John O'Mahony (Mayo, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The purpose of the meeting is to engage with stakeholders to establish the likely repercussions of the potential sale of Aer Lingus to the International Aviation Group, IAG. Members will have seen statements from Dublin and Cork airports outlining their responses to the committee's invitation. Members will also be aware from correspondence that officials from the Department of Transport, Tourism and Sport did not consider it appropriate to attend today's meeting as the Irish takeover panel has ruled that Aer Lingus is now in an offer period and, under Irish market abuse law, the relevant officials are deemed to have access to inside information and are obliged to ensure that such information remains confidential. Members are also copied with the submission made by the Irish Tourist Industry Confederation, ITIC, which on balance views the potential takeover by IAG positively. The committee has received a significant number of communications from members of the public on the possible takeover. On behalf of the committee I welcome Mr. Emmet Oliver and Mr. Kieran Donoghue, IDA Ireland; Mr. Niall O'Donnellan, Enterprise Ireland; Dr. Neil Walker and Ms Mary Rose Burke, IBEC; Mr. Stephen McNally and Mr. Tim Fenn, Irish Hotels Federation; Dr. Neil Walker, IBEC; and Mr. Adrian Cummins, Restaurant Association of Ireland. We hope this engagement will provide the committee with a greater insight into what the possible consequences of a potential takeover of Aer Lingus might entail.

I draw attention to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009 witnesses are protected by absolute privilege in respect of their evidence to the committee. If witnesses are directed by the Chairman to cease giving evidence on a particular matter and they continue to do so, they are entitled thereafter only to a qualified privilege in respect of their evidence. Witnesses are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him or her identifiable. I wish to advise also that any submission or opening statements made to the committee will be published on the committee's website after the meeting. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable.

I invite Mr. Kieran O'Donoghue to make his opening statement.

Mr. Kieran O'Donoghue:

I thank the Chairman and Members for the invitation to address the committee. They will be familiar with the role of IDA Ireland. We are the Government agency responsible for promoting Ireland as a location for foreign direct investment, FDI. We report directly to the Department of Jobs, Enterprise and Innovation in this capacity.

We currently manage an investor portfolio comprising approximately 1,100 international companies. These companies employ more than 174,000 staff directly and spent approximately €22.4 billion in the Irish economy in 2014. Our client companies operate across a diverse range of sectors, including international financial services, life sciences, medical technologies, pharmaceuticals, IT, engineering, and online and professional services. Companies in these sectors undertake both manufacturing and service activities and include firms such as Intel, IBM, Microsoft, Citigroup, State Street, Google, Facebook, Pfizer, GSK and many more.

As a general rule, the principal markets and customers for these companies are located outside Ireland. As a result, Ireland is a base or platform from which these companies export their products and services to the UK, continental Europe and other international markets. In 2013, the year for which the latest data are available, exports by IDA client companies were valued at €125 billion, equivalent to 67% of total exports from Ireland.

As Ireland is an island nation with no direct land bridge to Europe and other markets, these companies are critically dependent on air, sea and telecommunications linkages from Ireland to their home countries, suppliers and customers. In this context, Ireland’s ability to win and retain foreign direct investment, FDI, is critically dependant on international air connectivity - for passengers but also, increasingly, for air cargo. This dependence is increasing over time.

There are several reasons why air connectivity matters for FDI, on which I wish to dwell briefly for a moment. It provides the principal means by which international companies and their key decision makers visit Ireland and assess the country, the jurisdiction, as a location for investment. Air access enables executives from existing companies to engage in person with their overseas headquarters and with affiliates around the world. The functions or activities performed from Ireland are increasingly what we describe as “high-touch”. Sales and marketing departments, EU headquarters and so forth require intensive face-to-face interaction between Irish-based executives and overseas colleagues and customers. An increasing number of multinational companies are in the services sector rather than the goods-producing sector, which is generating increased demand for passenger services into and out of Ireland. Services are expanding as a share of total exports from Ireland and now account for 53% of total Irish exports. Manufacturing firms are producing more high-value, low-volume products that are increasingly being transported by air. Air cargo currently accounts for 16% of total merchandise trade from Ireland by volume, but 38% in value terms. As the markets served from Ireland increase in number and become more geographically distant, the importance of global reach and time-to-market considerations is expanding the importance of high-quality air connections into and out of Ireland.

As a result of these trends and developments, Ireland needs frequent, direct and competitively priced flights to multiple destinations in the UK, the United States and Europe. We in the IDA would also like to see the commencement of direct connections to destinations in the Asia Pacific region as our business in this region, particularly in China and India, grows. As the committee knows, the largest segment of our business is made up of US companies locating activities in Ireland to service European, EMEA or international markets. In a company’s site selection process, the ability to fly executives from key cities in the US, convenient to their HQ location, directly to Ireland is an important consideration. For example, several client companies have made representations to us seeking ongoing development of Ireland’s air links with the west coast of the United States and other geographies. Direct connectivity to the UK and Europe is also critical to winning investment projects from companies whose headquarters are in Europe.

Significantly, there are destinations, particularly in the Asia Pacific region and close to second-tier European cities, that have no direct flights to Ireland. In this case, it is important to have access to the large number of destinations served from key hubs, especially Heathrow. This is achieved by high-frequency connecting flights from Dublin and other Irish airports. While Dublin Airport is our primary gateway for inward investment, our increasing focus on trying to ensure a more balanced geographical distribution of inward investment within the country means that we need to preserve and, if possible, increase international air connectivity from airports such as Shannon and Cork. At present, we have a total of 363 client companies, employing 64,000 staff, operating in the regions served by Cork and Shannon. Such connectivity is a key part of a region’s overall attractiveness that can influence the site selection and investment decisions of inward investors.

