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Seanad Éireann debate -
Thursday, 5 Nov 1992

Vol. 134 No. 10

Private Business. - Aer Lingus: Statements.

Tá mé buíoch as ucht an deis seo a bheith agam labhairt sa Seanad ar an ócáid deireanach agus mé i mo bhall den Dáil seo. Tá súil agam a bheith ar ais go minic san chéad Dáil eile ag labhairt anseo mar Aire Rialtais.

I am going to break all conventional debating ground rules by starting with a string of negatives. First I am not anti-Aer Lingus. I fly no other airline where possible, I do so preferably from Shannon. Fianna Fáil founded Aer Lingus. Fianna Fáil sustained Aer Lingus. These are my roots. I will always be true to them. Second, I am not anti-Aer Lingus employees. For me employees are the company. That is why I always travel Aer Lingus. That is why most people travel Aer Lingus. We must build on that strength. Third, I did not advocate massive redundancies. I did the opposite. I told the board I want maximum employment compatible with a viable company. I also told the board that employment in Ireland is my first priority.

Fourth, I do not want to downsize Aer Lingus to an Aer Aran operation, and I told the board so. I told them to avail of new opportunities I have negotiated for them. I have consistently advocated joint ventures and marketing alliances. Fifth, I did not maintain the Shannon stop to damage Aer Lingus. Aer Lingus Central Representative Council, representing all Aer Lingus employees, the majority of them in Dublin, formally asked me to maintain the stop. So did SIPTU and ICTU.

Sixth, I am not forcing Aer Lingus to keep fares low for tourism purposes. On the contrary, I have spent months pleading with them to put up their fares. I want competitive fares, but I want more. I want sustainable services. Fares on Dublin/London are suicidal. I have spent months trying to get sanity into the market.

Finally, I am not ideologically opposed to equity investment in State bodies. I am not the Minister responsible for such investment, that is the Minister for Finance. He has said the Exchequer currently has no money. If the Exchequer had money I would advocate investment in Aer Lingus provided it made commercial sense. All parties in the Oireachtas accept this proviso, so do most sensible trade union leaders. I also have an open mind on outside equity in the company if that would help it.

I feel honour bound to stitch these facts into the record of the Oireachtas to counter the inaccurate leaks to media and to Aer Lingus employees. These malicious leaks are not only damaging the company they are also causing unnecessary anguish to employees of Aer Lingus.

Let me reiterate what I said in the Dáil. The company has problems but there are solutions. We will find them with the cooperation of Aer Lingus employees and the social partners.

Let us first not just look at the company's problems in an honest and open way but also keep them in perspective. Aer Lingus has financial difficulties. It has lost around £40 million on its air transport operations in each of the last two years and faces further losses of around £40 million in the current year. However, let us remember it is incurring these losses in a period of major recession. In the past, Aer Lingus has been able to absorb losses on its air transport operations with profits from ancillary activities. However, these have also been hard hit by recession and certain remedial action is called for there.

Furthermore, Aer Lingus is facing major changes in the international marketplace. Aer Lingus is facing intense competition both on its transatlantic services, from indirect services over London, and on all European routes. The Single Market conditions to apply in the EC From 1 January next will intensify competition further but it will also open new opportunities which Aer Lingus can and must avail of.

These problems are real but soluble provided action is taken now. I am satisfied that the board and management of Aer Lingus now recognise the scale of the task facing them. The board have promised me that towards the end of this month they will submit specific plans to deal with the situation. I will assess these and place them before Government.

The board and I accept that Aer Lingus' services must be profitable and its fares competitive, if the long term survival of the airline is to be assured. A viable and developmental Aer Lingus will need to urgently address costs and prices.

Aer Lingus need to take action to ensure that its costs are at least as good as, if not better than best industry practice. All costs must be critically examined and ways and means found of reducing them where necessary. If costs are not tackled, the consequences will be severe in the coming years.

Most commentators accept this. For example Deputy Garret FitzGerald, a well known supporter and a former employee of Aer Lingus, in The Irish Times last Saturday expressed particular concern about the level of increase in unit costs of maintenance, overhaul, passenger service and general overheads in recent years. Reducing costs in these areas needs to be addressed vigorously as a matter of urgency. I accept that not all Aer Lingus costs are within the airline's control. However, those which are must be tackled.

While costs are important, so too are prices charged or yields. Aer Lingus' long term interests are best served not only by competitive fares but also by economically sustainable fares which will provide the necessary resources for the long term development of the airline.

I have, for some time, been very concerned about the low level of fares charged by both Aer Lingus and Ryanair on the Dublin/London routes. You should all know my views that these fares are suicidal in the long term. I have, therefore, been calling for an increase in the lowest fares charged by both airlines. Aer Lingus is the predominant carrier on the Dublin/London routes. It has been given much greater freedom in its pricing policy on these routes in recent years. If Aer Lingus will not or cannot increase its income by higher fares as well as cutting costs, it must cut the level of its operations.

I hold these views strongly. However, I have not imposed them on Aer Lingus. There is a board in place to run the company. I have emphasised to the board that I want to see Aer Lingus retain the maximum employment possible consistent with commercial viability. This has been read in some quarters as placing Aer Lingus in an impossible position. On the one hand, it is forced to keep current employment levels while it is also expected to produce a profit. Let me clarify my position. I want to see all solutions examined and costed. The board can best judge its employment needs and how to meet them. However, I do not want Aer Lingus, as a first resort, laying-off staff to cut costs if there are other solutions.

It has been suggested by a leading trade union official, who should know better, that my policy is to downsize the airline, not true, simply not true. I hold the contrary view and told the Aer Lingus board so. I want a strong and vibrant Aer Lingus expanding into new markets. It has shown itself capable of doing so in the past. It can do so in future by being once again better than its competitors in the marketplace. This is the only way to long term survival.

I acknowledge that in the short term the airline may have to reduce frequencies on some services and cut out a number of its uneconomic services. However, I made it clear to the board that this is not to be the start of a general winding down of the airline. I specifically told them that the US experience of deregulation shows that downsizing the airline is not the solution. Let me reiterate my conviction that Aer Lingus can have a strong future if the right decisions are taken now in relation to improving competitiveness for the years ahead.

I would now like to address the thorny issue of equity. In a recent debate on Aer Lingus in Dáil Éireann, Deputies from all sides of the House agreed that there may be a case for funding provided there is a credible business plan for the company showing profit into the future. That proviso is very important. It must make commercial sense. Money is not free; equity cannot be either. We must get a return on it.

The Minister for Finance has already made clear on several occasions that the position of the Exchequer finances is such that the Government are not currently in a position to invest additional equity in semi-State companies, including Aer Lingus.

It was against that background that the Taoiseach spoke about Aer Lingus engaging in joint ventures or strategic alliances where future expansion of Aer Lingus might be funded in ways other than direct State equity. I expect the board to come up with its own views on this matter in the coming weeks.

Finally, I would like to set on the record as I did in Dáil Éireann, what the Government's air transport policy is. I want to do so to nail the lie that we do not have such a policy. We have an air transport policy which has been developed against the background of trends in the world economy in general and in world aviation in particular. As with all Government policies for other sectors, our primary objective for our aviation industry is job creation. We must be competitive in international markets if we are to achieve this objective.

Our approach to air transport policy is, and has been, based on this philosophy to prepare the Irish airline industry for the European Single Market conditions which will apply from 1 January 1993. My Department will then no longer have any control over the allocation of routes between carriers who meet certain criteria. We will also have no power to prevent any EC nationals from establishing an operation in Ireland.

We have been preparing for this eventuality by strengthening the Irish presence on existing air routes to and from Ireland and by opening new opportunities for our airlines to compete in international markets. I have done so through the negotiation of new and extensive bilateral agreements and, within these, the pursuit of fifth freedom rights to further widen access to markets for Irish airlines

Since assuming office, I have concluded six new bilateral agreements with Austria, Hungary, Belarus, Malaysia, Russia and Bulgaria. That is not a bad start for eight or nine months. In addition to route rights for the airline, I have personally instructed my officials to seek extra business opportunities across the whole range of activities that the Aer Lingus group are involved in. To this end, a senior Aer Lingus official is part of the Irish Government's negotiating team.

