Air Companies (Amendment) Bill, 1993: Second Stage.

Question proposed: "That the Bill be now read a Second Time."

Minister for Transport, Energy and Communications (Mr. Cowen)

This Bill before the Seanad today represents both an end and a beginning.

In July of this year, when the Government accepted the broad thrust of the Strategy for the Future, we stated that, once the necessary decisions were taken by management and the workforce, we would support Aer Lingus in so far as we could contribute. The capital injection of £175 million, for which this Bill provides, represents a major injection of scarce taxpayers' funds. As shareholder, the Government is now making its contribution to restructuring the airline and helping to secure its long term future. This represents the final stage in the agreement on implementing the Strategy for the Future. To that extent, the Bill represents the end of a process.

But the Bill also represents a beginning. As a result of the agreement on the implementation of the strategy, Aer Lingus will be a fitter company. In addition, this Bill provides for the restructuring of Aer Lingus. In many respects, therefore, the new year heralds a new start for Aer Lingus.

At this point, I will set out the policy background against which this Bill was drafted. Aer Lingus has been a critical part of our commercial semi-State sector, a sector which has been fostered and encouraged to develop by successive Governments. This sector has played a vital role in the development of our economy since the foundation of the State and has led the way in economic progress. While the achievements of the commercial semi-State companies should be acknowledged, so too must their shortcomings be recognised and rectified.

The mutual commitment and co-operation between the Government and Aer Lingus has in the past proved to be enormously successful with benefits for all those involved; the Government, the employees of the airline and the taxpayer. However, the context in which that co-operation will continue has changed fundamentally and irrevocably. The whole airline industry is now operating in a changed scenario.

The direction of change in world aviation is irreversibly towards greater liberalisation and free trade. The rate at which this will be achieved is still uncertain. However, what is not uncertain is that airlines must be cost competitive to stay in business in a much tougher marketplace. Aer Lingus is no exception to this rule. It is now facing more intense competition from low cost airlines on all its routes. It has no alternative but to reduce its costs to meet these new challenges. That is the background against which the Government's approach to the financial restructuring of Aer Lingus must be viewed. I will now deal with the restructuring itself.

On my appointment as Minister for Transport, Energy and Communications in January of this year I quickly realised that Aer Lingus was facing a rapidly deteriorating financial situation. In response to this and following consultation with my Government colleagues, I announced the appointment of an executive chairman and gave him executive responsibility to take whatever action was necessary, with immediate effect, to restore the company to commercial viability.

In the view of both the executive chairman and myself, a partnership approach was essential in the difficult task ahead. In pursuance of that, a special task force was established in Aer Lingus, with almost 40 consultative working groups, to make recommendations on every aspect of the Aer Lingus system and operations. In addition, a company-wide open forum consultative process was initiated to facilitate input from staff. On 13 June the board of Aer Lingus presented to the Government, its shareholder, a strategy to return the company to commercial viability, entitled Strategy for the Future. The strategic plan submitted by Aer Lingus in June provided the Government with an accurate and up to date assessment of the scale and nature of the company's problems. It indicated there were severe financial difficulties and that operating losses were running at unprecedented and unsustainable levels.

Group profits of £28 million in the year ended 31 March 1990 have been transformed into losses of £188 million, including restructuring costs, in the year ended 31 March 1993. Shareholders' funds have fallen from £443 million to £93 million in the same period; in the Strategy for the Future, they are forecast to fall to £36 million in the current financial year. The group has, in fact, been losing over £1 million a week. The annual accounts for the year ended 31 March 1993, published in October, confirmed the picture painted in the Strategy for the Future.

The group's main problems have been in the air transport division, which has had significant losses over the past four years. In addition, the profit performance of the other divisions in the group deteriorated progressively as a result of increased competition and the international economic recession. This meant they were incapable of supporting the losses in the core airline business and the full impact of the airline's losses were no longer cushioned by profits generated elsewhere.

On 22 June last, in keeping with the partnership approach to which I referred earlier, the Cabinet sub-committee on aviation met the Irish Congress of Trade Unions to discuss Aer Lingus' strategy. That meeting was very constructive and vital in the whole process of reaching agreement on the implementation of the restructuring programme. As I outlined to this House before, it was recognised and agreed at that meeting that, first, the underlying financial position of the company was very grave and unsustainable; second, the core airline business would have to be returned to operating viability; third, all sides were committed to achieving the essential reduction in employee numbers which this entailed through a voluntary scheme; fourth, the question of participation by Aer Lingus employees in the future success of the company should be explored as a tangible form of recognition for the additional contribution being asked of the workforce at present; and finally, a special enterprise development unit would be set up right away, to consist of representatives of the unions and Aer Lingus, together with the IDA, Fingal County Council, FÁS and the Department of Enterprise and Employment, to identify new employment opportunities within the Aer Lingus structure.

On 6 July last, the Government endorsed the broad strategy set out in the Strategy for the Future and agreed, subject to certain conditions, to make a major contribution to the achievement of the strategy's goal — the restoration of commercial viability to the company. Since then, I am pleased to say, substantial progress has been made.

It is an essential part of the strategy of Aer Lingus that the airline's annual operating costs must be reduced by £50 million to restore it to commercial viability. The Government made this a condition of providing £175 million in equity. We did not stipulate how the savings should be achieved but pointed out that this was a matter for negotiation between the management and unions.

Aer Lingus management and the unions engaged in vigorous and forceful negotiations on the implementation of the cost cutting measures in the strategy. Those negotiations reached a successful conclusion which was emphatically endorsed by a large majority of the workforce. I would like to take this opportunity to pay tribute to the negotiating teams who worked long and hard to achieve agreement in a fair and reasonable way. The professional facilitation provided by the Labour Relations Commission staff in the negotiation and conciliation process was crucial and I would like to commend them also for their work.

Successive Governments have endorsed the decision of Aer Lingus to expand into businesses which were not part of the core activity. This strategy of diversification was aimed at underpinning the notoriously cyclical airline business. It provided profits in buoyant market conditions. However, these ancillary businesses, particularly hotels, have increasingly been subject to the same cyclical downturns as the airline itself, thus weakening their ability to cushion the airline in recessionary times. They also tend to have large capital requirements which compete with those of the airline and which can no longer be met from group resources.

In the current circumstances, it is time for Aer Lingus to divest itself of many of these businesses, so that the group can strengthen its currently weak balance sheet and management can concentrate their energies and attention on the core air transport business. Accordingly, the judicious disposal of a number of assets which are not essential to the core business is an essential part of the Strategy for the Future. This programme of disposal of non-core assets will be an orderly one and not a fire sale one. I must emphasise that the sale by Aer Lingus of any of its subsidiaries is primarily a commercial matter for the company.

Some subsidiaries such as TEAM and Airmotive have considerable synergy with the airline. In these cases, joint venture partnerships to assist the development of the companies concerned are the preferred option of Aer Lingus.

Let me now turn to the question of Shannon and where it fits into the Aer Lingus strategy. Aer Lingus and Shannon have grown up and developed together to such an extent that Aer Lingus accounts for 70 per cent of North Atlantic scheduled services through Shannon, despite the advent of other scheduled services in recent years. Without Aer Lingus, the future of Shannon would be bleak. However, as I pointed out last week in the Dáil, Aer Lingus needs Shannon just as much as Shannon needs Aer Lingus.

For a variety of reasons, such as seasonality and intensive competition over London, the economics of a transatlantic operation for Aer Lingus are difficult. The company lost £12.9 million on its transatlantic operations last year. Without the changes proposed in this new Strategy for the Future, it would have lost a further £20 million this year. This was clearly unsustainable. Aer Lingus would have been forced to pull off its transatlantic routes altogether if action had not been taken.

The Aer Lingus package for Shannon is both imaginative and progressive and has the full support and approval of the Government because it represents a major commitment on the part of Aer Lingus to Shannon. For the first time Shannon will have its own transatlantic operation based in and managed from Shannon. Aer Lingus transatlantic services will stop and start at Shannon. There will be a year round daily New York service and a dedicated Shannon-New York service in the peak summer season. There will be no change in the current Boston service.

Aer Lingus is examining ways of developing new business, including significantly lowering fares from the US to extend the peak summer season and will work closely with local travel and tourism groups in the Shannon region. In addition, other marketing opportunities for the new low cost airline operation at Shannon will be exploited for other business in all markets, particularly in the off-peak period. Aer Lingus will base an extra aircraft at Shannon to operate a new early morning Shannon to Dublin service, greatly improving the service out of Shannon by providing new connections to six European and three UK-provincial destinations.

It has been said that the amendment to the Ireland/US air transport agreement heralded the end of Shannon as we know it. This criticism is ill-informed and, in fact, the opposite is the case. If we had not succeeded in getting the US authorities to agree to the amendment, there would have been a complete "open skies" regime between the US and Ireland with no requirement on US carriers to stop at Shannon ever again. This is because under the previous agreement signed in 1990, once one carrier operated a direct flight to Dublin, all carriers would be entitled to bypass Shannon. Thus, if the transatlantic proposals in the Aer Lingus strategy had been put in place without the bilateral agreement having been amended, the Shannon stop would have disappeared completely and Shannon's status would have been eroded.

An alliance with another carrier is frequently proposed as some sort of panacea for all Aer Lingus' ills. This is an unlikely scenario but, nevertheless, alliances are worth pursuing. Aer Lingus is confident that, when the route network is restored to profitability, the airline will be in a position to strengthen both its market and financial positions through alliances with other carriers feeding into the Aer Lingus system. Some marketing alliances have already been entered into. Earlier in the year, Aer Lingus concluded a memorandum of understanding involving a world-wide interline feed agreement with British Airways on passengers and a similar agreement has recently been concluded on freight. Aer Lingus will continue to search out strategic alliances. However, the company believes that it may have to wait until the strategy is fully operational and the airline has achieved the necessary financial targets so that it will be better placed in seeking a partner.

The Bill has three principal objectives. They are to authorise the Minister for Finance, as shareholder, to inject £175 million equity into Aer Lingus; to organise the group's corporate structure and to allow for employee profit sharing schemes.

The existing corporate structure of the Aer Lingus group has a number of shortcomings. It has developed largely for historical reasons. For a start, the Aer Lingus group does not exist as a legal entity. Aer Lingus, the airline, comprises two separate legal companies. Aer Lingus plc was incorporated in 1936 and operates air services within Ireland and between Ireland and Europe. Aerlínte Éireann plc was incorporated in 1947 and operates air services between Ireland and the United States. Although separate legal entities, the two companies share a common management and board of directors. The services of both companies are integrated under the marketing name of "Aer Lingus".

While the existing structure, with all its subsidiaries, may have been convenient in the past, it is now more of an encumbrance which causes confusion. The audited accounts of the two companies, Aer Lingus plc and Aerlínte Éireann plc, suffer greatly from a lack of transparency. This causes difficulties for the airline in its dealings with financial institutions.

There is no rationale for the present distribution of the various subsidiary companies between Aer Lingus and Aerlínte. Ownership of the subsidiaries was largely determined by tax considerations at the time each company was established. This has the effect of adding to the confusion about the group structure. The Strategy for the Future could not be successfully implemented without a corporate restructuring, to simplify the structure and to make the relationships between the companies in the group more transparent.

An exhaustive examination has taken place in recent years of options which would address the serious shortcomings of the present structure with a view to identifying the most appropriate corporate structure for the group. The Strategy for the Future proposed significant changes in the group's structure. The strategy envisages a reorganisation of the group into four separate companies: Aer Lingus; Aer Lingus-Shannon; Aer Lingus Express and a holding company for support and subsidiary companies. Aer Lingus will serve Ireland, the UK and continental Europe. Aer Lingus-Shannon, based at Shannon, will provide direct services to the US from Shannon directly and from Shannon through Dublin on current routes.

In keeping with its strategy of competing in all segments of the market, Aer Lingus intends to develop the concept of a low fare/low cost carrier, separately branded as Aer Lingus Express, to compete mainly in those segments of the UK market which are purely cost driven. I will refer to this later. Subsidiary and support companies within the Aer Lingus Group will become independent profit centres responsible for their own cost structures.

This Bill provides for the restructuring of the group by the establishment of a new company, Aer Lingus Group plc, as a holding company for the Aer Lingus group of companies. This holding company with be designated as an air company for the purposes of the Air Companies Acts. The Minister for Finance will transfer his shares in Aer Lingus plc and Aerlínte Éireann plc to Aer Lingus Group plc in exchange for shares in Aer Lingus Group plc. Aer Lingus and Aerlínte will then be wholly owned subsidiaries of Aer Lingus Group plc. Aerlínte will effectively become Aer Lingus Shannon.

The restructuring will preserve the essential character of the Group, including the primacy of the airline business. According to the memorandum of association of the new holding company, Aer Lingus Group plc, the first object of the company will be to carry on and foster the business and pursuit of air transportation in all forms, both within Ireland and internationally.

The matter of Aer Lingus Express has been a source of some comment. Concerns have been expressed in some quarters that Aer Lingus might use part of the £175 million to subsidise Aer Lingus Express. I want to repeat what I said in the other House during the debate on 14 December last on that matter, namely that Aer Lingus Express will be a standalone company operating on a fully commercial basis.

The Government will ensure that the Aer Lingus Express operation will be put in place only when the company can demonstrate in full detail, on both costs and revenues, that such a low cost operation can operate profitably in a competitive market. Aer Lingus will be required to submit a comprehensive business plan as part of the approval procedure. I have consistently and repeatedly made it clear that the Government's proposed investment in Aer Lingus is an essential part of a once-off financial restructuring package designed to restore the airline's commercial viability within a short period. There is and can be no question of the investment of £175 million being used to subsidise loss making routes. The Bill provides for the Government's proposed equity investment in Aer Lingus. The Minister for Finance will be authorised to take up shares to the value of £175 million in Aer Lingus Group plc. The capital investment will be made on a staggered basis, with £75 million in 1993, £50 million in 1994 and £50 million in 1995.

