputies from the Dublin, Shannon and Cork regions as they are the most affected and genuinely worried about it.
Devastated.
The position is that Aer Lingus is in a dire and perilous financial state.
After four years under the Minister's stewardship.
If we cannot get it into shape it will close. There is a chance if we work speedily and with everyone that we can put it into shape. It is not a Cahill plan. The situation which appertained in 1993, though it seemed devastating, does not compare with the enormity of the present situation and the uncertainty which faces the airline.
I thank the Minister for the commitment she has given to Shannon and the Government for its repeated commitments regarding the transatlantic stop-over at Shannon. The Minister will be aware there is grave anxiety among the staff at Shannon about the impact of the difficulties. I welcome the responsible way in which the union leadership has dealt with the matter up to now. It is of critical importance that there would be the closest co-operation between the Department, the unions and Aer Lingus to ensure the survival of the company. In the aftermath of 11 September, the Government, under the Taoiseach's office, set up a committee to look at the impact of the events of 11 September on the economy generally. We in the mid-west are anxious to have some representation on that committee or that a task force for the mid-west should be established. In view of the still widespread anxiety in the mid-west about the impact on the region, I underline the necessity of having the mid-west involved in the Government task force or in a similar committee put in place by the mid-west region.
When we discussed the matter in the House last week Deputy Daly raised that issue. It is an issue that will be addressed by the Taoiseach and a Cabinet sub-committee.
I wish to ask four brief questions. With reference to the four-day closure of the north Atlantic route, has the Government sought permission from Europe to put money into the company regarding that route, and if so, how much, and what is the timescale? Is EU permission required to do that? In regard to the future of the company, the Minister said it is likely to run out of cash in January 2002. Can the company continue to trade until then? Can it continue to fly and remain in business until then? Is the Minister talking about early or late January 2002? On the question of external investment, how much is required to keep the company in operation? Will she need permission from Europe and will more negotiations be necessary to allow that to happen? Did EU officials justify not allowing the Government to match in any shape or form the state aid which the United States Government has given the American airlines and, if so, what reason was given to the Minister? Is the Minister aware of the status enjoyed by Cork Airport and of the vital importance of Aer Lingus to it? Is she also aware the industries in the area, which she recently visited, will be devastated if Aer Lingus goes out of business?
I agree with the Deputy. All industries throughout the country will be devastated if Aer Lingus goes out of business. Nothing is more certain.
With regard to the four day closure, to date what the EU has said is that the amount of money involved will be approximately £6 million. That money can be given because the circumstances are regarded as exceptional. To return to Deputy O'Sullivan's point, I made the case that everybody did not return to the air after four days and that the exceptional circumstances are ongoing and are not once-off in nature.
In respect of the company's future, the chairman has informed me that it is now trading recklessly. He is of the opinion that this cannot continue. I stated this in the House last week and I reiterate it now—
Why does the Minister not do what was done in the case of Sabena?
Order, please.
The answer is that she does not have the will to provide the money.
The Minister should not respond to questions which come by way of interruption.
The Ceann Comhairle has directed me not to respond, but what can I do when Members make interventions? They are entitled to talk.
They are not entitled to do so unless the Chair gives them the floor.
The company will run out of money in early January.
I do not know from where the idea came that matching funds could be provided. There was never a proposal from Europe or Ireland that money given by one could be matched by the other. I believe Deputy Stanton inquired about that matter.
I was referring to American money.
I apologise.
What justification did they give for not allowing the money to be given?
The justification was that circumstances in the US and Europe are different and that the former is entitled to run its industry as it sees fit. A complete distortion has emerged in this regard because I provided figures two weeks ago which showed that Continental and Delta received almost $500 billion in cash aid. We do not know how much of that money was invested in the airlines' transatlantic routes. However, these airlines, which are direct competitors of Aer Lingus, received direct cash aid.
Cork Airport enjoys a high status. If we can resolve matters involving Aer Lingus, I am sure it will continue to do so. Many companies in the area are hugely dependent on the airport, which has grown tremendously and which has a structural plan in place.
The cargo facilities offered by Aer Lingus on transatlantic routes – I am sure the company provides such facilities on European routes – are also extremely important. These facilities are regarded as vital both by the airline and by the customers it serves. If Aer Lingus went out of business, the 1,500 workers employed by FLS, which refurbishes the company's aircraft, would be immediately affected.
Everyone recognises that there are a number of issues at stake here. We must concentrate on arriving at a resolution to this problem which will allow the airline to continue in operation and which will sustain as many jobs as possible.
