Dáil Éireann díospóireacht -
Tuesday, 6 Jul 2004

Vol. 588 No. 5

Leaders’ Questions.

Mr. Kenny

I note the Taoiseach's comments to the Fianna Fáil Parliamentary Party about the recent election results which he described as devastating. In recent weeks, the Standards in Public Office Commission reprimanded two Ministers for not abiding by the code of conduct for officeholders. In particular, the Ministers in question did not observe the code that stipulates that official facilities should be used only for official purposes.

On a number of occasions during the past 15 to 18 months, I have raised the issue of the communications unit in his Department with the Taoiseach. The unit employs six staff and costs approximately €300,000 to run. The Taoiseach has consistently portrayed this unit as being non-political and has stated that it merely collects information in a factual manner and provides, without comment, a synopsis of the main news bulletins and major newspaper headlines. He stated, "There is no political comment on what I, other Ministers or Opposition spokespersons said."

How does this fit with the description of the functions of the media monitoring staff, annexed to a Department circular seeking staff for a post in the unit, which states that the principle function of the unit is to act as an early warning system to Government about critical and negative media coverage? The official circular states that the unit will be responsible for ensuring that relevant Departments are in a position to respond quickly to such negative media coverage. It further states that staff will need to maintain a constant watching brief on political issues.

There is clearly a conflict between what the Taoiseach has been telling the House and what the circular to staff actually says. This leads one to believe that this is another case of €300,000 being spent for political purposes. Will the Taoiseach agree to an independent assessment of the work of the communications unit, either by the Standards in Public Office Commission or the Comptroller and Auditor General?

The Taoiseach

I would have no problem if the Standards in Public Office Commission wanted to investigate the activities of the media monitoring unit. If it has nothing else to do, I would be delighted to facilitate it in this regard. If the Comptroller and Auditor General has nothing better to do, he can also investigate the unit.

Mr. Kenny

The Taoiseach has stated that this unit does no political work at all. However, the circular to which I refer and which is publicly available states that in many ways the unit will be modelled on the British Labour Party's quick response unit based in Millbank, London. Is the Taoiseach confirming that he has no objection to an independent assessment of this unit and its work, which is clearly political? There is quite a difference between what the Taoiseach has been telling the House for the past 18 months and what is contained in the official circular in which staff are requested for what are clearly political positions.

The Taoiseach

I have no difficulty with the Deputy's suggestion. As far as I am concerned, he can carry out the independent inquiry himself. The staff of the unit are civil servants and they play no political role. They carry out assessments of media reports in the morning and throughout the day. As I have said on the record of the House, they go to Ministers, Ministers of State and departmental officials. They also make transcripts of media interviews requested by Departments, which up to then were done by commercial organisations, thus saving a considerable amount of money. They do not make any political assessments and they are not involved in any participation or scripting of advice on how to respond to a headline or other media issue. They do not participate in any of that. As far as them being in the same business as Millbank, an operation with which I am reasonably familiar, they would not do 0.001% of what Millbank does.

Mr. Allen

The Taoiseach is getting bad value for money.

The Taoiseach

It is a different job.

Mr. Rabbitte

Since the announcement by the Minister for Transport last July, the Labour Party has indicated it would oppose the break-up of Aer Rianta unless the business case is clearly established in advance.

I have available to me the legal advice furnished last week to the company from Arthur Cox solicitors which appears to confirm the fears I raised by letter with the Minister for Transport on 27 July last year. In essence, the Arthur Cox advice appears to conclude that, at its mildest, it is problematic whether the Minister can proceed as outlined in the Bill and certainly not without securing express waivers from the company's bankers and bond holders. Otherwise, the restructuring would constitute an event of default and the banks would be entitled to accelerate and demand immediate repayment of the loans.

In the opinion of the company's legal advisers, the bank terms do not permit Aer Rianta "to cease to carry on any part, or in some case, any substantial part, of its business" or "Aer Rianta ceasing to retain ownership of, and to conduct operations from Cork and Shannon without an express waiver" or it would constitute an event of default. The advice also states:

The Bonds contain a cross-acceleration Clause pursuant to which if any indebtedness of Aer Rianta ... of more than 32 million were declared due prematurely by reason of an event of default this will constitute an event of default under the Bonds.