Section 2 provides that the share capital of Aer Lingus Group plc shall be such amount as may be determined from time to time by the Minister for Finance after consultation with myself or the Minister for Transport, Energy and Communications of the time.

Section 3 enables the Minister for Finance to exchange his shares in Aer Lingus plc and Aerlínte Éireann plc for shares in Aer Lingus Group plc. It also provides that Aerlínte Éireann's shares in Aer Lingus plc shall be exchanged for shares in Aer Lingus Group plc. These shares will then be redeemed by the holding company. Section 4 enables the Minister for Finance to subscribe for further shares in Aer Lingus Group plc up to £175 million.

The other main elements of the Bill include section 5 which provides for employee profit sharing schemes. Sections 6 and 7 provide that Aer Lingus Group plc shall be an air company within the meaning of the Air Companies Acts, 1966 and 1976 and that Aer Lingus plc and Aerlínte Éireann plc shall no longer be statutorily designated as air companies. Section 8 provides that the number of directors of Aer Lingus Group plc shall be 12 of whom four shall be worker directors elected under the Worker Participation (State Enterprise) Acts. Section 9 provides that the chairman and directors of Aer Lingus plc and Aerlínte Éireann plc, and any other such subsidiaries of Aer Lingus Group plc as the Minister may direct, shall be appointed by the Minister or by the chairman of Aer Lingus Group plc with the consent of the Minister. This also applies to Aer Rianta which is the second designated air company.

Section 13 amends the Worker Participation (State Enterprise) Acts, 1977 and 1988, to ensure that the provisions of those Acts apply fully to Aer Lingus Group plc. Provision is also made to ensure that the parts of the Worker Participation (State Enterprises) Act, 1988, dealing with worker participation below board level continue in Aer Lingus plc and Aerlínte Éireann plc. Section 14 provides for the extension to air companies and their subsidiaries of control on (1) the establishment or acquisition of subsidiaries; (2) the amount of investment in undertakings other than subsidiaries and (3) borrowing, by specifically extending the control to subsidiaries.

Section 16 provides that all moneys required by the Minister for Finance to meet sums payable under this Bill shall be paid out of the Central Fund. The Bill provides that the money shall be paid to a special account and issued from that account subject to such terms and conditions as the Minister for Finance may determine.

It was agreed at the meeting between the Cabinet sub-committee on aviation matters and the Irish Congress of Trade Unions on 22 June that the question of participation by the employees in the future success of the company should be explored as a tangible form of recognition for the additional contribution being asked of them. On 17 November 1993, agreement was reached between the Government, the Irish Congress of Trade Unions and affiliated unions representing employees in Aer Lingus on an imaginative arrangement for participation by employees in the company. Under this agreement, 10 per cent of the profits before tax will be allocated to the employees so that the employees can receive the equivalent of 10 per cent of the issued share capital of the company, split 50:50 between shares and cash.

Some 5 per cent of the shares of the company in issue will be issued to the employees up front, on a partly paid up basis in return for a nominal payment. The balance of the payment for the shares will be paid out of the additional distribution of profits. At the discretion of the employees, some or all of the 5 per cent cash payment may be used to accelerate the payment of the balance of the share price. Distribution will cease when the threshold of 10 per cent of the issued share capital has been reached. Section 5 gives effect to this agreement by providing for employee profit sharing schemes.

In view of my background, having served for a period as Minister for Labour, it goes without saying that I am a firm believer in worker participation. I believe that people at operative level have a vital contribution to make as to how the company should meet the competitive challenges facing it. I am, therefore, complying in full with the Worker Participation (State Enterprises) Acts of 1977 to 1991.

Section 8 provides that at group board level, where all the strategic policy decisions for the business will be taken, the provisions of the Worker Participation Acts will apply. Not only that but the section also provides that existing worker directors appointed by virtue of the relevant Acts will be appointed to be directors of the group board for the remainder of their terms.

I am also aware, as I am sure are Senators, that the worker participation legislation extends beyond representation at board level. In the discussions with the Irish Congress of Trade Unions, and the affiliated unions representing employees in Aer Lingus, I specifically undertook that structures for participation by employees within Aer Lingus would be strengthened.

Some suggestions were made when this Bill was originally published that I intended to exclude worker directors or representatives of employee interests from being members of subsidiary boards in the Aer Lingus Group. That was never my intention. I had always intended that representative employee interests would have a part to play on the boards of the main airline operating subsidiaries. In furtherance of that, I moved an amendment to the Bill in the other House to provide that the directors of the existing companies, that is Aer Lingus plc and Aerlínte plc, will include a representative of employee interests.

I wish to address the matter of the examination by the European Commission of the Government's investment in Aer Lingus. The Commission may decide in certain cases that aid may be granted to individual airlines which have serious financial difficulties provided certain conditions are met.

One of these conditions is that the aid must form part of a programme, to be approved by the Commission, to restore the airline's financial health so that it can, within a reasonably short period, operate viably without further State aid.

The Government forwarded the formal notification of the proposed investment in Aer Lingus to the European Commission in August of this year. The Commission decided today to authorise the Irish Government to inject £175 million equity into the air carrier Aer Lingus. This equity injection, to be carried out in three tranches, will enable Aer Lingus to implement a comprehensive restructuring plan over two years. After a thorough examination of the case, the Commission decided to consider the aid as compatible with the common market.

This is the first air transport State aid approved since full air liberalisation was introduced on 1 January of this year. I am very satisfied that I and my officials have managed to obtain the Commissioner's clearance in a very short time scale through several meetings and almost daily contact with Commissioner Matutes and his officials. Normally, the approval process would have taken significantly longer. I am particularly pleased that the very onerous conditions which at one time appeared likely to emerge did not materialise as a result of the Government's efforts The limited conditions which have been laid down by the Commission will apply for a relatively short period and, in any event, no later than 1995.

The terms of the Commission's decision should not restrict the airline's ability to operate commercially in accordance with its strategy which had been endorsed by the Government. This has been confirmed by the board and management of Aer Lingus with whom close liaison has been maintained at all times. The Commission's decision is a major step in the implementation of the future strategy of Aer Lingus which will pave the way for a successful commercial future for the airline. It is now up to all concerned in Aer Lingus to grasp the opportunities which lie before them.

Finally I express my appreciation of the efforts of the Aer Lingus board and management, the unions, MEPs and my officials over the past number of months in achieving such a successful outcome with the Commission under difficult circumstances. In bringing this Bill before the Oireachtas, the Government is fulfilling its commitment in the Programme for a Partnership Government to ensure the commercial future of Aer Lingus as part of our overall air transport policy. It is in Ireland's interest to have Aer Lingus as a substantial airline to serve trade, tourism and overall national needs. With this Bill and the full implementation of the strategy for the future, we will ensure that Aer Lingus will have a future of which we can be as proud as we are of its past. I commend the Bill to the House.

Mr. Ross

I welcome the Minister to the House and I congratulate him for achieving a solution of sorts to the problem with which he was confronted. It is appropriate, because some of my remarks will not be complimentary to Aer Lingus or the plan, to say that the Minister has shown a tremendously robust, aggressive, open and courageous attitude to this problem and to the problem of Telecom Éireann. Nobody could have had a more difficult baptism with regard to these semi-State bodies.

The Minister introduced a solution of sorts. He has successfully overcome the immediate problem which was that Aer Lingus was in serious danger of going bust. As the Minister said, if things had continued as they were Aer Lingus would have run out of money. First we were told it would run out of money by the end of August, then we were told by the end of October. However, it would certainly have run out of money by now. The immediate problem has been overcome. Aer Lingus will receive funds and a solution has been suggested and agreed between all parties involved. There is no doubt that this so-called solution required a great deal of pain and radical measures.

However, the Minister and the Government have not tackled the fundamental problems of Aer Lingus as I do not think they ever questioned the necessity or viability of having a national airline. The Minister said: "It is in Ireland's interest to have Aer Lingus as a substantial airline to serve trade, tourism and overall national needs." Although that is a bona fide statement, it is also an unsupported assertion. I am not so sure that we should accept, without question, the need for a national airline. I am not sure that what we are pursuing is not a sentimental attachment to the shamrock. Is Aer Lingus a symbol of our independence and our nationhood and as such should it be supported at all costs? I have not seen or carried out any detailed research on how or whether we would manage without a national airline. However, in view of the performance of Aer Lingus in the last few years it is undoubtedly true that we would have been far better off commercially without it. The national airline has become a commercial albatross around the neck of the nation and it will continue to be a problem in the years ahead.

The other fundamental question which the Minister did not address—and which Aer Lingus symbolises in its difficulties over recent years and months — is the problem of the semi-State sector. The Minister helped to perpetuate a myth about our semi-State sector in saying:

Aer Lingus has been a critical part of our commercial semi-State sector, a sector which has been fostered and encouraged to develop by successive Governments. [That is absolutely correct.] That sector has played a vital role in the development of our economy since the foundation of the State and has led the way in economic progress.

This is unsupported assertion. The Minister may be right or he may be wrong. Recent experience in the semi-State sector has been so disastrous that I am amazed the Government has not taken a fundamental view of it and decided that something is dramatically wrong.

This Bill is part of the philosophy of muddling from crisis to crisis. Each crisis is overcome by injecting State money into the particular semi-State body which is constantly confirming the inherent difficulties in that sector. It is no coincidence that this week we are voting £175 million of taxpayers' money for Aer Lingus after voting extra expenditure for the Film Board last week. Bord na Móna reported losses of £9 million in the same week and Irish Steel — I have not heard the 1 o'clock news — was in serious crisis early this morning and could only be saved by £10 million of State money which it will probably receive by way of guaranteed loan. Week after week — and I presume this is a particularly bad week — we inject State aid into the semi-State sector, guarantee loans or authorise expenditure on it. The lesson in this consistent pattern is that the semi-State sector has proved itself unable to stand alone. That is unfortunately true.

The Minister will say — he may be right — that this Bill will put Aer Lingus on its feet. However, the Government needs more than £175 million and the Cahill plan to do that. It must look at the fundamental problems in the semi-State sector, one of which is that it is politicised and Government controlled. We placidly talk about the semi-State bodies as being commercial semi-State bodies or commercial State sponsored bodies, they are commercial in certain circumstances but they are also political. They are under constant political and Government pressure to perform social service activities as well as commercial activities. That inherent conflict, which the Minister failed to recognise, will be there for as long as the semi-State sector has a dual mandate to make money and to pursue Government policy.

In that context one might ask why the boards of Aer Lingus and all semi-State bodies are appointed by the Government. It is fair to ask what the board of Aer Lingus has been doing for the last five or six years. As far as I know, no non-executive member of the board was dismissed in that time or during the Aer Lingus crisis. The board must take responsibility for this crisis. Membership of the board of Aer Lingus is a prestigious job. It carries a small salary but considerable perks. It is a job which has been used ruthlessly to reward people from various political parties and it cannot be described as an appointment on merit. I do not understand why the board of Aer Lingus was not sacked at an early stage of this crisis for presiding over an obviously untenable situation, for not giving the warnings which were apparent to other people and for not making decisions which would have pre-empted and avoided the impending crisis.

I would like to know from the Minister what input the board had to the Cahill plan. From what I read about Aer Lingus and what I heard about the Cahill plan, which was implemented and constructed with great dynamism, it was purely the work of other people. The board sat waiting for the plan to come to it and rubber stamped it. It is important that we know in this case whether the board made any contribution and, if not, why it is still in situ. We should then examine the reasons why the boards of semi-State companies are appointed at all and the contributions they make.

In management terms it is fair to say that only one or two people have had to answer for what has happened in Aer Lingus and, unfortunately, they have been made scapegoats. We should know the answers to certain questions about Aer Lingus before we decide to continue with the same board we have had for the last three years. We should know why a decision was made in the mid 1980s to replace the European fleet with new aircraft. That was an extremely expensive and extravagant decision.

We should have an explanation as to why Aer Lingus made this massive investment in GPA, which was disproportionate and crazy. The Minister will correct me if I am wrong, but I think that in its balance sheet the year before last Aer Lingus reported that its shares in GPA were worth £113 million. That is an enormous amount of money and an enormous investment, even for a company the size of Aer Lingus. A year later the shares were written off as nothing, at a nil value on the balance sheet. I know that the Aer Lingus board, management and investors will say that they did well out of GPA for a long time and it paid dividends. That is true, but it is investment folly to invest such a large proportion of one's assets in one particular company. It seems even more peculiar to invest it in a related company.

This is completely contrary to what the Minister talked about as diversifying Aer Lingus activities. This is not diversification because just as Aer Lingus was likely to be subject to the cyclical influences in the industrial world and in its sector, so was GPA. As it happened, GPA was worse off as it went to a value of absolutely nothing. I have never heard anybody in Aer Lingus explain how they could possibly have over-invested in this company and continued to try to support it in difficult circumstances. It was not in the interests of the Irish taxpayer.

I think, in particular, about Aer Lingus being willing to be locked in to GPA during the flotation — which I thought a strange decision — and also the apparent willingness of Aer Lingus to support GPA after the flotation. That would have involved sinking even more money into GPA. Luckily, at some point they decided against this. The Government probably told them not to do it. However, there were forces at work in Aer Lingus which failed to see the absurdity of that GPA investment. The result was a loss of £113 million, some of which went on the balance sheet and some to the profit and loss account last year. We should ask for explanations from the board who must have been aware of this heavy investment in GPA.

We also want explanations for the losses on the Atlantic route. We want explanations as to why the Atlantic route was continued at a time when it was making huge losses. Was it because the board was under pressure from the Government to keep the Atlantic route going, or was it because they expected it to return a profit? If this Cahill plan was not implemented in the next two years, Aer Lingus would see further losses on the Atlantic route of perhaps £20 million per annum. Was this just a flight of fancy or pride which made us feel that we had to continue flying the Atlantic when others would do it for us? I am glad the Minister projects that Aer Lingus is going to reverse its situation on the Atlantic route but we will believe it when we see it.

