Aer Lingus Bill 2003: Committee Stage.

Sections 1 and 2 agreed to.

Amendments Nos. 1, 2 and 5 are related and may be taken together by agreement.

I move amendment No. 1:

In page 4, subsection (1), line 15, after "Finance" to insert ", subject to the approval of both Houses of the Oireachtas".

I welcome the Minister of State and his officials to the House. This Stage should not take long unless Senator Dooley has problems with the legislation. It is proper to take those three amendments together. There are two Houses of the Oireachtas. The Minister gave a commitment in the Dáil that any future sale of Aer Lingus would come before the Dáil. My amendment proposes that it come before both the Dáil and the Seanad. I believe there is equal brain power in this House as there is in the other House. We are fortunate to have Members such as Senator Dooley and Senators O'Toole and Ross on the Independent benches. Senator O'Toole has a great trade union background while Senator Ross may be on the right of Irish politics. The requirement that any proposed sale of Aer Lingus should be debated in this House would ensure a good balanced view on issues that might be missed in the other House. I believe it is normal practice that an issue such as this would come before both Houses.

From my inquiries it appears that the sale of Eircom was debated in this House. The Leader has indicated to me that as far as she can recall this was the case. It might set a precedent. I ask the Minister of State to clarify the situation. It is in everyone's interests to have a debate in both Houses.

Most of the amendments being considered today have arisen from the debate in the Dáil. I appreciate the Senator's point of view. There is no question about the brain power in both Houses of the Oireachtas. Unfortunately the Minister for Finance is the main shareholder in the airline.

I am informed that in the case of Eircom it was stated the Minister could not dispose of any shares in the company other than as provided for in the relevant legislation without the general principle of the sale being laid before and approved by Dáil Éireann. For the information of the Senator, that is a standard regulation.

The Minister for Finance is the main shareholder in the airline and he has been given the powers to enter into one or more agreements in connection with the issue of shares in the airline, subject to consultation with the Minister for Transport. Similarly, the agreements may cover a wide range of issues, including representations, warranties and indemnities in connection with the sale of the shares in the airline. Section 3(5) states: "The Minister for Finance may not dispose of any share in the Company without the general principles of the disposal being laid before and approved by Dáil Éireann." The Government accepted that part of a Fine Gael amendment in the Dáil.

I acknowledge the point made by the Senator about approval by both Houses but that would set a precedent. On previous occasions such as in the cases of Eircom, ACC and ICC, that precedent was not established. It is not a case of it being the Dáil versus the Seanad; it is a case of it not being necessary. The Minister for Finance will bring it before the Dáil but it is not necessary for it to come before this House.

I accept the comments of the Minister of State. There was a good debate on the Finance Bill in this House yesterday. I realise that there are restrictions on this House in its dealing with Finance Bills. The future sale of Aer Lingus will be a major national issue and it will particularly affect employees and former employees of the company. One difference between the two Houses is that the Seanad has a Labour Panel whose Members, including myself, represented trade unions in the last Seanad election campaign. We could bring some knowledge to bear on the subject that might not be available in the Dáil.

I accept the Minister of State's point about precedent and that it did not happen in the past. I ask him to examine the matter again. I am sure the Leader of the House will facilitate statements on the sale of Aer Lingus if that happens. I believe the House should be involved because the more people who discuss the matter, the better for everyone involved.

I agree with the Senator. It was raised by Fine Gael Members in the Dáil. Accountability is very important in this case and I believe that is what the Senator is asking for.

The Senator has not tabled an amendment to section 3(5) which provides for the laying of the principles of a sale for approval by the Dáil. The text used in subsection (5) follows precedent as it is similar to that used in legislation for the sale of Eircom, ACC and ICC. In the circumstances it is considered prudent to continue to follow this precedent in this case and reject the proposed amendment. If I were to accept this amendment I would be creating a precedent which I am not prepared to do. The Minister, unfortunately, has rejected this amendment in the Dáil and I must follow that line. I am not saying that matters should not be dealt with by this House but in this case it would appear that the line of thinking is that it is unnecessary. Any points which Senators wish to raise could be raised in the Dáil in consultation with their colleagues.

Amendment put and declared lost.

I wish to bring to the attention of the House a typographical error in the text of amendment No. 2, in the second line. The word "Oireachtas" is misspelled. This amendment has already been discussed with amendment No. 1.

I move amendment No. 2:

In page 4, subsection (2), line 18, after "may" to insert "with the approval of both Houses of the Oireachtas".

Amendment put and declared lost.

I move amendment No. 3:

In page 4, subsection (3), line 25, after "Exchequer" to insert "Capital Budget".

This is a straightforward proposal, that the proceeds of the future sale of Aer Lingus would be invested in capital projects as opposed to current expenditure. That is the main purpose of the amendment.

While I understand where Senator Browne is coming from, from my perspective I would not want any encumbrance placed in the way of the State or the company in the disposal of any company stock or in terms of where the revenue might be used afterwards. Such an encumbrance is unnecessary. This is not something any Government has done in the past in identifying particular projects. I appreciate the Senator is not identifying projects. Given the level of Government investment in capital projects, particularly infrastructural projects, and the development of the public transport system, there is little doubt that the Government has shown a true commitment to such investment. Therefore, I am happy with the current situation.

