Private Notice Questions.

Proposed Aer Lingus Takeover.

Róisín Shortall

Ceist:

Ms Shortall asked the Minister for Transport the steps the Government intends to take to protect Aer Lingus from the takeover planned by Ryanair; when his attention was first drawn to the fact that Ryanair was acquiring shares in Aer Lingus; and if he will make a statement on the matter.

Olivia Mitchell

Ceist:

Ms O. Mitchell asked the Minister for Transport his views on the intention announced by Ryanair to attempt to purchase the shares of Aer Lingus; the implications of same for competition and consumers here; and his role in ensuring that competition in the aviation sector is not wiped out.

Shortly after 8 a.m. Ryanair advised that it had acquired over 16% of the issued share capital of Aer Lingus and announced its intention to make an all cash offer of €2.80 per share for the issued share capital of Aer Lingus not already in the ownership of Ryanair. This announcement by Ryanair was made without any forewarning. I was made aware of the announcement by the chairman of Aer Lingus and in a phone call from the chief executive of Ryanair at roughly the same time as the announcement was made to the public.

From the outset in regard to the Aer Lingus IPO the Government has been committed to ensuring that our strategic interests are protected. It was always the intention to maintain a significant minority shareholding for this purpose and that remains the position. The State's shareholding is about 28.3%. Aer Lingus, as a result of the IPO, now has the means at its disposal to fulfil its potential and contribute in a positive way to the country's economic development.

Ireland's strategic interest in aviation is best served by the provision of regular, safe, cost-effective and competitive air services linking the country to key business and tourism markets around the world, and that remains the case. The Government remains fully committed to competition in aviation markets.

On the basis of the information available to date I do not consider that the Government's strategic objectives would be well served by a take-over of Aer Lingus by Ryanair. It clearly raises fundamental questions in regard to aviation policy, competition and regulation issues and all these questions will have to be examined carefully.

It is in the first instance a matter for the board of directors of the company to evaluate any Ryanair offer and to express an opinion to shareholders. It is also the case that any proposal of this kind would require regulatory clearance from a competition perspective and it remains to be clarified as to how this would handled by the appropriate competition authorities.

The deputy chief executive of Ryanair has indicated that it will post the formal offer document in two weeks which will set out further details of the offer. I am consulting advisers and will evaluate all the strategic and policy issues arising. Until these matters have been examined further I cannot give any further information on this matter.

Throughout the debate on the privatisation of Aer Lingus over the past two years, the Labour Party opposed this proposal from the start and suggested that we could find ourselves in precisely the situation in which we find ourselves today. The Minister denied the possibility of that happening. A month ago there were two very strong airlines serving this country, a privately owned airline and a publicly owned one. We now face the prospect of a privately owned monopoly controlling the vast bulk of airline services in and out of this country. We know from this afternoon's news that Ryanair has approximately 25% and it is rising. Irrespective of any talk about golden shares, controlling shares or anything like that, is it not the reality that if Ryanair gets 51% of the company — it seems there is nothing stopping it doing that — it will in effect have full control of the company and can do with Aer Lingus what it wishes? Does the Minister think that would be a good or a bad thing for the economy and the travelling public? Does he think it would be a good or a bad thing for competition in this country, and if his answer is the latter, can he tell us what he intends doing to prevent that happening?

In a sense, this is tinged with a certain amount of irony if one looks back at the Government having very much assisted Ryanair in ending a monopoly in the aviation sector. We were very much to the fore in introducing competition, which as the Deputy has said, was without question in the best interests of the economy and the people in terms of business and tourism. In effect, Ryanair is now trying to recreate a monopoly in the aviation sector. I and the Government view this matter very seriously. A monopoly is bad for business. It is bad for this country, the customer, the travelling public and tourism interests. All of those factors were the reasons why in the first place the Government has fostered and encouraged competition in recent years particularly in the aviation sector. We certainly do not want to see a new monopoly created in the aviation sector.

This is a bit rich. I asked the Minister if he thought that a privately owned monopoly was bad for airline services and what he intended doing about preventing that monopoly occurring.

I set out clearly for the Deputy in my opening remarks that a substantial range of interrelated regulatory, legislative and legal matters are being considered. I am awaiting advice on exactly how these will unfold.

Does the Minister have any idea how matters will unfold?

I am sure the Deputy appreciates it would be wrong for me to speculate until I have all the facts in my possession.

But the Minister rubbished people warning him about this happening.