Why did the board not look for and find a partner? It is possible that the board looked for partners — and I believe it did in certain circumstances — and they came and looked at the figures of Aer Lingus and were horrified and did not want to know anything about it. Should it not have been a loud enough warning to the board of Aer Lingus when nobody was interested in partnership that something was dramatically wrong?

The other issue we must have an answer to at some stage is Aer Lingus Holidays. This five or ten years past has been a catalogue of disasters for Aer Lingus without any explanation from the Government or from the board. We should ask them about their attitude to Ryanair. Were they involved in predatory pricing at a time which was particularly difficult for Ryanair? What is the Government's attitude to Ryanair and its workers at this crucial time for Aer Lingus? Ryanair, which has no subsidy from the Government, will have to compete with Aer Lingus Express.

I have to ask a few questions about Aer Lingus Express. I accept the Minister's assurance about Aer Lingus Express and his intentions for it, and I think the Government is backtracking on the this issue at present because of the European Commission's restrictions on the Dublin-London route. Without hearing about it in detail. I find it difficult to understand what the Minister means by Aer Lingus Express being a "stand-alone" company. I read in the Minister's speech in the Dáil that no projections or plans are ready. Apparently, Aer Lingus Express is at the moment purely aspirational. We, and the workers in Ryanair, are due a detailed explanation from the Minister of his plans for Aer Lingus Express.

Obviously, Aer Lingus Express will be on the profitable route, since the Dublin — London route is where the money is to be made, but it must stand alone and we must be reassured that there will be no cross-subsidy from the first £175 million or following subsidies. We must hear in detail what is planned. Is it going to use any of this £175 million? I cannot see how there can be no cross-subsidy. If it is sharing facilities with Aer Lingus there is a cross-subsidy. The Minister apparently appears to have convinced the European Commission that this is not the case.

The disposal of assets is an interesting point which the Minister raised. I am slightly mystified by the attitude of the Minister, the attitude of the Cahill report and the attitude of the Government to this. Am I to understand that the hotels and some of the separate divisions of Aer Lingus are now for sale? The Minister stated: "I must emphasise that the sale by Aer Lingus of any of its subsidiaries is primarily a commercial matter for the company." It was my understanding that the Tánaiste had clearly said, without any equivocation, and this had been confirmed and reiterated in unambiguous language——

An Leas-Chathaoirleach

The Senator has one minute left.

Mr. Ross

I am only starting. Are we taking Committee Stage later?

An Leas-Chathaoirleach

Yes.

Mr. Ross

——that the assets of any State company, including Aer Lingus, would not be for sale. The Minister said they are for sale and that the programme for the disposal of non-core assets, by which I presume he means primarily the hotels, although not exclusively, will be an orderly and not a fire sale one. Will the Minister clarify if the assets are for sale and will the Tánaiste confirm it because it is an important point? If the hands of Aer Lingus are tied behind its back, its hotels or subsidiaries will not be worth anything as part of the plan. However, if the Tánaiste's decision is to be reversed, well and good.

It would be crazy not to sell the hotels when Aer Lingus is in appalling debt. It is understandable that the Minister does not want to make a fire sale, although God bless his prescience because there is no guarantee that the price of the hotels or the subsidiaries which have any value will increase in the period covered by the Cahill plan. This must be clarified.

There are difficulties in relation to privatisation. The unions and the Labour Party helped to prevent the privatisation of sections of Aer Lingus and this was not constructive in a critical situation.

An Leas-Chathaoirleach

I must ask the Senator to conclude.

Mr. Ross

I will deal with this issue on Committee Stage.

Mr. Wright

Many people will want to hear what Senator Ross has to say, although I oppose some of his views. As the Minister stated, Aer Lingus should be the main airline to serve our trade, tourism and national needs. Without discussing his speech in detail, Senator Ross's memory is selective in relation to the company's history. It is not too long since the company was profitable. As I stated in the past, Aer Lingus is facing a new beginning and it will return to profit. The changes and people involved in the company will help to bring this about.

Today is a new beginning for the people who have been involved in this situation over the last 18 months. The Minister introduced a number of new measures in the company. One of the reasons the plan was successful, particularly in relation to equity and flexible changes, is that the Minister accepted the idea of partnership. During the past year he has shown by his speeches and actions that he believes in the partnership approach and the involvement of his Department, the board of management, the staff and the unions. He also introduced the words "profit" and "competitiveness" and these are the two key factors in Aer Lingus.

There is a different attitude among the people of north County Dublin to the company, although the workforce may not be aware of this. The recent vote taken by the staff of Aer Lingus was one of confidence in its future and they hope the present plan will lead to its long term viability. The Minister has also brought the management and company back to its core business. While some auxiliary factors created great profits, the eye was off the ball at times in so far as there was a crutch for the core business for several years. The plan is to return the core business to profit, this was highlighted in the Minister's speech and in the weekend interview by the chief executive.

We debated the Aer Lingus crisis in this House last November, at the beginning of this year and in July. On each occasion I mentioned that the history of the company proved that the staff would not be found wanting in whatever changes were needed to keep the company afloat. The change in work practices in the last six months — and the recent vote by the staff — have proved yet again that the staff will not cause the company any difficulties. Now that the staff are flexible in regard to changes, it is important for the Minister and all those concerned to ensure that management moves with the times. Necessary changes, training etc., must permeate the company at management level.

Last November I put forward some ideas which I thought would be in the interests of the company. A different Minister was in office then and I made the point that the company would be unable to survive if we did not have a partnership approach which would enable us to introduce an integrated plan in the interests of the company. I also outlined five or six ideas which have been successful. I will not discuss the Shannon issue today, but during the debate last July I made it clear — and the Minister has gone further — that it was up to the people in Shannon to make a success of the package put to them. Forward thinking people, including politicians and business people in the Shannon area and the tourist industry, must see this as a new beginning in which they are well protected. The decision in relation to the stopover was correct in the interests of the economy and tourism.

The new marketing alliances are correct. Senator Ross asked why it was not possible to have a partnership. Who would want to buy into Aer Lingus at present? The company must return to profit and be seen to have a viable future. As mentioned by the Minister today, part of its strategy is to look at a joint venture. I agree with the idea of TEAM and Airmotive and I ask the Minister to ensure that their hands are not tied on the issue of joint venture. The Government must not intervene and there must be no strings attached if we want people to invest in these companies. Investment must be introduced as a result of good marketing. Marketing alliances will only happen in the core business and in TEAM and Airmotive if the company is returned to profit.

I welcome today's news about the equity for Aer Lingus. Over the last few weeks there have been uninformed comments in the newspapers about what would happen. I understand that the conditions mentioned in the Minister's speech will not affect the company's plans in its promotion of the core business. Some of the conditions will be in place only until 1995. Today's decision should be on the basis of our peripherality and we should seek funding for mobile assets. The funding should be made available through the Government on the basis of the peripherality of Ireland and that without sea and air transport we have no outside contact in respect of trade, tourism and so on. I therefore, ask the Minister to redouble his efforts to seek funding in the future for the provision of mobile assets. I believe we have a strong case.

The employee share option scheme was among my suggestions, although I am aware that certain commentators have opposed it. I suggested the scheme knowing the morale of the employees at the time. I believe it should be included in the programme because it is an incentive to all those working for Aer Lingus and committed in the long term to the company. When I was in business in the late 1970s and early 1980s I introduced a similar scheme in a company comprising 12 people. I understand Senator Quinn has suggested in the last year or two that this is a way forward in the interests of partnership and profitability within the company. I recommend and support the concept that when the company returns to profitability it will share this in a small way with its employees.

The role of Aer Rianta has not been to the forefront in the last year. I have previously suggested the role it should play in helping to secure the return to profitability of its main customer. This should be accomplished not to the detriment of Aer Rianta but in a "hands on" way; there may be conditions and costs which could be examined in the interests of achieving this objective.

I welcome the idea of joint venture partnership for TEAM Aer Lingus and Airmotive. There are other issues relating to these companies which I also welcome. There are many local employment groups in the north county area, established within the last six to ten years, which should be included in the talks on the special task force because I believe they would have many suggestions to offer.

If the establishment of the new boards brings more transparency to accounts and to the accountability of board, management and the workforce, as the Minister suggests and which I accept, it must be welcomed. On this issue, may I ask the Minister to detail the number of the new boards and their compilation? In this respect I note the Minister has advised that, contrary to some suggestions, it was not his intention at any time to exclude worker directors or representatives of employee interests. Perhaps the Minister would tell us the numbers on each board, the proportion related to the workforce and the link with the main board.

The Minister has brought about a fundamental change in the way people view Aer Lingus. During this most difficult time it was satisfactory to all that staff reductions were acquired by voluntary redundancies. At present the large workforce has given a commitment to Aer Lingus. The fact that the Minister has placed profit and competitiveness at the top of the agenda can only be good for the company. I reiterate that without proper management structures and direction, the sacrifices the workforce has made in the past, and are making, together with the flexibility in work practices which have been introduced, will go to waste. I urge the Minister to ensure that whatever is required at management level is undertaken.

As I mentioned, the staff have never been an impediment to ensuring the company remains in profit. I have no doubt that with the changes made, together with the support of the equity announced today and the support of management and the board, the company will return to profitability and play its part in the development of our economy as it has done over many years. I believe there is a need for a strong Aer Lingus in the interests of the economy as a whole.

Mr. Quinn

I wish to share my time with Senator O'Toole, I understand he wants five minutes.

An Leas-Chathaoirleach

I must advise the Senator that on Second Stage his request is not in order.

Mr. Quinn

I welcome the Minister to the House and I welcome this Bill. I have listened carefully to speeches made thus far today and I have not heard the word "customer" used in any of them. There has been a concentration on finance, management, boards and workforce. These are all important elements in a successful business. However, at the outset I wish to consider the issue of the customer, because for almost a year now, all attention has been focused on the financial and structural aspects of Aer Lingus, similar to the matters addressed in this Bill.

I believe that the future success, indeed survival, of Aer Lingus is not guaranteed — and I emphasise "guaranteed"— by anything that has happened to date. The injection of capital, the restructuring, the agreement of Brussels on the one side and of the unions on the other are all necessary conditions for success but, in themselves, they are not enough. They are nothing more than a framework on which success or failure can be built.

It is now time to focus on what is required to build a success on that framework. I have been in business for over 30 years and I have never found business easy. I have said that if we concentrate on a single element all will be well. I believe we are all in danger of forgetting, including those who work in Aer Lingus, Members of the Oireachtas and the public, that what determines an airline's success or failure in today's conditions, and probably in yesterday's conditions also, is the customer. It is the fare paying passenger who will decide the fate of Aer Lingus, not the Members of this House, not the bureaucrats in Brussels and not the unions, management and workforce in Aer Lingus. It is the passengers who will decide the fate of the company.

Why are we in danger of forgetting this? I believe it is because we do not realise how radically the world of aviation has changed over the last five to seven years. The Gulf War was merely a blip on the chart. The fundamental change was the deregulation of air routes and the opening up of what were once protected markets to wholesale competition. In this respect we can thank Mr. Peter Sutherland's efforts in Brussels to ensure that this had to happen if we are to have a competitive marketplace in Europe for the airline industry.

Passengers now have a choice of airlines; they are no longer offered Hobson's choice as they were for so long in the past. Passengers can make a conscious decision to choose one airline over another; I gather that we as a nation no longer have the right to refuse somebody the right to fly on a certain route if the safety conditions are passed.

How customers choose determines the amount of business or the amount of money an airline gets. It would be a big mistake to believe that the only way one competes in this situation is on price. Too often in the past companies believed that to be the case. The recent history of Aer Lingus is a classic example of how wrong it is to compete only on price. One ends up losing a packet and even then one does not succeed in getting the increase of the market share one requires.

Apart from price, the other main area of airline competition is service. The recipe for success in the aviation business today is to compete effectively in both those sectors. One competes on price in order to play the game. One wins the game by the superiority of the service offered on the aeroplane.

When greater access to the airways was allowed, Aer Lingus became entitled to run on routes leaving Manchester to destinations all over the Continent. It also flew to Europe from other British airports. It caused many of the present troubles by investing heavily in new aircraft to service those routes. Aer Lingus was quickly driven out of those markets by the competition, who reduced prices to the point where our national airline could not compete.

If its cost structure had been right, Aer Lingus could have continued much longer than it did. The strategic problem was that it was competing only on price. It was offering what I would call a "me too" service. It was seen as another airline offering flights to Manchester, Copenhagen, or Zurich. However, if Aer Lingus had built up a reputation for customer service, people would have looked at the list of airlines flying to a given destination and chosen Aer Lingus because it was special.

I travelled once from Birmingham to Brussels and on another occasion from Manchester to Copenhagen. Those people getting on the aeroplane in Manchester or Birmingham had no loyalty to Ireland or to the airline; it simply suited them to travel on that route. If Aer Lingus had conducted a market research survey and every passenger said everything connected with the flight was all right, that would not be enough.

In order to achieve success in the modern marketplace, it is not enough that everything be fine or that nothing goes wrong. In the modern marketplace, and certainly in this instance, people need to be made raving fans of the company. I use that phrase because a man called Ken Blanchard published a book recently entitled Raving Fans. His point is the same as mine; to survive in business it is no longer enough to give the customers what they want. Companies must make customers so enthusiastic about the service received that they will go out of their way to use it.

Those who travelled from Manchester to Copenhagen and Birmingham to Brussels received satisfactory service and no more. That was the problem. If Aer Lingus had made passengers on those flights enthusiasts for the airline, the problem would not have been the same. Had they been enthusiastic, Aer Lingus would have had an advantage which would have enabled it to compete in a price war.

All airlines are not the same in passengers' eyes. Some airlines stand out for the exceptional customer service they offer and passengers deliberately choose them over their competitors. Last year when I travelled to Singapore I chose Singapore Airlines because of what I heard about that company. Swissair is another example of such an airline.