There are many areas which the Department of Transport has sought to fund. For example, tolls should be ring-fenced for the Department. Unfortunately, we do not live in a perfect world and the Department of Finance seems to rule the roost. I have been informed that acceptance of the amendment, as read, would not necessarily mean the Department of Finance could use the capital for capital projects. That Department has observed that there is no question but that the receipts of any sale transaction would be paid into the Exchequer. The Minister may wish to acknowledge at this time that any receipts received would be recorded in the Department of Finance but he might also point out that the allocation of such receipts to capital spending, which we presume is the intention of the Senator's amendment, would not be achieved by it. That is the interpretation I have been given by that Department. We would all like to use capital acquired from the sale of various State assets in different areas but, unfortunately, it goes to the Department of Finance and the Cabinet decides where it should be spent.

Is the amendment being pressed?

I bow to the Minister of State's superior knowledge and withdraw the amendment.

Amendment, by leave, withdrawn.
Section 3 agreed to.

Amendment No. 10 is an alternative to amendment No. 4. They may be discussed together, by agreement. Is that agreed? Agreed.

I move amendment No. 4:

In page 4, line 36, to delete paragraph (a) and substitute the following:

"(a) issue shares in accordance with the Companies Acts as part of one or more than one employee shareholding scheme, and shall be deemed always to have had the power to issue such shares and”.

This matter was discussed on Second Stage. Several Senators, including Senator Dooley, highlighted the need to address this issue for those who had left Aer Lingus from 1 December 2003 and those who will leave up to 31 March 2004 as they might find themselves in no man's land. I understand having spoken to my colleague, Senator O'Toole, who will expand on the matter, and others that there has been some movement in this area and that the issue may be resolved internally rather than through this mechanism. I hope the Minister of State will ensure this happens. I eagerly await his reply.

I spoke at length on this issueon Second Stage when I indicated I wouldtable an amendment which I have subsequently withdrawn having discussed the matter with the Minister. I thank him and his advisers for their help in going through the issues with me.

The issue at the time was that those who had left Aer Lingus since October but who had bought into the scheme and had agreed with the whole deal might be excluded by this legislation from effectively sharing in the share option scheme. The Minister's advisers have explained to me that the legislation does not prevent them from being involved fully in the ESOP. On Second Stage I said we had dealt with a similar matter in the ESB Bill. I now recognise it was not precisely the same because the ESOP had not been established at the same time as the ESB Act. I also recognise, provided the legislation is passed before 30 June 2004, there is nothing in it which will prevent those who have left from sharing in it. Consequently, it would be helpful for the Minister to state that this is a correct interpretation. It was on that basis that Senator Browne and I made the case.

In order to include those who have retired in the meantime in the share option scheme, those who have the authority, discretion and power to decide are the partners to the scheme, namely, the Department of Transport, the Department of Finance, the workers represented by the trade unions and the company. Once those four groups agree to extend the options to those about whom I spoke on Second Stage, they will be included. On that basis it means that nothing that happens in this House today will prevent the retired staff from achieving equity for themselves. It would be useful if the Minister of State indicated that this interpretation is reasonably correct in order that we can be assured that what we are doing legislatively here today will not cause any trouble or create any block for those retired workerswho gave of their time to the building of the company.

Like my colleagues, Senators Browne and O'Toole, I raised this matter on Second Stage, following conversations with the members of two groups, some of whom had retired, as they had no choice but to do so in line with standard retirement regulations. Effectively, they could have been excluded from the share option programme. The difficulty for them was that they had taken certain actions in latter years in not getting the pay increases they had expected. They had agreed to remain on their then rates of pay. They had also changed working conditions. Effectively, they had bought into a programme that would ultimately see them receiving their reward at a later stage through the issuance of shares. Through no fault of their own but purely as a result of delays associated with the publication of the Bill and its subsequent withdrawal, they found themselves at a distinct disadvantage. I am pleased that the work done by Senators O'Toole and Browne behind the scenes with the Department will ensure they are not excluded, although I recognise there is work to be done to get agreement from all parties.

I understand another group will also be catered for in this regard — those being asked to take voluntary redundancy. This applies particularly to Shannon Airport where there is a proposal from Aer Lingus management, with which I disagree. Not having a controlling interest in Aer Lingus there is little I can do other than voice it here. Some 104 of the workforce of 208 have been asked to opt for voluntary redundancy. This would have a devastating effect on the airport and the presence of Aer Lingus but that is a matter for discussion another day. The most important object of this debate is to protect those workers in any way we can. It is important, if they opt for voluntary redundancy, that they will be in a position to avail of any shares which will be made available by way of a share issue. Many, who may have family and children settled in a particular area, will potentially make the ultimate sacrifice by accepting voluntary redundancy at a time when their futures are not definite. While some media elements have referred to this as a windfall, it is not and will be quite small for those in their late twenties or early thirties who have mortgages and car loans to pay.

