Dáil Éireann díospóireacht -
Wednesday, 18 Feb 2004

Vol. 580 No. 2

Aer Lingus Bill 2003: Report Stage.

Minister for Transport (Mr. Brennan)

I move amendment No. 1:

In page 3, line 27, to delete "2001" and substitute "2003".

This amendment changes the definition of "Companies Acts" in section 1, which is concerned with interpretation and construction. It is a technical issue. I proposed an amendment to insert the date of the latest Companies (Auditing and Accounting) Act, which came into force in December 2003. Deputy Shortall had a similar amendment on Committee Stage which also referred to 2003. I am happy to take the Deputy's point and change the reference to 2003.

Amendment agreed to.

Acting Chairman (Dr. Cowley)

Amendment No. 2 arises out of Committee Stage proceedings and Nos. 11 and 12 are related. Amendments Nos. 2, 11 and 12 may be discussed together. Is that agreed? Agreed.

Mr. Brennan

I move amendment No. 2:

In page 4, to delete lines 15 to 19.

This amendment deals with commencement provisions. It is to do with the way in which the relevant Acts are to be repealed. There is no disagreement between the two sides of the House on the legislation that is to be repealed. The issue is more to do with style than substance.

Deputy Naughten argued on Committee Stage that the Bill dealt with commencement in sections 2, 6 and 13. His proposed amendment on that Stage would have effectively relocated the commencement provisions so they were all dealt with in one place. I agreed to consider the amendment before Report Stage. I have done that and consulted the parliamentary counsel. As a result I am prepared to take on board the points made by Deputy Naughten and put forward an amendment which will meet his requirements.

The amendment is textually slightly different from that proposed by Deputy Naughten. However, the differences do not relate to substance. There is no disagreement about repealing the relevant Acts and Deputy Naughten's amendments do not contest it. They contested the manner in which we dealt with the commencement and repeal provisions. My amendments are designed to afford maximum flexibility with regard to the commencement orders and the repeal of the relevant Acts, and amendment No. 2 deals fully with Deputy Naughten's concerns.

Mr. P. Breen

I apologise for my colleague, Deputy Naughten, who is unavoidably absent today. He asked me to deal with Report Stage of this Bill. I thank the Minister for accepting his amendment.

Amendment agreed to.

Acting Chairman

Amendments Nos. 4, 5 and 6 are related to amendment No. 3 and amendment No. 5 is an alternative to amendment No. 4. Is it agreed that amendments Nos. 3 to 6, inclusive, be discussed together? Agreed.

Mr. Crowe

I move amendment No. 3:

In page 4, lines 20 and 21, to delete "for so long as he or she thinks fit".

I previously described this legislation as an enabling blueprint for privatisation and none of the amendments put forward by the Minister will change that. I oppose the plans to sell Aer Lingus. Following the debate on Committee Stage, the Minister agreed to the insertion of a requirement that the Minister for Finance would be unable to dispose of shares in the company without the general principle of the disposal being approved by the Dáil. While it is a welcome development, I doubt that it can be seen as an improvement to the Bill. In practical terms, it makes little difference and serves as a cosmetic change to allow the Government to pretend it takes the Dáil seriously.

The Government, particularly this Minister, presents a clear danger to semi-State companies with their blind faith in market forces and privatisation as the solution to our economic problems. In less than two years the Minister has initiated confrontations with a variety of public sector unions and has exacerbated the situation by refusing to negotiate except through media soundbites. This legislation gives the Minister for Finance the power to sell the company at any time he or she sees fit. When the decision is made, which could be as vague as the Minister desires, and judging by his proposal to break up Aer Lingus, Aer Rianta and CIE we can expect a high level of vagueness, the general principle of the Bill will be voted through by the Government Deputies, after the Opposition is allowed to talk a little about what a bad deal it is. It is because the amendment made no difference to the ability of the Government to sell the company that the Minister, Deputy Brennan, had no difficulty accepting it. It does not make a great difference whether the Minister for Finance can sell shares in the company at the drop of a hat or must come to the Dáil for a rubber stamp. This Bill is primarily about the desire of the Government to sell Aer Lingus using employee share ownership as a cover.

