Brian Cowen (Laois-Offaly, Fianna Fail)

As Minister for Finance and a shareholder in the company, my officials and I worked closely on the IPO process with the Minister for Transport and his officials, who have primary responsibility for all aviation policy matters, including the sale of Aer Lingus.

The sale of the over-allotted shares was done under the price stabilisation mechanism generally known as "Greenshoe", a standard feature of IPOs. It was provided for by a formal agreement in mid-September with the underwriters. Under that agreement, the exercise of the Greenshoe was a matter solely for the underwriters in their capacity as managers of the share dealing. On 3 October, they notified my Department formally of their decision to exercise the over-allotment option, which was a technical matter in their hands and did not require permission to proceed.

It was the Government's intention to hold at least 25.1% of Aer Lingus post IPO. We reduced our shareholding of 85% to 28.3% in a staggered process. We hold 28.3% and the ESOT has the option to buy 2.9% of those shares should it want to do so. In any IPO provision is made for the underwriters to over allot shares at a date after the IPO to ensure an orderly market in the shares. This is because shares new to the market have no track record and can fluctuate. The mechanism to feed shares into the market enables investors to have some reassurance that the price will not fluctuate widely in the normal course of events.

In this case the underwriters, using their judgment, announced that they were utilising the over allotment option. This is a technical matter in the hands of the underwriters and they did not require our permission to proceed.

In essence, the underwriting agreement gives the underwriters authority to sell shares on behalf of the Government and Aer Lingus as a part of the IPO process and outlines how the transaction is to be conducted. It was signed on 12 September 2006.

In regard to the making of contact with the European Commission on competition in Irish aviation, this is primarily the responsibility of my colleague the Minister for Transport, given his overall responsibility for aviation policy and competition in that area.

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