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.