Nearer to home, British Airways provides a most interesting case because it illustrates that it is possible to change the position. Ten years ago, British Airways had a terrible reputation. It was regarded as snooty and uncaring about its passengers. Many people deliberately avoided travelling on that airline. However it was decided to address the problem and British Airways completely turned its fortunes around. It is now regarded by passengers as one of the best airlines in the world and with reason. The quality of its customer service is quite exceptional compared to ten years ago.

BA saw customer service was becoming the key and worked to improve its position and achieve success. Other airlines did not see the world changing and continued what they had been doing before. In the 1960s Aer Lingus had a great reputation as the friendly airline. I suggest it is as good now as it was then but the world has moved on. Standards have become higher in the airline business, as in most other business.

When all the structural changes the Minister has described have been put in place, it is vital that neither the people in Ireland nor those in Aer Lingus think the work has been done and the airline will be back on its feet straightaway. The current stage is no more than the end of the beginning. If we do not realise that and Aer Lingus does not act on it, the new injection of capital will be wasted. New crises will occur again and again.

The company should decide once and for all that it cannot survive as a "me too" airline. It can only survive in the new world of aviation as an airline which is so special that passengers will choose to fly with it rather than its competitors. Aer Lingus can only make itself special by a superior standard of customer service. If the will is there it can be done. British Airways is one example but other companies have proved it is possible.

Given our national personality, an Irish airline should be able to do this superbly. Excellence in the service area would be readily accepted from Irish people because it is credible. We are recognised as having a tradition of hospitality and being good at giving service. The will is the key; we must want to do so. This is vital to the survival of the airline. If we think the world owes Aer Lingus a living and all that needs to be done is to pour money into it, we will be making mistake which will prove fatal sooner rather than later.

Aer Lingus has to beat the world in customer service in order to survive. This House should send that message to the company. The public and the Seanad should expect this of our airline, of which we are so proud. Aer Lingus can survive if it has the will to do so.

Ms Kelly

I welcome the Bill, which fulfils the commitment in the Programme for a Partnership Government to help Aer Lingus in its hour of need. I take issue with Senator Ross. He seemed to deny that the semi-State sector had any role in providing profitable services. He should be reminded that for many years Aer Lingus did so and we should give it the same commitment we have given over the years to Iarnród Éireann, Bus Éireann and other semi-State bodies. Private companies could have provided Ireland with an international carrier of our goods and people. However they could not have provided the service as effectively and efficiently as Aer Lingus has.

The staff of Aer Lingus are second to none, whether cabin crew or baggage handlers. The airline has built up a reputation for being friendly and helpful on all occasions. By comparison with other airlines the standard of cabin service is excellent. Nevertheless, no company can stand still. As Senator Quinn said all companies need to improve. No company, whether in the private, semi-State or public sector, could ever forget that. Management must be constantly looking over its shoulder at its competition, seeing what other companies are doing and keeping up with them in every field of activity.

We also welcome the decision of the EU Commission to sanction this investment in Aer Lingus. While accepting that this will be a once-off rescue plan, I join with other Senators in their call to the Commission to take note that Ireland is an island and when the Chunnel connecting Britain with France opens, we will be the only island nation in the EU. Therefore, we will need help from time to time.

One aspect of this Bill which I welcome enormously, and it could perhaps be a model for other companies, particularly semi-State bodies, is the concept of profit sharing. After all, it is the workers who will lose their jobs if anything goes wrong with the company. If they have the most to lose, they should also be able to gain and share in the profits. If a person working in a company feels they have a share in it, their commitment to that company is greater. We are talking about commitment, putting the best foot forward and making the best impression and it is easier to do that if one feels that it will somehow result in greater profit for oneself.

I am glad that our third of the main board, as before, will be made up of workers and will also be reflected in the profit and decision sharing. However, like Senator Wright, I have many questions to ask about the boards of the subsidiary companies which I hope the Minister will answer. The Bill does not seem to indicate how many people will take up positions on the board of the subsidiary companies, who they will be, their qualifications, their term of office and their responsibilities. Although the Minister has given a guarantee that at least a representative of the employees will be on the board, one may not be enough. If one third of the management board of Aer Lingus is made up of workers at present why should not one third of the board of the subsidiary companies consist of workers? The Bill also does not indicate whether this worker representative will be selected or elected. As a democrat, I would be more in favour of the representative from the group being elected rather than selected.

What is not clear in the Bill is the connection or liaison between the subsidiary boards. As I understand it the employees of the subsidiary boards will have responsibilities towards employees in common. Cabin crews are to be shared between Aer Lingus Express and Aer Lingus Shannon. There should be close liaison between the three subsidiary boards to ensure there is no conflicting policies and that employees do not have to follow one set of rules when working on the transatlantic route and another when working on a different board. It is important for the successful operation, and for management-employee relations, that there be close liaison, whether it takes the form of formal sharing of directors between the three boards or some mechanism whereby each of the boards has an opportunity to come together to discuss specific issues.

It is also not clear to whom the boards of the subsidiary companies will report. Do they report directly to the Minister, his officials or the board of the parent company? These difficulties should be fully discussed and ironed out to avoid needless hours of frustration because people are not sure what role they will be expected to fulfil. As this company is getting such a large investment of public funds, it is important that the actions of the boards of all companies be fully transparent and respond to queries from the public. I would not like to see a recurrence of the situation that got. Aer Lingus into these difficulties and finding ourselves in five years time with the same problems. Any action must be fully transparent and publicly accountable.

I wish to refer to the part of the Bill that is closest to home, the role of Shannon airport. I hope that once Shannon has its own company, it will engender new business for the area. It needs it because every day there is increased difficulties for industry in the area. The immediate cry from the media and some members of the Opposition is that it is the changed role of Shannon that is to blame. Anything that goes wrong in the mid-west region is blamed on this change. I have been at meetings where the potholes in west Limerick were blamed on the changed role of Shannon. That negative thinking should be put to rest and we should get on with the job and try to make the best of it. As the Minister said, there is a close relationship between Shannon and Aer Lingus. Aer Lingus needs Shannon but Shannon also needs Aer Lingus.

I am heartened to see that Shannon is developing its own niche as a hub airport, but not, as one might think, into Britain. Aeroflot seems to find Shannon a good stopover. One is struck, on visiting Shannon airport, as I have during the past few weeks when welcoming members of my family home, to find that one can fly not only from Shannon to Chicago, Washington, New York and Miami but also in the opposite direction to St. Petersburg, Minsk and Moscow. Aer Lingus could do worse than join Aeroflot in some form of an alliance and to expand the role of Shannon as a hub airport, both southwards and eastwards. Perhaps for too long we have simply looked to the north American market and ignored the fact that there are people in other parts of the world who wish to avail of air travel. Why not facilitate them by giving them an opportunity to use Shannon as a stop over?

I agree with many of the points made by Senator Quinn in that we need to get it into people's minds that Aer Lingus provides a quality service. As in his supermarkets, people will come back time and again for the quality of the product that is being offered. In future people will choose Aer Lingus because of its quality. The quality is already there; we just need to build on it.

Mrs. Taylor-Quinn

I welcome the Minister to the House with this important legislation. I compliment him and his staff in the Department for their success in securing agreement from the Commission to inject £175 million equity into Aer Lingus. I am aware of the difficult negotiations that took place and I compliment the negotiators. It was important to get clearance for Ireland to make this investment of taxpayers' money in an important national asset.

In his speech, the Minister announced that there are a number of conditions attached to the Commission's approval. I hope when replying he will be in a position to give the House details of the exact conditions relating to the injection of the £175 million, which will be paid in three tranches. Are there particular conditions regarding the number of passengers Aer Lingus can carry on certain routes? Are there restrictions between Ireland and England, Europe or the United States? It is important to get clarification and detail on this. I am sure Aer Lingus and its remaining workers are extremely pleased that the Commission has cleared this money for injection. It must be realised that this is £175 million of taxpayers money. It must be judiciously spent, well used and value must be got from it. There should be no opportunity for the money to be badly spent by the company.

The Minister said one of the conditions is that the aid must form part of a programme to be approved by the Commission. He also said that the board and management of Aer Lingus believe that the restrictions are not serious and should not hinder the commercial development of the airline. That is good but given the record and performance of the Aer Lingus board and management over the last three to four years, one cannot totally rely on what they say. I would like a clear assurance and details from the Minister on this specific issue.

The Bill before the House is enabling legislation to allow the Minister to proceed to reorganise Aer Lingus and to arrange for the injection of capital into the company. The crisis that has arisen in Aer Lingus was predictable. In 1990 the company returned a profit of £27 million, but, unfortunately, within three years it moved from that position to a loss of £188 million in 1993. It was a disaster. It was ludicrous and there are people who must be held accountable. We are aware of the international changes in the aviation sector but for such a disastrous change to occur within three years leaves many questions to be answered.

I do not blame the current Minister, who was presented with a hugely difficult task when he was given the portfolio. The problem was created by his predecessors, particularly by former Minister, Deputy Séamus Brennan, who let the Aer Lingus crisis lie for a number of years and took no action. He let the sore fester to a point where it was almost incurable. He was followed by Deputy Máire Geoghegan-Quinn who was in the Department for a short time. She examined the situation but did not get around to doing anything substantial because there was an election and her portfolio was changed. In future, semi-State organisations, and Aer Lingus in particular, must be accountable to this House. It is unacceptable that taxpayers' money can be literally flittered away so carelessly and recklessly without the company being accountable to this House. I hope the Minister when replying will be able to say quite clearly and definitely whether he points the finger directly at his predecessors or at the management and board of Aer Lingus. The Minister is not a man without a view.

Mr. Kelleher

It is bad manners to point.

Mrs. Taylor-Quinn

The Minister has definite thoughts on these issues. I have no doubt that since he got the opportunity to examine the entire Aer Lingus saga he can come to some conclusion as to whether it was his predecessors, Aer Lingus or both who were responsible for the crisis.

The crunch issue arose when the Aer Lingus board and management decided, and the Department agreed, to allow the Dublin-London fares to be reduced to such a level as to make them uneconomical and no longer viable. No profit was being made on any seat to London and that was done with the specific intention of getting Ryanair and British Midland off the Dublin-London route. I wonder if the Minister and his Department would have had much easier negotiations with the Commission if Aer Lingus had not adopted this attitude with British Midland and Ryanair over the years. Aer Lingus's attitude towards these companies should be examined because it did everything possible to get them off the route and put them out of business. The result was that British Midland and Ryanair, at Commission level, did all they could to try to prevent it agreeing to the £175 million injection. British Midland had a brilliant team of lawyers who did what they could to stifle the Irish case.

I suggest to the Minister that the attitude of Aer Lingus in the future towards competing airlines and their approach in relation to interlining and all the other activities carried out by airlines should be closely examined. Aer Lingus over the years refused to interline for British Midland in Dublin Airport and the Minister knows that they were quite obnoxious in their approach. Is that good policy in the interest of Aer Lingus and of Ireland? I do not think so and the Minister should look at that aspect which will come up in the future in relation to the communication and association that Aer Lingus has with other airlines.

Prior to the last election, the Minister, Deputy Geoghegan-Quinn made specific commitments in relation to Shannon Airport. The status of Shannon was highlighted as one of the substantial contributory factors to the major problems of Aer Lingus. I do not agree with that and one might say that one would not expect me to. The transatlantic route make a substantial profit in 1991 but that changed. I suggest the Minister looks at the accounting systems within Aer Lingus which have been used in recent times. This Bill endeavours to change that but there was much doctoring. Indeed, at a meeting in Shannon it was accepted and acknowledged by senior people in Aer Lingus that one could not rely on its accounts which were doctored to suggest substantial losses on the transatlantic route.

Shannon has been the victim of mismanagement in Aer Lingus and, as a result, the status of the transatlantic route has been changed. The Minister is doing his best to console the people of the area by saying things will be great and that everything possible is being done to ensure the continuation of Shannon. However, everybody in Shannon and the mid-west region knows the type of body-blow applied when the status of the transatlantic route was changed. Unfortunately, the Minister, his Department and the Government did not carry out an overview of the financial effect of this decision on the mid-west region and the west, particularly in relation to the tourism and industrial sectors. It is unfortunate that neither the Minister or the Government have agreed to undertake a feasibility study of the economic and social fallout of this decision on the region. If they had, they would be in a position to halt or counteract the serious fallout which may occur.

Before last year's election, the Labour Party gave a firm commitment to the retention of the status of Shannon and to the employees of Aer Lingus. The Tánaiste, Deputy Spring, stated in a hanger at Dublin airport that there would be no limit to the amount of equity, there would be no redundancies and that Aer Lingus was safe while the Labour Party was around and in Government. Such manipulation of workers and the public is despicable. Indeed, Fianna Fáil gave similar commitments in relation to the status of Shannon and to workers. Two weeks before the election the former Minister for Transport, Energy and Communications, Deputy Geoghegan-Quinn, visited Shannon and made a statement as to why the status of Shannon should be retained. That type of cynical exercise is deplorable.

Unfortunately, hundreds of workers have lost their jobs in Shannon and Dublin. Most of them are in the process of arranging redundancy packages and will experience hardship and loss because they must continue to pay mortgages and look after children; they must face the same responsibilities. We must be aware of what is happening.

Mr. Cahill was appointed head guru by the Minister. I realise the Minister had to take action and, in fairness, he was the only one of three Ministers who did so. The person he appointed got down to work. We were not pleased about what happened in Shannon, but we realised there were other areas which had to be dealt with. In doing so, the Minister tried to reach the best possible arrangement. The Bill which will put into effect the recommendations of the Cahill plan which establishes a number of groups, including Aer Lingus, Aer Lingus Shannon, Aer Lingus Express and a holding company.

In relation to the subsidiary section, the Minister referred specifically to TEAM Aer Lingus. Because of its association with Aer Lingus, TEAM Aer Lingus will be maintained. However, the Minister did not refer to other subsidiaries, including Cara and SRS in Shannon. What is the position in relation to SRS? Are there orders on the company's books? Will staff continue to be employed there? Does the Minister agree that SRS Shannon is as closely associated with the airline company as TEAM Aer Lingus? I hope the Minister can give an assurance that SRS Shannon, a subsidiary of Aer Lingus, is safe.