Has the Minister or the company been in contact with any of the company's lenders or the bond trustee to seek such a waiver? What is the view of the Minister for Finance? How much are the fees referred to by the legal advisers for securing such a waiver?

According to the advice from Arthur Cox:

It appears therefore that waivers will be required from some lenders under the Bilateral Facilities and possibly from the bond trustee to avoid defaults arising in connection with the proposed restructuring. These lenders may baulk at issuing a general waiver in connection with the restructuring and may wish to limit the scope of any such waiver, adopting a 'wait and see' approach.

The Taoiseach

The bondholders' issue is being dealt with by the Department of Transport. The maintenance of good communications between Aer Rianta and all its funders, including the bondholders, is an important but normal part of the process upon which the Government has embarked in restructuring Aer Rianta. The company is handling the funder relationships in a professional and business-like way. The appropriate initial communications were made by the company in July of last year on the announcement of the Government's decision to restructure Aer Rianta and more recently on the publication of the Bill. That has been accompanied by appropriate communications between the company and its funders. The communication process will continue in the coming weeks and months.

While the handling of this important aspect of the restructuring process is a matter for the company, both the Department of Transport and the Department of Finance are involved and continue to offer whatever advice or assistance the company may seek from the handling of these communications. The Department of Finance is fully involved in this matter. If necessary, senior officials from both Departments will participate appropriately in such communications. The issue is being dealt with and has been dealt with for the past 12 months and this will continue to be the case.

Mr. Rabbitte

I asked the Taoiseach to clarify whether the matter is being dealt with or as he said, has been dealt with. It is important that we are precise. We have been going on with this for a year. The Government is proceeding to break up a company and then to give the justification for breaking it up afterwards. The advice I partially put on the record of the House is dated 30 June and states:

The purpose of this letter is to confirm the current status of our analysis in relation to the implications that enactment of the Bill may have for the Aer Rianta group's funding arrangements.

Has the Taoiseach provided for that? There is no point telling me that it is being provided for, as this has been going on for a year. I wrote to the Minister on 27 July last year and raised this very particular point about the indebtedness denominated in bonds at that time. I explained my advice in terms of the implications for funding of the dismantling of the company in terms of company law and so on and so forth. In response, the Minister said he did not know but he was having it examined. The Taoiseach appears to be saying now in one breath that it is being examined and in another that it has been examined.

Has the waiver been sought from the bankers and the bond trustee, has it been received and is there a clear position on this in terms of Aer Rianta itself? Why would the company be seeking legal advice if the matter were secured and approved by Government.

The Taoiseach

I will repeat what I said. The initial communications on this matter were made a year ago when the Government announced the decision to restructure Aer Rianta. More recently, the discussions have continued by the appropriate communications between the company and its funders. It is an ongoing issue. The funders must be involved and the bondholders must be informed. As I said, this is an important but normal part of the process upon which the Government has embarked in the restructuring of Aer Rianta. That process will continue in the coming weeks and months. The process to be followed between now and next April has been set out in——

Mr. S. Ryan

The Bill will be enacted tonight.

The Taoiseach

—— a Bill that is before the House.

Mr. S. Ryan

That is a damning report from Arthur Cox.

An Ceann Comhairle

Deputy Seán Ryan should be silent and allow the Taoiseach to answer the question without interruption. It is not Deputy Ryan's question; it is his leader's question and Deputy Rabbitte is entitled to hear the answer.

Mr. S. Ryan

I cannot keep quiet and listen to the Taoiseach codding people.

An Ceann Comhairle

The Deputy should be quiet.

The Taoiseach

Both the Department of Transport and the Department of Finance are involved in the handling of this important aspect of the restructuring process of the company. There is no ongoing difficulty with this issue. The matter is being handled. The Department of Finance is involved in the issue and any matters arising will be dealt with between the two Departments.

Mr. Rabbitte

Why would the legal advisers say there are difficulties? That is a ridiculous answer.

Mr. Sargent

On a related matter but a different company, the news of the management buy-out proposal from Aer Lingus management is of immense interest and not a little concern to the 4,100 remaining Aer Lingus employees, given that 3,000 have already been sacrificed following the downturn after 11 September 2001. Given that the airline stands to make profits of €90 million this year, will the Taoiseach indicate to the House when he or the Minister for Transport became aware of this proposal? There is a widely held view that the Government was aware of this going back some time and that it only came into the public domain at the weekend.

