JOINT COMMITTEE ON TRANSPORT díospóireacht -
Wednesday, 28 Nov 2007

Shannon-Heathrow Link: Discussion with Secretary General of Department of Transport.

Chairman

I welcome the Secretary General of the Department of Transport, Ms Julie O'Neill, and officials of the Department to discuss her report to the Minister for Transport regarding the Aer Lingus decision on the Shannon-Heathrow link.

I draw witnesses attention to the fact that members of the committee have absolute privilege but the same privilege does not apply to witnesses appearing before the committee. Members are reminded of the parliamentary practice that Members should not comment on, criticise or make charges against any person outside the Houses or any official, either by name or in such a way as to make him or her identifiable.

Members are also reminded that civil servants while giving evidence to the committee may not question or express an opinion on the merits of any Government policy or policy objectives or produce or send to a committee any document in which a civil servant or member of the Defence Forces or the Garda questions or expresses an opinion on the merits of any policy or policy objectives.

Before we hear a short presentation from Ms O'Neill, which will be followed by questions and answers, I remind members that this is one of a series of hearings the committee will hold on Shannon Airport. As I have already indicated, the chief executives and chairmen of the Dublin Airport Authority and Shannon Airport have been asked to come before the committee so that we can produce a report on the future of Shannon and on the committee's wishes for its future development. That will be done in the context of the future development of air transport on the western seaboard, involving Knock, Shannon and the regional airports.

Our first discussions in that series are with the Secretary General and officials of the Department of Transport. Ms O'Neill and her officials are very welcome.

Ms Julie O’Neill

I welcome this opportunity to meet the Joint Committee on Transport to discuss my report to the Minister for Transport. My report outlines the sequence of events surrounding the issue so I do not propose to go into the factual details contained in it as members will have had the opportunity to read it. Instead, I would like to use this brief opening statement to try to give members a greater understanding of how it could happen that the Minister was not briefed or informed on this issue before the end of July.

In any one day, vast amounts of data and information come my way and that of my senior management team, spanning all aspects of the transport sector. A particular feature of the Department is the immediacy of the issues we deal with and the extent to which we are constantly in the media spotlight. I regard it as a significant part of my job and that of my senior management to scan the horizon, sift the urgent and important information from the less urgent or less important, take action where appropriate and communicate urgent and important information to the Minister.

In this instance, we were alert in scanning the horizon and following up on a short newspaper article that flagged an emerging issue relating to a Belfast base for Aer Lingus. We acted with alacrity to clarify the situation with Aer Lingus and we expressed strong concerns to the chairman and chief executive about possible implications for Shannon and asked that they be taken into account before a decision was reached.

When we look back on events such as this, with the benefit of hindsight, we tend to edit out the context as background noise and overlook the many other issues that were crowding in on us at the time. So I will attempt to give some of the context that led to the Minister not being informed.

Initial concerns at official level about imminent implications for Shannon of an Aer Lingus Belfast base were alleviated by the reassurances I received when I spoke to the Chairman on the morning of Friday, 15 June. I believed the immediate urgency had gone out of this important issue and was reassured by that conversation that all aspects would be fully explored by Aer Lingus before a decision was made. At that time I also envisaged that an early meeting would take place between the Minister and the Chairman, well in advance of any decision being made on a Belfast base, which would provide an opportunity for discussion of the issue.

At the time the issue arose in June, there were many other important and pressing issues "live" in the aviation sector and the transport sector generally. These included, in the case of aviation alone, the Ryanair takeover bid for Aer Lingus, industrial relations issues in Aer Lingus, the planning application for Terminal 2, and the then forthcoming determination by the Commission for Aviation Regulation.

Since the flotation of Aer Lingus the dynamic of the relationship between the company and the Government had changed considerably. One of the strategic advantages of the State retaining a 25% share-holding in Aer Lingus is that it enables the Government to protect the provisions of the articles of association of the company including the safeguard against the disposal of Heathrow slots. However, the remaining Government shareholding does not confer rights on government to influence the commercial decisions of the company. We also had legal advice to the effect that price-sensitive information and forward plans had to be treated with utmost confidentiality and not disclosed publicly, with significant limitations on how such information could be used. While this would not inhibit us in informing the Minister on the matter it made it less likely that the information would be included in briefing documents or shared at general briefing sessions involving a wider group of staff.

The appointment of a new Minister at the same time as the issue of a Belfast base arose meant that my attention and that of the senior managers involved was focused on getting to know the Minister's expectations, giving him an overview of his responsibilities in the Department and briefing him on a number of pressing issues that would require his immediate attention in the short window of Dáil time before the summer recess and the holiday season. Given the vast array of complex information to be shared with an incoming Minister, a degree of selectivity was inevitable in choosing the urgent and immediate issues over those which we had good cause to believe would hold.

In the weeks immediately after the Minister's appointment, there was an intensive schedule of high level briefing sessions with divisions of the Department and agencies across the full range of his brief. These meetings combined with a backlog of Government and parliamentary business following on the general election, and staggered summer leave arrangements meant that opportunities to build informal relationships with the Minister and have in-depth discussions with him on issues were very limited in the first six weeks of the new Government. As a result of all of that, the issue of a possible Belfast base and its implications for Shannon was not in the immediate and imminent category in our minds at any stage in the aftermath of the Minister's arrival. The matter appeared to be dormant. It is now apparent with hindsight that, notwithstanding the clarity of the exchanges in mid-June with the chairman and CEO, it ought to have occurred to us to raise it with the Minister and to check with Aer Lingus during July if there were any developments in respect of the proposal. In the event, nothing triggered a recall of the issue until it was raised when the Assistant Secretary, Mr. John Murphy, met the deputy CEO of Aer Lingus on Friday, 27 July.

Notwithstanding what I have outlined, I fully accept that we should have told the Minister what we knew of the issue. I also make it clear that at no stage was a deliberate decision taken to withhold information on this issue from the Minister.

Another issue raised is why I completed my report to the Minister despite discovering I had received a version of the "Note for the Minister's Information" which had not been brought to his attention. When the principal officer brought the "Note for the Minister's Information" to my attention, in the context of an FOI request, neither the Assistant Secretary nor I could recall this note or the specific information in it. I will explain why later. On 18 October the Minister informed the Dáil that he had asked the Secretary General of his Department for a full report on the matter which he intended to make public.

Initially it appeared that the Assistant Secretary had simply overlooked the e-mail he had received from the principal officer on 13 June to which the "Note for the Minister's Information" was attached. Late on the evening of Friday, 19 October, during a trawl of deleted e-mail records, I discovered that the Assistant Secretary had, in fact, sent revised versions of that note to me as attachments to e-mails on 14 June at 7.28 p.m. and 8.22 p.m.

I telephoned the Minister early on the morning of Saturday, 20 October to tell him what I had discovered and that my report would now clearly involve myself as having also received the note in question. I offered to step aside from completing the report. I was concerned lest there be any suggestion that I had overlooked any relevant source of factual information or missed any salient information in compiling the report.

The Minister responded by making it clear that he required me to complete my report. To alleviate concerns about transparency, he agreed that I would ask the independent chairman of the Department's internal audit committee to review the factual evidence.

I also decided that, in view of my involvement in events, I should stick to outlining the facts and avoid reaching conclusions, as to do so could be perceived as making excuses or offering defences for my actions or inaction. Far from exonerating myself or glossing over my involvement, my report starkly put me at the heart of events. I am sure the committee will accept the bona fides with which I undertook the task imposed on me by the Minister and the frankness with which I outlined the facts, particularly where they reflected on my role.

Deputy Fergus O’Dowd

Ba mhaith liom fáilte a chur roimh na seirbhísigh atá anseo inniu. Tá súil agam go mbeimid in ann caint go macánta faoi na rudaí tábhachtacha atá os ár gcionn anseo. I welcome the Secretary General and her officials to the meeting.

If I had been a Minister on 14 June, as Deputy Noel Dempsey was, I would first have asked the Secretary General of my Department if I needed to know about any express trains coming down the line towards me. Shannon Airport, its future, connectivity and industrial base are critical issues. The mid-west and Limerick are deeply concerned about this issue. It is a very serious political issue.

When the Minister asked the Secretary General to inquire into this matter did she tell him about her level of involvement in the affair? According to her first report, the Secretary General telephoned her Assistant Secretary at 8.26 a.m. on 13 June. Was the Minister fully aware of that situation? Did she discuss all aspects of the affair with the Minister before she carried out her inquiry?

Ms Julie O’Neill

Would you like me to answer one question at a time, Chairman?

Chairman

No, we will take a number of questions together.

Deputy Fergus O’Dowd

I would prefer to get the answer to question now, if I could.

Chairman

Please ask whatever questions you wish to ask now, Deputy. I will allow you to come back with further questions or contributions.

Deputy Fergus O’Dowd

I welcome the Secretary General to the committee. I have been a member of several committees. I have a number of questions and I would like to get answers to them before we move on to other questions, if that is in order. I believe the Secretary General is agreeable to that.

Chairman

Very well.

Ms Julie O’Neill

I am happy to answer any questions I am asked. The most effective way to use the available time is a matter for the chairman.

May I explain the context of what happened around the time we brought to the Minister's attention the existence of the record which surfaced following the Freedom of Information request? When Mr. Fintan Towey, principal officer, showed me the record in question I had no recollection of it at all. I think that was because when Mr. John Murphy, Assistant Secretary, e-mailed me a version of it I picked it up on my mobile phone, which is also a BlackBerry. My first concern was to understand where the record had come from. I did not believe I knew it existed. I had not seen it in the form in which Fintan produced it to me. John was away for a few days and I waited for him to come back.

Deputy Fergus O’Dowd

I am really asking a different question. Perhaps I did not make it clear earlier.

Ms Julie O’Neill

No. I appreciate the question Deputy O'Dowd asked. I am not time-wasting but I think it is important to put things in context.

Deputy Fergus O’Dowd

Ms O'Neill is not time-wasting. I want her to be completely relaxed about this issue.

Ms Julie O’Neill

I am relaxed. Frankly, I am relaxed because I am telling the truth and I will continue to tell the truth at all times. I hope that will be very clear.

The sequence of events was this. Fintan produced the record which I believed I had never seen. I had a vague recollection that something some time in June had involved some contact with Aer Lingus. I recalled that I had some conversation with the chairman at some point around the issue of a possible Belfast base and possible implications for Shannon. It was as vague as that in my mind but certainly not something I had completely forgotten. It was there in the recesses of my mind but I could not make sense of the note.

I waited, out of courtesy, for John to come back to hear what he had to say because the record showed that it had been sent to him on 13 June. John could not recall it either and, frankly, we were quite mystified and our initial assumption was that he had simply not done anything with it.