Can I come back with other questions or should I ask all the questions together? Will I get back in again?

Three other Deputies are offering and the matter will conclude at 4.45 p.m. The Deputy should bear that in mind.

I will try to get all my questions in together. I suppose the Minister was as gobsmacked as the rest of us this morning to hear this news. I assume we, the taxpayer, employed advisers prior to the sale of Aer Lingus. Did they ever consider this possibility in their risk assessment? We did talk about the possibility of British Airways buying Aer Lingus. Perhaps that was just in jest but there has always been a possibility that another airline would buy it. Was it ever considered by the advisers that the one competing airline in Ireland might buy it?

The Minister spoke to Aer Lingus this morning. When the chief executive contacted the Minister, did he give any indication of the Aer Lingus response to this proposal? Obviously shares are being sold all day. Ryanair now owns almost as much of Aer Lingus as the Government. Was there an official response from Aer Lingus as to how it might react to this bid from Ryanair to buy shares in the company?

Did either Michael O'Leary or Aer Lingus give the Minister any idea why Ryanair decided to do this? Was it a thought out strategy, in which case one can well ask why Ryanair waited post-flotation to start buying shares? There has been a rumour that another airline was sniffing around and that the Ryanair bid was an attempt to stymie that attempt. Is it the case that Ryanair simply wanted to get into the long-haul business and found Aer Lingus a convenient vehicle for doing this?

A great deal has been said about the loss of competition and clearly that would be a major concern for everybody from the consumers point of view as people would lose out in terms of price and choice. Does the Minister think that if this matter goes to the European competition authorities Ryanair will have a very strong argument to the effect that when it went into new markets as well as existing markets, it grew the market in both cases? Will that not be a strong argument against our argument that this is anti-competitive and that we will lose out?

Everybody says we must block this move. It is important to look soberly at this matter and consider what exactly it means in the long term. Currently, Ryanair holds all the cards. It can hold on to what it has and go no further but it can also drive Aer Lingus into the ground in terms of competing against it. It now has access to 281 new 737s. It can out-compete Aer Lingus, drive it into the ground and buy it for nothing in six months. The knee-jerk reaction is not necessarily always the best one. Has the Minister considered all of these lines of inquiry? Is his preferred option to block the take-over or negotiate with Ryanair? Where are we going next?

The first thing I should make clear to the House is that what we are reacting to is a press release, some comments from Ryanair and its activity on the market. No formal offer document has been received and the Ryanair deputy chief executive indicated this would be presented in two weeks. We must wait until we see the formal offer document.

Second, the Deputy has speculated, as I am sure have many others, as to the precise agenda of Ryanair. That is entirely a matter for Ryanair and I will not try to guess it. What I and the Government are clear about is that this is unquestionably bad for competition. We are against monopolies in the aviation sector. We are not in favour of a new monopoly being created by a company that was assisted by this State to end a monopoly in the aviation sector. Clearly, all the different regulatory authorities and legal issues, some of which are interrelated, are being studied as we speak.

It is also my understanding that the board of Aer Lingus is obliged to consult with its advisers before it makes a formal statement to its shareholders. We must wait for all of that to unfold in the near future. I emphasise the Government is not going to sell its significant shareholding in Aer Lingus. The memorandum and articles of association cannot be changed.

It is worthless.

The Deputy should please not throw in remarks that are incorrect.

It is completely worthless.

As Deputy Shortall is aware, the memorandum and articles of association state that once the Government has a 25.1% shareholding — we have 28.3% — and if another 5% shareholder acts we cannot change, for example, the arrangements with regard to the Heathrow slots. That cannot be changed as long as the Government has 25.1% of the shareholding. It is important to put that on the record.

The issue is very clear. This country has prospered in the aviation sector enormously since the introduction of competition. It is without question that it has been of enormous benefit to the travelling public, for tourism, business and the economy. The Government takes a very strong view of the attempt by Ryanair to recreate a monopoly in this country. It is not something the Government wants to see happen.

I put it to the Minister that what is abundantly clear is that this has been one of the worst decisions and the most obvious mistake made by any Minister in the many years I can remember. It has taken a week for the folly of his course of action to emerge. As Deputy Shortall stated, this was argued against on this side of the House. Our party was strongly against it. It was an incredibly foolish and reckless decision to give up a national asset and to put it, effectively, on the market.

