Timmy Dooley (Clare, Fianna Fail) | Oireachtas source

I welcome the Minister and thank him for beginning a process of informing us about this particular deal. My party and I are deeply disappointed that the Government did not afford the transport committee an opportunity to engage with it, the Department and the various stakeholders in order to discuss the background and details of this deal. Deputy O'Mahony, as Chairman of the transport committee, has performed his function to date in an independent and transparent way and sought to add to the discourse on the decision the Government is ultimately taking. He will be disappointed that the committee was not given an opportunity to parse the finer details of this deal so that Members of the House could take a collective view rather than having the Minister present Members with some of the more positive and salient points of the deal but little about the associated risks. There has been a lot of talk in the past couple of days from those on the Government side of the House and others regarding the previous decision to sell 75% of the company. On that occasion, the transport committee was afforded an opportunity to debate the matter in detail.

For the life of me, I cannot understand the haste with which the Government is moving, considering that it has had six months to address the overall offer. I cannot see the necessity to have the debate over the next two days and have a vote on it on Thursday, before we leave. The House is not sitting next week. Next week could be used well by the transport committee to go through the matter in detail. It has shown the capacity over recent months to meet at short notice and on days the House is not sitting in an effort to add to the broader debate and afford a better understanding to the people whom we represent as to why we take decisions. The approach shows what the Government thinks of the commitments it made in regard to transparency and affording the House an opportunity to exercise the mandate its Members were given, particularly regarding the teasing through of important decisions and the discussion of legislation. In saying this, I am not attacking the Minister personally.

It is often said that our Parliament is weak by comparison with others across Europe. In the Minister's previous role as Minister of State responsible for European affairs, he will be well briefed and will understand that many parliaments operate really effectively because they show regard for their individual members by giving them a say in decisions that are taken and by allowing them to analyse in detail the background to the decisions that must be taken. More often than not, they make mature decisions. The Government, comprising Fine Gael and the Labour Party, talked a lot about a revolution in the way in which it would do business. Today, that revolution is on its knees. Sadly, we are not allowing this Parliament the kind of input I believe is important in this debate.

From the very start, I could never really get my head around the necessity, from the Minister's perspective, to sell the remaining 25% stake. A decision was taken in 2006 to change Aer Lingus's semi-State status and trade it publicly, thereby ensuring it would be run on a commercial basis in the best interest of all, including workers, passengers and the country. I supported the decision and believed it was correct. One aspect of the decision was to retain a 25% shareholding in the company for strategic interests. From where I am looking at the matter, granted without the benefit of all the information the Minister has, I do not believe the State has any less of a strategic interest in the airline than it had back in 2006. For the life of me, I cannot understand how the Government has failed to realise the importance of retaining the shareholding and having control, although not absolute control, over the direction of the company, or an input into it. The Minister now tells us the State will have a B share, one share, and that this will somehow have attached to it all the rights, responsibilities and benefits as obtained previously, with the exception of profit and voting rights. If that is the case, I am somewhat amused that IAG would want to purchase the 25% that the Minister is selling. What benefit will it ultimately derive if the State still retains all that control?

The company was performing exceptionally well as an independent company, which really underpins the view that the right decision was taken in 2006. Since then, passenger numbers have grown from 7 million to 11 million, as the Minister knows. Aer Lingus has developed important access to the north of England and has managed to develop business there and take passengers through the hub in Dublin. In addition to seeing a growth in passenger numbers, the company's costs have been reduced significantly. It is now a much leaner and fitter independent entity and is able to take on the challenges the Minister talks about. It is well capitalised and profitable.

Some years ago, Ryanair and easyJet would have had passenger numbers of 11 million. Their respective figures are now 100 million and 60 million. Through strategic alliances and various other corporate tie-ups, there is no reason Aer Lingus could not be such an entity. While the Minister talks about possible difficult periods ahead in the aviation sector, he should realise those threats have always existed. Other airlines have survived. Therefore, I cannot understand the necessity to proceed with the deal at this time.

The current growth trajectory of the company is such that remaining an independent carrier would not be the tragedy some proponents of this deal have depicted. As I stated, the company carried up to 11.1 million passengers last year. In 2014, revenue was up 9%, and there was an operating profit of €71 million. I accept that is attributable to the efforts of the staff, management and chief executive of the company.