Given that Mr. Murphy had received the e-mail, he felt it was appropriate that he should be the one to tell the Minister that we had a problem and that this record had surfaced. He did this. I am sure he will be prepared to speak for himself as the meeting proceeds. He rang the Minister at home on the Saturday evening. On the Monday morning, he and I went to see the Minister and showed him the record. At the time both of us said to him that we were aware that there had been some contact in June, but that we could not tell him when that contact had been made, what had happened, how it had arisen or what the sequence of events had been.

One of the lessons I learned from undertaking this report is that memories are like layers of an onion and that when one starts to piece the facts together by setting out telephone records alongside text messages and emails, events come back to one. At that stage I would not have been clear, for instance, that I was the one who had made initial contact with Mr. Murphy. When he was trying to make sense of why he had made a telephone call at that early hour of the morning when he would normally have been in transit to work, we went back to my records and I noted from them that I had telephoned him moments beforehand. I have a habit of going into the office early every morning and one of the first things I do is quickly look through the newspapers to see if there are any interesting articles in them. Clearly, I saw the particular article and this matter came to mind when we looked at the records. I rang Mr. Murphy and asked him what it was about. He acted instantly in making a telephone call and the rest is history.

I want to be clear that I said to the Minister that I knew something about this matter, but in terms of what happened and when contact was made, I could not tell him and that it did not make sense. Even when I rang the Minister on the Saturday morning to tell him that I had discovered that Mr. Murphy had sent me a version, I still would not have even been able to tell him the sequence of events. I could only do this after I had pieced together the facts. I hope the Deputy will appreciate that I was extremely thorough in piecing together every bit of information I could humanly get hold of to tell him this story.

Deputy Fergus O’Dowd

I thank Ms O'Neill for her response. The point I wish to make is that it is difficult for a Secretary General of a Department to inquire into actions taken by him or her. Does Ms O'Neill not consider there is a conflict of interest in her being asked to inquire into issues involving her in her Department when the precedent nationally in such circumstances is different? The Travis, Cromien and O'Sullivan reports are examples in recent years where independent persons examined issues in Departments. Does Ms O'Neill not consider there is a conflict of interest in her being asked to examine these issues, first, because it involves her Department and, second, because she had told the Minister initial contact had been made by her good self as part of her duty of care to the Department in this affair? The issue concerns the conflict of interest arising because she was asked to inquire into issues involving her. Does she have concerns about this and, if so, did she express those concerns to the Minister?

Ms Julie O’Neill

I do not want to cut across the Deputy but I am enthusiastic to answer his questions. I wish to make it clear that I was not asked to carry out an inquiry into my actions. I was asked to make a report to the Minister who is perfectly and absolutely entitled to ask me to do so. In a situation such as this where clearly there had been a communications breakdown in the Department with the Minister, the first thing I would have expected him to do was ask me, as Secretary General, to find out and tell him exactly what had happened, including my role in this. He was perfectly entitled to do this. It was a necessary first step in terms of anything he might want to do. He asked me to prepare a report and I undertook its preparation in good faith.

The Deputy can appreciate that late on that Friday evening, when I discovered that a version of the record had come to me, it was not one of my better moments. At one level it reassured me because I had been experiencing grave difficulty trying to understand why nothing had happened after Mr. Murphy had received the record. At least it began to make some sense of the sequence of events, but it was a point at which I felt I was in a difficult position. I rang the Minister and offered to step aside. He was very clear that he required a report of me, correctly so, and that it was not an option for me to opt out, but I was concerned lest Deputies on the other side of the House or anybody else would have a view that I was in some way choosing what I would include in the report. That is why I called in the independent chairman of the audit committee who was rigorous in his approach.

What I have done is, by definition, come out with my hands up. I have come out and openly put on the record facts that were not in the public domain, not even known to me when I started to put together the report on my involvement in the matter. I did this in the interests of openness and transparency and not allowing matters to reflect on my colleagues in the Department. There was certainly no sense in which I was taking the easy way out. It was a very difficult position in which to be put. It was a conflicting position but one that forced me, in a very public way, to be accountable to the Minister.

Deputy Fergus O’Dowd

When the issue first came to Ms O'Neill's attention on 13 June, there were at least nine telephone calls and e-mails within 24 hours between her and her top officials and the chief executive and chairman of Aer Lingus, and the chairman of Dublin Airport Authority, yet there was no contact at all with the Minister's office on this important political issue? Why was contact not made?

Ms Julie O’Neill

I tried to set that in context in my opening statement. The Chairman will appreciate that the days immediately following the appointment of a new Minister are quite different to days that involve what one might call "business as usual" within a Department. In a business-as-usual context, I would have contact with the Minister perhaps two or three times per day on issues that arise during the course of each day. To answer the Deputy's question, I must put myself back in the frame of mind I was in at the time in question. To start with, the reason I was in early — I am always in early — on the morning of 13 June was because I was conscious a new Minister was likely to be appointed. I did not know for certain we would have a new Minister at that stage and I was scanning the newspapers for developments that I would need to tell him about on day 1. It is quite clear we acted very quickly in response.

It was on the night of 13 June before I realised Deputy Noel Dempsey would be my new Minister. When I had the conversation with the chairman on the morning of 14 June I was, to put it mildly, quite exercised about what the company was at. I got a very clear response from the chairman that the developments that followed were low on his list of priorities and would occur down the track, or quite some time from then. I understood that no decision had been made about Belfast and that, even if Belfast were decided upon, no decision had been made on the implications for Shannon. The chairman heard my concerns loudly and clearly and said he would consider them and respond to me.

If it had been a normal day with a normal Minister, I have no doubt I would have picked up the phone at some stage during that day to let him know what was happening. After my telephone conversation with the chairman in the morning, it was a case of "full systems go" while preparing myself for meeting a Minister with whom I had never worked before and whom I had not met. Deputies might not appreciate that it is quite daunting for a Secretary General to meet someone with whom one will have to develop a working relationship. There was a backlog of significant issues that developed inevitably over the course of the interregnum between the two Governments. There were a number of issues we had to raise in the Dáil in the following week or two and a number regarding which immediate decisions were taken. As I said in my opening statement, I regarded the matter in question as undoubtedly important but, based on the conversation I had earlier that day, not urgent. The mind acts as an extraordinary filing system and I had filed the matter in a category of my mind that regarded the developments as important but not imminent. I expected there would be, within a fairly short period, an opportunity for engagement with the chairman. I did not make a judgment call not to tell the Minister about the developments; rather, I made one about the things I had to raise in my first encounter with the Minister. This is a subtle but quite important distinction.

Given that the chairman realised the depth of my concerns, I came away from my conversation with him with a very clear understanding that I would hear from the company before any decisions were made. However, I did not and, as I stated in my opening remarks, I fault us for not asking, at least in July when the decision on the takeover bid had been announced, whether anything had happened. Frankly, given the depth of my concerns, I would have expected the company to revert to me.

Chairman

That is all dealt with in a detailed and significant way in the report.

Deputy Fergus O’Dowd

On the evening of 14 June, the assistant secretary e-mailed the Secretary General twice with a note for the Minister, the second version of which had an added bullet point to the effect that Dublin Airport Authority was in contact with Aer Lingus to determine whether it was possible to provide an incentive for the continuation of at least one daily Shannon-Heathrow service. Am I correct that Dublin Airport Authority was in contact with the Assistant Secretary roughly between 7.30 p.m. and 8.30 p.m. on that night and that it offered new information? The Dublin Airport Authority believed there was an imminent threat to the Shannon-Heathrow service. It was so concerned that it was in the process of offering an incentive package to Aer Lingus to keep at least one flight. In its contact with Aer Lingus, no one mentioned anything to the authorities in Shannon. I put it to Ms O'Neill that it is highly unbelievable to us that nothing was mentioned to the Minister given the serious concerns expressed by her staff, herself and the Dublin Airport Authority and the decision of the Dublin Airport Authority not to inform Shannon. This was highly important and very sensitive information which the Minister should have known.

Ms Julie O’Neill

My colleague, Mr. John Murphy, will deal with that aspect.

Mr. John Murphy

There was a conversation between myself and the chief executive of the Dublin Airport Authority in between the first e-mail and the second one but it did not happen in the way the Deputy sketched. What actually happened was that he rang me. He was abroad on business and he rang me about a completely different issue to do with the review of airport charges. In the course of that conversation, I raised with him in a rather roundabout way, because I was conscious of the confidentiality of the information we had received from Aer Lingus the day before, what I already knew to be an issue of concern which was the level of airport charges Aer Lingus faced in Shannon vis-á-vis other airlines operating out of Shannon. It was in that context that I asked if the Shannon Airport Authority was finding a way to address it. I was assured it was. It is not the case that it came back to us specifically in regard to the Belfast base. That was not the point of the conversation at all.

Deputy Fergus O’Dowd

I refer to the parliamentary reply I have in that regard. There was an exchange of e-mails between the Department and the Dublin Airport Authority and serious concerns were expressed. Basically, the Department asked the Dublin Airport Authority of an A to Z on Shannon and how it might impact on it. The Department took it quite seriously. What I find unbelievable in all of this is that the Minister was not told.

Mr. Fintan Towey

I refer to the note on 13 June which I wrote following contacts with Aer Lingus and the DAA. It is useful to make clear in regard to contacts with the DAA that they took place on a confidential basis with the tariffs and forecasts unit in the DAA. After I first made contact with an officer who works there and made the request, his boss, the manager of the tariffs and forecasts unit, rang me back to check the purpose of the information. They would obviously be quite cautious about how they would release it. I made clear the context in which I was looking for the information and that it was on a confidential basis. I would have very much expected that the nature of that inquiry, the information given to me and the information I passed to the DAA would have been treated with absolute confidentiality in the DAA and specifically that it would not have been passed on to other parties, including Shannon.

Deputy Fergus O’Dowd

I will hand over to my colleagues but I reserve the right to come back in later. Again, I refer to the key issue. The telephone calls were made at 8.26 a.m. and 8.31 a.m. E-mails were sent. I understand there was an informal management meeting. How many informal meetings are held which are not minuted if that is what the word "informal" means? Who was at that meeting? The meeting was on the morning of 13 June.

I find it incredible that neither the former Minister, Deputy Cullen, nor the new Minister were informed. The report includes a press document stamped 13 June. It is from the Irish Independent and the Irish Examiner of that date. Did it come from the communications or press unit? Did the Minister get a copy of it? If not, why not? There are many questions to be answered.

Mr. John Murphy

There is a point to which I wish to come back. The Deputy asked why, if I sent these e-mails and made these telephone calls, I did not inform the Minister. My situation is the same as that of the Secretary General. I had a conversation with the chief executive of Aer Lingus on foot of being alerted by the Secretary General. I received the same assurances from him. I understood that the concerns we had expressed would be considered. I specifically said to him that they should not allow themselves to be bounced into a quick decision because of a media leak because I suspected that this might be why the story appeared in the paper in the first place. He agreed that they would not allow themselves to do this and would give this issue the time it needed.

