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JOINT COMMITTEE ON TRANSPORT debate -
Thursday, 18 Dec 2008

Proposed Merger: Discussion with Ryanair and Aer Lingus.

I welcome everyone to the meeting. Members of the committee enjoy absolute privilege but that same privilege does not extend to witnesses appearing before it. I remind members of the parliamentary practice that members should not comment on, criticise or make charges against any person outside the House or any official either by name or in such a way as to make him or her identifiable.

I welcome Mr. Michael O'Leary, chief executive of Ryanair.

Michael O’Leary

I am accompanied by Mr. John Given of A&L Goodbody who must chaperone me to these kinds of meetings under takeover panel rules.

That must be a terrible disadvantage.

Mr. Michael O’Leary

I find it very constricting and constraining.

We will begin the meeting with a presentation from Mr. O'Leary. He is very welcome.

Mr. Michael O’Leary

I thank the Chairman and the committee for their time. This is a useful opportunity to present the committee with the rationale behind Ryanair's offer to merge with Aer Lingus. I realise time is tight so I will not bore the committee to death by taking it through the presentation page by page. However, I would like to take the committee through some of the key themes which no doubt we will address in the question and answer session.

I ask the committee to look at page 6. The world has changed dramatically in the last two years: oil prices have risen; the recession is now devastating airlines; there have been more than 30 airline failures to date in 2008; small standalone or independent EU flag carrier airlines are disappearing simply because almost every EU country accepts that they are unsustainable; and the process of consolidation is accelerating.

We are also seeing a process across Europe where airlines are cutting back short haul capacity and routes and there has been a collapse in air travel demand. This is reflected in Aer Lingus's most recent November traffic statistics where, for the first time in a number of years, it has reported a decline in traffic in November of this year over last year. It was the state of Aer Lingus's finances, as reflected in its half year interim statement published on 11 November, on page 7, which prompted us to say the time is now right to launch this bid. We have a better future and a better vision for Aer Lingus which, sadly, we do not believe Aer Lingus has.

Let me take the committee through some of the details and refer to quotations on page 7. So everyone believes me I have also given members of the committee a copy of Aer Lingus's 11 November management statement, in other words its half year guidance. Quoting directly from that, Aer Lingus confirmed last month it was facing a very difficult trading environment. To quote the company, there has been "an exceptionally tough trading environment that has deteriorated throughout 2008", "falling consumer demand in Aer Lingus's key markets.... and significant fare pressure". "The new Irish airport tax of €10 per departing passenger [which as members know comes into effect next April] will have a direct bottom-line impact [on Aer Lingus] of €30 million." "The group [Aer Lingus] has extended its [fuel] hedging for the full year 2009." It has 64% of its fuel bought forward next year at $995 a tonne which is more than double the current spot rates.

Of much more concern, both to us as a shareholder in Aer Lingus and we believe to this committee, is Aer Lingus's bleak outlook in terms of growth. Fleet and capacity reductions have now been announced to minimise losses. I will quote the document. There will be a "cancellation of services on Dublin Los Angeles route from 2 November". There will also be a "deferral of an A330 delivery from September 2009 to June 2010". Aer Lingus will also be "reducing the long haul fleet from 9 aircraft to 8 for Summer 2009" and, here is the key, "capacity for Winter 2008/09 will decline by 11% on long haul and 1% on short haul, compared with previous plans to grow by 1% and 2% respectively."

Then Aer Lingus came out with the guidance "operating loss of €20 million for the 2008 period" and "in the context of the overall harsh economic and competitive environment, which is expected to deteriorate further in 2009, the Group currently expects to report an operating loss for 2009".

After two years of independence within Aer Lingus what we have is an airline which is losing money, cutting flights, cutting routes, cutting jobs and cutting pay. In fact the only thing it has not cut is air fares as they have gone up by 7% in the past two years. This is one of the reasons we believe it is now cutting flights and routes.

On national radio last week, the chairman of Aer Lingus accused me of telling lies when I simply reported these quotes from Aer Lingus's results. He said, "We are not losing money." I say, "Well, sorry you are." He said, "We are not cutting routes." I say, "Sorry, you said you are". These are the statements Aer Lingus cannot get away from, much as it has been trying to dance around them in recent weeks.

If one looks to the broader European agenda, independent carriers are disappearing. Frankly Aer Lingus's management seem to be the only people left in the mainstream airline industry in Europe who believe that being an independent small carrier is a viable strategy going forward. Almost no other European country agrees with them.

If members look at page 8 they will see the following statistics: Austrian Airlines sold to Lufthansa; SN Brussels, the former Sabena, sold to Lufthansa; the Danes have sold a significant stake in SAS to Lufthansa; Air France is leading European consolidation; Lufthansa is leading European consolidation; the Dutch have recently sold KLM to Air France; the Italians have now merged their two big domestic airlines, Alitalia and AirOne, and are busily and desperately trying to sell it to Air France or Lufthansa; SAS Norway's stake has been sold to Lufthansa; in Spain Iberia is in active merger discussions with British Airways; SAS Sweden's stake has been sold to Lufthansa; the Swiss have sold Swissair to Lufthansa; and in the UK, not alone is BA leading the process of consolidation through discussions to acquire more of Iberia — it already owns 10% — but recently BMI has agreed to sell a majority stake to Lufthansa.

All over Europe airlines are consolidating to form three big airlines — Air France, Lufthansa and BA. There is no alternative strategy. One must either find a way into one of those big airlines or find another strategy. Aer Lingus, sadly, is not able to find a way into one of those three airlines. It has tried, and those airlines are not interested in a small, regional, peripheral airline such as Aer Lingus. We offer Aer Lingus a way forward. There will be four large powerful airlines in Europe within the next 18 months — BA, Air France, Lufthansa and Ryanair. Ireland is one of the few countries that will have one of the big four European airlines. This is the opportunity to allow Aer Lingus to share in that success. I ask members not to take my word for it. Aer Lingus's own adviser, Goldman Sachs, also agrees. In a research report issued on 3 December, it stated "It seems inevitable that all European carriers will belong to one of the big three groups (BA, Lufthansa and AF-KLM)".

We welcomed the comments of the chairman of Aer Lingus, which we will go into in more detail later, when he not only accepted and acknowledged that Aer Lingus needed a partner, but vowed to go and get a 51% partner. I do not know why he is trying so hard, since there is one here on his doorstep. This is the big issue for Ireland. Even if one could get BA, Air France or Lufthansa to take a stake in Aer Lingus, it would do real damage to Irish national aviation policy. The only reason one of these three big carriers would be interested in Aer Lingus would be to take the Heathrow slots. Ryanair's offer guarantees not only to secure the Heathrow slots for Ireland, but to transfer control of those Heathrow slots to the Houses of the Oireachtas. The management and headquarters of Aer Lingus would be secured here in Ireland and fares charged by Aer Lingus would be reduced. There would be no commitment from any of the other three airlines, which are busy raising fares and fuel surcharges at the moment, to reduce Aer Lingus's fares. It would secure the future of Aer Lingus as part of one strong Irish airline group, as opposed to being a tiny regional subsidiary of some multinational with European headquarters.

I would like to deal with the other responses we have seen from Aer Lingus in recent days. The classic one has been to maintain that the merger cannot go ahead because the European Union turned it down two years ago, which is complete and utter rubbish. This is a different deal. Neelie Kroes, the Commissioner for Competition, when rejecting the last offer in June 2007, specifically stated: "The European Commission does not rule out a future merger between Ryanair Holdings plc and Aer Lingus plc under the right conditions." She also told reporters: "The tie-up is not a case of 'never ever' and the deal 'can be fixed' under the 'right conditions' ". We believe the right conditions exist now. Airlines around the world are in crisis. Aer Lingus is certainly in crisis. Members need only read the last half-year management statements. If Aer Lingus does not secure as part of this offer a long-term, stable, strong financial partner in Ryanair, we believe it will continue to dwindle and ultimately die — the tragic fate that has befallen so many other Irish indigenous brands this year.

I heard a comment last week from the chief executive of Aer Lingus to the effect that putting Ryanair and Aer Lingus together was a bit like putting Manchester United with Liverpool. Clearly he knows less about soccer than he does about running airlines. Frankly, Ryanair is the Manchester United of the European airline industry. We beat the pants off every other European airline. Aer Lingus is much more similar to Shamrock Rovers. It used to be big in Ireland in the 1950s and 1960s and it is coloured green, but it does not have any home at the moment, it has not won much in recent years and it is continuing to cut back and dwindle.

Aer Lingus has had a series of new managers in recent years and it does not seem to have improved its long-term strategy.

To demonstrate how much the world has changed, since Ryanair's last merger proposal with Aer Lingus was prohibited in 2007, there has been a series of national and pan-European airline mergers. These are not mergers between weak or disappearing airlines, which has been another defence used by Aer Lingus — it says these mergers only happen when an airline is going bust. KLM and Air France merged but they were not going bust. BMI and Lufthansa are merging but neither is going bust. It is simply inevitable that Europe is seeing the emergence of four large European champions. This is an opportunity for Ireland to have one of these big European champions. In almost every other industry, the largest Irish player is just a tiny subsidiary or a small peripheral player. By putting Ryanair and Aer Lingus together we will establish not only Europe's biggest international airline but the world's biggest international airline. This is the chance for Shamrock Rovers to play on a big pitch rather than a weedy field in Tallaght.

To deal with some of the other competition issues, Aer Lingus has been bleating on that we would have a bigger share at Dublin, for example, than any other airline. Again, this is complete rubbish. Let us look at the concentrations emerging from European consolidation. At Frankfurt, Lufthansa has 88% of the morning peak slots and at Munich it has 83%. In Lisbon TAP and Star Alliance have 77%. Down at the bottom we see Ryanair with a 70% share. That is a big share; we acknowledge that. However, it must be understood that Ryanair on its own already has about 45%, and this is growing. Even if we do not merge with Aer Lingus we will probably get to 70% or 80% on our own in the next few years. As Aer Lingus continues to cut flights, cancel routes and cut capacity, we will continue to grow and we will push it out of the way.

One of the big issues members will hear about from other contributors this morning is that they should not do this because Ryanair will have a dominant position at Dublin Airport, and when Ryanair gets a dominant position everyone must pay €300 air fares and everybody suffers delays. Many of the people in this room do not represent Dublin 4 constituencies but real constituencies, I am glad to say, in rural Ireland — where I come from — where Ryanair already has no competition. Aer Lingus has pulled out of the Shannon-London route. We have 100% of Shannon-London routes, and we have increased traffic and lowered fares. Many years ago Aer Lingus pulled out of Knock Airport, but the airport continues to grow because Ryanair continues to increase capacity and lower fares. We are the only airline serving London from Kerry since Aer Lingus pulled out. We are making the business grow. On routes that Aer Lingus has pulled out of in recent years — Dublin-Liverpool, Dublin-East Midlands, Dublin-Leeds-Bradford — we have continued to expand by lowering fares. In every market in which Ryanair has, God help us, a monopoly, we lower fares and increase capacity. We are a one-trick pony. We are the Ikea of the airline industry. We are the Lidl and the Aldi of the airline industry. One may not like to admit to one's friends at a dinner party that one shops in Lidl and Aldi, but one flies Ryanair because that is what one chooses on a daily basis.

On some of the routes on which Aer Lingus says it offers competition — the phrase is "without fear or favour" — to Ryanair, it actually does not. The last two years have demonstrated that where there is competition Aer Lingus's chosen strategy is to run away. It has been reducing capacity on the Dublin-Edinburgh route. We now have 77% to Aer Lingus's 23%. On the Dublin-Newcastle route we also have more than 77%. Even if this merger does not happen, Aer Lingus will continue to dwindle because its only strategy is to cut capacity and raise fares while Ryanair is out there busily adding capacity and lowering fares.

What has happened in the last two years? Aer Lingus has had its turn as an independent airline and the results have been appalling. Two years ago it rejected Ryanair's offer of €2.80 per share. In the last two years its shares have fallen to under €1. They were less than €1 in November before we launched our offer. Aer Lingus wasted €24 million in a defence bid two years ago rejecting a €2.80 offer. By the way, one of the few things that have risen in Aer Lingus along with its fares have been fat cat fees. Directors' fees have gone up almost threefold, from €17,500 to €45,000. The short-haul fares have risen as well. As an independent competitor to Ryanair, Aer Lingus raised short-haul fares by 7% in 2006 and 2007. The fuel surcharge has gone up five times. We, as the largest shareholder in Aer Lingus, have on three occasions in the last six months called on Aer Lingus to scrap the fuel surcharge because it is damaging its long-haul business, but it kept saying it would keep it under review. We had this "Sauline conversion" last week. Ryanair is promising to remove the fuel surcharge, and all of a sudden Aer Lingus comes out with a dramatic initiative — it is going to scrap fuel surcharges. Of course, what has clearly emerged is that it has not scrapped them at all but bumped up all the long-haul fares by a similar amount, as has been exposed by the newspapers, RTE and the average consumer in Ireland. This is not the way forward for Aer Lingus. It cannot succeed in the future by cutting flights, cutting jobs, cutting pay, raising fares and pulling sneaky stunts on fuel surcharges, particularly when the price of oil has fallen back to levels below those that pertained when the fuel surcharge was originally launched.

I refer to page 16 of the presentation. The problem in Aer Lingus is that load factors have been declining all year. Its long-haul load factors are down 7% on the year to date and on short haul they are down nearly 2%. The short haul load factor decline has picked up in recent months as Aer Lingus has been cutting capacity and raising fares. If the committee really wants to go to the heart of Aer Lingus's problem, I refer to page 17 which explains it all. Last month Aer Lingus said it wanted to be an efficient airline or that it wanted to compete with EasyJet because it cannot compete with Ryanair on costs. Here is the problem. Aer Lingus's average cost per passenger is €135; EasyJet's is €70 and Ryanair's is €50. Let us consider the position after Aer Lingus has gone through this radical transformational deal it has recently announced, although it is a bit mumbled as to what exactly has been achieved. Reports suggest it has spent €100 million in compensation to achieve it. I ask the committee to put the question to Aer Lingus this morning as to what the saving will be. It mumbled €50 million, €25 million this year and €25 million in postponed pay rises next year. That reduces the cost per passenger by €5. After this wondrous transformational deal in Aer Lingus it has reduced its cost per passenger from two and a half times Ryanair's cost per passenger to two and a half times Ryanair's cost per passenger. It would need about another 22 transformational deals of the type delivered by Aer Lingus in recent weeks to get down to Ryanair's cost per passenger.

Aer Lingus will not become a successful brand airline in the future by having these rubbish transformational deals which shave buttons off the cost base. The only way to restructure Aer Lingus's cost base here is to grow the business and grow it rapidly. The way to bring down the operating costs per passenger is to either hack out costs or double the traffic. We are the people who could double the traffic since clearly Aer Lingus, in its November statement, said its traffic would decline next year because it is cutting capacity. It may be churlish of me but one cannot believe what one hears from Aer Lingus management. On page 18 of the presentation we have given selected highlights of its last defence document in 2006. It states, "Aer Lingus is committed to reducing unit costs. Operating costs per passenger have risen 18% in the last two years. Aer Lingus has excellent prospects as an independent carrier". I argue that nobody has excellent prospects as an independent carrier. "Aer Lingus's superior returns justify a premium rating". Actually they have negative returns this year and next year and their ratings have collapsed. They promised to deliver further value through profitable growth but what we have got in the November statement is that we do not have growth any more and nor is it going to be profitable — in fact it will be loss-making. It is saying to the Government as a shareholder, "We expect to add significant value to our company". Whoops, they have lost almost €1 billion in value in the last two years.

We have seen various responses to Ryanair's offer in recent weeks. Aer Lingus can be independent. Here is another question I urge the committee to put to Aer Lingus later today. Who are the successful independent airlines around Europe on which Aer Lingus models itself? The only four we have seen quoted thus far have been Finnair, Icelandair, Norwegian and Whizz. I offer the committee Aer Lingus’s vision or the management’s vision for the future of Ireland’s national airline, Whizz, Norwegian, Icelandair and Finnair. These are small, peripheral, non-entities of European airlines, whereas Ryanair offers Aer Lingus a chance to be not just at the heart of European aviation for the next five years, but one of the big mega-carriers in the next five years.