The Minister did not refer to Cara, the hotel group or to baggage handling, sales and catering. Many of the employees in the hotel group are located outside the country, but nevertheless they are employees of Aer Lingus and most are Irish. We have an obligation to let these people know what the future holds for them. There have been rumours that baggage handling may be put out to tender. We, in Shannon, are concerned about that and we would like to know the position in relation to the future of baggage handlers. Is it the intention to put catering out to tender or to offer it to private enterprise in the next three years?

A number of questions are being asked about the overall situation. Given what the Minister said today, the airline sector is the only one which is secure, while the subsidiaries may be in danger. I hope the Minister will clarify this in his reply.

Mr. Daly

Senator Taylor-Quinn would be well advised to dispense with some of the baggage because it has been hawked around in the past. She mentioned the necessity of an impact statement to identify fallout from the change in policy in relation to the Shannon stopover. However, it would be more important for the Senator to assess the impact on Shannon and the mid-west region if Aer Lingus had collapsed. The Minister faced this possibility when he took up this position.

I avail of this opportunity to congratulate the Minister on the energy and vitality he has brought to Government aviation policy. I commend the skilful and professional way he and his officials handled the Aer Lingus problem since taking over that complex and important area. As the Minister said, this legislation deals with three major issues. First, the restructuring of the companies involved in the aviation business, second, the Government financial injection which has be approved by the EC Commission and, third, the profit sharing arrangement for employees.

The work done by management, employees and, in particular, unions and Department officials in piecing together the various elements of this strategy for the survival of Aer Lingus deserves commendation and praise. At the beginning of the year the wildest imagination could not have dreamt that we would now see the various elements of the rescue strategy for Aer Lingus coming together. I congratulate the Department, the Minister, his officials, the management and workers of the company on the professional and skilful way they handled this. It was a delicate and tense situation and a dispute or disagreement would have been detrimental and devastating to the entire operation. The way this episode was handled gives a vote of confidence to the trade union movement and the skilful negotiations of management and workers in bringing together this extraordinary package in such a short time. However, a continuation of the partnership between management and staff will be necessary.

In outlining the necessity of putting Aer Lingus on a profitable cost-effective basis, the Minister has sent a clear signal to those involved in the tourism business, in particular, those in the Shannon and mid west region. Shannon is, to a large extent, a seasonal airport dependent on tourism related business. Unless the whole tourism product can be kept on a cost-effective and efficiently managed basis, the future attraction of the mid-west region, in particular as a tourist destination, may well be damaged. Those involved in the airline business have to keep a cost-effective, well operated and well managed operation in place. However, there is also a challenge to the tourism interests of the mid-west region representatives of which have clearly and rightly spoken out about the importance of Shannon. They take their responsibilities seriously and will ensure that the package in the mid-west remains cost-effective, thus making the region, and the country as a whole, an attractive destination for American tourists and business interests. Many more passengers have come into Shannon this year and advance bookings indicate a resurgence of interest from North America with the advent of lower fares in off-peak periods.

I welcome the establishment of the new Shannon-Aer Lingus arrangement and I congratulate the new manager, Tom McInerney, and his staff who now have a grave responsibility to manage and promote the region. It would now be opportune to establish a board in Shannon to draw together semi-State and other bodies which have, through no fault of their own, operated in an unco-ordinated way. I refer to bodies involved in tourism and business promotion in the mid-west such as the Shannon Free Airport Development Company, Aer Rianta, the many private companies involved in tourism including tour operators, and the chambers of commerce. Such a board is urgently needed to bring together the expertise of tourism bodies in the mid-west and business professionals and the new Aer Lingus company. Such an arrangement would attract more visitors to Shannon Airport and maintain Shannon as the attractive destination it has always been for the American tourism market.

Aer Rianta should proceed with its investment plans for Shannon. The company has a number of propositions dependent on the relocation of the transatlantic fleet in Shannon. These include the expansion of aprons, resurfacing the cross runway, building new hangars, and new offices and staff facilities. EU funding is available with Government funding for that type of investment so I urge Aer Rianta to press ahead speedily with the reconstruction and development work essential to make the whole transatlantic operation, based on Aer Lingus and Shannon, effective and viable.

I am pleased to welcome to the House the Minister of State, Deputy Treacy, who, with Minister Cowen, has been a tremendous driving force in the whole area of air navigation and transport. The Minister recently brought the Irish Aviation Authority Bill, 1993, before the Seanad. I congratulate and compliment him on the decision to establish the new aviation academy in Shannon, a suggestion I put forward. Following discussions with Limerick University and officials of the new Aviation Authority, the Minister today announced the establishment of the new academy at Shannon. This should be a message to people who continue to moan about the loss of the airport's transatlantic status that the Government — like previous Governments — is committed the development of Shannon Airport. The Taoiseach has been a frequent visitor there, as have Ministers Cowen, Treacy and others. They fully recognise the pioneering work as well as the professionalism of those involved in the aviation business at Shannon. The establishment of the new academy is a vote of confidence in Shannon and should dispel any fears about a lack of Government commitment or investment. I congratulate the Minister and the Government on this far-sighted and positive development.

I also compliment the professionals in the Minister's Department who negotiated the bilateral agreement with the United States. I was involved with the Department of Foreign Affairs when previous negotiations were held on bilateral agreements and everyone knows how complex and difficult they were. The present United States' Administration would like to dominate the entire European aviation business, as well as many other areas, if they could get away with it. In negotiating the agreement and travelling to the United States to copperfasten it, the Minister has ensured the bilateral arrangement will underpin Shannon.

I would like to see some new developments at Shannon, including the purchase of new aircraft. The current climate in the aviation business provides an opportunity for the new Aer Lingus authority to purchase such planes for the transatlantic operation. This would underpin the Government's commitment to the development of Shannon.

It is important to put on record this House's appreciation of the professional way in which the Government's case, seeking European clearance for State funding for Aer Lingus, was dealt with at EU Commission level. I recently visited Brussels for discussions with some of the people involved and it is recognised by the EU that, as well as being dealt with in an expeditious way, the Government's application was competently presented. The speed with which the issue was dealt with — in an area as complex as international aviation which involves new regulations — by the Minister, his staff and the Irish Government's personnel in Brussels, indicates the high degree of professionalism in our aviation services. Faced with the challenge, they can deal with complex matters and obtain results such as those announced today. I welcome the EU's clearance for the Aer Lingus equity injection as well as the Minister's decision to proceed with a new beginning for the comany and the development of new business and services, particularly in the transatlantic sector.

I welcome the legislation and compliment all those involved in it. It sets a challenge of new and exciting possibilities for the various companies forming the new arrangement. The troubles of the past can be put behind us and new alliances put in place to make Irish aviation the dynamic force Aer Lingus was for many years. The temporary setbacks and difficulties experienced from time to time can now be put aside and the energy and vitality displayed by the Minister can work its way down to every section of the new operations. We can see a reorganised, vibrant organisation serving its customers, as Senator Quinn rightly said, and serving business interests and people in regions which depend so much on our national carrier to operate successfully and to bring people in and out of the country. There is now a great new challenge facing Aer Lingus and it is one they will meet with the same enthusiasm they have shown in the past. We must put past difficulties aside and march forward into a new era of prosperity for the national airline and the people involved in tourism and the businesses dependent on it.

Professor Lee

May I share my time with Senator Norris?

Acting Chairman (Mr. Fitzgerald)

Is that agreed? Agreed.

Professor Lee

I welcome the legislation. The tributes which have been paid to the Minister for his energy and commitment to achieving progress in the Aer Lingus saga are highly commendable.

My questions and comments relate to a number of details. I am glad the Minister is adopting a non-ideological approach to Aer Lingus and recognises it has been a critical part of our commercial semi-State sector which has, in many respects, rendered excellent service to the economy. I am pleased to see Senator Ross' entry to the Chamber, given that I am about to make the point that it is utterly inappropriate to adopt an ideological attitude to the role of semi-State companies in an economy as small, open and vulnerable as ours where every decision concerning such companies has to be based on prevailing circumstances and not on ideological dogma which, whatever its merits in other economies and in other circumstances, may be irrelevant to ours. The problem of managing such companies cannot be based on whether they are better in principle. This depends on circumstances and requires the highest quality of both commercial and political judgment in any particular case.

I welcome the balance of emphasis in the Minister's contribution. He accepts that semi-State companies can be extremely positive and negative in their contribution to the economy, depending on circumstances. However, I find it a little incongruous that in the Oireachtas we frequently pronounce on the quality of performance of outside organisations and use words like "competitiveness", "price" and "profit". These concepts are very appropriate elsewhere but if we were to be subjected to any degree to those criteria, I suspect sweeping managerial changes as to how we conduct our business would be recommended by consultants. We set a very poor example for decision makers in other sectors, even accepting one cannot draw very close analogies in the way we undertake our business. It is with a sense of incongruity that anybody in this Chamber, certainly anybody with any responsibility for the way we conduct business in Oireachtas Éireann, should pronounce on how others do things. Having said that, and apologising to those for whom we legislate because of our inability to apply to ourselves the criteria we wish to apply to others, there are very valuable provisions in this legislation, a number of which are effectively highlighted in the Minister's contribution.

May I ask a question about the relationship between the core business and those sectors which are to be sold? I have never been wholly convinced by the argument, even though there is empirical evidence in support of it in some cases, that companies which depart from their core are almost axiomatically going to run into trouble. This proposition is widely held in management theory and in practice has occurred. However, the troubles into which such companies have run have not been in their cores but in the other areas into which they have diversified and into which they did not bring the managerial skills which enabled them to make, at least initially, a success of the cores. Aer Lingus has managed to achieve the reverse. It has been reasonably successful over time and, on occasion, spectacularly successful in the areas into which it has diversified whereas it has been less than successful in recent years in its core activity.

While I take the point that the ancillary businesses, particularly hotels, have increasingly been subject to the same cyclical downturns as the airline itself and that, therefore, the strategy of diversification, which was based at least partly on the assumption that the ancillary businesses would compensate for the cyclical downturns, may have been weakened by the most recent such downturn, I wonder if one should generalise entirely and project forward unqualifiedly from the experiences of the current cyclical downturn, which in many ways is very unusual in terms of the confluence of cyclical pressures on all these areas. I wonder whether one should assume this will inevitably be the case in the future and that, therefore, Aer Lingus should cease its ancillary activities as quickly as can be decently arranged without total disorder enveloping those areas and selling at massive losses in the current depressed state of some of those relevant markets.

The relationship between the core and the ancillary in Aer Lingus may deserve closer consideration, depending on what time horizon one has in mind, than is given to it here. It is true that the achievement of the commercial viability of Aer Lingus is the prime objective; nobody can disagree with this as the most urgent need. It is a great pity, however, that Aer Lingus' finances became so appalling that crisis management is being combined with some attempt at a longer term strategy because it does not allow for asking questions not so much about the strategy for Aer Lingus as the role of Aer Lingus in a national strategy of either transport development or of tourism and wider economic development. We have said on innumerable occasions in this House, and Senator Daly made the point implicitly in his contribution, that there is a constant tension between sectoral policy making — which is how Departments have to make policy recommendations — and regional and national requirements. Because policy is initially devised at departmental level — for example, policy on Shannon Airport, whatever one thinks of the current attempts to reorganise the role of Shannon — those who are concerned with regional consequences, mainly politicians, are viewed as demanding unfair or unjustified remission of the regional consequences of policies which are devised at national level.

Those concerned with regional policy appear, in a sense, as sinners against the economic light, although all that is involved is that the criteria by which policy is devised at a sectoral level are being subjected to scrutiny or, at least, being resisted. The resistance involves some subjection to scrutiny in a way which would not occur but for the politicians.

One of the ways in which policy formulation could be significantly improved is by finding a way — and I do not pretend that it is easy, it has baffled other countries but we are particularly vulnerable in this area — of balancing sectoral and regional concerns at the time of policy formulation. At present, sectoral concerns are considered initially and then there is a rearguard political action to try to defend local interests against the consequences of the sectoral decisions. Such decisions may be justified within their own terms of reference but are not necessarily justified within the wider terms of reference. However, because of the way we devise policy, the sectoral concerns come first and national and regional concerns and the linkages with policy resolutions in other areas are only considered retrospectively.

I will not linger over that point but, unfortunately, that is how we generally devise policy. It has certainly characterised this whole Aer Lingus saga. Even if we now have the best result possible in the circumstances, it was achieved via a process which need not have been so fraught with tension and anxiety and so messy in many ways.

I see that the Minister, and I presume this is normal in Bills of this type, is reserving the right to determine the remuneration of the chief officer of the Aer Lingus group, which shall be subject to the approval of the Minister, given the consent of the Minister for Finance. I welcome the provision for worker directors and worker participation. The more which can be done in that direction the better.

While I do not know what the chief officer of Aer Lingus is paid, in general the chief officers of our semi-State companies are paid appallingly badly by market criteria. If we are seeking managers of the calibre which is required in what, we are told, will now be a highly competitive area, then we have to be prepared to pay the market rate for such managers. I hope that will be kept in mind and the Minister will not find himself in the thicket of restrictions in which Governments, Ministers for Finance and so on have found themselves when trying to evaluate the market value of those whom they wish to employ to steer our semi-State companies in a competitive direction.

Acting Chairman

Senator Norris has less than a minute and a half.

Mr. Norris

In that case, I shall not take the opportunity now but wait for a chance to contribute later on.

Mr. Mooney

I welcome the Minister of State to the House and I also welcome the European Commission's announcement in Brussels earlier today that it has accepted the Government's application for the injection of essential equity into Aer Lingus. I am particularly pleased that this announcement has been welcomed on all sides of the House. The Minister went into the background of the crisis which faces Aer Lingus in great detail, although that crisis may be somewhat lessened as a result of today's announcement.