Aer Lingus is a successful and profitable company and a valuable State asset. The Government is not capable of exercising the power that would be granted to it under this legislation so my amendments are designed to restrict its ability to do so. I make no apology for that. The amendments seek to remove some power from the Minister.

The company made a loss of €139.9 million in 2001. A year later, in 2002, it had been turned around to make a profit of €35.3 million. The most recent results for the first half of 2003 point to an operating profit of €14.3 million against an operating loss of €12.6 million for the same period the previous year. Passenger numbers have increased since 2001. We are talking about selling a State asset that has been supported by workers and taxpayers down through the years. It is a disgrace. This is enabling legislation to bring about privatisation.

Ms Shortall

Will the Minister take this opportunity to respond to a newspaper report last week on the Minister's plans to privatise the company? The report referred to selling 40% of the company initially to the institutions and floating the company at a future date. It said this was a proposal from the board of Aer Lingus and that the Minister supported it. Will the Minister clarify the situation? Was there a formal proposal from the board and, if so, was it endorsed by the full board? What was the date of that proposal from the board? Does the Minister consider it appropriate that people who have a vested interest in privatising a semi-State company should be the people to advise him, given the likely payola that will be available for senior management and members of the board? Would it not be advisable and more appropriate to get independent advice and not to take directions from the board if there is such a proposal?

With regard to the newspaper report that 40% of the company would be sold initially, will the Minister explain what this sale of 40% of Aer Lingus to financial institutions will do for the company? The revenue raised by such a sale would obviously return to the Government's coffers. It would not be invested in the company. Why would the sale of 40% of the company benefit Aer Lingus? The impression is being conveyed that it would be good for the company if it was part or wholly privatised. What benefits would accrue to the Aer Lingus company from privatising any part of it?

Mr. P. Breen

With regard to the alleged proposal that 40% of the company be sold, what effect would this have on Aer Lingus employees? We are told there will be more redundancies among ground staff in Shannon Airport because Aer Lingus head office has informed Aer Lingus in Shannon that it must cut costs by 15%. This will probably result in redundancies. What benefit would the company secure from selling a 40% share, particularly with regard to the employees and job prospects?

Mr. Brennan

The legislation provides the legal framework to facilitate the sale of shares in the event that the Government decides to go down that road. On Committee Stage we inserted an amendment to the effect that the Minister for Finance may not dispose of any shares in the company without the general principles of the disposal being laid before, and approved by, Dáil Éireann. To be clear, the Dáil will have to approve any Government decision to sell any shares in Aer Lingus.

I listened carefully to the concerns raised by Deputies about specific issues in the event of the State exiting from the ownership of Aer Lingus. Having taken those concerns on board, I moved the amendment to which I already referred which gives some comfort to Members with regard to the future direction we may take. I assure the House that if the Government decides to embark on a sale of all or part of Aer Lingus, I will set out the basis for any Government decision, including the arguments for and against such a direction. I have also committed myself to set out how the Government proposes to deal with important strategic issues such as slots at Heathrow. I will, of course, also outline the general principles of any proposed sale or move in that direction.

On the specific questions raised, Deputy Shortall asked me about the newspaper and company reports. I cannot say that the report I have is specifically a board document. I cannot say that to her. I had a meeting with the chairman and chief executive — in September I think — at which they presented me with a report from the company.

Ms Shortall

Is it a proposal now? It was reported as a proposal.

Mr. Brennan

What I have is a report from the chairman and chief executive. They presented it to me as a company report.

Ms Shortall

A report on what?

Mr. Brennan

It was on the possible future strategic direction of Aer Lingus.

Ms Shortall

Were they speaking in a personal capacity?

Mr. Brennan

I took it that they were speaking fully for, and that the report was for, the company. I since understand that they have briefed the board on the matters contained in the report. I want to be clear that the report which has been presented is, as far as I am concerned, from the company Aer Lingus. It was presented to me by the chairman and chief executive as a company report and they have briefed the board fully on its contents. As far as I am concerned that is its status.

Ms Shortall

When did they brief the board? Was it subsequent to the newspaper reports?

Mr. Brennan

I do not have the date. I am not privy to the inner management and structures of how and when they do their briefings. I do not want that report to become a major occasion or document. It is an input into a system and process and that is all.

