Mary Hanafin (Dún Laoghaire, Fianna Fail)

I am responding on behalf of my colleague, the Minister for Transport and the Marine, Deputy Dempsey. Under the memorandum and articles of association, the State is entitled to appoint three directors to the board of Aer Lingus. Currently, there is only one State appointed director serving on the board and it is now proposed that two further appointments be made. The State's representatives will not, as has been reported, have a mandate to block any future slot transfers. Under company law, all directors have legal responsibilities to protect the interests of the company which, in practice, means advancing the interests of all shareholders.

Immediately after the IPO, Ryanair's attempted takeover bid was launched. Under the applicable law, the State representative on the board was excluded from board meetings at which the takeover was discussed. It would not have made any sense in such circumstances to have appointed all three State directors at that time.

The circumstances are now different and it is appropriate to make those appointments in the near future. The State appointees will seek to ensure that all future decisions of the company that have implications for wider Government, aviation or regional development policies are considered and decided at board level. This will give the State appointees the opportunity to raise the public policy implications of each decision and to ensure that the full commercial implications for the company are taken into account. The State appointees to the board do not have a veto on board decisions. It is not possible for the State, even as a shareholder, to seek to impose non-commercial obligations on the company.

Aer Lingus has stated that it made its decision to transfer the Shannon-Heathrow slots for commercial reasons and the company has confirmed that this decision is commercially robust. Under company law it is not possible for the State or any other shareholder to overturn a decision taken by the company on day to day business matters. The legal advice to the Government has been clear and unequivocal on this point. The Minister has made it clear to the company that this decision goes against national aviation and regional policy, but it has made it clear that it will not change that decision. By appointing our full board complement it will be possible to ensure that the full ramifications of all significant strategic decisions are fully discussed and decided by the board.

In regard to connectivity, the report of the senior officials group, which has now been published, examined all the implications of the Aer Lingus decision. It concluded that while the withdrawal of the Heathrow service is a loss to the Shannon region, the negative impact from a connectivity point of view almost completely relates to one stop connectivity and flight duration to key destinations in Asia, the Middle East, Africa and Australia, as such destinations must generally be accessed through a major hub. This has obvious adverse effects in terms of business travellers and other users from the Shannon region.

However, the senior officials group confirms there should be little impact on connectivity with destinations in the Americas as the best route is as likely to be through one of the US hubs served directly from Shannon. Services between Ireland and US are enhanced when one takes into account the link up by Aer Lingus with the US carrier, Jet Blue, which makes possible access to and from Shannon to 50 airports in the US, Mexico and the Caribbean.

This is in addition to the new direct services being provided under the open skies arrangements. In the case of European origins or destinations, the analysis found that there is no loss of one-stop connectivity but travel via Heathrow was found in general to be faster.

The Minister commends the Shannon Airport Authority for its positive response to the current difficulties. The authority has specifically identified airline services to the key European hub airports of London-Heathrow, Paris, Amsterdam and Frankfurt as being of key strategic importance to its ongoing development. The airport recently published a European hub airport incentive scheme for services to come into operation in 2008 which provides for significant discounts in airport charges and for the possibility of marketing support to be provided by Shannon Airport for new services.

The Minister is very committed to ensuring that the mid-west region will continue to have the widest possible range of connectivity options available for the benefit of business and tourism throughout the region.

Arising from the Government's acceptance of the report, it is proposed that, taking account of the findings and the other issues addressed therein, the relevant Ministers, following consultation with the four mid-west planning authorities, together with the Mid-West Regional Authority, will report back to Government as soon as possible on strategies for unlocking the further development potential of the Limerick-Shannon gateway and its wider region. This will be done in light of the substantial investment planned under the national development plan and Transport 21 to create an integrated infrastructure underpinning the region's competitive position.

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