There are two issues that need to be addressed in relation to Aer Lingus, namely, the Government's submission to Brussels——
Notice taken that 20 members were not present; House counted and 20 Members being present,
Private Members' Business. - Air Companies (Amendment) Bill, 1993: Second Stage (Resumed).
Question again proposed: "That the Bill be now read a Second Time".
There are two difficult issues that need to be addressed in the context of this Bill, one being the Government's submission to Brussels. Media reports reveal that the Commission appears to be considering imposing commercial restrictions on the airline. Those restrictions must be rejected as the Commission has already approved major investments for national airlines of other member states in recent years. A total of £1.28 billion was allocated to Sabena Belgian World Airlines. The total investment approved to date for Iberia Airlines of Spain is £620 million and £700 million has been allocated to Air France by the French Government. In many of those cases money was invested in the national airlines before an application was submitted to the Commission. Having regard to the vote of confidence by the staff in Aer Lingus, it would be catastrophic if the Commission, on the basis of possible political pressure, now intends to apply commercial restrictions. All carriers, including Aer Lingus and Ryanair, must be allowed to operate on a level playing pitch. Having regard to the seriousness of this matter and the need to make a decision in regard to the company in the next few days, the Minister and the Taoiseach should travel to Brussels to make a case on behalf of the Irish Government and our people to highlight our concern about this matter and our opposition to the imposition of restrictions in this regard.
The Bill does not provide for representation or for worker participation on the boards of subsidiary companies of Aer Lingus. That is a major defect in the Bill and I ask the Minister to reconsider this matter on Committee Stage. As a firm believer in industrial democracy, I consider the proposed Bill represents a rolling back of the progress made in that area. The Minister admitted that there will be a substantial overlap between the membership of the group board and the composition of the main operation boards. Furthermore, he stated that it was his intention that representatives of employees' interests would have a part to play on the boards of the subsidiary companies of the main airline. Now that an unprecedented level of agreement has been reached with the staff of Aer Lingus, I appeal to the Minister to give statutory effect to that agreement by providing, on Committee Stage, for worker representation on the boards of the subsidiary companies. A precedent in that regard exists in the operation of CIE. I am referring to the transportation business where decisions are made on a day-to-day basis.
The restructuring plan and the negotiations with TEAM Aer Lingus have not got off the ground yet. I hope it will be possible to conclude an agreement that will ensure the future security of the existing workforce and also provide the opportunity to expand the business and maximise the skilled employment opportunities in the Dublin area, particularly north county Dublin, an area which has been devastated in recent months. Regarding the corporate structure of the company, how does the Minister envisage the interconnection between the holding company and its subsidiaries will operate? Hopefully, the workers will be represented on the board of the holding company. I compliment all those involved, the workers, their representatives, management and the Minister, in bringing the restructuring plan to its current stage. Notwithstanding the comments that have been made tonight, the Labour Party has given a commitment to Aer Lingus which has been realised. The Labour Party and myself are committed to supporting the company in the future. I do not have a magic wand but I hope we can put together a plan that will secure the future of Aer Lingus, enable it to prosper in the next century and, in the process, protect the maximum number of jobs.
I listened with interest to the contributions made in support of this Bill and to contributions by speakers on this side. I detect certain complacency on the Government's side where Members, having applied their energies to securing a major redundancy package, believe the problems of Aer Lingus have been more or less resolved. A more honest and sincere approach could have been adopted by the Government parties if, prior to the general election, they had objectively considered the problems of Aer Lingus and announced that there would be almost 1,000 redundancies.
They were not prepared to sell it.
It was not possible.
The parties did not address the problem in an objective manner. This crisis arose mainly at the behest of the banks. The banks pulled the plug on the financial difficulties experienced by Aer Lingus. It is painful that the Minister's speech is not changed on the word processor. The Minister makes a similar speech on each occasion he talks about Aer Lingus. He was interviewed on Clare FM today and he gave the same recital. Tonight he said:
Let me first of all set the policy background against which this Bill was drafted. When I was appointed Minister for Transport, Energy and Communications in January of this year it quickly became clear to me that Aer Lingus was facing a rapidly deteriorating financial situation.
That is a misstatement. The Minister was Minister for Labour when Deputy Geoghegan-Quinn examined the position in Aer Lingus and he knew how deep the problem was.
The Deputy must think we are clairvoyants.
We faced a general election, with the Labour Party outbidding Fianna Fáil to try to find a resolution to the Aer Lingus problem.
We did find a solution.
You conned everyone. Let us be honest.
Be generous.
Deputy Carey, without interruption.
This is a national Parliament.
The Minister should give himself a real chance of being re-elected. I would say to the Labour Deputies that we experienced a similar difficulty when Fine Gael was in Government with the Labour Party and we faced up honestly to our problems. I was re-elected to this House because I was honest.
I hope the Deputy is not saying that I am not honest.
A few moments ago I listened to Deputy Ryan claim a victory for the Labour Party and Labour Party policy. The Deputy's party was involved in the decision which resulted in the voluntary redundancy of almost 1,000 people. The Government is proposing to give £175 million of taxpayers' money to rescue Aer Lingus.
I hope the Deputy is not opposing that.
When campaigning in Dublin North Deputy Ryan promised £500 million. That was stated in the Labour Party document. Anything the people wanted, the Labour Party was going to give them.
This case must now be presented to the Minister responsible for competition in Brussels, who will consider the matter. He issued statements about the Aer Lingus solution and the Cahill plan and he is not very happy with it. He queried the sincerity of the plan.
One only has to look back at the history of aviation policy to see the way the whole question of air transport has been dealt with by successive Governments. It was the generous accounting system operated by Aer Lingus group and accepted by the Department that led to the present problems. When I read the Minister's Second Stage speech today I realised that the first paragraph was similar to that of many other speeches. He stated: "Let me first of all set the policy background against which this Bill was drafted".
There is nothing wrong with that.
No, except that he knew exactly what was going on. To say that he is starting off as Minister for Transport, Energy and Communications with a clean sheet is not true.
It is true.
Deputy Cowen was Minister for Labour when Deputy Geoghegan-Quinn, as Minister, made the decision in relation to Aer Lingus and Shannon.
She pinpointed the weaknesses and the need for action.
If everything was so secure, why did Deputy Killeen and Deputy de Valera find it incumbent on themselves to resign the Whip?
Ask them.
(Carlow-Kilkenny): The Minister has no answer to that question.
As a western Deputy the Minister should not be consoling himself that this is all that will happen. Politically speaking, many of these matters will come home to roost. The effect of Deputy Killeen and Deputy de Valera denying themselves the Whip has been to dampen the debate. There is no debate in the mid-west about the rights or wrongs of the amended Cahill plan or whether tourism in the west will receive a magnificent boost. I was a little puzzled at Deputy Haughey's statement that the plan will reduce costs and bring more tourists into this country. I am concerned about the mid-west region. I believe that as a result of this plan the tourists will stay in Dublin.
If the Deputy keeps talking like that he will do tremendous damage to his area.
The tourist industry in the west depended on the 400,000 American tourists visiting there. Many tourists come through Shannon Airport to Galway every day.
They will continue to do so.
If the position was reversed and the Dublin stopover was abolished, we would see how long the national airline would be amenable to that proposal. In those circumstances it is the tourists who would have to pay the increased costs. I appreciate that Deputy Haughey wants to see American tourists on the streets of Dublin and perhaps more theatres opened up there, but in doing so many good hotels and guesthouses would be closed in the west. As a result of this plan much of the economic infrastructure in the west will be transferred to the east.
