I welcome the Minister and his officials. He is accompanied by Mr. John Murphy, assistant secretary; Ms Eithne Brogan, assistant principal officer; and Mr. Fintan Towey. Members of the joint committee have absolute privilege, but this same privilege does not apply to witnesses appearing before the committee. Members are reminded of the parliamentary practice that they should not comment on, criticise or make charges against any person outside the House or an official, by name or in such a way as to make him or her identifiable. I propose that the Minister make a brief presentation, which will be followed by a question and answer session. Is that agreed? Agreed.
Privatisation of Aer Lingus: Ministerial Presentation.
I thank the committee for the invitation to make a presentation on the future of Aer Lingus. At this stage in the privatisation process I am, for legal reasons, restricted in what I can say about Aer Lingus and its business. The future funding requirements and ownership structure of the airline have been the subject of much analysis and debate in recent years. The future of the company has been considered by a dedicated Cabinet sub-committee and has been debated in the House on a number of occasions. My Department and the Department of Finance have also commissioned studies on the matter and the future of the company has also been the subject of much debate in the media.
Throughout this time the board, management and staff in Aer Lingus have done a fantastic job in maintaining the airline's competitiveness and expanding its business in an industry that is widely regarded as one of the most dynamic globally. The quick turnaround in the company's performance following the events of 9/11, which was the most significant challenge the global aviation industry has ever faced, is testament to the commitment of all involved. The company has continued to perform well since then and it posted good results for 2005 in a particularly challenging operating environment, arising from significant increases in fuel costs. However, the history of the airline business has shown that profits can quickly disappear in a downturn. The airline business is extremely competitive and many well known names have gone to the wall in recent years, while the emergence of a significant number of low-cost carriers has added to competitive pressures in the industry. Standing still or seeking to preserve the status quo are not options for Aer Lingus or any other airline.
We could continue to debate and analyse the issues indefinitely but this would not be fair to the company or its staff. The company needs to have certainty if it is to be able to plan effectively for its future. To provide this certainty, I brought proposals to the Government last May on the airline's investment requirements and future ownership structure. These proposals took account of the work of the Cabinet sub-committee and the outcome of consultations with the trade unions, which were held in accordance with the terms of Sustaining Progress.
The Government agreed to a reduction of the State shareholding in Aer Lingus but decided to retain a stake of at least 25.1% to protect key strategic interests, provided that the Minister for Finance and I are satisfied that this level of reduction is warranted on foot of the analysis prepared by our advisors on the investment transaction. The Government believes that providing the company with access to international capital markets is the best means of providing it with the investment needed to enable it to compete effectively and fund growth.
Following the Government's decision, the board of Aer Lingus was mandated to prepare and submit a plan for future growth on the basis that additional equity capital will become available within a reasonable period. The board has adopted a new business plan based on a twin-track strategy of developing both short and long-haul markets. The company's primary focus in the most recent past has been on developing its short-haul business. However, the new twin-track business strategy should allow the company to take advantage of growth opportunities, which will have positive implications for employment in Aer Lingus and the wider economy, as well as benefits for the travelling public.
Following the Government's decision, the Minister for Finance and I appointed financial and legal advisers to advise us on the most appropriate investment transaction mechanism for Aer Lingus and on the scale and timing of the investment transaction. The advisers' report, which was furnished at the end of last year, has been comprehensively analysed by both Departments. On the basis of the advice we received, the Minister for Finance and I brought proposals to Government on 4 April for the implementation of an investment transaction for Aer Lingus. In line with the Government's decision of May 2005, the Government will reduce its shareholding in Aer Lingus while retaining a significant stake. This will be done through an initial public offering of the company's shares on the Stock Exchange. The State will retain a minimum stake of 25.1% in the company in order to protect the State's strategic interests. The transaction will be implemented as soon as possible, taking account of Stock Exchange rules and market conditions.
I met the trade unions on a number of occasions over the past year with regard to Aer Lingus's future, including twice during the month preceding the finalisation of the proposals I brought to the Government. I am therefore aware of the concerns expressed by many staff in Aer Lingus about the planned investment transaction, especially in respect of issues such as job security and pensions. Arising from the consultations, I mandated management in Aer Lingus to engage intensively with the trade unions with a view to addressing the issues they raised. This process is now under way and I am confident that a solution can be found in which staff concerns can be addressed while also ensuring a successful investment transaction.
The Government's strategic aim for Aer Lingus is to ensure the company has access to sufficient resources in the long term to enable it to compete successfully, develop its business as market opportunities emerge and ensure its balance sheet will be strong enough to withstand the industry downturns and external shocks, both of which are recognised features of the airline industry. This will require the company to have ongoing access to capital on the same basis as its main competitors. The investment transaction is the best way of providing it with the capital it needs to secure the future of the company in the interest of all concerned. It will give the company the means to develop and grow in coming years, with obvious benefits for the airline's customers and staff and the economy as a whole. Preparations for the transaction are now under way and my Department, the Department of Finance, the company and our respective advisors are working to prepare for a flotation as soon as possible to fulfil the mandate given by the Government on Aer Lingus.
I thank the Minister for his presentation and join him in congratulating the Aer Lingus management and staff on their tremendous performance in surviving a difficult climate and turning the airline around. It is now competing very successfully with the other major Irish airline.
I would like to learn more about the secret meeting between the Minister, the Minister for Finance, Mr. John Sharman and Mr. Dermot Mannion, in which a decision was reportedly reached to make a final offer to unions. We are told that Aer Lingus needs to make a decision within the next ten days and to reach agreement with unions before the Government commits to the sale of the airline. I understand the need for clarity and that matters have been allowed to drift for far too long, not only in respect of unions but also in terms of the deal for pensioners. However, members of the public, who own Aer Lingus, also need clarity. My colleagues and I speak on behalf of all the people who have supported and funded Aer Lingus over the years.
While a sale is probably in the best interest of the airline to give it access to equity capital and commercial flexibility, we have a right to know what deals are being made because every caveat placed on the sale, deal made in private or restriction placed on the flexibility of the new management, will reduce the value of the airline. While the deal may be good for taxpayers in the long term, we are entitled to know the terms. Will the Minister make public the offer made to unions and the deal reached on pensions?
Aer Lingus proposed that €70 million of the money it raises from the sale of additional shares would be made available as a lump sum for the pension fund. Has Government sanction been given for that?
I acknowledge that the Minister may not be able to fully answer my next question because I am entering the area of the fluctuating market. We have been at this stage before, when the sale of Aer Lingus had to be called off due to changing market and world conditions. Market conditions have changed again in recent months, with rising oil prices and political instability in certain oil-producing regions. The sale of Air Berlin was cancelled and the airline subsequently offered at a lower price. Has a minimum price been decided below which the Government will not allow the sale of Aer Lingus? It is our national airline and we have all invested and supported it over the past 75 years. Will the Government wait until September before deciding whether market conditions are suitable for a sale? I accept the price cannot be determined until the airline is put on the market. His advisers will advise the Minister. I was surprised to find that the advisers had been given crucial commercial information only this week at a seminar. Everybody is being briefed except the public which knows nothing about the deal being made on Aer Lingus. It has a right to know what is being committed.