I wish to pay tribute to the Minister, Deputy Cowen, who, on assuming responsibility for this portfolio when the Government was formed earlier this year, immediately set about addressing the problems which had been identified by a previous Minister. I also wish to pay tribute to the far seeing philosophy of the former Minister for Transport and Communications, who is now Minister for Justice, Deputy Geoghegan-Quinn. She was the first Minister to identify the crisis which was revealed to the public and the workforce at the beginning of 1993. When she became directly involved in the Aer Lingus crisis, she requested the then board and management to devise a suitable business formula, in other words, the business package which has now, through the efforts of successive Ministers and Governments, entered the public domain.

The Minister, Deputy Cowen, briefed members of the Fianna Fáil parliamentary party when it became apparent that Aer Lingus was in severe difficulties. I particularly remember the shock which the litany of statistics he conveyed to that meeting caused. It was a shock because many of us, particularly those from rural Ireland, grew up with a strong support for the national airline - flying the shamrock was seen as a patriotic duty as much as a commercial decision. It became apparent that Aer Lingus was losing money to such a degree that unless a strategy was worked out between the various component parts — the staff, management and the Government — the airline would go bankrupt by the end of August.

One statistic which stood out on that day in May when we were briefed by the Minister, Deputy Cowen, was that Aer Lingus was losing money on every seat it sold on every commercial flight. It was obvious that something radical had to be done. It is to the credit of this Government and the Minister, Deputy Cowen, that he was able to act as a conduit and create the environment for legislation to go through the House to inject much needed equity into Aer Lingus which will, I hope, ensure its survival.

It would be remiss of me, as my party's spokesperson on transport and communications in this House, if I did not put on record the tremendous reaction of the workers and the trade unions. Many workers will lose their jobs but they considered their patriotic duty, the future of the airline and the number of jobs the industry could sustain and voted to accept the rescue package. Sometimes it is easy to criticise trade unionists going about their legitimate business or workers whom many of the public would perceive as having soft, cushy jobs.

From a rural perspective, a job in Aer Lingus — as I am sure the Acting Chairman will agree, as he is also from a rural constituency — was viewed, as was a job in Guinness, as a job for life. It also attracted a certain social status. In this age of cynicism, it was an act of unparallelled patriotism for workers to make the decisions they made in the last few months. The actions of the workers, the trade unions and management will result in a brighter future for all.

While handing out bouquets to Aer Lingus workers I have to say that I have not always been pro Aer Lingus as a corporate entity. In the past, particularly when Aer Lingus had a monopoly, I experienced a certain arrogance among its middle and upper management. This arrogance was best exemplified by the manner in which they contrived — I have to confess with the connivance of the Governments of the day — to maintain a monopoly on the Dublin-London route.

I lived in London from the late 1960s to the early 1970s and the main political issue as far as emigrants were concerned was the outrageous charges being imposed and the cartel operated by British Airways and Aer Lingus on the Dublin-London route. It may have been the enormous profits generated on this high density route which led Aer Lingus corporate management to think that the good times would continue forever and that they did not have to worry about effectively or aggressively marketing routes within the UK, Europe or beyond. To paraphrase W.B. Yeats, this has all changed, changed utterly in the new commercial environment.

It is important to acknowledge the existence of Ryanair. Many Members were concerned at what they saw as a possible continued subsidisation of the State airline to the detriment of the small privately owned commercial airline. I am glad the Minister went some way towards allaying any fears which the employees of Ryanair might have in this regard. He stated time and time again that Aer Lingus must stand on its own two feet, that airlines must be cost competitive to stay in a much tougher marketplace and that, in this regard, Aer Lingus is no exception to the rule and is now facing more intense competition from low cost airlines on all routes.

There are those who say that the conditions which the European Commission has attached to the injection of equity inhibit the ability of Aer Lingus to develop its airline business more effectively. I would see it as a probationary period for Aer Lingus. Over the two years, it will give us all an opportunity to see what a streamlined Aer Lingus is going to produce. The day of the lame duck has been consigned to history. Notwithstanding that, it is in Ireland's national interest to have a State airline. I do not subscribe to the view that, in this brave new Europe where barriers are being dismantled, it does not matter with which airline one flies. I do not subscribe to that philosophy across the entire spectrum of international endeavour. We are a separate country; we may have diminished sovereignty but we have a distinctiveness in which Aer Lingus and flying the shamrock plays a large part.

I am not going to dwell on the Shannon stopover issue as the Minister has covered it in great detail. In detailing the various aspects of the Shannon issue, he says that criticism of the Government's position is ill-informed. The Government has been attacked for an apparent lack of interest in or concern about Shannon. As the Minister points out, the opposite is the case. Even a cursory reading of the Aer Lingus package for Shannon will give the lie to those who say that the Government has abandoned them.

We are all products of our environment and I come from a county with an ever dwindling population and a poor industrial infrastructure, a Border county which has suffered more than most because of partition. We observe with envy our friends and colleagues in the midwest region and the number of jobs which have been created in the region over the last number of years, notwithstanding job losses. In many other parts of the country job losses have not been replaced. People in my part of the country, particularly in the Drumshanbo area where we lost over 400 industrial jobs in the last six years and received no replacement industry, are casting envious eyes at the people in Shannon.

I suggest to those in the Shannon region, without being political, that perhaps they should be less insular about their problems. They should look at statements such as those the Minister made in this House and see the reality on the ground. They would be more than welcome to visit parts of the west and north west of Ireland which have been ravaged industrially, economically and socially and increasingly experience a population haemorrhage. I do not mean to set one region against another but now that all of the component parts have been put in place and there is absolutely no doubt about the future of Shannon, these things should be said in order to put the issue in perspective. I am not suggesting that the people in the midwest should get down on their hands and knees to thank God but if we got half what they are getting, we would certainly be saying novenas on a regular basis.

I am a little concerned about the sale of the non core assets. The Minister made the point that through the years and particularly in the last ten years, Aer Lingus lost a great deal of money on its non core business. He said that it is time for Aer Lingus to divest itself of many of these businesses. However, he also pointed out that the main source of loss to Aer Lingus in recent years was the air transport division. As a result of the fact that the air transport division was not delivering commercially and because of the international recession and downturn in tourist trade world-wide, the non core businesses, especially the hotel group Copthorne, were not generating the same profits as previously.

Why should any company divest itself of assets even if those assets are only producing a reduced profit? Surely it takes from the viability of the core company to strip it of its assets. Aer Lingus should not easily consider selling its chain of hotels across Europe. It is as important to an Irish identity as the airline itself. I am glad the Minister emphasised in his speech that the sale by Aer Lingus of any of its subsidiaries is primarily a commercial matter for the company. I suggest that they tread warily. We are emerging from an international recession. The major growth area from now until the end of the century is tourism and leisure and yet, because of the economic realities imposed on Aer Lingus, they may be forced to sell off their hotel chain. I suggest that should be the last rather than first option.

I hope that the Minister will in his reply reassure the employees of Ryanair. They are a small independent commercial airline who several years ago, against all the odds commercially and otherwise, set about breaking the cartel and monopolies that had emerged in the airline industry between Ireland, Britain and Europe. They probably rose on the crest of a wave because of the continuing liberalisation of air transport policy and hopefully that deregularisation will continue to help them. However, I hope that the Government, as it has shown in its commitment in the application to the Commission, will not forget that while Aer Lingus is the State airline and is primarily the airline about which we should all be concerned, Ryanair is also an Irish-owned airline with Irish workers living and working in this country and if they are made redundant, they have nowhere to go.

Mr. Cregan

I also welcome the Minister to the House. I welcome the Bill and the fact that at last a company like Aer Lingus is being broken up into smaller shareholdings. For a long time many of us had the impression, like the previous speaker, that when we were talking about Aer Lingus we were talking about a very stable company but that is not the case. Many questions have been asked recently about accountability, not just of Aer Lingus but of other companies and semi-State bodies. Our semi-State bodies should report to the Oireachtas Joint Committee on Commercial State-sponsored Bodies at least twice a year.

If the public had been aware of what was happening in Aer Lingus over the last four years, many serious questions would have been asked. If every detail was explained to the public we would have suffered the political consequences. Very serious mistakes were made and there was not enough accountability. I question how anybody, especially members of the board of Aer Lingus, could allow that to happen. The banks would not allow it to happen in the private sector but we allowed it to continue and that is why I am asking about accountability. The Minister has to take a stand and insist that all semi-State bodies will be accountable to the Oireachtas Joint Committee on Commercial State -sponsored Bodies.

I am a believer in shareholding for workers, if this is done the company will benefit. I saw proof of this for the first time in a private company in Cork; the company is going from strength to strength because the workforce have a responsibility to it and of course a shareholding.

As a result of the commitment of the workforce of Aer Lingus, the company will work well in many areas. However, there are many others areas about which I wish to speak. All airlines suffered massive losses during the last two or three years and that is understandable in companies with a fleet of over 150 aeroplanes. Aer Lingus has a fleet of 25 or 27 aeroplanes and I cannot understand how every seat was losing money. There is no excuse for losing that kind of money in such a short period of time. The management and board have a massive responsibility in this regard and the Minster, to his credit, has taken a stand.

A short time before this another Minister gave the false impression that there were no great problems in regard to the west or Aer Lingus. Then within seven or eight months, a different scenario prevailed. It is a very sad reflection on us to have to go so far and I cannot stress that enough. I also question the amount of money that will be spent on cutting the workforce in Aer Lingus. I do not agree with cutting any jobs, I believe in creating them. Serious questions would be asked if a private sector company spent £47 million or £48 million on redundancies.

As the previous speaker said, working in Aer Lingus was always a pleasure and its workers had a special standing. It gave an impression, like other companies in the private sector, that those working with them are better than the rest. What is the present standing of Aer Lingus? How do the workers feel about what it costs the taxpayer? Is the money being spent properly? Are my figures right? A sum of £47 million or £48 million will be spent on reducing the workforce by around 1,500 people, which is a very sad reflection on us. I do not like to see people encouraged to take voluntary redundancy, although many will do very well out of it. It is recognised, even by the Department of Social Welfare, that people are living below the poverty line. I would prefer to see more people working in Aer Lingus, instead of redundancies, but unfortunately it was overstaffed. That is the fault of those managing Aer Lingus but the taxpayer will pay for it.

In regard to breaking up the company I recognise that the structure being put in place will benefit it, but I do not want to create the impression that all is well. I certainly do not want the board of Aer Lingus to be under that impression. We have only a very short time to show that we are doing the right thing in regard to our airline. A large amount of money was lost on the holiday homes and no questions were asked but the matter should be clarified. There was no accountability in regard to what happened there. The public are entitled to hear the facts, if the ordinary person in Leitrim, Skibbereen or Mullingar found out what was happending, they would revolt.

Unfortunately the people suffering are those who want to keep their jobs in Aer Lingus. That is why there should be accountability to the Oireachtas Joint Committee on Commercial State-sponsored Bodies.

I welcome the Bill and what has been said with regard to Shannon. Nobody can say that the Gort bridge in Galway or the Ennis Road are not relevant to Shannon or do not depend on Shannon. The enormous amount of business using that major road from Gort through Ennis to the roundabout in Limerick and the commercial life of that area are relevant to Shannon. I am not from the Ennis region. However, in view of the investment that has been made in that area we would not want to give the impression that the content of the Minister's speech or the content of the Bill solves the problem. It does not. Anybody here who would say otherwise would not be speaking the truth. It will not solve the problem.

There will be serious crises in Shannon within the next 12 to 18 months and I hope SFADCo and other interested parties in the Shannon area will get their act together. They must because Aer Lingus will not solve the problem for them and we should not expect them. However, we are now by-passing Shannon and we must not allow Aer Lingus to have full control; under no circumstances should Aer Lingus have full control.

That was the case in the early 1970s when the cartel consisting of Aer Lingus and British Airways was in control. The cost of flights was enormous. Some companies were railroaded into disaster by the price structures of Aer Lingus at the time. We do not want the same to happen to Ryanair. Irish people also work in that company. They work with very old planes, like the B111 which, although doing great work, is 30 years in service. Let us not suffer from the consequences of thinking that we can afford to have 767s on the runway in Dublin Airport at a cost of £250,000 per month even though they are not in service. The people who authorised the purchase of those planes must answer for that decision. Why were the older planes not disposed of and the new ones used on the transatlantic route at less cost?

I am not saying those planes should not be there; of course, they should. It is right that our 737s and 300s should be replaced. They have been in service long enough. I do not deny that we have an excellent fleet. However, we do not want that fleet on the ground and nobody accountable for that. The main question is accountability. Nobody had to account for those decisions.

Nobody is more proud of seeing the shamrock on our planes than I. I have been in many places where I was delighted to see the shamrock on the runway and to see our air hostesses and flight crew in their green uniforms. We would not want to take that for granted, which is exactly what we were doing. We were not giving credit to other companies which were prepared to do similar work but did not use the colour green. It was assumed that Ryanair or other private companies would continue to work at little cost. They deserve great credit for being able to compete against a company which had been given a free hand by the Government. Did we undermine decent people in decent companies who wanted to give a service to our country and were not allowed to do so because of the cartel? That is a serious question. That is why there should be accountability.

What does the 5 per cent shareholding of the employees mean? In what way is it relevant? Is it an empty gesture? Will they be responsible for the other companies or will they have the shareholding in only one part of the company? I welcome that shareholding. We will achieve better services through more responsibility. There will be a better atmosphere and more prompt service because the employees will have a shareholding. I will have more to say on Committee Stage.

I welcome the Bill with reservations.

Mr. Cassidy

I wish to share my time with Senator McGennis.

Acting Chairman (Mr. R. Kiely)

The Senator cannot share his time on Second Stage.

Mr. Cassidy

The precedent was set today.

Acting Chairman

The opportunity was not taken today. The time cannot be shared.

Mr. Cassidy

It was accepted by the House——

Mr. O'Toole

On a point of order, the decision of the Committee on Procedure and Privileges is that spokespersons cannot share time on Second Stage but other speakers can.

Mr. Cassidy

With the Chair's permission, have I the agreement of the House?

Acting Chairman

Is that agreed? Agreed.