Can the Taoiseach confirm that a management buy-out proposal would usually come about when a company was in some trouble and needed radical or emergency action to be taken? Where does that sit in regard to Aer Lingus which we all thought was doing very well? Is the Taoiseach considering the ethical issue of management putting forward a buy-out proposal having been the same people that have engaged in so many of the cuts? Is there not a case to be answered ethically as to whether those people should then, effectively, benefit from having made those cuts themselves?

Many people also want to know about the pension arrangements. When it considers this matter, will the Government honour the Pensions Act, considering the €120 million shortfall from the superannuation scheme? In other words, is the taxpayer to take on that matter outside the management buy-out terms?

An Ceann Comhairle

The Deputy's two minutes has concluded.

Mr. Sargent

Despite the fact that British Airways is experiencing a fall in share price due to fuel costs, there is no reference to this with regard to Aer Lingus. It seems strange that this matter would not be taken into account when the Government is considering it. When did the Government know about the management buy-out proposal and is it as recent as the newspapers indicate?

The Taoiseach

The Deputy has raised a number of points. The Government discussed this matter today and will respond in due course to the request in the context of the ongoing consideration of the ownership issue, which has been under way for several months. It will not be considered separately. A Cabinet sub-committee which consists of myself, the Tánaiste, the Ministers for Finance, Transport, and Arts, Sport and Tourism is examining all the issues on this matter and will report back to Government. We have advised Aer Lingus senior management that in the interim there was to be no further activity as regards the requests for consent to develop a proposal until the Government has had time to consider the matter in detail. So it cannot proceed any further with its proposal.

We will also consider the request in the context of the point the Deputy made on the need for openness and transparency, and avoidance of conflict of interest in consultation with the stake holders. This is an important point as these people form the company's management and as the Deputy said, the governance issue is important in this matter and must be protected. Legal advice on that issue was sought. The new interim chairman, Mr. John Sharman, as an existing director acting in that position, has sought legal advice on the roles and corporate governance arrangements they need to put in place for the specific and unique circumstances that have arisen, where management has requested permission to develop a proposal but no such proposal currently exists or has been tabled, which is the position.

On 2 July, the chief executive formally wrote to the Minister and the company's secretary advising of the request and submitting a briefing document. The Department of Transport immediately requested that no further activity take place on the proposal until that matter had been considered from a corporate governance process and policy perspective. The appropriate legal and financial advice was then sought and the Government reiterated that today.

As I understand the Deputy's first question, Aer Lingus senior management has requested permission to develop investment proposals for the company and in the absence of a company chairman, the chief executive advised the Secretary General of this request at a meeting on 24 June. This was the first time the matter was raised and it was followed by a letter on 2 July.

Mr. Sargent

The Taoiseach said this was raised for the first time on 24 June. However, my question was whether this matter was discussed at Cabinet prior to that? Is there truth in the reports I have heard that the Cabinet was thinking along these lines and that effectively the management has been acting on what was unofficial Cabinet policy? The Taoiseach did not answer my final question about fuel costs. I have raised this issue in the House before and will continue to do so because fuel reserves here are limited to about three days. I understand that most of our fuel reserves are in the UK. If British Airways is concerned about this matter, I would be surprised if a company like Aer Lingus is not concerned.

The Retired Aviation Staff Association is certainly very concerned about this proposal. I did not get an answer to my question about the Pensions Act and honouring the superannuation scheme, which is at a cost of approximately €120 million as far as I am aware. Will this be honoured by the taxpayer or what will happen to the retired staff who are concerned about their pensions?

The Taoiseach

No management buy-out proposal was put on the table in any form. As the Deputy knows, for some time the Government has been considering the future ownership of the airports. That process has been under way and that matter has been in the public domain for a long time. However, this was a new proposal that was not discussed and the Government was not aware of it. Today was the first time the Government discussed it. Most Ministers would have heard nothing of this until 2 July because the other meeting was with the Secretary General of the Department. It was only when the letter came in that the matter was made public.

Obviously if there is a change in the future, issues concerning pensions, governance etc. would have to be examined in detail. At this stage it is preliminary to say that. The ownership issue and the ongoing consideration of these issues are at an early enough stage.