I assumed, wrongly as it turned out, that the company would come back to us at a certain point in time when its proposals had crystallised. I also drew a distinction between the kind of information people at middle management gave, which was their understanding of the position at which a proposal was, and the assurances we got from both the chief executive and the chairman which sent back a very clear signal that they were considering the wider strategic implications of this and would ensure they were considered before a decision was made.

I have difficulty establishing to my own satisfaction why I did not complete a job and send a note on to the Minister because that would be a normal thing to do. I suspect that when the job was not finished on the night in question — it was a late evening and I was already due somewhere else — I e-mailed an unfinished note to the Secretary General to provide her with a reminder to phone the chairman, which we agreed she would do, and for whatever reason we did not get back to finishing that job the next day. We were then in the middle of preparing to meet the Minister for the first time and ensuring a series of other issues were addressed so it was not in the forefront of my mind at that point in time.

Deputy Fergus O’Dowd

The question was whether Mr. O'Connor discussed it at the informal meeting.

Chairman

Deputy O'Dowd should allow the Secretary General to conclude.

Ms Julie O’Neill

I will deal with the two questions addressed to me. Deputy O'Dowd raised the question of whether we have lots of informal management board meetings. We had a particular reason for having a quick get-together of whichever person from the management board happened to be around on the morning before the change of Government, which was the morning of 13 June. This was simply to ask whether we had everything together in terms of the brief.

I recall that at that stage, Mr. Murphy departed from that meeting because he had to leave for some other purpose. On 13 June, apart from asking Mr. Murphy, who had not come back to me at that stage, to check out what was going on, the matter was not raised in any way at that meeting.

Deputy O'Dowd asked me several times why, notwithstanding all the intense activity about this in the previous 24 to 48 hours, the matter was not raised with the Minister. I have already tried to answer that question very clearly a number of times. I still believe it was reasonable that when I had to make a judgment on what briefing to include when meeting a Minister for the first time, I included those things that were both important, urgent and imminent and which needed to be dealt with. My time with him in that first period was quite short and I had to decide the most important issues to include.

I believe, especially after the assurances I got from the chairman and the belief about the fluidity of the situation and the very immature stage of its development, this particular issue was important but one which had some distance to go before it crystallised. Do I, with the great benefit of hindsight, regret that somewhere over the coming period we did not tell the Minister about it or that the note did not get finished and sent to him? Of course I do, for the very obvious reason that I would not be sitting here now.

Deputy Thomas P. Broughan

I welcome the Secretary General and her officials to the committee and thank them for some briefings they have given to my colleague and me over recent weeks. In respect of the report she gave to the Minister for Transport, when one reads about the detail — a number of telephone calls and e-mails that took place or were sent on 13 June and the next morning — it beggars belief that an issue that came back and forth and in which the principal officer and the assistant secretary were so deeply involved would not have been an issue that would have been raised a few days later with the new Minister on 15 June. It is unbelievable. Ms O'Neill has given a number of explanations. My colleague has outlined the times, which include 11.30 a.m., 11.34 a.m. and 3.31 p.m, right down through 6.30 p.m., 7.27 p.m. and 7.41 p.m. Our experience in our offices would be that if we had invigilated something to that degree, we would have pursued it.

In respect of the Assistant Secretary's note, in his dealings with the chief executive, he seems to have heard a very firm proposal to move out of Shannon. The proposal envisaged that a Belfast-Heathrow service would be the anchor with a reallocation of Heathrow slots and that the Shannon slots were the least profitable. Shannon was gone and this was major news. This fact appears in the e-mail submitted by the principal officer and it entailed moving the aircraft from Shannon to Belfast. This was major news and an important issue. It beggars belief that it would not have been registered in the first meeting with the Minister or his introduction to the Department.

The Assistant Secretary dealt with Mr. Dermot Mannion. His point of view is transmitted in the principal officer's note. The Secretary General spoke to Mr. John Sharman, chairman of Aer Lingus. Mr. Sharman said it was not immediate, which is quite different information. Does the Secretary General feel she was let down badly by the chairman of Aer Lingus who provided misleading information that contradicts what the chief executive told colleagues of the Secretary General?

A major question is why this was not immediately transmitted to the Minister if it was taken seriously. It beggars belief that receipt of a note prepared on a critical issue for an incoming Minister was not verified by the official involved. I do not understand the rationale behind these intense developments over a 24-hour period. It seems the elephant in the room was missed. Other issues, such as metro north, the M3 and other issues to which the Chairman will refer were discussed but the elephant in the room was the shafting of Shannon, so to speak. What did we do to protect it? Does this indicate a culture in the Department, arising from the privatisation of Aer Lingus, that it was not concerned about the future of Shannon or Aer Lingus?

Regarding the board, two of the public service directors were not appointed to that board but Mr. Francis Hackett was. We were told by the Minister, Deputy Noel Dempsey, and the Taoiseach that the board knew nothing about this. As someone who serves on a number of boards, I do not believe a chief executive would pursue a major strategic change in direction without the board knowing. The chairman, Mr. Sharman, seems to have known, even though he did not tell the Secretary General the full story and may have misled her, but why did Mr. Hackett not know? It is an amazing story.

Ms Julie O’Neill

I accept that from the Deputy's perspective it beggars belief. I must reiterate that I am telling the truth, explaining the context in which it happened and the unique situation when one meets a new Minister for the first time. With the benefit of hindsight, I see that Shannon was the elephant in the room, even though it did not look that way at the time. Far from looking like a done deal, my conversation with the chairman of Aer Lingus led me to believe that this was far from fully developed.

Deputy Thomas P. Broughan

Does the Secretary General think the chairman misled her?

Ms Julie O’Neill

As was said at the outset, we must be careful about what we say about people outside the House. I have always had a good personal relationship with the chairman of Aer Lingus and have found him to be direct and honourable. I believe he meant what he said at the time and that he heard loud and clear the depth of my concerns. I had a clear understanding that these would be considered.

Deputy Broughan is drawing a distinction between that conversation and the conversations with Mr. John Murphy and Mr. Fintan Towey. When I saw a copy of the note Mr. Towey made, the reference to a cessation of Shannon-Heathrow services struck me forcefully. I wonder if I had missed it. The lesson for me is that when one reads an e-mail or an attachment, one does not always pick up on the subtleties. Having said that, even if I had picked up on it, it was clear from my conversation with the chairman that this eventuality was far away. As Mr. Towey stated, there is a distinction between the mindset of someone at middle management level who may be developing a proposal and the mindset of the chairman. The chairman made it clear that there were many other matters of priority that were far more pressing than the establishment of a base, not to mention one at Belfast that would have implications for Shannon. When the Minister and I met the chairman for the first time on 3 August, we were shocked when we realised that he intended to put forward a package that would respond to Shannon.

I was also asked if there was a culture of being anti-Shannon or of ignoring the airport. I hope, notwithstanding concerns regarding the follow-up action, that the actions we took on the day made clear that we had deep concerns in respect of Shannon, which we expressed. There is a reality we must face about the role of Aer Lingus post-privatisation. Government and policy decisions were taken and we were clear on the limitations of our ability to influence commercial decisions.

The Deputy inquired about the board and its involvement. I took the opportunity earlier today to contact Francis Hackett in order to be informed of the sequence of events. As I understand it, sometime early last year — post the flotation of Aer Lingus — a decision was taken, in principle, by the board regarding the establishment of a base outside the Republic of Ireland. The members of the executive were mandated to develop this project. The executive attended the board meeting on 6 July — subsequent to the developments on 13 June — at which it was stated that the board noted that management was investigating the possibility of opening a Belfast base in line with the company's strategy as set out in its business plan. It was also stated that this might have consequences regarding schedules for Shannon. There was nothing about the reallocation of slots.

The first the board heard of the decision to reallocate the Heathrow slots in total was by an e-mail from the company secretary at 6.30 p.m. on 3 August, namely, the Friday of the bank holiday weekend. That was after the Minister, John Murphy and I met the chairman and chief executive. It was only on that evening that an e-mail was received to the effect that the CEO proposed to make the decision and announce it on 7 August. That is what happened. At the same time, notification was also sent to the Stock Exchange.

The Deputy might feel that I was blind-sided and that I inadvertently blind-sided the Minister as a result. I accept that. It is clear that the board was in a similar position. I accepted, in good faith, the chairman's assurances. When we met the chief executive and the chairman on the day in question, I asked both of them, in the Minister's presence and in very strong terms, about what they had done regarding people's concerns. The chief executive informed me that he had taken full account of all the concerns and weighed up all the issues but that this was a commercial decision and it was the best one.

Deputy Thomas P. Broughan

On Tuesday, 19 June, a series of sectoral meetings were held for the new Minister, Deputy Dempsey.

Ms Julie O’Neill

I apologise, I meant to respond in respect of that matter.

Deputy Thomas P. Broughan

The four principal officers of the aviation division came forward between 10.30 a.m. and 11.30 a.m. I find it incredible that no one mentioned this as a matter that required attention. What would have been the position if Aer Lingus had been discussing moving slots from Dublin or Cork and transferring them to the Heathrow to Malaga route? The previous Dáil engaged in an intense debate on privatisation and it was issues of this nature about which Members were concerned. We were profoundly concerned about Shannon. My colleague, Deputy Shortall, represented my party on this committee at the time and indicated our concerns regarding Cork and Dublin. However, this fact does not appear to have been contemplated in the discussion to which I refer.

In the context of this matter and what happened in respect of learner drivers, is the Department of Transport fit for purpose? Since the events relating to Shannon, has the Department been reorganised in any way? In the middle of the controversy, the Minister of State at the Department of the Taoiseach, Deputy Roche, stated that it was not a resigning matter for the Minister, Deputy Dempsey. However, he also stated that the Government would wait until the report appeared before deciding if others would be obliged to resign. Have any changes been introduced in the Department. To put it mildly and without being facetious, does it have an elephant detector that will prevent matters of this nature arising in the future?

Ms Julie O’Neill

An elephant detector sounds like an attractive proposition. I will deal with the Deputy's last question first. Well in advance of this, under the organisational review programme undertaken by the Department of the Taoiseach, my Department volunteered to be one of the three involved in the pilot phase which is getting under way. I am sure I will have another day out with its findings in due course. I look on it as an open opportunity to find out what we can learn about ways to improve the operation of the Department.

No Department is perfect. It would be a mistake to judge the Department on this one event, with regard to whether it is fit for the purpose. This is not a structural or organisational matter. It is an issue with regard to a choice made on the provision of information for a Minister in a particular and unique context on the appointment of a new Minister. We can learn from it. I assure committee members that we as a senior management team, with the Minister, conduct post mortems after such circumstances.

Many committee members know the Minister for Transport, Deputy Dempsey, well. He is thorough in the way he operates. He likes detail. We now have extremely highly structured arrangements in place for his briefings which are copied not only to his private secretary but also to his adviser, me and my private secretary. Anything which comes back from him — it tends to come back rapidly — is also captured within the system. All of this helps. We have worked on the nature and sequencing of meetings of the management board. The irony is that I spent much of the Saturday after the Minister arrived in the office laying out all of these arrangements.