The second priority in our aviation policy has been to provide and develop top quality infrastructure for our airlines. We will continue to ensure that our airports are of the highest international standard and have the capacity needed to meet the growth in traffic arising from future economic growth.

We have backed this policy with resources. Substantial investment has been put into the State airports in recent years to enable them to keep pace with traffic growth. In the four years to the end of 1991, investment in infrastructural improvements amounted to £82 million. The projects funded in recent years included a new runway, a multi-storey car park and extension of the departures and arrivals levels at Dublin Airport. We also financed the extension of the terminal building and of the main runway at Cork Airport, and a new self-drive car park at Shannon Airport.

An additional £30 million Exchequer money has been invested in high technology radar and communications equipment which have revolutionsed Irish air traffic control systems. Irish controlled airspace is now among the most modern in Europe.

The continuing growth in traffic, particularly at Dublin Airport which is reaching capacity levels due to the success of our policies, will necessitate further substantial capital investment in infrastructure in the years immediately ahead. We will make that investment. We will provide over £138 million in the period up to 1996.

Projects planned at Dublin Airport include a major extension of the passenger terminal, construction of a new passenger handling pier and extension of the apron, as well as further phases of the multi-storey car park. Improvements to the passenger terminal at Shannon and further terminal expansion at Cork Airport are also planned.

I have emphasised the need for competitiveness. We have taken specific action on this front to ensure that our airports make a contribution. We have frozen airport charges at their current levels since 1 April 1987. This Government's policy is and has been to keep charges at the lowest possible levels for the main users, Aer Lingus and Ryanair, in the interests of low access transport costs for tourism and other economic development.

Apart from the State airport, the Government, in pursuit of their commitment to balanced regional developments, have also pursued an active policy of developing regional airports. The six regional airports at Waterford, Kerry, Carnmore, Connaught, Sligo and Carrickfin are operated by private limited companies. However, this Government have already invested a total of £14.2 million Exchequer moneys in the development of these airports.

In addition they have obtained from the EC Commission the resources for a capital development programme costing over £20 million. This programme which is funded jointly by the European Regional Development Fund and the airport companies is due for completion by the end of 1993.

In the time available to me, I would like to conclude with the reference to the final major component of the Government's aviation policy, this is to develop Ireland as a centre of excellence in aviation. Employment in aviation and in aviation related activities in Ireland has been buoyant and is expected to expand in the coming years.

The development of a world aviation park in the Shannon area has been a major factor in this success. This caters for industries involved in the manufacture, service and repair of aircraft, spares and components and also developments in relation to attracting additional aviation services from Eastern Europe. The aviation park has already got off to a good start and it is estimated that about 5,000 people will be employed in the aviation park by the end of the decade.

We also have the magnificent TEAM facilities at Dublin Airport. I have had the privilege of examining these personally in depth and comparing them with similar enterprises abroad. In my view the TEAM facilities and workplace are the best I have seen.

In conclusion, let me put unequivocally on the record of this House that I acknowledge the role played by Aer Lingus over the years in the development of Ireland's trade and tourism. I appreciate the contribution of its employees over the years in enabling the airline to fulfil that role. I recognise the serious financial difficulties currently facing Aer Lingus. It is a matter for the board in the first instance to determine the urgent remedial action necessary to restore the airline to profitability. I have asked them in doing so to take full account of the Government's objectives of job maintenance and job creation. We are living in difficult times. However, let me assure this House and the Irish people that this Government have a fully integrated and well thought out air transport policy to take Irish aviation through these difficulties. We can and we will take Aer Lingus through its difficulties also. We are determined to do so while maintaining employment in the airline at the maximum possible level, consistent with maintaining a viable commercial operation.

May I add it will be necessary for me to leave the House for approximately 20 minutes during the course of this debate, though no fault of my own? That is the slot I have on the Government motion in the other House. I will be back to reply.

I would like to welcome the Minister to the House and to pay tribute to her for her progressive statement recently with regard to the future of Shannon Airport. The present crisis facing Aer Lingus causes great concern to all of us because, as we know, Aer Lingus has contributed very significantly to the tourist industry in Ireland over the past 50 years and is a major national employer, currently employing approximately 8,000 people in the country. Our concern about the present unprecedented crisis in the company is that, if not corrected, it will damage the country's tourist industry and add to the dole queues.

It is appropriate to stress how vital is the development of our tourist industry and the part it must and will play in the future economic development of our country. Regretfully, I must say that the responsibility for the present crisis in the company rests with Aer Lingus, but also has been contributed to by the Government. There was a time, until the mid-1980s when the Government contributed to the cost of Aer Lingus. For example, the Exchequer paid a grant annually to the company to alleviate its costs on the Atlantic and, in particular, in recognition of the promotional expenditure incurred by Aer Lingus in attracting US tourists to Ireland. This was an extremely important function but all that has changed. In more recent years, the Exchequer has demanded a dividend from Aer Lingus profits despite the fact that in some of those years the company was borrowing significant amounts for the replacement of its European fleet.

Many questions asked about the present crisis rests on the doorsteps of Aer Lingus management. I have said this already, but it has to be stressed. The company should not have delayed until now to request the Government to invest capital in the company. This request should have come at the time of the replacement of the European fleet. They should not have incurred losses of over £100 million in the past three years. They should not have waited until they had massive losses before coming to the Government. They should have come at an earlier time when the Government would have been investing in a viable unit. That would have minimised the effect all round.

While I am not adverse to the State investing more in Aer Lingus, the proposal should be for the funding of viable capital investment and not to shore up trading losses resulting from bad management. This is an extremely important point. Money from the State should be invested in Aer Lingus to ensure its viability at all times. Surely the consistent and extravagant losses on the Dublin-London route, amounting to £20 million a year for the past three years, must be explained? I believe these losses are not as a result of market forces but are caused by the obsession of Aer Lingus to see off the competition that exists. I share the concern of the Minister that part of the objective by Aer Lingus is to see Ryanair off the scene. If this is the case, there is no way the people should be asked to subsidise it.

The policy of the national airline to see off competition at any cost is not good. Aer Lingus should be as competitive as possible with the competition but not to the point where the company does serious financial damage to itself. Of course, one of the most serious consequences of this loss-making policy on the London route was the decision of British Airways to pull out of Ireland. Access to the country poses a major difficulty and a State company like Aer Lingus should not have been allowed to pursue a policy which was so damaging. Of course, Aer Lingus carried out this policy because of the ambivalence of the Government and in no place can this be better seen than in relation to the Shannon issue to which I have already referred and on which I have complimented the Minister. I paid tribute to her for her foresight in her recent decision.

The Minister has been highly critical of the airline's attitude to Shannon which she described as a red herring. What the Minister should realise is that Aer Lingus pursued this anti-Shannon policy on the promotion of her predecessor, Deputy Brennan. If she has any doubt about that, she should read Deputy Brennan's memorandum to the Government when he was Minister for Transport some 12 months ago. It was because of this attitude in Government that Aer Lingus felt so justified in pursuing the anti-Shannon policy. Fortunately for Shannon, Deputy Brennan was moved from that Department, but the expectation of change which he has encouraged continued to be expressed by Aer Lingus until the Minister recently put them right on the Shannon question.

A bright, prosperous future for Aer Lingus is very important, but the responsibility for this rests in the first place with the company. I do not think the company can rely on the Government to the extent it appears to be doing. Aer Lingus should make the company more efficient and more cost effective. It is not enough to claim one is making cutbacks. They must be meaningful and effective in their operation.

Where Aer Lingus is making losses on the Dublin-London route Ryanair is not; this would indicate that the smaller airline is more competitive and would also indicate room for improvement in Aer Lingus itself. Aer Lingus should be allowed to charge more realistic air fares on this route, even if it means carrying fewer people. The Minister recently said that Aer Lingus makes a loss of £5 on every London passenger; I suggest to the Minister that this should not continue. She can clarify the matter if that is an inaccurate reporting of her comments. The supermarkets or any other business in this country cannot sell at below cost, neither should a national airline.