I hope they can be accommodated in some way because many of the redundancies are expected before the passage of the Bill. I assume the provisions which apply to those who have already retired under normal retirement procedures will apply particularly to those at Shannon, which is the only area within Aer Lingus where there is a current request for redundancies. I look forward to the Minister of State's comments in that regard. I compliment the Minister of State and his officials, who have worked hard to identify a solution to this important matter.

There is obviously consensus in the House on this matter. It is agreed that the workers concerned contributed towards the restructuring of the company. Had the Minister had his way at an earlier stage, the company would long since have been disposed of and they would have been party to the employee share ownership plan, ESOP, arrangement. My understanding is that the Bill does not exclude the possibility of them being included in the ESOP, and it is important to put that on the record. I am fascinated and puzzled by Senator Dooley's remarks about Shannon.

It is understandable.

If I understood him correctly, he said he did not have a controlling interest. When last I checked, Senator Dooley was a member of Fianna Fáil.

I am not on the board of Aer Lingus. It is a plc.

To the best of my knowledge, the Minster for Transport, Deputy Brennan, and the Minister for Finance, Deputy McCreevy, are also members of that party. Is Deputy McCreevy in a different Fianna Fáil to Senator Dooley? I understood it was all one big, united outfit.

Perhaps the Senator should tell that to the approximately 100 workers who will be obliged, one way or another, to take redundancy, and to the customers of the company in the County Clare region who will find it more difficult to use the services when the programme of change goes through. It is quite remarkable how Fianna Fáil can dissect itself in this way and wear different hats in different places at different times.

That is what makes it great.

Maybe so. However, there is consensus on the substantive issue of this section and it is useful that the matter has been clarified.

I thank the Senators for accepting this. It was a matter with which I, the Minister or anyone else had no major hang-up. It is understood that the proposed amendment would have been tabled in the belief that such amendments would facilitate the issue of ESOP shares to Aer Lingus employees who have recently left the company. This is not so. The legislation does not determine who gets the shares. It is a matter for legal documentation governing the ESOP which was agreed by the unions, the company, the relevant Departments and the Revenue Commissioners. It would not be appropriate for the Department to suggest or initiate any changes to the ESOP legal documentation. However, if such changes were proposed by the trustee directors, the Department of Transport, in consultation with the Department of Finance, would endeavour to facilitate the change, if at all possible.

Following the tabling of the amendment, the issue was considered by the directors of the employee share ownership trust, ESOT, which comprises representatives of the unions and the company. The secretary to the trust has advised the Department that the following are the views of the trustee directors. First, amending the Aer Lingus Bill as proposed would not facilitate former staff in receiving shares under the ESOP. Second, former staff cannot participate in future allocations of ESOP shares because the legal documentation governing the operation of the ESOP precludes it. Third, the trustee strongly believes that any change in relation to former staff is not a matter for legislation but for the trustee, the unions, the company and the Departments in considering whether a change in the legal documentation governing the ESOP is appropriate in approving any proposed change, for these parties, the Revenue Commissioners and, potentially, the current participants. Fourth, the ESOP legal documentation which was signed by all parties in April 2003 provides that when the ESOP shares are acquired by the trustee, such shares should be nominally allocated to all beneficiaries who were employees on the relevant date. The relevant date is defined as the date on which the ESOP shares were acquired by the trustee. The trustee can amend and submit for approval any such changes. Fifth, the ESOP explanatory booklet which was sent to all prospective ESOP participants on 15 September 2003 stated that shares would only be allocated to those who signed the contract of participation and who were employees of the company on the date the shares were acquired by the ESOT. Sixth, any changes to the rules could have significant consequences, some of which may not currently be foreseen. The trustee directors must consider the interests of all beneficiaries and, given that any change of the rules would serve to dilute the interests of the current staff, it is likely that the trustee might or would require a ballot of the members to ratify the proposed change. The trustee is anxious that the Aer Lingus Bill should be enacted as soon as possible so the ESOT can subscribe for the additional shares with a view to making allocations immediately thereafter, thereby ending the accumulation of leavers without share allocations, and, notwithstanding the above, the trustee has not formed any definitive view on whether a change of the rules is appropriate.

As I understand it, Fine Gael introduced this amendment because it felt, given the Air Companies Act 1966, that the company would have the power to allocate the shares. That might well be so in an interpretation of other companies. However, it was agreed with the Attorney General that this part of the Bill was required to ensure the Air Companies Act 1966 was able to deal with the ESOT in this manner. Senator Browne's interpretation seems to have been that the company was empowered to issue shares under the Companies Act, as all companies can. However, there was a tie to Aer Lingus in the Air Companies Act 1966 which did not apply to other companies and which meant the company would not be able to do this. This part of the Bill is to clear the path for it, as was agreed with the Attorney General. Senator Browne's amendment applies to this section of the Bill whereas that of Senators O'Toole and Ross applies to section 7.

I welcome the clarification from the Minister of State. I am concerned with the outcome, although that has nothing to do with the legislation, and wish to pick up on some of the points made by the Minister of State. He said, quite correctly, that it would not be appropriate for the Department to make proposals on this matter to the trustees at this time. I agree fully with this as such proposals must come from one of the other groups, namely the worker trustees. The Minister of State was clear about the implications of the legislation and it was helpful that he gave a clear interpretation of the trust and its legality.