I accept the Deputy's advice that I should get independent advice. The Department asked Mr. Hooper, formerly of the Bank of Ireland, to examine some issues. He has given me a very brief report also on the issues available to us and with which it is possible for us to deal in the context of any move forward in the area. The Deputy is right; independent advice in the area is important. I will deal with that issue shortly and certainly long before the Government makes any decisions.

In reply to Deputy Crowe, I do not want to get argumentative because Aer Lingus is a very good company. It has turned around and over 1,500 people have left the company in the past 12 months. This was done without losing a single day. It was negotiated. It cost the company many millions to bring this change about but it did it and there is a good working relationship between both sides.

It is worth noting that this Bill is not designed to sell Aer Lingus under the cover of the ESOP but that it legalises the 14.9% that the staff of Aer Lingus get. I do not begrudge that to them as they are entitled to a share in their company. However, I sometimes worry when people do not consider shares given to the workers, up to 15% of a company, as privatisation — because the shareholders happen to be workers — but if shares are sold to ordinary taxpayers, the customers, somehow that is not a good thing to do. All of us have supported the awarding of shares in the company to the staff and workforce. I am sure they are in good hands and they deserve them. However, we cannot have it both ways. We have taken shares from the taxpayer and have given them to the workers. Therefore we cannot cry too much over the taxpayers. That is a big debate and I do not wish to get into it now.

I have probably dealt with the other matters mentioned in that newspaper report. It did suggest that I had made up my mind on this issue but I have not. I am working through a process of discussions with the company and taking some independent advice. I will shortly have a full discussion with Cabinet on the options available to the company. After that full discussion we will decide how to proceed. I do not want to rehearse the arguments in the context of this Bill but there are strong arguments for the company staying as it is and for the taxpayer to continue investing in it. There are equally strong arguments for the taxpayer taking time to examine whether attracting private investment into the company, in terms of building up its future assets, is appropriate. There are arguments on both sides.

Mr. S. Ryan

What does the Minister mean? He says there are strong arguments for continuing as it is and for getting the taxpayer to invest in its future. Is it not true that the chairman and chief executive indicated clearly that they do not want or need any further investment at this stage in funding for Aer Lingus and that they also indicated that they would give the Minister €30 million in the context of any privatisation that might take place?

Mr. Brennan

I will bring to the House reasoned arguments on both sides before we proceed or conclude, whatever view the Government takes.

Ms Shortall

Where did the newspaper story originate? Did that story originate in the Minister's Department?

Mr. Brennan

Does the Chair want me to deal with one question at a time, or is this Question Time? What does the Chair want me to do?

Ms Shortall

Where did the story originate?

Mr. Brennan

Does the Deputy want me to deal with her colleague's question?

Ms Shortall

Yes, but the Minister should answer the other one afterwards.

Mr. Brennan

I will come back to it. I will present a document which will lay out the pros and cons. I take the Deputy's point. There is a view which says that Aer Lingus will never again need investment because it is doing so well. Deputies should think about that. Another argument says it is growing so fast and there are so many new routes on offer that it will require substantial funds for investment in new aircraft, routes and strategies. We must think about both of these and consider which we believe. Whether we think the company will require further investment is an issue to which we will come, if the Government takes a decision to proceed.

To come to Deputy Shortall's question, I cannot deal with the matter of from where newspaper reports come. The newspaper report did lay out what the Aer Lingus report purported to contain — the ESOP, five strategic options, an evaluation of the company's view and a private placement to institutional investors. It rehearsed arguments which were and are in the chairman's report to me, such as the argument about the various options if the Government decided to sell shares in Aer Lingus. It also expressed a preference for a model which suggested institutional placement to investors initially, followed later by an IPO. To that extent the newspaper report was accurate. I have not arrived at any conclusion on these issues. I need to study them and to talk further with advisers and the company to see what is the best road forward for the company.

This Bill does not sell Aer Lingus. It allocates the 14.9% finally and commits the Government to coming back to the House if it attempts to sell any of Aer Lingus. It will have to come back to the House.

Ms Shortall

It is important that we get further clarification on this. The newspaper report outlining the Minister's position in respect of the future of Aer Lingus indicated it had emanated from the Minister's Department. Did that report in The Irish Times last week emanate from his Department?