There are many people in the Deputy's county who would not agree with that.
People are still attracted to the west.
If the Minister was sincere we would bring the Dublin football team down to Clare any time. If we could beat them, we would be happy.
(Carlow-Kilkenny): Éire Óg would join in as well.
The real difficulty, that is the accounting system operated by semi-State companies, particularly the Aer Lingus Group, has not been faced up to. The whole future of semi-State bodies depends on how transparent the system is.
The dispute between Shannon and Dublin was highlighted when certain learned economists wrote in national newspapers about their knowledge of the cost in terms of transatlantic losses and so on. These people were geniuses because they were able to work out the Aer Lingus accounts, which nobody else was able to do. I do not know where they got the figures. The question of the Aer Lingus accounts is a puzzle and if it is not dealt with in this legislation when we have the opportunity to do so it will not be dealt with for a long number of years.
I do not know what controls the Minister intends to introduce — he did not mention this matter in his speech. Does he intend to provide for internal auditing? Will there be some mechanism which will anticipate the difficulties that may arise in companies such as Aer Lingus Holidays, or dare I say anything about that company? I think it was Deputy Brennan as Minister who commenced examination of that matter, but the House has heard nothing about it since. I do not know whether there is any intention to report on this matter.
When replying, the Minister should indicate the exact position in relation to Aer Lingus workers. In 1987-88 no internal audit took place in Aer Lingus. Why did management not introduce an auditing system? Why did the Department, who was represented on the board, not insist that internal audit systems be put in place so that some of the difficulties that arose would be reported?
The immense losses suffered by Aer Lingus did not suddenly creep up on the Government — they were signalled for a long time beforehand. It should be remembered that these problems were brought about by the Government, who failed to take decisions on the matter. The former Taoiseach, Charles J. Haughey, must have known that Aer Lingus was going down the tubes, yet he did nothing about it. I feel very aggrieved about this matter because when we put forward a solution to the problems which have been allowed to evolve in Aer Lingus we were told by the Labour Party that we were attempting to privatise the company. This proposal was never put forward; we merely put forward a solution to save the company from extinction.
The taxpayer is now being asked to save Aer Lingus, a public company. If Aer Lingus was a private company it would have been closed down long ago. It would have been declared bankrupt and the banks would have moved in. However, because the Government has been there to back the company and give it a letter of comfort it has struggled on. The threat by the banks that they would pull the rug out from under the company on 1 September if agreement could not be reached was wrong. An agreement should have been reached between the management and unions upfront and should not have been brought about as a result of threats or the circuitous route used — getting certain people involved and asking them to put forward proposals, including the number of redundancies required. The people in Aer Lingus have been very fair to the Minister. I suppose they have some admiration for the so-called pragmatism of Fianna Fáil. However, it should be remembered that this pragmatism has resulted in huge redundancies.
Deputy Ryan referred to the impact this blight of redundancies will have on north County Dublin. This blight will not affect that area this year; rather it will affect it next year when there is no dole and the following year when the children of these workers have nowhere to go. Redundancy is a terrible thing. I do not know how many Members of this House have worked in companies where there have been huge redundancies and experienced the trauma this has caused for families. I have been down that road twice and I know that most of the people in management do not really care about the workers who are left on the sideline. I am very sorry for the workers in Aer Lingus caught in this trap who were told last October that the jobs were secure and that this semi-State company would receive what was virtually a blank cheque from the Government.
The Minister made several claims in his speech. As a Deputy from the west, the Minister of State at the Department of Transport, Energy and Communications might be interested in what the Minister had to say about my constituency.
I am deeply interested in the Deputy's constituency.
The Minister stated: "The Aer Lingus package for Shannon is both imaginative and progressive and has the full support and approval of the Government". I am glad this package has the support and approval of the Government. However, I do not know how many people in my constituency support it.
Does the Deputy support it?
The only way the people in my constituency will support this package is if Shannon is allowed at least to retain the 400,000 American visitors it had for the past three years.
We will work together——
There is nothing in the Bill to suggest that it will happen. The Minister went on to say that for the first time ever Shannon will have its own transatlantic operation based in and managed from Shannon. That claim by the Minister is not true. When Aerlínte was set up by Seán Lemass——
A great man. He was an institution in his own right.
He should get credit for setting up this company which ran flights directly from Shannon to New York. The Minister for Transport, Energy and Communications, Deputy Cowen, cannot claim a first in this area. He said that Aer Lingus's transatlantic services will stop and start at Shannon. Having regard to the Dublin stop-over, this certainly will be a first. The Minister said that there will be a year-round daily New York service and a dedicated Shannon-New York service in the peak summer season and that there will be no change in the current Boston service. Most of the people flying to Boston get on at Shannon. If these flights were to fly from Shannon to Dublin, even Mr. Cahill could not wave his magic wand to get over that one.
I am particularly interested in the Minister's claim that Aer Lingus is examining ways of developing new business. Why could the company not do that previously? What magic wand does Aer Lingus now have which enables it to examine ways of developing new business?
The Deputy has already referred to some of its——
Is it the case that the costs in Aer Lingus were so high that it had to charge passengers high fares and lure them into Shannon? Will the Minister make provision in the Bill to grant aid the Shannon-New York service so as to guarantee tourists in the future?
The Deputy means subsidise.
Grant aid.
There is a difference between the two.
Grant aid is a different thing——
We are living in the commercial world and reality must be faced.
The Minister went on to say that other marketing opportunities for the new low cost airline operation at Shannon will be exploited for other business in all markets. I should like to know what the Minister means by "low cost airline". How can the costs be lowered?
(Carlow-Kilkenny): Put four in a seat.
Aer Lingus complained about the Aer Rianta landing charges. I understand from the people working in Aer Rianta that landing charges amount for 3-4 per cent of airline costs. Why did Aer Lingus complain about the landing charge at Shannon? Why was it such a burden on the company? Will the company be given some kind of relief on this charge in the future? Will the Minister help Aer Rianta to lower this cost on the airline? It is possible that the Minister might do this — he referred to an integrated aviation policy. Will the Minister help to subsidise the Aer Lingus Shannon-New York service by waiving the landing charges? I do not know how such a proposal would be greeted by Aer Lingus's competitors.
Under the package proposed by Aer Lingus, for the first time ever, Shannon will have no direct daily flights to New York. That is the worst blow in the Cahill plan. I think people were expecting an explosion, so to speak, in the mid-west region about the decision to do away with the Shannon stop-over. The people in this region are very disappointed. The uncertainty about the status of Shannon has gone on for three and a half years and I do not want to add to it. I had hoped that the Minister would outline today some definite future role for Shannon. However, all he gave was some mythical solution to the airline's problems. I cannot accept the package outlined by the Minister as a ready solution to the problems in Aer Lingus.
I wish to share my time with Deputy Joe Costello.
Is that agreed? Agreed.
At the outset, I wish to support the statement made earlier by my Labour Party colleague, Deputy Seán Ryan. This Bill has three main objectives, the principal one being to provide the £175 million of equity for Aer Lingus. It represents the final stage in the commitment given by the Labour Party in the last general election to provide equity for the company as part of a strategy to ensure the return to viability of the airline. I am proud that the Labour Party has honoured this commitment made at the meeting in Dublin Airport last November.
Deputy O'Malley referred scathingly to the "Santry Six" but I think the Deputy could be referred to as one of the "Shannon Seven" because his policy with regard to Shannon tends to run completely counter to his political and economic philosophy on every other matter. Therefore, I think one is entitled to make that comment when he refers to others.
