I welcome the opportunity to speak on this Bill, which allows for the employees of Aer Lingus to have share ownership of Aer Lingus as agreed by the Government and the unions, but I am also mindful of the broader implications of the Bill.
It is clear that the Bill before the House is intended to mark the first step in the privatisation of Aer Lingus and one can only assume that this is based on the poor financial state of the company in 2001. However, given the Government's current financial deficit perhaps it is trying to capitalise on the massive changes that have taken place. That would be regrettable in light of the fact that €1 billion has been calculated to be the miscalculation on the pre-1953 pensions and €1 billion has been identified as the possible cost of the redress scheme. In terms of Government expenditure, what might be assumed to be a good price could be spent easily on services that are not nearly as essential as the national airline. However, it must be acknowledged by everyone that this is no longer the situation in Aer Lingus and it is to the credit of all involved, including the staff and particularly the management of the company, that they have effected a complete turn-around in the financial circumstances of the company. That was some achievement in a very short period of time. Aer Lingus is now showing a profit and its costs have been reduced by up to 14%. I know from my own business experience of the difficulty of keeping costs down while running a company efficiently. Keeping operational costs down is an example of good management and the profitability of the company clearly indicates its viability.
It would be unfair not to give Aer Lingus a longer tenure of management. We have seen the introduction of competition in the market with Ryanair. Competition is good but it would be a real disincentive to the company, unless there is something we do not know about, if the Minister is considering the possibility of putting the company up for sale, which is clear from the Bill. The future of Aer Lingus looks bright and it continues to reduce costs. That has to be applauded. The company appears to be making every possible effort to pass on these cost cuts to fare paying customers, which is important.
We now see an airline company that is competing with Ryanair. The feeder service with Aer Arann is working well. I am aware the Minister opened the new airport in Sligo and I give credit where it is due. The Minister's support for Sligo Airport has been extraordinary. We had difficulties getting a carrier organised but what the Minister has done in Sligo has been very effective. As regards Aer Arann, which I acknowledge is getting good State subvention, with the level of aviation as an island country and the feeder services from regional airports, it has been very successful.
Aer Lingus is a very good brand. It is like Kerrygold. When I pass through an international airport and I see the Aer Lingus brand I am always proud. It is like a tourism brand and we should not lose that. We are an island nation. We depend on the image of Ireland abroad that we are a progressive country which can run private and State companies and that we have multi-choice in that regard. We all saw the debacle over Eircom, the major advertising, the millions spent on buying shares and the subsequent miscalculation. The Minister may not go down the share option route but in terms of attracting another international airline, the passion for the company on the part of the Aer Lingus employees and the management and the Minister's support is extraordinary. The Minister must be proud that after only two years the State no longer has to give subventions to the company. That is a healthy sign and it is clearly something the Minister will examine from a business perspective.
It has been predicted that Aer Lingus will return a profit of up to €80 million by the end of 2003. That is over €1.5 million per week. That is a significant achievement, particularly when one considers the war in Iraq earlier this year and the outbreak of SARS, both of which did much to turn people away from air travel in 2003 and depress the aviation industry. When one considers that the American possibilities have been brought to a standstill, that is a very good return. Globally, every airline is losing money. In America and throughout Europe section 11 companies have sought support from Governments and the protection of financial losses where airlines were losing money.
Aer Lingus has done well, however, and it appears confident that it can reduce costs even further, with the welcome knock-on effects that will have for customer confidence and satisfaction with the airline. That is important because Ryanair was the brand leader. It is all about brand, being competitive, value for money and encouraging people to spend money. A total of 14 million people go through Dublin Airport. There was a major debate here when the duty free facility was removed from the airport but the spend in the stores in Dublin Airport is extraordinary. It is a huge industry that benefits from partnerships with a competitive airline and people coming here from abroad.
It is evident that section 5 is the critical element of the Bill because it allows for the privatisation of Aer Lingus and gives the Government the wherewithal to attempt to attract an outside private buyer for the national airline. The issue of the future control of Aer Lingus is one which cannot be rushed. It necessitates a definite plan and a need to pinpoint in advance any problems or difficulties, strategic or financial, which could arise further down the road as a result of sale of the State airline. I know the Labour Party will support this position.
Business is about profitability. If we are talking about supporting semi-State bodies and we consider the costs associated with benchmarking in the public sector –€1.3 billion next year – the Minister could get a bad price for the sale of the airline. It would be difficult to put a value on such a sale because he must have regard to future profits, possibilities and the potential future involvement of the Government. Future Ministers will be sitting where the Minister is now and it is important that they have that independence and a stake on the board of the company.
In the not so recent past the rationale for the sale of Aer Lingus was clear. It was a loss maker and a burden on the public finances. The company was inefficient, it did not provide an efficient and effective service. However, as I have outlined, the tide has turned in favour of the company. The company is not only standing on its own feet but it is doing so extremely successfully. This situation leads me to question the rationale behind taking the decision to sell off this valuable asset. Why favour privatisation? We must consider whether that is the best option and the best value for money, particularly when one considers the importance of protecting our national interest in aviation terms.
I have no doubt that because of the profitability and the potential of Aer Lingus, there will be people who will have an interest but it would be wrong to take the easy option, namely, to dispose of the asset, eliminate the risk and hand over control to somebody else. The public service has the capabilities and the competence to run a business and because the tide has turned and the balance sheet looks better it is felt this is the optimum time to sell, but that is not the case. It is crucial that the Minister makes a solid business case for the privatisation of Aer Lingus. We must have a clear, straightforward business plan to justify the company's sale. A business case in favour of sale, however, also makes a case for maintaining a company. There would be nothing wrong in retaining ownership as currently constituted.