I call Deputy Shortall.
How much money is needed?
That is a matter for negotiation.
I would prefer if the Minister did not answer questions that come by way of interruption.
It seems extraordinary and unbelievable that a major company such as Aer Lingus could move from a position of trading profitably nine months ago to being in such a state that it must be sold off to pay redundancy packages to the 50% of the staff who are to be let go.
Does the Deputy have a question?
Does the Minister accept that what is happening suits the interests of the people in Government and those in the company who are determined to see Aer Lingus privatised and that they are using the events surrounding 11 September as cover for achieving their goals in relation to the company?
It seems the Minister did a poor job on our behalf in Brussels.
A question
please, Deputy. I want to give an opportunity to those who submitted questions.
Will the Minister indicate the outcome of the case she put in Brussels in respect of the damage that has been done to Aer Lingus in the aftermath of the events on 11 September? What investment has been sanctioned by the Government to offset the effects of 11 September? What case did the Minister put forward in respect of the other exceptional circumstance which arose this year, namely, the outbreak of foot and mouth disease, and which had a huge impact on the company? Did she obtain permission from Brussels to invest in the company on foot of the latter argument and what was the extent of that permission? Was she given the go ahead to make a loan only on the basis of the impact of 11 September or was she given permission to make a loan on the basis of the exceptional circumstances which arose in relation to foot and mouth?
My final question relates to the role played by the board of Aer Lingus during the current crisis. The Minister and, in particular, the Taoiseach have close contacts with several members of the board through party connections.
The O'Donovan Rossa cumann.
Yes, others have referred to the board of Aer Lingus as the O'Donovan Rossa cumann. Will the Minister indicate the point at which the board first notified her of problems within the company? When did it inform her that the company's condition had reached a stage where she had no option but to consider privatisation? The Minister should inform us about the role played by the board within the company because it is an interesting one.
I am sure its role is interesting, but I do not meet with the board of the company. I have never met the board of Aer Lingus, I meet the chairman of the company.
I am sure the Minister meets individual members of the board.
Please, Deputy Shortall.
The Deputy asked me a number of questions and I will provide answers. I have already given those answers earlier this evening to other Deputies and I also gave them last week and the week before. However, I have no objection to repeating them. I meet the chairman, which is the duty of the Minister of the day. Anybody who has served as a Minister will be aware of that.
The Minister takes the diktat of the Secretary General of her Department to the chairman.
If there are any more interruptions I am going to conclude the question, on which we have already spent an hour.
The Leas-Cheann Comhairle may do so if he likes because we are not getting any answers.
I wish to give those who submitted questions an opportunity to ask brief supplementaries, but that will not be possible if the Minister is not allowed to answer. I will proceed to the next business if there are any further interruptions.
I meet the chairman. I met the previous chairman, Bernie Cahill, who has since passed away, in June of this year and he informed me – this is the third occasion on which I have outlined these details to the House – that the end result for 2001 would be a loss of £25 million which the company would be able to trade out of in 2002.
Deputy Shortall inquired about the case I put forward in respect of foot and mouth. I explained clearly to the EU that particularly exceptional circumstances had arisen in Ireland in relation to foot and mouth disease in the spring and early summer of this year.
The Deputy made use of the term "unbelievable". Everyone in the House agrees that the crash into the twin towers was unbelievable. Aer Lingus's trading position was fine until 11 September. It was working its way out of the difficulties caused by foot and mouth and the downturn in the IT industry. What happened on that day, however, turned the world upside down, particularly for the aviation industry. The Deputy said that we are using the events of 11 September in a particular way. I am not using it. I did not invent what happened on 11 September and it is appalling to say that I am using what happened on that day.
The Minister is using it to further her privatisation scheme.
Will the Minister please address her remarks through the Chair?
Yes. I have answered all the questions put to me.
The Minister used it to further her privatisation plan.
I will take a brief question from each of the Deputies who submitted a private notice question.
What state aid has been sanctioned?
Deputy Shortall, if you do not resume your seat, I will move on to the next item. I ask the Minister not to answer questions which come by way of interruption.
(Mayo): In essence the Minister's final comment seems to be that this was a perfectly good company until 11 September and now she is prepared to throw it to the wolves. What is the estimated value of the company? If one is to sell something, one must have a notional price. What is the Minister's price expectation in relation to the company? In this context the 35% element is very important.