The briefing session was mentioned. When I look back, I think it was a pity this was not raised at the briefing session we had with the Minister on the 15th. This raises a couple of issues. As I stated, the brief had been finalised before these events transpired. In the same way as I find my first encounter with a Minister daunting, the first encounter of four principal officers and an assistant secretary for a briefing session is a tightly structured affair. Each of them had a short period to raise imminent and urgent issues which needed to be flagged. The time was tight and I was controlling time management and ensuring we did not have an overload of the significant volumes of information we threw out.

My feeling is that given the sensitive nature of this issue, the appropriate way for it to have been dealt with would probably have been for Mr. John Murphy and I to have spoken with the Minister in the light of the completed and updated version of Mr. Murphy's note which took full account. This did not happen and I put my hands up and take responsibility. It should have happened but the context of Mr. Fintan Towey raising it at a meeting where he ran through key points in a prepared text might not have been appropriate.

Deputy Timmy Dooley

I welcome the members of the delegation. I read the report and followed the comments made today, but I am still baffled as to why they failed to communicate this critical information to the Minister. We now see it was of such strategic importance that it should have been brought to the attention not only of the Minister but also the Government. It has had an impact on the region which I represent and, in my mind, will have an extremely serious impact in the coming years. While the members of the delegation might believe their actions blind-sided the Minister, those actions have devastated or have the potential to devastate an entire region.

I wish to get to the core of the issue. A number of questions I would have asked have been answered. I want to get to the Secretary General's mindset. If this information was communicated and the word "Dublin" appeared instead of "Shannon", would her actions have been different? Would it have set off an alarm bell in her mind that it was of more significance or importance to the Department of Transport? I will leave her to answer that question.

Two important questions are raised. Why was the information not communicated? Was it because the Secretary General failed to understand the enormity of the importance of this decision? As somebody stated, was it because--

Chairman

That question has been answered.

Deputy Timmy Dooley

I am not sure it has. I would like to fully understand whether the Secretary General was directly misled by the Chairman. I know a reference has been made to this but I am not sure it was fully answered.

As I see it, it was clear from the information that many knew about this. Therefore, I do not accept it did not rate highly in the Secretary General's mind. Reference was made to the flurry of activity. The report lists what the Secretary General refers to as those issues which were important as opposed to those which were critical. The list includes the implementation of Transport 21, the metro north project and the M3 motorway but does not refer to aviation. Later in her report, she noted a reference when the sectoral meetings took place. Why was there no discussion on the first day with the Minister on aviation matters, given that she acknowledged at a later stage that issues had arisen?

Regardless of what the chairman of Aer Lingus had to say, it was clear that an evaluation process was ongoing within the company which had the potential, based on the information provided by Mr. Towey, to put services at Shannon up for grabs. There was a chance that the slots would ultimately be transferred and the connectivity between Shannon and Heathrow airports was, therefore, vulnerable. I cannot understand why she took it upon herself to withhold that information. Her report indicated that she only saw a role in terms of reporting to the Minister when a decision was made but, as no decision was imminent, she felt it was not critical. Given the ramifications of such a serious issue, her Department should have prepared a memorandum for the Government.

There are wider implications in terms of connectivity and the industrial and employment base, so I have to return to the mind set issue. Does the Secretary General see Shannon Airport purely as a regional airport or does she understand the significance it has for the lives of the people of the mid west and west? I do not want to overplay the west of Ireland card but the biggest industrial base outside of Dublin is located in the Shannon Free Zone, which employs upwards of 10,000 people. Does that not receive consideration in the Department? I ask because the lack of action on the part of the Department suggests that it felt the issue was not critical.

Deputy Pat Breen

The Secretary General referred to the newspaper reports of 13 June and stated that because she was very busy with the appointment of a new Minister, she overlooked informing him about a number of matters. On 15 and 17 February, circumstances were normal in the Department. Is it true that she scanned the newspapers on a daily basis?

Ms Julie O’Neill

Yes.

Deputy Pat Breen

Two important articles were published in The Irish Times on the aforementioned dates in February. The first, entitled “Aer Lingus may use Belfast as new base” stated: “A decision is likely to be made within three months, and services could begin next January.” Did the Department’s communications unit see that article? Circumstances were normal in February and the newspaper was reporting on a significant aviation matter. Was the Department made aware of the report and should it not have set alarm bells ringing for the Secretary General? If the articles were not noticed, there was something very wrong in the Department given that its communications unit costs €400,000 annually. I raise this issue in the context of the importance of the slots to the articles of association. If Aer Lingus opened a new base, it would have to find slots. Were slots not at the back of the Secretary General’s mind when she considered the matter?

She mentioned her deep concern for Shannon but it is obvious the airport does not feature high on the Department's priorities. I do not wish to be parochial but the Department's list of priorities are exclusively east coast projects such as metro north, the M3 motorway, the Dublin Airport Authority, integrated ticketing and Dublin Port tunnel. To the ordinary person in the west, it seems that the Department has an anti-Shannon agenda. The Department sought information from the Dublin Airport Authority on traffic through Shannon Airport. Why did it not seek the information from the Shannon Airport Authority? I understand from sources in the Department that it is the only authority which has up-to-date information on passenger statistics such as passenger load figures because the computer systems of the three airports are not integrated. It is astonishing that the Shannon Airport Authority was not asked to provide this information.

On the tourism and economic development plan discussed on 27 June, the Secretary General will be aware of the challenges facing Shannon Airport as a result of the open skies policy. Already, Air Canada has decided not to recommence services at the airport, American Airlines has ceased serving it and Aer Lingus which has ended direct services to Chicago has shown no real commitment to continue after October 2008. I learned today, albeit unofficially — perhaps the Department is aware of this information — that Delta Airlines will no longer have a Shannon-Atlanta service in its summer schedule. As the officials will be aware, the company has provided this service which does not operate in winter since the 1990s. We now learn it does not propose to recommence services on the Atlanta route. This is another nail in the coffin of transatlantic routes.

The previous Minister informed us that airlines were waiting on the runways to take off to Shannon Airport. While I do not want to spread doom and gloom, I have outlined what are the real effects of the open skies policy. I raise these matters in the context of the need to provide funding for the tourism and development plan.

When does the Department expect the business plan to be completed? I have heard rumours that it is planned to merge Shannon Development and the Shannon Airport Authority to secure the future capital of Shannon Airport.

Deputy Dan Neville

Does the Secretary General feel misled by Aer Lingus, given that she expected the company to confirm its decision before it was made public? Were any of the Department's concerns about regional and aviation policy taken on board by Aer Lingus management when it made the decision on Shannon Airport? Were Ms O'Neill and Mr. Murphy concerned about the potential consequences of the Department having commercially sensitive information on Aer Lingus in its possession at a time when no other shareholder had access to it? Would the decision to allegedly withhold this information from the Minister be connected with a concern to keep the information under wraps until the public announcement, as was stated on several occasions during the debate on the issue?

Ms Julie O’Neill

I shall start with the first question on whether I was misled by the chairman of Aer Lingus because it is very important. It is extremely important that I state I do not believe I was misled by the chairman in the conversation I had with him on the day in question. I believe I had an honest conversation with him in which he gave his views to me, both on the status quo and his commitment--

Deputy Dan Neville

I am not asking--

Ms Julie O’Neill

Please, let me finish the point. I will come to that issue but I want to pick up on Deputy Dooley's question first. I absolutely believe what the chairman told me, which was not only that the issue was far from decided and a decision was not imminent, but also that he understood the concerns expressed. I recall putting those concerns to him in the context of a Minister having been appointed the previous night, asking what he was doing and stating I needed a great deal of clarity about what Aer Lingus was considering. When the Minister, Mr. Murphy and I met the chairman and chief executive on 3 August, I was extremely disappointed that they had effectively stated they had listened to our concerns and taken them on board but were sorry that their decision was the only one that made commercial sense.

This was the situation right up to the conversation I had, which I believe was in good faith, with the chairman on 31 July. Even at the time of that conversation, I felt that while there was clearly going to be a base in Belfast, there were still issues relating to Shannon Airport and that they would come to the meeting on 3 August with proposals in that regard. I do not believe I was misled, but I was disappointed by the manner in which they had dealt with the issue.

Deputy Dooley asked about my mindset. I understand it may look at times as if the Department of Transport is Dublin-centred. In the past five years at the helm of the Department, with my colleagues, I have been acutely conscious of the challenges facing the mid-west and the Shannon region. We have, fortunately, managed to retain a good relationship with Mr. Pat Shanahan, chairman of the Shannon Airport Authority, and are aware of the dilemmas and difficulties he faces. We were aware the open skies policy, which was coming at us from the European Union and had to be dealt with, would be a big challenge for the airport authority. Frankly, given the challenges being faced in the open skies policy context, I felt Shannon Airport needed this issue coming at it like a hole in the head. I articulated this view strongly to Aer Lingus and it was for precisely that reason that I expressed my concerns in such strong terms. I would not accept that I did not take action. Clearly, I failed to communicate my concern to the Minister, but I certainly took strong action.

The Deputy asked if I would have reacted in a similar way if the word "Dublin" was substituted for "Shannon". In the conversation I had with the chairman the word "Dublin" or "Cork" could have been substituted for "Shannon". It was clear once they had started talking about a base, they would have to find the slots from somewhere. Therefore, I left the issue alone on the basis that what might come back might be a split of the slots between Dublin, Cork and Shannon airports. I understood that was the kind of solution that might be considered. There was no attitude that it would be all right because it was only Shannon Airport which was involved. I expected some kind of spread.

I do not believe I was misled, but my disappointment centred on the fact that I did not understand this decision was going to be taken by management. I had expected the matter to be brought back to the chairman and the board and that I would, out of courtesy, be alerted in advance of what was happening. Also, I hoped, which did not prove possible for diary reasons, to have an early meeting with the chairman. That was very much my mindset with regard to Shannon Airport.

With regard to the issues raised on the day, I am acutely conscious that whenever one makes a list of items discussed with the Minister, not everything is included. I obviously went back to the brief to see what was on my mind. The issues were not on the list because they were Dublin-centred or important, but because they were the various items that were considered urgent and imminent at the time. Committee members may remember that immediately after the Minister took up office, there was a particular issue about the M3 and whether the project would be blocked. A particular licensing application was also on our desks. The list was not comprehensive. There were a few issues, of which I had to remind the Minister, as he would have to deal with them the following week. One of the items he would have to deal with the following week was bringing to the Dáil a road traffic Bill for enactment. It was, therefore, a selected list of issues about which he needed to know that day and which he needed to have in his mind heading into the weekend.