As a Deputy elected last year for the first time to this House and representing a constitutency on the northside of Dublin, I welcome this Bill. It is an expression of confidence in the future of Aer Lingus and in Dublin Airport which will now be open to direct flights from North America.
Deputy Carey referred earlier to Shannon and stated that this was a Dublin versus Shannon argument. I reject that, it is a divisive argument and it is not what the people in Dublin, who support Dublin Airport, are fighting for. If additional flights are allowed into Dublin it will result in additional tourism and business for the country generally, but that should not be done at the expense of a particular region. I am opposed to the view that one region is in conflict with another.
I welcome also the outcome of the recent Aer Lingus workers' ballot which had a decisive and emphatic outcome in favour of the Aer Lingus strategy for the future. This outcome is a tribute to the negotiating teams, both the management and unions, and to the Labour Relations Commission which toiled long and hard to reach his agreement. I would like to pay tribute also to Minister Cowen for his open approach and his commitment to achieving a solution and resolving the difficulties in Aer Lingus. I believe Aer Lingus and its staff are now confident that when its route networks return to viability the airline will be in a position to strengthen both its markets and financial position through alliances with other carriers feeding into an expanded Aer Lingus system.
Having said that, one is conscious that this agreement was not achieved without some pain. It did not, however, involve compulsory redundancies, it involved a voluntary employee reduction scheme of approximately 800 jobs. The contribution made by those workers to the survival of Aer Lingus must be commended and in this context I welcome also section 5 of the Bill which allows for an employee profit-sharing scheme.
As we are all aware, the injection of equity requires European Commission approval. I hope this approval will be forthcoming with the minimum of restrictions and with the maximum commercial freedom to allow Aer Lingus and its subsidiaries expand and grow in the international air travel market. EC approval has recently been given for equity injections to Air France, Sabena Belgian Airlines and Tap in Portugal, on a far higher scale. Aer Lingus should not be required to face restrictions additional to those applied to these national airlines.
Section 8 deals with worker participation and the appointment of employee representation to boards. In this section it is proposed to confine worker representation to Aer Lingus group only. I would ask the Minister to give serious consideration to providing for employee representation on the operating subsidiaries, Aer Lingus plc and Aerlínte plc, now and in the future.
My colleague, Deputy Ryan, referred to what took place in Córas Iompair Éireann in 1986 when that company was divided into three operating companies and a holding company. In that case, the elected worker representatives on the main board also have representation on the subsidiary boards which allows for continuity between the boards and greater involvement in the running of the companies. I would ask the Minister to seriously consider that option when he is replying to the debate.
I am delighted to have the opportunity of speaking on this Bill. Listening to the remarks made by Deputy Carey, I could only describe him as a prophet of doom for Aer Lingus who saw nothing positive and had no proposals to put forward in relation to how we would deal with the very serious problem with which Aer Lingus is confronted. There is no point in simply giving a pessimistic analysis of the problem unless one is prepared to put forward positive proposals. That is what this Government has done. It has grasped a very difficult nettle that had not been grasped in previous years and it has dealt positively and comprehensively with this issue.
I do not like this issue degenerating into one of the regionalism as my colleague, Deputy Kenny, has mentioned, because that is a blinkered approach. When this whole problem came to the fore, I remember Sligo County Council putting forward a motion seeking an open skies policy in relation to Ireland because it felt it was poorly served by the Shannon stop-over and that it did not benefit the north-western region in any way. I believe we must examine the overall approach——
Wait until they see it next year.
The local representatives felt that all——
They are positive people.
They were the people who were concerned that this matter was being looked at——
I would not be too vocal on that subject if I were the Minister of State. He is walking on icy ground.
The people in Shannon know their friends.
It is one thing to look at these issues in a blinkered, regional fashion and it is another to look at it in terms of the future of the air industry, which is what we are examining here.
By and large, I welcome the proposals in the legislation. I welcome also the restructuring proposal before us in terms of the establishment of a new holding company and also the proposals for the establishment of subsidiaries. This is part of a package which will bring about a profound transformation of Aer Lingus and the air transport industry in this country. It is a package that has not been implemented without a considerable degree of pain and trauma but I believe it will result in considerable benefits in the long term.
It is difficult to make major changes without a number of people being hurt in the process but if the situation had continued indefinitely I have no doubt the end result would have been much worse and might have come too late to save the industry entirely. It would have been swallowed up and we would have lost a very substantial asset to this country.
These changes have taken place with the hard work and goodwill of all the staff in Aer Lingus who faced up to a crisis and who, one could say, took it on the chin. Together with the Labour Relations Commission, the management and this Government, a package of proposals was put together that involved voluntary redundancies. It must be emphasised there were no compulsory redundancies despite the prophets of doom from the Fine Gael side of the House.
Work practices changed and it must be remembered that it is not easy to change work practices either. It is difficult, particularly when it involves a fine industry that was operating on the international scene. When radical work practices have to change it requires a considerable degree of psychological examination. One's livelihood and one's parameters of activity, family life and so on, must be taken into account.
The elimination of the Shannon stopover has been another substantive change. It would be improper for me to dwell on that decision only. Nonetheless we must recognise that the market warranted a greater degree of flexibility and, within the context of deregulation, that was something we had to face up to. I do not believe for a moment that this decision will mean the deathknell of Shannon since already we have observed further industries being attracted to the south-west. Rather I predict that Shannon will receive a new lease of life. The commitment to base a certain number of crew there, ensuring its use as a regular base, is a mark of goodwill in that direction.
Aer Lingus have now put together this restructuring package. This will turn around what had become a £50 million operational loss and lead to its eventual elimination in future years. It is a tremendous mark of support for the people who worked so hard in compiling the restructuring package and ensuring its success. Those were the difficult decisions taken. On the other side of the coin is what Aer Lingus can obtain in return. Aer Lingus workers will receive 5 per cent equity, plus 5 per cent profit-sharing, giving them a foothold in the company and a say in its future direction.
Aer Lingus is receiving an injection of £175 million by Government, the major shareholder, not a huge amount of money in international terms but nonetheless a substantial equity injection on the part of taxpayers. We should remember that every penny invested in Aer Lingus has to be paid by taxpayers through their money hard-earned. Then there are the new structures placed before us: the holding company that has been established, in addition to the subsidiary companies to be established to deal with the various operational aspects of Aer Lingus, entailing a corporate reorganisation.
That takes me to what I consider to be the most serious element of that restructuring package, that is, the manner in which the board of the holding company and any of its subsidiaries will be constituted. It is essential that there be worker directors serving on the boards of the holding company and likewise of any subsidiary established. We must remember what has been said about the enormous pain and suffering endured within the company by its employees, the decisions that have been taken, some too late, and the agenda that must be drawn up for the future.
If we are to ensure that Aer Lingus does not fall into crisis again it will be the people at the cutting edge, workers and management, who must have control and the ultimate say in what will happen to the company. The only way in which that objective can be achieved is through the participation of workers in all the relevant subsidiary companies having a decisive and strategic say in the future direction of Aer Lingus. I am concerned to note that there will be 12 members serving on the board of the holding company, four of them worker directors, the remainder to be nominated by the Minister. That excludes any worker participation in the existing Aer Lingus and Aer Rianta boards. This means we are losing worker participation in some boards while not gaining participation in any of the subsidiaries to be created by the Minister in the future.
We must examine some decisions taken in the recent past. Deputy Carey referred to Aer Lingus Holidays. There are questions to be answered there — and I should like to see them answered — ascertaining who was responsible for a considerable loss of money in that area. There was the question of the purchase of the two 767 jets lying idle on the runway at a cost of £10 million per annum. That decision was not included in a proper package, thereby precluding the deployment of those aircraft. They were bought in advance without the requisite strategic decisions having been taken.