I thank the Deputy for her opening remarks. I am happy to comment on this so-called secret meeting. I am bemused because I met the people concerned in Kildare Street. I walked them through Leinster House, met the media, Deputies, Senators and anybody who was around. We went out the back gate and over to the Department of Finance. Therefore, it was not an attempt by me or anybody else to hold a secret meeting. It was held during the day and everywhere was busy. It was public and open.
The content of the meeting was secret.
It was described as a hush-hush, secret meeting.
The Minister will have no trouble telling us what happened then.
I am giving my response to the Deputy's suggestion that there was a secret meeting. I am saying it was not a secret meeting. It was open.
I was not invited.
Deputy Cowen as Minister for Finance and I as Minister for Transport are the shareholders of the airline and must hold regular meetings on behalf of the taxpayer. We met the chairman and the chief executive to get an update on how these matters were progressing. Many complex issues are being discussed and decided on at different levels. There has been engagement within the airline as Deputy Mitchell said. Everybody here is aware of the engagement between management and the unions on a couple of key issues which have been well voiced and identified, namely, job security and pensions. It is right that they be properly addressed. I was anxious that they be addressed satisfactorily. I gave a commitment to the unions that they would and believe they will.
How will they be addressed satisfactorily?
I am not in a position to speculate. These matters are being discussed in the context of the sale of Aer Lingus. I am restricted in what I can say publicly on the issue, as the Deputy probably knows.
I understand the commercial sensitivity but if a deal is being done on behalf of the public with Aer Lingus staff, the public has a right to know what it is because it will impact on the price of the airline that the Minister is selling on its behalf.
Absolutely. When the deal is done, it will be made public. The Deputy is asking me to discuss and negotiate with her or somebody else. I have met the unions and management. I am clear on the issues and how they can be resolved. I want to see them resolved in the next week to ten days in order that we can complete the process. That is happening and when it is complete, it will be made public. There is no question about this. However, the Deputy would not expect me to speculate here as to what that might be. It would be misleading of me to do so because we are not at the final point, although I know the parameters. I wish everybody concerned well. On the other side of the coin, there are massive preparations for the sale. As all Deputies in the room know, preparing for a public offering is complex. For example, the prospectus has to be prepared and lodged with the Stock Exchange. All of that work is under way.
The Deputy has asked when we will know if the Government is committed to the sale. It has made a decision on the sale of Aer Lingus and will not make another.
Does the Minister mean the Government will sell at any price?
The Deputy knows I am not saying that. We are here to try to elicit information or score political points——
I am trying to get information.
Of course, we will not sell at any price.
That is my question.
What does the Deputy want to know?
Does the Government have a bottom line in terms of a price and the revenue it wants to gain from Aer Lingus for the taxpayer who supported the airline and invested in it?
I know what the investment requirement is; it has been publicly articulated by the company in the past year. We will not sell the company at a price that will provide us with less than what is necessary to fund it.
That is the raising of additional shares. I am talking about the sale of the Government's shares on our behalf.
I have not got a final price.
The Minister has no idea what the bottom line is.
I would not be expected to have a price at this stage.
The public will be upset to hear that.
Upset to hear what?
That the Minister has no idea of the price at which he is selling the national airline.
I am not in a position — I cannot be under Stock Exchange rules, as the Deputy knows——
The Minister must have some idea. I am not asking for the price——
The Deputy knows as well as I do that I am precluded from speculating on the price of Aer Lingus. It is against the law and I cannot do it.
I am asking the Minister if there is a bottom line.
I said yes. Of course, I know what the bottom line is but I cannot express it here. It is against Stock Exchange rules and illegal. It would be unconscionable for me to do so.
That is not the truth because that is not the question I am asking. I am not asking for the share price but whether there is a bottom line below which the Government will not sell Aer Lingus.
Of course.
I thank the Minister.
I thank the Minister for his presentation. Will he spend a few minutes explaining to us the precise nature of the transaction he has in mind? Other than the Government decision that it will divest itself of some 60% of the company, we have not been told much about the transaction. Whatever the 60% is worth, it has been suggested it may be worth approximately €400 million, perhaps less.
What are the Minister's intentions as regards the proceeds of the sale? Various promises have been made to various interests, particularly pensioners, about what he might do with the proceeds. Given that our national airline needs access to capital, it is strange that he proposes a course of action that will result in capital being taken from the company. I am trying to find out what is in this for the taxpayer. The taxpayer owns 85% of a successful and profitable company and has the benefit of all the guaranteed services that are critical for the country and important for consumers. After the sale is complete, it could find it owns a small portion, 25%, of a company and does not have any guarantee of services. The longer it continues, the more caveats the Minister attaches to the sale, the less valuable that 60% will be and the less will accrue to the taxpayer, while many risks are taken in the process. Will he explain what he intends to do with the proceeds?
The Minister has said a number of times and repeated today that the State intends to retain a significant stake of at least 25.1% to protect key strategic interests. Presumably he is referring principally to the important Heathrow Airport slots. The story on this issue has changed many times. When the initial Government decision was taken, a succession of backbenchers talked about golden shares and ensuring the slots would be retained. I do not know if Deputy Glennon was one of them. Many north side Dublin Government backbenchers talked about this. That is how it was being spun, that by retaining 25% we could retain control of these important aspects but that changed quickly. In the past couple of weeks Commissioner McCreevy's office commented that there was no room for golden shares in the Single Market. We know the European Court of Justice has ruled against a block of shares. How will retaining 25% of the company give any influence with regard to the assets of the company? The only power one has by retaining a minority shareholding is to block a complete takeover. How will this influence decisions coming before the future board of the newly-constituted company about selling landing slots or aircraft? Private investors are chiefly concerned with making as much money as quickly as possible, as was the case with Eircom.
The flotation of Air Berlin is regarded as an accurate indication of what might happen with Aer Lingus. It was deferred and was generally regarded as a flop when it took place. Given the delays over the past five years and the recent delays in the past year, what lessons has the Minister learned from the Air Berlin experience and to what extent will that influence the likely valuation of the company?
Deputy Shortall is correct in stating that there is balance in the issues being discussed. We must make sure the workforce is in tune with the future of the company and that the issues of job security and pensions for existing and former staff are raised. Everything has a price but the objective is to bring Aer Lingus to the market in the best possible shape in terms of its internal dynamics, profitability and growth in short-haul and long-haul flights. A range of dynamics affect this, a number of which have been enunciated by Deputy Shortall. These are not separate and have costs. Any company in the private sector seeking further investment would be prudent to ensure it deals with them. It is not peculiar to a public sector company to seek the best practice in terms of industrial relations, planning and negotiating a deal with the United States. This affects the value of the company.
The main reason for the sale of Aer Lingus is to allow the company to invest some €2 billion in the short to medium term to purchase new aircraft for its long-haul fleet. Pensions are being dealt with, a concern of many private sector companies. We must resolve these issues within the context of the sale. The shareholding of 25.1% is the minimum——
I asked a very specific question. There was much blather but the Minister did not answer my question.