Deputy Timmy Dooley

The issue does not so much concern whether the words "Dublin and Cork" could be switched for "Shannon". Mr. Towey's memo clearly sets out the cessation of services between Shannon and Heathrow airports. It appears Ms O'Neill did not comprehend the importance or relevance of that sentence, to the extent that it was mentioned in discussions between Aer Lingus and her Department. It should have raised a flag with somebody in the Department to the extent of seeking the intervention of the Minister in terms of whatever he might be able to bring to the table.

Ms O'Neill felt she would be able to handle the issue within her competency. I could make allegations in that regard, but I will not. The truth, however, is that this demonstrates the enormous lack of connectivity. The end of connectivity for the industrial and residential base at Shannon did not seem to rate for her. It seems to be more about the profitability of Shannon Airport in the context of its relationship with Dublin Airport. That suggests it is a matter of getting Shannon off the back of the Dublin Airport Authority in order that the growth of one central international hub can proceed. Nothing that has been stated today by the Secretary General or anything in this report does anything to dispel that sentiment. I do not believe it is a sentiment. I believe it backs that up because clearly the issue did not rate highly enough in the Secretary General's mind to be concerned about it to the extent that it should have gone to a further level within the Government because of its impact on regional policy.

Ms Julie O’Neill

I am conscious that there are a few other questions I was asked on which I did not finish off. There was one particular question as to whether the commercial sensitivity of the information was on our minds. Yes, it was. Would that have meant that we felt we should not tell the Minister? Absolutely not. I keep having to go back to the fact that I did not make a decision not to tell the Minister. I made a decision on certain things I would tell the Minister on the day. This did not hit the list. Why did it not hit the list? It did not hit the list, not because it was not important, not because I saw it as something to do with Shannon and, therefore, not relevant and not as important. In fact I had keyed it up so that it could equally have to do with Shannon, Dublin and Cork, depending on the outcome.

I did not mention it because, while it was important, there was some distance to go before the issue crystallised. That also applies to at what point one brings something to Government. One brings a crystallised issue to Government, not something which is a series of ifs, mights, buts and maybes.

To go back to the issue of what was in the notes Mr. Fintan Towey had compiled and the issue of the cessation of Heathrow services, of course, that set off alarm bells. Of course I would be acutely conscious that it is not just about the viability of Shannon Airport, it is the mid-west base. My concern about that was totally alleviated by the conversation I had with the chairman. That is the reality. That is where we are at.

Deputy Pat Breen

That concerns regional development. The Secretary General was concerned because she spoke to him on regional development and the importance of a balance--

Ms Julie O’Neill

Yes.

Deputy Pat Breen

There must have been some doubts in her mind.

Ms Julie O’Neill

No, it was because of the response he gave me to those concerns, which I wanted to ensure were clearly articulated, and his response that they were not remotely near making a decision about Belfast as a base, never mind on the implications for Shannon. They were thinking of all kinds of options for meeting the issue of connectivity at Belfast and I was reassured by that.

Deputy Pat Breen

Did the Secretary General think of the slots?

Ms Julie O’Neill

The issue of the slots came in to my mind but the response I got from the chairman--

Deputy Pat Breen

They would have to be got from somewhere if a base was being set up in Belfast.

Ms Julie O’Neill

Absolutely, but there was a whole series of ways in which they might have got those slots, either getting new ones or taking them from other sources, including Dublin and Cork.

Deputy Pat Breen

Did the Secretary General discuss that with the chairman?

Ms Julie O’Neill

What I discussed with him is what is set out in my report.

Deputy Pat Breen

You did not discuss it with him.

Ms Julie O’Neill

No, what I asked him was if this would have implications for Shannon and for connectivity from Shannon. He said, what I have said in my report, namely, that they had not decided on a Belfast base, and that a number of bases were in play. He said that if they were to go for Belfast there could be implications but they were looking at all the options for servicing that Belfast base, of which Shannon was just one of the options.

Deputy Pat Breen

So the Secretary General took it in good faith.

Ms Julie O’Neill

I did take it in good faith and I think it was mentioned--

Chairman

We have been over this ground and I do not want repetition. The Secretary General has stated on three occasions what is contained in section 20 of her report. There is no point in pursuing an issue and getting the same answer for the fourth time. We want to move on. Deputy Connaughton is next.

Deputy Pat Breen

The Secretary General did not answer my question about the newspaper items.

Chairman

I am satisfied in regard to the newspaper items.

Ms Julie O’Neill

The Deputy referred to an offer of €400,000 for a unit. That is not for my Department. It is the Taoiseach's Department.

Deputy Pat Breen

Yes, it was the Taoiseach's Department.

Ms Julie O’Neill

The Deputy asked a question about press cuttings. We have a system in the Department where one of my staff comes in early in the morning with a small team and pulls press cuttings. The Deputy mentioned a newspaper article back in February--

Deputy Pat Breen

Two newspaper articles.

Ms Julie O’Neill

I do not recall those newspaper articles.

Deputy Pat Breen

Is that not amazing? The Secretary General looks at all aviation matters. She said it was a quiet time in the Department and there was no new Minister.

Ms Julie O’Neill

I doubt if it was a quiet time.

Deputy Pat Breen

Somebody slipped up.

Ms Julie O’Neill

There is no such thing as a quiet time.

Deputy Pat Breen

The Secretary General said it was not as if a new Minister was coming in. It was normal work.

Ms Julie O’Neill

No.

Chairman

Has the Deputy a reference to the newspaper articles to which he referred?

Deputy Pat Breen

I have them here. They are two articles from The Irish Times.

Ms Julie O’Neill

I will certainly have a look at them. The short answer is "No".

Deputy Pat Breen

It is quite clear.

Ms Julie O’Neill

I do not want to create the impression that I spend all my life reading newspapers, frankly I have an awful lot more to do. However, I have a habit of skimming either the newspapers themselves or the press cuttings which are circulated early in the morning. To say the reason I would have been likely to be more alert to something like that was not because--

Chairman

I suggest we give copies of those articles to the Secretary General who will come back to us.

Deputy Timmy Dooley

May I clarify one point?

Chairman

Yes, if the Deputy will be very brief.

Deputy Timmy Dooley

The Secretary General stated that the chairman had indicated to her that the decision was not imminent and that she believed him. In Appendix 6, which refers to an appended e-mail Mr. Murphy sent to her — it was the note for the Minister — the final line of the e-mail states that while a final decision has not yet been taken, the recent media reports in the North have led to an acceleration of the decision process in Aer Lingus and that the decision could be finalised very shortly. I do not believe Mr. Murphy made that up. The same sentiment was expressed in the note prepared by Mr. Towey. They were getting their information at sub-chairman level.

It is clear there is a difference with regard to the information the CEO or Mr. Corneille, who is referred to as commercial director, provided to the Department and that which the chairman communicated to the Secretary General. It is clear misinformation has been provided by Aer Lingus. I do not expect the Secretary General to state she was lied to--

Chairman

I have five other speakers---

Deputy Timmy Dooley

This is critical, Chairman.

Deputy Pat Breen

I went to the DAA for the statistics.

Chairman

The chief executive of the DTO is present. Deputy Connaughton should ask his questions.

Deputy Paul Connaughton

My questions are linked to those of my colleagues. Although the Secretary General suggests otherwise, I think the chairman sold her a pup on that day. He covered himself for future eventualities but, following that, he could always have said he had informed the Secretary General of the Department. That is my first point.

My next question has not yet been asked at the meeting. At the high level at which the Secretary General operates, was there any discussion on the Good Friday Agreement and its relevance to transport matters? Was there at any time a connection at Government level with regard to the significance of the peace treaty in this case?

It appears many people knew about this issue at certain levels, whereas those who should have known were excluded. The public only received the information on the Monday of the busiest bank holiday of the year. While I am not suggesting the Secretary General organised this as it was a political matter, the announcement was made on the August bank holiday weekend. It would be interesting to know who knew it was to be announced that weekend. Was it not a remarkable day in a remarkable month to make such an announcement?

When one lines up all the problems that have beset the west, such as the question of Shannon, we have discovered that while some friends of the west remain, given what I have heard today there are not many friends in the Department of Transport. What would need to happen in the Department to ring an extremely loud bell with the Secretary General? She stated that one of the issues about which she intended to speak with the Minister was integrated ticketing. I have been listening to that being discussed for ten years and it will probably be another ten years before it is introduced, so the Secretary General cannot claim it was a particularly urgent matter. Against that background, one wonders where the Department stands in all of this business.

Why did the Secretary General not tell the Minister on the day after the meeting, when the pressure was off the Department? Given that she was thinking about doing so on 15 June, the day she met the Minister, why did she not tell him on 16 or 17 June?

Deputy Joe Carey

The three witnesses knew a decision by Aer Lingus was imminent and they knew its implications for the Shannon region. Why, from 15 June to the end of July, did they make no further contact with Aer Lingus? Why did the Secretary General not go back to him and follow up on what she was told? There was some reference later on that she had to ask in a roundabout way and did not want to put it directly to the officials in Aer Lingus. Why was there not a direct follow-up to this? It is incredible that we should debate this matter here at all. Was the Secretary General told formally or informally to stop what she was doing? Given the flurry of activity on 13 June, including nine different telephone calls and e-mails here and there, was she stopped by someone from doing what she was doing? What sort of procedure has the Secretary General put in place and has she learned any lessons from this?

Chairman

This question has been asked already.

Deputy Joe Carey

Yes.

Chairman

I am sorry but I will have to interrupt the Deputy.

Deputy Joe Carey

This question has not been asked. What is the Secretary General doing to restore connectivity between London-Heathrow, Shannon and the west? What is she doing and has she learned anything from this?

Chairman

That is a very relevant question but we have until 5.30 p.m. and there are four more speakers so I suggest that we should concentrate a bit more on the future rather than the past.

Deputy Fergus O’Dowd

On a point of order, I indicated when I spoke earlier that I have further questions. I have two further questions for the officials.

Chairman

We are now into serious repetition.

Deputy Fergus O’Dowd

My questions will not be repetitious.

Chairman

With all due respect to everybody present, a number of members have other appointments, so I ask the remaining speakers to be brief. Perhaps they could dwell on the future because what is done is gone. The important thing now is to look to the future of Shannon. The committee should concentrate its efforts on what the Department, the airlines and various airport authorities can do to build a good future for Shannon and restore that Heathrow slot.

Deputy Kieran O’Donnell

Does the Secretary General accept that if this information had been made available to the Shannon Airport Authority when it first came into the public domain on 13 June, Shannon would have been able to find an accommodation with Aer Lingus? Furthermore, what communications, if any, were made with the Dublin Airport Authority? An e-mail from Mr. John Murphy to Ms Julie O'Neill stated that the Dublin Airport Authority was looking to find continuation.

In page 7, paragraph 26, the Secretary General said she could not include any details on Shannon because the brief had been finalised in advance of discussions. That is not the case, however. The brief was only finalised in the afternoon of 14 June. All the telephone conversations took place on 13 June, so that point does not stand up.

