Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

As the B shareholder, the Minister for Finance would have no rights to dividends or votes at general meetings.

The steering group has received detailed financial advice from its advisers on the question of price. The financial advisers have considered a range of valuation methodologies which they consider to be relevant. The steering group has concluded that a price of €2.50 is acceptable. The Dáil is being asked to approve in principle the disposal of the shares for a cash payment of at least €2.50 per share, payable on completion of the transaction. The proposed offer also refers to the payment by Aer Lingus of a cash dividend of 5 cent per share. The dividend will be paid on 29 May to Aer Lingus shareholders on the Aer Lingus share register on 1 May. Obviously, this is payable, irrespective of whether the proposed offer proceeds.

Price has been an important but not an exclusive consideration in the State's evaluation of the proposal. It would generate proceeds for the State of approximately €335 million. It represents a premium on the share price on the day prior to the announcement of lAG's initial approach and the Aer Lingus initial public offering price of €2.20 in 2006. Prior to the IAG approach, the Aer Lingus share price had not traded at this level since late 2007. The board of Aer Lingus has publicly stated the financial terms of the proposal are at a level which it would be willing to recommend to its shareholders.

It is a principle of the proposed sale that the Minister for Finance's acceptance of the offer will be on the basis that the legally binding commitments agreed by IAG and detailed in the announcement are conferred on the State as the holder of a B share in Aer Lingus. This was a significant area of negotiation. In essence, the commitment is that the existing Aer Lingus winter and summer daily scheduled frequencies to Heathrow Airport from Dublin, Cork and Shannon airports would be maintained for a period of seven years from completion of the transaction, the final two years of this period being subject to a condition that airport charges at these airports would remain at or below 2014 levels, adjusted for inflation. Furthermore, for the first five years Aer Lingus would operate the remainder of its slots on routes between these or other airports on the island of Ireland. Furthermore, lAG's proposed offer includes a legally binding commitment that the Minister for Finance would be entitled to block a proposal by Aer Lingus to change the company name, brand, head office location and place of incorporation from Ireland. This is unlimited in time and provides protection that is not currently provided.

If IAG proceeds to make a formal offer, the impact on competition will be subject to review by the European Commission under the EU merger regulation. While we believe no significant adverse impact on existing competition is likely to arise, given the relatively limited overlap of existing route networks, we cannot prejudge the Commission's review. If, as part of that review, IAG is required to offer remedies that are unacceptable to the Minister for Finance, the principles of the disposal recognise our right not to proceed with a sale in these circumstances.

Another issue that the Government considered was the potential use of the proceeds of any sale of the State's shareholding. The Government has agreed that the proceeds should be used to establish a new connectivity fund as part of the Ireland strategic investment fund. The Minister for Finance will seek the approval of the Oireachtas in due course for the payment of the proceeds of any sale of the State's shareholding into this fund in accordance with section 46(2) of the National Treasury Management Agency (Amendment) Act 2014 should the sale proceed.

The chief executive of Aer Lingus has confirmed to me that the strong expressed preference of Aer Lingus is to utilise direct labour wherever efficient and effective. In addition, the company's clearly demonstrated preference and practice for many years to restructure only in a manner as required and so as to avoid compulsory redundancies is noted.

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