Now that the Shannon question is out of the way, there is a real opportunity for Aer Lingus to develop the Atlantic route. The Minister suggested that Aer Lingus enter into an arrangement with another carrier and I agree totally with this. Part of the reason Aer Lingus could not have an alliance with a US carrier up to now is because of its negative attitude to Shannon and its promptings that things were about to change. Now that the question of change is out of the way, Aer Lingus should back Aer Rianta's policy of promoting Shannon as a hub which undoubtedly would bring profitable opportunities for Aer Lingus. I hope that the new task force announced by the Minister for promoting traffic through Shannon will work closely with Aer Lingus on this matter.

I suggest that Aer Lingus should commit resources to work with Aeroflot and the other emerging Soviet carriers with a view to a close working arrangement. Aeroflot have a major involvement in Shannon and also with Aer Rianta in Moscow. There must be an opportunity, through a Shannon hub, of flying from Russian and other Soviet airports to Shannon and for Aer Lingus going onwards to the USA. If steps like these were to be taken, it would move the company towards positive viability. The Minister should respond by putting a capital injection into a prosperous, successful, happy State-owned company we can all be proud of in the future.

I would like to compliment the Minister for her excellent outline of events to us this afternoon and her forthright comments about the various issues. Without being repetitive, I wish to say that Aer Lingus cannot be spoon-fed all the way but it is essential that it gets the required capital to bring it back to viability. At that stage under the direction of the Minister for Tourism, Transport and Communications, it is essential that Aer Lingus does not stray again into the serious financial mess it has got into in the past.

I thank the Minister for her reiteration and that of the Government of their commitment to Aer Lingus. One of the problems we have is a misconception of the reality of the situation in regard to the Government's commitment to Aer Lingus. I am glad we have given her the opportunity yet again in a House of the Oireachtas to put on record Fianna Fáil's commitment and her own to the development of Aer Lingus.

It is not overstating the issue to say that this House is about to discuss one of the most important national issues facing Ireland at this time. As an island country our air access links particularly to Europe are the lifeblood of our economic development potential, our tourism industry and our social integration with the rest of the world.

I live and work politically in a constituency where aviation and Aer Lingus are the dominant employers and there is no denying that the current situation is a grave and general cause of concern as the economy and fabric of the community depend on a successful and growing aviation industry. The Minister will be well aware of the situation in north County Dublin. I am part of the community and am well aware of the apprehension that exists there and I may get a chance later on to elaborate on the feeling that the Government must respond. Despite the recession of the past two years it is inconceivable that the aviation business can be viewed as anything other than a growth industry which is essential and central to national progress.

I do not intend to use the time available to me to analyse again how the present situation has arisen. Clearly the Gulf War and recession have been major factors but the scale of the problem is a compound of many unfavourable factors coming together in the past two years. I would prefer to start in a pragmatic way by accepting that a certain critical point has been reached which severely challenges all parties who can contribute to a solution.

We who are on the political side have continuously encouraged a strong and independent semi-State sector and we have freed them to organise commercially and use best commercial practice to respond to the management challenges in a changing market environment. An integral part of that reality is the acceptance that the necessary solutions to commercial problems must be generated and proposed by the companies themselves. Aer Lingus has always ranked as one of our foremost companies within any commercial criteria. It has shown an exemplary commitment to the Irish economy through using, accepting, adapting and investing its technical skills to the immediate core business through aircraft maintenance, computer services, hotels and other areas. These activities are designed to be profitable and play a vital part in the strategy of the airline to produce profit to underpin the aviation side of the business. I believe this is a correct and realistic strategy. The fundamental problem arises because the recession simultaneously hit both sides, pushing the aviation sector into deeper loss while reducing profitability in the ancillary business which, not surprisingly, are aviation-related.

It is this twin problem which has accelerated the build-up of losses and which now poses such an acute challenge to the board, management and staff of the company. It is not the first challenge that Aer Lingus has faced and overcome but it is undoubtedly the most severe. The Minister and the Taoiseach on behalf of the Government have now clarified the environment within which Aer Lingus must seek and propose solutions. I fully agree that tremendous understanding is both necessary and merited.

The most important single point which the Minister has made clear and with which I agree is that a solution which relies in a major way on sizing down the airline, its route system and its staff is not the solution to the problem. It is not the type of solution we expect from a competent and professional management who can only rely on the full support of the community when they reduce the effect on staff to the minimum possible.

The key factor, therefore, in recovering the situation is clearly a coming together of the board, management and staff and the formation of a detailed and integrated plan which will secure the future. Such a plan has already been called for and its preparation is underway within the airline. The Minister said today that within the next month or two we should have that plan.

The Minister, on behalf of the Government, has left the door open but understandably she wants a realistic, imaginative and pragmatic approach. I believe that everyone from the chairman of the company downwards understands this and the need for a response which will gain the acceptance and confidence of the Government and the community. Nothing less is expected and nothing less will do.

On many public occasions I have praised and supported the management and workers in Aer Lingus; they continue to have my confidence and support in finding and gaining acceptance for a planned solution. I will restrict my specific advice to them to a single point. I have always felt, and I know others agree, that the competition which naturally exists between Aer Lingus and Ryanair has obsessed the corporate attention of both airlines to an unacceptable degree and possibly to the detriment of other issues. In particular I have in mind the Dublin-London air route. The case has now been made beyond doubt that more realistic fares must be charged by both companies.

Aer Lingus is a great company. It provides employment in Ireland for 7,600 people and has given us good reason for national pride in its many achievements. It is a key factor underpinning our tourism industry which supports 87,000 jobs. It is a key service for the business community and for exports and communications. It is a key service for everyone who lives on this island and our social contact with our emigrants and with the world.

It is too important to all aspects of our national life to fail or to be allowed to fail. It is central to the life of this island. I appeal, therefore, to the board, management and staff of Aer Lingus to expedite this plan and to do so within the guidelines that have now been clearly drawn. Then I expect and will urge my Government to respond in a positive way. I particularly remind them of the need to provide options to Government and in these options to look strongly at survival together with future growth and potential.

I want to make some constructive proposals that I hope management and staff will take on board with the Minister as the major shareholder. I disagree with the decision on the Shannon stopover. I can understand the Government's policy on regional development and I sincerely hope that their decision will be of great benefit to the Shannon area but I hoped that a mixed decision would have been possible.

I am amazed and surprised that the Minister was supported by SIPTU and the CRC because my constituents and the workers in Dublin Airport who came to see me on many occasions did not agree with that stance. I am asking the Minister, in the light of the decision and the reaction that, as time goes on and the Shannon decision has been developed, and the Minister feels that Shannon is able to stand on its own two feet, the door will have been left open for that decision to be reviewed in the interests of Aer Lingus.

My second suggestion, and one I believe has support within the company and among the employees, is an employees shared option scheme. I am asking the Minister to consider the possibility of such a scheme for Aer Lingus. I understand there would be support for this in the workforce. I have written to the Minister for Finance in support of this and I am asking this Minister to lobby him in this regard.

My third proposal deals with Aer Rianta. Aer Lingus being Aer Rianta's biggest customer because of the former's financial situation, will find it extremely difficult to secure a private investor at this time. This is borne out by the board's failing to secure an investor in recent months. I am suggesting that Aer Rianta, as a profitable State company with Aer Lingus as their most important customer, could buy 25 per cent shareholding of Aer Lingus in the interest of the development and survival of Aer Lingus. This could be secured by Aer Rianta by its assets and half its annual profits being capitalised. I believe they are an ideal partnership with a common interest and Aer Rianta should in the future, if they wish, be given an opportunity to pass on their investment to a private investor. I make that point on the basis that if anything should happen on a down trade, the first company to be affected would be Aer Rianta.