Three questions are allowed, the Minister can reply and I can allow supplementary questions afterwards.
This is not a supplementary question, it is my main question. The Minister is moving on to the second question. Can he answer the first question?
I thought I was absolutely direct. Deputy Shortall spoke at some length about the cost of certain measures and the effect they would have on the company. I answered those questions.
I did not ask about staff or unions. I asked what the Minister intends to do with the proceeds of the sale.
I clearly stated that the proceeds are for investment in Aer Lingus. I stated that three times since I came into the room.
That does not make sense. What does the Minister intend doing with the proceeds of the sale? Does he understand the question?
Does the Deputy wish me to answer her question?
Deputy Shortall had an opportunity to pose three questions. I am allowing the Minister to answer the second question. Then we will have supplementary questions.
The Minister will raise new shares and will sell existing shares.
It is the Vice Chairman's responsibility to ensure visitors to this committee answer questions.
My job as Vice Chairman is to allow the Minister to answer the question and then to allow supplementary questions.
Does the Minister understand the question? What does he intend doing with the proceeds of the sale? We have had this kind of evasion before. I want a straight answer.
For the third time this morning, the reason we are putting Aer Lingus on the market is so the proceeds will be invested in the company. I could not be clearer. Deputies have referred to pension funds and other issues that I am trying to resolve. I am awaiting advisers, management and unions to decide how that will happen. I cannot give precise figures until discussions are concluded over the next ten days.
Is the Minister selling 60% and reinvesting the proceeds in total?
I did not state we would sell 60%, I stated we would retain a minimum of 25.1%. There is a fundamental difference between the two.
I ask the Minister to stop dodging the question. The Minister goes on an endless speech without answering the question.
I did not interrupt Deputy Shortall while she asked a series of questions.
I have indicated that supplementary questions can be asked later. I ask the Minister to answer the second question.
Deputy Shortall's second question concerned the benefits for the taxpayer. The best that we can do to protect the strategic interests of the country and Aer Lingus is to create a level playing field. The company needs ongoing access to capital markets to develop. That is the best way to ensure the staff, taxpayers and the company are well served. If we do not do so, Aer Lingus aircraft will not fly in a few years. The best way of preserving and enhancing the strategic assets and benefit to taxpayers of our having a strong Aer Lingus in this country is to do what the Government decided, namely, to put Aer Lingus on an equal footing with other airlines by giving it direct access to the markets through selling the shareholding in the company, but retaining 25.1%. That will make a difference to future growth, which will see Aer Lingus expand, as it has already been doing substantially in the short-haul market. It also has great growth potential in long-haul markets, however, not only to the United States of America but, as has already begun to happen, into the Middle East and on to the Far East.
At this stage I do not know whether the figure will be above 25.1%. All I can say is that 25.1% is the minimum. It is right to say it is not a golden share, and I never presented it as such or used the expression. I never suggested that it was different from any other company in which a group holds over 25%, which is enough to make it a very strong shareholder and give it tremendous influence over strategic boardroom decisions. If one couples that with the strategic shareholding that the employees have through the ESOT, which is another 15%, one sees that, at a minimum, the State and unions would hold over 40% of the company. That fairly strong strategic representation would give the State major influence in any of the companies that I follow on the stock markets, whether in the private or public sector. It is right that the State should do that.
I am told I should not comment on the sale of Air Berlin. The only point I would like to make is that there is no comparison whatsoever between the sale of Air Berlin and that of Aer Lingus. It is as simple as that. For many years it was loss-making, and it is in any case a completely different type of airline. It does a disservice to Aer Lingus to compare it with Air Berlin. That is my view, and I can say no more than that.
As promised, I will allow the Deputy to ask supplementary questions.
I will repeat my first question. What does the Minister intend doing with the proceeds of the sale of whatever percentage of the company he intends selling?
I apologise. The Deputy asked about the proceeds.
What does the Minister intend doing with them?
We will invest them in the company.
As well as the money raised through the creation of additional shares?
That is what we will do with the additional shares. I appreciate why the two Deputies are asking me the question and where they are trying to put me. I am not prepared——
We are trying to get information.
I agree, but the Deputy must understand from my perspective that, much as I might like, I am not able at this stage to set all the details regarding the sale of Aer Lingus before the committee. I will do so for the benefit of the Deputy and the Houses of the Oireachtas as a whole before the sale takes place, but I am not yet at that point. I am unable to speculate, breaking down what the State may or may not do with elements of the proceeds. If there is a return for the Exchequer on the existing shareholding, that is fine, and we will see what the new shares will bring. However, I am waiting to see how all that affects the issues I am trying to resolve. At this stage I am not prepared to speculate on how that might be broken down.
It is absolutely central, and as important for the taxpayer as anyone, that we ensure Aer Lingus emerges from the process very strong, with the funding and wherewithal to invest heavily in its future by drawing substantial moneys from the markets. As I have said, it has been publicly stated that the company wishes to spend approximately €2 billion on long-haul aircraft alone, and that is the minimum that it must do. Advisers to the Minister for Finance and me are examining all those issues. As members know, there is a twin-track process in place whereby the company is dealing with certain issues with the unions. On the other side of that coin, its advisers are preparing the prospectus for the sale.
The point I am making is that the taxpayer is going from owning 85% of the company to owning 25%, with nothing to show for it. It looks like this will be a very bad deal for the taxpayer. On top of that, there will be no certainty regarding services operating from this country. Ultimately, what is the point of doing this from a taxpayer's perspective? There is all this talk regarding the €2 billion required, but that is contingent on the issue of open skies being satisfactorily resolved. There is no guarantee of that, and it is looking less likely.
It is also based on projections of capital requirements over the next ten years. Creating an impression that the company needs €2 billion tomorrow and that we must facilitate it in that is entirely misleading. At no point was a proposal put to the Minister regarding the capital requirements of the company over the next eight to ten years. At the end of the day, what is the justification for this, and what will the taxpayer have to show for it?
The issue is very clear. This is probably the first time in ten or 15 years that Aer Lingus has been in a position where we are all talking about growth and looking positively to the future. To my knowledge, over the last ten or 15 years, every time we dealt with Aer Lingus, it was as an airline in crisis. That was not all of its own making, and I am not apportioning blame in saying that. It has a great deal to do with the markets in which it operates and the aviation sector as a whole. That is abundantly clear.
I have put my cards on the table on this issue, and the Deputy is entitled to disagree. She asked me directly what was in it for the taxpayer, Aer Lingus and the country. If we do not do this, we will not have an Aer Lingus flying anywhere. It will not exist in two or three years. The strongly held view in the international aviation sector is that it would be too weak to survive as a company. The Deputy may disagree with that view, but I subscribe to it because the evidence is clear.
The number of traditional national airlines that, for the same reasons, have gone to the wall and are no longer flying is there for all to see. We must position Aer Lingus to create a level playing field so the company can compete with very stiff competition on the domestic and regional market for short-haul flights within Europe and face the competition that will certainly come from the major US carriers. We all know who they are. There is no question that there are large, powerful carriers very interested in getting onto the transatlantic route.