Questions also remain to be answered about how a loss of £50 million was allowed to accumulate. People in high places should not have failed to foresee that the "open skies" policy beginning to emerge in Europe would lead to the deregulation and liberalisation of air travel. This should have been acted on at an earlier stage. We must remember also that if approximately 1,000 personnel have opted for voluntary redundancy, that places an additional responsibility on the staff remaining, an extra responsibility they are taking on in good faith in order to run an airline that will be at least as strong and which will continue to expand. Therefore we must ensure that the workers and their colleagues have a very definite say in and responsibility for the running of the airline so that the mistakes of the past will not be allowed recur.
A good analogy would be that of CIE when that company was restructured. My colleague, Deputy Sean Kenny, knows all about that, having worked in that company. He knows precisely how CIE was restructured. It is divided into three separate subsidiaries — Iarnrod Éireann, Bus Éireann and Bus Átha Cliath — each of which has two worker directors. This was specifically written into the relevant legislation, the Transport (Reorganisation of Coras Iompair Éireann) Act, 1986, section 11 (3) of which said:
The directors to be appointed to each company shall include two persons elected from the members of the board...provided that such persons are willing to accept office.
That was the parallel restructuring that took place in the case of that former State body, which meant that there was worker director participation in the strategic operational subsidiaries. I believe that is the direction in which we should be moving. I want to see the Minister take that concept on board and I would hope he would introduce tomorrow on Committee Stage an amendment acceptable to all sides of the House, ensuring that such worker director participation is introduced.
Finally, I want to refer to the Government equity injection of £175 million into Aer Lingus, which, as I have said, is peanuts in international terms, a very small amount of money, particularly when one observes the amounts of money injected into say, Air France, Sabena or Iberian. Yet for the first time the European Commission is expressing concern that Aer Lingus should receive their equity without restrictions. The European Commission is now seeking to impose restrictions and conditions rendering it difficult for Aer Lingus to obtain that equity and then compete in an open skies market on a competitive basis. It is a sad irony that many of the problems that confront the international aviation industry have been caused by liberalisation and deregulation. Then suddenly we have the European Commission saying we must regulate Aer Lingus, that it will not allow Aer Lingus to compete in an open skies market. I have no doubt that this latest pronouncement on the part of the European Commission is against the stated intention of Aer Lingus to establish Aer Lingus Express to operate a no-frills schedule between Dublin and London, the second busiest route in Europe.
I would be concerned that undue pressure would be brought to bear on the Commission because up to now the Commission saw no problem. I would be worried that people who have influence in Europe might use it on behalf of one or other airline.
Acting Chairman
Will the Deputy bring his contribution to an end.
The restructuring of Aer Lingus, in terms of equity, profit-sharing, Government equity and staff equity, is the way forward for the company. I am delighted the staff co-operated so generously in the difficult circumstances. I am pleased the Government grasped the nettle and that the Labour Party is honouring any commitments it made.
I cannot let the opportunity of this historic Bill pass without making some comment in view of the fact that when I was my party's spokesperson on transport some years ago I was aware of the acute difficulties Aer Lingus faced. Former Ministers, Deputies Seamus Brennan and Geoghegan-Quinn, refused to acknowledge, steadfastly ignored them and are, in no small way responsible for this emergency legislation. My colleagues, Deputies Noonan and Carey, have outlined our general approach to the Bill. We are not opposed to this injection of capital, although it represents a very substantial transfer of resources from the taxpayer and is something that should not be taken lightly by any State company. We wish the plan, this legislation and the equity injection every success for not only those working in Aer Lingus but for those dependent on Aer Lingus as an access transport carrier in and out of the country for tourism, freight and for developing and marketing Ireland's goods and services abroad.
I do not think this plan will work. There is optimism about this plan but I believe that in three or four years time Aer Lingus will face another crisis. It is important that someone puts that on the record. Economists involved in aviation to whom I have spoken are extremely doubtful of the economics of what is proposed for the transatlantic route. They believe that because of the global changes taking place in aviation it is likely that Aer Lingus could become a regional carrier. While strides have been made in some type of crisis management to arrest the decline and the losses the fact is that even if there is a stop to the haemorrhage of £1 million per week it does not mean the company will be guaranteed into the future.
I wish to comment on the transatlantic route. If we are trying to establish any consumer service we must have certain matters on which we wish to trade, for example, price, quality or frequency of service. I do not see how Aer Lingus will be able to compete and win against the transatlantic carriers operating out of the UK. They cannot offer flights as frequently or as cheaply and they cannot greatly improve on the quality of service. I am aware that 58 per cent of people who fly from America to Ireland come other than by direct routes. I have yet to be convinced that this plan will work.
We must face the issue of the fleet replacement on the transatlantic route. The three ageing 747's have not been replaced. If the company could not make money on the transatlantic route with free depreciation, it is difficult to understand, when writing down leased or purchased planes at a cost of the order of $100,000 a month, how those economics will work.
It is difficult to justify to the Irish taxpayer how they should be so heavily involved in the hotel business. The balance sheet of Aer Lingus shows borrowings of £500 million; the great majority of which are for hotels. I do not know why the taxpayer should be so heavily involved in the hotel business abroad. We have moved away from our direct involvement in the Great Southern Hotel group. If we have to keep a fundamental access transport service in operation some major surgery is required in regard to the hotels.
Some international trends in transport cannot be swept under the carpet. Aer Lingus is the only carrier in Europe that is not part of cross-shareholdings and an amalgamation of other airlines. For example, Lufthansa, KLM and British Airways all have cross-shareholdings in each other. Every day these cross-shareholdings are becoming more intricate, more interdependent and Aer Lingus has, to a great extent, missed the boat. The recent RTE programme, "Tuesday File", was very significant in this regard because they tracked down all the potential carriers that considered Aer Lingus and looked away. I have no doubt that what we are seeing is the development of oligopoly, where we will have ten to 12 mega carriers that will control world aviation. In any line of business the level of losses now being incurred by world aviation can only be sustained if the competition can be wiped out in the process. It is a very familiar cycle. The start is made by having competition from deregulation and then there is extra capacity. The airline managers say they need to get the backsides on the seats and, as they cannot have empty seats, they sell below cost to fill them. What follows is, in effect, a fare war, an airline company closes down and goes into Chapter 11. Airlines then have consolidation and amalgamation and settle down to a level of competition, usually on a hub and spoke basis, focusing on key routes.
If Virgin Airlines or British Airways decide to pick off Aer Lingus they could say that they do not care and will carry the loss. If we got into that situation I do not see how the taxpayer, going to that poker table, will have the resources that other international mega carriers will have. That is a very serious problem.
I should like to deal with some of the political aspects. I was transport spokesman in the late 1980s for my party. It is fashionable now to blame most of the problems of Aer Lingus on Mr. Mullan and Mr. Acton — the top two executives in the company. The story goes that they are responsible for 767s lying on the tarmac, for trying to put Ryanair out of business and failing, for not alerting the Government to the losses in time, for ALH and many other problems. Some of that criticism is justified. What is conveniently forgotten is that after the 1987 election the former Taoiseach, and others, went out of their way to make Government policy central to aviation policy. The policy was to double tourism numbers at all costs. When Aer Lingus applied for fare increases on critical routes they refused, particularly in regard to short-haul routes. That is part of the problem because their most profitable route, Dublin-London, started to lose in the order of £18 million per year. The former Minister, Deputy Seamus Brennan, knew in part about those difficulties and refused to sanction fare increases simply because it would interfere with the projected growth in tourism numbers.