My fourth proposal deals with the Cohesion Fund. I suggest that the Minister should try to provide equity from the Cohesion Fund which should be decided in the coming months. Take, for example, the fact that Spain has been funded massively to build highways that link France and Italy to cater for their exporters and to bring tourists and tourism to Spain. Roads are not our link with mainland Europe but planes and ships are. Britain has the Channel Tunnel and I am urging the Minister to make the strongest case possible for equity from the Cohesion Fund to be provided for air transport. I say that in the certain knowledge that a member state has been funded in such a way — I know the Greek Islands have been funded for air transport. I am asking now that the Government in the strongest terms should look for an equity funding for air transport.

A second reason for Cohesion Funds is that Ireland has faced major emigration which has affected every part of our country. Regional airports and low cost fares are absolute essentials for husbands, wives, sons and daughters to get back to their family homes on a regular basis. I support the policy of the development of regional airports that has been pursued by this Government. It is essential that people can get back to their regions whether they are from the west, the south or the north-west.

My fifth suggestion relates to eastern European options. The Minister stated that she and her Department have been making every effort to secure further business for Aer Lingus around Eastern Europe and with some success as, she rightly points out, but I believe that Aer Lingus should be trying to capitalise or the fantastic success story of Aer Rianta's operations in Russia, and I would hope that Aer Lingus management are making every effort to piggy-back on their success throughout Russia.

My sixth proposal relates to marketing alliances. I urge that Aer Lingus endeavour to set up marketing alliances in a world-wide network of air routes; I have in mind the USA and the Far East. As I have already stated, to downsize is not the answer.

Finally on equity, I have heard the Minister and the Government state that at this moment the national finances do not allow further equity to be put into the company in its present state. I hope that, if the board respond with a cohesive plan that will help to bring the company's present financial difficulties into line, the Government will respond with equity. I genuinely believe that, because of the importance of Aer Lingus to the national economy, with its record of profits and the sacrifices the workforce have made in improved work practices and salary cuts, the Government should respond in kind. I welcome the Minister's comments on that. I hope I am reading the script correctly but in my view, given the right circumstances a different opinion may be taken on whether equity would be forthcoming.

They are just a few proposals which I feel are worthy of consideration. The Government are clearly on record to commit themselves to a strong and vibrant Aer Lingus. The company should take confidence from this commitment and respond to it with a plan which will be seen as worthy of this stiff challenge, worthy of the excellent record of Aer Lingus itself and worthy of the trust it has in the future of the industry and the company.

When the company spells out the strategies and policies for success, I have no doubt that such a plan will receive a positive response from Government and the agencies of Government who have a role to play in supporting such a solution.

I would like to make a few final points for the record. There has never been any doubt about Fianna Fáil's commitment to Aer Lingus from Seán Lemass's time onwards, and its recent record of investment in the years when I have been at local authority level and national level. We have seen, and Senator O'Toole will know, the £30 million investment for the new runway; the £16 million investment to Airmotive, with 660 people employed there at the moment; the £13 million to TEAM Aer Lingus, which the Minister has rightly praised in her speech here today and which has created 2,000 plus jobs. In my capacity as chairman of the local authority, I had the pleasure of supporting and proposing the planning application and expediting that application through the Dublin Planning Authority and then of lobbying the then Taoiseach and Government — the 1987 Fianna Fáil Government — for the funding I mentioned for TEAM Aer Lingus. That proposal was on the table for years and other Administrations failed to take it up. There are now 2,000 plus people there, recognised worldwide as the most skilled labour force in aviation maintenance. That is something we should all be proud to be associated with. There is also the £6 million training grants that have been mentioned.

I have refrained from any knee-jerk reaction to the news of the financial troubles of Aer Lingus. I have been in constant touch with the Minister and her Department trying to find solutions to their problems. Some of the comments which appeared in the paper, in my view, were not in the interests of the company or the workforce. I have lived among this workforce, they are my friends, my neighbours, and I understand their concerns. It is not in the interests of the company to have Aer Lingus linen washed in public. Now it is time for all those involved, unions, management, the board and the shareholders, to come together in the interests of the company.

The Government's message of commitment to Aer Lingus has not come across to the workforce and I hope the Minister will take the necessary steps to rectify that. I want to assure everybody of my total commitment to the aviation industry in Ireland, to Aer Lingus and to Dublin Airport. I will be urging in the strongest possible terms the Minister and the Government to respond in a most positive way in the interests of the workforce and the national economy.

As somebody who lives two or three miles from the airport, in a community of people who are sustained by the airport, I am delighted to have the opportunity to put a few points on the record. It has been important for the Minister to say what she has said today because it was new and will come as news to many people who are neighbours and friends of mine. Knowing the Minister as long and as well as I do, I have no reason to doubt her and indeed I believe her when she speaks of her commitment to Aer Lingus but such commitment has been sadly lacking.

I listened to the contribution made by Senator Wright. It was a well thought out, well reasoned and very positive statement and he has put forward a number of recommendations which have to be considered. However, I have great difficulty in accepting from this Fianna Fáil Government a statement that they support a strong and independent State sector. I have not seen it. Every time I have seen a State sector become competitive, whether it has been RTE or any other body somebody brings the chopper out to them. In this case, and I would like to get a response from the Minister on this, we sowed the wind and we are reaping the whirlwind.

I did not hear any views coming from the opposite benches two or three years ago when I stood up here and asked why was it that Aer Lingus had lost its route to Liverpool? Why was it that Aer Lingus had lost its route to Munich? Why was it that Aer Lingus, after three years of market survey and preparation, was refused permission to do the Stansted route? This was not an anti-Ryanair thing. The reality was Ryanair was established. I have always supported the viability and the involvement of Ryanair but let us put the record straight on it; the establishment of Ryanair led to the creation of 500 new jobs in Ryanair and lost 500 jobs in Aer Lingus. It was playing musical chairs with job losses. I thoroughly support the involvement of Ryanair but I do not understand how we have got ourselves into the position we are in at the moment.

In terms of the different groups within Aer Lingus I consider the board of Aer Lingus to be as patriotic and as committed a board as there is to be found on this island. There is no doubt about the commitment of the board to the industry and to the country. It is also important to put on the record that the State has made an enormous investment in Aer Lingus and in terms of the capitalisation of Aer Lingus the State and the taxpayer are well ahead.

What I find hard to take in the Minister's speech is her comment that if the State is to invest in equity in Aer Lingus it will only do it on the basis of getting a return for its money. I stood up in this House two years ago when the Government proposed the privatisation of Irish Life and, much to the annoyance of some of my friends on the left of the political spectrum, I said I had no objection at that stage to the privatisation of Irish Life for the simple reason that the State, being the largest shareholder, had never taken a dividend from it. We have, on the one side, a Government who will prop up Irish Life and not take a dividend from it in order to make money out of privatisation and, on the other hand, saying:

"We will not invest an equity in Aer Lingus because there is no return". Those two statements are contradictory.

Aer Lingus is going through a rough period. It is going through a rough period for a number of reasons; the obvious ones are the impact of the Gulf War on air travel worldwide, the fact that there is a world recession at the moment which has led to a reduction in passenger numbers and, associated with those two reasons, the number of passengers using aircraft worldwide has actually gone down over the past two years, something that has never happened before.

I do not see in the Minister's speech any reference to the fact that the employees in Aer Lingus were the first people to make a sacrifice when, as Senator Wright said, they put their heads on the line last year and agreed not to accept one of the pay increases due to them under the Programme for Economic and Social Progress. Let us credit them with taking that stand. There is a board who are committed, who are doing the business. There are employees in the company who, by their action, have shown their commitment to the company. Those employees who took that reduction in salary last year should at some stage in the future be rewarded either by shares or equity in the company. That should not be forgotten at some stage in the future. We have a workforce there who have proved themselves to be flexible, to be committed and to be able to give a service which is unmatched internationally.

In terms of the trade unions, it is fair to say that the agreement reached between Aer Lingus, Aer Rianta and the trade union movement some years ago, when there were 30 different groups of workers who agreed after very difficult and intense negotiation to a package represented a sense of commitment on all sides that should be noted.

The future of Aer Lingus is being put in jeopardy because of current problems and, at the very least, we should ensure that the equity and investment required by the company is made available in order to get through this difficult patch. It is regrettable that the board of Aer Lingus have found themselves unable to establish the Los Angeles link. I ask the Minister to put pressure to ensure it is established.