The Minister of State made two points. First, the ESOT can only give out shares after it receives them, as that is part of the rules of the trust. Effectively, what must be changed, to benefit those for whom we spoke recently, is the date from which this becomes applicable which, as of now, is the date of the receipt of shares. Although that is simply a date change, it must go through the process.

Arising from the fact that people bought into this by way of the prospectus issued in June last year, it may be the case, as the Minister of State stressed, that in order to enable any changes to take place the trustees might consider it a requirement to ballot all members. I understand that but some points need to be made.

There is a question of equity here. Workers on pensions are effectively getting deferred wages or salaries. It is important to recognise that these people were given this option in the first place because they agreed to make sacrifices while they were still employed. The changes made were specific, measurable and easily quantifiable. As I have stated previously, these people agreed to forego the increases due to them under the national agreement, which was quite significant, at a time when the workers had already come out of the belt-tightening of the Cahill plan and other changes. In effect they were paying for the future allocation of shares by doing this.

In addition, they agreed to a combination of changed work practices and a series of redundancies and workforce reductions which increased productivity significantly. That productivity is also directly attributable to their input and sacrifice, all of which was done on the basis that they would get their day in the sun with the share option scheme. That was understood by everyone.

I have not read the prospectus but it was surely intended to be made available to all the potential beneficiaries, whose names are listed. It is not as if some of them were away at a certain time — we know who they all are. I ask the Minister of State and his Department to take a special interest in this issue. I am not arguing with him on the legal aspect, and I agree with the importance of the Department standing back from a matter which would be better dealt with by workers' representatives, but there is a broader issue here of trust and confidence. What is happening in An Post at present is a rerun of what happened in the airports several years ago when we decided on the solution I outlined earlier. I do not want a trade union official dealing with the An Post issue to have someone at a meeting say: "We might agree to something now, but I know people in Aer Lingus who agreed to a proposal but because of their age they had left before it was implemented and they were screwed." That is the kind of thing which, ultimately, makes life difficult for everyone, so there is an issue of good faith here also.

There are legal issues and responsibilities which arise from the establishment of the ESOP and we also have issues of trust and confidence in human resource procedures. For that reason, while workers will appreciate the commitments given by the Minister of State today, I ask him to get the Government to take an interest in ensuing these workers get their due in equity.

I endorse what Senator O'Toole said, which makes sense and repeats what we said earlier. I am now more confused than I was ten minutes earlier about the legal structure of the ESOP. Section 7, as I now understand it, allows for a certain power and confirms the power the Minister already thought he had to set up an ESOP. It provides that one or more such scheme may be established. I am not clear whether the existing ESOP is being merged into the new ESOP. My understanding was that they were essentially separate.

More important perhaps, I am also unclear as to whether the now departed workers, who took redundancy in recent months, are existing members of the already existing ESOP and have to be accepted into the new ESOP. At what point does their entitlement arise?

The Minister of State's comments about existing members of the ESOP having to vote is crucial. My understanding was that they were already members of the ESOP by virtue of the 5% provision, which was already disposed of, and that their entitlement to any additional shares which might be disposed of would arise by virtue of that fact and that there was no need for them to be accepted into membership and so on. I see from the Minister of State's officials that is clearly wrong but perhaps he can explain the position.

They are two separate situations — the original 5% provision remains as it was.

Is there a separate legal structure with separate membership?

That is my interpretation at this point. The original one has finished and this is the new ESOP — the new legal structure.

Does the existing trust continue?

No. I see Senator O'Toole's point. He has accepted the legal situation and the documentation. When one is reading a reply something may hit one and that is the issue one raises. I knew he would raise the ballot issue I mentioned but I still felt I had to state the position as it is something of which Members should be aware.

If we were cold and calculating we could tell these people they could take the package or they can stay, though the package might not be available to them later. That would be a calculating approach, to say that some people took a package which might not be available to them at another time. I see Senator O'Toole's point, that they took the package in order that others could benefit and the company could survive, and we should take that into consideration. Senator O'Toole asked me to raise this with Government colleagues. I will raise it with the Minister for Transport in order that he can discuss it with Government colleagues. I will do so because, as Senator McDowell said, when dealing with ESOPs in future people may say, when looking at what happened here, that people who took up the option were left floundering even though taking up the option allowed the miracle in Aer Lingus to continue. Not only does this apply to the people involved here, it could have implications for future agreements also.

I concur with much of what Senator O'Toole said. The important issue for me is the contract of participation. These people signed up to a process in good faith and on the basis of deferred rewards for the work they were doing. Unfortunately, if the situation was as we thought up to the last few days, they would not have received that reward. I thank the Minister of State for clearly outlining the position.