When the Secretary General had a meeting with the Secretary General of the Department of the Taoiseach on 27 July, informing him of what she had got from the deputy CEO of Aer Lingus, was it brought up that the matter would be considered for the Cabinet meeting on 30 July?

On Tuesday, 19 June, the Secretary General had a meeting with the Minister in which she discussed the tourism and economic development plan for Shannon. Why did it not come up in that context? She said it was not important, but on 4 July I tabled an Adjournment debate matter asking about the tourism and economic development plan. I received a reply from the Minister stating that it was currently being finalised. This was on foot of a report by the Mid-West Regional Tourism Authority as far back as June 2006. It was a top priority. I cannot understand it. It would appear as if Shannon did not register on the radar. I take the point that there appears to have been a flurry of activity, but on the morning of 15 July it was stopped.

Chairman

I think we have heard that point.

Deputy Kieran O’Donnell

I will make onelast point. In the Secretary General’s statement today, she obviously felt that she could not continue with the report because her independence was compromised. Furthermore, she made the point that she could not reach conclusions. Surely she should have stepped aside. There is now a case for an independent investigation. Does Ms O’Neill believe that is now warranted?

Ms Julie O’Neill

There are so many questions now that the committee will have to forgive me if I miss any of them. I will come back to them. I will answer questions that I can answer. There are some that I will field to my colleagues on either side.

One question was whether the chairman contradicted the chief executive officer. I am satisfied that what the chairman said to me was in good faith. That is really important. I do not want to cast aspersions on him. When I contacted the chairman in the context of completing my report, he not only reiterated his understanding of the conversation we had, he also confirmed to me that immediately after having that conversation, he contacted the chief executive officer, we enforced the message to him and got his assurances that he would take on board fully the concerns we had. I have no reason to doubt the concerns were taken on board. The reality is that, notwithstanding those concerns, they came to the commercial decision they did.

The question in regard to the DAA I will field to Fintan Towey as it was he who contacted the DAA, and John Murphy might want to add something on possible contradictions between the chairman and the chief executive officer because I do not necessarily see that.

There were two questions related, in summary, to the Good Friday Agreement. In the context of the North-South Ministerial Council, I was not present in the room for the discussion but I attended the lunch with the Minister at which a number of the Northern members were present. This issue was not raised. I want to be clear about that. At no stage was it raised with me. At no stage did anybody on any pretext related to North-South relations or anything else suggest to me that we should be going slower or we should be taking a view on that. I want to be very clear on that.

There was a question whether the alarm bells rang in regard to the consequences for Shannon. They rang very clearly on the basis of the initial information we got. On the basis of the reassurances I got, it was not that I did not see this as important. I saw it as important but I did not see it as imminent. Some of the other issues, unfortunately, seemed to be imminent at the time and, in some cases, are still here. I was asked were we stopped by somebody and what procedures we put in place for Shannon. John Murphy was a member of the senior officials group and this was a business connectivity issue for Shannon, so I will ask him to take that question.

The business plan has been received by Dublin Airport Authority. A copy of it has been forwarded to us. We will be meeting for an informal session with the chairman of the Shannon Airport Authority, and we will meet one of his board members in the coming days to have an informal conversation with him. The process involved is that the Shannon and Cork business plans will go to the Dublin Airport Authority. What we are looking for is a joined-up business plan and a joined-up view in regard to those, which we will consider. The Minister is anxious to give this priority. It is in all our interests to bring this matter to a head.

Deputy Pat Breen asked specifically whether there might be a join-up between Shannon Development and the Shannon Airport Authority. I am conscious of the fact that all these are ultimately matters for Government decision so I cannot speculate about them. I have heard suggestions along those lines. It has not been raised as an explicit proposal at this stage.

Deputy Pat Breen

Has the Secretary General heard suggestions?

Ms Julie O’Neill

Yes, I have heard it mentioned from time to time as a possibility. We are quite aware that it is important before any business plan is signed off for Shannon Airport which allows it to float free, which it very much wants to do, that it is done on a basis by which Shannon Airport is viable. It is one of the requirements under the State Airports Act that the Minister for Finance and the Minister for Transport must be satisfied on that. We are open to all suggestions but there is no specific proposal on my desk or in the Department in regard to that issue.

Deputy Pat Breen

Was the Secretary General concerned about the Delta issue?

Ms Julie O’Neill

I was not aware of that. I will allow John Murphy to deal with some of those issues because he was in the senior officials group. On the issue of the brief, we finalised it on the morning of 14 June.

Deputy Kieran O’Donnell

Did the Secretary General sign off?

Ms Julie O’Neill

I cleared it in the afternoon. It was the following morning, 15 June, that I had the conversation with the chairman. It had not matured.

Deputy Kieran O’Donnell

Mr. John Murphy had two conversations with the chief executive officer. He spoke to the Secretary General on the afternoon of 13 June. She was fully aware in that context in terms of Shannon. When one looks at the Secretary General's dates, she has the new Government in place on 13 June. It was not. It was in place on 14 June.

Ms Julie O’Neill

To be clear, I can only tell the truth. The Deputy might find it difficult, and there may be aspects of this where I made the wrong call, but the reality is that the brief was not updated because at the stage when we were finalising the brief on the evening of 14 June, I had not had an opportunity to have the conversation with the chairman.

Deputy Kieran O’Donnell

The Secretary General will have to accept that her actions have resulted in a retrograde step for the mid-west which now has no connectivity. I do not believe she fully understands the situation.

On a more positive note, the PSO is being rolled out as an option for Shannon. I am told in Europe that officials in the Department of Transport are the experts in this regard. They are highly thought of in Europe. Has the Department considered the PSO as an option for Shannon?

Chairman

I must allow the Secretary General to reply to the questions asked.

Ms Julie O’Neill

I would like first to respond to a number of other questions asked. I will answer the Deputy's question as best I can later.

As regards the briefing — this is an important point which I must make — there could be an assumption in the discussion on this that if I had told the Minister or the Shannon Airport Authority, with whom I believe we could not have shared the information--

Deputy Kieran O’Donnell

The Secretary General could have followed up with the DAA in respect of keeping the route in place.

Chairman

The Deputy must allow the Secretary General to answer the questions.

Deputy Kieran O’Donnell

The Department was remiss in its responsibilities in that it should have contacted the DAA.

Ms Julie O’Neill

I am, at this stage, trying to answer five or six different questions. I would appreciate if the Deputy would allow me to do so.

We could not have shared that confidential, commercial, price-sensitive information with the Shannon Airport Authority. I will ask Fintan Towey to comment further on this later. A more fundamental question arises, namely, do I regret not telling the Minister about this? Of course, I regret not telling the Minister about it. I put him in an extremely difficult position in not providing him with access to this information. I do not believe that if the Minister had access to the information it would have made a blind bit of difference to the outcome. The reality is that Aer Lingus is entitled to make commercial decisions and it cannot be overruled by me, the Minister or anybody else.

On whether the Minister would have said anything different — we have had this conversation with the benefit of hindsight — I believe he would have made exactly the same points as I made and he would have made them as forcibly as I did. While the Minister should have had the opportunity to do so, I regret I did not give him that opportunity.

Deputy Kieran O’Donnell

Why did the Chairman of the Shannon Airport Authority feel it necessary to resign--

Chairman

The Deputy is out of order. The Secretary General is answering a series of question raised by members including Deputy O'Donnell.

Deputy Kieran O’Donnell

I must put these questions on behalf of my constituents.

Chairman

Yes, but the Deputy must adhere to the procedures involved.

Ms Julie O’Neill

Members referred to our meeting with the Secretary General to the Government and our request that this issue should be placed on the Cabinet agenda. I want to put in context the conversation I had in this regard. John Murphy and I attended an interdepartmental meeting with the Secretary General to the Government. Members will be aware from my report that he had earlier in the week raised with me an issue in the context of his role as chairman of the NIB. In the course of the briefing on this issue, we alerted him to the fact that apart from IR issues, on which we had some new information, there was an emerging issue in respect of Shannon which was potentially serious. We made clear at that stage our understanding that a decision had not yet been taken that the CEO involved was only returning from leave the following Monday and it was reasonable for us to expect there was room for manoeuvre on this and that we were seeking the earliest possible meeting between the chairman, the CEO and the Minister. The earliest available date was 3 August. We did not suggest to him that this matter should be brought to the attention of Government as we did not have enough factual information.

It was suggested that I stated in my opening statement that I felt I could not continue the report. I want to be clear about this: I did not say that I felt I could not continue the report. I felt it absolutely incumbent on me that I immediately bring to the Minister's attention as soon as I became aware of it the specific nature of my involvement so that he had an opportunity to decide whether he wanted me to continue the report. I offered to step aside. The Minister said he wanted me to complete my report notwithstanding the fact that he knew it would be deeply embarrassing and difficult for me. I do not believe that in asking me to do so he compromised my integrity.

Deputy Kieran O’Donnell

That is not what I said.

Chairman

The Deputy should allow the Secretary General to finish. Three other Deputies are waiting for replies to their questions.

Deputy Kieran O’Donnell

My question is relevant to the point made by the Secretary General.

Chairman

The Deputy is out of order.

Deputy Kieran O’Donnell

Ms O'Neill said she could not reach conclusions.

Chairman

The Deputy is out of order.

Ms Julie O’Neill

I thought it was inappropriate. When I started to write the report and it had not involved me in any way, it might have been appropriate for me to say I concluded certain findings in regard to my colleagues or other aspects of the matter. To reach conclusions of that sort in a context where I was personally involved I thought would risk the report appearing like a whitewash, of which I know I have been accused in some quarters. I find it difficult to believe how anybody could describe my standing up and putting my hands up in this regard as a whitewash. I believed it was appropriate in the circumstances in which I found myself to spell out the facts to the Minister who had asked for them, and it was a matter for the Minister to decide what way he responded to that.

The Deputy asked whether I believe an independent inquiry is warranted. No, I do not because I have checked literally every corner of the Department in terms of the records that are available. I have unearthed the story as best I can. I am satisfied there is no gap of recollection on the facts among my principal officer, myself, my assistant secretary and the Minister. If there was anything that indicated a big difference of opinion among us or some hidden fact, I would be up for checking that but there is nothing. There is nothing new to be found out.

Deputy Kieran O’Donnell

An e-mail dated 13 June is missing.

(Interruptions).

Chairman

I ask the Secretary General to respond to Deputy Joe Carey's questions.

Ms Julie O’Neill

Unfortunately, I have lost track of them at this stage.

Chairman

They relate to the future of Shannon.

Ms Julie O’Neill

The issue of the public service obligation was raised. I might let Mr. Murphy take that question. I had said he would take a number of those questions.

Deputy Kieran O’Donnell

I wish to clarify what the Department is doing--

Chairman

We want answers to the questions that have already been asked.