I find the Dublin-London route utterly confusing. I do not know how it operates. There are planes all over the place and yet every time somebody gets into a plane the airline loses money. I was in London Airport last week and I could not get a flight to Dublin after 8.30 p.m. I just do not understand the operations of Aer Lingus and Ryanair from Stansted, Luton and Heathrow, and nobody else does either. You are never sure of a flight, you are never sure of a service; indeed, I believe Aer Lingus has been cast into the outer wilderness in Heathrow Airport. You would nearly walk as quickly to Dublin now as you would from the centre of Heathrow to the Aer Lingus boarding gate.

I would like to raise a point I have raised on two previous occasions in this House and I am glad somebody from the Government side, Senator Wright, also raised the same matter. Ireland is on the periphery of the European Community and that fact has to be recognised in Brussels. I have asked time and again for recognition of the fact that for the Irish business person to go to Europe to do business, for a tourist to come to Ireland on holiday, is more expensive and if there is to be equality of treatment among the partners in the European Community the Brussels-London-Dublin link should be subsidised and there should be an air corridor between Dublin and Brussels which should be subsidised. It should be subsidised in the interest of greater communications at European level. We are perfectly entitled to that and it is a demand I have no hesitation in making.

I also accept the point the Minister has made that at all times we must maximise on the employment creation opportunities made available by Aer Lingus. The possibility of expansion in air traffic is extraordinary. I remember the first time I spoke in this House on the whole question of air transport. It was shortly after deregulation in the US and we saw what happened within two years of deregulation in the US. We saw the elimination of most of the smaller companies in an extraordinary, inexorable circle of woe in the air traffic business in the US. This was followed by the elimination of some of the largest air companies in the world and the re-establishment of smaller companies. Now we have the larger companies again and this is not in anybody's interest. I agree with the Minister's point that the Dublin/London fare should be standardised. There is no point saying we are looking for equity and for a return on investment. It is ludicrous to consider that competition has reached a stage where both Ryanair and Aer Lingus are in danger of going bust because of the nonsensical level of competitiveness which has developed on the London/Dublin route. That must be made economic.

I share the views of the Minister on the need to retain a strong national airline. Apart from the prestige for the country, which is not unimportant, there is also the fact that it is the hub of a huge network of companies in the Aer Lingus group in which, the last time I checked, there were approximately 40 different companies tied into one another. In recent times Members of this House went out to TEAM Aer Lingus. Nobody could be unimpressed by the work in that company and its proposals for growth.

The economic indicators in this country were never better. Interest rates are up at the moment but they will be reduced. We have failed, however, to translate that into employment creation. Looking at it over the last decade, it appears to me that every 5 per cent growth in the economy leads to a mere 1 per cent growth in employment. That is a ratio we have to look at and that goes back to the Government's macro-economic policy. It has to do with the repatriation of profits by foreign companies. I make this point because, were Aer Lingus to go to the wall, were the unthinkable to happen, were Aer Lingus to go under to be replaced by a foreign airline company, would not just cause a loss of jobs.

I am worried that the debate in the media has simply been on the question of jobs, quite correctly from the point of view of the people whose jobs are at stake, but that would be only the tip of the iceberg. Were jobs at risk and were Aer Lingus to go, that would only be the beginning. There would be the knock-on effect on the Aer Lingus group of companies and it would be a devastating blow to the Irish economy. There are many other companies involved besides Aer Lingus.

I agree fully with the points made by Senator Wright. We both live in a community which is sustained to a large extent by the airport, Aer Rianta, Aer Lingus and the Aer Lingus group of companies. It would devastate north Dublin and its hinterland were these jobs to be lost. It would be a killer blow to the economy of that area.

We need to further develop Aer Lingus and the airport immediately by extending either light railway or DART to the airport to encourage a greater use of the airport and greater growth. We need to ensure that equity is provided in order for Aer Lingus to develop by loans, by Government equity or by allowing employees to invest in their own company as proposed by Senator Wright. All these matters need to be looked at.

However, I pull back from the position of the creeping privatisation technique Senator Wright suggests, involving give and take and sell to the private sector in three different chess moves. I disagree with him on that, but I compliment him on the extraordinary research he has carried out as is evident from his contribution here today. It deserves wider publication and I hope it gets wide coverage, which is what this House is good for. Senator Wright has put things on the record which deserve to be responded to. In conclusion, I thank the Minister for coming today, putting these matters in front of us and allowing us to debate the issues.

As a responsible trade union leader, I say that this company needs the support of the Government and the State. No matter what the problems are, in terms of investing in infrastructure and jobs, the money has to be found for an investment in equity in Aer Lingus.

I welcome the Minister of State to the House and I also welcome the comments by the Minister. It gives us some hope, it gives hope to the board and employees of Aer Lingus.

Senator O'Toole hoped that Senator Wright's contribution would get wider publicity. I have no doubt that Senator Wright will give a copy to every member of Aer Lingus staff he meets during the election campaign. I am sure Senator O'Toole need have no fears in that regard.

Aer Lingus is a State company; in many ways it is the leading State company. It has made an enormous contribution not just to the Irish economy but also to our national life. As a major State company it is entitled not just to Government support but to Government co-operation and encouragement as well. This is particularly so at times of difficulty. In our modern and fiercely competitive world, any company which has to trade in an international environment will, at some stage, encounter problems and setbacks. At such times it is mandatory on the Government to do everything it can to sustain and support its own company.

Aer Lingus is the Government's aviation company. It is ridiculous to look upon it as the enemy, to treat it with hostility, to attack and hassle it when it needs assistance and support from its owner. If nothing else, it is at least entitled to moral support. In practically every modern industrial nation, governments intervene regularly, and often in a substantial way, to assist key commercial concerns whose role is significant to the economy as a whole. This happens even if these commercial concerns are entirely private sector owned. For instance, many of us learned recently to our surprise that the mighty Mercedes Benz has been actively supported by the German government over a long period of years. Sometimes this intervention is of a permanent nature. At other times governments merely intervene to tide the particular concern through a particular rough period.

As an island nation it is of fundamental importance to us to have a national airline to provide access to the outside world. To suggest otherwise is to ignore basic realities. It also must be accepted that in modern circumstances our national airline, in providing for our different access needs, will not have an easy task. It must operate in an environment which is by no means ideal. It has to operate from a very small narrow base. Its place, however, in the overall economic scheme of things is of such vital importance that it must be assisted in every way open to the Government to enable it to operate successfully. Any other policy by an Irish Government is totally indefensible.

From 1 January next the Single Market will be brought fully into operation throughout the 12 member states of the European Community. This vast market will offer us great opportunities for the development of our economy and of the creation of jobs but it will also bring challenges. There is almost unanimous agreement among everybody concerned that it will be of crucial importance for us, if we are to exploit this new situation, to have a vast, efficient, modern transport system between here and mainland Europe as well as Great Britain in order to maximise the opportunities available.

For this reason we have already expended a considerable amount of Structural Funds on improving our transport infrastructure, roads, harbours and airports. An efficient air service for both passengers and freight between here and the principal European centres will be an absolute necessity. Only Aer Lingus can provide us with such a service. It must be given every support and assistance necessary to enable it to provide the essential service we will need in that European market. When this strategic economic necessity and the many thousands of jobs provided by Aer Lingus are taken into account, the argument that Government support of whatever kind is necessary and feasible for Aer Lingus is unanswerable. There should be no delay in providing it not just in the interests of Aer Lingus but also in the national interest.

I believe the new Cohesion Fund, which is to be established by the EC, offers possibilities which should be explored in this regard. Ireland has been arguing consistently with the Commission that, in our case, it is legitimate to use Structural Funds to finance not just permanent infrastructural transport facilities but mobile transport investment. There is a strong case that Ireland as a peripheral region, with an economy totally dependent on our foreign trade, should be able to use Cohesion Funds to finance a major expansion of the company's European fleet.