Something which cannot be dealt with by legislation — I understand why from the Minister of State's explanation — is the situation where some voters will not take care of those who have left the company. There is also the fear that what they take out of it will be diluted. From looking at the numbers I understand the level of dilution is so small as to be almost negligible. Much depends on the value of shares at a later stage and the figures I have seen do not seem to indicate any great loss when one compares the numbers affected to the entire number in the organisation. While recognising that one cannot do anything by way of legislation because it is open to all parties, the Minister could let it be known that the Government accepts the principle that those who signed the contract of participation, bought into the programme and were part of the company's recovery, either by accepting early redundancy or a wage freeze, would benefit. It should indicate to all concerned that it appreciates, understands and believes there is a valid entitlement which may help to resolve the matter.

It is important to acknowledge the sacrifices Aer Lingus employees have made to save the company. It is fair to say, however, that once one leaves a position — whether one is an ex-Minister, an ex-Senator or a formercivil servant — one is, unfortunately, quickly forgotten. I do not hear colleagues referring often to former Senators but that is a fact of life.

Senator Dooley raised a concern I had that even if this matter was put to a vote, would the current Aer Lingus staff accept it? One would hope they would. Unfortunately, however, people tend to consider the present, rather than the past but I hope that will not be the case. This may involve more than just the 200 to 300 people we are currently discussing because we are witnessing a major downsizing of Aer Lingus. We can see what is happening at Shannon Airport and while the company is seeking voluntary redundancies, they may not be as voluntary as one would wish.

There is also an ongoing problem concerning Aer Lingus pilots because the company is seeking a reduction of 40 pilot positions. The way in which this matter is being approached is unfair, considering that pilots on full pay were put out of work because of a lack of aircraft. They have since been informed that they will be redeployed. This means that captains could be working as co-pilots, while co-pilots will be redeployed elsewhere.

Cabin crew.

As there are big issues involved, I hope the Minister will keep his word. For the sake of future industrial relations we must act honourably. Given the current fiasco in the postal service, people may use the Aer Lingus example as an argument against reform of An Post but I hope that will not happen.

While I accept most of the points the Senators have made, I want to reply to the latter points concerning the situation at Aer Lingus and Shannon Airport, including the accusations flying here, there and everywhere. I have heard Deputies and Senators extolling the virtues of what Willie Walsh has done for Aer Lingus but the same arguments are not made about Shannon Airport. One Senator said Aer Lingus was dead and then resuscitated but I would have said it was unconscious before being resuscitated. There seems to be a contradiction in terms because one cannot praise a person, on the one hand, while criticising his methods, on the other.

One can, if one is a member of the Fianna Fáil Party in County Clare, apparently.

Aer Lingus is a commercial company with a commercial mandate and has to make its own decisions. We do not interfere in a company which has a commercial mandate as such. However, Fianna Fáil has and will continue to have a political interest in the matter at Shannon Airport. Aer Lingus must ensure it can take its place among other airlines operating in the international aviation industry. One only has to look at what is happening around the world in the industry to understand the situation. I am a great admirer of Michael O'Leary who has said he will never go to Ireland unless Dublin Airport has a second terminal. I am all for a second terminal but Mr. O'Leary has a financial nose which is pointing towards Dublin because the current situation in Norway and France is not panning out. Whether it likes it, Ryanair will probably locate in Dublin because that is the financial reality.

Aer Lingus is trying to ensure it continues to have people like us admiring the way it has turned around. If one looks at what is happening worldwide, one will see that KLM and Air France have practically merged. In addition, I forecast that Olympic Airways will probably be no more after the Olympic Games. We must ensure we work in the best interests of Aer Lingus and the Irish aviation industry.

The situation is a difficult one but people are beginning to understand it better. I wanted to point out, however, that one cannot extol the virtues of one person while criticising him also, although I realise that the Shannon region is suffering as a result of what is happening. It has been suggested that Aer Lingus does not care about it anymore. Aer Lingus is a commercial airline which makes its own commercial decisions but, politically, I can assure the House that Shannon Airport will not be forgotten.

Amendment, by leave, withdrawn.
Section 4 agreed to.

I move amendment No. 5:

In page 4, subsection (1), line 41, after "Minister," where it secondly occurs, to insert "and with the approval of both Houses of the Oireachtas,".

Amendment put and declared lost.

I move amendment No. 6:

In page 5, between lines 22 and 23, to insert the following new subsection:

"(4) Without prejudice to the generality of the foregoing an agreement referred to insubsection (1) or (2) shall, include provisions relating to——

(a) Aer Lingus slots at airports which it services; and

(b) minimum levels of service,”

The second part of the amendment is self-explanatory. The first part reflects my concern about slots, primarily at Heathrow Airport. The Minister expanded on this point on Second Stage when he indicated they were not owned by Aer Lingus. I may withdraw the amendment if the Minister of State can clarify their exact status.

Sadly, this amendment demonstrates the regrettable ambivalence of Fine Gael on the whole issue. The party is effectively saying we can sell off Aer Lingus but should seek to maintain the slots at Heathrow Airport. That argument is not made in the real world. The major assets which, I suspect, any likely purchaser of Aer Lingus would want are the Heathrow Airport slots, which are very valuable.

To suggest that we can dictate to any private investor or private owner of Aer Lingus that it must observe minimum levels of service is not realistic. If we want to maintain "minimum levels of service", to use the wording of the amendment, between Ireland and elsewhere, we will have to retain total ownership of Aer Lingus, notwithstanding the ESOP. That is the reason, as the Minister of State will be aware, we opposed the Bill on Second Stage.