Ireland continues to have a strong manufacturing sector through the focus on and growth in high-value, low-volume products, typically in the life sciences and ICT sectors. These are frequently shipped by air rather than sea due to the need for rapid delivery. As a result, hold cargo as well as more dedicated air freighter options need to be available.

Air connectivity is critical to winning and retaining inward investment projects. We need long-term direct and indirect air connectivity to our major markets that caters for both passengers and freight. We also need competition between carriers to ensure long-term cost competitiveness.

With respect to any offer for Aer Lingus now or in the future, the IDA is not in a position to assess the impact of the sale of the company without a clear statement from potential buyers on their future development plans for the airline, its route network and services. When such a statement is available, we would expect the relevant authorities here in Ireland to undertake a thorough due diligence of any proposal from a national interest perspective.

In conclusion, therefore, I thank the Chairman for his patience and wish to make the following final points on behalf of IDA. Ireland is a small, open economy that is highly dependent on trade and investment. In this context and in terms of promoting Ireland as a location for inward investment, for tourism and enterprise development more broadly, it is vital that we maintain and enhance air access into and out of the country. The IDA’s principal concern is to ensure and develop air connectivity between Ireland and the sources of inward investment and the markets into which our client companies export goods and services both now and in the future. Requests for information, especially from new investors or those contemplating expansion within Ireland, routinely ask for data on air connectivity, namely, on airlines, destinations served, frequency, etc. This underscores, from the IDA's perspective, the fundamental importance of air access for Ireland’s ability to attract and support investment by international companies. I thank members for their attention.

John O'Mahony (Mayo, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I thank Mr. Donoghue and invite Mr. Niall O'Donnellan of Enterprise Ireland to make his opening remarks.

Mr. Niall O'Donnellan:

I thank the Chairman and members for giving Enterprise Ireland the opportunity to speak to the joint committee. Enterprise Ireland is responsible for helping Irish companies export throughout the world. More than 3,000 clients sell internationally to 189 countries, resulting in more than €17 billion in export sales in 2013. This has resulted in more than 300,000 jobs in these companies through direct and indirect employment, which is 16% of the workforce. As we speak, clients are operational throughout the world in all major centres, with teams from these companies talking to buyers, investors and suppliers, working with key decision-makers on current and future projects, as well as working on-site in many locations. All of this requires global mobility, which is absolutely central and which covers the sectors in which they are involved, namely, software services, engineering, life sciences and food. Our companies are regionally spread throughout Ireland, with the majority of jobs being outside Dublin. As for the markets into which our companies sold in 2013, in terms of exports, 36% went to the United Kingdom, 21% into northern Europe, 12% into southern Europe and the Middle East, 12% into the United States of America and 7% into the Asia-Pacific region. As members can see, these exports are spread widely throughout the world. These are global companies selling internationally.

Enterprise Ireland works with these companies in developing their business plans, building their capability, introducing them to opportunities overseas, helping them to access the knowledge and research in colleges and providing finance, both directly and indirectly. We have 32 offices overseas in all the key markets. As I stated, central to the selling ability of our companies is air connectivity to all key world markets. Consequently, the critical issue for Enterprise Ireland is direct access to key markets. Enterprise Ireland and its clients certainly seek to understand that there is a potential for increased direct access to global hubs for connecting flights, as well as access to regions in the United Kingdom, that is, not just the south east and London region but also to other regions in the United Kingdom. Moreover, as a consequence of the regional spread of Enterprise Ireland's companies, access from Dublin, Cork, Shannon and throughout Ireland is of deep importance. As a conclusion, the overall criterion for Enterprise Ireland and its clients as to changes in the provision of air connectivity is whether the current services are, at the very least, not disimproved. Ideally, they would be improved.

John O'Mahony (Mayo, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I thank Mr. O'Donnellan and invite Ms Mary Rose Burke of IBEC to make her opening statement.

Ms Mary Rose Burke:

I thank the committee for the invitation to speak. I am IBEC's director of policy and corporate affairs. My colleague, Mr. Neil Walker, heads up our infrastructure unit, whose policy remit includes transport and spatial planning. IBEC is by far the largest business representative organisation in Ireland, with thousands of corporate members across dozens of industries, as well in the not-for-profit sector. We operate a countrywide network of staff with regional offices in Cork, Limerick, Galway, Donegal and Waterford, reflecting the broad geographic spread of our membership. This strong regional structure is supported by policy specialists based in our Dublin and Brussels offices. There are frequent interactions on regional concerns, including regular seminars and workshops.

IBEC's transport council, for which Mr. Neil Walker, is responsible, represents both the users and providers of travel and transport infrastructure. It is the national voice of business regarding all transport policy matters. Our core objective for transport policy, including air travel, has always been to ensure appropriate investment in services that will continue to support competitiveness, economic growth and an enhanced quality of life. Our transport council has previously made submissions to Government on national aviation policy, as well as on regulatory issues concerning Dublin Airport.

Over recent weeks, we have taken particular care to consult with our members, through the council, in order to formulate a balanced and an informed position on the implications of a possible sale of the Government's Aer Lingus shares. Given the size and diversity of our membership, it would be unrealistic to expect complete agreement. Nevertheless, there is a fair degree of consensus on the issues at stake and on the approach that ought to be taken in response to IAG's most recent overture. Our members have identified three distinct issues for consideration, namely, the impact of any share sale on the national economy, in particular business and tourism; the impact on balanced regional development; and the impact on our public finances. In addition, I will offer brief observations on the concerns expressed by other stakeholders regarding the extent to which a sale of Aer Lingus shares might lead to rationalisation of jobs in Ireland. I will also speculate on the potential consequences of a decision by the Government not to sell its 25% shareholding at any price.

