(Limerick East): Section 4 provides that the Minister for Finance may subscribe for further shares up to an amount not exceeding £175 million. Deputy O'Malley seeks to amend that section by providing that the Minister for Finance or any other person, which introduces the concept of private investors coming in and buying Aer Lingus shares. In present circumstances the only investor who is interested in Aer Lingus shares is the Government. On any kind of open market there would be no offer for a tranche of Aer Lingus shares. We need only recall that there were accumulated debts of £540 million and losses of £188 million in 1993. Who would want to buy into a company, in terms of equity, with that kind of profile? Even after the restructuring which has taken place on the cost base and the intention of the Minister to sell subsidiaries and put in equity, on the best case scenario it is difficult to see Aer Lingus being profitable in the short term and it is difficult in the medium term to see a dividend being distributed. The issue of private shareholding in a public offer, along the lines of the amendment, is not a practical possibility at present.
The future of Aer Lingus, like the future of many European airlines, is contingent on arrangements being made with other large airline companies. The national carriers of Europe are forming alliances and there will be four or possibly five mega-carriers within a short time, some of which are in place already. There are groups of airlines centred around British Airways, Lufthansa, Air France and SAS and another may be centred on Alitalia or Iberia. It is not possible for Aer Lingus to continue on its own under the guise of being a national carrier when it is becoming increasingly regional in its activities.
I am not sure what the future of the North Atlantic holds under the arrangements being made by the Minister. Following changes in the bilateral agreement, Aer Lingus will be competing with American airlines whose cost base is 40 per cent lower than the average European cost. Aer Lingus will also be competing indirectly with the same group of airlines into London and backtracking into Dublin. If the Minister's plans are successful for Aer Lingus Express on the Dublin-London route and if the competition which one expects comes in on that route — I understand six or seven airlines have indicated an interest — this will be a very low cost route for several years ahead. That has an implication on the transatlantic route also. If one can backtrack from London to Dublin at shuttle costs it makes it a very attractive option to fly from one of 25 American cities directly to Heathrow and backtrack to Dublin.
I do not think Aer Lingus has a future in the medium term unless arrangements are made with other European carriers and perhaps with American carriers. SAS is a very big airline company but originally it was an amalgamation of the national airlines of Sweden, Denmark and Norway. Individually they were three small national carriers. It is interesting to see how this has developed. We now have a merger of Swedish Air, Danish Air and Norwegian Air into SAS. Last year SAS announced they were teaming up with KLM, Swissair and Austrian Airlines. SAS, KLM and Swissair each plan to hold 30 per cent in a new operating company. The smaller Austrian Airlines will take 10 per cent. That is the kind of arrangement that is being made between the smaller national carriers — a holding company with three taking 30 per cent and one taking 10 per cent. That is the type of arrangement Aer Lingus will have to consider in the future rather than a public subscription to shares.
I do not believe Aer Lingus can survive as a national carrier in anything but name without making arrangements with some of the other European carriers. As we move towards the open skies policy and the free market policy to which most Ministers of Transport in Europe have now pinned their colours, there will not be an independent airline carrier for each country of Europe. The days of the individual national carrier, almost being an arm of Government as a state company and flying all the national routes on a closed shop basis, are over but the fallout is commencing.
An enormous number of arrangements operate now following Danish Air, Norwegian Air and Swedish Air coming together to form SAS and then entering into a partnership arrangement in a holding company with KLM and Swissair with a 10 per cent holding for Austrian Air.
KLM, in which it is in partnership, has a minor stake in American North West, in Swissair, in Delta Airlines and Singapore Airlines. Air France, for example, has teamed up with Sabina and CSA; Air Canada has invested in American Continental. Even American Airlines are taking on partners and that company has a partnership arrangement with Lufthansa. British Airways plans to set up an airline in Russia. It owns 49 per cent of Deutsche BA, a new German airline and it took a 25 per cent share in Quantas in 1992.
It is not the detail but the pattern that is important. While the arrangements for four or five mega carriers are being made in Europe, Aer Lingus is struggling with bankruptcy. It is not a question of Aer Lingus being a company for which there is a queue of investors if only the reluctant Minister would open the door to the private sector. That is not the reality. If it were not for the Government's commitment to the rescue plan, Aer Lingus would have gone belly up and nobody from the private sector would come in to rescue it until the liquidation sale.
We hope that the combination of the cost-cutting measures, the injection of equity and the disposal of subsidiaries will return the airline to profitability. It is only at that point that Aer Lingus will be on a par with other airlines, which made such decisions but they had been properly run for the past three or four years. Aer Lingus will then have to make the key decisions for the medium term and this must involve partnership arrangements. I know the Minister is putting matters rather softly but I do not think joint ventures is the way things will work out. It will be organised on the basis of either a holding company, in which a number of partners have a shareholding or a reciprocal arrangement where Aer Lingus buys an equity stake in its putative partner and the partner buys into Aer Lingus.
We have gone beyond the stage where the equity holding of Aer Lingus can be preserved totally in the hands of the Government. It is not because there is an ideological drive towards privatisation but simply because of the way the airline industry is going, this is the nature of the arrangement that will have to take place. Whether it can open up further and the Irish investor in the future can buy shares in the publicly quoted Aer Lingus company on the Dublin Stock Exchange, I do not know but, again, there are straws in the wind that suggest that is what will happen eventually. There is not much point in giving the workers of Aer Lingus up to 5 per cent of the equity of the company unless the shares have a market value. If the Government is the only investor it seems that there is not any market value except what the Minister decides from time to time might be the value of the shares. Certainly, I doubt if the workers will be able to cash in their shares at the nominal value.
I am glad Deputy O'Malley tabled this amendment as it opened up the debate. However, in the way it is cast it is premature. If one were trying to privatise Aer Lingus it would require a major privatisation Bill rather than an amendment to a provision that allows the Minister to inject equity into the company. I am not advocating that route but in my view it is inevitable that there will be arrangements where the Government shareholding in Aer Lingus will of necessity be diluted as Aer Lingus enters partnership arrangements which are necessary for its medium term survival. Beyond that point it is a question of whether individual shareholders can get involved subsequently or not. I believe that is the way it is going to go.
The unions negotiated an arrangement with the management team, with the goodwill of the Government, to enter into profit-sharing arrangements by way of equity. I suggest that that arrangement only makes sense if ultimately the Government's shareholding is diluted and where it reaches the point that the value of the share has a measurable external value and is simply not an internal estimate by the Minister and his Department.