I do not deny that Aer Lingus needs access to capital.
Yes.
The point is that when the Minister employed Goldman Sachs, he told it specifically to consider all scenarios, except that of the State investing.
I have not——
That is why Goldman Sachs did not advise him on it. He excluded it from doing so.
Neither I nor the Government based our decision entirely on one report. I acknowledge that it was part of the process, but it would be wrong to conclude that one report caused the sale.
The Minister made enough of the advice.
If the Deputy wishes to answer her own questions, that is fine. However, I am trying to answer them too.
The arguments are changing by the week.
No, the Deputy has a different point of view from me, and I respect that.
Nobody is denying that the company needs access to capital or that it should grow and is well positioned to do so. The question is how it gains that access and what kind of value the Minister is securing for the taxpayer. As matters currently stand, the Minister is providing very bad value.
I absolutely disagree with the Deputy on that assertion, which represents an archaic view typical of the Labour Party. That will not save Aer Lingus or do anything for its development.
The Minister is spoofing his way through this.
It would not do anything for the airline's development.
We must move on. The Deputy will have an opportunity to come back. I call Deputy Glennon.
The Deputy suggests that retaining the status quo for Aer Lingus is good enough for the future. I disagree with that view.
The Minister should not be so disingenuous. No one is suggesting that for one minute.
That is what the Deputy is saying.
Everybody wants to see the company grow.
Is the Deputy for or against the sale?
I am opposed to it.
That is fair enough. The Deputy wishes to maintain the status quo.
No, I do not want to do that.
What does the Deputy want?
I want the company to have access to capital.
Where does she suggest that it get that?
Through the State.
The Deputy wishes to maintain the status quo.
In so far as ownership goes, yes.
The Deputy would risk Aer Lingus's future on an ideological point.
I do not know what the Minister is talking about when he mentions risking Aer Lingus.
The Deputy knows that the State's ability——
The Minister is the person risking Aer Lingus. He is also the person here to answer questions.
One speaker at a time.
The Minister cannot say who will own Aer Lingus in five years' time.
In five years, I know that there will be an Aer Lingus flying out of this country.
In five years, Dublin Airport could be the back office for British Airways. There is no way of guaranteeing that will not be the case.
I ask Deputy Shortall to point out to me an airline sold in another part of the world, uprooted, taken away from its market and located elsewhere. This is nonsense. The suggestion that, given the market in which the company exists and that it is commercially viable, somebody should invest in the company and destroy his or her own investment is the most illogical thing I have heard in a long time. However, the Deputy is correct in saying she is not alone in making this suggestion in the last number of months.
The Deputy will have an opportunity to come back to this point.
Look what has happened to small airlines in the United States.
I join my colleagues in congratulating staff and management in Aer Lingus on providing a real issue to be discussed today. In the early stages of my short time in these Houses there was a real prospect of Aer Lingus going out of business. Were it not for the efforts of management, staff and retired staff, that would have happened and we would have nothing to discuss today.
I have a question relating to the detail of the proposed transaction. Today's discussion is like "Hamlet" without the prince in that we are talking in generalities without access to the details. This is entirely understandable and I fully accept that the reasons for this relate to ongoing discussions. I hope my question for the Minister will not come under the umbrella of the existing negotiations.
There is a long-term liability on the part of Aer Lingus to a group of employees of SR Technique, the company formally known as FLS Industries and prior to that as TEAM Aer Lingus, in relation to their transfer of employment, originally, from Aer Lingus to TEAM Aer Lingus. I presume the liability of Aer Lingus to the pension fund of that company will be dealt with in these negotiations and will be part of any proposal presented to the Houses of the Oireachtas.
I am well aware of the issue raised by the Deputy, however I am not in a position to get into that level of detail. The Aer Lingus pension fund is not a State pension fund, I am not the trustee, neither is the Government. However, we recognise that this is a good opportunity to resolve a number of issues that relate to Aer Lingus generally. I am dealing specifically with, and I understand the discussions are specifically focussed on, the pension fund that exists which affects Aer Lingus workers directly and I cannot comment on the companies the Deputy mentioned.
Will not all existing liabilities be dealt with by way of due diligence in any proposed transfer of ownership, be it to a single party or by way of flotation?
All of the due diligence issues must be dealt with before one finalises the prospectus to go to the market. I am not being restrictive in setting the parameters for the discussions on resolving the issues that have been raised. It is up to the pension fund and the trustees to deal with these issues. I cannot speculate, however I am satisfied with the company carrying out legitimate practices.
On the second page of the Minister's presentation he states that the Government agreed to the State reducing its shareholding in Aer Lingus while retaining a significant stake of at least 25.1% to protect key strategic interests, provided he and the Minister for Finance are satisfied that this level of reduction is warranted on foot of the analysis prepared by our advisers for the investment transaction. Does the Minister mean a shareholding of 25.1% or more? It does not read that way.
I do not disagree with the way the Deputy put it.
That is how the Minister put it.
I said that the minimum stake the State will hold in Aer Lingus will be 25.1%. The Deputy is right in saying it could be higher.
Why, then, did the Minister add the rider "provided the Minister for Finance and I are satisfied that this level of reduction is warranted"? That suggests that, under certain circumstances, it could be less than 25.1%.
The Deputy can take it for certain that it does not mean that. There is no question of the State reducing its holding below 25.1%.
That is alright, so long as the Minister has put it on the record.
I was suggesting the converse, namely, that it could be higher than 25.1% depending on a range of factors, not least of which are market conditions.
My other question is technical and I admit that I do not possess expertise on the subject. The Minister's advisers will inform him when the time is right to float Aer Lingus, as the advisors to Air Berlin presumably did when they went to the market. Can Aer Lingus withdraw from the market if the reception to its flotation is cool and the degree of funding sought is not achieved? Must one sell at that stage, like it or not?
I am not going to speculate.
The Minister either does or does not know the answer.
The Deputy put the question from the perspective of a company that is not performing well. We will not go to the market with a poorly performing company. We will go with a company in excellent health, which is profitable and showing growth with further growth planned. These circumstances are immeasurably different to any recent sale of an airline.
I think it is a reasonable question. The Minister, the Government, Aer Lingus and this committee have no way of knowing what the successful bid will be. That is how commerce functions whether one is buying a house, a tractor or cattle.
I am asking the Minister if a stock market flotation reaches a point beyond which one cannot retreat, at which one has to sell at the going rate.
We will know well in advance what the market response will be before we press the button.
The Minister will know what price will be reached before the bidding begins?
I presume the Deputy knows how an initial public offering process works. There will be clear indications from various investment institutions as to whether they are interested in the purchase. All this will be clear to the company. On the position outlined by Deputies Shortall, Olivia Mitchell and Glennon, I will not press the button in the final analysis on Aer Lingus if it is going over a cliff, so to speak. We will know that in advance. We will not be operating in a speculative way, whereby on the last day we will press a button and hope that the right thing happens. That is not how one does business in an IPO process.