It is important to start by acknowledging that there is no formal offer from IAG on the table and that we do not yet have all the details in regard to its plans for integrating Aer Lingus into the group in the event of a takeover. However, subject to appropriate safeguards, such a deal could well represent a positive economic opportunity for Ireland as a whole. As I will now outline, there are considerable synergies to be exploited to Ireland's overall benefit. The resulting economic gains would, however, need to be shared across the regions and I will return to this particular point shortly.

Ireland's ease of access to the rest of the world is a key competitive advantage and is crucial for jobs and investment. Excellent connectivity is essential for foreign investors and Irish exporters, as well as our tourism industry. There are good reasons to believe that IAG sees the possible acquisition as a springboard for further growth on the key North Atlantic routes. In recent years, Aer Lingus has successfully grown its share of that market, reflecting the logistical advantage of our location, as well as the brand marketing of what is still seen as our national carrier. Given the capacity constraints at Heathrow, the home base of British Airways, there could well be scope for IAG to promote Dublin as a secondary hub, thereby growing the amount of traffic and improving Ireland's international aviation links. We do not believe that IAG is seeking to buy the company simply in order to strip assets, such as landing slots.

A major concern, however, for some of our members is whether the business plans of IAG would include any commitment to maintaining strong aviation links to Shannon and Cork. Any prospect of reduced frequency of access to Heathrow for Irish travellers would be a big concern, in particular for those using these regional airports.

The outcome on Cork and Shannon Airports of any share sale must, therefore, be a consideration for the Government. International connectivity is a legitimate concern, in particular for our south-west region which is heavily reliant on Heathrow as an aviation hub. However, we believe judgment should be reserved until IAG has had an opportunity to explain its plans in detail and, if possible, to explore ways and means of allaying these concerns. Recent indications are that IAG is, indeed, willing to give appropriate assurances, including binding commitments on the issue of landing slots.

In regard to Ireland's public finances, if a formal offer emerges in excess of €2.50 per share, this would represent more than 60 times the annual dividend paid to the Government over recent years. It would allow for a reduction in borrowing or preferably for an increase in capital investment on essential public infrastructure, such as land transportation. IBEC has for some time been arguing that the level of public investment has been too low for the needs of a growing population and that spending needs to double over the period to 2020.

The proceeds of a share sale could arguably be put to good use rather than retaining the shareholding.

In recent days, some stakeholders have expressed fears that a takeover of Aer Lingus by IAG would lead to large numbers of jobs being lost at the airline. This appears to be based on observations of what happened to Iberia after it was fully merged into IAG in 2011. However, the two situations are not really comparable. Aer Lingus has undergone several rounds of rationalisation during the past decade, becoming one of the most efficient airlines in Europe. As recently as yesterday, Aer Lingus has been seeking to achieve voluntary redundancies in its workforce as part of an initiative that commenced two years ago. Any company, regardless of its ownership, aiming to compete and thrive in a dynamic international market must strive continually to be lean and efficient.

It is worth considering also what might happen in the longer term if the Government was not minded to accept any bid. Although Aer Lingus has been performing well in recent years as an independent national carrier, it remains a small regional player in what is an increasingly consolidated global industry. There are few other groups in Europe capable of offering the same type of strategic fit as IAG, and there is always the possibility of a hostile bidder emerging to take control of the company at some point in the future. The Government stake would not be able to block such an outcome. We anticipate that the expert group now advising the Government on its best course of action will be cognisant of all of these points.

To sum up, we see the proposed merger as potentially very beneficial for the company, for tourism, for inward investment and for the wider business community. We acknowledge that there are legitimate concerns for particular regions but we believe that these can be addressed given sufficient goodwill and trust-building.

John O'Mahony (Mayo, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I invite Mr. Tim Fenn of the Irish Hotels Federation to make his presentation.

Mr. Tim Fenn:

I thank the committee for inviting the Irish Hotels Federation to address the joint committee on this critical national issue. The Irish Hotels Federation, which was founded in 1937, is the national representative organisation of the hotel and guesthouse sector in Ireland, and we are a key stakeholder in Irish tourism. Tourism is one of Ireland's largest indigenous industries, providing 205,000 jobs, which is equivalent to 11% of total employment in the country. It accounts for almost 4% of gross national product. With 54,000 people directly employed in hotels and guesthouses across every county and town, the hotel sector is playing a critical role in contributing to recovery in the tourism industry and the wider economy. We believe the potential sale of Aer Lingus would have enormous implications for the tourism industry and the wider economy, given the unique challenges Ireland faces as a small island on the edge of the Atlantic with no passing footfall.

Maintaining strong levels of connectivity with our international markets is of vital importance. As such, the IHF has serious concerns about the sale of Aer Lingus and the prospect of the reallocation of its Heathrow slots to other routes down the line. Let there be no doubt about what is at stake. Any agreement that fails to safeguard those slots for Irish routes would have serious consequences for the long-term prospects of our national tourism product. The future loss of these slots is very real risk for Ireland given the constraints currently faced by Heathrow Airport, which is now at full capacity. In light of the critical strategic importance of these slots, it is imperative that the Government secure contractual rights to determine their use as part of any potential sale of the State's interest in the airline. In this regard, we support the recent commitment from the Government to seek a permanent and cast-iron guarantee in respect of connectivity for Shannon, Cork and Dublin Airports.