Mr. Cassidy

I congratulate the Minister, those in Aer Lingus and the departmental officials for bringing this difficult period for Aer Lingus to a conclusion. This Bill will give Aer Lingus in the future a profit making identity. The Minister said: "Group profits of £28 million in the year ended 31 March 1990 have been transformed into losses of £188 million including restructuring costs in the year ended 31 March 1993.". That shows the extent of the problem Aer Lingus confronted. I cannot understand why some Members did not realise that the world recession had a greater impact on the airline business than on other industries.

I am aware of the passenger traffic figures for Irish airports and I have seen the magnificent job being done by Aer Rianta in promoting the airline business. More people are flying into and from Ireland than ever before. There is a cost factor involved in competitive pricing with other airlines which are seeking the same markets. With such competition in mind a reappraisal of the future is being undertaken in many industries, and the airline industry is no exception.

As one who travels with Aer Lingus weekly I was proud to see the shamrock, the marketing symbol of our country, being carried across the world by Aer Lingus. Aer Lingus has done a tremendous job and it has a terrific workforce. It has done Ireland proud over the last 50 years. I am glad to say that Fianna Fáil established Aer Lingus. Fianna Fáil maintained the workforce and the growth which Aer Lingus enjoyed over the last number of years. To hear Members from the Opposition speak, one would think their parties had set up this great airline, although at the time they made many negative speeches which can be read in the Official Record. Looking at the great success of Aer Lingus today, I am proud to be a member of the party which established that great airline.

I am glad the Minister has put down an amendment to provide for a representative of the employees' interests on the sub-boards. We in Fianna Fáil have always believed that the workers' voice must not only be heard but their concerns should be addressed and their expertise utilised fully. The employee has the expertise. He or she knows the problems and, no matter how many qualified people are called in from other sectors, the expertise of the employee who knows and operates the company's systems cannot be beaten.

I agree with Senator Mooney and Senator Cregan in relation the selling off of the hotel side of the group. As the Senators pointed out, the world recession looks like it is coming to an end and the greatest asset we have are our tourist facilities. Surely the airlines and the hotel trade go hand in hand in filling available spaces. It showed great foresight in the first place in advancing the tourism side of Aer Lingus to have the hotels. However, simply because certain sections of the airline company are not competitive at present they should not be selling off what has great potential over the next ten years.

Everyone knows that there is high profit in the accommodation side of the hotel industry. There is up to an 80 per cent profit margin in bed and breakfast if the accommodation is paid for and a 75 per cent profit in the associated services. That is a big profit margin and, bearing that in mind, I would like to ask the experts who are advising the Minister and his officials to examine where the profit margin is not being sustained. It does not make sense when one considers what is happening in the hotel industry.

I would like to speak at length about Aer Lingus but Senator McGennis has an interest in this matter as many of her constituents are directly affected by this issue. I gladly give way to let her make a contribution and I look forward to participating in the debate on Committee Stage.

Mrs. McGennis

I thank Senator Cassidy for sharing his time with me. As Senator Cassidy said, I have more than just a passing interest in this subject. I had a baptism of fire in the 1992 general election when I stood for the first time in the Dáil constituency of Dublin North, and I learned the difference between local politics and national politics. Whereas the issues in a local election might be categorised as being trivial, in that general election the issue raised on most of the doorsteps was that of peoples' livelihoods — people who were concerned about their jobs, their futures and the future of their families, and about mortgages they had taken out on foot of expecting to continue in employment.

The Tánaiste's meeting in the hangar with the workers in Aer Lingus has been referred to several times in this Chamber and in the Dáil. I did not meet with the Aer Lingus workers in the hangar but I met with their trade union representatives in their offices at the airport during the election campaign, and while we did not agree on everything and I did not agree totally with their view of the issue. I learned a lot. I learned that there are two sides to every debate and that there was a need for a consensus to be arrived at if there was to be any future for Aer Lingus.

I want to refer to a couple of points the Minister referred to in his speech. It has been said time and again that it was not until June 1993 that the Government became absolutely and clearly aware of the position of Aer Lingus. That is wrong and unfortunate. It was due to bad management and, perhaps, this Government and the previous Administration should take some of the blame. It appeared that while the company was making profits nobody wanted to know about it, but as soon as the losses became known it required immediate attention. The first lesson we should learn as a result is that all companies, whether in a healthy or a not-so-healthy financial condition, need to be kept under review at all times. To let a company get to a point where it is losing £1 million a week and then have to take fire brigade action not only smacks of bad management but must also carry a certain measure of the blame.

Two of my colleagues on this side of the House have spoken of their reservations about selling off the non-core assets. Aer Lingus has been criticised for diversifying, but it did exactly what it was told by the Government. It was told to diversify at a time when that was the "buzz" phrase. Current thinking is to concentrate on the core assets and that everything else will follow. Aer Lingus was told clearly that it should diversify and it did so. If it had not, its financial position would be worse than at present. I share the fear about selling off those assets because when that is done there is nothing else to sell off.

I welcome particularly section 4 which concerns the injection of £175 million. This Government gave a commitment in the Programme for a Partnership Government that it would ensure the survival of Aer Lingus, and this is as firm a commitment as one can get.

I find myself in agreement with Senator Cregan on this occasion — probably not for the first time — and I would have problems with Senator Lee's suggestion that these decisions must be taken on a purely commercial and political basis — this was also the thrust of Senator Ross's contribution — and not decided on an ideological basis. I disagree with that totally and fundamentally. When we make decisions about companies we are talking about people. I have a problem with the idea of getting the books right and leaving people sitting at home unemployed. Who will use the product when a company has become so commercially right that nobody can afford the service or the product anymore?

It is Government policy to support the creation of jobs and that continues to be the case. Why then do we see ourselves paying people to walk away from jobs and then say that unless a company can become totally commercially viable it is finished. I see Aer Lingus in the same way as I see any other company applying to us for assistance to create jobs. Provided there is some likelihood of the company providing a service that is necessary and, hopefully, making a profit, we should support it. I will stand by that ideological principle as long as I am in politics.

I welcome section 5. Mismanagement has been mentioned, and while this company was being mismanaged the only people who suffered were the workers. They suffered changes in work practices, reductions in wages and various cost cutting exercises, so I welcome this section which allows for the introduction of employee profit sharing and also the appointment of worker directors.

I also want to put on record my congratulations to the workers and their unions. I know that the union representatives have taken a great deal of flak and that certain vested interests — one of whom is a member of another body with me — wanted the workers to take to the streets and plunge the company into chaos and ruin. The trade union representatives and the workers have behaved responsibly, and they have swallowed what is probably a bitter pill in order to see Aer Lingus continue in a healthy shape. I add my congratulations to those of previous speakers.

I have a reservation about this Bill, and it is a point which was made to me in the airport during the election, and that is the total absence of a national aviation policy. It should have formed part of this Bill. I do not think that putting money into the company is an aviation policy. My understanding is that Aer Lingus will not be allowed to expand or to operate on additional routes until it has shown that it can make a profit on the routes it currently operates.

I share the views of those who spoke about Ryanair. That company needs to be protected and its personnel need to have their jobs protected. When we talk about Ryanair operating on a competitive basis on the Dublin — London route we are not comparing like with like. It was a Government decision which allowed Ryanair to operate in and out of Stansted, an airport which has——

Mr. Cregan

No thanks to Aer Lingus.

Acting Chairman

Senator McGennis without interruption.

Mrs. McGennis

——lower landing fees, for example. One is not comparing like with like. Aer Lingus was being forced to fly into Heathrow at a much higher cost whereas Ryanair was given a more lucrative route. I know that it cannot be done in the context of this Bill but we must address the future direction of Aer Lingus and it is not good enough to throw the money at the company and hope everything will work out right.

I wish to put on record, as I have done at parliamentary party meetings, that we must have a national aviation plan. If not we will be back in this Chamber in another five or six years discussing the demise of Aer Lingus. I know that I am short of time but there are one or two other points I want to make.

I also welcome the Commission's approval for the £175 million. I was in the other House when it was discussed and some speakers, particularly the Progressive Democrats and the Democratic Left spokespersons, hoped that the Commission would not approve this money. They suggested it would be tied up by various constraints and regulations and that it would be worth nothing. I am glad the Minister succeeded in this regard. He told those Members in the Dáil that he would remain on the doorstep of the Commission's offices for as long as it took to ensure this could be done.

We discussed the Irish Aviation Authority recently in this House. Today the Minister appointed nine members, including four women, to the board of the Irish Aviation Authority, the greatest number of women appointed to any State board. On behalf of the House, I congratulate those members and wish them well in the future.

I hope this Bill protects the future of the staff in Aer Lingus. We must keep it under review and ensure the best possible working conditions for the people who work in Aer Lingus.

Mr. O'Toole

I would like to share the last five minutes of my time with Senator Norris.

Acting Chairman

I am pleased you specified the time because he ran out of time the last occasion you shared. Is that agreed? Agreed.

Mr. O'Toole

I will observe the rules. I remind Senator McGennis that, under the rules of the House, it is unacceptable to refer to speeches in the other House, although the Minister was not in agreement with her.

Mrs. McGennis

I did not know that.

Acting Chairman

That is a matter for the Chair.

Mr. O'Toole

I brought it to the attention of the Chair.

Mr. Mooney

The Chair is sharp today.

Mr. O'Toole

I live close to the airport and many of my neighbours make their living there. I share their fears and concerns about the operation of the airport and the airline. The last two years have been difficult and I agree with previous speakers, particularly with Senator McGennis, who mentioned a number of important matters. The trade unions represented the workers and the Minister represented the taxpayers and the Government. The representatives of the Government and the workers have had many difficult times over the last year. These people are patriots in the real sense of the word because they gave in the interests of the State. I have been critical of the Minister about this issue, but I would not deny him his commitment to make this work. I would have preferred if he had taken different decisions. I also understood the concerns of the workers because no group was more flexible or committed than those in the Aer Lingus group of companies during the last few years.

I will discuss the Bill, but I want to make a number of specific points. The trade unions have acted in a responsible way and this is a key factor in how trade unions represent workers in the interests of the State. It is not the first time this happened in Aer Lingus. It happened two or three times in relation to the need for cutbacks in the company. It also happened in other ways, for example, the multi-trade or multicraft agreement which was set up with the establishment of TEAM. This is a headline for the rest of Europe because it brings people from different work backgrounds together which this is important.

One aspect of this Bill which has not received as much attention as it should is that the workers now have a 5 per cent equity or shareholding in the company. I was one of the speakers who said it should have been more and I supported the workers in this regard. They took an even-handed approach and they have decided to give it a chance. This should be developed in future.

The difference between Aer Lingus and other European airlines is that we are on the periphery of Europe and we have no advantages in the marketplace. The trade triangle in the core of Europe is at the end of our highway which does not go along road or land. Our highway is the air link from Ireland to the Continent. It is easy for business people from Frankfurt, Amsterdam or Paris to drive along the highway or get a train and arrive at their destination in the European market in a short period of time. Our highway is our link with Brussels. Therefore, I make no apologies for demanding support from Europe to ensure that people can participate in the marketplace and in every other aspect of Europe. The peripherality of this country and the marginal nature of its location should be taken into consideration.

I also want to put into context the £175 million being given to Aer Lingus. The conditions in relation to this money are questionable and I will speak about them later. The money has been delivered, even if it is less than we expected, but I do not wish to score political points on this issue. The money was sought and delivered from Brussels today. Although I would have preferred a larger sum, congratulations are due to those concerned. I am disappointed that the Government does not compare the amount of money given with the level of support given to other European airlines. In Belgium the level of State support for Sabena is £1.3 billion, our £175 million pales into insignificance when we consider it from this point of view.

The company did well until 1989. It replaced its European fleet and diversified and built up its hotels and other subsidiaries. It would be a bad market decision to sell the hotels at present when they have a low value. As far as I am concerned, the group bought them and they should sell them when it is commercially right to do so and invest in some other diversified industry. I have used these hotels at different times. When I was first elected to this House six or seven years ago, I made the point that other State companies could not diversify in the same way as Aer Lingus because the legislation in relation to Aer Lingus was new in comparison to that for the ESB. Aer Lingus has been successful in this and many other areas.

When Aer Lingus was in profit in 1989 the Government interfered with its market. It took the Munich route, the Stansted route, which Aer Lingus had researched for four or five years to ensure it got the best slot, and the Liverpool route, the first route Aer Lingus had, from the company. At the time the Government insisted that a certain amount of money had to be taken from the profits of Aer Lingus and paid to Revenue. This happened in 1989, which was probably the company's second last year of profitability before it experienced the difficulties caused by the world-wide recession in the airline industry.

I am concerned about worker participation in this Bill because various aspects of it are unclear in section 9. I intend tabling an amendment on this issue because it is important to have elected worker participation at various levels, whether at group board level or on the board of the new companies. Senator McGennis welcomed the nomination of women to these boards and I also welcome this development. However, I am worried that their political persuasions would be of more importance to certain Ministers than their gender.

Mrs. McGennis

I was not appointed.

Mr. O'Toole

I know the Government or the Minister of State at the Department of Transport, Energy and Communications, Deputy Treacy, would not do this, but I am sure he is aware of the temptation to appoint a good party supporter. As Independent Senators, Senator Norris and myself would look at this matter in a way which lesser people might be——

Minister of State at the Department of Transport, Energy and Communications (Mr. N. Treacy)

We would also have difficulty seeing the transparency.

Mr. O'Toole

We would prefer if the workers decided who should represent them on the board.

The operation of this Bill gives the Department a greater opportunity to interfere in the operation of the airlines. I note the Department advisers do not agree with me, but I will return to that point when we discuss the sections of the Bill. That has been the rock on which many companies have perished. The State should play its role as the major shareholder and in this respect I agree with the remarks made by Senator McGennis. There are decisions beyond the area of commercial considerations which may have to be taken from time to time, such as the decision the House is discussing today. I believe it is important to ensure that the practices in which some of the Minister's predecessors involved themselves will not become established.