Aer Lingus now agrees it needs a partner but, sadly, nobody is calling and they cannot find one. It is not that difficult. One could make three calls to Air France, Lufthansa and BA. What is taking them so long? Aer Lingus knows how to compete with Ryanair but repeatedly withdraws. It has called our offer of €1.40 per share pathetic. I ask the committee to ask its representatives if our offer of €1.40 is pathetic and how they describe their share price in November which was less than €1 before Ryanair's offer. Aer Lingus says that Ryanair's offer will mean desolation at Ireland's airports and higher fares. Coming from the people who previously pulled out of Shannon, Knock, Kerry and almost all of Ireland's regional airports, this is pretty bloody rich.

I will deal with the partnership issue. Thankfully, the chairman of Aer Lingus in his interview in The Irish Times on 12 December, finally agrees that Aer Lingus needs a partner. I refer to page 20. This is a bit of volte face on what the management of Aer Lingus has been telling all and sundry for the past two weeks, namely, that they have an independent strategy but clearly, the chairman does not because he said in The Irish Times that he vowed to find a friendly investor who will take a majority stake. I understand from this morning’s newspaper that some 24 year old in Wicklow might provide that friendly investor. I say, God speed, let us have a competition and let us really make a comparison as to who has the valid vision for the future of Aer Lingus. It was stated that Aer Lingus can get a new shareholder to ensure that Ryanair never gets the 51%. I say, God speed, get on with it. Let us provide the Government and the other Aer Lingus stakeholders with that alternative. The Chairman said, “I have not seen any perfect partner yet that I would be happy to support”. He is the chairman — what is he doing about it? He should get on with it.

He also said that from a consumer point of view and a country point of view, Air France-KLM would be a better option than Ryanair, "but I haven't got a call yet." He has not got the call from Air France-KLM but he views it as a better long-term partner for Aer Lingus. Air France-KLM, even if it could be persuaded to buy Aer Lingus, would want to take the Heathrow slots and they certainly would not be used for Irish routes. It would increase the fares, which is what it has done with KLM in the two years it has owned it. It currently levies the highest fuel surcharges on short-haul routes around Europe and frankly, I fail to see why Air France-KLM would be a better option than Ryanair which offers to secure the Heathrow slots — we will give them to the Oireachtas. We will lower Aer Lingus fares and provide a €100 million bank guarantee to boot. We promised there would not be fuel surcharges in Aer Lingus. If the chairman of Aer Lingus can deliver a similar or better offer, I suggest he produce it. Do not bother with the defence document in the next couple of weeks because, frankly, the defence document 2007 was a load of rubbish anyway. Let them go and get another partner and then let us have an auction or let us have a bid. Failing that, the chairman promised he did not rule out a link-up with a private equity group. That is wonderful. The two alternatives are to have Aer Lingus in the next couple of years operate as an independent Icelandair, Whizz Air or Norwegian, or have the private equity vultures in here and let us see how they secure the Heathrow slots and promise to reduce fares or reduce costs.

I refer to page 21. It has been stated that Aer Lingus knows how to compete with Ryanair. Yes, it does so by running away. It pulled Shannon-Heathrow in December 2007 and I refer to a list of eight other routes that it has also pulled where it competed with Ryanair in the past two years. The only airline that has been adding routes to compete with Aer Lingus has been Ryanair. Aer Lingus has no record of competition with Ryanair. Any time it is offered the option of compete or run, the choice is to run and it runs pretty fast, in fairness. It regards Ryanair's offer of €1.40 as pathetic. If our offer of €1.40 is pathetic, I suggest Aer Lingus finds somebody else to offer more or please explain why it has presided over a collapse in Aer Lingus's share price from over €3 in November 2006 to less than €1 in November 2008.

I refer to slide 23 because this is the point I want to focus on. The argument is that if Ryanair merges with Aer Lingus, it will mean higher fares and airport desolation. The one airline in this country that knows all about airport desolation is Aer Lingus because it pulled out of Kerry, Shannon, Knock, Galway, Sligo and Donegal. With the exception of Cork-Dublin and the transatlantic routes in Shannon which it has heavily reduced, Aer Lingus has a record of pulling out of everything. It is the coitus interruptus airline of Ireland. By contrast, when it did pull out of Shannon, Ryanair responded by adding flights to London, lowering fares to London and growing the business. In the 11 months of 2008 since Aer Lingus pulled off Shannon-London, Ryanair has lowered the fares on Shannon-London from an average of €26 per passenger to €20.12 this year, a reduction of 25%. The argument is that if Ryanair merges with Aer Lingus, everybody will be paying €300. Why am I not charging everybody in Shannon €300? The reality is Ryanair’s model is built on 20% compound growth and we cannot keep growing unless we keep lowering fares, and whether it is Shannon, where I have no competition, or Dublin, where I have very little competition, we will keep growing. That is the best security for Aer Lingus in the future.

Our record at Shannon conclusively proves that where Ryanair has no competition, as is the case at Knock and at Kerry, we grow and we lower fares and add routes and capacity. We did the same thing when we bought Buzz in 2003, which is the last time we made an acquisition. We bought Buzz from KLM at the time when it was a high-fare airline based in Stansted. In the five years since we bought Buzz, we have almost trebled the traffic on the former Buzz routes and we have lowered the average fares on the former Buzz routes by nearly 50%.

Aer Lingus has a very bleak future, we believe, without Ryanair. It is doomed to a future where it will remain a sub-scale flag carrier isolated and uncompetitive, a Norwegian, a Whizz Air or Icelandair. All it has delivered are higher fares and, as we demonstrated with its November statement, forecast losses for 2008 and 2009 with cutbacks in flights and capacity. The chairman of Aer Lingus now accepts that the independence strategy has failed because he has vowed to get a partner airline. However, he just cannot find one. In the absence of another partner, I suggest Aer Lingus seriously considers the Ryanair offer. We have sought meetings with Aer Lingus management but all they say is, "No, we will not meet with you". What are they afraid of? I promise I do not bite and I will be nice. We have put guarantees in the offer. Why will management not meet us and, at least, debate the future for Aer Lingus? Its future, according to management, is Whizz Air. Our future is to make it an Irish champion, not just one of the four big European airlines but the European airline that scares the pants off the other big three.

Aer Lingus has suffered repeated restructuring, job cuts and operating losses. It will be doomed to more because it cannot compete with Ryanair. Passengers will continue to suffer higher fares and fuel surcharges. It has a small free float in an illiquid market and, therefore, shareholders will continue to suffer.

Here is the alternative — the bright new dawn for Aer Lingus. It is a vision, a strategy which the committee will not get from anyone who shows up from Aer Lingus later on today. Our offer will deliver more than €325 million in cash for the Government, the ESOT and employees. We know, particularly with the enormous crisis the Government is facing with further cuts in public spending in the spring, that €188 million will make a big difference. It will mean the difference between making and not making some of the serious and politically sensitive cuts being confronted.

The Government originally said — with which we agree — that it would hold the 25% stake in Aer Lingus to protect national interests, namely the Heathrow Airport slots. It was not able to protect the Shannon-Heathrow slots which went to Belfast and whether members like it or not, that is still a different country. If the Government is holding the 25% to protect the Heathrow slots, we have relieved the Government of that burden because we will transfer control of the Heathrow slots to the Houses of the Oireachtas. It will be a legally binding commitment. If we own Aer Lingus, or it is part of a merged Ryanair group, the Heathrow slots cannot be sold, leased, switched or anything else without the prior written approval of the Houses of the Oireachtas. We know how difficult it is to get agreement from the Houses of the Oireachtas on many issues, so, therefore, the Houses will control them.

We guarantee that Aer Lingus will continue to be a separate company and a separate brand. We see Aer Lingus focussing on its strength. It will be a slightly higher-fare, better-service model to Ryanair. To use a newspaper analogy, Aer Lingus can be the Irish Independent while Ryanair continues to be The Irish Daily Star. We will carry many more passengers around Europe but Aer Lingus can be the vehicle by which we offer choice and competition at some of the large primary airports. We will do it with fares that would be far cheaper than what Aer Lingus is currently selling.

We will secure the Heathrow slots for the Irish people and secure Heathrow connectivity for consumers at lower fares. We have undertaken to put Aer Lingus back on the Shannon-Heathrow route with a minimum of a morning and evening service. We recently have heard some mutterings from Aer Lingus that it will revert to the Shannon-Heathrow route. Yet another conversion. It seems we do not need to own Aer Lingus to show it a coherent way forward. It just adopts many of our proposals, except the fare cuts. Its plan is to have flights four times a week. What the hell is four times a week? It should stop wasting time. If it is to serve Shannon-Heathrow, it should be done, at a minimum, morning and evening every day.

Ryanair and Aer Lingus, post merger, would also compete with each other. We will put Aer Lingus back into Shannon to compete with Ryanair. Competing against each other is how costs and fares are reduced.

For the employees, we have said we will recognise the trade unions in Aer Lingus. Whatever the procedures for negotiating with the unions, they will be honoured and respected. We want the current Aer Lingus management to continue to manage the airline under Ryanair ownership. However, we will give them a much clearer agenda and one to deliver growth.

Ryanair will provide Aer Lingus with access to 33 of our new short-haul aircraft. It does not have to take them if it does not want to fly Boeings. It can, however, take that benefit and negotiate with Airbus for 33 cheaper Airbus aircraft. That alone will allow Aer Lingus to double in size in the next five years. Its short-haul fleet would grow from 33 aircraft to 66. That would guarantee Aer Lingus's traffic growing from 9 million passengers last year to 18 million. No one else, not Air France, not some 24 year old from Wicklow, not some private venture vulture capitalist, will double Aer Lingus's traffic in the next five years. Ryanair can and it will. That is the greatest security to ensure fares in Aer Lingus will continue to fall. In much the same way as Ryanair grows, the only way to deliver growth is by reducing air fares.

Doubling the short-haul fleet will create a minimum of 1,000 new jobs for pilots, cabin crew and engineers. We know the unions have concerns about Ryanair. Take us at our word. Aer Lingus will be a separate company with separate management. The size of the fleet will be doubled with 1,000 new jobs. These will not be the IDA jobs, 100 jobs on a wish list. Every aircraft needs 35 cabin crew, pilots and engineers. We will cut Aer Lingus's short-haul fares by 5% for the minimum of three years post completion. To guarantee that, we will put a €100 million bank guarantee in place in favour of the Houses of the Oireachtas which will be triggered by an independent audit of Aer Lingus's short-haul fares. If they are not reduced by 5% for each of the three years in question, we will pay a penalty of €100 million.

Ladies and gentlemen, trust me. We will not pay that penalty because the fare reductions in Aer Lingus will be significantly greater than 5%. By that stage, we will have grown Aer Lingus by 60%. We will also put a €100 million bank guarantee in place to remove Aer Lingus's fuel surcharges immediately. It tried to head us off at the pass by removing them yesterday. Ryanair will also provide a guarantee to all of our passengers that we will not levy a fuel surcharge, ever. Perhaps the committee should ask Aer Lingus later on if it will give the committee a guarantee that it will never again have a fuel surcharge. That would be worthwhile and valuable for consumers.

Ladies and gentlemen, this is the way forward for Aer Lingus. Every other European flag carrier airline is merging with Air France, British Airways or Lufthansa. The sad truth for Aer Lingus is that Lufthansa, British Airways and Air France are not interested in it. Willie Walsh runs British Airways. Few know Aer Lingus better than him. He is busily trying to merge with Iberia and Qantas. He has no interest in merging with Aer Lingus because he already gets Aer Lingus's feed into Heathrow. Lufthansa has already bought British Midland Airlines and is the second largest holder of slots at Heathrow. It does not need Aer Lingus. Air France already has a substantial subsidiary in City Jet which feeds Air France into Paris and London and next year will feed the Air France-KLM combine into Schiphol. Nobody needs Aer Lingus.

The only alternative strategy to putting Aer Lingus together with Ryanair and building one Irish champion is to put it with the dwindling Norwegian, Whizz Air and Finnair, an independent strategy in which it will continue to go through more transformational changes. It will have to pay €100 million to deliver a €50 million cost saving. What are the economics of that? Ryanair, as a shareholder, cannot yet get a response from Aer Lingus on how much the transformational deal cost the airline. The report states it cost €100 million. I know of few companies which would pay €100 million to save €50 million. The sad reality is that the deal only reduces Aer Lingus's cost per passenger from two and a half times Ryanair's cost.

The Ryanair deal is the future for Aer Lingus. The guarantees we put in place in favour of the Houses of the Oireachtas ensure independence, separation, growth, lower fares, no fuel surcharges and trade union recognition to address shareholder concerns. The Government will receive almost €200 million in cash, at a time of national financial crisis. Aer Lingus employees and the ESOT will receive more than €135 million in cash at a time when cash is a scarce commodity.

I apologise for the delay in getting a copy of the submission out.

Mr. O'Leary proposes to guarantee competition through running Aer Lingus as an independent airline and as a separate brand. How can we trust him to do this? How can we be sure that the competition will continue? The same applies to the Dublin Airport monopoly of which Mr. O'Leary has been so critical. How can we be sure that Mr. O'Leary's monopoly can be trusted? How can Ryanair get over the EU Commission's rejection of its previous bid for Aer Lingus? Why did the bid not include a remedies document with regard to the issue of competition?

This is not the Michael O'Leary we saw in times gone by. He is now the wolf in lamb's clothing, the big brother to the Government and the unions. How can we trust Mr. O'Leary that he will change? He referred to the takeover of Buzz. My understanding is that Ryanair took it over in 2003 and shut the airline down in 2004. Staff in Buzz are not happy with what happened. It is a concern of staff in Aer Lingus that the same thing would happen. What will Aer Lingus look like in five years' time if Ryanair succeeds in its bid to take it over?

Mr. Michael O’Leary

Aer Lingus will look very much like it does today except it will be twice the size, have 18 million passengers a year and significantly lower air fares. All the time, we must ask what the alternative is. The Aer Lingus statement of November confirms that, left to its own devices, if it still exists in five years' time it will have run out of cash, will be significantly smaller than it is today and will charge higher fares. It will probably be still mumbling about fuel surcharges on transatlantic flights.

How can people trust us on competition? We built in legally binding guarantees. Aer Lingus will continue to be a separate company. It makes no sense for us to merge Aer Lingus with Ryanair, if for no reason other than the issue most sensitive to the workers. We will recognise the unions in Aer Lingus because Aer Lingus recognises unions. We do not recognise unions in Ryanair because our people do not want union recognition. They want to continue to deal directly with us. The only way to marry those two is to keep them separate. The only way to encourage both airlines to continue to compete to offer punctuality for lower fares is to create competition.

Within the Independent News & Media PLC, the Irish Independent and the Daily Star will murder each other for the advertising spend. We know this first hand. They constantly compete against each other. Drinks companies constantly run promotions when they are owned by the same company. This is a well-known strategy. Air France and KLM continue to compete, although not very well. They are two separate airlines. Lufthansa bought Swiss International Airlines but they are two separate airlines. This is a well-documented strategy. It is the only way to secure competition into the future. Our offer guarantees lower fares. That is what competition delivers. It guarantees growth.

I accept that, but my question concerns Mr. O'Leary's references to a merger. In fact, what is proposed is a takeover. When those two companies come together under his control, Mr. O'Leary can do what he likes. What guarantees do we have that Aer Lingus will continue to run as an independent airline, independent of Ryanair?

Mr. Michael O’Leary

You have the guarantees contained in the offer document.

For example, would Mr. Mannion continue to be the chief executive?

Mr. Michael O’Leary

We have no difficulty with Mr. Mannion and the rest of Aer Lingus management continuing to manage the company. It is a matter for him. An interview in the newspaper quoted him as saying he would not work for us. That is fine; it would be entirely his choice.

Mr. O'Leary says he will recognise and negotiate with unions and that procedures with unions will be honoured and respected. What will Mr. O'Leary do differently to what Aer Lingus management does at the moment? Aer Lingus management has tried to bring about change.

Mr. Michael O’Leary

In negotiations with unions one cannot get everything one is looking for but we have a package to offer workers in Aer Lingus. The first offer consists of 33 new aircraft and 1,000 new jobs. Because there is no growth, a first officer at Aer Lingus at the moment must wait for the captain beside him to die or retire, with the greatest respect, before he will see a promotion. We will promote first officers rapidly because the company will be growing. Ryanair has a successful record of high pay. We are in the middle of a five year pay deal with our people. The captains and the cabin crew received a pay increase this year when management had a pay freeze. The only way to secure the future of the workers is by growing the airline.