The temporary five-year arrangement proposed by IAG is entirely unacceptable. There needs to be a permanent commitment if any sale is to be considered by the Government. From a regional perspective, for Shannon and Cork, Heathrow slots are crucial in terms of providing tourism and business links directly to the south and west of Ireland. The figures speak for themselves. In 2014, passenger numbers between Shannon Airport and Heathrow stood at 233,000, while passenger numbers between Cork and Heathrow stood at 400,000.

The loss of the slots would be detrimental for national tourism, business employment and the ability of the west and south regions to attract multinational investment and sustain economic growth. Given the stakes involved, it is imperative that the Government uses its shareholding to protect the valuable slots in the national interest. Any other course of action would be short sighted. Thank you, Chairman, for the opportunity to address the Oireachtas joint committee. We look forward to addressing any matters the members may wish to raise.

John O'Mahony (Mayo, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I call Mr. Adrian Cummins from the Restaurants Association of Ireland.

Mr. Adrian Cummins:

I am here in my capacity as chief executive of the Restaurants Association of Ireland. On behalf of the association I thank the Chairman and committee for inviting me here to speak on such a crucial issue for the tourism industry in Ireland. The Restaurants Association of Ireland represents more than 1,700 restaurant owners and small businesses in every county and constituency in this country. A substantial 45% of people involved in the tourism industry work in the restaurant sector.

The proposed sale of Aer Lingus to IAG should not be rushed and whatever decision is made must be considered in the national interest. Hasty decisions will result in the loss of a national asset that is respected worldwide. Last week the committee heard from Chambers Ireland, trade unions and Shannon Airport. I do not intend to go over old ground covered by the committee but to set out how the restaurants sector in Ireland views the proposed takeover. Tourism numbers in Ireland have returned to 2008 levels after five lengthy years of despair and hardship, especially for small tourism businesses. Markets that have seen significant growth are North America, mainland Europe and long-haul destinations, all of which have proven that access is paramount for tourism levels to continue growing.

It gives me great pleasure to mention Ireland’s flagship tourism project, the Wild Atlantic Way – 2,000 miles of a national treasure which has proven to be one of the greatest economic generators for the west coast. This project is reliant on Ireland’s aviation connectivity with the world. When tourists arrive in Shannon and Cork airports they expect to start their journey on the world’s most written about, iconic and talked about tourist routes. Yesterday, when IAG released its statement giving the Government legally binding assurances to protect the 23 London Heathrow slots for five years, it was a step in the right direction. It gave some reassurance to our all-important tourism industry but it did not go far enough in my opinion. There was indeed something missing from the IAG statement, namely, the safeguards for Cork and Shannon airports with regard to connectivity to London Heathrow. Also omitted from the statement was any reference on the future of the Aer Lingus regional brand servicing Kerry, Cork and Donegal.

I suggest that the Government would give a commitment to the effect that the details of the proposed sale would be laid before the Oireachtas, as provided for under section 3 of the Aer Lingus Act 2004. As an island nation, Ireland is very dependent on connectivity and the tourism industry strongly depends on access to the country. It is simple; the more access, the more tourists will visit our wonderful island. The Restaurants Association of Ireland is opposed to the sale of Aer Lingus if there are no long-term, cast-iron guarantees that the 23 Heathrow slots are safeguarded for Cork, Shannon and Dublin airports.

John O'Mahony (Mayo, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I thank Mr. Cummins. I wish to ask one question before I hand over to the members. Mr. Donoghue from the IDA made a point that was echoed in the other presentations, namely, the importance of connectivity to all of the airports and the regions. He said he would like to see the commencement of direct connectivity to destinations in the Asia Pacific region as IDA’s business in the region, in particular in China and India, grows. He then referred to clients continually looking for the ongoing development of connections to the west coast of the USA. Could the ongoing and new connectivity that is needed be provided by Aer Lingus at present, the status quoas it were, or would it be better provided under a new arrangement?

Mr. Kieran Donoghue:

At the moment there are no direct services from Ireland to those destinations. Hubs such as Heathrow and, increasingly Dubai, are used for that purpose by our clients.

However, strategically and thinking long term, should an economic business case develop to allow it to happen, a direct service to those destinations would be helpful to our clients.

John O'Mahony (Mayo, Fine Gael)
Link to this: Individually | In context | Oireachtas source

In Mr. Donoghue's opinion, could that be provided by Aer Lingus as it currently exists?

Mr. Kieran Donoghue:

My understanding is that Aer Lingus could not provide that service at the present time - not direct services to those destinations.

John O'Mahony (Mayo, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Do any other witnesses have an opinion on that? If not, I will call Deputy Dooley.

Timmy Dooley (Clare, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

I welcome the group members and thank them for their presentations. From the bulk of what we have heard today it is clear that the State's part ownership of Aer Lingus has been vitally important in developing not just our tourism sector but also, as importantly, our key business sectors throughout the country. Aer Lingus's access through Heathrow in particular, as identified by Mr. Donoghue, is a critical component of our foreign direct investment offering, and obviously needs to be maintained. There is almost unanimity about the necessity to retain that connectivity. Where the spread of presentations seemed to tail off was in how it is hoped to achieve that in a sale.