This is an important day in the continuing development of Aer Lingus. However, I wish to ensure that anything that happens will be a base for future development. The last thing that is needed is to retrench to such an extent that we cannot avail of and exploit market developments. It is important that Aer Lingus is poised to take advantage of the recovery of the air transport industry in 1995.

I will conclude on that point. However, there are other matters I will raise on Committee Stage.

Mr. Norris

I am grateful to Senator O'Toole for sharing his time with me. I had put forward my name to speak at this time, but I yielded to Senator O'Toole because of his expertise in this area and the fact that he had a more extensive briefing. As a prominent trade unionist the Senator is in a position to comment more knowledgeably than myself on this issue.

In the final sentence of the second paragraph of the Minister's speech he said: "The capital injection of £175 million, for which this Bill provides, represents a major injection of scarce taxpayers' funds". Regarding the grammatical nicety of this sentence, the noun that is qualified by the adjective is "taxpayers" rather than "funds". Therefore, I am speaking as one of the scarce taxpayers whose funds are being employed.

Mr. N. Treacy

They are both scarce.

Mr. Norris

We are very scarce indeed. I also share some of the concerns of Senator O'Toole when he delicately hinted that perhaps this capital injection might not be sufficient. This is a worry expressed by people closer to the financial world than myself. I hope that there is sufficient margin in this sum to allow Aer Lingus get back to the kind of health which we all wish for it.

There are a number of ways of approaching Aer Lingus and let me say at the outset that I am proud of the service that Aer Lingus represents to the customer. I have always been well treated.

Mr. Mooney

Not all of us.

Mr. Norris

I believe it is important for us as a nation to have our own national airline. It is part of being a nation and it should not be forgotten in all the financial considerations that there is the question of national pride.

Aer Lingus has been traditionally used by Governments as an arm of tourism policy and it is perhaps unfair to apply exclusive financial criteria to a situation where the Government has clearly used the airline as part of this policy.

Regarding the question of diversification, I am considerably less worried than some other Members because the situation appears to me to be logical. The companies which get into trouble through diversification are those which diversify into areas unrelated to the core of their operation. The reason Aer Lingus was successful in the hotel business is that it is related to, and links in clearly, well and efficiently with the airline business. For that reason it is a pity that the company is selling its hotels, especially as it will be selling them at a point when the property value is low and while they are still generating a profit. Therefore, it appears sensible to retain this area as it is so directly related to the core elements of the airline business.

I take some wry satisfaction from the decision on the Shannon stopover, having been one of the few Members of this House who spoke against the stopover over many years and received cat calls, quite impartially from all sides of the House, because I suggested that the stopover was a bad decision.

Mr. Mooney

Were they impartial cat calls?

Mr. Norris

Now the Government is rescuing an airline which it did not help by insisting upon this Shannon stopover.

Senator O'Toole has indicated that he is putting down some amendments which pleases me. I understand some points he will be addressing. One of these amendments will, I understand, refer to the fact that the Minister is contemplating splitting up Aer Lingus into a series of separate companies which will have boards and so on. Unusually, the Minister will have the power directly to appoint directors to these subsidiary boards. I understand that this is different from the CIE model. May I ask why there are these differences? I believe it is a bad practice because it is important, even if one does split up these operations, that one has them all travelling in the same direction and that there is no conflict between the different elements. The issue of the election to these boards and their composition is important and I understand that this is a subject that will be addressed by Senator O'Toole.

There has been much criticism of Aer Lingus, but I believe that there should be more criticism of the board. I do not know why the entire board did not resign. It made a series of disastrous decisions. It increased the workforce and recruited a considerable number of young people to the staff at a time when it must have been aware that the position of the company was financially critical. I believe that was completely irresponsible and the entire board should have resigned. One cannot blame a workforce for taking up the offer of a job, but one can certainly blame management for making a bad decision to expand the workforce. It is management who should be criticised and not the unfortunate workers who quite legitimately and understandably seek to hang on to their jobs.

I understand, and perhaps it is not true, that at the point when senior management was expecting the employees further down the line to take cuts in employment, wages, such as foregoing the Programme for Economic and Social Progress, and so on, they accepted delivery of approximately 50 new executive motor cars. Whether this is true or not, it is the kind of issue that has become established in the public imagination.

Mr. N. Treacy

It is not true.

Mr. Norris

I am pleased that has been clarified, if nothing else.

May I ask the Minister if I would be correct in suggesting that, despite his good grace on the Child Care Bill, 1988, which he allowed to be recommitted to the Dáil, it is highly unlikely at this point in the political term that any amendments will be accepted by the Government on this Bill? If so, it turns Senator O'Toole's amendments into a merely academic exercise.

Mr. O'Kennedy

I congratulate the Government and the Minister most directly concerned in presenting this Bill to the House. It is a happy coincidence that the Bill is before the House on the day the EU Commission has sanctioned the restructuring proposals which have been agreed between the company and the trade unions. That in itself is significant.

We must now follow through to the next stage in the implementation of the strategy. I agree with the Minister that if Aer Lingus is to be a fitter company as a consequence of the restructuring, with a more sound financial basis, then the foundation for dynamic, aggressive and effective marketing policies must be in place.

In the management of the national enterprise, the Government in 1987, took difficult decisions. The national enterprise was placed on a sound financial basis in 1987. Good management has continued ever since, to such an extent that the climate for investment, for dynamic development and for generating better employment conditions has been successfully created.

Following the analogy through to the Aer Lingus situation, the first step is to have a sound financial basis and hopefully the agreements that have been made, and to be put in place by this Bill, will achieve that. However, restructuring is not simply about the restructuring of the financial arrangements for the company. In any enterprise there is an important correlation between the financial security of the company and effective, aggressive marketing policies and product development. This is where the real challenge arises.

Effective marketing is required in areas that are not affected or limited by some of the restrictions which might apply in Europe or elsewhere. Such a marketing policy will seek new outlets in growth areas of the world. In this context I am thinking especially of an area of dramatic economic development, that is the whole ASEAN region; we have known about Japan for some time and China is emerging as an economic giant. The unusual but typically Chinese association with their traditional adversaries in Taiwan, now known as the Republic of China, is a measure of the dynamic economic development which has been going on for some time and can be contrasted with the position in the western world, in the United States and the European Union. We are emerging from a period of quite severe depression and lack of investment.

It is time Aer Lingus looked at these distant locations as I am not satisfied they have done so up to now. For a considerable time Aer Lingus was almost unique among the airlines of Europe in not having a common fare rating with many distant carriers, whether in Japan, Australia, or other airlines in that region. Other European airlines had a shared policy with those eastern carriers, whereby one could travel from Japan to Brussels and then to a number of destinations within a 400 mile radius, at no extra cost.

Aer Lingus has come late to that activity. I have seen Japanese people queue to play golf in Belgium, a country which would not be known as a mecca for golfers. The golf courses of Ireland are not crowded with Japanese; perhaps some of our golfing buffs would object to the slow play and other consequences of these visitors from the eastern hemisphere. I am not qualified to speak as an expert although I enjoy the game. However, the impact this would have on economic development and tourism throughout Ireland is beyond any current expectations.

Aer Lingus must not operate independently in keeping its finances on a solid basis. That is important but not the most important issue. In achieving that, it will contribute to keeping the national economy on a sound basis, because it is the national carrier. Tourism is projected to be the big growth industry in the service sector over the next decade.

Japan, Singapore, Thailand, the Philippines, China, Taiwan, Malaysia and Indonesia are areas of huge growth. We must broaden our vision and enter those markets. That may not have a dramatic overnight effect but the wealth and resources of that area, and the capacity for enormous customer development, are untapped. In the restructuring, the chairman and board of the company should have the imagination and the capacity to do this.

I have some reservations here. The chairman has turned round the fortunes of the former Irish Sugar Company but he does not appear to have had similar success in the airline and aeronautical sector. This may be the key element of the future dynamic development of Aer Lingus and I hope the executives will be sufficiently aware of it to maximise the benefits to the country and secure the future of Aer Lingus and its employees.

In that context I welcome the profit sharing concept and the reorganisation of the company structure introduced in this Bill. Those who share responsibilities and obligations are entitled to a share of the returns, there is no better incentive. It has worked in the private sector when it is applied effectively with imagination and sensitivity and there is no reason it should not be a success here.

It is significant that the main losses have been in the air transport business. Undoubtedly the airline sector has had a difficult time throughout the world in recent years. The indications now show an improvement in the world economy and a dramatic and dynamic development in the regions I mentioned. I spoke to the ambassador of the People's Republic of China recently and we should reflect on the scope for development in that area. It is a distant country and the people are different from us. Very few Irish people have relations in China but we must recognise its huge market potential. Given the changing environment in the People's Republic of China we should explore and exploit the new opportunities which will arise. That might ensure the losses in the air transport business being minimised.

Shannon has been synonymous with the development of Aer Lingus. Special arrangements are being made and for the first time Shannon will have a transatlantic operation based and managed there. An Aer Lingus transatlantic service will begin and end there. That is not the only development, the Centre for International Co-operation is based in that region. A range of new businesses are being established and exploited in the developing countries and the republics of the former Soviet Union. It is vital this new element in Shannon links with the centre to explore the opportunities which will arise because of the dramatic changes there and in the Far East, notably China and its neighbouring countries.

If one wants a vigorous marketing policy one needs a vigorous marketing team. We have perhaps the best marketing team any nation has been privileged to possess in recent years, the people themselves. In particular one thinks of the followers of the Irish soccer team. I was privileged to be in Italy for the games and I lived and worked in that country for a time. The effect those supporters had might have been slightly different if Ireland had beaten Italy. That said, everywhere I went and when I was interviewed on Italian television, everyone spoke of “questi sportivi Irlandesi, che sportivi”; what sporting and marvellous Irish people.

The same marketing team will be leaving Ireland next June, a magnificent, happy bunch of marketers. The world will be tuned into this event and we should exploit the opportunities that may arise. Norway is outside the European Union, we will deal with them, win, lose or draw. Not many Mexicans can afford to travel to Ireland but there is a deep residue of wealth in Mexico. I hope Aer Lingus will have a dynamic, confident and expectant policy based on the World Cup platform in all the countries we will meet and, I hope, beat along the way. We shall never have a better group of marketing people to create a new attitude towards Ireland. They will demonstrate that it is, for all we say about it ourselves, a happy country with friendly, courteous and exciting people.

I congratulate the Minister on achieving this significant restructuring policy and its effective recognition and acceptance by the EU Commission. It is now up to all of us, especially the management and workers of Aer Lingus, to do all we can to work effectively in preparing a vigorous marketing policy. I wish to emphasise that because restructuring does not end with financial restructuring. To ensure success over many years, there must be a vigorous marketing policy. I look forward to seeing that policy put in place.

Minister for Transport, Energy and Communications (Mr. Cowen)

I wish to thank the Senators who made contributions. We have had a stimulating debate. I would also like to thank the Senators for the constructiveness of their comments, many of which I could agree with. I also thank them for their congratulations which I will pass on to the officials of the Department who have been working hard on this dossier over the past 12 months and even longer. If the Senators have specific questions they want answered, I will deal with them on Committee Stage.

One thing we all have in common is a commitment to a strong and viable Aer Lingus and a sustainable future for its employees. By passing this Bill, we will have started the process of ensuring that viability. The Programme for a Partnership Government contains a commitment to ensure the commercial future of Aer Lingus as part of our overall air transport policy. This has been the Government's primary objective in its consideration of the serious financial position of Aer Lingus. This Bill copperfastens the Government's commitment to the future of Aer Lingus.

I take pride in the role played by Aer Lingus over the years in the development of Ireland's trade and tourism. The airline business is a people business. It was Aer Lingus employees who made the company what it is. It is Aer Lingus employees who will continue to make it a proud symbol of what we are. We are a quality nation with a quality airline. We are facing difficulties but we shall overcome them, with the help of Aer Lingus staff and the backing of the Government. I wish to publicly acknowledge once again the commitment of Aer Lingus employees during this most traumatic year in its history.

This Government is one of partnership, which is not only confined to the two parties who comprise the Government. It permeates our whole approach to economic and social development. In this context, an essential element in seeking solutions to the problems of Aer Lingus was to consult with the Irish Congress of Trade Unions on the measures necessary to restore it to viability. As Senators will know, a meeting was held on 22 June between the Cabinet Subcommittee on Aviation Matters and the Irish Congress of Trade Unions. This meeting was an exceptionally constructive one where the willingness of both sides to look at what was in the best interest of the company was clearly evident.

I would like to thank the Senators for not bringing out the old hoary chestnut of the Government supposedly acting in a policy vacuum. I hope that this is because they accept that the Government has a fully integrated and well thought out air transport policy for this country. Within that policy, we have a clear vision of the role of Aer Lingus and its employees. It is my belief that all the main stakeholders in our national airline; the employees, the company and the Government, can draw from the inspiration of the past and can match the best efforts of other countries' airlines. We must take the measures necessary to ensure that Aer Lingus not only has a past we are proud of, but has a future which should be based clearly on competitive commercial success.

In looking to the future, it is vital to recognise the realities of the international environment in which Aer Lingus must operate, particularly in the Single European Market, which accounts for most of Aer Lingus' services. Airlines must compete in an open market where Governments can no longer intervene to regulate access to routes or pricing. The new regulatory environment within which Aer Lingus must compete poses threats for the company. However, it also presents new opportunities for development, many of which were mentioned by the Senators in their contributions. I am confident that Aer Lingus, once its costs are brought into line with its competitors, can not only survive, but develop, both in its existing markets and new markets to which it has access, due to Government initiatives.

The new year will signal the start of a new era for Aer Lingus. The collective courage and commitment to the future of the company that has been evident over the past few months must not be allowed to wane. We must harness those qualities because with them, Aer Lingus can achieve that competitive commercial success which, as I said, is vital and will make all the hard work and sacrifices of this year worthwhile.

Question put and agreed to.

Sitting suspended at 4.15 p.m and resumed at 4.45 p.m.

Seanad Éireann debate - Tuesday, 21 Dec 1993