Aer Lingus has successfully emerged from the worst financial crisis in the history of this State, or one of the deepest in the OECD, as a lean and growth-oriented company with very significant cash reserves to take on the kinds of challenges that arise. Any company facing a difficult trading period would love to find itself with the balance sheet, growth strategy and cost base of Aer Lingus. Over recent years, Aer Lingus's passenger numbers have grown remarkably. Perhaps the growth has something to do with IAG's interest, particularly because Aer Lingus's growth is concentrated on the north of England. This has effectively highlighted the weakness of British Airways' approach to the regions. Senator Sean Barrett has made much of the fact that the entire north of England and Scotland have no direct access to the United States, even though British Airways is the dominant player in that market. It has routed every flight through Heathrow. There are some concerns that it may wish to do the same with Irish passengers. Much has been made about the limited capacity at Heathrow but this has been the case since I entered public life and politics. Despite the shortage of slot access, it always manages to squeeze an extra aircraft in and continues to grow successfully without the additional runway. I am not so sure the bulk of the business involving direct flights from Ireland to the United States could not be pushed through if there were sufficient desire on the part of IAG or British Airways. I have some concerns in that regard. They are certainly not mollified by anything I have said here today. I would have believed that, by remaining independent, Aer Lingus could do more than just survive over the longer term and could emerge as a very strong carrier in the region.

I have never really got into the debate on the share price offered by IAG because, quite frankly, I took the view that it was the wrong decision and that the strategic interest of retaining a shareholding was principally the most important point we should consider. However, now that the Minister has taken the decision, I will comment on this. Twenty-four Heathrow–London landing slots are worth a possible €400 million, depending on whom one is prepared to listen to. Acquiring the slots will, as the Minister knows, give IAG 55% of all the slots at Heathrow, where space is at a premium. There is a very real benefit to IAG in that regard.

The Minister talks about the guarantees and I will address them later in my contribution. I am not as enthusiastic about those guarantees as the Minister seems to be.

Pádraig Ó Céidigh, who is an expert in this area having founded Aer Arann and is also a serial investor in a range of sectors, believes that the share price should be in excess of €3, which would give the company a valuation of about €1.7 billion. However, the Minister seems to accept that what is on offer at the moment, namely, €2.50 plus the 5% dividend which was already on its way to the Government, is adequate. I do not believe that the takeover is better for the future of Aer Lingus as a company. Aer Lingus has done a good job to date in competing with British Airways and other much larger rivals. I understand that British Airways is trying to expand into the Irish market because it sees the lucrative business that is there as we emerge from recession. It is not out-competing its Irish rivals. It is attempting to buy in. This is very much as a result of the very strong presence of Aer Lingus in the north of England routing passengers through Dublin onwards to the US.

The reality is that Ryanair and easyJet are two very considerable airlines. In fact, they are bigger than British Airways in terms of passenger numbers. This demonstrates to me that if another option was put forward by the Government as a strong shareholder, we could see the retention of an independent airline with a strategic tie up with somebody like IAG or somebody else. IAG has a strategic partnership with American Airlines that works really well. It talked about how that has worked in some of its statements to the stock exchange last night. There is no reason the same could not have been done here.

I believe the takeover deal is anti-competitive and bad for consumers. Virgin Atlantic seems to be of the same view and has expressed its position. I understand it is in the process of lodging a complaint with the EU competition authority. Virgin Atlantic appeared before the Oireachtas Committee on Transport and Communications and set out very clearly how it believes a tie up between British Airways and Aer Lingus would limit the product offering to Irish consumers travelling to the US. I have not heard the Minister or Government address this issue at any point. The trend in the aviation sector is toward consolidation. I believe this is anti-competitive and bad for the consumer. These trends have come and gone. We have previously seen consolidation in the aviation sector. Large companies emerge, enter financial difficulty and sell off bits and pieces of the company at a later stage. Consolidation and fragmentation of corporations throughout history has been cyclical. We may be going through a phase of consolidation but as sure as night follows day and boom and bust or turnaround occur in economies, we will see fragmentation at some point. It is not clear how Aer Lingus will fare when the fragmentation happens within that larger group and the shareholders want to release the value that has been built up over time. This is a real concern and I remain to be convinced that the Government's approach is in the long-term interest, particularly because of our status as an island nation and the need to retain that strategic carrier. It is a fact that while a smaller number of large airlines in a market might increase net margins for airlines, it reduces competition, increases fares and makes it more difficult for new airlines to enter the market. It takes fragmentation at a later stage to address that and it is not clear how or in what form Aer Lingus would emerge from that.

Regional connectivity is the one area about which I have had the greatest concerns from the start having seen the difficulties that emerged when Aer Lingus decided to re-allocate slots to Heathrow from Shannon to Belfast in August 2007. I saw the impact this had on companies and tourism interests in the region and the damage it did to efforts to attract and maintain foreign investment in the region. This is where I have always seen the limitations of the 25% shareholding. At the time, the fact that the State had public interest directors or was in a position to appoint them after that, had a presence in the boardroom and over time was able to change the articles of association so that a decision like that became a board decision rather than a management decision and the retention of that shareholding allowed for the reversal of that decision. That was a good decision and the right decision.