The Labour Party, which was going to put trust into politics and justice into economics, lectured us from the highways and byways and in the hangar in Dublin airport. They contended that those of us who were saying that Aer Lingus had to get a partner, that costs needed to be cut and the balance sheet put right were Thatcherite monetarists who were anti-Aer Lingus. Now we find that even more harsh measures are required. For example, the cabin crews have had to make the most extraordinary sacrifices in relation to their work, pay, condition and prospects. To listen tonight to the Labour Party saying it is proud of its honourable role and that it has honoured all its promises makes me wonder whether it is downright deceit in trying to shift the goal posts of its response to the pressure.
The Labour Party promised there would be no job losses and also access to unlimited equity. It made promises that should not have been made. Labour Party popularity enjoyed an unprecedented increase and it swept all before them in north Dublin and captured two seats in constitutencies where it had none. All other parties suffered from this tidal wave of Labour Party support. I have been at functions and luncheons in north Dublin recently and the people's hostility and bitterness to the Labour Party is palpable. People feel a sense of betrayal, a sense of being left in the lurch by the Labour Party.
The prospect of worker shareholdings in Aer Lingus is something that I support. Some trade unions, particularly in the private sector, have not supported the concept of worker shareholding in a profit bonus or incentive basis, but the level of sacrifice made by the workers justifies their long term stake in the company. However, it would be wrong to mislead the workers into thinking that the shareholding would have a particular worth. I fear that will not be the case.
The question must arise whether the £175 million equity injection is enough. It is enough to keep the banks away from the door for a while, given the borrowings of £500 million, but unless something is done to reduce the debt-equity ratio in a meaningful way, the burden of debt will continue to make Aer Lingus unprofitable.
When I was spokesperson on transport I did not comment on events in Aer Lingus Holidays Limited because I was advised that legal action was being taken by Aer Lingus against a firm of accountants and against people involved in Aer Lingus Holidays Limited. I was advised also that there was a file with the DPP and this led one to believe that if one made a comment it would be prejudicial to any subsequent proceedings. As we now know, the Aer Lingus Holidays Limited debacle came to a head in 1987-88 and now, some six years later, no proceedings, either civil or criminal, have been taken. There will have to be an inquiry by either a committee of this House or some other appropriate body into how £17 million of public money could have been defrauded in this way.
Like other Deputies, I have received correspondence from employees of Ryanair who have expressed grave concern about the Aer Lingus Express proposal. They feel this is designed to put them out of business and that having experienced enormous sacrifice their taxes are now being used to subsidise the company who will try to put them out of business. I cannot adjudicate on the fairness of that allegation but at the time that Aer Lingus and British Airways operated a cartel, particularly on the Dublin-London route, we saw the effect of Ryanair coming on stream. Passenger numbers doubled over a two-year period and the consumer got a wide range of options at cheaper fares. It would be wrong to solve one problem by creating another.
I believe that Ryanair is not a real competitor to Aer Lingus in the context of where it can operate from. I do not believe it is profitable for Aer Lingus to operate from many of the regional airports, whereas the cost structure in Ryanair is such that it could, particularly on a seasonal basis. The regional airports are experiencing enormous difficulties and I notice in the Book of Estimates that their marketing budget is being cut again. I hope that a happy co-existence can be arranged. I believe that Ryanair will be a small niche operator. It is much more important that Aer Lingus strengthen its hold on other routes rather than to get that monkey off its back. I believe it has been looking in the wrong direction.
An independent appraisal of the Aer Lingus balance sheet indicates two problems. It is losing £1 million each week, a total of £50 million a year, principally in air transport. It needs to increase its revenue and its yield and to cut it costs to deal with this. I believe it would not be in a strong position should a competitive war break out on any of its principal routes arising from EC aviation deregulation. The proposals for the transatlantic route are not soundly routed in economics, particularly when the cost of fleet replacement is added. The frequency of services will mean that it will still be outmanoeuvred by larger hub airports. Very serious political responsibility rests with the three preceding Ministers for Transport. They did not want to hear about the crisis in Aer Lingus when Mr. Mullan and Mr. Acton were telling them and their officials in the clearest terms possible that the manure was going to hit the fan specifically because of the lack of approval for fare increases.
The only future for Aer Lingus, as more than a regional carrier is to be part of a mega carrier. Discussions should start immediately in phase 2 of the Cahill plan to get a partner. The whole purpose of the plan is to restore Aer Lingus to a position where it can be part of a larger group. That will fundamentally secure the future of Aer Lingus because if anyone decided to put it out of business it would have to take on a group which is big enough to fight it off. Competitive wars are nothing more than a war of resources and whoever has the deepest pocket wins the war. It is the same in the supermarket business. Ben Dunne and Quinnsworth got a grip of the market because their pockets were deeper and they were able to do more below cost selling for longer periods than anybody else and people could not afford to shop elsewhere. The same is happening in aviation and if an airline is not part of such a mega carrier, it simply has no future.
I wish Aer Lingus well. I acknowledge the sacrifices the workforce have made and I hope for the sake of tourism and Ireland Incorporated that it succeeds.
I would like to share my time with Deputy Ray Burke.
Is that agreed? Agreed.
I am glad to have the opportunity to speak on this important legislation which will put in place the measures required to put Aer Lingus on the path to profitability. A number of months ago I spoke in this Chamber on a Private Members' motion introduced by the Opposition. Since then, the unions and management at Aer Lingus have put together a development plan which will put in train the measures needed to put the national carrier firmly on its feet and ensure its future. The development plan has now been put in place. I praise all the union negotiators, the management and particularly the staff for their efforts in securing such an agreement. It is important also to recognise the efforts of the Minister in putting together a plan to secure the future of the company. Tremendous sacrifices have been made by all concerned in putting this package together and it will breathe new life into the company at a time when the company desperately needs such a boost.
On the foot of the deal the company will receive an equity injection of £175 million from the Government. I dread to think how much equity the company would have received if Fine Gael or the Progressive Democrats were in Government. The Fine Gael-Progressive Democrats answer to the problems of Aer Lingus is to privatise. They would not have given Aer Lingus a single penny whereas the Government has put its money where its mouth is and we have lived up to our commitment.
Earlier today the former leader of the Progressive Democrats, Deputy O'Malley, made a feeble attempt to criticise the Labour Party record in regard to Aer Lingus. I shudder to think what Deputy O'Malley would have recommended for the company if he had a seat at the Cabinet table. Let there be no doubt about it, he and his ilk would have sold the company down the Swanee. Deputy O'Malley made a side swipe at the trade union movement and I take grave exception to his remark. Throughout the last 12 months the Aer Lingus unions have acted responsibly. Indeed, they were the main driving force in ensuring that the plan was put in place and they deserve the praise and respect of the House. They do not need cheap, snide remarks from the ex-leader of a moribund party, a party which is not represented here tonight. The Labour Party gave the company a commitment to equity and have delivered on that promise. We gave a commitment to avoid compulsory redundancy and we have delivered on that promise too. However difficult times may be at the moment, Aer Lingus staff are in no doubt that their greatest friends and their best allies are in the Labour Party. They are all well aware of how much better off they are faring with a Labour Party in Government——
That is reassuring.
——rather than Fine Gael or the Progressive Democrats. This Bill will put in place the measures that will turn the company around. I am proud to be a member of a party and of a Government which has stood by Aer Lingus. However, the Bill requires suitable amendment to ensure full worker participation on the boards of all Aer Lingus subsidiaries.
