Vol. 671 No. 1
59 Deputy Fergus O’Dowd asked the Minister for Transport his position on the proposed takeover of Aer Lingus by a company (details supplied); the implications that would have on aviation policy; if competition law would allow such a takeover; the communication he has had with Aer Lingus and the company’s management on the latest takeover bid; and if he will make a statement on the matter. [46631/08]
60 Deputy Thomas P. Broughan asked the Minister for Transport his national aviation strategy in view of his recent comments that he will consider a takeover bid for Aer Lingus by a company (details supplied) in the context of the national aviation strategy; the directions he has given to the three Government-appointed directors to the board of Aer Lingus in view of the recent €748 million proposal by the company to acquire Aer Lingus; and if he will make a statement on the matter. [46527/08]
I propose to take Questions Nos. 59 and 60 together.
I wish to bring to the attention of the Deputies the fact that under the applicable takeover rules there are constraints on any comments I can make about the matter at this stage. The reply is given in that context.
Ireland's aviation policy, as set out in my Department's current statement of strategy, is to promote regular, safe, cost-effective and competitive air services linking the country and key business and tourism markets. The priority, from an Irish economy perspective, is to maintain the highest possible levels of connectivity between Ireland and key markets around the world. That remains the strategic context against which any proposal for the purchase of the State's shareholding in Aer Lingus will be considered.
Following its initial announcement on 1 December, Ryanair posted a detailed offer to Aer Lingus shareholders on 15 December. In accordance with the takeover rules, the board of the company must set out a detailed response within 14 days following the release of the detailed offer so that shareholders can make a decision on the acceptance of the offer or otherwise. The Deputy will be aware that the board of Aer Lingus has publicly announced its rejection of the proposed offer.
I have said that the Government would consider the Ryanair offer when received. It is now being examined by my Department. The State's nominees on the board were issued with a mandate to seek to reconcile commercial and public policy objectives on 31 January 2008. I have not given any specific directions to the State's nominees on the board in regard to this matter. All members of the board of directors are subject to the requirements of the Companies Acts to uphold their fiduciary responsibilities and to act in the interests of the company and its shareholders.
Even if a sufficient number of Aer Lingus shareholders were willing to accept Ryanair's offer, the completion of a merger between Ryanair and Aer Lingus would only be possible with the approval of the European Commission. The Deputy will be aware that Ryanair's previous takeover bid, initiated in 2006, failed to obtain the necessary approval and that decision is now under appeal by Ryanair to the Court of First Instance.
On 11 December, I agreed to meet with the CEO and chairman of Aer Lingus who wished to convey to me their opposition to the Ryanair offer. The Deputy will be aware that the company made a public statement following the meeting.
What is Government policy on this issue and how does it impact on the board members nominated by the Minister? If the Government were to decide to accept this offer, would the Minister be in a position to instruct his nominees on the board to do so or are they separate to and independent of his policy decision?
On 1 December, the Minister said there were two key issues. He did not include competition today. What is his view on competition? Would it be bad for consumers if there was only one airline option in Ireland, in other words, if Aer Lingus and Ryanair were part of the one fleet and under the same ownership?
Does the Minister consider that the recent Ryanair offer, which is much less than a previous offer, is bad for the taxpayer in the context of the Government investment in Aer Lingus? The key point is that on 1 December the Minister said the Government's shareholding was being held, in particular, to prevent hostile bids or takeovers. Can he define what he means by a "hostile bid"?
As I indicated at the outset, I must be careful in what I say until such time as the Government makes a final decision on the issue. To try to be helpful to the Deputy, I repeat that it is Irish aviation policy to have maximum connectivity and competition. We have pursued a two-airline policy for many years, in the sense that we believe two airlines is the minimum number that should fly in and out of Ireland. We have more than that and we would want to see more than that, but in the context of that particular aviation policy I will present to Government when I know the full facts of the offer, and when I have the full response from Aer Lingus, which is due to be made on 29 December. At that stage I will make my recommendation to Government on the shareholding we have. I will take into account the matters the Deputy legitimately and correctly raised, namely, whether the offer is good value for taxpayers and whether it will enhance or hinder competition.
