asked the Minister for Transport and Power whether Aer Lingus have recently acquired further hotel interests; if so, if he will give details; and the reasons for such new acquisitions.
70.
Ceisteanna—Questions. Oral Answers. - Aer Lingus Hotel Interests.
69.
asked the Minister for Transport and Power why a decision to acquire a controlling interest in certain hotels at a cost of between £700,000 and £800,000 was not conveyed initially to the Dáil.
With your permission, a Cheann Comhairle, I propose to take Questions Nos. 69 and 70 together.
Aer Lingus has recently made an offer for an interest in the Kingsley-Windsor hotel group which have hotels in England and Ireland. The offer is subject to the approval of the shareholders. The shareholders meeting is to be held shortly. The constituents of the offer are as follows—
(1) An issue of shares will be made to Aer Lingus amounting to 25 per cent of the enlarged share capital at a cost of £747,000.
(2) Aer Lingus will buy 750,000 shares from the joint managing directors of the Group (Mr. and Mrs. Jackson) over a period of three years at a cost of £525,000.
(3) The total cost to Aer Lingus, therefore, will be £1.3 million approximately and by 1st April, 1973, Aer Lingus will be entitled to just under 50 per cent of the votes which may be cast at general meetings.
The reasons for the Aer Lingus investments are air transportation and the development of tourism in the 1970's which will be dependent more and more on package tours and on the availability to the carrier of hotel accommodation at selected points. This is recognised by the airlines of the world and accounts for the very substantial hotel investment being made by them. Aer Lingus had already taken some action in this direction in Ireland. There was an urgent need to intervene at London which already was close to becoming a bottleneck in sales of inclusive tours through Ireland from North America.
The very large investment in our airlines particularly on the transatlantic route would be seriously affected if left exposed through lack of co-ordination with hotels—both in Ireland and in key centres abroad.
It was within the competence of Aer Lingus under the relevant legislation to take this decision but because of the policy and financial implications they first sought and obtained my approval and that of the Minister for Finance. The House will appreciate that absolute secrecy had to be observed up to the time at which an agreement was reached between the boards of the two companies, and it was then necessary to give immediate publicity to it to prevent speculation in the shares to the prejudice of the rights of shareholders. The whole proposal is, of course, subject to approval by the shareholders of the Kingsley-Windsor group of hotels.
Is the Minister of the opinion that a situation which could give Aer Lingus slightly less than 50 per cent of the voting strength is a healthy situation, even in 1973? Is the Minister aware that other airlines have succeeded in making long-term contractual arrangements with groups of hotels so that they can arrange to have bedroom accommodation available for their passengers without heavy capital expenditure? Is the Minister further aware that the financial results from the Kingsley-Windsor group over the last period of years have not been very striking and have been described in some financial papers as quite unsatisfactory?
I will deal with the latter point first. This is precisely the reason why Aer Lingus moved into this group. The Deputy may have some point in that. Recently the Kingsley-Windsor group have not expanded the growth rate in keeping with other hotel organisations. Aer Lingus propose, with their expertise and management, to expand considerably the activities of this group. They feel there is a tremendous area of growth in the particular chain of hotels and that this has not been developed to the extent to which it could have been developed. This is precisely why Aer Lingus went into the Kingsley-Windsor group of hotels. They feel that this chain of hotels has not been fully developed for various management reasons. Aer Lingus are confident they can develop and extend the group to a great extent.
Can Aer Lingus do this from a minority situation?
They hope to work out of the minority situation. That is all I can say now.
Is this a wise thing? The Minister states now to the Dáil that a State company is buying almost 50 per cent of the shares of a public company and they hope to work out of that situation and to work themselves into a position where they will have 51 per cent of the shares? Does that not leave the other shareholders, who now know their shares are golddust, in a rather good bargaining position? Surely that is not a wise position for the State. Is the Minister happy that the expenditure of £1.3 million eventually will give as good a result as if long-term contractual arrangements were to be made with existing groups of hotels who would be glad to get business from Aer Lingus?
I am sorry to interrupt the Deputy but we seem to be enlarging Question Time.
This is a very serious situation.
The Deputy will appreciate, as a business man, that this is a matter of negotiation and discussion over a period of years. It is a matter which will not be settled across this House. It will be settled by business arrangements.
I wish I had a few shares in the 51 per cent at this moment.
The Deputy is not worrying me at all.