Dáil debates

Wednesday, 27 May 2015

Aer Lingus Share Disposal: Motion (Resumed)

 

7:35 pm

Photo of Alan FarrellAlan Farrell (Dublin North, Fine Gael) | Oireachtas source

I thank the board of Aer Lingus and the Minister for Transport, Tourism and Sport for the considerable work they have done on this matter since the original offer was made. That offer was not acceptable to the vast majority of people, including the Cabinet and myself. The revised offer brings certainty to a situation in which the airline was relying on a number of aging aircraft on its transatlantic routes. Eight Airbus A330 aircraft are due to be retired and the airline had ordered a number of new aircraft, the Airbus A350, but it had to delay its purchase of the aircraft because of a lack of funds. This highlights a particular issue for Aer Lingus as a small operator in the international scene in terms of sustaining itself as a company employing more than 3,500 people. It currently owns 48 aircraft and leases another three but it has to enlarge and improve its fleet if it is to expand and remain on a sustainable footing. It is not in a position to do that at present.

By joining a conglomeration of airlines under IAG, it will have the financial backing to expand. This morning we heard that IAG will invest €1.5 billion in Aer Lingus.

That is clearly welcome and it will allow them to expand not only on the routes they have suggested - four new transatlantic routes, two of which will be started up next year and the other two by 2018 - but also growth in employment levels. The current employment figure from last year is 3,766 and I understand that an additional 630 will be taken on over the next five years. That is a beneficial part of this arrangement. Not only have we seen investment in the fleet, but also in the size of the airline's employees. There has also been an increase in the number of destinations that Irish customers can avail of. In addition to direct flights from Dublin, as part of the IAG group, cheaper flights will no doubt be offered to passengers who are continuing their journeys to other places, particularly in Africa and the Far East which are growing destinations for Irish customers.

I still have concerns about the terms and conditions of existing employees, a great many of whom are in my constituency and dotted elsewhere around Dublin. I have received the 36 page document but have not yet had time to read it. The business case for the disposal of the shareholding of this private company is warranted. In addition to the value placed upon it, the strategic investment fund will give the Government an opportunity to invest in critical infrastructure in and around the airports, which I assume is the plan for that fund.

The international airline industry is a fragile one. A bit like our economy, it is on a high at the moment and is doing reasonably well but it is fragile. A number of industry experts have spoken about this matter in the last 24 hours and I was listening to some of them on radio programmes this morning. They stated that the reality of a small airline like Aer Lingus is that there are international issues, including the ash cloud, military events or terrorist incidents, which can cause massive problems for airlines.

We saw a number of such firms go out of existence following the September 2001 attacks in the United States. They included Swissair and Malev. They were flag carriers, as is Aer Lingus. No doubt they were considered to be strategic assets in their countries of origin. Aer Lingus is an asset to all of us. Like most Irish people, we are loyal to that brand with the shamrock, but it is not a State asset. It is a plc and was sold in 2006. The realisation of the value of the State's 25.1% share was inevitable. It was only a matter of time before a suitable firm purchased the company with a view to improving its service to the Irish people and its connectivity across the world. IAG has made clear its ambition to do that.

I assume and hope that the loyalty Irish customers have to Aer Lingus will continue on that basis. If Members will pardon the pun, the sky is the limit in terms of where the company can go and how its workforce can continue to grow.

The previous speaker raised the issue of Iberia, which is an interesting one. First and foremost, Iberia was a state-owned company when it was sold. Back in the day when Aer Lingus was State-owned, the pension fund was used as an exiting tool to encourage people to leave. Iberia, however, was purchased and not downsized but its staff were because it had too many employees. It was in a crisis scenario, but Aer Lingus is not. Aer Lingus is a lean, profitable airline serving 48 destinations, with an additional transatlantic route starting this summer to Washington. As part of this proposal, we will also see the four transatlantic routes. From my perspective that is a positive thing.

Dublin Airport has grown over the last few years since the beginning of the crisis. The numbers are now getting back to an encouraging level concerning the availability of jobs both on and off the airport campus in recent months. I know of three firms in the airport that are providing services to airlines that are currently enlarging their staff.

If one looks at the ratio of employees to aircraft, the effect of new routes on ground staff, and the eight new aircraft that have been promised as part of the takeover, it is very positive. However, I do have some slight concerns about the employment terms and conditions of existing personnel. They have contracts which are being adhered to, as has been stated, in line with the proposed takeover, and there is an increased number of employees.

