Vol. 439 No. 1
10 Mr. Rabbitte asked the Minister for Transport, Energy and Communications, in regard to the rescue plan for Aer Lingus approved by him, the plans, if any, he has to proceed with the Aer Lingus express service on the Dublin/London route; when the service will commence; and if he will make a statement on the matter.
In keeping with its strategy of competing in all segments of the market, Aer Lingus has indicated its intention to develop the concept of a low fare-low cost carrier, separately branded as Aer Lingus Express, to compete mainly in those segments of the UK market which are purely cost driven.
The formulation of plans for and the timing of the establishment of Aer Lingus Express are matters, in the first instance, for the management and board of Aer Lingus.
Will the Minister agree that the proposal to establish the Aer Lingus Express service was an integral part of the plan for Aer Lingus which the Minister presented to the House? Will he agree that the conditions set down by the EU Commission in respect of the Cahill plan, specifically the Dublin-London route, whereby there has been a cap on the number of passengers, effectively means that the proposal to establish Aer Lingus Express has been dropped by Aer Lingus?
Those conditions do not effectively mean that. The conditions imposed by the Commission do not in any way preclude the implementation of recommendations of the Strategy for the Future document which forms the basis of Aer Lingus's restructuring plan. Apart from that condition, I have indicated that it would be the Government's and my intention that Aer Lingus Express must be a stand alone operation. It will target a cost driven niche in the market. There is no point, nor is anyone in Aer Lingus interested, in setting up another subsidiary company that is not a stand alone commercial operation. In accordance with section 14 of the Air Companies (Amendment) Act, 1993, Aer Lingus require my prior written approval for the establishment or acquisition of a subsidiary given with the consent of the Minister for Finance. It was stated in the plan that it was management's strategy to target all areas of the market. It realised that there was a prospect of establishing Aer Lingus Express in the low cost market. I am awaiting detailed proposals regarding its viability as a stand alone commercial operation. As soon as those proposals from Aer Lingus are to hand I will consider the matter.
Am I correct in understanding from the Minister's replies that Aer Lingus has not yet made this proposal and, if not, when does he envisage it will make it? Will it be in a position to comply with the Commission's conditions which include operating within its existing fleet, not acquiring other aircraft nor increasing the number of seats it offers between Ireland and the UK?
It is incorrect to say there is a cap on the number of seats on the Ireland-UK routes. I will go into detail in that regard when replying to another question. Regarding Aer Lingus Express, the company has initiated a review group on a management-staff basis to examine what is required to set up a commercial stand alone operation in that end of the market. I await those detailed proposals. It was stated in the plan that management should target all areas of the market. The company is required to act commercially. We are in the business of making profit which in itself is a quota of efficiency. As soon as detailed proposals in respect of Aer Lingus Express are presented they will receive favourable consideration from me on the basis I outlined.
Obviously, the Minister is familiar with what is required in respect of the operations of Aer Lingus since his intimate involvement with the company during the past year. Given the extraordinary decision of the EU Commission to limit the number of passengers Aer Lingus may carry on the Dublin-London route and that it may not increase its fleet, does he believe it is possible for Aer Lingus to establish Aer Lingus Express?
That was not an extraordinary decision. What was extraordinary about the conditionality attached to the State aid approved by the Commission was that it in no way hinders management from full implementation of the Strategy for the Future. That resulted from good lobbying, not alone by my Department and I, but by management and staff of the company.
It limits the number of passengers.
If the Deputy was acquainted with the plan——
I am acquainted with it.
——the Strategy for the Future he will know that over the period of the plan the conditionality applying to passenger numbers in no way affects the plan. A further reduction in the cost base is needed to establish a commercially viable Aer Lingus Express service. The Aer Lingus joint study group is considering those issues to ascertain what will be required to compete in that end of the market. The condition in respect of the present availability of the fleet in no way denies flexibility to use alternative aircraft once the general number of aircraft in the fleet are kept within the limit set out in the Commission's letter of approval. It is possible to set up the service. There is nothing to preclude it being set up once a proposal is presented which meets the commercial criteria required.
Will the Minister assure the House that the proposed service will operate on a commercial basis and that taxpayer's money will not be used to subsidise the service to operate in competition with free enterprise operations, such as Ryanair, British Midland and Virgin Atlantic? Will he give an assurance that there will be no undercutting of prices by the use of taxpayers' money in an attempt to drive legitimate operators out of business?
I can give the Deputy that assurance. It would not be in the interest of Aer Lingus for that to happen.
It has been done before and it has been condoned by successive Ministers, more is the shame.
The Minister referred to the strategy that has been set out and said he has been successful in negotiations. However, from his replies one gets the impression that there are some flaws in the strategy — Deputy Gilmore asked a number of questions about this matter. Are there other flaws in the Strategy for the Future that we do not know about and will the rest of the plan be implemented?
I am sorry for giving the Deputy the wrong impression. This is a good strategy which has received the approval of the board, management and staff and the European Commission. It provides the best prospect for a viable future for Aer Lingus. As I have often said in this House to those who criticise measures, it appears that plan B is a blank page.