Senator McDowell has said the delivery of minimum levels of service can only be guaranteed by retaining Aer Lingus in State ownership. In this respect, I raise a point that has been well documented in the last two days. Last week a wheelchair-bound passenger travelling from Shannon Airport to Dublin was left on an aircraft for 90 minutes during very bad weather. The person concerned who is suffering from diabetes was travelling to attend a hospital in Dublin. This occurred due to a misunderstanding and, although I accept fully that such difficulties can arise, it does not reflect a good level of service within the public sector.

While I agree with Senator Browne that it is important to have identifiable levels of service, I am not sure they can be provided for through legislation. Whatever regulatory authorities are in place post privatisation, if that is what happens, there are ways by which levels of service can be regulated. The market tends to address service levels when they fall below a specified standard as the company tends to suffer the wrath of the travelling public. These issues can be dealt with later.

I agree with Senator McDowell's interpretation of the section, which is paving the way for privatisation. I am absolutely delighted by the changed emphasis to slots over the past two months after an official said Heathrow Airport would do whatever it wanted with its slots, including giving them to airlines without necessarily being sold on. Suddenly the value of Aer Lingus goes up and down on the say so of an invisible bureaucrat or management type at Heathrow Airport. That demonstrates how dependent we are.

This is similar to the point made in jest about Senator Dooley and County Clare. A consistent theme of the Fianna Fáil Party is that privatisation is good but as soon as a State company is privatised and the level of service turns into a disaster, everybody wonders how it happened. The swings and roundabouts we have experienced regarding Eircom are precise and classic examples. If Eircom was still owned by the State, every house would have broadband because it would come through the copper lines but, as soon as Mr. O'Reilly and company got control of the utility, it was not worth their while providing broadband for households at Malin Head, west Kerry or west Clare. Senator Dooley would be a long time waiting for the company to provide broadband in the Loop Head area.

I disagree with Senator McDowell on one issue. The presence of two Fianna Fáil Members can be helpful given that many senior people in the party have grave doubts about the privatisation of a number of State transport companies. We might just be saved by this. The man in charge of transport has a clear view but the man in charge of the man in charge might not have the same clear view. The man in between might not have the same clear view either.

For example, a minimum level of service to Carrickbeg cannot be included as part of the sell-off of Aer Lingus. There are strategic issues involved in such a sale for both airports and airlines in terms of which other airlines can set up in the State. Every argument used against the threatened strike by Aer Lingus workers two weeks ago could be used to make a case against the sale of the company and the airports. However, the slots at Heathrow Airport are bottles of smoke. There is an ongoing row between British Airways and Qantas over a proposed merger because Qantas wants to use its transatlantic slots at Heathrow Airport for connecting flights between Birmingham and Heathrow and BA is unhappy about this. If that is the case, it will not happen. The slots are in the ownership of the airport.

I took the Montreal Convention legislation in the Dáil yesterday and there was more debate about Knock, Shannon and Cork Airports than about the legislation. However, if I was a backbencher, I would also make sure that I raised those issues.

The Council of Ministers is debating the single skies policy and the slots issue is being dealt with separately. Aer Lingus does not own slots but has so-called grandfather rights. However, such slots are important to the United Kingdom. Heathrow Airport is so important because only two British carriers fly to the United States — British Airways and Virgin — while only two US carriers — USAir and American Airlines — fly the same routes with 40% of all European passengers travelling to the United States flying from the airport.

Discussions are ongoing between the European Union and the United States following the recent European Court of Justice decision which provides that any airline can set up in a member state. For example, if Air France has a gateway in Washington, it can set up in Dublin Airport and provide a direct service. We must always keep an eye on what is in the best interests of Aer Lingus and Irish aviation.

I disagree with Senator McDowell regarding the privatisation of Aer Lingus. While I have no problem with the privatisation of certain State companies, I have reservations about the privatisation of a number of others. While I do not have reservations about privatising an airline, I would have reservations about fully privatising an airport as in the Aer Rianta scenario.

Will the Minister of State reassure Senator Dooley about the Shannon stopover if the Government sells off Aer Rianta?

I have explained what could happen regarding the Shannon stopover. An airline such as Air France could come in and swipe the gateway from under the nose of Aer Lingus.

I am anxious that Fianna Fáil in County Clare should be aware of the situation.

Shannon Airport no longer needs to be as dependent on Aer Lingus as it has been. More than 70% of people from Munster must fly from Dublin when going on holidays when that is not necessary.

This is a complicated area and it is a case of the best interests of Irish aviation versus the best interests of Aer Lingus. The slots issue is a concern because 40% of all European passengers travelling to the United States fly out of Heathrow Airport. However, the issue will be addressed separately at European level and, if an airline is taken over, it will have to be given rights to the slots out of necessity. Slots are also a major problem because they are responsible for between 20% and 30% of delayed and cancelled flights. The slots would naturally be part of whatever transaction involved Aer Lingus. I have reservations about this issue and, before privatisation takes place, it will have to be addressed at European level.