What is plan B? It is not a great time to sell an airline. Suppose nobody is interested or meets the Government's price expectation. What is the fall-back position then? Is the Government prepared to go ahead if it does not get the price? Surely the airline will not be sold for £50 million or £60 million or £100 million. If the Government does not get the price, is it prepared to make the necessary capital injection, in defiance of Brussels if necessary, and face the legal consequences? To hell with it: meet them in court.
Finally, in relation to a point raised by Deputy Shortall, State companies are too serious to become an honours system for loyal party hacks. Is the Minister prepared to replace the board of Aer Lingus immediately with airline specialists and people with some financial experience of the markets?
The Deputy has a bit of a neck – a big neck – to make his last point—
(Mayo): Why?
—when one thinks of his party and all parties.
(Mayo): Financial experience all right: raising funds for the party.
The Deputy has some neck.
The Minister should address her remarks through the Chair and Deputy Higgins should not interrupt.
My answer is, "No".
(Mayo): We are back with Taca.
I will move on to the next matter if Members do not want orderly questions.
No, I am not throwing the company to the wolves, but unless we all get our act together it will be thrown to the wolves. Regarding the notional price, that is something that will now begin to be discussed. There is interest in a partial purchase of some of the shares of Aer Lingus; there is definite interest, but clearly it would be within the One World arena. There is interest and if management and interested parties get together, then prices will be discussed and put forward.
Does the Minister believe, in her own words, that this is a reckless package? We are told by her that cash will run out in January and that after January we will face a loss of £120 million in 2001 and £125 million in redundancies. Nobody believes that cash will come from a private investor. Nobody believes that £245 million will come from a private investor to cover the losses in 2001 and the redundancy package. Is the Minister trying to convince us she has an investor that will come and pay that money in order that the company can get to the end of 2002? After Aer Lingus runs out of cash we are hoping that some investor will come up with £245 million just to get to the end of 2002. Is the Minister trying to convince us that that will happen?
Second, is the Minister effectively saying that the workers must now negotiate redundancy packages with British Airways? Is the blunt message coming out of this that whatever the lowest offer is, that is what people will have to make do with?
Has the Minister taken legal advice on the Commission's position? I am reading from the provisions of the state aid, which states—
It is not in order to quote.
I will not quote, but give a precis. It indicates that restructuring aid can be given a second time to a company in exceptional and unforeseeable circumstances for which the company is not responsible. The Minister eloquently described a couple of minutes ago how the company was not responsible for these problems. Is she saying she cannot get legal advice to underline her case that Aer Lingus is not responsible for the catastrophic losses it faces? That is what she told us two minutes ago. She is saying she will not go and fight the case—
I did not say that.
—and that she will not produce legal advisers to help her fight the case.
They could have—
Please, Deputy Owen.
Finally, if it comes to it, will the Minister present her case to support the company, as the Government wishes, directly to the Council of Ministers, as she can under Article 93 of the Treaty of Rome?
I have already presented the case to the Council of Ministers and will—
Not under Article 93.
—certainly do so again. The idea that—
Is that a commitment?
I will present the case; I am not saying under any article. I will present the case again to the Council of Ministers.
We have certainly taken legal advice on the whole state issue with the European Union. The legal people we have engaged are working through various scenarios. We will continue to present our case to Europe, but cannot simply wait while Europe looks and looks again. We will continue to do this in parallel with what we are already doing.
When Deputy Bruton presented the figures unbeknownst to himself he may have done so wrongly. In summary, the company is losing money at the rate of £2 million a day and forecasting losses of over £60 million in 2001 and £120 million in 2002—
That is before redundancies.
—and is likely to run out of cash in early January 2002, as I told Deputy Stanton. However, if the survival plan is adopted and put into place quickly, as management told the employees last Friday – the plan involves the entire hierarchy of the company at all levels – then the cash situation can begin to be reversed. As of now, that is the cash situation and the reason it is so serious.
Finally, the workers will not be negotiating with any other company. The negotiations will continue within the company of Aer Lingus; that is where they will take place.
I do not know where to start.
A brief question.
Regarding the Minister's last point, she has said about ten times that she wants the staff to negotiate quickly, to use her word, on the viability plan, but how does she expect staff to negotiate when she stated, "While I wish to see the negotiations on these matters begin and proceed with urgency, the scale of the redundancy payments cannot be finalised without reference to the stake in Aer Lingus?" Is she asking the trade unions to negotiate how the viability plan is to be put in place in the abstract and without having the slightest idea about how much money will be available to pay them or the level of redundancies? How can she put that forward as a realistic option to the staff of Aer Lingus who were obliged to make the Cahill plan work and will be required to make this plan work also?