Deputy Connaughton referred to another process, to which I have been told I should not refer. The indications in regard to that process were negative long before the button was pressed on that airline. That was clear and those concerned did not take them on board. They wanted to get a price for the airline, which they were not going to get, and they were told that, yet they persisted. Aer Lingus is a strong company in the aviation sector. It has had a solid track record of profitability in recent times. It has plans for growth and a strong management team which is also important in this process. All those factors are crucial in terms of the determination and the interest in the company in the marketplace. We will have a fairly good indication as to the success or otherwise of this proposal. I am confident about the process and indications in regard to it are good.
We sincerely hope that is exactly what will happen. If the company flotation does not occur by September, does that imply that the news on the markets is bad?
The preparation process for the sale of Aer Lingus is well under way and I will not speculate beyond that. We will bring this company to the market as quickly as we can, with prudent agreement on all the issues with which we are dealing.
Can we agree that the airline has been successful under State ownership? The Minister referred to it being in a healthy state, which reflects on its position under State ownership. We would also agree that we want it to be successful in the future. The Minister said that the sale of Air Berlin was not comparable to the sale of Aer Lingus because Air Berlin was, for want of a better word, a basket case and was not in as healthy a state as Aer Lingus.
I did not say that.
I am paraphrasing what the Minister said.
The Minister was careful in what he said, he is not allowed to describe that company as being a "basket case".
A comparison has also been made with the sale of Air New Zealand. It was considered a good idea to sell that national airline, but subsequently it transpired not to be the case and it was a costly mistake, given that the state had to buy it back. There needs to be clarification as to valid comparisons that can be made. If anything, the position is more precarious in the aviation sector than it was at that time, given the price increase in fuel in particular.
Can the Minister offer an opinion as to whether what happened with the sale of the national airline in New Zealand is comparable to what the Minister proposes to do in regard to Aer Lingus, which I consider to be irresponsible? However, I realise it the Government's position and the Minister is merely reflecting a decision that has been taken.
It is desirable for any aviation company to have landing slots at Heathrow. Is there any guarantee that Aer Lingus's slots at Heathrow will be retained? Is it not likely that they will be seen as the cherries to be picked from Aer Lingus? If so, would that not be a cause of concern for Ireland and for Aer Lingus?
The Minister mentioned that the company's pension fund is not a State pension fund, but the company is a semi-State company. To that extent, there is a responsibility on the Government to ensure that the concerns about employee's pension provisions are resolved in the interests of the people who have worked hard to build the success of the company, including those in TEAM Aer Lingus, as it was known, to whom Deputy Glennon referred, and the wider group of aviation workers who have contributed to that pension fund. Resolving those concerns and signing off on them is understood to be a responsibility of the Government, irrespective of whether the fund can be described as a State pension fund. I would like the Minister to first answer my question in regard to the national airline of New Zealand.
On that point, what happened in the case of Air New Zealand is not comparable to what is proposed here.
The Minister has not said why it is not.
The Deputy asked if I had examined it, to which the answer is "Yes". I have examined and read about everything that is happening in the markets worldwide to make sure, at a personal level, I understand what is happening and can form my own view on it, apart from listening constantly to, or depending almost entirely on, advisers. One likes to have one's own view.
I am the Minister and I am charged with certain responsibility. According to the most recent news on Air New Zealand, it is not performing well and is in serious difficulty, even though it is back in state ownership. To put it mildly, its future does not appear to be a happy one. There is a different regulatory environment operating in New Zealand compared to that in the EU. It is open to the state in New Zealand to purchase and invest in airlines. There is no issue with that, whereas, under state aid rules, the position is entirely different for the government of any member state of the EU. Therefore, there is no point in comparing the two companies.
One of Aer Lingus's most profitable routes is the Dublin to Heathrow route. There is no question about that. I have no doubt that any investor in the company would want to maintain the reason he or she bought into the company in the first instance, which is to maintain the company's routes. There is, however, an interesting wider issue. Historically, Heathrow was the only major hub. That will change dramatically and has already begun to happen. The Middle East is opening up as a new hub. I am delighted that Aer Lingus quickly introduced new routes there. The Middle East has enormous potential as a significant hub into the future.
Frankfurt airport has become a major hub. The dynamics of international air travel are changing dramatically. Many people from Ireland who fly to Heathrow use it as a connection to another destination. When discussing new bilaterals with which we are preparing with Singapore and Thailand recently, an interesting statistic that emerged was that more than half a million Irish people travel to those two countries annually, and that number is increasing substantially. My view and wish is that direct flights from Dublin to those destinations will be available in the medium term. That would change the dynamic of the use of all the landing slots we have in Heathrow. It would change the dynamic of the marketplace, which has begun to change. The volume of slots we, as a island nation, have in Heathrow is important, but slots are equally important in airports in other countries. There is no doubt that Heathrow will remain a key hub and key connectivity will be required from Heathrow to other destinations. Aer Lingus will certainly want to retain its slots into the Heathrow zone.
I highlighted this issue to broaden the debate and for us to have a better understanding of the dynamic that is occurring in international aviation travel and for us not to get caught up in the holy grail of the English destination being the only one in the world that resolves everything we want to achieve. Many Irish people transit through Heathrow Airport to further destinations. Heathrow is a destination for many Irish people but not for all Irish travellers. That should be realised.
The market of transiting and hub creation is changing dramatically. With the development of Dublin Airport, it is our intention to create a hub, which would be a major contributor to the growth of Aer Lingus but equally to the growth of the aviation business in Ireland. We are developing that dynamic and account can be taken of the demand for connections to here from transatlantic cities, 22 of which have indicated they would like direct connectivity into Ireland. Dublin is very well placed as a redistributor hub on short haul into the European sphere of operations and vice versa. The dynamic of what we are doing by investing in Aer Lingus and in Dublin Airport is all about symmetry and the development of the aviation sector worldwide.
Will the Minister resolve the pensions issue before proceeding?
Yes. I would be very confident that, in the parameters set in terms of what needs to be done to ensure the pension position of current and former employees of Aer Lingus going forward, the situation is well secured. That is my intention and I believe that will happen.
Is the Minister talking about Aer Lingus employees?
I am dealing with Aer Lingus.
How does the Minister separate them from the other two companies?
From which two companies?
From the Dublin Airport Authority and SR Technics.
Aer Lingus and DAA staff are in the same pension fund. Clearly, we will resolve the issues from the Dublin Airport Authority's point of view as well. SR Technics is in a different pension fund. Some workers have opted to stay in the original pension and they are fine because they are still in it.
That is not state aid.
What is not?
Putting in €70 million or whatever.
Is it the Labour Party's position not to look after the pensioners?
Will the Minister answer a straight question? He is playing politics with this issue. Does he actually know what he is doing about it?
Am I playing politics with it?
Will there be an issue about state aid?
No. It is a matter for the company.
How does one separate them? Is it the way he separated Aer Rianta?
It is a matter for the company and we are well advanced in resolving this issue. The Deputy should not try to pretend to open up an issue which is close to resolution. It is a matter for the company.
I will be very interested to see how he does so.
The management in any company is entitled to make sure its staff are properly looked after in regard to pension issues and it is entitled to deal with it. That is how it should be.