To some extent, all the witnesses have referred to ways of allaying fears, which is what Ms Burke identified. She spoke of putting certain guarantees in place. Anybody I have spoken to in the corporate sector, however, cannot understand why we are discussing the notion of some kind of guarantee from the purchaser of the State's shareholding. How one might put in place or structure a guarantee that would ultimately ensure that the State would not lose access to these markets is almost laughable when one talks to corporate lawyers. Nobody in the real world is suggesting that one can put such guarantees in place. That is why I would welcome it if the witnesses, who have indicated they accept the notion of selling the State's share, could outline how some kind of irrevocable guarantees could be put in place. Two of the witnesses said that five years would not be enough and that it should really be in perpetuity, but nobody seems to be coming forward with any methodologies for doing that.

Interestingly, Ms Burke is the only person I have heard in recent weeks suggesting that somehow €2.50 per share might represent good value for the State. Even people who support the State's disposal of its shareholding are saying that €2.50 or €2.55 per share significantly undervalues that shareholding.

I want to ask all the representative groups - although not Enterprise Ireland or the IDA - if Aer Lingus is a member of any of their groups and, if so, what is the airline's annual contribution to those organisations?

John O'Mahony (Mayo, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I will take Deputy O'Donovan now, and we will go in twos.

Sean Barrett (Independent)
Link to this: Individually | In context | Oireachtas source

Could we have the answer to that question, if we may? It is important as we have to know who is representing Aer Lingus here this morning.

John O'Mahony (Mayo, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Could we have a short answer to that?

Mr. Stephen McNally:

There is no connection whatsoever with the Irish Hotels Federation.

Mr. Tim Fenn:

No connection with us, or any contribution to our organisation.

Ms Mary Rose Burke:

IBEC represents pretty much every business in Ireland. Most big players in the transport and aviation industries are members of IBEC.

Timmy Dooley (Clare, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

Including Aer Lingus?

Ms Mary Rose Burke:

Yes but I am representing the views of all of our members.

Timmy Dooley (Clare, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

Can I get clarity on that? There were two parts to my question. First, is Aer Lingus a member of the organisation? I think Ms Burke has answered "Yes" to that. My second question concerned its annual contribution to her organisation.

Ms Mary Rose Burke:

I do not know that off-hand, but my colleague Dr. Walker may.

Dr. Neil Walker:

We have a standard, fixed scale which is based on the size of the company's turnover. I do not have the exact figure in my head but they are a medium-sized member.

Timmy Dooley (Clare, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

Maybe Dr. Walker could come back to the committee with that figure.

Dr. Neil Walker:

That is no problem.

Timmy Dooley (Clare, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

I thank Dr. Walker.

Patrick O'Donovan (Limerick, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I wish to revert to Ms Burke's commentary on how things stand now. I suppose we could go back seven or eight years to how this thing started in the first instance and how we were left with a 25.1% rather than 100% share, but we are where we are.

As regards IBEC's position on this, has Ms Burke asked her membership in Limerick - which I represent, including Castletroy, Raheen, Newcastle West and all over County Limerick - if selling the 25.1% share in Aer Lingus is in their best interests? The last time we went down this road, when the first 74.9% was sold, we saw the slots being removed from Shannon Airport and put into Belfast with great aplomb.

It was the only measure from the South the then First Minister in Northern Ireland, the late Dr. Ian Paisley, welcomed.

What engagement has IBEC had with its member companies in the Limerick region? I know from speaking to them that they are not saying what Ms Burke is saying.

Ms Mary Rose Burke:

We have engaged with members throughout the country. We are a national organisation and we have to balance the views of members across all sectors, all sizes of business and all geographical locations. Through the transport council, we have contacted our members who have an interest in this area and have looked at those. As I said in my statement, it would be unrealistic to think that we would have complete agreement on the issues because there are quite a diversity of views, but there certainly is consensus on the three distinct areas that I outlined which look at the national interest: the impact on the national economy, particularly business and tourism, the impact on balanced regional development, and the impact on the public finances. Those are the three issues that our members, as a collective, believe the Government needs to take into account. Equally, as we saw, the Government's holding of 25% does not currently give any guarantees around the slots, and what appears to be on offer is some more control than the Government currently has.

Patrick O'Donovan (Limerick, Fine Gael)
Link to this: Individually | In context | Oireachtas source

In the absence of those assurances, in the absence of that clarity, and in the absence of not knowing what is on offer, how did IBEC arrive at a decision that this was a good idea?

Ms Mary Rose Burke:

We are not proposing that it is a good idea. We have highlighted areas we believe Government needs to take into account.

Patrick O'Donovan (Limerick, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Ms Burke stated that in general they were in favour.

Ms Mary Rose Burke:

We are equally saying that there is a risk in looking at all the downside without also evaluating and taking into account in a balanced way the potential upside. From what we can see, and not all of the details are on the table, there is potential upside for Ireland if it is part of a strong global brand with a strong balance sheet that has growth ambitions for the company. We need to focus on the potential for future growth, the potential to drive further footfall, and how we strengthen Ireland's connectivity and competitiveness. Regardless of who owns which airlines, the issues for business are around competitiveness, growth and increased connectivity.

Patrick O'Donovan (Limerick, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Would Ms Burke accept that there is a potentially massive downside to the region from this?

Ms Mary Rose Burke:

There are risks to the regions that have been highlighted. There are concerns around connectivity. Business needs connectivity through the regional airports into hubs as well. However, on balance, the upside needs to be looked at as well.