The Bill outlines an appointments procedure whereby the Minister for Transport and Communications and the chairman of Aer Lingus will appoint directors to all subsidiaries of the new Aer Lingus group holding company. In recognition of the sacrifices made by the workers I appeal to the Minister to ensure that there will be strong worker representation on these boards. The Minister would enhance the stature of the company by providing for worker representation on all the boards of the subsidiary companies. The workers deserve some gain through increased particiation at board level. I appeal to the Minister to accept on Committee Stage amendments designed to ensure stronger worker representation on the boards.
I also call on the Minister to ensure that Aer Lingus is not put at any commercial disadvantage by the European Commission. The terms which apply to State equity injections in the case of Air France and Sabena should apply to the Irish Government plan to restructure Aer Lingus by the injection of £175 million in equity. Any restriction or the threat of any restrictions from the Eurpean Commission on this rescue plan must be strongly resisted and Aer Lingus should be unhindered in developing new routes and new commercial enterprises to ensure its future. I urge the Minister to make the strongest possible representations to the European Commission to ensure that the company is able to develop these new routes.
I pay tribute to all the people at every level of the company who showed strong commitment to their own company. The unions, management and workers of Aer Lingus deserve praise for working out an agreement which we sincerely hope will secure the future of the company.
I thank Deputy Shortall for sharing her time with me. In the last 12 to 18 months I have seen the most traumatic time ever faced by my constituents during the nearly 21 years I have been in the Dáil. The progress in the development of our major employer, a company that has returned profits for many years, has been turned upside down by the losses which have taken place. Families have gone through periods of anxiety and despair. There have been nearly 1,000 redundancies from the parent company. Despite the establishment of an enterprise development unit, which I hope will be successful, men and women in their fifties have been made redundant with little hope of future employment. The remaining staff in Aer Lingus have gone through the trauma of coping with major changes in work practices, their income and in their expectation of promotion. The workers deserve the heartfelt thanks not only of this House but of the nation for what they have done to develop the company and for the sacrifices they have made to keep the company going.
I welcome the Bill to authorise the injection of £175 million in equity into the company to organise the group's corporate structure and to allow for the employee profit-sharing scheme. However, without the loyal workforce the company will go nowhere. The loyal workforce voted by a massive majority to accept this tough medicine including redundancies and changes in work practices. They deserve the support of the Government.
I am concerned that sections 8, 9 and 14 of the Bill do not fully recognise the role and the commitment of the staff, with the watering down of the rights of worker directors, the position of worker directors in the future structure of the company and the right to appointment to the ancillary boards. After all of their sacrifices the workers' position is not being fully recognised and appreciated. The Minister should reconsider that matter before Committee Stage and I have no doubt he will. I hope the injection of £175 million is enough.
I do not understand why we as a small country with a national airline should have to accept the conditions imposed by the EC outlined in its document published in October. Those conditions are being imposed on Aer Lingus but not on Sabena, Air France or other airlines. We are unique in that following the opening of the Channel Tunnel we will be the only island nation in the European Community. From an industrial development, commercial and tourism point of view it is important that we have our own State airline. Aer Lingus is having conditions imposed on it which are not imposed on other European companies. If that happened to the French they would send a letter to the Commission merely acknowledging its existence and proceed to ignore it. Aer Lingus want to be treated in a similar manner to other airlines. Why should it be treated differently?
I do not accept the ruling that no further equity injections can be made in the company. If the directors, investors and shareholders of British Midland, one of Aer Lingus's main competitors, want to invest money in that company there is no rule which states they cannot do so, but because Aer Lingus is owned by the State the EC claim it can have only one bite of the cherry. I do not accept that. Aer Lingus and other State companies should be treated as fairly as those in the private sector and allowance should be made for a further equity injection if it is needed.
I do not wish to bring politics into the debate, but I could not allow my colleague, Deputy Shortall to speak of the Labour Party as the only friends of Aer Lingus. In the fifties when Aer Lingus had few friends and the Labour Party was in Government, it was busy selling aeroplanes. Some of us have long memories. Prior to the last election the Labour Party promised those in Aer Lingus the sun, the moon and the stars and no redundancies, but Fianna Fáil told them the truth — that we would inject equity. This matter is too serious to play politics with and Aer Lingus has had too much politics played with it in the past. I do not wish to do that tonight, but I do not want Deputy Shortall's comments to go unanswered.
Aer Lingus has been profitable through the history of this State. Through no fault of its own, it went through a difficult period during the Gulf War when there was a downturn in the world economy. That also affected its ancillaries which had enabled it to operate profitably. As a group it made massive profits and it is not asking a favour from the taxpayers or the EC by allowing it to have an equity injection. It is only right and proper that we should support Aer Lingus, which returned massive profits to the Irish taxpayer, provided employment and paid taxes for many years. If one added the taxes and PRSI payments of Aer Lingus employees down through the years, the figure of £175 million would pale into insignificance. The company and its workers served this country well and will do so again. I would caution against speedy sale of the ancillaries which have served the company and this country well. They are a group and should be recognised as such.
Aer Lingus will go from strength to strength in the future, but we should not be ashamed to say that if it requires an injection of equity in the future it will receive it. We must be prepared to support our own; this company is our own and we should be proud of it. The staff of Aer Lingus and their families have accepted many sacrifices and should not be left in any doubt as to their future by the imposition of EC conditions. They must receive our unreserved support. The Minister fought hard for this and I congratulate him in his absence for what he has achieved so far. He should keep up the fight. This is a company worthy of our support.
The Minister should also reconsider the position of worker-directors. It would be a mistake to ignore the position of workers and the right of the staff to be represented on the various boards in the companies. The provisions in sections 8, 9 and 14 are a retrograde step and the Minister should reconsider the matter.
In general, I welcome the Bill as a major step forward. I congratulate the Minister on his achievements and, please God, we will see Aer Lingus and its shamrock flying high and profitably for many years.
Far be it for me to introduce a political tone to this debate.
Never.
The Deputy has not been successful in the political field for long enough.
Nevertheless, I am sure I will be forgiven for reminding the House that this is a political arena in which it is no harm to reflect occasionally on how politics work. I smiled when I heard a number of speakers from the Government side criticising Fine Gael and the Progressive Democrats for allegedly suggesting privatisation for Aer Lingus when in fact we suggested a partner. It is rather cynical that this should be mentioned now, given that the only partner that 1,000 of the workforce in Aer Lingus will have tonight is the dole queue. That is a very serious reflection on what was said by a number of speakers in this House in this debate.
When one considers a partnership one normally considers taking somebody on board who will add to the company and as a result make it stronger, bigger, better and more efficient. That is what a partnership means. Amazingly, and for some unknown reason with remarkably little negative criticism, that has been transformed into a partnership with social welfare. A total of 1,000 of the workforce of Aer Lingus have been unloaded onto the Minister for Social Welfare. That is a far cry from what was told to many of those people prior to the general election and repeatedly during recent years when it was clearly stated that the only people Aer Lingus or any such company could look to for a secure future was the Labour Party and perhaps Fianna Fáil. It is ironic that those two parties should now be in Government busily jockeying and ushering 1,000 of that workforce into the redundancy market. That is rather peculiar, especially as some of those people suggest that those who requested a partnership were in some way disloyal.
Surveys highlight that public confidence in politicians has waned in recent years, one of the main reasons being that politicians no longer do what they say they will do. It is particularly relevant to note that this is more noticeable when one compares what politicians say before an election with what they propose to do after an election.