I have explained the specific details regarding the directors to the Deputy. The directors of the Aer Lingus board have already made their views on the offer known, but they have to make a formal response to it. The directors must have regard to the general aviation policies of the Government, but they must also ensure their fiduciary responsibilities are fully met. I cannot dictate to them how they should act but I can point out what is Government policy at the time. I will not make a decision on the matter until, first, I have seen the offer, which I have now seen and that is being examined, and second, Aer Lingus has made a full response to the offer.
On behalf of the Labour Party, I have heard from both sides and I have read the Coinside Limited offer document. I have also heard from Aer Lingus. I agree with Mr. Conor McCarthy. I think this is an ego trip and a complete distraction by the chief executive of Ryanair. On competition and connectivity grounds, but above all on behalf of the Irish travelling public, I believe the offer should be rejected out of hand and Aer Lingus should stay as a totally independent airline. That is where my party stands. Tomorrow we will have an opportunity to question again representatives of the two airlines in public.
The Minister outlined the Government's aviation policy. Does it encompass a two major airline policy? In other words, are we in favour of two major airlines connecting this island nation to the United Kingdom and to Europe?
I understand the three Government-appointed directors to the board of Aer Lingus are Mr. Hackett, Mr. Wall and Dr. Hunt. Has the Minister been in contact with them in any way? Has he spoken to them and will they fulfil the objectives of the national aviation policy? Has the Cabinet discussed the matter? Has the Minister spoken to any of the other large shareholders, such as, for example, Bank of Ireland, which I understand owns 4% of Aer Lingus, Mr. Denis O'Brien and, above all, the ESOT itself and Aer Lingus?
Will the Minister comment briefly on the competition issue? Is it not a fact that if the takeover were to be achieved, the number of routes out of Ireland would increase by approximately 20% or 25% immediately, that it would increase in terms of being a single airline route and there would be much less competition? Is it not the case that this would be a major blow, that we would have a dominant, monolith airline with 75% or 80% of traffic?
In terms of connectivity, regarding the slots in Heathrow, for example, and Shannon, is it possible for the kind of guarantees Mr. O'Leary has said he would give to be incorporated into any takeover agreement, given the comments of the Stock Exchange on a number of offers?
Most Members would agree that Ryanair has a dismal record — sometimes an appalling record — in regard to the conditions and salaries of workers who work for the company on this island and in other parts of Europe. Does the Minister have concerns about the future treatment of the workforce of any merged airline?
I thank the Deputy for his contribution and his statement of Labour Party policy. I trust he will appreciate that Fianna Fáil has a party policy on the matter also but I cannot act on the basis of party policy. I have a particular role as adviser to the Government and to the shareholder, who is the Minister for Finance. I am somewhat constrained in what I can say. On aviation policy, which I outlined to the Deputy earlier, it is not that we just have two major airlines coming in here. If we could have ten major airlines, that would be Government policy, but at a minimum we should have competition — the point the Deputy made.
As I explained in the House the last day, very specific rules have been put in place by takeover panels, competition authorities, the Stock Exchange and everything else as regards shareholders acting in concert during a bid period. Therefore, when Mr. O'Leary requested a meeting with me, I felt it necessary, as did he, to have a legal adviser present to ensure these rules were obeyed. From that viewpoint, I can confirm that I have not had conversations with other shareholders, nor would it be right or proper to have had, as this could give rise to competition difficulties — and Stock Exchange difficulties.
As regards the slots at Heathrow, the "initial offer" suggested the Government would have to give its approval for changes to those. In the offer document it is now suggested that the Houses of the Oireachtas is the body that should have the say in that regard. I do not know, legally, whether that is a possibility and we shall take legal advice on that as we will on the other aspects.