Patrick O'Donovan (Limerick, Fine Gael)
Link to this: Individually | In context | Oireachtas source

How does IBEC relay that balance to its members in Foynes, Askeaton and Limerick who depend on an early morning flight to Heathrow or an afternoon flight to JFK or Boston, from an airport that is 40 miles up the road or from one that is more than 150 miles away where one cannot park a car practically in the same time zone because it is so big? Shannon has all of the facilities that are available. If one asks any executive of a multinational IDA Ireland company in the mid-west, one element that has been key to bringing such companies into the Limerick and Shannon region is that it has an international airport and the deepest seawater port in the country. I cannot square how IBEC would represent-----

Ms Mary Rose Burke:

We are very much agreed that connectivity to Shannon is important. The point I would make in that regard is that the 25% shareholding the Government has gives it very little control over operational issues as it currently stands.

Dessie Ellis (Dublin North West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

I thank everyone for their presentation. Everyone seems to be agreed there are enormous implications for the sale if it takes place. We have heard differing views. I would certainly be worried about the issue, which has not been mentioned, of job losses. IAG, if it was to take over here, would start trimming the workforce and start to bring it up to what it wants.

I note IAG stated it would give a five-year guarantee on the slots. That is not worth the paper it is written on. What would happen after five years? We have seen a steady growth in difficult economic times of sectors such as tourism and manufacturing.

We are talking about putting that in jeopardy for the sake of €300 million, which one can compare to the value of the tourism industry. The people from IBEC know how many jobs and the level of exports that are involved. I do not see the logic in a sale.

The Irish people should have a say in this by means of a referendum. This asset belongs to the State and not to any political party that comes into power or has the numbers in Parliament to deal with it. When it comes to assets belonging to the State, the people should have a say. There are vested interests who support that sale of the remaining shares owned by the State - for example, executive managers, among others, stand to make €30 million. If I had shares in a company, I would forever try to sell them if I thought the market was right. We have one of the most modern fleets around. It is not that big is good, which seems to be the general impression I am getting. We have an airport and a service that is fit for purpose. It is modern, up to date and doing extremely well. Why would we take a risk in selling slots in Heathrow that mean a lot?

IBEC never surprises me; it always seems to favour whatever deal is on. Ms Burke indicated that she does not believe IAG would strip assets from the company. I do not know what that is based on. She also argued that the money from the sale could be invested elsewhere. We are talking about €300 million, and when we weigh that up against the risks, including the overall consequences, I cannot see the logic in making a statement like that. When we see eminent people such as Michael Smurfit outlining their serious concerns, we should consider why we would sell something that is working and delivering in the middle of a massive recession.

Michael Fitzmaurice (Roscommon-South Leitrim, Independent)
Link to this: Individually | In context | Oireachtas source

I thank the witnesses for their contributions. I ask the representatives from IDA Ireland and Enterprise Ireland about a hypothetical scenario in five years' time if we get guarantees on Cork and Shannon. If disaster struck and the Shannon and Cork services lost those slots, what would be the consequences for people who are trying to go out and attract foreign direct investment in the area of the 33% of Enterprise Ireland-supported exports that go to the UK? What are the consequences when one leaves Dublin and goes to other parts of the country? Do the witnesses believe this could be detrimental for foreign direct investment?

Mr. Niall O'Donnellan:

Loss of connectivity or a reduction in connectivity between Shannon and Cork and significant destinations, particularly in the UK, would be deeply significant for a range of companies in the engineering, services, software and food sectors. It clearly would be a very significant issue.

Mr. Kieran Donoghue:

I thank the Deputy for his question. If the regional airports, particularly Cork and Shannon, lost access to Heathrow, it would certainly have a negative impact on our ability to distribute foreign direct investment into the regions. Our existing clients use that infrastructure to access Heathrow and travel beyond the Heathrow hub. There would be a negative impact if that happened. The reality is that we do not know what is likely to happen.

Michael Fitzmaurice (Roscommon-South Leitrim, Independent)
Link to this: Individually | In context | Oireachtas source

I do not believe in hypothetical guarantees. No more than anybody else in business, as the people from IBEC know, if I buy something, I would not have somebody else down the road running that business for the next five or ten years.

If someone buys a company, he or she buys it and runs it himself or herself.

I read Richard Branson's book over the weekend about what happened in England with BA and so on. In the hospitality sector, we have the greenway in County Mayo. Tourism figures have increased. We are struggling outside Dublin to attract FDI, including in places such as Athlone, Carrick-on-Shannon, Limerick and Cork. We have to put our best foot forward to get people working because that is not happening at the moment. Is there a risk to tourism and everything else we have talked about after work even in the five year slot? Five years in a person's life is a while but in the life of a country it is minuscule.

Mr. Stephen McNally:

From a tourism point of view, it has to be remembered that in 2014 we attracted 7.6 million tourists and it took us five years to get back up to this level. Our largest tourism market is the UK. More than 3 million of those visitors came from the UK and, therefore, connectivity is absolutely crucial. We must also never forget that we are an island and it does not pass one by. It is either coming here or it is not. From that point of view for businesses in our industry and in tourism all over the west coast and the south, connectivity is imperative for us to sustain growth. Every industry has had a difficult five years but tourism has been a shining light and it would be folly for something to threaten that now.

Mr. Adrian Cummins:

On tourism, our aim is to be at 10 million visitors by 2020 and we need to make sure that the connectivity to the west coast is ring-fenced. We are at the 2008 level now and we need to move forward. The west coast depends on tourism. Many places are seasonal operations and they do not want to market their business by telling visitors they must fly into Dublin. They want to market their business by telling them they can fly into the closest airport. The assurance on connectivity for Cork and Shannon airports must be ring-fenced to enable major growth in our sector, especially on the west coast.