Is that why the Minister ignored them for the past five years when they were looking for a meeting with him?
That is grossly unfair and untrue.
That is true.
The Deputy said I ignored them for five years but I was not in the Department——
The Minister is only playing the pensioners card now when it suits him.
Deputy Shortall, there is still a Chair here.
The first people I met when appointed to the Department of Transport were the pensioners from Aer Lingus. Therefore, the Deputy should not accuse me of not meeting them.
The Minister's strategy is to divide and conquer. That is what the Minister is doing.
Deputy Shortall——
The figure was supposed to be €200 million and now it is €70 million.
On the question of access by the pensioners to various Ministers, especially this one, I put on record that I have been at meetings with, and have introduced the pensioners to, successive Ministers for Transport. I agree with the Minister that the first group he met after taking office was, at my request, a group of pensioners from across the three aviation companies at Dublin Airport.
I apologise to the Minister and the committee for missing the early part of the meeting. I was with other members of the Joint Committee on Foreign Affairs at a private meeting with the Iranian ambassador. The committee will be pleased to learn that from my part, the exchanges were as robust as they apparently were here this afternoon.
I welcome the Minister's commitment to Aer Lingus, which he put on the record. We all feel that commitment and, by and large, feel well served by Aer Lingus as a national airline. The situation has become difficult. The Minister is correct that we have witnessed the collapse, for various reasons, of national airlines throughout the world. We want to avoid this by whatever means possible. The Minister said we will need €2 billion to invest in long-haul aircraft and I am sure that is reasonable. I also know one cannot expect the Minister to give an estimate of what he imagines he will get from the sale because that could be financially prejudicial. However, the newspapers have suggested it could be approximately €400 million. Therefore, it will certainly be very far short of the €2 billion needed. That raises the question of from where the money will come.
As an observer, I noticed it was authoritatively stated at one stage that the State could not invest in Aer Lingus but this turned out to be incorrect. Under European Union rules, one cannot invest in the airline if it is in a financially negative situation. However, the market would not do so either. The market would be much more ruthless. It might not be prevented by legal restrictions from investing in a disastrous situation but I cannot imagine anyone investing in something which would be a dead end. There is a certain level of contradiction there.
It is also worrying to those of us who are not experts on the stock market to read comments suggesting that as the year progresses, the situation appears to be getting less favourable. Like Deputy Connaughton, I would be concerned. He asked a very good question which was not answered to my satisfaction. He asked if it is possible, even at a late stage, to pull out even if Aer Lingus has been put on the market and the machinery has been set in train. Is there a point at which it becomes impossible to take Aer Lingus off the table, because the auctioneer's hammer has come down, and even if it must be sold at a bad price?
I am not ideologically committed one way or the other. I am not a member of a political party nor will I ever become one.
The Senator is welcome to join us.
I thank the Deputy for the invitation which I will graciously decline.
Remarkable allegations were made in the Dáil suggesting that senior management had attempted to steal the assets of the airline. I know that was modified subsequently but it raises the question of parallel situations where utilities were privatised. We are right to have concerns about it given, for example, the Eircom situation. Were the same advisers, who were consulted on the Eircom sale, consulted? It turned out to be a bit of a stinker. The net result of that is that we have a thoroughly rotten public utility in terms of Eircom. It gives hopeless service to the public and it was clearly asset stripped in the interests of wealthy people. Ordinary punters like me would be very concerned that something comparable should not be allowed to happen to Aer Lingus.
There is also the question of pensions. Again, the Minister went part of the way — I will not get involved in a badinage — but I still have a slight concern. The type of talk I heard today was about fulfilling the legal requirements. The legal requirements may be less than the moral ones. A week or so ago, two gentlemen of a certain age, who had retired from the successor to TEAM Aer Lingus, appeared before the committee. What they were looking for was not only the minimum required by law but what they felt was their moral entitlement which was parity with other Aer Lingus employees because they believed they were, in essence, although perhaps not in law, employees of Aer Lingus. What the Minister has said suggests they will be treated in accordance with the requirements of the law which might create a difference between them and other Aer Lingus employees.
As an observer on the sidelines, I am concerned. I like Aer Lingus and fly with it whenever I can by choice. It is important we have a national airline. I am concerned about the privatisation of utilities precisely because I believe the citizen has often been shown not to get as good and as appropriate a service. I would not like to think this would happen to our national airline. We should treat all former employees equitably.
The Senator raises a number of issues, some of which we have covered. We have had a debate on the EU rules on state aid and whether the Government could invest in a company. The rules are complex and while State investment might be possible in principle, in practice this may not be the case. It is a complex legal area and the matter is not as straightforward as some of the advocates of State investment might suggest. While it is possible that state aid rules might facilitate Government investment in Aer Lingus on the basis of the market investor principle, the application of the principle is certainly not straightforward. Even without State notification of such investment, the European Commission might seek to challenge any such investment. If, in the prevailing circumstances at the airline, the state aid rules did not prove an impediment to investment, there is no certainty this would be always the case.
I would be on very solid grounds in saying that if the State were to invest, it would be challenged. I think it is clear who would challenge it and I never limited the raising of such a challenge to the Commission or the EU. The Government would end up in the courts for a number of years and by the time the process would be complete we would have crippled Aer Lingus. I have no doubt that, like us, the Belgians probably held exactly the same views about their national airline, but sadly Sabina no longer exists. To the best of my knowledge none of the other traditional state carriers remains in state hands. That tells us something. I am not in the business of tying the hands of Aer Lingus behind its back and then sending it out to compete in the marketplace. That would be disingenuous. I would be failing in my duty to the staff and, as Deputy Shortall stated, to the taxpayer. I am not prepared to allow that happen. I have no doubt the best way forward for all, the staff, the national airline and the economy, is to ensure Aer Lingus has the necessary resources to compete.
The figure of €2 billion has been mentioned. That investment can be funded in different ways. However, one needs strong investment in the company to fund part of it, the company can then borrow on the strength of what it is doing and there are various ways of funding the purchase of aeroplanes. We are not trying to raise €2 billion from the sale of the company, as that would be neither feasible nor realistic.
Pensions are an issue for the company. The staff are not in receipt of State pensions. That is not to say I am a passive observer of what is involved. Obviously, I want to ensure the pension fund is in a strong and robust state, not alone to cater for those employed at present but to ensure existing pensioners are catered for. We will come to the final conclusion of how the figures break down. A number of issues fit into the parameters, only one of which has been mentioned in regard to the resolution of the pension fund. I do not want to speculate beyond that.
I am not an expert in the law, but I know that in certain areas of law in Ireland, and I assume it may be applicable internationally, in regard to commercial competition — I presume the Minister was talking about other airlines seeking to damage Aer Lingus — that if such action was lost and-or held to be vexatious for the purpose of wasting the assets of the opponent, the person taking the initial action could be required to lodge in court sufficient funds to compensate the party for the injury suffered. I would have thought this might be a line the Government might take up. The Minister referred to tying its hands behind its back but it seems that unless it has been aggressive in pursuing the possibility, there may be an ideological reservation about that slightly pusillanimous position being taken up by the Government in regard to whether it can legitimately invest in Aer Lingus. I think it would be worth looking at that possibility in a vigorous light.