On the Government policy to have at least two airlines, is it not implicit that there will not be two separate airlines if Ryanair owns both? In terms of the hostile bid — the point the Minister referred to on 1 December — a hostile bid means that something would not be in the best interests of the company or of the Government's shareholding, which is what I presume the Minister is talking about. It seems that implicit in what the Minister is saying is that he will reject this, even though, perhaps, he cannot say that.
What Ryanair is guaranteeing is the connectivity from Heathrow to Ireland. If Aer Lingus is taken over by any other company, that guarantee will not necessarily be there. Will the Minister please comment?
At the time of the first attack on Aer Lingus by Ryanair, which the Minister's predecessor should have expected, Commissioner Kroes demolished the bid on economic grounds, in terms of the severe lack of competition and connectivity and pointed out that this was different from other takeover bids in Europe. Has the Minister had any contact with the Commissioner?
Looking at the two airlines over the past year or so, is it not a fact that Ryanair has performed quite badly from its shareholders' viewpoint, with massive losses and a serious failure in the hedging of fuel costs as well as other problems on the closure of bases and so on? At the same time, the smaller airline has had a relatively good six months and looks as if it will break even in this very difficult period. Is this not really a smash and grab exercise by Michael O'Leary, in his typical buccaneer fashion, on an enormous asset which is worth three or four times the valuation he has put on it?
I do not know whether I can add much. However, Aer Lingus has done well in very difficult circumstances this year and the agreement reached with the trade unions and workers will help it to do even better, into the future.
I do not agree with knocking Ryanair, however. Ryanair employs a good many Irish people as well. It is a very successful Irish company, and we should bear that in mind, whatever our views might be as regards the current offer, or anything else. There are sufficient people across Europe knocking the airline, who are competitors of Ryanair, and would like to see it going out of business, without us starting to do so in this House. It employs a good many Irish people and while I would not share Mr. O'Leary's attitude to trade unions, people who work in the airline are, by and large, well paid. That should be kept in perspective.
61 Deputy Fergus O’Dowd asked the Minister for Transport if he has met the board and senior management of all 37 agencies under the aegis of his Department; the outcome of such meetings; and if he will make a statement on the matter. [46632/08]
Since my appointment as Minister for Transport, my practice has been to keep open lines of communication with the agencies operating under the aegis of my Department, primarily by maintaining regular and appropriate levels of contact with the chairpersons of the boards of the agencies, or their equivalents in the case of certain regulatory bodies. Communication takes place in several ways including by telephone and by way of both formal and informal meetings and encounters. Occasionally I meet the full board of an agency in a structured setting. I have also on occasion met senior management as required from time to time to address matters of particular pertinence for a given agency.
These discussions, encounters and occasional formal meetings have addressed, inter alia, issues such as review of overall strategies, business plans, financial outlook, performance by agencies, safety, reform and modernisation of the various sectors, structures or possible rationalisation, updates on investment programmes or on specific projects, or proposals for legislative change.
Clearly, my engagement with the agencies focuses mainly on issues of strategic note but I am aware that my discussions are complemented by talks which take place on an ongoing basis between my officials and the management of the agencies operating under the aegis of the Department.
While this form of engagement and oversight has worked well in the past, I recognise that there is always scope for improvement. For this reason, earlier in 2008 the Department carried out a comprehensive review of its corporate governance relationship with the State agencies. As a result of this review, I wrote to the chairpersons of the State agencies under my remit last month announcing the introduction of a new approach to corporate governance. This initiative is aimed at: providing a clearer mandate to each of our State agencies and enhancing the Department's monitoring of their performance; ensuring continuing compliance by agencies with the code of practice for the governance of State bodies; and ensuring that more regular and structured engagement takes place at ministerial and senior management level with all agencies, as a means of reviewing performance and ensuring that the Department's objectives are being met.
Additional information not given on the floor of the House.
Specifically, I have proposed to each agency the particular schedule of regular structured meetings, which should become the norm for that agency from now on, as meetings with me or alternatively with senior officials in the Department may be more appropriate in different cases. I propose to meet the boards of the larger agencies. The agenda at such meetings will cover my mandate and expectations, as well as the agency's performance and will address any other pertinent corporate governance issue arising in the context of the particular agency.