Ms Julie O’Neill

On the issue of the Shannon Airport Authority and why the chairman resigned, I understand the chairman will appear before the committee. As I understand it, that is an issue between the chairman of that authority and the Dublin Airport Authority and one for him to deal with. Perhaps Mr. Murphy could deal with some of issues relating to the future.

Mr. John Murphy

The Deputy raised a number of questions about what we are doing to promote and restore connectivity to Shannon and to the west. In the context of Shannon Airport, he will be aware that in conjunction with the Dublin Airport Authority, it published a new route support scheme to facilitate new services, especially to other hubs, which would seek to restore the connectivity that would be lost from the service to Heathrow. That route support scheme goes to the limit of what is allowable for those kinds of schemes under the relevant EU regulations. An airport authority can provide support for new routes on a sliding scale on what is called a rational investor principle for genuine start-up costs of new routes. That must be made available on an open and transparent basis to all comers. It has done that.

It is engaged in discussions, as is generally known, with CityJet on the possibility of introducing new services. We understand those discussions should be coming to the point where a decision would be made fairly soon and working towards putting services in place from early January such that there would not be any significant break between--

Deputy Joe Carey

Is that in relation to Heathrow?

Mr. John Murphy

No, it is not in relation to Heathrow.

Deputy Pat Breen

Is it Charles de Gaulle Airport in Paris?

Mr. John Murphy

Yes.

Deputy Pat Breen

Starting on 8 or 9 January?

Mr. John Murphy

There is not a precise date.

Deputy Pat Breen

That is my understanding of it.

Chairman

Allow the Assistant Secretary to answer the questions.

Mr. John Murphy

Members will also be aware that after this decision was made, the Government established a senior officials group which examined the impact of this and tried to identify how it could best be addressed not only by the promotion of air services but by a range of other issues. A number of developments are being examined in other areas in terms of institutional reform and the investment that needs to be made, whether under Transport 21 or in other areas. Work will proceed on that. A system is in place whereby we report back to the cross-departmental team on infrastructure and, ultimately, to the Cabinet committee. We are keeping in touch with that.

Deputy Pat Breen

What about the tourism development plan?

Mr. John Murphy

I expect the economic and tourism development plan will be finalised shortly. There are issues relating to funding of aspects of that which need to be examined in a wider budgetary context. No more than the members, I would like to see that finalised and put into operation.

Chairman

I am sure we will have the opportunity of inviting the officials to come to the committee again to discuss those issues. If some issues are not finalised today, we will bring the officials back before the committee.

Deputy Michael McGrath

I welcome the Secretary General, the Assistant Secretary and the principal officer from the Department. The focus of the discussion until now has been on who knew what, when they knew it and who they told. While this is important, the substantive issue concerns the post-privatisation environment we are now in. The Secretary General answered the question I was to ask by stating that if the Minister had been informed in the middle of June, it would almost certainly not have made any difference to Aer Lingus's decision. Much as we might object to this, it is the reality of the new aviation environment.

On the remaining slots at Cork and Dublin airports, is it not the case that in the post-privatisation environment, we are completely at the mercy of the commercial realities faced by Aer Lingus? If it were to decide tomorrow morning to set up a European hub in Paris, Rome or Munich and transfer the Heathrow slots thereto, we could not do anything to stop it from proceeding with the plan. Is it not the case that the best thing we can do for Shannon and Cork airports is to proceed with the implementation of the State Airports Act 2004 and make their authorities fully autonomous and without debt so they will both be viable and can compete with Dublin and other European airports on an even keel? We need to make the developments relevant to the circumstances of today. While the agreement reached during privatisation prevented the disposal of slots, it did not prevent deployment from Ireland to mainland Europe, which seems to be permitted.

Chairman

I will invite the DTO representatives to make a brief presentation and give us their documentation after some questions. I appreciate their patience. I call Deputy Feighan.

Deputy Frank Feighan

I thank the Department officials for coming here today and giving a comprehensive report. They have been up-front and candid. The Department seems to have sleepwalked itself into this very critical situation, in respect of which we refer to elephants in the room.

If the Minister happened to be from County Limerick — let us say it was Deputy Willie O'Dea — would the Department have acted with more urgency? This is a very serious matter and every dog on the street knew Aer Lingus was facing commercial problems in Shannon Airport, where Ryanair was effectively attacking the slots.

The Government Information Service monitors every national, regional and local newspaper and every radio and television station, national and local, in addition to the websites of relevant organisations, including chambers of commerce and football clubs. The staff of the Government Information Service were in top gear and knew what was going on. An article published in The Irish Times three months before the general election was damning regarding the matter in question. It stated: “Belfast International, which is owned by ACDL and handles 5 million passengers a year, is the bigger of the two [airports in Belfast] and thought more likely to be chosen by the airline [Aer Lingus] should it choose the city.”

Chairman

The Deputy's point is well made.

Deputy Frank Feighan

It is obvious that the Department of Transport was unable to detect what was happening. There are 20 to 30 people working in the Government Information Service monitoring what I say today. Has it or any member of the Government contacted the Department in the past five years with information such as this suggesting that it might look at it? It was in the Government's interest and it should have contacted the Department. Has it ever contacted the Department--

Chairman

The Deputy has already asked the question.

Deputy Frank Feighan

Has the Government Information Service ever relayed information to this Department, or to any other one, which it should have known?

Deputy Michael Kennedy

I welcome Ms O'Neill and her colleagues. I welcome the clarification given that lessons have been learned and procedures are in place to avoid a recurrence in the future.

In the event of Aer Lingus offering the Heathrow slots for sale in the future, what role would the Department of Transport play? What mechanism is in place in terms of advising the Minister and Government on whether they should be sold? Does the Department have a function in that regard?

I wish to make one suggestion. The report is very comprehensive and I thank Ms O'Neill for it. However, I did not find the use of job descriptions instead of people's names easy to follow. We know that Mr. Fintan Towey is the principal officer and that Mr. John Murphy is the Assistant Secretary but it would be useful when writing a report to state, for example, Ms Julie O'Neill met or telephoned Mr. John Murphy or Mr. Fintan Towey. It would make it easier to follow. I make that point because in the accompanying letter and e-mails, the names are clearly stated. It is not a case that the people are not identifiable.

Deputy Áine Brady

I thank the group for its attendance. Has any action been taken to improve the process of having press articles relating to the Department of Transport brought to the Secretary General's attention?

Chairman

I have two brief questions. In view of the fact Aer Lingus made this decision on a commercial basis, is it possible it could decide, on a commercial basis, that a Cork-Heathrow slot could be switched to a JFK-Heathrow one given that it would appear that JFK-Heathrow would be a far more profitable route? Has the Department discussed that with Aer Lingus?

If in the future it became clear the Shannon-Heathrow route could become commercial — that is quite a possibility given the very significant motorway network being built at great speed in the west — has the Department had any discussions with Aer Lingus about the possibility of coming back to Shannon?

Ms Julie O’Neill

I will take a few of the easy questions first. I sincerely hope not to have to write another report like this in the foreseeable future but if I do, I will take what the Deputy said on board. Out of courtesy to people, I am always conscious not to name names in a very overt way. However, at the end of the day, we are all here and are up for being named. It is a fair point that it makes readability a bit more difficult.

On the issue of press articles and the Government Information Service, we have a scanning arrangement in our Department which works very well in terms of bringing information to our attention. I get the press cuttings every day. Sometimes, despite my attempts to read them on the day, I might only get to read a batch of them at the end of the week. I must look at those specific ones to see them in context. However, without having the benefit of having them in front of me, the issue of Aer Lingus establishing a new base was not in itself news to me. I do not recall those articles at this stage but that the base might be Belfast would not have set off any alarm bells.

Deputy Pat Breen

It concerned slots.

Chairman

There will be no interruptions.

Ms Julie O’Neill

I am trying to deal with it. The issue that made me jump on the morning of the two articles that appeared on 13 June was a suggestion that an announcement was imminent which, most certainly, was news to me and was a concern that was well articulated by Mr. Murphy. I will let him pick up on a few of these questions in a few minutes. Quite clearly, the announcement was nowhere near imminent in February. I now understand that even as late as late June, Birmingham was still in play and was very much in play at the time I spoke to the chairman. I will look at those articles.

Deputy Kieran O’Donnell

An announcement was imminent. The announcement was made.

Chairman

We cannot allow interruptions at this stage.

Ms Julie O’Neill

Somebody asked me at one stage about the announcement on 3 August. Quite clearly, that was a decision by Aer Lingus to announce over the bank holiday weekend. That had nothing to do with us.

I understand the Government Information Service provides a service that connects with the press officers in Departments. In the normal course of things, I do not receive and do not expect to receive information direct from the Government Information Service. Sometimes the media and monitoring unit within the Government Information Service raises issues and acts as a resource. We would often use it if, for example, we wanted to get the transcript of a recording of a radio interview on a local radio station because, clearly, we cannot track everything ourselves.

I understand Deputy Michael McGrath raised the issue of the realities of the world in which we live. I welcome the Deputy's comments because they are an acknowledgement of the reality for all of us. We are in a merciless aviation environment internationally. Let us be clear about this. It is merciless. The survival of the fittest is what is at stake here. I am not in the business of commenting on Government policy but, in making the decision to allow Aer Lingus to go to the market, a critical factor at the time the decision was made was that Aer Lingus needed to have access to capital to grow and needed to have access to the markets. That meant that Aer Lingus had to have commercial freedom.

It is sometimes assumed that before Aer Lingus was floated free, we were in a position to interfere with the operational decisions about routes. I remember how during Deputy Séamus Brennan's tenure as Minister for Transport, we had long stopped interfering with the commercial decisions of Aer Lingus on a day-to-day basis because to do so would, frankly, hamstring it. Frankly, I cannot give any kind of certainty that similar things could not happen in the future in respect of Cork or Dublin because a call had to be made at the end of the day in terms of bringing Aer Lingus to the market.

I will get Mr. Murphy to comment on the restrictions on the sale of slots, which is one issue. However, there is an issue in terms of the commercial freedom to utilise those slots, which has been picked up by Deputy Broughan in respect of the Heathrow to Malaga route and by the Chairman in respect of the route between Heathrow and John F. Kennedy Airport. What can we do about that? One of the things that was talked about was the independence of the airports and strengthening them so that they can attract the best kind of business for their catchment areas, which I think is correct.

We must also remember that Aer Lingus is based on an island. We are acutely conscious of this. Aer Lingus is based on an island that does not have a land link to Europe. Therefore, there is a very healthy demand, including a commercial demand, for services on and off the island, whether it is built by Aer Lingus or anybody else. While I will not do anything that suggests that we have some kind of guarantee about the disposal or reallocation of the Dublin-Heathrow slots, I am satisfied that there is huge commercial viability in those at the moment. At the end of the day, we must ensure that we have airports that are attracting the best kind of business to their catchment areas, not just from Aer Lingus but from all others. A strong Aer Lingus that is growing and increasing its services on the transatlantic service and on all its short-haul services is a more valuable asset to us at the end of the day. I will ask Mr. Murphy to deal with the question of PSOs and I want to bring Mr. Towey back in again.