A member asked how we can get this through the European Commission. Commissioner Kroes has already said there is no reason a future bid cannot be approved as long as it is in the right circumstances and features the right elements to protect the competition and consumer interests. That is why we built into our offer document the guarantee that Aer Lingus will be separate. It will not be like Buzz, where we will merge with Ryanair. It is a merger, not a takeover, because we will own Aer Lingus if our offer is successful but it will continue, like KLM and Swissair, to be a separate airline, managed separately.

Will it not be like what happened to Buzz?

Mr. Michael O’Leary

No.

At the last bid Ryanair was going to cut 1,000 jobs. This time, it will increase the number of jobs by 1,000. What has changed?

Mr. Michael O’Leary

We made mistakes with the last offer. We thought we would go in and run the business as we do in Ryanair. This time we have tried to be more sensible. The offer reflects the concerns of all the various stakeholders in Aer Lingus. The Government wants money but it also wants Irish national aviation policy and connectivity protected. Our offer does that. The unions want to see investment, job security, jobs, promotion and growth. Our offer delivers that. One of the reasons the EU could reject our offer last time is that we did not provide specific guarantees or penalties to back up our promises on fare reductions and fuel surcharge elimination. This bid puts hundred million euro bank guarantees in place to back it up. That is why we think it will get through.

I welcome Mr. O'Leary and acknowledge the fantastic change he has brought about in aviation and particularly in prices for the consumer. Several points about the offer are worthy of serious consideration, particularly that of connectivity through Heathrow being guaranteed by the State. That was a major issue when the Aer Lingus Shannon operation was closed. We realised the problems we would have with connectivity in terms of business and investment if it ever disappeared. Aer Lingus will say that Ryanair cannot guarantee the matter in law. How cast iron can the offer be? This is an important part of the offer.

If Mr. O'Leary had not made his statement, we would not have heard talk from Aer Lingus about the return of connectivity between Shannon and Heathrow, nor would we have heard about the fuel surcharges being reduced. These are good points. The ordinary man on the street has the same questions as the Chairman. People like Ryanair and want Ryanair but do not want it to be the total monopoly it would be if it took over Aer Lingus. That is the key point. Ryanair is willing to make an offer for Aer Lingus but Ryanair is the only company that cannot buy it from the point of view of the national interest in the context of choice for the consumer. Even though Mr. O'Leary would run the companies separately, he would still have to have a holding company that would control those issues. The people of Ireland would not welcome a monopoly of the airline industry, no matter who ran it.

Mr. Michael O’Leary

I will address those points. How can we guarantee the Heathrow slots? The part that proved ineffective the last time was that Government had a golden share in Aer Lingus, which meant that the Heathrow slots could not be leased or sold but there was nothing about switching them. The management of Aer Lingus was quite creative in putting two fingers up to the Government and switching the slots. Our offer document promises to amend the articles of association of Aer Lingus. One must understand that the ownership of slots, such as it is, must remain with the airline. That is the legal mechanism and the airline has grandfather rights over those Heathrow slots. They can never be owned by any company other than Aer Lingus. Aer Lingus owns and uses them. We will amend the memorandum and articles of association of Aer Lingus with two amendments. None of the Heathrow slots can be sold, leased, transferred or switched without the prior written approval of the Houses of the Oireachtas. This clause in the memorandum and articles of association of Aer Lingus cannot be varied or altered without the prior written approval of the Houses of the Oireachtas. We will provide absolutely watertight legal guarantees that do not exist in the memorandum and articles of association of Aer Lingus at present. The Houses of the Oireachtas will control the Heathrow slots and no amendment can be made to memorandum and articles of association of Aer Lingus without the approval of the Houses of the Oireachtas.

The ordinary man on the street thinks lots of things but much depends on how one asks the question. I was somewhat amused on the night we launched the offer on "Questions and Answers", the politicians' programme late on Monday night on RTE. John Bowman put a question to the audience at the end of the programme and asked an RTE-esque question. He asked those who would like Michael O'Leary to own Aer Lingus to put their hands up. All of the hands stayed down. Michael O'Leary has not made an offer for Aer Lingus. He then asked how many people would like Aer Lingus to remain independent and all of the hands went up.

If this question was put a different way to ordinary people on the street such as, "Hands up how many people want lower fares, growth, 33 new aircraft and 1,000 new jobs in Aer Lingus?", hands would be raised all over the place. If the audience was asked how many of them want what Aer Lingus is promising in its most recent half-year results, namely, higher fares, fuel surcharges hidden in the transatlantic fare, fewer flights, capacity reduction, and losses in 2008 and 2009, every arm would be folded into the person's lap.

To make the point again, I know what Mr. O'Leary is stating, but the national interest dictates that there should not be a monopoly. This is the problem. Mr. O'Leary is prepared to guarantee something in terms of Heathrow connectivity which anybody else who might take over Aer Lingus would not have to guarantee and this is a problem also. However, we must return to the point that we cannot have a monopoly. I do not know whether a structure can be found to deal with this issue.

Mr. Michael O’ Leary

This is remarkable, and I understand because it is always the gut reaction. However, people in Shannon, Knock and Kerry do not object to a lack of competition. They are delighted with the services, fares and traffic growth. The difficulty for this country and Aer Lingus management is that the choice is not between having Ryanair and Aer Lingus merge into one strong Irish airline group and keeping Aer Lingus as a strong, viable independent airline. Either one finds a strong partner for Aer Lingus or it will continue to dwindle, cut capacity, raise fares and lose money forever more.

The Germans, Austrians, Belgians, Italians, Spanish and Portuguese have all recognised that there cannot be competition in a tiny peripheral market such as Ireland. One may want it but the way the airline industry works means that four large European airlines will exist. This is the best guarantee of competition because it is the only offer for Aer Lingus that will guarantee it will continue as a separate company growing with lower fares and with a vision and strategy to not only expand out of Ireland but also to open up bases throughout Europe. We will plant Aer Lingus flags throughout Europe. At present, Aer Lingus is pulling down flags.

If Ryanair and Aer Lingus are put together we will not have a monopoly in Ireland or Dublin. Yes, we will have 70% of the morning slots but Dublin has confirmed it has spare capacity and is discussing cancelling the second runway. Everybody is free to enter the Dublin market. Most companies choose not to and this is not because they cannot compete with Aer Lingus but because they cannot compete with Ryanair. This is the fundamental problem Aer Lingus has.

On this issue, it has been stated to me that because of the contraction of the airline industry Ryanair may have parked some of its airplanes. If Ryanair controls a contracting market there will be less choice.

Mr. Michael O’Leary

This is extraordinary. The issue is that I am confronted with a Government-owned monopoly which has ignored the interests not only of Ryanair but of Aer Lingus and every other airline for years. The threat to the Government monopoly is Ryanair having 70% of the morning slots. May I remind the committee that it is a monopoly. It ignores its customers, wishes all of the time.

If Mr. O'Leary buys Aer Lingus he will get the cash.

Mr. Michael O’Leary

Cash is an interesting issue. We have heard a great deal about valuations. I have heard many spurious comments in recent months, which always occurs with this type of offer. The value of Aer Lingus in November was less than €1 per share. Comments were made such as that the Heathrow slots are extremely valuable. No, they are not. Our offer gives control of the Heathrow slots to the Houses of the Oireachtas and they cannot be transferred or sold. They no longer have value. One can be sure if any other offers come in all they will want is the Heathrow slots.

We hear of Aer Lingus's cash mountain of €1.3 billion or €1 billion — we do not know how much it has given away in recent weeks — but Aer Lingus in its 28 August telephone conference with its shareholders predicted that the net cash balance at the end of 2009 would be €550 million. The cash is being frittered away. It has a great deal of debt. We believe it will pay out €100 million for the latest transformational deal. Aer Lingus is not an organisation rich with assets or that is growing and profitable. We must be careful because I am not sure there will be another offer if this one is not accepted. In two or three years' time the other stakeholders in Aer Lingus may come to a far bigger and stronger Ryanair and ask it to rescue Aer Lingus.

I welcome the chief executive and his colleague. I read carefully the Coinside document and the presentation on behalf of Ryanair. I also listened to Aer Lingus. My belief is that this merger or takeover would not be in the interests of Irish consumers or of the Irish nation.

With regard to competition, having a 75% or 80% monopoly out of this island is not good for Irish consumers. It would return us to the bad old days before Seamus Brennan gave Ryanair the Stansted slots and started real competition here. The deal is extremely bad for Aer Lingus and the 60% of shareholders who have not taken a position on this would want to be crazy to accept it. The deal is good for Ryanair and it needs it. Ryanair is the airline losing money now, not Aer Lingus. It is predicting significant loses of €250 million in its next two quarters until April.

An important issue for me is jobs and working conditions for workers with Mr. O'Leary as their chief executive. Mr. O'Leary has always railed against monopoly. He attacked BAA and I am sure the news this morning was music to his ears, with regard to the Spanish company having to divest at least two major airports in the UK. He railed against the DAA and the monopoly there. He attacked the spending of money by the DAA on T2 and the terminal at Cork Airport. He is the man who stated we must drive competition at all costs.

Two years ago the judgment of Neelie Kroes, the European Commissioner for Competition, was that this takeover would have led to dramatically reduced choice for consumers. This is still the situation. At the AGM in 2006, Mr. O'Leary told his shareholders that he would not encourage anybody in the room to buy an Aer Lingus share because it was going nowhere and was a waste of time. Mr. O'Leary has not addressed the competition issue this morning.

The cash pile was mentioned. I understand Aer Lingus has a cash pile of €1.3 billion. It is paying a mortgage of a couple of hundred million euro for half of its aeroplanes and it owns the other half. Mr. O'Leary stated the slots have no value. However, he is valuing them at zero. He will give nothing for the brand and has stated the management is hopeless although I understand he also stated that Colm Barrington is safe in the new regime. He states they buy planes at the wrong time and will not enter the United States where all of the cities are clamouring for Aer Lingus. However, value is not being given. Even if €2.80 or €4 was being offered it still would not give the value inherent in the airline given the fact that it has hedged better than Ryanair.

Ryanair is having difficulties at present and has cranky shareholders in the United States who own significant shareholdings. They will call Mr. O'Leary to account. It made €250 million in the first two quarters and Mr. O'Leary has stated it will break even in the financial year to April. Surely this means Ryanair is losing money whereas the national airline is making money. Ryanair shares have dived by 75%. Ryanair has a stream of aeroplanes on order. I heard an extreme critic of Mr. O'Leary's compare him to Bernard Madoff, in that he is running a Ponzi scheme. Mr. O'Leary has aeroplanes arriving at the rate of two or three a week and he does not have any work for them. He expects at least 33 of them. He repaints them, puts the slanty shamrock on them and off he goes. That is the 33 aeroplanes. That gives him another way to try to keep the pyramid going and keep it moving. Half the airlines that have collapsed are low-cost airlines like Mr. O'Leary's. I refer to Buzz and all the other airlines that have collapsed.

My last point relates to the workers. The fact that Mr. O'Leary is recognising trade unions after all this time, all the marching we did in the airport ten years ago which nearly ended up in a riot with the two sets of workforces when Mr. O'Leary was goading on his workers is a bit like Osama bin Laden appearing on al-Jazeera to tell us he has now become a Christian and that he was wrong. I was on the ground with some of his workers at that time. Why should we believe anything he tells us in terms of jobs? How many of the 1,000 jobs will be in Dublin, Shannon or Cork? Where will the jobs be located? As I understand it from the reports, Ryanair has approximately 6,000 core staff, not 1,500 as Mr. O'Leary is always telling people. He has approximately 6,000 staff and they include agency workers. Brookfield Aviation is a pilot agency that is registered in Gibraltar, which means it is a British company. Approximately 4,000 cabin crew are agency workers registered with Dalmac and Crewlink. Agency workers are low paid and they do not get sick pay. If they cannot fly, they do not get any wages. That is rough. Is that not the situation Mr. O'Leary is presenting to a workforce in the future?

On competition grounds it is a bad deal for Aer Lingus and good for Mr. O'Leary. The deal is bad for Aer Lingus workers and Ryanair workers and good for Ryanair.

We will allow Mr. O'Leary to respond. If we had a Ronaldo performance from Mr. O'Leary we had a John Terry performance from Deputy Broughan.

Mr. Michael O’Leary

I thank Deputy Broughan and the Labour Party for their insight into our financial accounts and the financial state of the airline industry.

Let us face it, this is the only way to secure competition. Do not take my word for it; take Aer Lingus's word of one month ago that it was going to cut flights, cut back on capacity, pull the Dublin to Los Angeles route, cut jobs and cut pay. That will not deliver competition. I understand the Labour Party has its own electorate to deal with. However, with the greatest respect, one cannot take from Ryanair's commitments. We will deliver 33 brand new, shiny aeroplanes. They have to be flown by brand new, shiny pilots, brand new, shiny cabin crew and serviced by shiny engineers who will be employed by Aer Lingus who will be union members. God help me, I will actually be boosting the number of union members at Dublin Airport.

If the committee wants a Sauline conversion, there is one. We recognise we must address each of the concerns of the stakeholder group. If Aer Lingus or the trade unions can come to the committee today and say they have a strategy that will grow Aer Lingus by more than 33 aircraft in the next five years, although they do not have any aircraft ordered, and that they will create more than 1,000 jobs in Aer Lingus in the next five years, they should put forward that strategy.

They should stop blathering on about Ryanair needing Aer Lingus. Ryanair does not need Aer Lingus. We will double in size from 50 million passengers to 100 million passengers in the next five years. Are we taking delivery of five aircraft a month? Yes, we are. Our traffic in November was up 14% despite sitting some aircraft on the ground in Dublin and in Stansted. We are almost the only airline that grew traffic in November. EasyJet did not. BA did not. Aer Lingus did not; it actually had a decline in traffic. We are growing and we are the only people who can deliver those kinds of benefits.

As to whether it is a really bad deal for Aer Lingus, on its shareholder conference call in August Aer Lingus said it expects its net cash to be €550 million at the end of 2009. Aer Lingus will be before the committee later. One should not mind the gross cash; there is a load of debt on the balance sheet also. It told shareholders that it expects the cash pile to have dwindled to €550 million by the end of 2009. That is not money Aer Lingus generated from some profitable activity. That is the shareholder funds we put in at the time of the IPO two years ago. All that has happened since is that it has dwindled. It is not the way forward for Aer Lingus.

It would be a really good deal for Ryanair. Our latest guidance to the market is that this year Ryanair will break even but we will probably do a little bit better. That was based on oil being at $70 a barrel for the rest of the winter. I am pleased to say oil is now less than $50 a barrel. Yes, we did get our hedging strategy wrong last year. I frequently said I do not believe oil is sustainable at $140 a barrel and I am not going to bloody hedge at $140 a barrel. We have now been proven absolutely correct. I will be buying spot oil from 1 January at approximately $55 a barrel. Aer Lingus, sadly, made the mistake of hedging forward at more than double the spot rate. It will be paying double the market rates for 65% of next year's fuel trying to compete with Ryanair that has oil at $55 a barrel next year.

It cannot compete with that already. Its cost base is already out of line and next year it has the double whammy of much higher oil prices and the travel tax. The tourist tax will be introduced on 1 April next year. We need to look beyond the bloody local, the next field. This is not about Ireland. This is about competing with the best in Europe. We would give Aer Lingus the opportunity to compete against the best in Europe. We are having talks this week with major European airports; Copenhagen, Zaventem in Brussels, Malpensa in Milan, Madrid, all of whom are losing huge capacity from SAS, Lufthansa and SN Brussels. They are desperate to get Ryanair to put a ten or 20-aircraft base into them in the next two years. We are the only people with aircraft.

I see no reason one could not establish an Aer Lingus base in, for example, Brussels Zaventem. Ryanair would continue to compete as we fly to Brussels Charleroi. One can have both, in the same way as in the London market one would have a much more competitive Aer Lingus at Heathrow, still competing with Ryanair at Stansted, Luton and Gatwick. One would have more competition, not less, but Aer Lingus has already confirmed that left to its devices there will be less.

