Paudge Connolly (Cavan-Monaghan, Independent)

The air transport industry in Europe is currently in a phase of major transition. Like most other airlines, Aer Lingus has not been exempt from the turbulence of speculation about its future. Last week the Government announced its intention to sell most of its majority 85% stake in the national airline while retaining 25% in State ownership. Four years ago, many predicted the imminent demise of the airline when it appeared to be in dire trouble. The driving force in cutting costs, jobs and fares, and restoring the airline's profitability was initiated by the Cahill plan and more latterly by Mr. Willie Walsh and his team. Mr. Walsh has departed for pastures new as he takes over the controls at British Airways. Only last week he decried the Government's retention of a minority stake in the airline as totally ineffectual.

Credit for the transformation of the national asset is due in no minor way to the company's management and in particular to the staff and unions who made a major contribution to the airline's survival. Another national asset, the former Telecom Éireann and now Eircom, was privatised four years ago with disastrous consequences for shareholders. Since then, the privatised Eircom has behaved abominably in abusing its position by stalling on the unbundling of the local loop in order to prevent competition in the telecommunications sector. It has also systematically hindered, obstructed and generally endeavoured to sabotage broadband availability nationwide at a competitive and reasonable price.

Aer Lingus is one of our major national public assets. In the strategic sale of such an asset, we yield the management of the company to the private sector. The Government clearly expects an alliance of some sort between international foreign investors and domestic private investors who together will control 60% of the company after privatisation. In such a tie-up, the foreign investor who will control the largest block of equity will be the determining influence on the operations of the privatised company. A shareholder agreement negotiated in the sale would have sensibly defined the relative roles of the strategic investors and the Government. However, the principal motivating factor for the sell-off seems to be the need for private investment to facilitate the upgrading of the fleet by the purchase of new aircraft.

The EU Commissioner for Competition recently clarified the question of State investment in Aer Lingus when he said the Government could invest in the airline's expansion. The Government's decision is surprising for a number of reasons. Most nations have sought to create and still maintain a State-owned national airline flying domestic and international routes on strong economic and social grounds, namely the need to provide connections to major international airline hubs and different centres within the state, even if such connections may not turn out to be profitable.

International connectivity and ease of access are crucial when a country seeks to engage in international markets and build commercial bridges with the rest of the world. Airline privatisation minimises State control and means that decisions regarding what points to connect and at what frequency are determined purely according to concerns of profit. Reference has been made to the future of the Aer Lingus slots at Heathrow Airport which are also an important national asset. They are owned by Aer Lingus and worth some €75 million, and were developed with taxpayers' money.

See this speech in context