The aviation industry is notorious for its ups and downs. Aer Lingus has had many long periods of successful, profitable operation. The present difficulties should be regarded as temporary and, as such, fully justify Government investment and other assistance to overcome them. We have already lost enough of our industrial and commercial base. We simply cannot afford to allow the prospects and potential for Aer Lingus to be damaged in any way. Our employment situation is too desperate to put the thousands of jobs in Aer Lingus in jeopardy.

As I said at the outset, I welcome the Minister's speech today. The debate has thrown up many suggestions as to how Aer Lingus can proceed from here. The issue should be a priority for the Government and for the Oireachtas as a whole.

Like Senator Wright, I, too, live near the airport in Dublin. Reference was made to Seán Lemass and his role in establishing Aer Lingus. I feel very proud of that fact for reasons of family tradition. For that reason also I will defend Aer Lingus, our national airline, and will work consistently to ensure that the company overcomes the current difficulties it is experiencing.

Aer Lingus is the largest and most successful entrepreneurial force in the country. No company comes near it in creating jobs in Ireland. For example, Smurfit, which employs 15,000 people worldwide, employs 2,000 people in Ireland, reduced from 3,700 in 1986. Aer Lingus, on the other hand, has expanded employment at home and abroad. It employs 7,600 here out of a total of 13,631, and has expanded its workforce by almost 2,000 since 1987. Is total wage bill amounts to £300 million per year.

Throughout its 56-year history, Aer Lingus has been the focal point for the development of significant levels of employment opportunities in Ireland, with high levels of skill and technical expertise. Its drive has led it not alone to expand into the creation of direct employment in its many large subsidiaries but also to foster Ireland's leading company, Guinness Peat Aviation. Guinness Peat Aviation was founded by a former Aer Lingus employee who was taught and encourged by Aer Lingus.

Aer Lingus has been a very good investment for the taxpayer. My information is that since the company was founded 56 years ago, the Government's only investment was £68.6 million shares, plus a permanent loan of £5 million on which it has charged interest. In March 1992 its gross assets were £1,200 million but the precise value of the company depends on many factors, such as the state of the stock market, the world airline industry in general the performance of the company itself and its profit levels and level of indebtedness. It is, therefore, difficult to give an exact valuation of the company. However, it is reckoned to be worth between £600 million and £1,000 million. It is more likely to be valued at the lower range of the scale at the moment because of the chaos in the world air transport industry and its consequent low level of profits in recent years. Even so, this figure is many times more than the Government's total investment of £68.8 million.

The most recent investment on Aer Lingus took place almost ten years ago, when £30 million was invested in the company over a two year period. The question is, why does Aer Lingus need more capital? Companies usually go to their shareholders looking for capital for two main reasons. They are either in a short term crisis or they are embarking on expansion. Aer Lingus needs money for both reasons. The world airline industry is in deep crisis and Aer Lingus wishes to expand and replace its transatlantic fleet. In 1990 the world airline industry lost more in one year than it made in profits since air travel began. The last two years have not been good for the airline business, and in these circumstances Aer Lingus has performed well.

Aer Lingus has a debt at £580 million which, as a percentage of equity, is 8.51 per cent. This is clearly unsustainable. A normal commercial company would be able to call on its investors for backing. Last year, Aer Lingus paid £58 million interest on its enormous debt. With equity funding, some of the money could be paid in dividends to the Exchequer and in investment. At the moment, Aer Lingus is working for the banks, not the taxpayer. Companies seek additional support from their shareholders to fund expansion. Aer Lingus has increased employment in Ireland by 1,700 people in the last five years and it is due to replace its transatlantic fleet which is more than 20 years old.

The 1980s saw the company replace its short haul European fleet; it now has one of the youngest short haul fleets in Europe. Aer Lingus has invested over £500 million in 28 new aircraft from its own resources but it built up its present high level of debt not anticipating such a deep crisis in the world airline industry. It had the ability to do that and it deserves great credit from us.

The investment of equity funds in Aer Lingus is essential to ensure the future viability of the company. Its debts are too high but they have been run up because of under-investment by an unsupporting shareholder, the Government, because of an unforeseeable crisis in civil aviation and because of the necessary programme of fleet modernisation. The small State investment in Aer Lingus to date has paid off in a massive increase in its value, in a world class airline and in increased tourist numbers.

The establishment of Aer Lingus in 1936 played an important role in helping to modernise the economy and provide many direct and indirect jobs in Ireland. Senator O'Toole spoke about privatisation. Would privatisation help Aer Lingus? If the Aer Lingus group were to be privatised it would be asset stripped. Its current unprofitable air transport side would either be closed down or massively reduced and valuable airport landing rights, for example into London Heathrow would be auctioned off by the asset strippers to cover the cost of buying Aer Lingus. This is a classic asset stripping technique. The privateers would probably sell off the other valuable operations, such as the 8 per cent stake in GPA, the hotels and TEAM, to foreign buyers. The net result would be that Ireland would be very poorly served by air transport which would have a severely damaging effect not just on tourism but on business and the economy in general. Business people would have fewer flights to and from Ireland and would be less inclined to do business here.

Aer Lingus is, in the real sense, a strategic State enterpise. Like electricity, air transport is an integral part of any modern business, but, to the asset strippers parts of Aer Lingus would be worth more than the whole. These juicy titbits would be picked clean, destroying the jobs of thousands of Aer Lingus employees and of workers elsewhere whose livelihood is dependent on the survival of our national airline. The loss of the PAYE revenue plus the cost of social welfare and other benefits arising from job cuts on such a scale would impose a substantial additional burden on the coffers.

World airlines are in chaos. Airlines are growing bigger with the large swallowing the small. Leading international airlines, such as Pan Am have collapsed and, today, TWA is in difficulty, as is Dan Air in the UK. It has been forecast that by 1995 there will be only five major airlines in Europe. The huge losses made by airlines in recent years spell deep trouble for many existing airlines. Yet, high future growth was forecast for the survivors in the eighties. The number of airline passengers also doubled and it is expected by the year 2000 that the number of passengers will double again to over two billion a year. The increases in passenger numbers carried by Aer Lingus have been considerably above the European average and the company expects this trend to continue at 5 per cent or even more annually.

The non-air transport side of Aer Lingus is very profitable and has been developed to counter the cyclical nature of air transport. It is on the air transport side that Aer Lingus has made large losses in the last few years. It made a small profit in 1988 and a small loss in 1989 but losses amounted to £43 million in 1991 and, while reduced to £38 million in 1992, the profits in the other division were not large enough to cover this, hence the group loss of £3 million.

The question was posed, why should the taxpayer invest in this company? The taxpayers' investment to date has paid off, not just in small dividends but in huge capital appreciation through their investment from £68 million to £600 million. In other words, the company is worth a lot more than the State put into it, and it is likely to grow in the future. The air transport business is going through a very rough patch and considers Aer Lingus's size and circumstances, it has done extremely well.

Aer Lingus is vital for Irish tourism. Air transport is now the dominant mode in international travel. Fifty-eight per cent of visitors travelled to Ireland by air in 1991 and Aer Lingus carried 75 per cent of the total as opposed to its 51 per cent five years earlier. In other words, Aer Lingus carries three out of every four visitors to Ireland by air. The number of visitors to Ireland in these five years grew by 55 per cent and the number of people who flew with Aer Lingus into Ireland grew by a massive 130 per cent. Last year, Aer Lingus brought 1.26 million people to Ireland. Aer Lingus fares are very low compared to other shorthaul routes in Europe, which is good for the tourist but bad for Aer Lingus because they are below cost in many cases. The company spends £22 million annually on sales and marketing abroad through its 22 overseas agencies.

The relationship between air transport and peripherality was mentioned earlier. Aer Lingus is highly dependent on leisure travellers who are far more price conscious than business passengers. It operates from an island with a low population, with a relatively low income economy and with seasonal traffic, carrying twice as many passengers in the summer as in the winter. The air transport side of Aer Lingus faces unusual difficulties. The short length of its journeys means that it is difficult to be profitable. Its major problem is its low yields from passenger revenues.