The responses I have received to date from the State agencies have been very positive and I am confident that this new approach will significantly improve the oversight of the agencies under my remit and ensure that the performance dialogue will become more structured, focused and productive with all the agencies concerned from now on.
The Minister has some 37 agencies under his remit. How many has he met? As he knows there was a review of his Department by the Department of the Taoiseach. Transport is a very critical Department, where €1.27 billion of taxpayers' money is being spent on public transport, €2.1 million on national, regional and local roads, €40 million on road safety, €48 million on coastguard activity and so on. It is a very important Department. He mentioned the word, "governance". The governance of his Department is inadequate. There is little consensus within the Department as to whether users of the services of these agencies are customers of the Department and what its oversight role is.
The criticism is that the Minister is not doing his job, that he is sitting back and not meeting these agencies. They are spending billions of taxpayers' money and the Department does not know whether it has oversight. Those semi-State bodies do not know whether they are overseen by the Minister, either. In fact, they complain of the lack of direction and leadership from the Minister.
If the Deputy spoke to some of those people, they would probably say I take too great an interest in their activities — to ensure I know what is happening. That has always been my style. It was for that reason we initiated the review of the relationship between the State bodies and the Department earlier this year. I did the same in the last Department I was in, the Department of Communications, Marine and Natural Resources. The Deputy is talking about an internal organisational review report of the Department, but the criticisms levelled in it are not levelled at the Minister, as he will see if he cares to read the report carefully.
The Minister is accountable in the Department.
I am accountable for what I do in this regard and for ensuring my Department keeps in close contact with the various agencies.
How many has the Minister met?
I have met with all of the major agencies of the Department, at CEO, chairman or board level, since I became Minister.
The Minister has not answered the question I asked him. How many of the 37 has he met? The criticism I made is of the Department and the Minister is the leader of the Department in terms of policy. The report clearly states the Department needs to take a more proactive leadership role in setting and clarifying strategies. The issue is that taxpayers' money is being wasted in some of these bodies, but the Minister has no oversight of them.
If I was in here in other circumstances and interfering in the day-to-day operation of the companies in question, the Deputy would make another complaint. He asked about the various bodies I had met. I have met with all the major ones since joining the Department. I met with Aer Lingus, Bus Átha Cliath, Bus Éireann, the Cork Airport Authority, CIE, the Commission for Aviation Regulation, the Commission for Taxi Regulation, the Dublin Airport Authority, the Drogheda Port Company, the Dublin Transportation Office, Dublin Port Company, Galway Harbour Company, Iarnród Éireann, the Irish Aviation Authority, the National Roads Authority, the Port of Cork Company, the Railway Safety Commission, the Road Safety Authority, the Railway Procurement Agency, representatives of the three airports and the Shannon Foynes Port Company, and the Minister of State, Deputy Noel Ahern, has responsibility for the ports.
62 Deputy Thomas P. Broughan asked the Minister for Transport the size of the subvention for CIE in 2009; if he has had contacts with the Department of Finance, Bus Éireann or Dublin Bus on the subvention and any proposed programme of cutbacks for Bus Éireann and Dublin Bus services and jobs; if his Department or the Minister for Finance have suggested any series of cutbacks for public transport companies; if he will rule out large scale cuts to critical bus and rail services provided by public transport companies; and if he will make a statement on the matter. [46528/08]
The 2009 Exchequer subvention to CIE will be €313.279 million, an increase of 1.5% on the 2008 figure. During the course of the Estimates discussion, my Department had discussions with the Department of Finance and with CIE on the overall financial position of the CIE operating companies, Dublin Bus, Bus Éireann and Iarnród Éireann. The chairman and chief executive of each of the companies also briefed me on the financial outlook on 1 December.