Sean Barrett (Independent)
Link to this: Individually | In context | Oireachtas source

I welcome our visitors. The journal.ieopinion poll on this found 58% of respondents against the takeover, 6% against it at the price and 21% in favour. I find the comments of the industry representatives strange, given that they do not reflect what I am picking up. My constituency comprises a substantial number of the diaspora and they are appalled that this is getting such credence. The Stock Exchange rules should not have been invoked earlier and the Secretary General of the Department of Transport, Tourism and Sport should have appeared before the committee. Pro-takeover information is being leaked to the newspapers every day and Parliament has been restricted in its discussions of this.

I refer to the positive comments of the representatives of the development agencies. IDA Ireland's submission states: "We need competition between carriers to ensure long-term cost competitiveness." I could not agree more. Economists always oppose these anti-competitive mergers. They welcomed the deregulation of the market and its opening up to new entrants. In its home market, BA is substantially smaller than easyJet - by at least 10 million passengers - and Ryanair. How BA came to be seen in this country as the patron saint of the regions and the tourism industry is bizarre.

Let me tell the committee what its record is on the island of Ireland. Northern Ireland has 190 air routes: eight from Derry, 81 from Belfast International Airport and 29 from George Best Belfast City Airport; of those, only one route is operated by British Airways. In this country there are 264 routes, with 175 from Dublin, 41 from Cork, 30 from Shannon, 12 from Knock and six from Kerry - again, with only one route operated by British Airways. How people formed the view that selling Aer Lingus to British Airways would promote Ireland as a destination is bizarre.

Let us see how British Airways treats its own regions. Glasgow has 268 routes, of which two are operated by British Airways; Birmingham has 217 routes, with none operated by British Airways; Manchester has 225 routes, with one operated by British Airways; and Edinburgh has 179 routes, with one operated by British Airways. Guess where these routes go? They go to Heathrow, because British Airways is Air Heathrow. It promotes that hub.

Let me give an account of what British Airways has done in the UK regions. BA had previously operated a significant hub at Manchester, but Manchester operations ceased, along with all international services outside London, when the subsidiary BA Connect was sold due to a lack of profitability. Passengers wishing to travel internationally with BA, either to or from regional UK destinations, must now transfer in London. When Ryanair was founded, Heathrow had 35 million passengers a year; the figure is now 72 million. It says it is full in order to preserve the value of the slots. It keeps expanding, and that is where BA plans to divert the Irish business. It is really amazing that people from the business community cannot see the value of what is being done by Aer Lingus as a brand, particularly on the north Atlantic routes. Approximately 2.4 million passengers travel between Dublin and Shannon and North America. The equivalent figure in Scotland, which is a bigger country and also has a diaspora, is about 400,000. British Airways is not what Willie Walsh tells you; it is what it does, and what it does is to seriously neglect Manchester, Belfast, Birmingham, Edinburgh and Glasgow. I would advise members to go and look at the numbers before people make these presentations - wondering, as Deputy Fitzmaurice said, about what might be, and whether we can get a guarantee.

On a radio programme last Saturday, I spoke against this measure. I utterly oppose it and I will be voting "No" at every opportunity. After the programme I called in to what used to be Superquinn in Lucan. There is not the slightest shred of evidence that my good friend Senator Feargal Quinn was ever there, that he founded it, or that he worked in it for four decades, because it is now owned by Musgrave and it is called SuperValu. That is what happens when firms take over. Instead of asking whether we can get a guarantee on this and that, people should realise that it comes down to one thing: either they want a national airline, or they do not. The pilots, who own 7%, are strongly in favour of retention. Mr. O'Leary has 30% and the Government owns 25.1%. We can make Aer Lingus a strong airline by it doing what it has been doing. In every market in which it has competed, Aer Lingus has knocked British Airways for six. This is the inferior competitor taking over a profitable airline which has made great progress under Christoph Mueller. The concern I also have is that neither David Begg nor Christoph Mueller was at the meetings at which this was discussed, and we would rely on them to represent what the management and the workers have been doing in recent times.

Handing the decision on a vital national issue over to a committee of bankers, financiers and accountants and the Stock Exchange takeover panel puts aviation policy in the lap of the same people who bankrupted the country on 29 September 2008, which we are now trying to investigate. Do not make the mistake a second time. This is a profitable airline that has been doing a valuable job. It has 11 million passengers and people say it has an uncertain future. In 2001, Ryanair had 9.4 million passengers, and it will have about 100 million passengers this year. EasyJet, which had 11 million passengers in 2001, will have 65 million passengers this year. There is no reason a profitable Aer Lingus cannot grow. It does not have to be bought in a hostile takeover - and it is hostile, as far as the vast majority of Irish people in Ireland and abroad are concerned, and it should be seen as such by this Parliament.

John O'Mahony (Mayo, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I thank Senator Barrett, who has provided much food for thought.

Eamonn Coghlan (Independent)
Link to this: Individually | In context | Oireachtas source

I am somewhat confused. As Senator Barrett indicated, in a recent poll, 58% of respondents said they were against the takeover and 21% said they were in favour of it.

I do not know whether I am for or against it. The people who are against it say the implications are enormous. Job losses have been mentioned as well as the potential to lose the slots. The connectivity between Dublin and the regional airports has been mentioned also.

Those for the proposal say it is a good development because IAG is in a much stronger position financially to grow tourism in Ireland. It sees value in the Aer Lingus brand and it can probably provide direct access to the routes and the services indicated that Aer Lingus cannot currently do. If the sale goes ahead and IAG takes over Aer Lingus, it will not become a dead duck because IAG sees the ability to grow tourism and improve direct access to Ireland for businesses.