The question was then posed: does the State have the money? Yes, it has. The State borrows to invest in many areas which generate no financial return, but the investment in Aer Lingus yields a clearly measurable return in capital growth, dividends and jobs. Most economists are coming back to the view that borrowing for investment is worthwhile. As things stand, the Government borrow a substantial amount every year to invest in areas where they get no financial return, though they get other benefits, such as roads, sewerage, water, etc. To ensure the future of this strategic and expanding enterprise, the State needs to invest now in Aer Lingus which will continue to be very worthwhile and rewarding for the taxpayer and the economy.

Could the State investment be used more effectively elsewhere? I accept the Minister's and Senator Wright's views on that. The question is can Aer Lingus be turned around? Its air transport business has been profitable in the past and the company and the workforce together have done everything they can to reduce costs. However, with new equity, the company's financial position would be dramatically improved. It has other problems, such as the continuing crisis in the world aviation industry which will ease when the US and the UK recessions end. When the recession ends and unsustainable competition eases, Aer Lingus will be able to charge more realistic fares.

More credit for diversifying for success might have been forthcoming. Recognising that air transport is subject to seasonal variations and trading cycles, Aer Lingus has successfully expanded into many different areas in Ireland and abroad. It has a major hotel chain in the UK, having recently sold its big chain in the US at a large profit. Aer Lingus has hotels in France and Belgium and leisure properties in Spain. It has subsidiaries providing international management services and hospital recruitment services, but its most important success in Ireland has been its diversification into maintenance with TEAM Aer Lingus, the expert in aircraft maintenance and aircraft engine overhaul which provided 2,000 highly skilled jobs in Ireland, earning foreign exchange in a competitive industry.

Around 4,300 of the company's total of 7,500 employees in Ireland are involved in the air transport business. Without Aer Lingus, Irish tourism would be severely damaged because it gives frequent and reliable access to Ireland. Tourism is one of the key growth industries in this country, employing over 80,000 people.

We have heard about subsidies and the question was asked what subsidies? Although it is commonly, but mistakenly, assumed that all companies are regularly subsidised by the taxpayer. Aer Lingus, receives no State subsidies. A small subsidy was paid in the early eighties for operating the transatlantic route but no such payments are made today.

Aer Lingus has made an outstanding contribution to the economy, but it is in difficulty. Because of the reluctance of successive Governments to carry out one of the shareholder's responsibilities which is to invest adequately in the company, Aer Lingus has been forced to take out expensive loans from private institutions to finance the capital costs associated with the aviation industry. The repayments on these loans are a millstone around the neck of an otherwise sound company.

Aer Lingus has practised wage moderation. It has introduced new scales with lower starting points. Incremental increases have been foregone. There were changes in crews and staff levels, increasing flexibility and other charges in work practice. While we may be critical of management, and in some cases that may be justified, they recognise that further belt tightening on the part of the employees has been virtually exhausted, because after all these exercises the debt problem remains. Unless it is addressed effectively the whole company will be affected.

Investment of Government equity at realistic levels would stabilise the company's financial position. It would allow everyone in Aer Lingus to work with greater security and satisfaction so that together they could provide an even better service to their customers and to Ireland. In return for an extremely modest State investment of £68.8 million over a period of 56 years, the Irish people have in Aer Lingus a company worth in excess of £600 million which provides employment for 7,600 people in Ireland and a further 6,000 people worldwide. That phenomenal success has been tempered by the impact of the current downturn in the world aviation industry which say all but two international airlines register losses last year.

Although the staff of Aer Lingus have made considerable sacrifices to ease the company through this difficult period, Aer Lingus requires additional resources to get over the recession. Panic measures such as extensive cuts in services may improve the appearance of the accounts in the short term but in the long term they spell disaster for the company and for Ireland where job creation and not job destruction is the number one priority.

Different figures are being bandied about in all sorts of arguments and we might find ourselves asking the chairman of the beef tribunal to decide who dealt with the facts and who did not. I am not going down that road; I read the statement because I wanted to be accurate in my research. I accept the Minister's statement which helps the workforce to understand the situation. It has also played a role in telling the media that while you do not tell lies you often give truth a hard time. The media will probably take that message, too. That is not a criticism of the media. It is not always possible to get at the full facts and, consequently, they may have to go to press with less than the full story. I hope we have given the Minister sufficient to think about and that we will not be overshadowed by events in the other House.

I presume that this will be my last offering for this session. I welcome the Minister to the House. It is sad to be discussing the impending crisis in Aer Lingus at the last sitting of Seanad Éireann and of the 26th Dáil.

The national airline has been one of the great success stories of the semi-State sector. It has grown from a small operation to an extensive one employing substantial numbers of people at home and abroad. We talk in terms of 7,000 at home and 6,000 abroad, a colossal number to be directly or indirectly employed by Aer Lingus. The estimated value of the company at £600 or £700 million is substantial compared to the amount of equity that has been put in over the years and which amounts to less than 10 per cent of its present value.

We should also consider the enormous network of activity that Aer Lingus has been involved in both at home and abroad. It has operated as a major industry should operate, creating initiatives and expanding into ancillary operations and activities to supplement the main operation. Here I might mention the establishment in Shannon of a duty free shop which displayed Irish goods to visitors from all over the world, the promotion of Irish coffee which became a world famous drink and the enormous success of TEAM maintenance introduced in the past number of years for the overhaul and the maintenance of aircraft.

There has been ample evidence of initiative among those involved in Aer Lingus to diversify into additional products and activities related to the main industry there which is the training of pilots. The success of Guinness Peat Aviation followed the decision by former employees of Aer Lingus to go out on their own to provide the prime international leasing service in the airline industry. That development owes its origin to the ethos created by Aer Lingus.

Aer Lingus at home has been a tremendously positive and productive force in Irish society in tourism and job creation. Its imagination and initiative have often been lacking in other industries which do not have proper research and development facilities and the necessary flair to succeed.

Aer Lingus has been equally successful abroad and has been an excellent ambassador for Ireland. In the United States which it targeted as its main centre initially it has been a success with offices in every part of the country. It has provided a tremendous boost both in personnel and promotional material to the tourist industry which has brought hundreds of thousands of visitors here. Anything that would undermine that activity would endanger not only the future of Aer Lingus but also the future of our tourist industry and of our recovery.

More recently Aer Lingus expanded into the USSR; they provided opportunities which Aer Lingus was quick to take up. Aer Lingus worked in tandem with Aeroflot which provided a huge base and a tremendous number of jobs in the Shannon area. That has been reciprocated by the establishment of bases in Moscow and other cities in what was the USSR. Duty free shops have been introduced there where Irish goods are being marketed for the first time. That has been an initiative of Aer Rianta and Aer Lingus. In the United States Aer Lingus has given a tremendous boost to Irish tourism and has moved into ancillary industry of hotels and catering.

The aircraft industry is an expensive operation. When we talk of aircraft replacement we must talk in terms of tens of hundreds of millions of pounds so the requirement for a replacement fleet inevitably brings with it a crisis in terms of capital and when that occasion is compounded by a recession in the tourist industry major problems emerge. We have been faced with this and Aer Lingus have countered by establishing a new salary scale for employees but that has not resolved all of its difficulties. Aer Lingus needs an adequate equity investment by the Government to rescue its operation.

There are a number of options the Government might explore to respond positively to Aer Lingus both on a policy and on a financial basis. The first thing the Government should do is to sit down with the airline executives and come up with a national aviation policy, dealing with matters such as the strength and potential of our national airline, the extent of existing structures, matters of personnel, the location of ancillary operations and on where profits are being made and losses incurred. Now that European Union is imminent we will be the only island state in the EC. We will have no road or rail link with mainland Europe unlike our next door neighbour but will be entirely dependent on sea and air traffic for communications and the supply of goods.

As the Minister knows, this country has performed well over a number of years in the production and the export of goods. We rely to an inordinate degree on the sale of our goods abroad and their transport is, therefore, a major consideration. Air transport is ideal for ensuring quick and easy access to the main markets of Europe. It is the quickest and most reliable route especially for fragile or perishable goods. Air transport is part of our infrastructure and from that point of view the Minister has good cause to argue for Cohesion Funds to ensure that our national airline will not be covered by deregulation status.