Given the recent controversy surrounding the break-up of Aer Rianta, it is hardly surprising that one would question the viability of selling Aer Lingus. A PricewaterhouseCoopers report questioned the viability of the break-up of Aer Rianta, particularly from the perspective of Shannon and Cork airports. It also warned that Aer Rianta's debt levels could rise to €400 million by 2006, while Dublin Airport's profits could fall by 75% if it has to assume the burden of the debts of Cork and Shannon airports. The lesson from the report is that privatisation of Aer Lingus should not be rushed through, as has so often been the style of the Government.
The importance of a logical and workable business plan to privatise Aer Lingus cannot be over-stressed and I call on the Minister to guarantee to the House that one will be produced. Once a decision has been taken on privatisation – the main section of the Bill is an agreement in principle – it is possible the matter will not be discussed again in Dáil Éireann.
Having reduced staff by 2,500, Aer Lingus has an excellent, effective team. Access to the United Kingdom is vital. The security of aviation links between Ireland and Britain, long facilitated by Aer Lingus, must be protected at all costs because they bring immeasurable benefits to sectors such as industry, tourism, trade and financial services, which heavily depend on them.
It has been stated that the most likely future purchaser of Aer Lingus would be British Airways, which, it has been argued, would seek to reallocate or sell for financial gain Aer Lingus's valuable landing slots at Heathrow Airport. These slots, paid for by the State – the taxpayer – in difficult times are a prime asset and their loss would be detrimental to our national, strategic interests. We cannot allow them to be easily whittled away.
I reiterate the call made by my colleague, Deputy Naughten, that the Minister ensure that any decision on the sale of Aer Lingus be made by the House and not solely by the social partners. As an island on the periphery of Europe, we have a unique and heavy dependence on a good quality, reliable air service for access to the rest of the world. As there are no guarantees that new owners would have loyalty to this country and its citizens, it is vital to obtain such guarantees before a sale takes place.
Aer Lingus's links and connectivity with other airlines are critical to the growth of Ireland as a tourism destination and the future viability of our airports. Aer Rianta and Aer Lingus have worked as a partnership. Competition among carriers is good and I welcome the entrance of Ryanair and other carriers to the market. Knock Airport, which has developed a charter business, is performing exceptionally well and has generated significant traffic by offering chartered flights to European holiday destinations and daily direct flights to Manchester and Birmingham. The airport is competitive in bringing people into Ireland.
It is a pity Shannon Airport and other airports in the west are not used more for charter flights. We have heard about difficulties in increasing business in Cork and Shannon airports. There is major potential for Ryanair, which is seeking a second terminal in Dublin Airport, to make greater use of airports in the west. I ask the Minister to encourage the company to use Shannon or Knock airports, with their considerable facilities, to offer cheap flights to the western seaboard, as opposed to Dublin with its traffic chaos.
It would make economic sense to offer incentives to Ryanair to use Shannon Airport as a major international hub. Tourists arriving at Shannon or Knock airports could tour the country from a western base. An increase in passenger numbers at Dublin Airport would cause major difficulties by increasing traffic congestion in the city, whereas bringing increased numbers of people to the western seaboard would deliver major economic benefits which would filter through to the regions. I am disappointed Ryanair refuses to consider this possibility, given the excellent landing facilities available at Knock and Shannon airports.
The sale of Eircom highlights only too well the disastrous outcome which can occur when the sale of State assets is not well thought through by those in power. I am concerned about the temptation to make short-term gains through the sale of Aer Lingus. That must not be allowed to prevail. The unique and important service provided by Aer Lingus must be at the forefront of all considerations of whether to sell Aer Lingus. The Government must lay out the terms under which the company would be sold well in advance of any sale, spell out its objectives and provide guarantees. I would prefer if Aer Lingus were not sold. In the past two years, which were difficult times for the aviation industry, the company has turned losses into profits in excess of €6 million per month. It would be a disaster to consider a sale in light of this fact.
The Minister has not made public the proposals he received from the chief executive of Aer Lingus, nor has he revealed what proposals he intends to bring to Cabinet on any future sale of the company. Instead, he is asking the House to push through legislation which opens the door for privatisation. The Minister has proved effective and decisive since taking on a difficult portfolio and I wish him well with his plans to resolve difficulties he inherited in Dublin. Given his commitment, I have no doubt he will show care in studying the option of privatisation, the implications of which would be disastrous.
To set the record straight, the Minister should issue a White Paper setting out all the issues related to the sale of Aer Lingus. This should go some way towards answering important outstanding questions such as the likely capital needs of Aer Lingus in the coming years, whether a strategic partner for the company is required, whether the State will retain a certain amount of shares and many others.
Section 11 provides for the repayment by Aer Lingus Limited to the Exchequer of moneys amounting to €6,348,690 advanced to Aerlinte, now Santain Developments Limited, under the Air Companies (Amendment) Act 1969. What is involved in that? Has that been repaid from the point of view of the timescale? It seems the date has yet to be agreed. Section 2 provides for the repeal of the provisions in whole or in part and on different days under the Air Companies Acts 1966 to 1993, as detailed in the Schedule to the Bill.
I am happy to speak on the Bill. This is an important debate. I appeal to the Minister not to rush into a sale without first discussing the clear benefits to the State. As I have seen in the Committee of Public Accounts, millions and even billions of euros can be spent unwisely, which means the taxpayers do not get value for money. We have an asset which does not cost the State money. We should consider all the possibilities before we rush to dispose of something which makes money.