The Minister has put a lot of stock in the fact that individual airports have welcomed this decision. He is joined by some of his departmental advisers today and they will have a knowledge of all of this. The reason the management of Aer Lingus moved the slots from Shannon to Belfast in 2007 was because the then management of the airport decided to give sweetheart deals to Ryanair, much to the annoyance of the management of Aer Lingus. The airport treated the management of Aer Lingus poorly and as a result, it left. The approach that was taken in Shannon at the time was largely responsible for the removal of those slots so to some extent, I must take the Minister's acceptance of management's support for this with a grain of salt. Management got it wrong in the past so there is no reason it is infallible on this move. I would much prefer to see the State retaining its shareholding and having that input at board level, which resulted in the reversal of that management decision and has benefited everyone. The same situation happens in Cork and the mid west. There has been a significant amount of investment in that region involving IDA and Enterprise Ireland-supported businesses. It is not just about passenger numbers. There has been much discussion and effort relating only to the workers at the airport. Yes, they are a hugely important component of this debate but there are people working in other enterprises and business and tourism interests in those regions who are completely dependent on the services operated through the airport. One of the most important services is the access to Heathrow. It is not just about the impact on workers at the airport. The entire micro-economy of those regions could be fundamentally affected by any change to slot access to Heathrow. This is why I remain unconvinced that this is in the best interests of the overall economy of this State or the regional balance that is so important to keep people living outside the city.

Of course, I am not surprised that Dublin Chamber of Commerce weighed in relatively quickly in support of this deal. All along the way, Dublin Chamber of Commerce failed to reveal that Aer Lingus is a member and a very significant partner of Dublin Chamber of Commerce and Cork Chamber of Commerce so it has a significant say in the position of those chambers of commerce. It is a conflict of interest. Dublin Chamber of Commerce is presented as some kind of independent external adviser that sees all the benefits but it does so largely in the interests of a very significant member.

Very sizeable cities in the UK do not have a presence on the north Atlantic route. I find it difficult to see anything in the cast-iron assurances that have been offered by IAG that would either stand up to legal challenge in the long run or would ultimately be enforceable over time. While the Minister says that the Government has done a deal and managed to get from five to seven years, I do not believe that if an event occurred in the running of IAG or if it had some financial difficulties, it would not be in a position to move on. If one looks at the document that was presented to the Stock Exchange - a document that does not seem to form any part of the Government's deliberations, it refers to cautionary statements regarding forward-looking statements. Much of what the Minister has been talking about for the past day concerns the forward-looking aspect of this deal.

Within this there are certain assumptions. I wish to read the caution that forms part of the document:

All forward-looking statements in this announcement made by the IAG Group are based upon information known to the IAG Group on the date of this announcement and all forward-looking statements in this announcement made by the Aer Lingus Group are based upon information known to the Aer Lingus Group on the date of this announcement. In particular, statements are made in this announcement as to IAG’s approach and plans for growth of Aer Lingus’ business, the addition of new destinations to Aer Lingus’ route network and to related implications for employment. These statements are based on certain assumptions as to economic, business and operational conditions prevailing at the time Aer Lingus will decide to make the associated investment in new aircraft and additional employees. In the event that these conditions are significantly different from the ones envisaged at the date hereof, IAG may need to make changes in its approach and plans. Neither the IAG Group nor the Aer Lingus Group undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, save as may be required by law.

That sets a very cautionary tone, which is a requirement under Stock Exchange rules. That said, it is worth noting that the assurances, guarantees and the forward-looking statements on jobs and so forth could well be impacted on by any significant change that takes place. I was struck yesterday by the backdrop to one of the Minister's press statements which almost looked like the set of "Blue Peter". The words "jobs, strategic investment and guaranteed connectivity" were writ large, as if someone was trying very hard to reinforce and sell this message. I wondered what it was about. It might just have been part of the Minister's public relations machinery, but it looked a little like an oversell and an over-spin of what was actually a complex transaction that would effectively reduce the State's interest in strategic infrastructure.

In the time available I would like to ask the Minister some more questions about the so-called B share because certain issues are still not clear in that regard. He spoke about the articles of association being changed to give a certain character to the share, setting out, effectively, what could and could not be done. He went on to say the name of the company, the brand and the head office would not change, but what he did not say was whether the articles of association could or would change. He said at one stage that as the B shareholder, the Minister for Finance would have no rights to dividends or to votes at general meetings. If a decision was taken by the board to change the articles of association and it held a general meeting, is it possible that the articles of association that give the significant powers to the Minister through the B shareholding could effectively be wiped out or changed? Is that a possibility? Nothing the Minister has said so far helps me to understand the position in that regard.