The 1,000 people who have lost their jobs must be reflecting in their homes tonight in north County Dublin, north County Kildare, south County Meath and other areas on what they were promised. I wonder what answer they would give if they were asked in a survey whether they have confidence in politicians and their promises. Based on their experiences I have no doubt they would say they have little confidence in politicians. It is grossly unfair of Government politicians, having made false promises which they had no intention of keeping and which they knew they could not keep, to point the finger at the Opposition parties and attempt to blame them.
Will the public listen to these people in the future and accept their promises or will they ask serious questions? Instead of asking politicians during election campaigns what they will do for them, will they ask a more relevant question such as whether they will stand by their promises and fulfil their obligations? The public have lost a great deal of confidence in politicians and the sooner the better we recognise that this shadow boxing and showmanship serves no useful purpose for the Members of this House and for those who have to reap the bitter rewards of the false promises made by politicians.
The Deputy should say that at a Committee on Procedure and Privileges meeting.
I should and I would say other things at that meeting which the Deputy might not like.
(Interruptions.)
Deputy Durkan has the floor and he should be allowed to continue without interruption.
During the past few years there was apoplexy on all sides of the House each time the question of the Shannon stopover was raised. Every time the word "Shannon" was mentioned there were loud cries of support from the Fianna Fáil and Labour Party benches. Anybody who suggested that there should be a compromise——
We built Shannon.
And you are now demolishing it.
The Deputy should check the history books and examine the utterances of his leaders.
Every time a question was raised there were loud cries of support from the Government parties——
(Interruptions.)
Deputy Durkan to continue without interruption.
Incidentally, I am glad they have now found their voices again because for quite some time they were silent.
Never.
At least two members of the Fianna Fáil Party had the gumption to resign. Why did these two members of the Soldiers of Destiny feel it is necessary to resign from the parliamentary party if the package was so attractive and would receive the support of the Government parties?
The Deputy should be a Soldier of Destiny.
The Deputy should be careful or I will turn on him also.
Deputy Dukes depends on him.
God help him.
What is the reason these two unfortunate Deputies felt it necessary to stay away from the Fianna Fáil Party for so long? They felt aggrieved and recognised that damage was being done to Shannon but nobody else in that great party was prepared to stand up for them.
Before the election there were dramatic utterances, the beating of breasts and the thumping of chests. We should compare this with the sad and deflated exercise that is now taking place. I welcome the decision to provide the paltry sum of £175 million. I suppose it was the best the Government could do. For so long billions of pounds were being tossed around like snuff at a wake. Indeed, we thought there would scarcely be an organisation in the country which would not have been given the paltry sum of £175 million that is now being given to Aer Lingus. I expected the billions of pounds to be stretched to cover every sector of transport and, indeed, every other service also, and that we would not now be talking about the paltry sum of £175 million for Aer Lingus. Surely it could have been stretched to £1 billion or £2 billion at least, given the prognosis in recent years.
The Deputy's party was talking about a paltry figure.
It is no wonder Kildare has not won any football matches.
I am delighted that Deputy Callely is taking an interest in this matter but he shows an amazing lack of knowledge about what goes on in Government Departments, given that he tables questions to his own Ministers at every opportunity.
The Deputy should clarify that matter.
I am delighted that he is able to get answers in that way. It is sad however that he cannot walk into the Minister's offices to get them.
I can get them that way as well.
I would like to address the question of what the future holds for Aer Lingus given the competition air transport companies will face. Some months ago in this House I predicted that our once proud national airline would be dismantled and I was not too far wrong. This package was known as the Cahill plan when no one on the opposite side of the House wanted it; it was as if a villain of the piece was brought in to take responsibility. Now they are supportive because they have been told that is all Aer Lingus is getting and the two great parties can do no more. This is a sad state of affairs.
If the national airline is to be viable, vibrant and able to face competition it will have to transport the entire population of the country in and out as fast as it can and to as many destinations as possible. It is obvious therefore that it will have to seek an outside partner. My party has been advocating this for a number of years. If we look at the profit and loss graphs for Aer Lingus we will see that group profits of £28 million for the year ending 31 March 1990 have been translated into losses of £188 million, including restructuring costs, for the year ending 31 March 1993. It must have been obvious that there was a downward trend and it would have been pertinent to say that we should look at the matter before it got worse. This did not happen. Instead disaster struck and there was a crisis, with the result that the Government said that 1,000 members of the workforce would have to go on the dole. That is the Christmas box for the workers in Aer Lingus.
In recent times various world financiers have had their eye on subsidiaries of Aer Lingus. The Government has denied that there is any intention to sell any part of them. This rings hollow to the 1,000 workers in Aer Lingus who have been made redundant. We do not know what is going to happen to any of its subsidiaries at this stage. I am sure the Minister and the members of the Fianna Fáil Party would like to know the answer. I am sure the Members of the Labour Party who are not now evident in the House would like to know also. I am quite sure, too, that the remaining workforce in Aer Lingus would like to know all of these things. Unfortunately, we have taken dramatic action when it is too late, when a little action at an earlier stage could have resulted in a much better restructuring of the company with the retention of many more jobs and a much expanded radius within which our airline could operate.
I want to refer briefly to competition. Nobody can expect to be in business in the future without being up against competition, but it must be fair competition. The Ryanair employees have written to most Deputies pointing out that their company has survived against competition without any great assistance. I hope it is not the object of the Government parties to see them out of business with a view to doing something else. That would not prove anything, because if Ryanair are put out of business the competition will be provided by another much more powerful company and we must recognise that.
A number of other speakers referred to the European Union approval or lack of approval of a package of this nature. We are an island nation. We depend on transport. The Minister referred to an integrated transport policy, for which some of us have been asking for a long time. I do not know what the Minister means by an integrated transport policy. The revitalisation of Aer Lingus does not sound to me like an invigorating process. Therefore I am not too sure what the Government means. If it means that the transport policy on air, sea or road puts us in touch with the rest of Europe and the rest of the world in such a way that we can compete throughout Europe, then it will be successful. But if we think we can remain in a little cocoon of our own and isolate ourselves from outside competition, then we are wasting our time.
I strongly support the idea of worker participation. It is desirable and necessary to obtain maximum worker participation in any company of that nature in the future, particularly a company likely to face stiff competition in the years to come. I hope my worst fears are not realised. I hope that in a few years' time somebody does not have to salvage what remains of Aer Lingus when this Government has finished.
The Minister is putting a structure in place for the commercial future of Aer Lingus. He is not doing what you did with Irish Shipping. What about those employees?
I would first like to thank all Deputies who contributed to this debate for the very constructive manner in which they have approached it. There is a temptation in debates such as this to score cheap political points against various parties involved and particularly the Government. I am grateful that no Deputies succumbed to this temptation. The level of contribution to the debate so far has been not only constructive but incisive. I wish to continue in this vein and will attempt to address the substantive and legitimate queries which Deputies have raised.
Deputy Noonan and other Deputies raised the issue of EU Commission approval. Let me clear up a point of confusion about an important principle. This Bill is not subject to EU Commission approval, so the question of sovereignty does not arise. What is subject to approval is the Government's investment in Aer Lingus under the State aid rules of the Treaty of Rome.
Deputy O'Malley asked why the Strategy for the Future, which formed the basis of the Government application to the EU, has not been published yet. This was a confidential report prepared for me, containing much commercially sensitive information. I did make available to Members of the Oireachtas a briefing document on the strategy. I can assure the House that there is nothing sinister in the non-publication of the report; it is merely to protect the interests of Aer Lingus.
