Martin Cullen (Waterford, Fianna Fail)

The decision to dispose of a majority shareholding in Aer Lingus was made following detailed and comprehensive consideration of the issue by me and my colleagues in Government. The Government agreed in its decision that the strategic development of the State airports and Aer Lingus was essential to underpin Ireland's competitiveness, industry and tourism. Furthermore, its consideration was based on an acknowledgement that the company had an immediate need for access to equity capital to enable it to compete effectively and fund growth and that this investment could and should not come from the Government. It is precisely because of national transport interests that a third party investment is sought. Without third party investment, there would be a far greater threat to these interests.

The Government also decided it would retain a significant stake of at least 25.1% to protect key strategic interests. This level of shareholding is significant in that provisions in company law will allow the State's interests to be protected while it retains a shareholding at this level. A shareholding of 25.1% in a public company is a major voting block and will ensure the State has significant influence. It will provide a strong basis on which to establish board representation which, in turn, will provide key access to information and influence on the key strategic and commercial decisions of the company.

A 25.1% shareholding also entitles the registered holder to deny the remaining shareholders the ability to pass special resolutions, for example, as required to change any terms of the memorandum and articles of association. Ownership of more than 20% of the issued share capital of a company also enables the registered holder to deny the right of third parties to compulsorily acquire 100% of the company.

The Minister for Finance and I appointed corporate finance and legal advisers on a third party investment in Aer Lingus. In their report on the nature, scale and timing of an investment transaction, the advisers considered the possible need for any measures going beyond the retention of a 25.1% shareholding to protect strategic interests. In the case of landing slots at Heathrow airport, the advisers suggest that some additional measures may be desirable to ensure the slots remain available for the provision of a reasonable level of service to and from Ireland. I am considering the manner in which such protection might be implemented in practice. Any measures that could restrict the commercial freedom of the company would have to be in accordance with the relevant EU rules.

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