CIE is projecting an operating deficit of €39.5 million for 2008 after Exchequer subvention, compared to an operating deficit of €1.47 million in 2007. This significant deterioration in the financial position of CIE is due in the main to losses in revenue due to a drop in demand for services and increases in costs, particularly fuel costs in the earlier part of this year. The outlook for 2009 is for a further deterioration in the group's financial situation in the absence of corrective measures. In order to preserve the financial stability of the group, each of the companies must, in addition to increasing fares, pursue some rationalisation of services, ranging from frequency reductions, to service withdrawals. The CIE subsidiaries are considering service reductions that maintain the integrity and attractiveness of their networks and achieve significant cost reductions over time.
Following my discussions with CIE and its subsidiary companies and taking account of the emerging findings of a cost and efficiency review of Dublin Bus and Bus Éireann by Deloitte, to be completed shortly, I have agreed the following package of measures to protect the financial position of the CIE group and to maintain public transport services to the maximum extent possible: an increase of €5 million in 2009 over 2008 in the compensation paid to CIE in respect of its public service obligation, provided for in the Estimates; a fares increase of 10% for January 2009; CIE to identify a package of service rationalisation and reductions, focused on heavy loss-making services, sufficient when taken together with the other measures set out to ensure the financial stability of the CIE group; and measures to improve bus priority and bus journey times.
It is a matter for the CIE group of companies to secure operational efficiencies and to reduce costs so as to maintain services at the highest level possible. I have requested that, in deciding on service reductions, the group should aim to maintain rail services, peak-time bus services, and bus services to developing areas. Service reductions should be a last resort in the group's efforts to maintain financial stability.
I thank the Minister for his comprehensive reply. Does what the Minister now proposes to do with regard to bus transport and public transport generally not completely pull the rug from under his sustainable transport policy? The Minister will launch the sustainable policy in a few weeks' time, but with these cutbacks he is completely wrecking the sustainable policy in terms of bus transport. Is it the case that the subvention to the CIE group of companies is among the lowest of the 27 European Union member states? It is certainly the lowest of the old EU 15. Is it the case that the cutbacks now proposed will involve the loss of 40 Dublin Bus routes, of 150 Bus Éireann routes, the withdrawal of 170 Bus Éireann buses and of 100 Dublin Bus buses and the loss of 400 jobs? Is the Minister not effectively eviscerating the whole bus-public transport strategy?
A few months ago the Minister agreed with me that buses must perform the core role until we get the major investment required into heavier public transport over the next five or six years. Is he not wrecking that policy now by these short-sighted financial constraints he and the Department of Finance are imposing?
The country is in the financial situation it is in and no amount of burying one's head in the sand with regard to reality will help anybody. CIE is suffering as a result of the economic recession, just as is everybody else. Fewer people are using buses and trains and coming into towns to shop and fewer people are working. In that kind of environment, it is inevitable that services will end up in a loss-making situation.
The company has a responsibility to ensure that it trades responsibly. We provided an increase in the subvention and a fares increase. It is up to the company to try and ensure it works within those provisions to maintain services and try and grow them if possible. Taxpayers are providing €313 million to public transport, but there is no more money available from them. It is and will be taxpayers from whom these moneys must come. CIE, as it has done in the past and must do in the future, must live within its means and within its budget.
When I spoke to CIE about nine months ago the key issue was escalating fuel costs, with oil at $150 a barrel. That cost has been cut by two thirds, down to $50 or so and I understand CIE and the various bus companies are well hedged for next year. Therefore, how can fuel be used as an excuse to cut back on transport? The Minister failed to get the European Union to do anything about the fuel rebate, which has hurt all public and private transport operators since 1 November.
Is it not the experience of our European sister countries that the lower fares are, the greater the number of people who will travel? Study after study has shown this to be true. Instead of increasing Luas, Dublin Bus and Bus Éireann fares by between 5% and 10%, the Minister should be cutting them by 20% if he really wants people to use public transport. The Minister is taking a short-sighted and undynamic approach to policy, is he not?
I am somewhat confused by the Deputy. I am not sure what he wants me to do on this matter.
I want him to get more people on buses and trains. He is the regulator.