Some of the spin in advance of yesterday's announcement, largely provided for The Irish Times,suggested the Minister for Finance would have a veto. Over the course of the day the veto appeared in the character of the B share. The Minister is now informing the House and the language he has used is careful and concise. There are about six or seven lines on the issue in his speech. I am really concerned about the extent to which the B share can actually be used to do what the Minister has attested. Can the conditions in which the B share will be held after the transaction takes place be changed? Is it possible that at a future extraordinary general meeting or annual general meeting the articles of association could change, effectively wiping out the assurances given? I ask the Minister to deal with this question.

On the period of five or seven years, I am not too sure about the character of these assurances because it is not clear how they will be guaranteed. There has been talk about a legally binding agreement, but if one looks at the risks and the forward-looking statements, it is possible that other events could require the company to take a different direction. It is possible that IAG could be subject to a takeover bid. We know that Qatar Airways owns 10% of it. Obviously, Qatar Airways, as constituted, would not be in a position to buy IAG because of certain EU rules, but it is not impossible to suggest some other company might buy it. How will the assurances stand in the event that IAG is taken over in the medium term? Will they remain? The articles of association of IAG would surely change as time passed were that to happen.

There is also a question about the assurances the Minister has given on jobs. He has said Aer Lingus has stated that where restructuring is required, "it does not foresee a likelihood of either compulsory redundancies or non-direct employment." The phrase "it does not foresee" is rather weak. The Minister is familiar with the Nyras report which was commissioned jointly by the boards of Aer Lingus and IAG in February this year to look at potential cost savings arising from the proposed merger. It was paid for by both boards and involved a comparison of Aer Lingus with Easyjet and Vueling Airlines, two low-cost carriers. It was made in order to see if Aer Lingus was out of kilter with these low-cost models and the report found that costs in Aer Lingus were about 40% higher. Therefore, if IAG was to benefit from the consolidation of the two entities, it would have to reduce costs. The report refers to outsourcing ground-based operations and the savings to be made in doing so under the heading of "Cost Reduction Phase 1". It estimated that savings of 20% could be made in ground handling operations, 40% in catering services, 15% in maintenance and 25% in heavy maintenance operations in moving operations to eastern Europe. If any or all of this were to come to pass, there would be a very significant loss of direct jobs. That is the only way the company would achieve such cost savings. While the Minister has talked about registered employment agreements, I want to know if it is possible as a result of the takeover, notwithstanding what the chief executive has said in his communications with the Minister, the way in which ground handling, catering, maintenance and heavy maintenance services are provided could be changed to the extent that the cost savings identified in the report could be achieved. The Minister will have to explain it to us more clearly.

I would also like the Minister to help us to understand another issue. He probably cannot help us to understand where the Labour Party is because it seems its members have difficulty in understanding it themselves, but he might be able to help me to understand some statements made by the Tánaiste in recent days. When pressed about the cause of the delay in reaching a decision, she said there were some complicating factors. She mentioned Ryanair in strangulated syntax that seemed to suggest the Government was somehow constrained in making a decision because it was going to be dependent on whatever Ryanair might do. It seems from what the Minister has said, however, that he has had no communication with Ryanair and that the group concerned has had no communication with the company either. I am sure it would be entirely wrong if the Minister had discussions with Ryanair on this issue. In that context, I need to understand who briefed the Tánaiste and what the complicating factor actually was in the case of Ryanair. Perhaps the Minister does not know, but he might find out because it raises serious concerns. It suggests the Tánaiste had access to information on Ryanair's position and how it might complicate a decision the Minister might take. My understanding, from the presentation Mr. Walsh made to the Joint Committee on Transport and Communications, is that the offer from IAG was an indicative one which was subject to confirmation in the event that both the Government and Ryanair acceded to the request for the purchase of shares, nothing more and nothing less. How the Tánaiste could believe Ryanair was involved in the Government's decision I do not know, but I hope the Minister will be able to help me on that issue.

My party remains strongly opposed on the basis that we understand what it took to get Aer Lingus to the point where it could be a successful, independent entity by changing its character from a semi-State to a publicly traded company back in 2006.

However, we can see no logic in any of the documents produced by the Government or anybody else that would suggest now is the time to cast away the strategic interest the State has in an airline, notwithstanding the limitations of such shareholding. Nonetheless, it is critical in retaining boardroom representation, which, of course, feeds into the strategic direction of the company.

See this speech in context