The answer is that we looked at the situation in a very vigorous way. At the start of the process, more than 12 months ago, that issue was given very serious consideration. I think it would be impossible to prove and I do not think it necessarily would be a vexatious challenge that would be made. Anybody who would bring a challenge would do so on a point of public policy in the European Union and that would be legitimate. That happens all the time. Even though the net effect of such a challenge could have a result as enunciated by the Senator, the fact is it would be legitimate on a point of law and public policy in the European Union. I do not think anybody could dispute that.
Today's meeting is part of a process which the committee has been going through over a number of months, involving taking submissions from various interested parties, stakeholders, unions and other third parties. I am interested in hearing the Minister's response to some of the questions that have been put to us. One of the main arguments on the proposed part-privatisation revolves around the issue of access to capital. As we know, there are different types of capital, not just private equity, but capital markets, equity markets, bond markets and other different sources of capital. The Minister spoke at length about going to the market for the IPO in September with a company that is in good condition, profitable and with ambitious plans for development. The question we have been asked, and I reiterate it, is: if Aer Lingus is such a profitable company, with such a rosy future, why does it not do what a very similar Irish airline, that is, Ryanair, did in the past ten or 15 years, and go to other capital markets such as the bond market, debt markets and access funding through long-term leases of aircraft? That company had hugely ambitious plans in the same way as Aer Lingus has ambitious plans and it was able to do so by going to other capital markets. The people who will invest in Aer Lingus ultimately — assuming the IPO goes ahead — are no more or no less financial people and when they try to buy shares, they will borrow money at certain margins. It begs the obvious question. Why does Aer Lingus not go to those markets and borrow those sorts of funds? If its product is worthwhile investing in, surely the banks are the first port of call? For other companies that want to expand and invest in their fleet and in capital and stock, the first port of call is to the banks. We have been asked that question over and over again and I wish to put it to the Minister on behalf of the people who have come before the committee.
We have a vote in the Dáil and I must suspend the sitting.
Sitting suspended at 4.10 p.m. and resumed at 4.25 p.m.
I have further questions that pertain to some of the submissions. The committee received a number of submissions on behalf of pensioners, retired employees of Aer Lingus and related companies. Some of them made compelling cases to the effect that they have been dealt with very unfairly. They have a good deal of equity on their side as regards their claims for matters to be dealt with in the context of the IPO. A number of these groups have held meetings with the chief executive, Mr. Dermot Mannion. As with the other pensioners, the committee asks that the submissions they have made, which will be included in its report, be examined carefully by the Department to see if those pensioners who made fair and compelling cases can be dealt with as part of the ongoing process.
I support Deputy Peter Power in that regard.
On the Deputy's first point, it should be stressed that there is a whole range of funding mechanisms, as outlined, which Aer Lingus has been using. Let us not forget that the company has been in a very substantial expansion mode, particularly in terms of short-haul routes, in the recent past. These have had to be funded from a mixture of borrowings with different methodologies being used. It is always a mix of leasing and buying aircraft. The net effect of either approach has the same effect on the balance sheet. That it what is important here.
It is vital for every company, particularly in the aviation sector, to have a strong balance sheet. A mixture of resources is required in approaching the market, using different modes in accessing the various sources of funding. The company must be in a strong position to start with, however.
The balance sheet shows the Minister, the Government, as the sole shareholder. It does not get much better than that. The balance sheet shows the assets of the company, prime assets, Heathrow routes. Its assets are its business plans, its expansionary plans. On the basis of that balance sheet, is Aer Lingus not in a position to say it has a profitable model, that it is planning to make it more profitable and more expansionary and ask the banks for money rather than going for other more expensive types of funding? I keep returning to the point that the people who invest in Aer Lingus in September will ultimately have to borrow in the capital markets. Why not go directly there if the model is so good? I am merely putting the point that has been put to us.
Aer Lingus has done that, but there is only so much one can do before one reaches the point where one must have one's own internal equity within the company to lever more substantial investment from the markets. That is why we are in this process. I have devoted some time to making it clear that, under EU law, it is not as simple as people suggest, or that it is open to the State to invest.
There is no question that this is a very complex issue and a very difficult legal area. As we know from examples, other airlines have been very dramatically affected. If an airline is in a downturn, in a bad position, the State cannot invest. Nobody believed Sabena and other airlines would go to the wall. We know for certain that globally the aviation sector is one of the most volatile business sectors and is likely to remain extremely volatile, with big cyclical flows. Just as there are up times, there are many very dangerous down times. We know for certain that in a down time the State cannot invest if the airline is going to the wall, and the airline will go to the wall.
We are not talking about immediate investment only. We want Aer Lingus to have the ability to compete with other airlines across the world global markets in terms of opportunities that arise from time to time. This is the best approach, not just in terms of securing Aer Lingus and its staff today but in terms of growing employment within the company and of growing the world-wide reach Aer Lingus can have into the future.
Aer Lingus would be classed as a small, strong and solid regional airline. I have a much bigger vision for Aer Lingus. I am not saying it can be a British Airways or a Singapore Airlines tomorrow but it can certainly fly on a number of expanded long-haul routes into the United States. Its first long-haul route to the Middle East commenced only in February this year. The potential for further expansion direct to China, direct to Singapore, direct to Thailand and, ultimately, direct to Australia and certainly direct to South Africa changes the dynamic of that airline very substantially and demonstrates the sort of security there will be in the future for Aer Lingus by doing this.
The key point here is that it is taking the Government two years to make a decision regarding investment in Aer Lingus. In two years the average airline can be a dinosaur. In two months the average airline could be a dinosaur, such is the rapid change of pace in the airline industry. I subscribe to the point of view that Aer Lingus does not just need access to capital, it needs access to capital quickly in rapidly changing circumstances. That point is being missed throughout this debate. When Aer Lingus hits the next wall, and as sure as night follows day it will hit the next wall, the Government will not have two years — it may not even have two months — to make the types of decisions that will need to be made in a rapidly changing aviation sector. That is the key argument in terms of this sort of process.
The Deputy is correct. That is what much of this is about. It would be extraordinarily negligent to try to pretend that we could do something entirely different from what is being done throughout the world in the aviation sector where the traditional state-owned model has disappeared. Since 11 September 2001, against the odds, staff and workers in Aer Lingus have turned the company around and an enormous tribute is owed to them. It would be criminal negligence merely to sit back and congratulate ourselves. That would not work. What we must now do is build on what has been achieved over the past four years and really drive growth into the future.
The main problem Aer Lingus has in getting access to capital to develop is that its shareholder will not give it capital. It is impressive to see Fianna Fáil members agreeing with each other and entrenching each other's arguments and so on. However, the reality is that the Government is refusing to give the airline that is owned by the Irish people the resources necessary to develop it into the future.
How can the Minister say that the best way to protect a national airline is to flog it off to the sharks on the international stock exchanges? Against a background of recession or of world crisis, what does the Minister think they will do with our national airline? Does he think they will be very concerned to keep routes that are of essential interest to the Irish people? He can be sure that they will not.