Will this be a really good deal for Ryanair? Not particularly. Most of my shareholders think this is some crazy idea. They do not understand why we are wasting time on some small Irish airline. They want us to get on and beat Lufthansa, Air France and BA. The big American institutions do not understand why we passionately care about the future of Aer Lingus. They just think it is too small to worry about. I keep saying to them that we can beat the pants off Lufthansa, BA and Air France in the next five years, rescue Aer Lingus and grow it by opening bases.

Some aircraft will be in Dublin and others in Shannon. Many of the aircraft will also be based at European bases all over Europe. Aer Lingus has tried that. It closed a successful Shannon to Heathrow operation and switched it to Belfast where the load factors have been pathetic — only 57%. It cannot even compete with EasyJet out of Aldergrove. Aer Lingus has a 40% load factor on either the Paris or Amsterdam route. One would need to be pretty incompetent to only be able to fill 40% of one's seats to Paris or Amsterdam. It is very easy to fill flights to those destinations.

Aer Lingus says its load factors are higher than Ryanair's at Belfast City Airport but our seats are restricted at that airport for safety reasons. If one takes the amount of seats we can sell, our load factors are significantly higher than Aer Lingus. We make money at Belfast City Airport at lower fares but Aer Lingus loses money at Aldergrove. This would be an okay deal for Ryanair but it would be a tremendous deal for Aer Lingus as it would secure its future. For the Government it would guarantee all of the national aviation policy. It is the only guarantee for consumers that fares in Aer Lingus will fall. We have seen in the past two years Aer Lingus has been putting up fares and trying to maintain unjustified fuel surcharges.

What would the jobs and conditions of Aer Lingus workers be if MOL was CEO? MOL will not be the CEO of Aer Lingus. It will be either Dermot Mannion or somebody else. I will continue to be chief executive of Ryanair. I have no intention of wasting my time running some small regional Irish airline with a green brand when we are running Europe's biggest international airline, kicking the pants off the Germans, the Brits and the French. I am sorry. I have much bigger issues to play with.

Let me tell committee members what is happening to the jobs and conditions of Aer Lingus workers under its independent strategy. They recently voted on a transformational deal that has lost jobs and delivered pay cuts. Is that what committee members want in Aer Lingus for the next couple of years? That is what independence has delivered — pay cuts and job losses during a period when Ryanair has grown its traffic by approximately 20%. We have grown jobs and we have had pay increases. There have been no pay cuts in Ryanair in recent years. Aer Lingus has delivered pay cuts and job losses. I do not believe that is what the workers in Aer Lingus want for the future, but that is all the current management has delivered for them.

I welcome Michael O'Leary and his colleagues. I am confused. Mr. O'Leary has brought in a proposed merger document yet he is saying he will not merge the companies but operate them side by side, with both having independent status. He has failed to convince me that will be the position. The way he describes it, it does not sound like a merger.

If over 70% of the passengers at Dublin Airport are controlled effectively by one group it will reverse the positive impact Mr. O'Leary and Ryanair have had on competition.

Mr. O'Leary said earlier and in his statement that he will increase the number of jobs at Aer Lingus by 1,000. As Deputy Broughan asked, where will those jobs be located? He mentioned pilots and engineers but he did not give us any other indication of where the 1,000 jobs will be located.

What is Mr. O'Leary's response to the many people who are concerned that Ryanair would use this takeover or merger to reduce the passenger capacity in and out of Ireland? The concern is that it would increase the cost of flights because the competition element would be reduced and this would lead to job losses.

I would also like to know what would be the position, or if the position would change, regarding Terminal 2 at Dublin Airport, Dublin's metro north and the proposed new runway at Dublin Airport if this merger were to go ahead?

I welcome Mr. O'Leary. I believe the merger or takeover, whichever terminology one wants to use, would create a monopoly. I find Mr. O'Leary's proposal extraordinary because over the years he was very anti-monopoly from the Dublin Airport Authority to Cork to Shannon. In everything he does he creates competition and now he wants to kill it off, so to speak. The feedback I am getting and the feedback we are getting from all the tourist bodies — he probably heard the comment from the chambers of commerce this morning — is that this merger or takeover would be anti-competitive and not in the best interests of consumers. I believe that.

In terms of the jobs, where does Mr. O'Leary intend creating the new routes? The routes out of Ireland to Britain and the main cities in Europe are already established. Why does Mr. O'Leary need to take over Aer Lingus to create new routes when every day of the week he is endeavouring to create new links with airports and closing down his facilities in areas like Fuerteventura and Valencia to get a better deal in other cities or regions? Can he indicate the new routes he would create and if the routes do not emanate from Ireland, how can he say 1,000 jobs will be created?

Regarding Deputy Broughan's point about the agencies Mr. O'Leary uses, correct me if I am wrong but I understand a large amount of tax is not paid in Ireland through the mechanism he uses for employing people. How many of those 1,000 jobs will be Irish based, with salaries paid in Ireland and PAYE and PRSI paid to the Revenue here?

In terms of the European Union statement on Mr. O'Leary's previous effort to acquire Aer Lingus, he said that subsequent to that effort the EU Commissioner used the phrase "in the right conditions". I understand the right conditions would be if there were other operators operating out of Dublin in real competition to Ryanair and Aer Lingus. If Mr. O'Leary acquires 70% or 80% of the passengers out of Dublin, that would create the same anti-competition scenario which made the EU reject his case some years ago.

In the document Mr. O'Leary produced today he provides very good statistics, if they are true, but on the last page he has a disclaimer. He is not here to make an offer to the Oireachtas committee so why did he put a disclaimer on all of the information, most of which denigrates Aer Lingus? We will hear from its representatives shortly and we will ask them the questions we are asking of Mr. O'Leary.

In terms of the new management structure at Aer Lingus, is it not inevitable that Ryanair, as a board, will dictate policy, management, etc.?

Mr. O'Leary says he will give a Government guarantee on the slots at Heathrow. The memorandum and articles of association will always be dictated by the board of directors. There is nothing to stop a decision being taken subsequently by the board to reverse that agreement and there is nothing the Government could do about that because the board of directors design, draw up and alter their memorandum and articles of association as they see fit, unless the law is endangered.

I will be brief. I want to put two or three questions to Mr. O'Leary. This bid is substantially different from the previous one and I suggest it is Mr. O'Leary's research that has changed it. The reason in my view is that he wants to keep the shamrock on the tail of the plane to appeal to the psyche of Irish people.

Mr. O'Leary spoke about the reaction of an audience to a television programme and that the vast majority of people want Ryanair in this country. They have proved that and in fairness to Mr. O'Leary, he has done a powerful job at that level. On the other side, however, they can see that this process is heading for only one outcome, regardless of whether Aer Lingus is a trophy Mr. O'Leary would like to have on his sideboard or it is good financially for him. Mr. O'Leary said he does not really want Aer Lingus and that he can manage well without it. Everyone knows he is not in the Society of St. Vincent de Paul mode and that there must be some financial or strategic benefit in this for Michael O'Leary.

Mr. O'Leary used the analogy of the newspaper or RTE, for instance, with its various stations and the competition among them but that is controlled competition within a corporate framework. If this merger goes through, one can only imagine what will happen when Mr. O'Leary gets the opportunity of having a go at the people he has detested over the years. It would be difficult to see how he and Dermot Mannion could sit down at the head table, be chummy and do a job together on behalf of Ireland. Would he accept that most people would believe — they might be wrong — that he would act the big bad wolf once he got the chance?

There is a vote in the Dáil. A number of Senators have indicated they wish to contribute and rather than delay people I propose, and I hope the Whips will agree, that the Opposition spokesman and myself will pair and we will continue with the meeting. A number of Senators want to speak. We will ask Mr. O'Leary to hold the answers until the Deputies return.

Mr. Michael O’Leary

Am I to hold the answers to those questions until they come back?

Mr. Michael O’Leary

That is fine.

We will do that rather than adjourn. We will clear that with the Whips. We will allow Senator Ross to speak — I am sure he will want to raise a number of issues — and Senator Mary White. Senator Ross will have the floor to himself.

Not quite. When I read what Mr. O'Leary states in his document I sometimes wonder where is the Michael O'Leary we used to know and love. It is difficult to comprehend the change in attitude to the unions, the Government, monopoly, competition and all those aspects we are used to hearing from Ryanair. It is somewhat puzzling and difficult to take this on board and to reconcile it with what happened in the past and with what Mr. O'Leary and Ryanair have said in the past. Mr. O'Leary says he is going to rescue Aer Lingus. He says Aer Lingus is basically a basket case that will lose money in the years to come, but he will take it over and spend €750 million of his shareholders' money on it. Why not just continue to compete with it and destroy it? Why does he not allow Aer Lingus to run itself into the ground, if it will be so unsuccessful and needs rescuing? Ryanair can then establish its precedence and commercial dominance, which it will get if it takes over Aer Lingus, in a normal commercial way. It will not cost so much money, because even by Ryanair's standards this involves a large amount of money. I would have considered that the normal course to take if Aer Lingus is really in the state Mr. O'Leary claims and badly needs a merger or takeover.

My second question is more technical. Mr. O'Leary spoke about the slots going to the Houses of the Oireachtas. The takeover panel said last Friday that it is not permissible to give them to the Government because it would be treating the Government in a preferential way to other shareholders. Is this sudden change of giving them to the Houses of the Oireachtas instead of the Government a result of the takeover panel's objection or is there another reason? In other words, is there a distinction between the Government and the Houses of the Oireachtas and does Mr. O'Leary really think it a good idea to give them to the Houses of the Oireachtas? It is unusual to give possession of anything to the Houses of the Oireachtas; my guess is that it is without precedent. I have never heard of it occurring previously and I am not sure whether legally the Houses of the Oireachtas are allowed to own such slots. It is a moot point.

Could Mr. O'Leary give the committee more detail on how the promises he has made in terms of concessions such as recognition of unions, creating jobs and opening flights to Shannon will be binding? The history of takeovers, and I am not sure whether this is true in the airline industry, is that those who take over companies make many promises during the takeover period but when the takeover is completed they breach those promises immediately, and they are not worth the paper on which they are written. Can Mr. O'Leary give us any type of comfort that these will be binding? Some people would hope they are in the realm of political promises and are not binding but are promises made in the heat of battle which will not be kept but which are made specifically to appeal to certain constituencies.

There are obvious moves here to pitch the takeover, in a very forensic way, at the constituencies who have the votes. In other words, Mr. O'Leary will keep the Government happy with the slots, the unions happy with recognition and I gather he has told the airline pilots, who have a large number of shares at almost 5%, that he will negotiate with them as well about recognition. The only large constituency he has not approached is Mr. Denis O'Brien. Perhaps Mr. O'Leary would clarify whether those constituencies he has approached for votes will have legally binding agreements or if these are simply promises made for the purpose of the takeover which can be breached afterwards.

Mr. Michael O’Leary

I will split the question into five components. Why do I wish to take over Aer Lingus and why not continue to compete and just destroy it? We are not in the destruction business; we are in the creating and growth business. However, it is one of the inevitable consequences if this merger does not go ahead. Aer Lingus clearly does not have a strategy for competing with Ryanair. The strategy as set out in its November statement is to dwindle, cut capacity, close routes and defer aircraft at a time when Ryanair is continuing to grow capacity, add routes and add aircraft. Aer Lingus's transformational deal has failed to transform its cost base and the cash pile is dwindling rapidly to approximately €550 million next year, if one goes by the company's last forecast. It is an inevitable alternative.

The issue here is not, as I have said previously, from an Irish and strategic point of view whether one wants an independent Ryanair competing with an independent Aer Lingus or one wants to put the two of them together; it is whether one wants a strong Ryanair and Aer Lingus competing aggressively within similar ownership or one wants to see Aer Lingus continue to dwindle and die, by cutting pay, routes and flights.

Without taking over Aer Lingus can you not do exactly as you say by having greater synergy between the two airlines?

Mr. Michael O’Leary

Look at the degree of synergy at present. We have had competition for the last two years and for the last two years Ryanair has lowered fares while Aer Lingus has raised fares. They do not pay any attention to what we——

I am sure Aer Lingus will argue with that point.

Mr. Michael O’Leary

No, this is in the airline's audited accounts. Its average fares have increased in 2006 and 2007 by 7%, ours have gone down by 7% in a similar period. We have been growing rapidly. That is why we continue to deliver. I do not see any way of working with Aer Lingus, and it would be anti-competitive. Aer Lingus does not wish to work with us. We tried to call an EGM when Aer Lingus wanted to pull out of Shannon, where it had an 80% load factor, and switch to Belfast, where it has a 57% load factor and is losing money. We asked to call a shareholders' EGM, as we are entitled to do, because we did not think it was a sensible strategy. We were politely told to X off. Aer Lingus broke Irish company law.

We have issued three press releases over the last nine months calling on Aer Lingus to scrap the fuel surcharges because its long-haul traffic is collapsing. According to its published statements last week, long-haul traffic fell in November by 17%. Almost one passenger in five disappeared; the ladies going to New York for shopping trips disappeared.

May I ask an important question? If what Mr. O'Leary says is true and Aer Lingus is heading downhill fast, why is he spending so much money to get the airline off the pitch, given that it will get off the pitch anyway in the natural course of events? It is costing Ryanair €750 million.

Mr. Michael O’Leary

Yes, it is €750 million.

That is if there is not a higher bid. Ryanair is spending that amount to get Aer Lingus off the pitch. If it was going downhill so fast, it would get off the pitch in the normal course of commercial conflict. The suspicion must be that it will not go off the pitch but that Ryanair is buying off a threat to secure a monopoly, rather than competing commercially with the airline and getting it off the pitch in that way. There is a counter argument that Aer Lingus is a threat and Ryanair wants to buy it out.

Mr. Michael O’Leary

I refer back to the presentation this morning. Two things should be noted. First, we have already spent a considerable amount of money buying a 29.8% shareholding in Aer Lingus and we want to protect our investment in Aer Lingus, by trying to encourage it to grow and lower fares instead of what it is planning to do, which is to dwindle and keep fares high. We do not wish to take Aer Lingus off the pitch. Our offer is the guarantee that it stays on the pitch, but as a much more competitive operator. I used the example of Shamrock Rovers. We do not want Aer Lingus to be Shamrock Rovers, we want it to be something akin to Ryanair or a Manchester United. We have the aircraft to allow Aer Lingus to grow. We have put in place guarantees that the fares will be lower. This is the only way to keep the airline on the pitch. Aer Lingus has singularly failed in the last two years to demonstrate that it can stay on the pitch.

One of the positive aspects of your proposal is your plans to develop Aer Lingus hubs throughout Europe. You gave the example of Brussels. Why can you not assist Aer Lingus in doing that as matters stand? You do not have to take it over to move it in the direction of that type of development, which is laudable from an Irish airline and aviation point of view.

Mr. Michael O’Leary

Sorry, we do. I must be careful here because Ryanair has a very large constituency of shareholders. There would be no question of us helping Aer Lingus when we only have 29% of the shares, even if it wanted to accept our help. If Aer Lingus does not want to grow with our help, Ryanair will simply open up a base in Zaventem Airport. These opportunities are not available to Aer Lingus; it does not have aircraft orders in place and the couple it does have it is deferring and cancelling. One must not look at this as a small Irish matter; there is a big European market out there which Ryanair is conquering and Aer Lingus is frankly losing out at every hand's turn. On the undertakings concerning unions, competition, fares and growth, it is strange for Ryanair to make those undertakings. However, we accept that the various stakeholders will not agree to our proposals unless we address their individual concerns. That is why we guarantee to lower fares, give the Houses of the Oireachtas control over the Heathrow slots, recognise the unions within Aer Lingus, create 1,000 new jobs and will rapidly promote many union members in Aer Lingus.

Is there any legal precedent for the Houses of the Oireachtas taking possession of the Heathrow slots?

Mr. John Given

There is very little legal precedent for this for the simple reason that the takeover panel came up with a ruling last Friday with which, with the greatest of respect, A&L Goodbody, Morgan Stanley, Davy and eminent senior counsel have disagreed. We believe we could have secured these benefits in favour of the Government. Having said that, however, we have moved on and put in our offer document rather than giving those commitments. With respect, this is not a case of ownership but more like a negative control right, which we have given to the Houses of the Oireachtas because they are clearly not the Irish Government.

Is it a power of veto to stop the slots going anywhere else?

Mr. John Given

Yes, effectively we are saying we will amend the articles of association of Aer Lingus and issue a direction at board level, from the shareholder to the board of Aer Lingus, that nothing can happen to the Heathrow slots without the affirmative vote of both Houses of the Oireachtas. It is, therefore, a veto as the Senator indicated.