He is telling me I should cut fares. I would be delighted not to approve a request for higher fares. The original request was for a 20% fare increase. I would be delighted to be able to say to CIE that I was going to get it to cut its fares. If the Deputy thinks that is a wise policy to pursue, that is okay. I will do that. The Deputy cannot complain, on the one hand, that CIE will not be able to operate as it wishes and, on the other, that somebody must pay for this. Taxpayers must pay the €313 million. CIE must promote itself as much as it can, as companies are obliged to do. It is clear there must be rationalisation within Dublin Bus. Many services can be saved if that rationalisation takes place.
I do not use fuel as an excuse. CIE has a very good record of hedging. The most it was caught for in fuel costs was approximately $100 per barrel. It did well and saved. I am responding on the basis of what I have been told. I am not imposing anything.
63 Deputy Shane McEntee asked the Minister for Transport the funding he has provided to local authorities for the provision of gritting; if he has been in contact with local authorities in 2008 regarding gritting; if so, when; if he is satisfied that all the stakeholders who are responsible for ensuring safe driving conditions during the winter months have acted appropriately; if he has communicated warnings to any of the stakeholders in this regard; and if he will make a statement on the matter. [46633/08]
Under the Roads Act 1993, the maintenance of roads, including winter maintenance, is a statutory function of each individual road authority. This work is funded out of each authority's own resources, supplemented in the case of regional and local roads by discretionary and block grants allocated annually by my Department. In the case of national roads, funding for maintenance, which includes the gritting of roads and other safety-related work in winter, is provided by my Department to the National Roads Authority which allocates it among the local authorities.
Local authorities are advised that they should set aside contingency sums from these resources to finance works necessitated by severe weather conditions. In 2008, the total discretionary maintenance grant allocated to county councils by my Department was €29.56 million and the total block grant allocated to urban authorities was €16.133 million. The maintenance grant by my Department to the NRA for allocation to local authorities in 2008 was €58.21 million. This includes provision for winter maintenance, forecasting and monitoring of weather conditions.
Local authorities are regularly reminded by my Department of their responsibilities in relation to winter maintenance of roads. During 2008, the matter was brought to the attention of local authorities on 5 February and again on 10 December.
I listened to the Minister on the radio last week. He said, rightly, that we have not had road conditions such as we have had in the past few weeks for a number of years. Many new drivers are not experienced in these conditions. I doubt there is a Deputy in this House who has not had many complaints in respect of our smaller roads, particularly those roads that were not maintained over the past number of years. We know our major roads are safer.
Is the Minister happy that the allocation he gave in 2008 is being used? There is a difference. If I contact local authorities in different areas some will claim, behind the scenes, that they are not funded properly. The Minister states that his Department funds them properly. Can the Minister clarify that all the county councils got the same money this year as they received last year?
We are coming near to the end of the year, and, please God, the Department can be proud of one thing, namely, that deaths are down. The Minister knows he has the backing of everybody in the House for every measure he takes in that regard. However, I am deeply concerned about the condition of our roads at present. I am concerned that funding is not being used specifically to grit roads if they continue to be in the same condition.
There is a serious problem throughout the country with regard roads that are newly tarmacadamed. They then have six-inch deep curves on their edges. I am aware of one road where there were four accidents last week due to non-maintenance of road edges.
To my recollection, and I may be corrected, the amount of money provided under this heading at the beginning of 2008 was an increase on the figure given in 2007. There was no reduction in funding. The grants we give for roads are meant to supplement local authorities' own resources. If the authorities feel they have not got an adequate amount in the grant they receive from us, they should put money from their own resources towards it. That is the situation as it is supposed to be.
I agree with the Deputy there appears not to be the same amount of gritting on minor roads. That is my experience and I hear the same from colleagues on all sides of the House. Perhaps the reason is that it is a long time since we had such a prolonged cold spell. Judging from the level of complaints we have heard, there has not been the same level of gritting as previously. The responsibility lies with local authorities and it is one they should take very seriously. I know the Deputy made that point publicly and I agree with it.