The Minister is anxious to elaborate on the usual alleged problems about the European Union not allowing the State to invest. We put questions on numerous occasions to leading European officials at the National Forum on Europe in Dublin Castle and at other venues. They assured us that there is no barrier to the shareholder investing in the national airline against a background of severe crisis in the world economy, which is quite possible as the cyclical nature of capitalism makes it inevitable. If the strategic interests of the Irish people and thousands of workers in the airline and the communities that depend on them, and particularly the necessity for an island nation to have a national airline, depend on State investment, then the Government should tell the European Union Commissioner to go to hell, as other states have done when it suited their interests.
The Minister contradicts himself as well. On the one hand, he pays tribute to the staff. He should do so. He said Aer Lingus is very strong going on from here. Then he predicts dire collapse within two years.
If we do nothing.
Who is arguing that the Government should do nothing? Nobody is arguing that the Government should do nothing. The Government should put in the necessary investment. The other thing it should do is bring the workers into the heart of the management of the airline. It is they who have kept it going for 70 years.
The National Development Finance Agency told me that if the Government asked, it would have no problem in preparing a plan or assisting Aer Lingus and its workers in preparing a plan to go into the future. The national pensions fund, under Government control, is investing in the world's armaments industry, but the Government will not dialogue with it in order to invest in the national airline. That is an incredible contradiction as far as this national asset is concerned.
It would be very possible to put together an investment programme if the Government had the will to do it and was not so ideologically against public enterprise and public ownership as Fianna Fáil and the PDs are. Fine Gael is only chomping at the bit to have the national airline privatised before the next general election in case there are problems with its putative Labour Party partners if is not. That is to their shame as well.
I have two final questions. I do not accept that Aer Lingus is as good as privatised. It is very possible that we might yet win the battle and that 12 months from now it will still be in public ownership. Assuming the Government goes ahead with this disastrous plan, is there an absolute commitment to maintain the 25% share that the Minister proposes to take? What would happen in the event of a huge number of shares being created and the value of a 25% holding being diluted? Is the State committed to maintaining a 25% holding plus against such a background?
In his opening statement the Minister said all kinds of talks and dialogue are taking place with the workers and the unions. That is not the case. The workers in Aer Lingus are extremely unhappy with the nature of the so-called talks. Management has handed them a diktat that they should accept a 3% pay cut to fund the pension scheme. Over many years the Minister has put into the management of Aer Lingus people who are saturated in the ethos of privatisation, so much so that the Taoiseach was embarrassed by the enthusiasm of some of them who wanted to take it themselves last year. In that sense the dice is loaded in favour of privatisation but I would like an answer to the specific questions.
I understand where the Deputy is coming from. He has a particular view to which he is entitled but his assertions are utterly wrong in my view. I will give him an example, because he and others continue to peddle the view that it is open to the Government tomorrow morning to invest in Aer Lingus if it wishes to do so. That is utterly untrue.
Under Transport 21, the Minister for Finance made available a reasonably small amount of money to invest in our regional airports. I do not think our regional airports will threaten any airports in Europe or elsewhere. We are going through an incredible process to try to persuade the European Union that the investment of small money — cents in comparison to what would be required for Aer Lingus — does not break state aid rules. We are in this process for the small regional airports in Kerry, Donegal, Galway, Knock and Waterford which by any stretch of the imagination are not a major threat on the European or world aviation landscape, but there is a very strong view in Europe that there are state aid issues with regard to this investment. Let us be clear about it. This is not notional, it is not baloney, it is not made up. They are the facts.
I ask members to raise this to the level of a company that is competing directly, every day of the week, with other comparable companies. The Deputy's suggestion that it is open to the Government tomorrow morning to invest in the company is utterly untrue. There is no question that the issue is complex and uncertain. There is absolutely no doubt this would be challenged within the European Union. I was misquoted before when I said directly that the Commission would challenge it. It may challenge it and it may not, but other airlines would certainly challenge it. It would put Aer Lingus in a position in the next few years, while everybody else was taking advantage of open skies and investment opportunities in growing their airlines and doing all the good things, where it would have its arms tied behind its back. Not only would it lose its opportunities under open skies but all its development plans, looking east as well, would be put on hold.
The Deputy and others present the status quo or the State investing in Aer Lingus as somehow utterly risk free, as a perfect scenario in which all the risks are on the other side while keeping it in State ownership with State investment has no risks attached. That course of action would unquestionably condemn Aer Lingus to a bleak future. It would make a categorical statement that we do not want Aer Lingus to be a major international airline. That is the decision one would take by following that course of action. Not only that, one would risk the ability of the State to invest in the airline. By the time one emerged from that process at European level the world would have moved on and it is likely there would be little left to play with in terms of the national airline.
I do not subscribe to that view. I am not blind, deaf and dumb to what is happening in the international markets. The Deputy is right that one should not buy into everything. Clearly major mistakes have been made in different sectors and there is no question about that. That does not mean fear dominates every other area of policy decision. The one used in this context is the issue of Eircom. Of all the Ministers the Deputy should challenge on this issue, I am the one person who has stated there is a fundamental difference between fixed capital assets and mobile assets. That is the reason I fought strongly the issue of who should own, control and invest in Dublin Airport because it is a fixed capital asset. At the time of the Eircom sale I was one of the few voices that questioned the sale of the network because it was a fixed asset——
The Minister was in government.
I am only answering the question. It is a matter of public record. The Deputy can challenge my record if he wishes.
Why did the Minister not opt out of government?
The Deputy can challenge my record in recent times when the same decision arose for me in a different position. I am now a member of Cabinet whereas I was not on the previous occasion when the development at Dublin Airport arose and I took a strong, clear view. While others on the union side have a more open view with regard to private sector investment in control at Dublin Airport, I think that would be the wrong decision. I stood over my view and I came out with a decision which ensured the control and ownership of all the properties at Dublin Airport would remain under the remit of Dublin Airport Authority, a public semi-State company. I think that is the right decision.
I do not have any skewed ideological views on this matter. I am not off on some ideological trip in regard to Aer Lingus, I am dealing with the facts. I believe Aer Lingus has a huge future and the way to ensure that is through the proposition on which the Government has decided, and with which it is going to the market. Unquestionably that is the way we will secure the future of the company.
What is the resolution?
The Deputy is right that these are issues. We will see what is the final outcome and the exact holding the State will retain. What I have said in categorical terms is that we will hold at least 25.1% of the share holding in Aer Lingus. I can assure the committee that from the Government's point of view there is no question of reducing our shareholding below that level. However, I cannot speak for any other Government of which some day the Deputy may be a part and he may want to sell below that level.
If the Minister is in the next Government will he maintain the holding at 25%?
It may be even more than that.
Will the Minister go below 25%?
Absolutely not.
I thank the Minister for Transport, Deputy Cullen, and his officials for appearing before the committee and being so forthright. We shall adjourn to allow witnesses to appear before the committee.
Sitting suspended at 4.48 p.m. and resumed at 5.01 p.m.