Will it change in the future?

Mr. John Given

Absolutely not. Even in the highly unlikely event of a future transfer, that is, if Ryanair were to sell Aer Lingus which it has no intention of doing, that commitment would have to be passed on to the purchaser and, in turn, from the purchaser. The Heathrow slots are secure in perpetuity.

Is the takeover panel happy with that position?

Mr. John Given

I cannot see that the takeover panel would not be happy with it. It is aware of the offer document which it has had for two days. If it were to express a view that it would not be happy with that position, it would, in effect, say that the Houses of the Oireachtas are one and the same as the Irish Government. We have very strong constitutional advice from the leading constitutional commentator here on that very point.

The Houses of the Oireachtas can legally take possession of——-

Mr. John Given

No, it is not taking possession.

Ryanair can change.

Mr. John Given

Ryanair can only change with the affirmative vote of both Houses of the Oireachtas. In the same way, if Ryanair does not deliver on its commitments to eliminate the fuel surcharge or reduce fares over the three-year period, the Houses of the Oireachtas can nominate a charity based on an independent auditor's view that Ryanair has not delivered on its commitment. If, for whatever reason, the Houses of the Oireachtas does not want to nominate a charity, the Consumers Association of Ireland can nominate the charity.

Mr. Michael O’Leary

The takeover panel may be confused. The offers we have made in this regard are designed to be offers to the people of Ireland. One always has a difficulty when trying to give something to the people of Ireland in deciding who one vests them in. We thought the logical choice was the Minister for Transport. The offers are made to the people of Ireland. If the takeover panel says to us we cannot make this offer because the Minister, while not a shareholder in Aer Lingus, is a member of the Government which is a shareholder, and therefore Ryanair is making an offer to one shareholder over all others, that is fine. We will change the offer and make it to the Houses of the Oireachtas. The key question here, one which goes to the core of the issue, is why the Government is holding 25.1% in Aer Lingus. Why is it tying up €188 million holding a 25% share in a loss-making company? It was not able to protect the Shannon slots and holds this share at a time when it could, for €10 million, provide a cancer vaccination programme for teenage girls. It makes no sense.

The Government holds a share to prevent a hostile takeover. That is what the Minister for Finance stated.

Mr. Michael O’ Leary

It clearly cannot prevent——

I will allow Senator Mary White to ask a quick question before Mr. O'Leary responds to Deputy Brady. I apologise, Mr. O'Leary wishes to finish.

Mr. Michael O’Leary

Yes, to come back to Senator Ross's point on what promises are in the takeover and what comforts I can give that these will be binding, the fare cuts are backed up with a €100 million bank guarantee. That is the binding commitment. The fuel surcharge is backed up with a €100 million bank guarantee. The promise on the Heathrow slots is tied up with a legally binding transfer of negative control of these slots to the Houses of the Oireachtas. On the commitments on the doubling of the fleet, Ryanair is happy to provide whatever guarantees the Government or anybody else wants. Put simply, this will happen and will deliver 1,000 new jobs which will be in Aer Lingus. While some of them will be in Ireland, some of them will be at bases overseas because that is where Aer Lingus's growth will be. Aer Lingus has demonstrated in the past two years that it cannot grow in Ireland. The Belfast base shows it cannot grow successfully abroad, yet Ryanair is on its 33rd European base. This is the way forward.

Lastly, in terms of the individual shareholders, we have sought meetings with all the big stakeholders — the Government, the ESOT, Denis O'Brien and the institutional shareholders in Aer Lingus. We hope they will all meet us in the coming week or two so that we can at least address their concerns and highlight the benefits of our offer. Sadly, the only people thus far who have refused to meet us has been the board and company of Aer Lingus. David Bonderman wrote to Mr. Barrington and was going to come over from the United States specifically to meet the Chairman of Aer Lingus but the company rejected the offer. Why? What does it have to lose by sitting down and at least understanding that Ryanair has a vision for Aer Lingus whereas sadly those guys do not.

We will ask that question as soon as the representatives of Aer Lingus come before us.

I welcome Mr. O'Leary. I am a fan of Ryanair and of Mr. O'Leary. My colleague, Ms Marie Nolan, a young person looking for inspiration as she goes forward in her life, attended specially to hear him. I spoke out against Aer Lingus's decision to withdraw from Shannon Airport, which showed disregard and disrespect for its 100,000 customers in the south west. The Aer Lingus brand was that the company looked after its customers and provided blue chip service. It treated its customers in the south west with disdain.

With all due respect to Mr. O'Leary and as much as I am impressed by him and his achievements in Ryanair, the role of politicians is to look after Irish consumers and I am not satisfied, from what I have heard so far, that we will not go backwards if a monopoly emerges. It was very cheap to fly to London in the 1960s but prices went crazy and became prohibitive in the 1970s and 1980s. I am not satisfied with what I have heard. How will——

The Senator has asked the big question.

With all due respect, Mr. O'Leary has not answered it.

I ask Mr. O'Leary to respond to the questions put by Deputies Brady and Kennedy and Senator White.

Mr. Michael O’ Leary

Deputy Brady's question was how we can secure or guarantee Aer Lingus's separate status. It will remain separate in the Aer Lingus company and will have its memorandum and articles amended to give the Houses of the Oireachtas control over the Heathrow slots. The very fact that Aer Lingus will continue to recognise the unions, whereas Ryanair will continue to deal directly with its people, almost gives the Deputy the absolute guarantee that these things will be separate. We have no intention of letting down our own people by recognising the unions in Ryanair.

We will have control of 70% of passengers at Dublin Airport. We already have control of 100% of passengers at Shannon, Kerry and Knock airports which all enjoy lower fares and traffic growth. For the past two years — this partly answers Senator White's question——

Dublin has 22 million passengers.

Mr. Michael O’Leary

Whether it is 22 million or 1 million, Aer Lingus has demonstrated in the past two years what it will——

Eighty per cent of 22 million is significant compared to 80% of whatever are the passenger numbers at Kerry Airport.

Mr. Michael O’Leary

I already have nearly 50% of the 22 million figure. Frankly, there is not a lot to prevent me in the next couple of years from getting to 80% of whatever the DAA's figures will be. The question is what will be the future for Aer Lingus without this merger. I do not think it has a future and the company certainly has not announced one, other than what it announced in November. Aer Lingus's future is less traffic, less capacity, higher fares and losses. There is no future in that. We already have 100% of passengers at many other Irish airports where Aer Lingus abandoned people. The chief executive of Aer Lingus spouted wonderful nonsense wherever he was able to get an interview in recent weeks that the company does not abandon passengers. It did so in Shannon and Kerry. Aer Lingus has repeatedly abandoned its passengers — in Shannon, Kerry and everywhere else. I agree with the Senator that not alone did it abandon passengers in Shannon, it has abandoned them with the ridiculous fuel surcharge scam it has been operating for the past 12 months at a time when oil prices have fallen back to less than $50 a barrel. It abandoned its passengers this week. If Aer Lingus appears before this committee later today it should be asked to explain why——

They will be in immediately after Mr. O'Leary and he is welcome to sit in the visitors Gallery to listen to its presentation.

Mr. Michael O’Leary

I am too busy. I have an international airline to run. I thank the Chairman for the invitation. I could not listen to someone rattling on about going forward.

What will Mr. O'Leary do if he takes over Aer Lingus?

It might be an opener to having it sit down and talk to Mr. O'Leary, which is what he wants.

How can we be sure that the price of fares out of Ireland will not increase if there is only one company, even if the two remain separate?

Mr. Michael O’Leary

We can have guarantees. The prices in all other Irish airports where we have no competition, such as Kerry, Knock and Shannon have continued to fall as we have continued to grow traffic. We will continue to grow at Dublin. The only guarantee between the claim of independence from Air Lingus and Ryanair's merger offer is that Ryanair guarantees to deliver 33 new aircraft, which doubles the size of Air Lingus's fleet.

Mr. O'Leary has said that already. We will have a question from Deputy Breen and we will then bring in Aer Lingus.

I welcome Mr. O'Leary to the meeting. I acknowledge his contribution to Shannon Airport over the last number of years and the contract is up for renewal in 2010. Returning to the issue of the Aer Lingus slots, Mr. O'Leary said he would reinstate routes from Shannon to Heathrow twice a day. Is that correct?

Mr. Michael O’Leary

Yes.

At whose expense would Mr. O'Leary do that? There are only so many slots in Dublin, Cork and Belfast. When Mr. Dermot Mannion appeared before this committee he said the only slots available were on lease, and were daytime slots which were no good for connectivity purposes. Who would suffer at the expense of Mr. O'Leary?

Mr. Michael O’Leary

No one will suffer at our expense. This is an issue to be determined by the management of Aer Lingus.

Mr. O'Leary should answer the question. He stated he would bring back morning and evening slots. Who will suffer? Will Belfast, Dublin or Cork services be reduced?

Mr. Michael O’Leary

I was going to answer the question. It is ultimately a matter for Aer Lingus management. The obvious way to do it would be to take one slot from Belfast and Dublin, respectively. Belfast currently has five slots and four would be more than sufficient. Dublin has 18 slots.

I thought Belfast had only four slots.

Mr. Michael O’Leary

I think it has five, but if it has four that is fine. Belfast can go to three. Dublin, which has 18 slots, can go to 17. That is not an unreasonable position, particularly where, thanks to Ryanair's ownership of Aer Lingus, the fares on routes from Belfast, Dublin, Shannon and Cork to Heathrow will be lower than is presently the case with Aer Lingus.

Mr. O'Leary spoke on the need for competition and against monopolies. He said Ryanair makes mistakes. Ryanair already has 60% of the business in Shannon. If Aer Lingus and Ryanair joined together they would control 90% of the business at Shannon. Is that correct?

Mr. Michael O’Leary

No. We have 100% of the short-haul business at Shannon.

We are talking about 60% of it.

Mr. Michael O’Leary

There are two markets. Aer Lingus has 100% of the long-haul market at Shannon and Ryanair has 100% of the short-haul market. One would not be changing any monopolies.

I believe it is 60% overall. Mr. O'Leary has brought a significant amount of business to the airport but many airlines have left the route. We lost EasyJet, Hapagfly, Flybe, Centralwings and many other German charters. If Mr. O'Leary has a monopoly, there will be little competition.

I mentioned that on the last occasion Mr. O'Leary was here. He said then he was losing money on Shannon and if it continued he would close down operations in it in the next 12 months. He will have an increase in landing charges in Shannon in accordance with the agreement.

Is there a danger that Mr. O'Leary could pull out of Shannon? Regarding regional airports, he said, "Close them down. Forget about Aer Arann". What will happen in that situation if Mr. O'Leary is successful?

Mr. O'Leary has said that he is losing money in Shannon. Why should he stay there if that is the case? He will not remain there for our good. He is happy making money. He has a contract which, I believe, is up for renewal in 2010.

Mr. Michael O’Leary

Yes, 2010.

What is Mr. O'Leary charged at the moment? Is it approximately €1 per passenger?

Mr. Michael O’Leary

For the incremental passenger, yes

Will he will be asking the Shannon Airport authorities to pay him to come in?

Mr. Michael O’Leary

That would be a good opening negotiating position. I will try as best as I can to answer the various questions. EasyJet showed up at Shannon and pulled out long before Ryanair announced a base there, as did Hapagfly, Express and others. That is distant history. No one has pulled out of Shannon since Ryanair opened its base there, with the exception of Aer Lingus.

Our response to its withdrawal from Shannon was to go in and add more flights to Luton, Stansted and Gatwick, which enhanced Shannon's connectivity.

Centralwings has gone since Ryanair went into Shannon.

Mr. Michael O’Leary

Centralwings was not competing with Ryanair on any if its routes.

It flew to Poland.

Mr. Michael O’Leary

It was not competing with Ryanair. Centralwings pulled out because it could not make money flying to and from Ireland.

I did not say at the last meeting that if Ryanair continued to lose money in Shannon we would pull out. I said the opposite, that I do not mind, we will continue to make losses at Shannon and meet our passenger traffic forecasts. However, if there is any increase in costs at Shannon in 2010 we will not accept paying higher costs at a base where we lose money. The Shannon Airport authorities are aware of that. We will continue to lose money at Shannon. I put that to the members of the committee and compared and contrasted with what Aer Lingus has done in Shannon, which is to cut and run, as it did in Kerry and Knock.

It is somewhat offensive. Everyone questions Ryanair's commitment to growth and lowering fares at airports where we effectively have a monopoly. We have a monopoly at Shannon and have more than doubled the traffic from fewer than 1 million passengers to more than 2 million. We have done it by offering lower fares at Shannon and have lost money doing so. People should stop questioning Ryanair's commitment to this country or regional airports in the country because no one can question it.

The next group to appear before the committee should be asked what it has done for the regions of Ireland, which is nothing. What it has done for Dublin in the last two years has been to increase fares and scalp passengers for unjustified fuel charges. In the last two weeks it is rumoured to be talking about restoring the Heathrow to Shannon route. One wonders why. It is talking about four times a week, which is not a service. It is rubbish.

We have to conclude.

Mr. Michael O’Leary

I am sorry. The Chairman asked a question on regional airports. It is very important to be accurate in what I said at the last meeting. I said I believed there is no future for the small regional airports of Ireland, such as Waterford, Galway, Sligo and Donegal, which fundamentally depend on a loss-making airline, Aer Arann, and receive massive Government subsidies on an annual basis. They receive €15 million per year.

We must question a Government which, in a recession when teenage girls are not receiving medical screening for the sake of €10 million, continues to give a subsidy of €15 million per year to Aer Arann to provide business people in the west of Ireland with connections to flights to and from Dublin, when they have good motorways and train services.

The regional airports that will survive and thrive under the Ryanair-Aer Lingus merger proposal are Dublin, Cork, Knock, Shannon and Kerry which have jet runways. In a country with 4 million people, trying to sustain five international airports is trying to do something which does not happen anywhere else in the world. It could not happen without Ryanair, Europe's lowest fare and largest airline sustaining these things because we have a commitment to this country. Sadly, our national airline does not and chose to switch the Shannon slots to a different country.

Aer Lingus should be asked about its commitment to this country. It has not demonstrated one. We have been lowering fares for the last two years while it has raised them. We have been growing our business while it has declined. This is the future and it is sadly in the distant past.

I put to Mr. O'Leary that the Government has a regional policy. The need for a connection from west Donegal to Dublin is important. The Government must continue to have that regional policy and it costs money to have it in place because it is a subsidy. From the regional point of view, Mr. O'Leary will not get away with closing down what are significant services from the airports which give connectivity to the regions.

I thank Mr. O'Leary for his contribution. It has been very useful for us to have the opportunity to hear what he has to say. I was vehemently opposed to the idea of a takeover in the past. I have an open mind about it; I do not say I support it. I am interested to hear the response from Aer Lingus.

Mr. Michael O’Leary

I thank the Chairman and the members of the committee.

We will suspend to allow Aer Lingus to come in and allow our members to return from the vote.

Sitting suspended at 11.20 a.m and resumed at 11.25 a.m.

We will now discuss the proposed takeover with Mr. Dermot Mannion, chief executive, Mr. Colm Barrington, chairman, and Mr. Finbarr Griffin, all of Aer Lingus. I welcome them all.

Members of the committee enjoy absolute privilege but that same privilege does not extend to witnesses appearing before it. I remind committee members of the parliamentary practice that members should not comment on, criticise of make charges against any person outside the Houses, or any official either by name or in such a way as to make him or her identifiable.

We will have a short presentation from Mr. Mannion, followed by a question and answer session.

Mr. Colm Barrington

May I give a brief introduction on behalf of the board of Aer Lingus?

Absolutely.

Mr. Colm Barrington

I thank the committee for meeting us today. We welcome the opportunity to put the Aer Lingus case. We are little bit constrained in what we can say. Ryanair has issued its offer document, but we have not yet issued our defence document. We are not allowed to disclose certain things in that document until they become public. We are having a board meeting this evening to approve our defence document, and this should be issued in the next few days. We also understand that the committee is under time constraints, with the Christmas break approaching.