Slots are important as, apart from Aer Lingus, only British Midland operates Heathrow-Ireland services. Their value arises from their scarcity which may change in future when additional runway capacity is developed. Heathrow Airport is still the largest international hub in the world and an important part of the Aer Lingus network.

It is essential that we continue to have access to this large hub. I have no problem with the privatisation of Aer Lingus because it has a market of 14 million to 20 million at Dublin Airport and nobody will turn his back on this large hub. There has been an increase in direct services from Ireland to other large European hubs in Paris, Frankfurt and Amsterdam. The slots would be part of any deal in the negotiations on privatisation, if the Government should so decide.

With grandfather speed as well.

The reason we have concerns about slots is that we remember what happened before. The Minister has dealt with slots previously. It is interesting that he referred to Aer Lingus flying to Heathrow. In 1989, following considerable investment in consultancy, planning, advertising and marketing Aer Lingus developed five to seven daily slots to Stansted, but the current Minister, who was then also the Minister, took the slots from Aer Lingus and handed them to Ryanair. I have watched this game being played before. At what stage does it not have an interest in it? I heard Senator Dooley say that the Government does not have a great influence over Aer Lingus but I draw Members' attention to Aer Lingus's chief executive who earlier this week listed the six new routes to the US he could open next month if the Government would let him do so. The Minister cannot blame Members on this side for querying the issue because we have suffered from what happened before.

That is an international agreement.

Let us remember that currently Aer Lingus does not have decent slots into Stansted which deprives it of a feed into one of the largest low fares markets in Europe.

I thank the Minister for his reply, however, I am still not sure of the status of the slots. The Minister said categorically that Aer Lingus does not own but has grandfather rights to the slots. Will he clarify what exactly that term means?

I do not agree with the point made by Senator McDowell. The Labour Party is having a cut at us and I am surprised it does not accept that the Government may invest in Aer Lingus when it is going well but is not allowed to bail it out should it get into difficulty. It is no harm to have the option of privatisation open to us. It makes sense to privatise a company when it doing well and not when its back is against a wall. Fine Gael accepts that point and makes no apology for it.

I am delighted the Minister agrees to a minimum service. Should a private investor take over Aer Lingus, it will want to make a profit. Dublin Airport is the jewel in the crown whereas Shannon Airport is a burden and a new owner could route all flights to Dublin Airport, where it would be financially attractive, and the regional airports could be disadvantaged. I understand it would be difficult to lay down conditions on what must be done when selling the company to an investor. Perhaps it can be done. Let us take a hypothetical scenario, which I know will not happen, in which Ryanair buys Aer Lingus and then puts it out of business, making Ryanair a monopoly. While this is farfetched, it is a possibility and the reason we tabled an amendment seeking minimum levels of service.

The Minister's actions would be determined by the Government of the day. Grandfather rights mean one is entitled to slots because one has been there for such long time, but one does not own them. There is an ongoing debate on this issue in Europe and I can make the papers available to the Deputy if he so wishes.

Can one inherit grandfather rights? If I bought Aer Lingus tomorrow morning, would I have the slots?

Whoever takes over the airline automatically gets them.

Amendment put and declared lost.
Section 5 agreed to.

Amendments Nos. 8 and 9 are related to amendment No. 7 and they can be taken together by agreement. Is that agreed? Agreed.

I move amendment No. 7:

In page 5, lines 34 and 35, to delete subsection (3).

This is a technical amendment which deals with duplication.

There are 12 members on the board, four of whom are worker directors and if an employee share ownership plan, ESOP, is to go ahead, the number of worker directors would be reduced to allow for representation by ESOP. In the event of a future sale, it would allow the third party to be on the board as well. It is trying to keep the number on the board at a workable level. It would not be the same if there were 24 on the board. As Members know, the smaller the board, the better the work. That is the reason I cannot accept this amendment.

Question, "That the words proposed to be deleted stand", put and declared carried.
Amendment declared lost.

I move amendment No. 8:

In page 5, lines 36 to 42, to delete subsections (4) and (5).

Question, "That the words proposed to be deleted stand", put and declared carried.
Amendment declared lost.

I move amendment No. 9

In page 6, lines 1 to 8, to delete subsection (6).

Question, "That the words proposed to be deleted stand", put and declared carried.
Amendment declared lost.
Section 6 agreed to.

Amendment No. 10 has already been discussed with amendment No. 4.

Amendment No. 10 not moved.

I move amendment No. 11:

In page 6, between line 12 and 13 to insert the following new subsection:

"(2) An employee shareholding scheme referred to insubsection (1) shall include the establishment of a shareholding scheme in respect of former employees of the Company.”.

This amendment relates to those who have left midway before the completion of the whole scheme and this ensures that former employees are protected and get their full entitlements.

I understood the Minister of State was of the opinion that this section would have retrospective effect. Is that the case? Can it be clarified that the Minister continues to have the power to issue shares? The wording is not very clear to me.