The Minister stated that nothing formal is on the table. The fact Ryanair in one day owns more of the company than the Government shows the change of thinking. Ryanair is running rings around the Minister. It is acting way ahead of him. Does the Minister agree that, even if Ryanair does not end up owning the company or taking a controlling stake, the company is "in play" in market terms? As Eircom was before it, Aer Lingus will become a vehicle for market speculation and changes of ownership in a manner over which we have no control despite what the Minister says about golden stakes.

I would argue and contend that this is a calamity for the company and of no benefit to the public. It is of disastrous consequence for aviation policy in this country. Given that events are evolving by the minute as Ryanair buys up the company today, has the Government considered going to the market and repurchasing some of the company, which it sold last week, in recognition of the fact that matters are out of the its control? Has the Government contacted the European competition authorities and how does it intend to influence them in this regard? What is the timeframe for a decision by the authorities? How rapidly will a decision be made on whether such a takeover would be in breach of European competition rules?

If the Government will not buy back some of the company or if it cannot tell the House what is the ruling of a competition authority, what can it do? What will the Government do today if, as any sensible person would, it believes that such a takeover is not in the interests of the State? What can the Government do after its incredible mistake in selling this company last week?

It is wrong for any Deputy to talk down Aer Lingus in the House. This is not——

I am talking down Fianna Fáil.

The Minister is the person who destroyed Aer Lingus.

I am not surprised to get such a typical response from the Labour Party and the Green Party. As I have enunciated in recent months, the growth potential for Aer Lingus is considerable. It is an important company——

Aer Lingus will not exist in a week.

——predicated on its base in Ireland, the potential new routes from here into the United States, the Middle East, the Far East and Australia and the substantial potential increase in short-haul routes. We must keep matters in context. The company is in a strong position and managed to turn itself around in a positive way thanks to great work by its workforce and management in recent years. That is the situation today.

Deputy Eamon Ryan seems to be ignoring EU competition rules in respect of our desire to ensure that Aer Lingus would not be made to face fierce competition with one hand tied behind its back. It would probably not have been able to survive. It needed the ability to compete on a level playing field and access to the capital markets. It can be said that once a company is put on the Stock Exchange, people can purchase its shares, but there are Irish and EU competition rules to ensure there is no distortion of the marketplace by the creation of a monopoly.

Facilitated by the Minister.

This is clearly an attempt by Ryanair to create a monopoly in this country's aviation sector. For Ryanair to create a monopoly would be bad for business, tourism and passengers.

The Minister has allowed it to happen. He is responsible.

The Deputy will not faze me. I am far calmer than she is, bleating at me from over there. This is a serious issue.

For someone who has just thrown away the national airline, the Minister is remarkably calm.

That will not achieve anything.

It is not a day to be calm. Does the Minister agree that only weeks after the privatisation of Aer Lingus, he is guilty of creating what is by any standard a shocking debacle for which the Government is responsible? Does the Minister not find it grotesque that an airline that belonged to the Irish people built by the dedication of thousands of workers over decades is in danger of being controlled by a ruthless private operator who is anti-workers' rights, anti-trade union rights and anti-environment?

Does the Minister understand the fury of Aer Lingus workers who, courtesy of his neoliberal economic agenda of privatisation, find a ravenous cuckoo in the Aer Lingus nest? Their jobs, working conditions, wages and futures are in mortal danger. Does the Minister agree that Aer Lingus workers are fully entitled to protect themselves from this sinister development, to fight this shark from taking Aer Lingus over and to do so with industrial action?

Is the Deputy asking a question?

The Deputy should keep his questions brief because three Members have submitted questions and I would like to let them speak if possible.

In light of this debacle, for which the Government, with Fine Gael's support, is responsible——

There is no need for statements, just questions.

Why should the Minister not be kicked out of office if he does not resign? Why will the Government not take Aer Lingus back into public ownership as it should, invest money in the future of Aer Lingus — the Minister should admit that the Government can invest this — and bring the workers to the heart of the running of Aer Lingus rather than throw them to the sharks on the international stock exchanges, which is what the Government has done?

Before the Minister answers, Deputy Crowe will speak. He has not spoken yet, so he can be facilitated.

I listened to the Minister speak about this being bad for tourism, but does he accept that it is also bad for commuters, Aer Lingus workers, the economy and employers who must get their products to the market? Does the Minister also accept that sharks or venture capitalists entering Aer Lingus was probably an inevitability?