Aer Lingus was a State-owned company for its first 60 years, which is a difficult environment in which to run a commercial enterprise. It was only in September 2006 that Aer Lingus became a plc. In that two year period, Aer Lingus has had a very good record, despite what some people who were here before us might say. Aer Lingus has made a profit of over €200 million since the IPO. It has increased its routes from 85 to 125 in that period, which is a 24% increase. It has changed its routes in some cases and closed other routes that were not doing well commercially, but all airlines do that and Ryanair does it more diligently than anybody else. Aer Lingus has grown its fleet from 34 to 42 aircraft in that period, and it has further orders for new aircraft.

Something that is relevant to the Ryanair bid is the fact that Aer Lingus has nearly €1.3 billion in cash in the bank today.

It is better off than most of the banks.

Mr. Colm Barrington

It is spread over several banks.

Aer Lingus should try to hold on to that.

Mr. Colm Barrington

We will take that as a compliment. The company has increased the amount of cash by over €100 million, in spite of putting €106 million into the pension plan in that period.

This year has been very bad for the global airline industry. The International Air Transport Association has stated that the world airline industry will lose about $5 billion. Aer Lingus will just about break even in 2008, which is a remarkable performance in this environment. Ryanair's own brokers are predicting significant losses in its financial year, which ends in March, while our financial year ends in December. Stock markets have been terrible, and while our share price has gone down significantly, Ryanair has lost over €3 billion in market capitalisation in the last year. We have done badly in the stock markets, but Ryanair has done just as badly. I believe a committee member said that it has gone down by 75%.

We believe that this deal is bad for the shareholders of Aer Lingus because Ryanair can buy the 70% of Aer Lingus that it does not own for €525 million. It can go to our banks, draw out that €525 million, pay itself back and end up with €800 million cash in its pocket. That is a very bad deal for the shareholders. We also think this is a very bad deal for consumers. Ten million people chose to use Aer Lingus last year. Ryanair and Aer Lingus control 80% of the traffic in and out of Ireland, and a slightly higher percentage in Dublin. If consumers have just one option, it will be bad for them. When I started my aviation career approximately 40 years ago, each country had its own state airline, basically. Fares were very high and business was quite low. Ryanair and other airlines were developed as a result of the liberalisation of the European airline sector, which happened when Mr. Peter Sutherland was European Commissioner for Competition. More than 30 airlines of a similar size to Aer Lingus, or bigger, are now operating successfully across Europe. While there have been some casualties in 2008, mainly as a result of high fuel prices, they have tended to be smaller niche carriers that were thinly capitalised. Carriers like Aer Lingus, which has €1.3 billion in cash, have not been affected in such a manner this year because they can survive any downturn.

I will conclude by speaking about the country as a whole. Dublin Airport Authority, of which I used to be a member, is spending €1.2 billion on Dublin Airport. It has already spent approximately €150 million on Cork Airport. It intends to spend a further €100 million on Shannon Airport. It would be an appalling vista for the population of Ireland if Ryanair, which is renowned for its negotiation of sweetheart deals with airports, were to be the only customer of this country's airports. Everyone in this room is one of the 4 million Irish people who own 25% of Aer Lingus. On behalf of such people, I reiterate that this is a bad deal for shareholders and for the country as a whole. That is why the board of Aer Lingus opposes it.

Mr. Dermot Mannion

I thank the Chairman. It is Christmas — perhaps that is why we had a pantomime from Mr. O'Leary, who is a pantomime queen. It is time to move on with the reality. Mr. O'Leary said a couple of interesting things. The most significant thing he said was his description of Aer Lingus as the slightly higher fare, better service model airline. That is entirely correct — I could not describe the airline any better. Aer Lingus wants to keep that proposition in the minds of Irish and international consumers. I would like to refute the suggestion that I am associated with Shamrock Rovers. As a keen fan of Sligo Rovers, I could not possibly let that one pass. Perhaps it is more a case of Sligo Rovers being in opposition to his home town team, Mullingar Town.

What is wrong with Mullingar?

Mr. Dermot Mannion

While I love Mullingar, I warn the committee to beware of Mullingar men bearing gifts.

What is the transfer fee?

Mr. Dermot Mannion

It is time to move on from the pantomime and address the realities. Our key message today is a positive one for Aer Lingus. It is in keeping with the Christmas spirit we have tried to engender over the past couple of minutes. Aer Lingus is a financially strong and successful airline. Fundamentally, it has a bright future as an independent carrier with a clear strategy for profitable growth. It has delivered on its promises to its shareholders and stakeholders. Aer Lingus has come through the toughest year for international aviation since the year following the events of 11 September 2001. At the end of 2008, Aer Lingus is strong and in better shape than many of its European competitors.

In recent weeks, Aer Lingus has reached a significant new agreement with its staff, which will underpin its future. The agreement opens up a range of new opportunities into 2009 and beyond. I wish to state unequivocally and definitively that savings of €50 million will accrue from the agreement in its first full year. It is truly a transformational change in the history of Aer Lingus. As the chief executive of the company, I can assure the committee that Aer Lingus is succeeding and growing. As Mr. O'Leary confirmed earlier in this meeting, Aer Lingus offers its customers a different and better proposition than that of Ryanair. The problem we face is that Ryanair wants to take our successful model and exploit it for its own commercial gain. As Mr. Barrington has said, Ryanair's latest bid makes no sense for the Irish people, for visitors to Ireland or for the shareholders and staff of Aer Lingus. Any move away from the current Government policy of promoting two strong and independent competing airlines in Ireland would bring about significant danger for this country and for the travelling public in general. In addition, a sale of shares by the Government at this time — in the stock market about which Mr. Barrington has spoken — would, in my opinion and that of the board of Aer Lingus, represent a rip-off of monumental proportions for the entire Irish nation.

I ask members to pause for a second to reflect on the amount of money that is being offered. Ryanair is offering €1.40 a share to Aer Lingus shareholders. In net terms, it would cost Ryanair €525 million to gain control of the airline. Ryanair would then have access to approximately €800 million of net cash on Aer Lingus's balance sheet. That sounds like a bargain, even before one considers that Ryanair would get the rest of the business and assets of Aer Lingus thrown in for free. I will expand a little further on this point. Aer Lingus has an extremely valuable and respected brand, an enviable reputation, a valuable fleet of 42 aircraft, a route network that would be the envy of many airlines in this sector and 23 Heathrow slots, which are often mentioned. Aer Lingus has an excellent and loyal workforce, who have demonstrated once more over recent days their capacity to move with the times and adapt to change. Aer Lingus has an extremely valuable business model, which is performing strongly in a difficult and challenging international environment.

The head-to-head competition between Aer Lingus and Ryanair in the past 20 years has been to the great benefit of the Irish consumer, in terms of choice of service and low price. This two-airline model should be allowed to continue, rather then being replaced with a monopoly provider that is keen to use dominance to crush all in its wake. Ryanair has already tried to kill off one airline in Ireland — Aer Arann. Mr. O'Leary made it clear that Ryanair is pushing Aer Arann to bankruptcy because it can do so and, frankly, because it could not care less about Aer Arann. He used the same tactics to bring an end to EasyJet's services to Gatwick from Cork, Shannon and Knock. That is the nature of the Ryanair model. I do not believe the new honey-tongued leopard will change its spots any time soon. I am sure the members of this committee agree with me.

Any transition to a monopoly in the Irish airline industry would inevitably result in a deterioration of customer service, less choice, reduced frequency and increased air fares. So much for Ryanair as the champion of competition. I will give the committee a small illustration of the point I am making. In November 2008, which was one of the toughest months in aviation history, Aer Lingus, which competes head-to-head with Ryanair in the short-haul sector, recorded almost exactly the same load factor, 72%, as it did the previous year. It was an outstanding competitive performance in a tough market. Mr. O'Leary pointed out that Aer Lingus has withdrawn from nine short-haul routes over the years. I remind him that since 2006, Ryanair has withdrawn from 30 routes outside Ireland and into the Irish market, or altered the schedule on those routes in some way. That is a measure of how well the Aer Lingus competitive model has done over the years, by comparison with Ryanair.

This committee knows only too well that the Government is currently engaged in a €2 billion programme of investment in this country's airport infrastructure. Ryanair has vowed that it will not use the new terminal 2 at Dublin Airport. It has an aggressive track record in this regard. I do not doubt that its threat to airports will become even more audacious if this takeover — it is not a merger — is allowed to proceed. Any objective financial assessment of Aer Lingus's performance to date will debunk the myth being peddled by Ryanair that the future of Aer Lingus is in question. Ryanair's own advisers, Davy Stockbrokers, have accepted this publicly:

The chances of Aer Lingus going bust are zero. It is more likely that their competitors will go bust.

That is what Ryanair's own advisers are saying. Since 2006, Aer Lingus has reported pre-tax and pre-exceptional profits of more than €200 million. It recently indicated that it will break even in the second half of 2008. Many of our competitors across the industry would be very happy to be in that position at the end of 2008, a year in which, as Mr. Barrington mentioned earlier, the entire industry as reported by IATA will lose more than $5 billion. Aer Lingus is also aggressively expanding our destinations. Since 2006 we have increased our overall route network, short haul and long haul from 85 to 106, an increase of 24%. As Mr. Barrington mentioned we are also expanding our fleet, going from 34 aircraft to 42, an increase of eight units. We have orders on the books for a further 11 units. These new routes combined with our co-share arrangements with partners such as United Airlines and others have greatly increased Ireland's overall connectivity in the past two years.

I will now speak about staff, pay and productivity. Our recent pay and productivity agreements with our staff open significant new opportunities for Aer Lingus. There has been a tremendous spirit of engagement between the board, management and staff in recent times. There is now a great sense of energy and optimism about the future. Until we got our staff costs in line we were significantly constrained from major expansion. However, we can now move forward to explore and develop new opportunities for real strategic, sustained and independent growth.

I will outline our position clearly. Ryanair is wrong in its assertions. Aer Lingus is no pushover peripheral carrier. Ryanair has chosen to characterise us as such for its commercial purposes. On the contrary, Aer Lingus is without question the most successful flag-carrier in Europe in the way our business model has been transformed to compete profitably in the ultra competitive low fares short-haul market. We have increased our business in the face of tough competition and developed a customer proposition which meets the poor service low-cost model of Ryanair head on. Ryanair wants to get control of this model and develop it to protect its core offering. Aer Lingus has identified real growth opportunities for our airline. We want to seize these opportunities on an independent basis for the benefit of our shareholders, customers and staff.

I thank Mr. Barrington and Mr. Mannion. My questions relate to the future of the airline in the context of the number of alliances, takeovers, and mergers of airlines across Europe. I take the point the witnesses have made that there are 30 airlines similar to Aer Lingus operating in Europe at the moment. Is it incorrect to say that rationalisation is happening in Europe? Most of the major former state-owned airlines have come together, for example KLM and Air France. Can a small airline like Aer Lingus continue on its own? Should it have an alliance with one of the bigger outfits? Will it need — as we read in the newspapers this morning — investors to come in to assist it?

Mr. Michael O'Leary claimed that Aer Lingus will not meet Ryanair. While they are in the white heat of competition, it would make sense that Ryanair and Aer Lingus would also at least have synergy, understanding and co-operation in other respects. If Mr. O'Leary is correct in saying the witnesses will not meet him, why will they not do so?

He mentioned some other issues to which I will briefly refer. I will leave the Shannon issue to Deputy Dooley. He said that Aer Lingus has only had a 57% load factor in Belfast and that it cannot compete with Easyjet. Was it therefore a mistake to have left Shannon and gone to Belfast? He claimed that Aer Lingus made a major mistake in the way it dealt with the fuel issue, that its fuel surcharge is a rip-off and that he buy fuel hedged at €55 whereas Aer Lingus will pay double that. Page 17 of his submission, which I believe the witnesses got, states: "Aer Lingus cannot compete on cost." He gave a breakdown of costs. For instance, Aer Lingus staff costs are €34 per passenger and Ryanair's are €5. Aer Lingus's total cost per passenger is €129.88 — even after it made its recent cost savings — and it is €50 for Ryanair. I ask the witnesses to comment on those.

In advertising and selling Mr. O'Leary claims Aer Lingus's cost per passenger is €5.68 and his is 23 cent. He claims that Aer Lingus pays €60 million in advertising and promotion to carry 10 million people and he pays €10 million to carry 60 million people. He makes a very convincing case that as Ryanair is the most successful and fastest growing airline in Europe, his model is an exceptionally good one. I accept what the witnesses have said. They put up a good defence there. However, is it not inevitable that if Ryanair does not succeed someone else will succeed if that is to be the future of the airline industry in Europe?

Mr. Colm Barrington

I will deal with the first two questions and Mr. Mannion might deal with the second two. On alliances of airlines in Europe, as I mentioned, we count more than 34 airlines of similar size to Aer Lingus operating in Europe. Mr. O'Leary referred to four of them. He did not expand and go into the other 30. The only major real airline alliance in Europe has been the one between Air France and KLM which happened in October 2003, five years ago. British Airways has talked about alliances and only this morning we have read that it has now broken off discussions with Qantas after some months. It may now go back to flirt with Iberia, with which it already has a sharing arrangement.

While there have been very few real alliances there have been takeovers as in any business. We have had a few of the major legacy carriers in Europe fail, such as Sabena, which then became SN Brussels and then got hoovered up by Lufthansa, but it was a failed airline. Swissair went bankrupt and re-emerged as Swiss International. That got hoovered up by Lufthansa. I could say kindly about Austrian Airlines that it is a railway with wings. It has not evolved in the way Aer Lingus has. It is still very much a legacy carrier. Lufthansa is in discussions to acquire all or part of Austrian Airlines. I do not believe a deal has yet been done, but it is being talked about.

Mr. O'Leary talks about what has happened in Italy where AirOne and Alitalia may potentially come together — it has not happened yet. Alitalia is another failed legacy carrier and has been bankrupt for several years. I do not know how, but the Italian Government has managed to keep it going. Alitalia is a failure and the Italian Government is now trying to arrange a merger between AirOne and Alitalia which, if the union problem in Alitalia is not sorted, will not work in the long run in any event.

There is considerable talk about it but very little happening other than some of these forced acquisitions. Mr. O'Leary's and Ryanair's view that in 18 months there would only be four major airlines in Europe — British Airways, Air France-KLM, Lufthansa and Ryanair — is a rosy picture for him to paint. It suits his purposes to claim his airline will be one of only four. It is actually very unlikely to happen and the reality is that a large number of airlines will continue to operate successfully in Europe serving the local markets and regions as Aer Lingus has been doing successfully for all these years.

The Chairman spoke about Aer Lingus and Ryanair meeting. I had a voicemail from Mr. Bonderman on the morning that Ryanair launched its bid. He did not get me on the telephone. His message stated that Ryanair was informing me out of courtesy that it was about to try to acquire us that day. He subsequently wrote to me and suggested a meeting, to which I responded that we did not want to meet until we saw the Ryanair proposal and until we issued our defence. We would then consider meeting him again. We have not refused to meet Ryanair. We have said, "Let us see what you have to say. Let us put it all down on paper and then maybe we will talk."

Mr. Dermot Mannion

Regarding Shannon, we completely disagree with the figures Mr. O'Leary has quoted on Belfast. He did not tell the committee that in each of the past four months the Aer Lingus load factor has been significantly ahead of Ryanair's load factor at Belfast City Airport. What he also did not tell the committee was that from a standing start in January last year — let us face it, in a very competitive market in Belfast in those months, as it has been everywhere else because of the recession — Aer Lingus almost has a 50% market share. So we completely dispute his figures on the current disposition of the Heathrow slots at Belfast.

The fuel surcharge has been taken off. I heard Mr. O'Leary claiming credit for that a bit earlier. The answer is very simple: fuel prices have now fallen to a level where it is right, proper and appropriate to take the fuel surcharge off. We had some teething problems in the first couple of days, taking the surcharge off the system. Right now, however, if one goes to aerlingus.com seeking to travel early in the new year, one will find a very competitive net fare with no surcharge and no gimmicks.

On Shannon, one of the key pieces of work that every public representative in the Shannon area would acknowledge in recent weeks, is the huge effort put in by management, staff and the trade unions at Shannon to at least secure year-round transatlantic services for the future. The transformation deal we have done with staff in recent weeks has secured that. That is a tribute to the staff, not to me. That is the level of engagement and commitment we have seen in recent times. I acknowledge that publicly and thank them for it.

Mr. O'Leary is making some wild allegations in page 17 of his document about staff costs.

What about fuel? Aer Lingus is hedging. What will you be buying fuel for in 2009?