In that article it was suggested that there was a proposal from the board of Aer Lingus on the future ownership of the company and that the Minister had accepted that proposal. The Minister has informed us that there is not a proposal, there is a report. Will the Minister clarify the status of the report? Did the chief executive and chairman of Aer Lingus draw up this report? Is that all it is or has it any other status? Was it presented to the board before it was presented to the Minister?

In light of his earlier commitment to discuss issues with Members of the House and to be open about what he is proposing to do, will the Minister make a copy of that report available to the Opposition spokespersons so that we can be in possession of the same advice he has had from the company, which is a semi-State company?

In the newspaper report the Minister is reported as favouring the sale of 40% of the company to financial institutions. The main purpose of the Bill is to sell part, or all, of Aer Lingus. Will the Minister explain what benefit will accrue to the company on the sale of up to 30%, 40% or 50% of the company, given that the proceeds from such a sale will come back into the Government coffers and will not be used for re-investment in the company?

Mr. J. Higgins

I strongly support amendment No. 4 in the name of Deputy Crowe. There is no good reason for the privatisation of Aer Lingus. It is a premier State company that has been built by the taxpayers of this country and by the commitment of a dedicated workforce over many decades. In reality there has been little State investment for most of those decades.

What is driving the Minister for Transport's proposal to bring the Aer Lingus Bill before the Dáil to provide for the inevitable privatisation of this premier State-owned company? It is clear that the Government is driven purely by the Minister's ideological commitment to a right-wing economic policy whereby he believes that crucial public assets should be transferred to big business interests. This is exactly what he is trying to do with Dublin Bus and what he also wishes to do in future with Aer Rianta.

The ownership of a critical air transport facility is of great importance to an island nation. The Minister should not pretend that the Bill does not relate to privatisation. We know that is his agenda. We know from the experience of almost seven years of these parties in government that this is the Government's agenda.

What is the experience of other crucial State assets and semi-State and publicly owned companies that have been privatised? Within a short period of time they find their way into the hands of major multinational corporations and become the playthings of international speculators and major multinational corporations.

It will be one of the shameful legacies of the Government that, for example, our telecommunications industry should have been handed over in this way to millionaires, tax exile billionaires and people who have no commitment to the welfare of the majority of people in the State. Giving a crucial air transport facility in an island nation over to these forces is particularly dangerous for the future of Irish air transport. If their commitment to greater profits dictate that services are cut back or otherwise changed and rationalised the welfare or needs of the Irish travelling public will not be the main priority.

What the Government has allowed to happen has been a source of great scandal to the majority of taxpayers. The rainbow Government gave the crucial mobile phone licence for a song to an individual who was able to speculate with it and walk away with a personal fortune of £250 million. These resources properly belong to the people. It demeans our society that Eircom, for example, and other important industries that were once in public ownership are now merely the subject of fights and contests between various sharks operating in the world economy.

The idea of people piloting the company, which they have been given in trust to run for the people, towards privatisation raises critical ethical issues, which need to be debated. It is impermissible that leading executives in Aer Lingus should move to assist the privatisation of a premier State-owned company when they stand to gain massively from that privatisation, which is exactly what happened with the privatisation of Telecom. It is immoral and should not be allowed.

In the seven years of the Government parties being in office, we have seen a tendency develop in the public sector whereby individuals with no commitment to maintaining public ownership of these companies are looking at the vast riches they can personally make for themselves through their privatisation. That is fundamentally wrong.

As a preparation for privatisation we saw the values and brutal methods of the anti-union companies in public air transport being brought to bear in Aer Lingus in recent times. This was an attempt to relentlessly worsen the conditions of workers who have given such great commitment, instead of bringing Aer Lingus workers to the heart of the management of the company and putting in the necessary State investment to this State-owned company, and to develop it for the benefit of ordinary people in an affordable way. The trade union movement and the ICTU should wholeheartedly support amendment No. 4. The idea of a certain cohort of share ownership for workers is trap for those workers. It is a cynical attempt by the Government that tries to foist privatisation on the workforce. I remind the Government that this company belongs to the entirety of the people. We have seen this company develop in public ownership. It is not in the ownership of the Government or any other sector. A proposal that goes any step towards privatisation should be rejected out of hand.

Debate adjourned.