What was the rush to sell Aer Lingus at this time? In recent years, the company was doing well and making a good profit. The Minister keeps talking about what Aer Lingus will face and how we could have entered a situation where the State began losing money, but, as an outsider looking in, the company was doing extremely well, expanding and making a profit. Does the Minister know how the workers of Aer Lingus feel today? Does he accept that they feel let down by the Government? Clearly, they have been let down.

The Deputy should be brief because we are running out of time.

Is the Minister surprised by venture capitalists moving in on Aer Lingus? Does he accept that the Government has made Aer Lingus vulnerable to people who will strip the company if they get the opportunity? The responsibility is not Michael O'Leary's. Rather, it is the Government's for selling a successful State company that was paid for and supported by taxpayers and its workers through the years.

How will this situation affect the organisations in Aer Lingus? Does the Minister have any idea about how the people in the company's unions, who supported it and took difficult decisions to make it successful, feel? His decision has left the company open to the sharks and the wolves.

I am surprised to hear the question about what the rush was because the Government and I were accused constantly of delaying decisions on Aer Lingus. People want it every way.

I do not agree with the suppositions of Deputies Eamon Ryan and Crowe. I should have responded earlier. The process involved will be lengthy and the regulatory and legal situation will not unfold during the coming days. A reasonable amount of time will be afforded the different requisite bodies to make their assessments and engage in processes. Ryanair will not make a formal offer for the company for at least two weeks.

On the decision to sell Aer Lingus, the business case that was put forward and the potential for which workers and management had worked over the past number of years could only be achieved by the strategic decision that was taken to sell a majority stake in the company.

Many of us around here must grow up. We do not operate in a bubble but in difficult markets at times, and the aviation sector is one such market. I and the Government remain confident about the future of Aer Lingus.

On the earlier question, I agree that the generally held view was that Ryanair did not appear to have an interest in Aer Lingus, but there you are.

There you are.

There you are.

The Minister might have thought of that beforehand.

Obviously, it confirms the Government's view that this is a strong company, which has the right business plan, the right opportunities, considerable potential for growth in the marketplace and is now on the move in terms of its own development.

I agree the Government moved over the past number of years to facilitate the break-up of a monopoly in Irish aviation because we did not think it was good for business and that it facilitated the advent of Ryanair, which has worked successfully, from the aviation point of view, for the benefit of the economy.

What we do not want — this is potentially what is happening — is an attempt by Ryanair to create a private monopoly in the aviation sector. Such a monopoly would be bad for business, bad for tourism, bad for the economy and bad for customers in this country. That is my strongly held view and that of the Government.

It is a pity the Minister did not think of that before now. At this stage, does the Minister accept that he and his Cabinet colleagues have been utterly reckless with the national airline in pursuing his privatisation agenda? Is it not the case that the Minister, in particular, blindly and continuously ignored frequent warnings that this particular scenario of a predatory takeover could occur?

What contact has the Minister had today with the European Commission in respect of the concerns which we all had before he moved to privatise the company and which he ignored? Has he registered the concern of the Government over what is likely to happen now to Aer Lingus? Does he accept that the only way he can block a takeover by Ryanair is to move to buy back shares to secure 50% of Aer Lingus?

I do not accept Deputy Shortall's submission that this was an utterly reckless course to adopt. It would have been utterly reckless to sit back and do nothing on the potential development of Aer Lingus for the future of this country.

He recreated a monopoly.

We are a long way from that happening. Deputy Shortall should calm down and tone down the tenor of her views.

The Minister should explain what he is doing about it.

Deputy Shortall asked what contacts I had today. She is probably aware that I only arrived back in Dublin, having started the largest single road project ever in this country, a 40 km project costing some €450 million.

Has he contacted the Commission?

The answer is "No". I have just arrived back in Dublin, but that is not to say that my Department officials have not done so. I have not had time to meet with all my officials, but they are meeting as I speak and I will get further briefings.

Why did he not instruct them to do so first thing this morning?

There are procedures that we will follow, as any sovereign government would do. We will behave ourselves within the regulatory framework.

Meanwhile, the shares will be sold.

Speculation and the language of some of the remarks by Deputy Shortall and some others in the House are not helpful to the staff of Aer Lingus, the company or the general process before us. There seems to be universal agreement on one matter, that the recreation of a monopoly, which is what Ryanair is trying to achieve today, is bad for the aviation sector in this country, bad for Ireland, bad for tourism,——

What is the Minister doing about it? He created the circumstances which allowed that to happen.

——bad for business and bad for the development of the aviation sector in this country.

Written Answers follow Adjournment Debate.