Mr. Dermot Mannion

I must be careful in putting out only what is in the public domain. It is true that 64% of our fuel for 2009 has been hedged at a level between $90 and $95 a barrel. That is the truth. Every other airline in the world hedges. We do too. Ryanair got it wrong last year. It may have a better situation in 2009, but who knows where the fuel price will go next? Suffice it to say that we have still got plenty of scope — because more than 36% of the fuel is not hedged — to take advantage of what we are currently seeing by way of very low spot prices. The important thing is that one cannot really judge one airline's performance versus the other in a single year because hedging on one airline can adversely affect the comparison. Look at it over a couple of years; look at the prognosis for 2010 where the forward prices are also down and that will also clearly be of benefit to Aer Lingus.

On this nonsense of staff costs per passenger, it is typical of Ryanair to mix up the fact that we are a long-haul, full service carrier and we are a short-haul carrier as well. They are adding up numbers that simply do not add up. We have not publicly disclosed — nor do we need to — what our staff costs per passenger are on short-haul routes. However, the transformational change that has been achieved in recent weeks will make a significant improvement in our ability to compete with Ryanair on short-haul routes and with every other carrier that comes at us on long-haul routes.

All this nonsense about advertising and promotion is mixing apples and oranges. Aer Lingus on long-haul is selling and distributing product through reservation systems around the world. That is an expensive process, but that is where one needs to be to sell the product. That is classified as advertising and promotion. That is not an expense that we pay on short-haul routes, it is a unique long-haul expenditure. So, yet again, Ryanair is adding up apples and oranges and getting it wrong. By implication, they are admitting that long-haul is a business they fundamentally do not understand in the way Aer Lingus does.

I welcome Aer Lingus here this morning. It would be proper to congratulate the company on reaching the arrangement it did with its staff. An appalling vista faced everybody not so long ago, so that is very welcome.

What Ryanair offers to the nation or the Oireachtas is total control of change of the slots in Heathrow. One of my criticisms of Aer Lingus is that when it moved the Shannon-Heathrow connection it created consternation in the region and particularly affected businesses and the whole community. I was in Limerick and there were thousands of people in the streets. When Aer Lingus moved that route is made a business decision that impacted nationally. Ryanair is saying it can deliver to the Oireachtas control over any changes in those slots. What does Mr. Mannion offer?

Mr. Dermot Mannion

I do not want to get bogged down in technicalities, but this was glossed over by Michael O'Leary in the earlier session. The takeover panel has told him that those guarantees are not valid. So much of what the committee heard earlier is simply in fairyland. Let us move on with the reality, however. The Deputy has asked a perfectly legitimate question concerning the Heathrow slots, and how we as a management and board have allocated them. I acknowledge there has been difficulty in Shannon, but we are steadily building Aer Lingus's relationship with the business and tourism communities in Shannon. We have shown substantial evidence of our bona fides recently and there is further work still to be done. At the same time, I cannot apologise for acknowledging that there is an island of Ireland dimension to this. People in the Deputy's constituency tell me they are using the Belfast service. We are proud of our contribution in Belfast and I accept we have some work to do in Shannon. Members of the committee should not treat lightly what the takeover panel said in recent days. There is nothing that we heard from Ryanair this morning that can turn that around. There is no basis on which any such guarantee can be given to the Government or the Houses of the Oireachtas. That is the reality we are dealing with.

The point is that Aer Lingus is a vulnerable company in terms of its share price, which is very low now. It has a very large cash reserve so predators or investors out there might look at the company. If Aer Lingus was taken over by Air France, what would happen to those Heathrow slots? As regards the national interest, regardless of who the carriers are, a lot of it depends on connectivity. Businesses and thousands of jobs depend on it. That is a key issue that Mr. Mannion is not dealing with.

There are two aspects. First, what does Aer Lingus propose to do now? I know it is a private business and that is why it cannot tell the Government what it will do, notwithstanding the fact that it has directors on the board. How can Mr. Mannion assure us of his continued commitment to keeping those slots for our use? Second, is it not a fact that while Aer Lingus is attractive from a cash price viewpoint, given the low price, those slots would be attractive to other companies who would then shift them out of Ireland completely? That is the crux of the matter.

Mr. Dermot Mannion

I take issue with the premise of the Deputy's question which asks what another carrier would do with these slots. The Aer Lingus business is not for sale to Ryanair or anybody else.

What if Aer Lingus got an offer?

Mr. Dermot Mannion

With respect, that is a hypothetical question. We can only deal with the here and now.

The company has an offer now.

Mr. Dermot Mannion

The board has already given its answer and by the way——

I want Mr. Mannion to answer the question.

Mr. Dermot Mannion

Please let me deal with this. These are important points. Even before any offer from Ryanair or anybody else can be considered, it has to be capable of being accepted. Let us not ignore the fact that there is still a prohibition decision in place in Brussels on this takeover. I would premise my comments on that basis. The second point is that the Government has a veto on the sale of Heathrow slots, which is enshrined in the articles of association. The Deputy and others may argue about whether that is enough or otherwise, but that is what is there at the moment and that is what will continue to be there while we remain as an independent company. Even if there was any notion, which there is not, of selling to anybody else, that veto remains unless the Government as a shareholder chooses otherwise.

I accept Mr. Mannion's position but the problem is that does not cover a change, it covers a sale or a lease. That is the kernel of it.

Mr. Dermot Mannion

I understand that. We are not pretending that the articles of association are anything other than what they are, but I emphasise that the board of Aer Lingus — I acknowledge the issue in Shannon — has made a responsible contribution to the island of Ireland in the way in which those slots have been distributed so far. So it would be wrong for me to even acknowledge that there was any necessity for further stricture or further control on the board in that respect.

The good part of all of this is that while we had the pantomime, or the constructive commentary from each other, it is a bit like the situation regarding a multi-seat constituency in politics in that the more people there are representing one, the better chance one has of getting a better deal, whereas if there is one representative only, the constituent has no chance at all if that person has a bad day. The key point is that the national interest dictates that there should be two airlines and that we should have as much control as possible, through their companies, over the Heathrow slots. Anything that affects that is a very serious issue for us.

In theory, Aer Lingus could be taken over by a company other than Ryanair with an offer that is attractive to everybody and which is three or four times what Ryanair is offering, at which point the Heathrow slots could be changed. I suppose that is the risk we must take.

I welcome Mr. Barrington, Mr. Mannion and Mr. Griffin. I want to state what I stated to the chief executive of Ryanair. Having looked at the Ryanair documents in detail and listened to the Ryanair presentations, and having listened to Aer Lingus's presentation previously, on behalf of the Labour Party my view is that the proposed takeover would be very bad for Irish consumers and bad for Ireland. That is my starting point.

I want to ask a number of questions arising from the critique that the chief executive of the other company makes of Aer Lingus. On the question of Aer Lingus's defence document, which I assume we will receive in the coming days, the last time around this cost the company €24 million. What budget has Aer Lingus provided for that? What will it cost to defend the company on this occasion? It seems crazy that €24 million should have to be spent on this.

Aer Lingus management indicated that it would like to get Mr. Michael O'Leary completely off the pitch. He is not in the boardroom of Aer Lingus. Ryanair's 29% shareholding is bizarre. In my experience of business, it is bizarre that one's main competitor has a one third shareholding in the company. Does Aer Lingus have plans to move on that?

What kind of support does Mr. O'Leary have among Aer Lingus shareholders? Is it a true that ten days or two weeks before the announcement when everybody got the early morning call from Mr. O'Leary, a number of fund companies such as ReachCapital Management bought extensive shareholdings in Aer Lingus? Was that due to media speculation or what?

On the question of management, Mr. O'Leary has indicated that Mr. Colm Barrington will be on the new team. Given Mr. Barrington's track record, he does not need to worry. He may even have bright future in Ryanair, in the combined brand. However, unfortunately, the rest of the management team, including Mr. Dermot Mannion, would appear to be on the way out should the bid succeed.

Mr. O'Leary stated that Aer Lingus made management errors, for example, that a group of US airports are clamouring to get Aer Lingus and the company will not respond. They want Aer Lingus and Ireland to partake in long haul routes but the company will not respond.

There is a distinguished aviation colleague from Clare beside me. The Shannon matter was a shocking fiasco. I am glad about one aspect of all of this, that it is bringing Shannon back in terms of connectivity, and my colleagues will elucidate on that.

On Belfast, Aer Lingus has told me that it is going head-to-head with Ryanair and out-punching Mr. O'Leary on load factor. However, is it the case that there is a yield problem? Does Aer Lingus have any problem with yields in Belfast on the basis that some say the city airport is a better airport?

In general terms, could Aer Lingus have been still more competitive on price? In the first Ryanair document, on page 14, Mr. O'Leary makes a stark contrast between €50 per passenger for Ryanair and €129.88 for Aer Lingus. He does not compare Aer Lingus's 10 million passengers out of this island with Ryanair's 10 million or 12 million, in other words, it is not a comparison based on passengers out of this island, and the Chairman correctly drew attention to it. Nonetheless, it is stark.

With regard to the Ryanair model, the Chairman correctly asked Aer Lingus about hedging. It seems to neutral observers to depend to a great extent on the price of kerosene — oil — which has gone south. We are in recession. If, say, the recession is not as bad as we think and oil prices start to increase, is there a question mark over the Ryanair model because the low fares are premised on very low fuel costs and all that?

Aer Lingus workers have bitten the bullet. I welcome the fact that Aer Lingus management, SIPTU and IMPACT have made this agreement to make cost savings of €50 million plus. The Aer Lingus chief executive told me previously that this was the key reason the company could not get the Shannon costs right. It is difficult for workers to resign and then return on lower terms and conditions. Mr. O'Leary makes that point, that at present Mr. Mannion is driving down the good wages and conditions of Aer Lingus. Mr. Mannion is following his example.

Mr. Mannion is taking action on those costs but has he got everything covered, for example, the defined benefit pension scheme? I ask him to refer briefly to that. Presumably that would be in grave danger if Mr. O'Leary takes over.

Is Aer Lingus waiting for a white knight in any way, shape or form? Aer Lingus management states the company is determined to be independent but this morning Mr. O'Leary again rubbished the fact that this 24 year old — like myself and himself and everyone in the room, we all were 24 years old once and very ambitious — white knight is riding to Aer Lingus's defence. Is that something Aer Lingus management would welcome?

Mr. O'Leary rubbished Finnair and, I presume, the likes of Malév, Czech Airlines and all the rest. Those smaller country-based airlines provide a fantastic service. Comparing one of our airlines with Finnair is reasonable. I am sure the Finns think so, as do the Hungarians in the case of Malév. Those are the core questions I wanted to ask.

Mr. Colm Barrington

To start with the budget for the defence, we have reduced the number of advisers that Aer Lingus has in its defence. We only have one Irish adviser, a representative of which is here beside me, and we have one international adviser, Goldman Sachs. We have reduced the number of law firms, one Irish and one which will be dealing with the European situation. We have put caps on all of their fees. I cannot disclose at present what our total fees will be but they will be substantially less than we spent the last time.

In terms of the shareholding, I have stated publicly that it is intolerable from a competitive point of view that one's largest competitor should own 30% of one's shares. It is a ridiculous situation and it is one with which I, as chairman, do not want to continue for the next three years with this hanging over me.

In a recent case in the UK, BSkyB was forced to sale down from 17.9% to less than 7.5% of ITV plc by the UK competition authorities. Unfortunately, we do not seem to have the same sort of competition rules in this country and we may not even have them in Europe. However, we have charged our advisers in the past week to explore every available opportunity to see what can be done about that because it is intolerable. Ryanair calls for EGMs. It launches bids every year or two. It hampers the way Aer Lingus can progress. We find it very damaging and we are going do something about it if we possibly can.

On Ryanair shareholder support, Mr. O'Leary himself has stated that his shareholders think — I understand he said it this morning — he is doing some sort of Paddy thing here. I understand his board is not supportive, as he himself stated. I understand his shareholders are not supportive. Who knows? For all we know, however, that may be another smokescreen.

On funds buying into Aer Lingus, we believe that one fund — which is associated with the TPG group, Mr. Bonderman's company — has bought a 2% stake. Representatives of the fund stated publicly that we should consider the offer. That is the only fund of which we are aware but who knows the identity of those on share registers from time to time. There may be some other involvement but we do not know.

Not hedging for 2009 at $90 to $95 per barrel of oil sounds like a good decision. However, who knows what will be the position on 1 January, 1 April or 1 September? Major airlines such as Air France automatically hedge 20% of their fuel each year. Air France will, therefore, have 20% of its fuel in five year's time, 40% in four years' time and 60% in three years' time. It simply does that as an automatic policy to lock in prices. One can toss a coin and take a gamble as Ryanair did this year and got it badly wrong. As Mr. Mannion stated in reply to an earlier question, one can do well year by taking such measures and the next one can do badly. We believe in a more conservative and safe policy so that we will know our costs and the prospects for the future.

Mr. Dermot Mannion

I will comment on one point relating to the hedging issue which is not often discussed. Due to the fact that we are a euro-based company, the key matter for us is the euro price of oil. There are two elements to hedging. The Deputy already referred to the first, namely, our ability to hedge in dollars. However, we also have an extensive portfolio of currency hedging and we will have more to say about that matter in the defence document, when it is published. We have hedged at very attractive rates against the US dollar. Members will see some evidence of that in the coming days.

A measured approach must be taken in respect of this matter. It is a two-pronged strategy. As Mr. Barrington stated, we must seek as high a degree of certainty as possible in respect of the dollar-based price of fuel and then try to translate as much of that as possible into certainty in respect of the euro-based price.

Overall, Aer Lingus is in quite good shape by industry standards. That will serve us well in 2009. As already stated, we will have more to say with regard to our latest guidance for next year when the defence document is published in the coming days.

I will deal next with the reference to transatlantic services. It is true that load factors relating to such services are challenging, not only for Aer Lingus but for every carrier — British Airways, Air France, KLM, United Airlines, and so on — on both sides of the Atlantic. Everyone involved is experiencing considerable challenges. We are taking actions to turn matters around. Not least of these is the extensive code-share arrangement we put in place with United Airlines on 1 November last. In addition to having EI flight numbers, all of our US routes also have UA flight numbers. People in the US are very much wedded to loyalty programmes and they will now be able to earn loyalty points by flying with Aer Lingus in that country.

One would imagine that there would be extensive Government travel, from both sides, on our Washington service. Until 1 November, US Government officials could not travel on the service because it was not designated as a US service and did not have a UA flight number. Now it is so designated, we will see the benefits of such traffic.

Overall, Aer Lingus is more than holding its own in an extremely challenging transatlantic market. I acknowledge that, for commercial reasons, we suspended the Los Angeles service in October, but there has still been a net increase of two in our long-haul operations during the past 12 months. We are optimistic for the future, particularly in the context of the aggressive cost-saving programme announced in recent weeks. Members should "watch this space" in respect of transatlantic flights.

Deputy Broughan's comments on staff costs could be summarised as stating that the transformational element has been recognised but will that be enough and will we be obliged to return to the well. All that one can ever ask members of staff to do is take market-based compensation. What is the market rate? What are good, reputable companies that recognise unions paying for equivalent services at Dublin, Shannon or Cork? That was the basis on which we entered negotiations with the staff unions in recent times. We are confident that with the market-based contracts we have in place, we will be best of breed in the market place and well able to defend ourselves and compete with Ryanair on short-haul services and anyone else that challenges us in respect of long-haul services.

The pension scheme is, quite rightly, controlled by trustees and not by Mr. Barrington or me. At the time of the IPO we invested €100 million in the scheme. The next fund evaluation is not due to be carried out by the actuaries for several months. We will consider the position when it is completed. We did not ignore the pension issue, which we might have done, at the time of the IPO. We stated that money needed to be invested and we took action. This will stand us in good stead.

I welcome our guests who have come before the committee on several occasions in the past 12 months. They have been extremely forthright in their presentations, which is welcome.

I will be somewhat parochial, if that is acceptable, and comment on Shannon Airport. Most of the other major issues relating to the proposal put forward by Ryanair have already been dealt with. It was correctly stated by our guests that workers had made great sacrifices and had engaged, through their union representatives, with the management of Aer Lingus. We are starting to see the fruits of what it will mean for the company in the context of profitability. When Mr. Mannion appeared before the committee previously, he contended that the reason Aer Lingus ceased its London service from Shannon had more to do with the cost of doing business there rather than with any political or ideological imperative to operate out of Belfast. In light of the sacrifices made, the significant cost savings that have accrued and the fact that there was a considerable load factor attaching to the Shannon-Heathrow route, will Mr. Mannion indicate when Aer Lingus expects to resume services on that route?