Air transport is a core essential of our infrastructure and if the European Community is sincere about improving the communications network of peripheral nations it should respond here. We can request the Government to provide essential equity itself and also look for further equity from Europe to ensure the survival of a long term national aviation policy for this country.

Those are the principal proposals I would like to make in relation to Aer Lingus and I direct the Minister's attention to those areas. I am sure that the Minister will not contemplate any serious undermining of Aer Lingus but I would hate demoralisation to set in regarding the future of Aer Lingus.

I am sure many Members of the House have an interest in the Shannon stop-over. I am a representative for Dublin and poor old Dublin has been having a rough time in recent years with regard to employment. Poor Molly Malone has been crying her eyes out for years. We have a greater percentage of unemployed people in Dublin than anywhere else. A recent article in The Sunday Tribune by Paul Tansey compared the various regions of the country in terms of population and employment. Dublin has lost out significantly over the past number of years where the average unemployment rate has increased by at least twice the national rate.

The Shannon stop-over needs to be looked at again. I am loath to contemplate anything that might undermine the enormous contribution Shannon has been made to the economy and to the tourist industry and to the quality of life in the western and southern regions. However, it is not only unusual but anomalous that there is no direct link between international capitals and our capital city; unlike other countries. That omission reduces the number of tourists who might otherwise come directly to the capital.

Dublin has never been properly marketed as a tourist centre. Ireland is still a green country in terms of marketing; we are rurally green although all the signs of a modern nation are evident in Dublin. Music, social life, and our film industry are urban generated for the most part. Nevertheless we still project an image of rural thatched cottages. There is too much of that at present; while it is good in its own right, it detracts from the national capital.

We would like to see Aer Lingus survive. We hope for an early decision on where the necessary funding is going to come from to ensure that it can expand, retain its workforce and continue its imaginative and successful record of promoting Ireland at home and abroad.

Ba mhaith liom ar dtús mo bhuíochas a ghabháil leis na Seanadóirí ar fad a ghlac páirt sa díospóireacht seo. Sílim go raibh deis acu éisteacht leis na pointí a rinne mé, agus rinne siad go léir tacú láidir lena dúirt mé faoin gcomhlacht iontach seo a bhfuil an oiread sin déanta aige ar son forbairt turasóireachta agus iompair sa tír seo.

I have been genuinely impressed by the level of insight and awareness shown by contributors from all sides of the House. I would like to thank Senator Wright for his initiative in having this debate in the Seanad and particularly on a day when political feeling in both Houses of the Oireachtas is in a state of flux. I am gratified to note that there is unanimous agreement among us all at the valuable contribution made by Aer Lingus to Ireland's development over the past 55 years.

I also welcome the recognition by Senators of the role of the board in tackling the major problems which beset the airline at present. The board has primary responsibility for proposing solutions to the airline's difficulties and that is a heavy load to carry. However, I want to stress that this is no time for despair. There are solutions to these problems which we will find and implement.

Senator Haughey raised many interesting points which I hope he will accept were covered in my opening speech. Senator Harte's contribution which was well researched concentrated on the company's finances. I agree that remedial action is needed urgently to restore the company's financial strength.

I emphasise the vital importance of the role played by employees in Aer Lingus. In the midst of the current problems it is critical as everybody agreed that the morale of staff in the company should not be undermined. It is worth repeating my conviction expressed in the Dáil that Aer Lingus is a people company, built upon the quality and commitment of its staff since its foundation and because of this has survived many crises in the past and will do so again.

Current staff in Aer Lingus have not only shown commitment but have also made sacrifices over the past two years in the interests of the company. I want not only to acknowledge these sacrifices but to express my appreciation of them. I ask Senator O'Toole to note these views which he knows as he and I have discussed this before, I hold passionately.

In relation to the workforce, one of the points I made to the board of the company — there is no harm in my talking about it now because for some strange reason it became public knowledge and many things that did not happen at the board meeting were also circulated in the national media — was that I did not think that downsizing the airline, which is one of the scare stories being put around at present, would be the answer to the airline's problems. I told the board they had a lot to learn from the United States experience where when airlines got into difficulties they downsized the airline, made low cost employees redundant, held on to high cost employees and high overheads so that many airlines ended up in chapter 11 and that that was not the answer. The board have the benefit of the experience of the United States and I did not think that they should go down that road.

I also said something to the board which for some reason was not talked about publicly and that was that I felt Aer Lingus as well as being a people company was a company of partnership. I compared it to the decision by the Government in 1987 that the only way to deal with our difficult financial circumstances was for Government and social partners to plan a programme together. We have seen how well the Programme for National Recovery and the Programme for Economic and Social Progress have worked. I gave those two examples at the board meeting and said that that was the way forward for board, the management and staff. This point was also made forcefully here today by Senator Wright. There is an opportunity there for a three way partnership with the board in the leading role, supporting and informing management and the workforce at all times.

Senator Hourigan made a constructive contribution and I support most of his points. There are two points of clarification, however, that I must make. The Exchequer did not give an annual subsidy to Aer Lingus for its transatlantic operation. It got a once off injection some years ago. Secondly, Aer Lingus management specifically said that it did not want or need equity for its European fleet.

I would like to thank Senator Costello for endorsing many of my views and I hope he will read my speech if he has any spare time over the next couple of weeks.

I am only waiting for the Minister to finish.

It is heartening today to have such cross-party support in this debate. In reply to Senator Costello's point about an air transport policy, I dealt with that matter comprehensively in my speech today and in the speech I made in the Dáil debate some time ago. We have a fully integrated air transport policy.

Without wishing to be party political I want to thank Senator Wright for his comments which as usual were not only constructive but innovative. It is no secret in this House or outside it that he has worked incessantly and with great determination behind the scenes researching trends in international aviation in an effort to bring forward solutions to the problems currently facing the airline.

Senator Wright raised the question of EC funding for aircraft, which was also raised by a number of other speakers. Senator Wright in this House and elsewhere has stressed how important it is to improve our access transport services in order to help offset the disadvantages of Ireland's peripherality and I agree with that sentiment.

When I took office I found that the European Commission had refused Ireland's application for EC funding of mobile assets in December last year and among the reasons cited by the Commission were difficulties in relation to distortion of competition. I felt that that was not good enough and following direct personal intervention by me the Commission agreed to consider a renewed application in which we addressed the concerns they had expressed. This renewed application was forwarded to the Commission in April of this year and there has been further intensive and extensive negotiations since then. I am at present awaiting a response from the Commission on my latest proposals.

Senator O'Toole also raised this issue and I would like to thank him for his support in this House. He is a fellow trade unionist and was my trade union representative when I was a member of his union some years ago. I ask him to give the kind of support he gave here in relation to our application for EC funding for mobile assets at international fora, and particularly within an EC context because such support from the trade union movement is extremely important and would assist me to press this country's case for funding for mobile assets.

Senator Wright also made the innovative suggestion that Aer Rianta should take a shareholding in Aer Lingus. I will certainly consider this. However, I foresee major problems here in that while Aer Rianta is one of the best State owned businesses, as the Oireachtas Joint Committee on State-Sponsored Bodies pointed out, it has very high borrowings. Furthermore the trend internationally over recent years has been to take airlines out of airport management business. An Aer Rianta stake in Aer Lingus might also cause problems on the competition front vis-a-vis the EC Commission but I will consider the suggestion.

The Senator's view on an employee shared option scheme is one which intuitively I find attractive and I imagine many Members would too. As he said, this is primarily a matter for the Minister for Finance and I know he is making strong representations to him. I will raise the question with the Minister, Deputy B. Ahern, and I am sure that in an effort to find a solution to the financial difficulties of the company, he will consider that suggestion carefully.

I would like to be able to respond in more detail to a number of points made by other Senators but my time is limited. I look forward to coming to this House on many future occasions as a representative of a Fianna Fáil Government to respond to debates. I hope that when we return in three, four or five weeks time to the other House there will be at least one Senator fewer in this House who may well join me. I suggest the Aer Lingus workforce have a champion in Senator Wright and that they should at this time support champions.

The Seanad adjourned at 4 p.m. sine die.