Mr. John Murphy

I will answer two questions on protections against the sale of slots and the PSO. In respect of the sale of slots, in the run up to the preparation for the privatisation, one of the strategic interests we were concerned about was a risk that a new owner of Aer Lingus would seek to dispose of a valuable asset, namely, slots at Heathrow. We sought to build in protection against that happening. That required some fairly complex negotiation with the European Commission because there is significant prohibition on golden share-type arrangements that governments sometimes try to put in place. The arrangement concluded allowed for the following situation.

The articles and memorandum of association allowed shareholders to block the transfer of ownership elsewhere, not reallocation within the company. This could be blocked by a special resolution, supported by the State as a shareholder plus another 5%. A prohibition was placed on the State alone being able to do this because the European Commission considered it would amount to a golden share arrangement, to which it objected. We considered seeking more than protection on the sale of slots but, as Ms O'Neill indicated, a balance had to be struck. The objective of privatisation was to ensure Aer Lingus would have access to capital and the commercial freedom to compete effectively in a difficult market and realise its potential. We had to strike a balance between protecting the sale of slots and leaving the company with the commercial flexibility to use its resources to best commercial effect.

Deputy Thomas P. Broughan

The Department did not safeguard Ireland's strategic interests. It was similar to a house with an alarm at the front but nothing at the back. A double lock was needed. It was a major flaw. The rumours that our friends in the media put out, that the Department wanted to be shut of Aer Lingus — lock, stock and barrel — were validated. If Ryanair takes over, as Mr. O'Leary tells us he intends, and is already five to seven times the size of Aer Lingus, did the Department not fail to protect the airports at Shannon, Cork and Dublin?

Mr. John Murphy

We are not here to comment on Government policy. The view taken by the Government, after much consideration, was that Aer Lingus should be privatised to compete with its rivals on a level playing field. The State concluded that we should maintain a shareholding for two reasons, one of which I have outlined. The second was that, as long as the State had a 25% shareholding, anyone who sought to acquire the company would not be able integrate the assets with another company or change the articles of association and, by virtue of the State having a minority shareholding, it would be difficult for a hostile takeover bid to succeed.

Chairman

Is it correct to say that although Aer Lingus is barred from selling the slots, it could transfer other slots to locations outside Ireland? Have discussions taken place with it to ensure this will not happen?

Deputy Fergus O’Dowd

They cannot be sold or leased but can be transferred.

Chairman

Excuse me, can we have an answer to that question?

Ms Julie O’Neill

I do not want to rephrase what Mr. Murphy said. Decisions were taken on how much commercial freedom should be granted to Aer Lingus. Deciding to sell something to the private sector with the hands of the company tied behind its back in terms of commercial decisions about the deployment as opposed to the disposal of slots, which all its competitors can do, would have made it unsellable and made it impossible for Aer Lingus to function. Clearly, there were downside risks, which we have seen. We cannot tell Aer Lingus that it cannot transfer other slots outside Ireland, just as we could not prevent it from transferring Shannon slots. We worked hard to convince it not to leave Shannon Airport and then suggested it should be open to the possibility of coming back to the Shannon route. The greatest opportunity to encourage it to return to Shannon Airport is by offering an economic and cost effective service at the airport and demonstrating that the business is there for it.

The issue of our mandate to the directors on the board, including the two that are to be appointed, has arisen previously. One of the aspects of the directors' mandate will be to state that they have full regard to the importance the Government attaches to the slots and to regional balance and other issues. Directors have fiduciary responsibility and the board and the company must ultimately make commercial decisions. That is the reality of privatisation. It is also the reality of the world in which we live.

Deputy Kieran O’Donnell

The question on PSOs was not answered.

Mr. John Murphy

The Deputy inquired about PSOs and whether PSO support for a Shannon-Heathrow service should be considered. A number of issues arise in respect of PSOs and the circumstances in which they can be used. The Minister asked us to enter discussions with the most senior officials in DG transport in order to explore what can be done to promote connectivity, not just narrowly in respect of a Shannon-Heathrow service but more widely from the west.

A number of specific issues would have to be addressed in the context of a Shannon-Heathrow service. First, Heathrow is one of five airports in the greater London area which are regarded as constituting a market. There are difficulties regarding providing an operator, whomever that might be, with a PSO in respect of a service to one of those airports when there are other carriers operating from the same airports, without the benefit of PSOs, to other airports in the same market.

Deputy Kieran O’Donnell

I understand there are two EU regulations involved, namely, 2408/92 and 95/93. Under the first of these, the Government is perfectly entitled to make the Shannon-Heathrow route a protected route. Under the second, the British Government can provide slots at Heathrow for the route.

This matter will arise in respect of Cork and Dublin. Ireland is an island nation and there are major implications for it. Our guests stated that the Department is responsible for implementing Government policy, the basis of which is to provide proper aviation services on a regional basis. Various interest groups in the mid-west, including the Atlantic Connectivity Alliance, which is comprised of a broad range of business interests, is writing to the Department and the Minister. Will the Department be examining whether the PSO will work?

Chairman

We are aware of that matter. The reply offered was that the matter is under discussion. Perhaps the officials from the Department will communicate with us when it has been discussed further with the authorities in Brussels.

I will take a final question from Deputy O'Dowd before we sum up. I want to bring these proceedings to a close as soon as possible.

Deputy Fergus O’Dowd

Alarm bells began to ring following press reports issued on 13 June. The Secretary General and her officials saw these. Who prepared them and from where did they come? In reply to a parliamentary question tabled in my name, the Minister stated, "My Department's Press Office did not bring press reports relating to the establishment of a hub by Aer Lingus in Belfast to my attention before my office was made aware of this possibility at the end of July." If the press office did not bring the reports to the Minister's attention, what was it doing?

Chairman

I will allow a brief supplementary from Deputy Broughan, the Labour Party spokesperson in this area.

Deputy Fergus O’Dowd

It appears that there has been a cover-up because the press office is not issuing press reports.

Deputy Thomas P. Broughan

Have the two new directors been selected? When will their appointments be announced?

Ms Julie O’Neill

The appointment of the directors is a matter for Government. I understand the Minister and the Taoiseach are in the process of selecting them. However, nothing has been finalised as yet. I expect the process to conclude shortly.

On Deputy O'Dowd's question, we have a small unit within the Department which is not part of the press office but which is part of the corporate services division and which does a job in terms of--

Deputy Fergus O’Dowd

However, the Department has a press office as well.

Ms Julie O’Neill

Yes.

Deputy Fergus O’Dowd

I am trying to understand this critical issue. The Department has a press office which did not keep--

Ms Julie O’Neill

I do not believe I saw those articles in the press cuttings because they tend to come around a little later.

Deputy Fergus O’Dowd

They are dated the 13th.

Ms Julie O’Neill

That is the way I included them in the report.

Deputy Fergus O’Dowd

That is why Ms O'Neill made the call.

Ms Julie O’Neill

No. I made the call because I had looked at the newspaper. I had the Irish Independent on my desk. I opened it and saw the article.

Deputy Fergus O’Dowd

That is the second press cutting.

Ms Julie O’Neill

Yes.

Deputy Fergus O’Dowd

It is mentioned in the report.

Chairman

Please allow the Secretary General to continue.

Ms Julie O’Neill

I read the Irish Examiner more frequently these days.

Deputy Kieran O’Donnell

On the basis of regional policy.

Deputy Fergus O’Dowd

Did the press office--

Chairman

Deputy O'Dowd has put a question. Will he please allow the Secretary General to answer?

Ms Julie O’Neill

Let me be very clear. I read the newspapers that morning. Three newspapers came through my door and I looked at them. It was on that basis I made the telephone call. I meant to bring with me the thick batch of press cutting which came that day. A couple of clerical officers come in extremely early every morning, scan all of the newspapers and put together the press cuttings. This is a service they provide for the entire Department, including the press officer.

The role of the press office is to deal with media queries to the Department. It is not part of the service which provides information for me or the rest of the Department in this regard. I received them from a unit which was not the press office. The press office has an extremely important function.

Deputy Fergus O’Dowd

I wish to ask a key question. Does the unit provide this service for the Minister, as well as the Secretary General?

Chairman

There will be no further questions, particularly about newspaper cuttings. I have been extremely reasonable.

Deputy Fergus O’Dowd

This is a reasonable question.

Chairman

Ms O'Neill will answer the questions which remain to be answered.

Deputy Fergus O’Dowd

Ms O'Neill is ready to answer.

Ms Julie O’Neill

It is available on the staff intranet in the Department which means it can be picked up by anybody.

Deputy Fergus O’Dowd

Can it be picked up by the Minister and his political staff?

Ms Julie O’Neill

It can be picked up by anybody in the Department.

Deputy Fergus O’Dowd

Therefore, the Minister did not pick it up and it was available to him. That is it in a nutshell.

Ms Julie O’Neill

With all due respect, a Minister on his first day in office will have a great deal on his mind. I doubt the first thing he would do is read every article in every newspaper.

Deputy Kieran O’Donnell

It was not his first day in office.

Deputy Fergus O’Dowd

This was the most important story of the year.

Ms Julie O’Neill

It became the most important story. It was not on 13 June.

Deputy Kieran O’Donnell

Deputy Cullen was in situ as Minister on 13 June. Deputy Dempsey took up his role as Minister on 14 June.

Chairman

Will Ms O'Neill reply to the other questions asked?

Deputy Fergus O’Dowd

The report states the press officer had the cuttings but did not give them to the Minister.

Chairman

Will the delegation reply to the other questions asked? I need to bring this to a head.

Mr. Fintan Towey

A question was raised about why I had made contact with the DAA. It is quite simple. I had pre-existing contacts with the DAA on statistical matters. I had obtained information previously and had a relationship with it. I was not aware that Shannon Airport had an independent statistics unit. I learned about it subsequently and had contact with it.

Deputy Pat Breen

It is amazing that Mr. Towey, as an officer of the Department of Transport, did not know this.

Chairman

No interruptions, please.

Mr. Fintan Towey

It may be amazing but I do not have responsibility for the DAA. I dealt with Aer Lingus issues during the past two years. I never dealt directly with the DAA.

Deputy Pat Breen

Mr. Towey could have asked Aer Lingus for details on passenger numbers.

Mr. Fintan Towey

I operated on the basis of my knowledge at the time.

Chairman

I thank the Secretary General and her two officials. It is obvious mistakes were made in the Department. It is good the Secretary General has admitted to them. We all make mistakes and lessons will be learned. It is my intention to ask the officials to come before the committee again following our other meetings on Shannon Airport to discuss its future which we did not discuss in as much detail today as I would have liked. I thank members for their questions and analysis of the problem.