As I understand it, Senator Browne's amendment seeks to provide that people who have left the company would be entitled to participate in a shareholding scheme. In the ordinary definition of the term, "shareholding" is used to reward people who have been in a company for the work they have done. It would be exceptionally difficult in this case to establish an entirely new scheme. The separate scheme which operated previously is no longer in place. The Senator seeks to set up an entirely new scheme for people who have left the company. Those who have left the company, notwithstanding what we have discussed in the previous amendment, have done so with pensions or lump sums. Where would this start and end? Should we consider all former employees of the company or those employed from a certain date? There is no way to properly accomplish the Senator's goal in the normal operation of any shareholding or pension scheme.

Amendment put and declared lost.
Question proposed: "That section 7 stand part of the Bill."

Is the power provided for the Minister under section 7 intended to be retrospective? I understood from the Minister of State's comments that the section was intended to cure any possible ambiguity about the power of the Minister to create previous ESOPs.

That matter is dealt with in section 4.

Section 7 provides, notwithstanding anything contained in the Air Companies Acts, that the company may issue shares in accordance with the Companies Acts as part of one or more employee shareholding schemes.

Can I clarify this with the Senator after the debate?

Perhaps that would be best.

Question put and agreed to.
Section 8 agreed to.

Amendment No. 13 is consequential on amendment No. 12. They may be discussed together.

I move amendment No. 12:

In page 6, subsection (1), line 45, to delete "or former employees".

These amendments relate to the pension rights of former employees and seek to ensure their full entitlements would be granted.

The purpose of section 9 was raised in the Dáil. It involves superannuation schemes in Aer Lingus and Aer Rianta and contains 17 subsections. My response to the Senator's amendment relates to superannuation schemes in general.

The sole purpose of the section is to provide that Aer Lingus may establish its own pension schemes at some stage. While the section is long and complex, running to 17 subsections, this merely reflects the complicated nature of pension scheme provisions and the need to ensure that if and when Aer Lingus establishes its own scheme, the rights entitlements and obligations of Aer Lingus employees or former employees under the existing scheme will be preserved under any new scheme. It is not feasible for Aer Lingus to establish pension schemes specifically for former employees and which would have benefits paid out in line with national wage agreements. In other words, it is a matter for the company. Pension payments are made in accordance with the rules of the scheme which also determine the rate of contributions.

The question arises as to where the funds would come from for the scheme proposed by the Senator. If his scheme was introduced, former employees would be in a better position than current employees who pay into the existing pension scheme. It should be noted that following Second and Committee Stages in the Dáil, during which concerns about pensions were raised by the Opposition, the Minister for Finance issued a letter to the Minister for Transport which stated that it was a long-standing policy and principle that pensions in the commercial semi-State sector were a matter for the trustees of the funds, the companies in question and the members of the schemes. The letter continued to the effect that it would be inappropriate for the Minister or this Department to become involved in such matters and that any issue raised should be referred to the company. I understand the Minister read the letter to the Dáil to confirm that pensions were a matter for the company rather than this legislation.

Amendment, by leave, withdrawn.
Amendment No. 13 not moved.
Section 9 agreed to.

Amendment No. 14 is out of order and cannot be moved.

While I accept the Chair's ruling that amendment No. 10 is out of order, it was tabled to provide the same pension rights for Aer Rianta workers as for those of Aer Lingus.

This is an Aer Lingus Bill and the amendment is not applicable.

Fine Gael accepts that it is forced to refrain from moving it.

Amendment No. 14 not moved.
Sections 10 and 11 agreed to.

Amendment No. 16 is consequential on amendment No. 15 and they may be discussed together.

I move amendment No. 15:

In page 9, before section 12, to insert the following new section:

"12. With effect from the coming into operation of this section, each enactment specified in theSecond Schedule ceases to apply to the Company to the extent specified in column (3) of that Schedule.”

All we are seeking through this amendment is to ensure the list in the Schedule would be published in tabular form. A table would be easier to understand and allow us to list the relevant Acts and their years of enactment. It would have the effect of making the legislation more reader friendly.

All I can say to Senators is that if a lay person was to attempt to read this legislation, he or she would consider it to be double Dutch. It is drafted in another form of the English language. The provisions of the Bill use a different phraseology to Senator Browne's amendment to achieve the same effect. My officials have indicated that the provision the Senator seeks to make through his amendment has been accepted in principle in the Bill which is drafted using a different wording. I will not return to the Dáil with the legislation for the sake of different phraseology.

Amendment, by leave, withdrawn.
Sections 12 and 13 agreed to.
Amendment No. 16 not moved.
Schedule agreed to.
Title agreed to.
Bill reported without amendment.

When is it proposed to take Report Stage?

On Wednesday next.

May I raise a point of order? As there are no amendments there can be no Report Stage. Is it not possible for us to take the remaining Stages now?

It is in the hands of the Leader.

This is an important semi-State Bill and my preference is to have an interval between Committee and Report Stages. I have consistently tried to do this with Bills, except where it is not possible. It is better that we should proceed in this way.

I thank Members for facilitating discussion on Committee Stage. If Members have any queries, they can avail of the expertise within my Department.

Report Stage ordered for Wednesday, 31 March 2004.

When is it proposed to sit again?

At 10.30 a.m. next Wednesday.

The Seanad adjourned at 2.55 p.m. until10.30 a.m. on Wednesday, 31 March 2004.