Dáil Éireann díospóireacht -
Tuesday, 23 Apr 1996

Vol. 464 No. 3

Ceisteanna—Questions. Oral Answers. - Aer Lingus Strategic Alliance.

Batt O'Keeffe

Ceist:

11 Mr. B. O'Keeffe asked the Minister for Transport, Energy and Communications if he will elaborate on the statement that he made on RTE Six-One News on 23 March, 1996, wherein he stated that the sale of a substantial minority stake in Aer Lingus as part of a strategic alliance must be looked at and looked at seriously; if a strategic alliance similar to Telecom Éireann is planned for Aer Lingus; the consultations, if any, he has had with management and unions at Aer Lingus in relation to such a strategic alliance; and if he will make a statement on the matter. [8232/96]

Mr. Lowry

I welcome the opportunity afforded by this question to put my comments in their proper context.

Both I and my predecessor, in response to similar parliamentary questions on 30 March 1994 and 22 November 1995, have indicated that the Government has encouraged and will continue to encourage Aer Lingus to develop appropriate strategic alliances with other airlines as part of its overall development strategy. This approach is consistent with the document on Irish aviation policy published in February 1994.

My recent comments were made in answer to a journalist's question at the press conference announcing the World-wide Partnership agreement between Aer Lingus and Delta Airlines. I said I believed the way forward was for Aer Lingus to associate and align itself with major international players in the aviation sector. This is an integral part of the way in which development takes place in this industry and Aer Lingus has been quite active in the forging of such alliances in recent times.

The announcement of the agreement with Delta Airlines was the most significant of these partnerships to date. It brings major benefits to travellers between Ireland and the United States and significantly strengthens the position of Aer Lingus in the international marketplace.

As regards the Deputy's question about the sale of a substantial minority stake in Aer Lingus as part of a strategic alliance, there is no such proposal before my Department at present, nor did I say there was.

Any such proposals would be a matter in the first instance for consideration by the management and board of Aer Lingus. In the event that such proposals were brought to my Department, I confirm that they would be looked at seriously on their merits in order to determine whether they were in the best interests of the airline and the economic development of the country.

Mr. B. O'Keeffe

I have listened to the transcript of the tape of the RTE interview. Is the Minister aware that he indicated an alliance with the big players in the aviation sector must be looked at seriously? If he is telling us that is consistent with what was said all along? Will he explain why two Cabinet Ministers immediately telephoned RTE about this matter? I will not outline how they described the Minister, but they effectively dissociated themselves totally from what he said during that interview. In referring to a strategic alliance, is the Minister talking in terms of selling off a percentage share of Aer Lingus?

Mr. Lowry

I will not speculate on the Deputy's hearsay about any of those comments. I have dealt with much hearsay in recent times. This is another instance of it with which I will not deal.

Mr. B. O'Keeffe

I am telling the Minister the facts.

Mr. Lowry

The Deputy and his party have a difficulty in understanding what is involved in a strategic alliance arrangement. There are many forms of strategic alliance and they do not necessarily have to be equity based. The alliances we requested Aer Lingus to forge, in which it has been particularly successful, relate to co-operation and agreements to the mutual advantage of Aer Lingus and the airline with which it associates.

The Deputy does not appear to understand what his party negotiated when in Government. An extract from the Irish Aviation Policy Report published in February 1994 under the direction of my predecessor, the former Fianna Fáil Minister, Deputy Cowen, states:

With the progressive liberalisation of the airline industry world-wide many airlines with relatively small domestic markets have sought alliances with stronger carriers or groups of carriers. In some cases these involve cross-shareholdings while in other cases alliances are confined to marketing arrangements. In so far as Aer Lingus is concerned, while the proposed form of such an alliance is a matter in the first instance for the board of Aer Lingus, the Government as the major shareholder will seriously consider on their merits all proposals from Aer Lingus on such alliances. Those could include cross-shareholding agreements and additional equity investments. If these are judged to be in the best interests of the company and the economic development of the country, the Government will encourage Aer Lingus to develop appropriate strategic alliances.

That extract indicates that any discussions that have taken place with Aer Lingus have been to the benefit of the company and the type of alliances that have come to fruition relate to associations with other airlines to give access to hub centres, human resource skills and, in particular, code sharing and marketing expertise with other airlines.

Mr. B. O'Keeffe

The Minister must accept that some of his Cabinet Ministers do not share his view and were afraid on that occasion that the Minister was shooting off his mouth without having discussed a matter of vital national importance with them. Has the Minister, as a matter of courtesy, discussed a possible strategic alliance with the Congress of Trade Unions, the unions involved in Aer Lingus or its management?

Mr. Lowry

As I stated, any strategic alliance, irrespective of its form, is in the first instance a matter for the board and management of Aer Lingus. The Government would only become involved if such a proposal were put forward. I can confirm that such discussions have not taken place with me. Apart from the recent announcement of an agreement with Delta Airlines, Aer Lingus has formed a number of strategic alliances. Other alliances include code sharing agreements with KLM and Hamburg Airlines, code sharing and block space agreement with Sabena Airlines, joint marketing initiatives with TWA and United Airlines and a world-wide cargo agreement with British Airways.

Mr. B. O'Keeffe

Given the annoyance expressed by the two Ministers who contacted RTE, has a strategic alliance for Aer Lingus been discussed and approved by Cabinet? Has the Government a policy on Aer Lingus that has the full support and approval of Cabinet?

Mr. Lowry

The Deputy is grasping at straws.

Mr. B. O'Keeffe

I am not.

Mr. Lowry

The Government has a clear policy in that regard.

Mr. B. O'Keeffe

The reality is that two Ministers telephoned RTE to dissociate themselves from what the Minister said during that interview.

An Ceann Comhairle

Let us listen to the Minister's reply.

Mr. Lowry

Will the Deputy allow me answer the question he put?

Mr. B. O'Keeffe

I will.

Mr. Lowry

The Government has an aviation policy which is clear and concise. It has the support not only of all Cabinet members but of the management, board and employees of Aer Lingus. Aer Lingus, with the support and encouragement of the Government, has made dramatic improvements, particularly during the past 12 months. For the first time in many years Aer Lingus is not losing but making money.

Mr. B. O'Keeffe

The Minister should ask the Minister of State, Deputy Rabbitte, and the Minister for Finance, Deputy Quinn, their views on the matter.

Mr. Lowry

The Deputy is whistling in the wind.