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Air Services.

Dáil Éireann Debate, Tuesday - 7 December 2004

Tuesday, 7 December 2004

Questions (38, 39, 40, 41, 42, 43, 44)

Seán Ryan

Question:

63 Mr. S. Ryan asked the Minister for Transport the reason consideration of State funding was ruled out in the mandate given to consultants with regard to a report (details supplied) on Aer Lingus; and if he will make a statement on the matter. [32367/04]

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Ruairí Quinn

Question:

83 Mr. Quinn asked the Minister for Transport his views on the recent resignations of persons (details supplied) from the board of Aer Lingus; if he has met them to discuss the reasons for their resignations; his further views on the implications these resignations will have for the future of the company; and if he will make a statement on the matter. [32361/04]

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Ruairí Quinn

Question:

85 Mr. Quinn asked the Minister for Transport his views on a report (details supplied) on the future of Aer Lingus; the action he intends to take in view of the report’s recommendations; if he will proceed with the privatisation of the company through an IPO; and if he will make a statement on the matter. [32358/04]

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Bernard J. Durkan

Question:

112 Mr. Durkan asked the Minister for Transport his preferred options in respect of the future of Aer Lingus with particular reference to structures, management, staff participation and the need to meet customer requirements; and if he will make a statement on the matter. [32385/04]

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Róisín Shortall

Question:

117 Ms Shortall asked the Minister for Transport when he expects final decisions to be taken on the future of Aer Lingus. [32528/04]

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Olivia Mitchell

Question:

199 Ms O. Mitchell asked the Minister for Transport if a decision will be made on the future of Aer Lingus before the Christmas 2004 recess; when he expects that a new management team will be put in place; when a successor to the outgoing chairman of the board of Aer Lingus will be announced; and if he will make a statement on the matter. [32533/04]

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Bernard J. Durkan

Question:

225 Mr. Durkan asked the Minister for Transport the position in regard to discussions he has had with management or staff in Aer Lingus, with particular reference to the future structures of the company and its role in the issue of air transport; and if he will make a statement on the matter. [32549/04]

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Written answers

I propose to take Questions Nos. 63, 83, 85, 112, 117, 199 and 225 together.

The Government decided on 6 July 2004 to establish a Cabinet sub-committee to examine all the issues relating to the future of Aer Lingus and report back to Government as soon as possible. The committee first met on 14 July 2004 to review the position and decided that work on future options continue with advisers as necessary and that the result of that work would be considered by the committee. Goldman Sachs was then engaged by my Department to provide advice and assistance regarding the future of Aer Lingus. This report, which was received on 6 October 2004, was considered by the Cabinet sub-committee at its meeting on 22 November following its review by relevant Ministers and Departments.

The Goldman Sachs report was published by my Department on Tuesday last, 23 November 2004, with copies of the report laid in the Oireachtas Library as well as being made available on my Department's website. The report summarises the global aviation market, the regulatory environment and Aer Lingus' history and current operation. It then moves on to Aer Lingus' funding requirement and capital structure. It identifies as a key issue the availability of capital to enable the airline compete on an equal footing, pursue expansion plans and withstand external shocks. Moreover, Goldman Sachs states that given the cyclical nature of the industry, access to equity capital is an important mitigant of financial risk.

The report goes on to review the status quo, the implications of change with regard to strategic issues and the various ownership structure alternatives under complete or partial divestment. The question of State investment was neither ruled in nor ruled out in the mandate given to Goldman Sachs since this is a matter for the Government to decide for the future. Goldman Sachs refers to successive Governments’ policy on investment in Aer Lingus and goes on to deal with this issue in the chapter on the status quo in the report.

The issue of funding for future growth is a major factor for consideration in any decision on ownership. As already mentioned, this is clear from the Goldman Sachs report. A major issue for any airline is the upgrading and replacement of aircraft. Aer Lingus is funding the upgrade of its short haul fleet from within existing resources but this is based on meeting performance and profit targets as set out in the business plan. In addition, the airline is currently examining its long haul fleet requirements and expects to complete a proposal in the coming months which will have to be approved by my Department and the Department of Finance. Pending the outcome, the company has confirmed to the Department that the airline will require equity funding to replace the existing long haul fleet and to support future growth.

At its meeting on 22 November 2004, the Cabinet sub-committee recognised that decisions on the future ownership should be made before Christmas in the interest of the airline and all its stakeholders. A further meeting of the committee is scheduled to take place on 9 December 2004.

With regard to the resignation of the three senior managers in Aer Lingus — the chief executive, chief operations officer and chief financial officer — their resignations will take effect from May 2005. I have placed on record my thanks to the three executives, Mr. Walsh, Mr. Kearney and Mr. Dunne for their work and commitment over the past three years in conjunction with the board and staff. That work has resulted in the profitable and successful airline we see today. I met the three executives on Tuesday, 16 November 2004, and at that meeting they explained their position and the reasons for their resignations. I do not propose to go into the detail of that meeting as it is a matter for the executives themselves to decide whether they wish to provide such information publicly.

Of course, the chairman and board of Aer Lingus are charged with ensuring the ongoing orderly management of the business and I have every confidence in them fulfilling this role, notwithstanding these resignations. Resignation of top management is nothing new in business nor is it the first time to happen in Aer Lingus. Clearly, the board will ensure that replacements for the top management team are recruited as quickly as possible. It would be preferable if such replacements could take office before next May. I met the acting chairman, Mr. John Sharman, on 18 November 2004 to discuss this matter and clarify the arrangements for the replacement of the three senior executives.

The recruitment of the chief executive officer is solely a matter for the board of Aer Lingus and I have no function in this regard. In that context, the board of Aer Lingus, at its meeting on Monday last, 29 November 2004, decided to commence the process of recruiting a new chief executive by establishing a sub-committee, comprising the chairman and two other non-executive directors, which is charged with identifying and recommending to the board the appointment of a replacement chief executive. In addition, all three resigning executives confirmed to the board their full commitment to working with the airline to ensure a smooth transition to their replacements.

In addition to commencing the recruitment process for a new chief executive, the board reiterated the need for the complete and early implementation of the business plan to address competitive pressures and build on progress to date. Implementation of the plan is crucial so that the airline can position itself to respond in a timely manner to changing market conditions and to take advantage of future growth opportunities so as to ensure its viability in the future.

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