Has any consideration been given in the viability plan to allow for winter leave in order that good staff are not lost? Finally, if the Minister wants co-operation from the staff, will she instruct Aer Lingus to remove the outsourcing element of the current viability plan, given that management stated, through Mr. Walsh, it will contribute nothing to the viability of this plan? I am quoting him fairly.
The winter leave issue was not put to me, but I put similar matters to the chairman last week. As I told Deputy Sargent when he raised the matter, the chairman undertook to look at all issues which would help to secure viability in various ways. I will certainly add this matter.
I dealt with outsourcing in an earlier answer. I know it is causing great anxiety. It is included in the survival plan put to me.
Deputy Owen asked about negotiating in the abstract. When I met the trade unions last Wednesday evening I told them that, as a general principle and based on the assumption of a negotiated redundancy package, talks should begin and it was agreed to proceed on that basis, but the redundancy payments remain an assumption until we can find a source of income for them.
The Minister expects them to co-operate.
Are we to accept that the only result of all the negotiations, including the Minister's solo run across the Atlantic Ocean at a cost of £80,000 to Brussels and all the negotiations in Europe, is that the funding for the rescue package will ultimately come via a third party investment? Are we also to accept that the staff of Aer Lingus, some of whom have given 35 years' service, are to accept that the shareholder is not in a position even to pay redundancy, that they must agree to the sale and privatisation of the company? That is the net effect of what the Minister said.
Brevity please, Deputy, we have spent well over an hour on this question and must conclude.
We should be prepared to spend much longer.
On catering, cleaning and the areas in which the outsourcing will be of no initial benefit to the company, will the Minister give a commitment here and now to withdraw that element of the plan? Perhaps she will accept that she did not need that aspect of the plan before she approved it.
In my initial reply I made it quite clear that the extent and amount of funding would be a matter for negotiation when we were aware of how much we were going to get for the stake.
The Minister is expecting some body to accept redundancy and they do not know what she will give them.
She still wants them to negotiate.
Deputy Ryan, please.
I have already said that in my answer. The Deputy also asked whether the funding was to come via a third party investment and my answer is, "Yes". He also asked about the two matters of outsourcing. Those two matters are dealt with in the survival plan and clearly are ones which will now stand to be discussed between management and trade unions.
This is a sham.
Can I defer to my colleagues who did not get an opportunity to ask questions?
I indicated I wanted to ask a question, but unfortunately I had to leave for a few moments. I am obliged, therefore, for the opportunity.
I put it to the Minister that, in the event that part or more than half of Aer Lingus is sold to a private investor, particularly a One World Alliance investor, the overwhelming likelihood is that in one year Aer Lingus will be providing a few flights to New York and a shuttle service to somewhere in Britain. Does she not agree that that would be a pretty sad way for the national airline to end up?
Let me pursue further the questions put by Deputies Bruton and Higgins regarding the capitalisation of the company. It seems, based on any reasonable assessment of the capital value of the company, that it is unlikely that the sale of up to 30% or 40% of the company will provide sufficient moneys to enable the Minister to bail out the airline. That being so, I invite her to explicitly guarantee to the House that the State will maintain a majority shareholding in the company.
To take the last part of the question first, that is what the Government said today, that the State would hold 51% of the airline.
Today.
Last week the Minister said there would be no sale.
No, I was asked the question and I am answering it. I can do no more than that. The Deputy asked me directly.
It is unlikely that she will do that.
It certainly would be sad if the scenario the Deputy painted was the one which would appertain for Aer Lingus, but I am determined that that will not be the case.
On money, to answer both the Deputy and Deputy Bruton, the losses will be over £60 million within two months, if there is no change, and £120 million in 2002. The company is likely to run out of cash in early January 2002. However that is predicated on the fact that none of the changes laid out in the survival plan would be put into effect. My wish is that, with the survival plan which management presented to the workers last Friday, everybody will work together to get a decent solution to save Aer Lingus in order that the company will move forward as a healthy airline, but that will not happen if we all continue to be negative. I understand the position of the representatives from the areas concerned.
These are fundamental issues.
Of course, they are.
The Minister should give them grant aid—
If we can move forward in a reasonable way with good will, I am satisfied that Aer Lingus can survive. That is what we want to see happen.