Deputies O'Malley and Sargent raised the issue of blame for the present situation in Aer Lingus. It is not my practice to apportion blame. I prefer to start from where we are and go on from there. However, whatever about management deficiencies, I feel it incumbent on me to put on the record of this House that the company also had bad luck. Deputy Haughey correctly and relevantly raised the issue of GPA. The collapse in this company's share price wiped £113 million off the Aer Lingus balance sheet.
Deputy O'Malley queried the delay in the Commission reaching its decision on the Government's investment in Aer Lingus. There has not been a delay. On the contrary, the whole procedure has been fast-tracked from day one, with the result that I believe it will be the speediest State aid case of its type.
Deputy Owen and others queried the type of conditions that the Commission might impose. My officials have had numerous meetings with the Commission. I have also been extensively involved. I have met Commissioner Matutes on three occasions in the past two weeks alone. We are doing everything to ensure that the Aer Lingus case is treated properly and in a fair and reasonable manner.
On the question of conditionality, it should be remembered that the Government's investment in Aer Lingus is the first State aid case to be considered by the Commission since full liberalisation of European Union air transport came into effect on 1 January 1993. It is also untrue to suggest that no conditions were attached in previous state aid cases in the air transport sector. For example, Iberia had to give an undertaking not to acquire additional capacity in Europe, while in the case of Sabena the Government had to give an assurance not to give preferential treatment to the airline at Belgian airports. I could give other examples if time permitted and I would be pleased to provide additional information to any Deputy who wants it.
Finally, on this point, I have to take issue with Deputy Gilmore's allegation that the Government prevented Aer Lingus management from lobbying the Commission. The opposite is the case. We not only positively facilitated Aer Lingus management in this but actually arranged specific meetings for them.
Deputies Noonan and Gilmore raised the issue of the level of equity given to staff in certain US airline rescue packages in contrast, they claim, to the employee share participation agreement negotiated in Aer Lingus. I would simply make the point that in none of these cases did the airlines concerned benefit from Government equity investment. There are other significant differences which I do not have time to go into.
Deputy Noonan also raised the issue of the subsidiaries of Aer Lingus and in particular TEAM. Other Deputies raised similar concerns. The Strategy for the Future was quite explicit on TEAM. Like the airline itself, it must reduce its costs if it is to have a viable future. The workers in TEAM have in the past shown their willingness to adapt to changes in the market place. I am confident that they will do so again and thus ensure the future of the company, which provides very highly skilled and well paid jobs for the north Dublin area. This is an area to which the Government is as committed as any other party in this House.
Both Deputies Owen and Noonan referred to outsourcing. This is an emotive issue which inevitably evokes emotive and ideological responses. I am not in that game. My philosophy and that of the Government is pragmatism and flexibility for the creation and maintenance of jobs in Ireland.
I am on the record of this House on many occasions as stating that the £50 million reductions proposed in the Aer Lingus plan were not cast in stone. The bottom line was and is that £50 million in cost reductions had to be taken out of the company. How that was to be done was a matter for negotiation by the trade unions and Aer Lingus management. I gave them the flexibility to negotiate. Within this flexibility, both sides reached agreement on cost reductions in the areas of catering, baggage handling and cleaning services. So the question of outsourcing does not arise. The Government endorsed these agreements. Contrary to what has been implied, neither party in this Government had any ideological commitment to outsourcing.
Deputy O'Malley raised the question of whether the operating structures below the holding company would be divisions or separate companies. They will be four separate stand-alone companies. This will ensure greater transparency between the operations of the companies. It will also ensure against cross-subsidisation to which a number of Deputies referred tonight.
I would like to comment on another point made by Deputy O'Malley. He said that the Government's equity investment of £175 million is to pay for past losses. That is not correct. The purpose of the investment is to assist Aer Lingus's restructuring programme mainly by restoring the company's balance sheet through a reduction in debt, no part of which will be used, as suggested by Deputy Yates, to drive Ryanair out of business.
I join Deputies who specifically praised a number of members of the trade union movement. I would like to put on record that there were many other trade union officials, not named tonight, who contributed to the successful outcome. They should be complimented also as should the new management team in Aer Lingus.
Some Deputies raised the issue of alliances. With the progressive liberalisation of the airline industry worldwide many airlines with relatively small domestic markets, such as Aer Lingus, have sought alliances with stronger cariers or groups of carriers. In some cases, these involve cross-shareholdings while in other cases alliances are confined to marketing arrangements. In considering proposals for the future development of Aer Lingus, the board of the company will no doubt wish to consider alliances. The proposed form of any such alliance is a matter, in the first instance for the board of Aer Lingus.
Let me put on the record of the House our position. The Government has in the past encouraged and will continue to encourage Aer Lingus to develop strategic alliances. We will seriously consider, on their merits, all proposals from Aer Lingus for such alliances, including cross-shareholding agreements and additional equity investments, if these are judged to be in the best interests of the company.
Aer Lingus has just come through the most traumatic year in its history. It has faced the worst financial crisis and has had to take the toughest decisions since its foundation. However, all the main stakeholders in our national airline, that is, the employees, the board, management and the Government as a shareholder, have all faced up to the challenge with courage and determination. We have taken the measures necessary, however painful, to ensure that Aer Lingus not only has a past that we, the Irish people, are proud of but it was the capability also of having a future in which we can take equal pride. That future must be based clearly on competitive commercial success.
The new year will signal the start of a new era for Aer Lingus. It will be a slimmer, fitter Aer Lingus but one which will show the shamrock, if not the flag to which Deputy Noonan referred.
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 have already said, is so vital and which will make all the hard work and sacrifices of this year worthwhile. Let me avail of this opportunity to again pay tribute to all involved in reaching the stage we are at here tonight. Management and unions have worked long and hard to reach agreement on the cost cutting measures which are a necessary part of the "Strategy for the Future". The Labour Relations Commission, the adjudication tribunal and the Irish Congress of Trade Unions all had a vital role to play and I thank them for it. So, too, have my officials as Deputy Owen graciously acknowledged and which I acknowledge tonight.
This Bill copperfastens the Government's commitment to the commercial future of Aer Lingus. We have said at all times that we were prepared to play our part, once the necessary decisions had been taken by management and the workforce. We are now making our contribution.
In the Government's view, Ireland's geographic location within Europe and the international trading and tourism needs of our economy require that we have at least one substantive, domestically based and financially viable airline capable of competing in international air transport markets. Ireland also needs a critical mass of domestic aviation activity in the country if it is to attract new aviation-related industries to locate here. Aer Lingus has provided this critical mass for most of the last 50 years. It is the Government's intention that this will continue. This Bill, when passed by the Oireachtas, will be the first and most significant step in ensuring that it does.
In that regard I thank the Deputies who contributed to the debate. Their contributions were constructive and incisive in regard to the issues that face the company. The Bill provides a restructuring corporate framework which, subject to EU approval, will in the first instance allow an equity injection to be made to the company, which forms part of an overall plan for its future economic viability. It is the beginning and not the end. The corporate culture of the company must be such as to face the competitive challenges that a liberalised air transport sector now presents for all carriers, be they private or State owned. We can look forward to a detailed Committee Stage debate when all the issues and further detailed queries of Members from all sides will be teased out. They have shown a great interest in this matter during the many months it was deliberated on in the Houses of the Oireachtas. We will have a further opportunity to tease out other issues which will concern Deputies as we proceed to pass this Bill.
Question put and agreed to.
When is it proposed to take Committee Stage?
Tomorrow at 3.50 p.m., subject to agreement among the Whips.
Committee Stage ordered for Wednesday, 15 December 1993.