What is clouding everybody's view of this issue is the emotional chord. Aer Lingus is Ireland. When an Irish person gets on a plane in New York, London or Spain, they feel they are at home, which is not the case when they board any other airline in the world. Our emotions are taking over in this debate.

The other side of the coin is the potential political fallout. When Aer Lingus was put up for sale by the previous Government some years ago, I do not know whether there was as much debate about it then as there is now. It must be remembered that the Government only holds 24% or 25% of the shares in the airline. If it decides to sell them, where does that leave Ryanair, which will carry 100 million passengers? Could it block the sale? Will this deal be good for Ryanair? If the sale goes ahead, do the witnesses believe that IAG, with its strength and power, will sabotage what we already have or grow business for Ireland?

John O'Mahony (Mayo, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Does anyone want to lead off the responses?

Ms Mary Rose Burke:

We can only respond to what is in the public domain so we have to inform ourselves from the information that has come out in recent days. There does not appear to be any reason to think that IAG has anything other than growth ambitions for Aer Lingus. In our deliberations we have not seen any red flags that would indicate concerns. From what we can see, it would appear there is growth ambition from Aer Lingus and on that basis we see that there is potential for Ireland to become a bigger aviation hub and to grow its connectivity, thereby enhancing the competitive environment for both foreign direct investment and indigenous businesses.

Sean Barrett (Independent)
Link to this: Individually | In context | Oireachtas source

That is not what happened in Glasgow, Birmingham, Manchester, Edinburgh, Belfast, Derry, Cork, Shannon, Knock or Kerry. I do not know where this British Airways growth engine is coming from because, as far as I can see, it is only in Heathrow. It is naive to put the future of a profitable and expanding airline at risk.

John O'Mahony (Mayo, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The Senator has put forward the evidence. Ms Burke says there are no red flags in what we have heard so far but the evidence of what has happened in the past raises many red flags.

Ms Mary Rose Burke:

Looking at Aer Lingus as a small, regional airline in a globalised world, what is its sustainability into the future? The reality is that Aer Lingus has been in play for the past number of years. There have been a number of takeover discussions and the expectation would be that if it is not this deal, Aer Lingus remains in play and therefore what will the future hold? We will be back here again. This is not a new place in which to find ourselves. Aer Lingus probably will not survive as an independent entity in the long term and, therefore, we have to discuss the salient issues now. It is a profitable, well-run and lean organisation and it is an acquisition target in a consolidating industry.

Dessie Ellis (Dublin North West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

It was brought to our attention that there was a takeover bid previously and that after five years the regulator in England ruled, in regard to the Heathrow slots, that it was contrary to best practice that the airline could dominate those, so it was forced to sell slots in the past. It must be borne in mind that we could face that after a five year period.

Mr. Tim Fenn:

There is conjecture about whether this will be good or bad and whether it means that Aer Lingus will expand and be successful in the future. It may or may not be, but the issue here is the potential conflict of interest between the interests of the island of Ireland and the interests of IAG as a corporation. At this point, IAG wishes to purchase 100% of Aer Lingus, and the Irish Government has something IAG is seeking. In any negotiation of whatever price will be agreed by the Stock Exchange or whatever incentive IAG might seek to present in terms of commitments and so forth to the Irish Government, as time passes they will disappear into history. Somehow or other we believe it should be possible for the various advisers involved to investigate the feasibility of a contractual option that the Irish Government will purchase now and which could be exercised in the event that at any time in the future those slots are withdrawn from the Irish market. They are tradeable assets as long as they are 80% used. While we have a minority shareholding in the company, we cannot dictate how they are being used, but the day before we sell is the day we have an opportunity to gain some ground in regard to what the future usage of the slots will be. We strongly suggest that when discussing contractual rights over those slots, there must be some means by which the lawyers can devise a way whereby Ireland can purchase those slots now or have an option to purchase at market value at some point in the future, but in such a way that the strategic interests of the island of Ireland are protected in the transaction.

Sean Barrett (Independent)
Link to this: Individually | In context | Oireachtas source

Does that not assume we have a level of senior civil servant which simply does not exist at present, in terms of conducting slot negotiations with highly experienced international aviation business people and international airports? Let us be realistic. With the best will in the world, we are not in a position to do that at some theoretical point in the future. That is why I raised the Musgrave versus Superquinn issue. In the case of the takeovers of British Midland International and British Caledonian, they disappeared. The winner takes all in that situation. Staying with what we have, which is a proven success and growing airline that is at the approximate point where Ryanair and easyJet were at the turn of the century, will give the growth, not relying on an airline which is completely overshadowed in its home market by easyJet, with its tens of millions of passengers, and by Ryanair. I do not know where this growth is supposed to come from by relying on British Airways.

I support everything Mr. Fenn said about tourism. I was a director of Bord Fáilte in the past - the Minister, Deputy Bruton, asked me to go on the board - and my main work was to break up cartel airlines and secure some competition. Now I am in the Seanad. These two airlines should be competing but the far less impressive one has more money to take over the very impressive one, which has been doing well as a reformed legacy airline. The restaurants and hotels need that, and I support them fully. I would hate to be a Scotsman waiting for British Airways to deliver much in the way of tourism to his country.

John O'Mahony (Mayo, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I thank the witnesses for attending the meeting this morning at short notice and for engaging with us in an informative manner. It is important that all views, be they pro or anti, are ventilated and heard. The main function of the committee is to allow stakeholders to have their say and to ensure it feeds into the overall decision.

As there is no other business, this meeting is now adjourned.