Mr. Dermot Mannion

I acknowledge the positive contribution Deputy Dooley and all public representatives in the mid-west region made in respect of the recent impetus on the question of staff costs. We have received nothing but encouragement for the process and this has paid off handsomely in the context of the negotiations that took place. I refer members to the contents of the extremely important press statement in which we announced that the deal with SIPTU and the staff had been completed. The statement indicated that for the first time in recent years, Aer Lingus has a platform to explore short-haul opportunities at Dublin, Cork and Shannon. If people can bear with us for a period, we will have more to say on the matter in due course.

That would be extremely helpful. Like me, Deputy Breen is aware there are business people in the region who want the service to be resumed. Mr. Michael O'Leary informed us that this will be the case. It is clear that certain questions arise in respect of what Mr. O'Leary said and Mr. Mannion highlighted these. Notwithstanding that, we need to be informed of the position by our guests. I accept that they are constrained to some extent by the fact that they are preparing a rebuttal document. However, I urge them to be very direct on Aer Lingus's position in respect of this matter, particularly if they want our support. As the people who represent the region, it is incumbent on Deputy Breen and me to ensure that we back whoever provides a degree of certainty with regard to connectivity. The ball is in Mr. Mannion's court and I would welcome his views on the matter.

Deputy Connaughton is due to contribute next. However, I will allow Deputy Breen to comment because I do not want to rehearse the points in respect of this matter later in the meeting.

My concerns mirror those of Deputy Dooley. I acknowledge the sacrifices made by the Aer Lingus workers at Shannon and I wrote to Mr. Mannion in connection with the matter. If the Shannon-Heathrow service were to resume, what would be the impact on other services? Aer Lingus has only a limited number of slots available and is obliged to distribute them. Mr. Mannion stated previously that two slots had been leased to Continental Airlines.

Let us get the service back first.

For it to resume, the slots must be available. Some other region will suffer as our region did when the Shannon-Heathrow service was terminated last year. As Deputy Dooley is aware, people in Clare remain extremely angry with regard to Aer Lingus's decision to terminate the service. Each morning there are debates on local radio and people's wrath with regard to what has happened to the region as a result of this decision is evident. Businesses are suffering in this regard. If Mr. Barrington could put his Santa Claus on and be generous to us before Christmas by giving us an indication in this regard, confidence would be regained in the region.

Shannon Airport will provide full customs and border protection facilities from July 2009. Will he expand on transatlantic proposals the airline may have for 2009, given this facility is a huge positive for the area?

Is Mr. Barrington looking for a partner for Aer Lingus?

Mr. Colm Barrington

We have not been out looking for a partner. We have not approached any other airline to acquire Aer Lingus or to buy shares in Aer Lingus.

Is it in the back of Mr. Barrington's mind?

Mr. Barrington would want to have his legal adviser to answer questions such as this.

Mr. Colm Barrington

Mr. Mannion said we would work with other airlines and codeshare other arrangements as we do with KLM on the Amsterdam route, BA on the London Gatwick and London Heathrow routes, and United and EasyJet on north Atlantic routes. What I have in my head is the present situation is intolerable and we must have a solution. We are working with our investment advisers to get a short, medium and long-term solution to the Aer Lingus shareholding situation. In the present circumstance we are supposed to be a plc but the fact that 30% is owned by Ryanair, 25% is owned by the Government and the people of Ireland and 16% is owned by the employees makes Aer Lingus a very difficult plc to market to long-term institutional investors. We have to work towards a medium to long-term solution where there is more free float in Aer Lingus shares and one of my objectives in my tenure as chairman is to try to achieve that.

The 25% State share is the common glue in all this. We are here on behalf of the people and that is why Ryanair and Aer Lingus are before the committee. The State shareholding is important because if it was not there, I doubt if either company would appear before the committee.

Mr. Dermot Mannion

I will address that but I do not want to forget Deputy Breen's question, to which I will return in a moment. From Aer Lingus's perspective, the Chairman will acknowledge we have never been slow to accept an invitation in the three and a half years I have been here to appear before the committee on good and bad days to face up to the issues and the comments.

That is not what I mean. It is important that the people understand through the Government that the shareholding is there on their behalf. It will stand to the company on this occasion for a variety of reasons.

I have a bee in my bonnet regarding Aer Lingus's policy on Shannon Airport. The company let our region down. I represent a constituency in Galway and it has been hurt as badly as Clare and all the other western counties. During the negotiation on the slots, Mr. Mannion told the committee the company did not know about it. We will never accept that there was a business reason for getting out of there. There is business to be won in Shannon. While Ryanair has given so-called guarantees about what it will do with the Heathrow slots, this is an ideal opportunity for Aer Lingus to regain the ground it lost in our region to ensure connectivity for good economic reasons, even though the company made a mistake.

I am based in Limerick and the loss of the Aer Lingus Shannon-Heathrow route is still a sore point with people but the company seems to realise that. Various media have reported on the reintroduction of the route and it would be extremely important for the company to give a date for that and to make a commitment that the service will not be withdrawn at a later date. It has always been a profitable route and the explanations given by Aer Lingus when it announced the withdrawal of the route did not stand up. However, if Aer Lingus was to restore the route like the prodigal son, it would be extremely welcome. It is vital for the region. The company is curtailing transatlantic services from 1 January for a number of months. What will happen going forward at Shannon Airport regarding these routes? Will the Shannon-Heathrow Airport service be reintroduced? If so, on what date? Will Aer Lingus give a commitment that the route will be retained? Will Mr. Mannion deal with the retention of transatlantic routes at Shannon Airport?

I endorse the comments of my colleagues. Ryanair stated earlier it would operate a morning and evening service on the Shannon-Heathrow route and it would take a slot from both Belfast and Dublin Airports. We need a commitment from Aer Lingus that this will happen. The representatives did not do themselves any good the last time they appeared before the committee and they did not do good by the regions through what they did. Aer Lingus pulled out of Knock Airport and it pulled out of Galway as a feeder airline. It also pulled out of Shannon and Farranfore airports. The company is still high in the people's estimation but it has abandoned the regions.

I liked a lot of what I heard from Michael O'Leary earlier because he is down there with us operating 34 routes out of Shannon Airport. Aer Lingus represents all the country and not only Dublin. The company had better get back into Shannon Airport and we want the company to support the regional airports, which Mr. O'Leary is not prepared to do. The last time the representatives appeared, we asked whether Aer Lingus would codeshare with Aer Arann. It must have a link with Aer Arann and it should invest in the airline because it is critical to the regions and the connectivity necessary for people in west Donegal, west Mayo, Galway and Kerry. We need to hear from the representatives that Aer Lingus will do something for the regions if it wants to continue to be the national airline and retain the goodwill and support of the people, which could be the one thing that will save them.

Mr. Dermot Mannion

I can only acknowledge what the Chairman said. I do not apologise to anybody for the work put in in recent weeks to sustain a year round transatlantic service from Shannon Airport. Two years ago, one of the big concerns in the Dáil, the Seanad and at this committee was what would happen to Shannon Airport in the event of the Open Skies arrangement being agreed. Combined with the massive economic recession we have witnessed in recent times, it has taken a substantial combined effort on the part of the board, management and staff of Aer Lingus to create a situation where we can confidently look forward to retaining winter and summer transatlantic services from Shannon Airport. This was going on long before the Ryanair bid. It is an indication, from the top of Aer Lingus, of the airline's bona fides in respect of the region. I acknowledge the comments of Deputies Breen, Dooley and O'Donnell that the Shannon service is an outstanding issue. That is as far as I can go for today.

Mr. Mannion, you have dealt with the transatlantic issue. We need you to tell us more than that. This has nothing to do with the takeover.

Mr. Dermot Mannion

Chairman, you know the constraints under which we operate. We will issue a statement in a matter of days. For the purpose of this meeting, that is as far as I can go.

I understand there are things Mr. Mannion can and cannot say. However, he and his chairman should leave this committee with a clear understanding of our concerns. Deputies in the mid-west may not support them in their endeavour to protect the company in the future. There will be considerable support for the O'Leary proposal unless Aer Lingus moves on the Shannon to Heathrow service.

The restoration of the Shannon to Heathrow service should be a normal commercial decision by Aer Lingus. It should have nothing to do with the Ryanair takeover bid.

Mr. Dermot Mannion

I agree.

Therefore, Mr. Mannion should be able to give the committee an indication of his intentions. Public representatives from the western seaboard regard the Shannon to Heathrow link as a vital ingredient in the region's infrastructure. Aer Lingus must give some commitment to the committee.

Mr. Dermot Mannion

The timing of today's meeting is unfortunate. I cannot make any further comment. It would not be in anyone's interest to prolong this discussion.

Mr. Mannion has been very helpful. Let us not kick the cat.

What about the Aer Arann connection with the regional airports?

Mr. Dermot Mannion

There was a reference to Aer Lingus abandoning airports other than Shannon. I accept criticism of many things that have happened in my time but that did not happen in the past three and a half years. At one time, Aer Lingus had a commuter service which, as the Chairman said, has been taken over by Aer Arann. We have connectivity with Aer Arann at Cork. It started several months ago and is working. That is as much as I can say at present.

Is Aer Lingus prepared to look at connectivity from places such as Galway and Knock? Is it not in Aer Lingus's interest to keep Aer Arann going? Is it not in Aer Lingus's interest to invest in Aer Arann if it comes under pressure, because it is the airline's only link with the rest of the country?

Mr. Dermot Mannion

Aer Lingus is the only one of the two major airlines in Ireland which has had an appropriate discussion of any kind with Aer Arann. We have a limited codeshare with them on the Cork route. Let us see where it goes next. No one asked the previous witness, Mr. O'Leary, for his view of Aer Arann. I told the committee his objective is to put it out of business.

We have asked him. You are right in what you say. He told us he is not interested in co-operating with Aer Arann because that does not fit his business model. Even before your time, Mr. Mannion, Aer Lingus had commuter services from Galway and Knock. We all know Aer Arann is under pressure at present. It is Government policy that we should have commuter services from regional airports and those services are being subsidised. We need Aer Lingus to enter into some arrangement with Aer Arann. It is utterly ridiculous that people from the west of Ireland cannot book direct flights out of Ireland but must go through departures and arrivals at Dublin airport and spend time waiting there. The national airline, which has abandoned the regions, must address that issue. The committee will ask you to come back to discuss the Aer Arann and Shannon issues at a later date.

This morning, Mr. Michael O'Leary said he had heard through the grapevine that Aer Lingus would restore a Shannon service on four days a week. If Aer Lingus is to return to Shannon, I appeal to Mr. Mannion to provide a full three flights per day service and proper connectivity on seven days a week. We want a full service and not a limited one.

I welcome Mr. Mannion, Mr. Barrington and Mr. Griffin. I did not hear the reply to my question as I was voting in the Dáil. Mr. Michael O'Leary says he will give a Government guarantee regarding the Heathrow slots, which will be locked into the company's memorandum and articles of association. I asked could a board subsequently amend the memorandum and articles of association. Could the legal adviser to the committee answer this question?

I regard the Ryanair offer as particularly bad value for the Government and for travelling commuters. Mr. O'Leary has negative views on the Dublin Airport Authority, metro north and other important issues.

Aer Lingus is cash rich. When the Ryanair effort has failed, as I hope it will, why does Aer Lingus not use its cash to buy out Ryanair and get the monkey off its back?

I do not think Mr. Mannion had thought of that?

Aer Lingus has the cash resources. Just as Mr. O'Leary has the cash to buy Aer Lingus, Mr. Mannion has the cash to make him an attractive offer. Ryanair would then be out of the equation and the threat of monopoly would no longer hang over the country.

I congratulate the Aer Lingus staff who have agreed to the company's cost control package. Now that costs are under control, can Aer Lingus create new routes and new airports, as Ryanair has done? Ryanair negotiated with local authorities to operate routes to small local airports. Aer Lingus seems happy to maintain what it has. Mr. O'Leary argues that if he had not developed Ryanair in that way, another airline would have taken its market share. Attack is the best form of defence. Why does Aer Lingus not come up with proposals for similar development throughout America and Europe?

I would like to see Aer Lingus creating jobs and opportunities. Mr. O'Leary says he can create 1,000 extra jobs but I doubt if he will open extra routes and create jobs in 2009. Aer Lingus is now a progressive company with large cash resources. I urge the airline's management to do things they might not have done in the past. Why should they not get on their bikes?

Deputy Connaughton asked does Aer Lingus need a partner. Mr. Mannion says that question is not in the back of his head but I am sure it is not far from his mind. Is he confident that Aer Lingus can trade profitably and successfully on its own?

I congratulate Mr. Mannion, Mr. O'Leary and their colleagues on their presentations. It is encouraging to hear people with the strong will to promote both companies. My loyalty is to Aer Lingus but my children's loyalty is to their pockets and Ryanair. I hope the two companies remain in Ireland and continue to operate as they are. Monopoly cannot be allowed. I come from a farming background but I left farming because of monopolies. Two or three food industries took over the market and farmers were driven out of business. I am a publican. What is left of that trade is also controlled by a monopoly. Prior to Ryanair's entry into the market Aer Lingus, the monopoly airline, was, basically, robbing people by way of its expensive fares. Competition is, at the end of the day, good for everyone.

I would like it to be clearly stated that Aer Lingus can survive on its own. I do not want a foreign company to take over our national airline. If I had to choose between an Irish or German company doing so, I would opt for the Irish company. Mr. Mannion has illustrated here this morning that Aer Lingus is a strong company going forward. People accept the company has been reformed and that a good job has been done. Perhaps Mr. Mannion will clarify that Aer Lingus is in a strong position and is not seeking assistance from anyone.

My final question is a political one which I ask on behalf of my colleagues from the west. If the Taoiseach invited Mr. Mannion to dinner and asked that Aer Lingus reinstate flights at Shannon — which is what I believed happened on the last occasion — would Mr. Mannion accede?

Mr. Dermot Mannion

Deputies Kennedy and McEntee spoke of growth. We have already said — this is endorsed by the board, management and staff — that we are moving forward with a presentation of independent growth in Aer Lingus. There is no secret in this regard. That is what the defence document will contain. We believe we have a good story to tell. There is much mythology about Aer Lingus being a somewhat marginalised and peripheral carrier on the edge of Europe. We have a brand that is capable of resonating across Europe and the United States.

Members must bear in mind that Aer Lingus has not even begun to explore opportunities on continental Europe. I would like to make a related comment in respect of the 1,000 jobs referred to by Mr. O'Leary. What he did not tell the committee is that all of those aircraft are operational anyway. The problem that arises is, is Mr. O'Leary's brand capable of sustaining that number of extra aircraft or does he need a new, better quality business model to drive it forward? That, I would suggest, is part of the reason for this contemplated take-over by Ryanair. I agree with Mr. O'Leary that the Aer Lingus brand can resonate across Europe. However, I believe we can do a better job than he is capable of doing.

Leaving aside all prejudice, nobody can deny that Ryanair is an out and out low cost model. If one associates the Aer Lingus brand with this, it will be damaged. That is self-evident. That is not a personal statement against Ryanair, Michael O'Leary or anyone else. It is simply the way it is. The defence document will be a strategy of independent growth in Aer Lingus, pushing the brand not alone outside the jurisdiction of the Republic of Ireland but of the island of Ireland.

Perhaps Mr. Mannion could respond to my final question.

Mr. Dermot Mannion

It has no meaning for me. I have never had dinner with any Taoiseach of this jurisdiction and as such cannot answer the question.

I thank Mr. Mannion for the robust and impressive defence of Aer Lingus on this occasion as compared with the last occasion when he tended to hide behind the European Commission's decision in regard to monopolies. We welcome Mr. Mannion's spirited defence of the airline and wish him well with his future plans. We look forward with interest to the outcome of the take-over bid.

Listening to the representatives from Aer Lingus and Ryanair has been a useful exercise for us as politicians and, it is hoped, the public. Thank you.

The joint committee adjourned at 12.50 p.m. until Wednesday, 21 January 2009.
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