At the same time, as a private company Aer Lingus is susceptible to market forces. If, for instance, the international aviation industry was to nosedive and face difficulties following an event that caused airlines to be grounded for a period, Aer Lingus would be the first firm to feel such an impact. However, as a cog in a much larger organisation it would not feel the impact as quickly, which is positive for employees both in Dublin and the regional airports.

The sale of the State's 25.1% shareholding in Aer Lingus will result in €330 million plus another €6 million which is due in a dividend. That sort of money can readily be used for investment in infrastructure around the airport. We have seen investment in Dublin and Shannon airports in recent years. It would be welcome to see that money targeting airport infrastructure the public uses daily, including roads.

As regards the €330 million the State will gain from the sale if it goes through, I will selfishly mention my constituency and the Minister's in terms of the north Dublin transport corridor. I will take the opportunity to plug that because €330 million would go a long way towards an investment directly serving Dublin airport and Swords. It is a critical piece of infrastructure for the northside of Dublin, hopefully linking into the existing Luas network which serves Dublin and the rail network which serves the country at large.

If that is what the Minister has in mind, such connectivity will certainly be of great benefit to everyone who uses Dublin airport from time to time or travels through Dublin to other locations, for example, on the northern rail line. Such an amount of money would be welcome for infrastructural and connectivity investment, particularly in Fingal where Dublin airport is located.

As regards the Heathrow slots, I do not want to go over the same ground that has already been covered by every speaker who has contributed to the debate today. Those slots have a value of approximately €300 million. They are of critical importance to this island nation which does an enormous amount of trade with our partners in the UK and the rest of Europe. Those slots have been guaranteed as part of this deal. It was a guarantee we did not have up to the point of that offer yesterday.

The only example we can give is the decision of the Aer Lingus board to relocate its services from Shannon and move them to Belfast.

That did not work out in the end but with the State's 25.1% shareholding, we were powerless to do anything about it. My perspective on the Heathrow slots is that we were powerless to do anything about the movement of slots but we have now been given a guarantee that nothing will happen to them and they will remain attached to Dublin Airport. That would be a very significant gesture on the part of IAG. It did not need to do it and it could have taken over the company in a hostile manner. It could have taken over the vast majority of the shares - perhaps even the balance of 74.9% - and done whatever it wanted. The company did not need to give guarantees in the proposed business model but it gave the commitments, one would assume, because of an element of loyalty that Mr. Willie Walsh has for Aer Lingus, having run it for a number of years beforehand. It also presents opportunities to make a profit for shareholders and the citizens of Ireland, who will utilise the airline and the rest of the group in getting around the world. That must be borne in mind in this discussion.

Individuals mentioned the "paltry" sum of approximately €300 million. I do not believe it is paltry, as it would pay for half of the north Dublin transport corridor or a large number of services in and around our airports across the country. That is not even mentioning the guarantee of an increase in jobs over a five years, which is a significant investment. We should bear in mind that if these individuals happened to be on the unemployment line now, the State could save in the region of €20,000 per individual per annum if they could be taken from the unemployment line into Aer Lingus. It is a very significant figure for the State to bear in mind.

The brand and headquarters, etc., are being retained and 2.4 million passengers will be delivered to Dublin either in transit or as direct customers to our shores for tourism purposes. There were fantastic results published today by Tourism Ireland relating to growth; there was a 25% figure for Spain, a 15% figure for the UK and a 20% figure for mainland Europe. These are really significant and terrific figures and each one of those travellers would no doubt bring in excess of €1,000. I am sure it would be more than that but I do not have that figure to hand. The investment that such people bring to our shores really helps us to keep up employment and continue growing our economy in a sustainable fashion.

There was mention of a report from Nyras. I have not seen the report but I have helpfully printed the Fianna Fáil press release, for which I thank Deputy Fleming. The statements from Aer Lingus are quite telling in its view of the report, which is an industry standard. It is not an unusual report to have done on behalf of an airline. It has no bearing in the context of the IAG offer and Aer Lingus has stated that this type of exercise is part of the normal course of business in the highly competitive international airline sector. The company argues that it is highly misleading to suggest that there would be reductions in employment within the airline as a result. We have heard from the commissioners of that report that it was a marking or comparative exercise on the international competition to Aer Lingus. From that perspective, I do not believe for a moment that this in some way undermines the IAG offer. I am positive, given the commitments received by the State, and some of which will be written into the constitution of Aer Lingus and legally binding agreements provided to the Minister, that the guarantees will be upheld.

On the jobs issue, if the Minister for Jobs, Enterprise and Innovation, Deputy Bruton, took to the plinth tomorrow morning and announced 635 new jobs, I am fairly sure members of the Opposition would welcome it, particularly if they were around the airport in the constituencies of Dublin North-West, Dublin Central-----

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