Róisín Shortall (Dublin North West, Labour)
Link to this: Individually | In context

Question 2: To ask the Minister for Transport if he will set out his case for either the part-privatisation or full-privatisation of Aer Lingus. [9821/05]

Martin Cullen (Waterford, Fianna Fail)
Link to this: Individually | In context

Last Tuesday, I briefed my colleagues at Cabinet on a number of key aviation issues, including the future of Aer Lingus. I am anxious in the interests of the airline to move forward on this issue as a matter of urgency. As the House is aware, Aer Lingus must be provided with the flexibility to grow and compete on a level playing field.

The current situation is not sustainable and is restricting the airline, particularly in regard to profitable growth opportunities on long haul routes. To fund that growth and to provide financial security, Aer Lingus must have access to the full range of funding mechanisms. Equity capital is a crucial element in that mix. Early clarity on realistic options for accessing that equity are crucial and I will bring specific proposals in this regard to Government shortly. I will continue to consult stakeholders as I move forward on this issue.

If the Government decides to embark on a sale of all or part of Aer Lingus, I will set out for the House, in accordance with the provisions of the Aer Lingus Act 2004, the general principles of the proposed sale as well as the basis for the Government's decision and the arguments for and against such a sale. I will also set out how the Government proposes to deal with important strategic issues.

Róisín Shortall (Dublin North West, Labour)
Link to this: Individually | In context

Will the Minister be more specific about Aer Lingus's needs? There is much talk of urgency in regard to access to equity but the chairman of the company is not in agreement in this regard. He is in the process of replacing the short haul fleet and is considering the question of long haul fleet replacement in the coming years, in which regard there are a number of options. Various figures have been quoted but has the Minister an estimate from the board of Aer Lingus regarding the company's capital requirement and the timescale over which such might be delivered? Has he carried out any type of serious examination of the different options available to Aer Lingus for meeting its needs? The Minister does not seem to be making a case for even the part-privatisation of the company.

Martin Cullen (Waterford, Fianna Fail)
Link to this: Individually | In context

I have been involved in a detailed analysis of the prospects. The current chairman has written to me recently to urge me to emphasise the enormous opportunities in the immediate future for Aer Lingus, but decisions need to be made immediately.

Róisín Shortall (Dublin North West, Labour)
Link to this: Individually | In context

What are the capital requirements?

Martin Cullen (Waterford, Fianna Fail)
Link to this: Individually | In context

I will come to that in a moment. I will give the Deputy an example. It was clear even three or four months ago that the buying opportunities for airlines vis-À-vis the manufacturers was very opportune. I have been anxious to place Aer Lingus within that window of opportunity to get the best possible deal from manufacturers in terms of ordering aircraft. Recently, for example, China made substantial orders with Boeing and that has taken some of the pressure off the manufacturer. While the window of opportunity in terms of purchasing aircraft has not closed, it is closing fast as more and more airlines purchase new fleets for the future. Aer Lingus must order fairly quickly, not just for that reason but because it will take a lead-in time of about 18 months to acquire the aircraft and get them operational. At present Aer Lingus has seven long haul aircraft in its transatlantic fleet, all of which need to be replaced immediately.

Róisín Shortall (Dublin North West, Labour)
Link to this: Individually | In context

The chairman is not saying they need to be replaced immediately.

Martin Cullen (Waterford, Fianna Fail)
Link to this: Individually | In context

He is. He has written to me since——

Róisín Shortall (Dublin North West, Labour)
Link to this: Individually | In context

He is not.

Pat Carey (Dublin North West, Fianna Fail)
Link to this: Individually | In context

Deputy Shortall will allow the Minister to speak.

Martin Cullen (Waterford, Fianna Fail)
Link to this: Individually | In context

I do not want to disagree with the Deputy, but he has been quite clear on this since he was appointed fully as chairman of the board of Aer Lingus, as distinct from being acting chairman. As the Deputy knows, he is acting in the capacity of executive chairman at present. The prospects for growth essentially are tremendous and not just on the transatlantic route, although that is where the immediate opportunities lie.

Róisín Shortall (Dublin North West, Labour)
Link to this: Individually | In context

Nobody is denying that. How much does the company need?

Martin Cullen (Waterford, Fianna Fail)
Link to this: Individually | In context

That is a matter for the airline.

Pat Carey (Dublin North West, Fianna Fail)
Link to this: Individually | In context

I will allow the Deputy back in, but she must let the Minister finish.

Róisín Shortall (Dublin North West, Labour)
Link to this: Individually | In context

Has the Minister not established that?

Martin Cullen (Waterford, Fianna Fail)
Link to this: Individually | In context

If the Deputy wants me to answer the question rather than interrupting me, I will try to facilitate her.

Pat Carey (Dublin North West, Fianna Fail)
Link to this: Individually | In context

I will allow Deputy Shortall back in.

Martin Cullen (Waterford, Fianna Fail)
Link to this: Individually | In context

I started by referring to the immediate replacement of the seven existing planes, which is very substantial in itself. We believe 21 destinations in America are anxious to have Aer Lingus flying in to them. I do not believe any airline, even Aer Lingus, could do that overnight, but it shows the scale and depth of opportunity that is available in the US market. I would like Aer Lingus to gather at an early stage a number of these new routes and destinations and to be in a position to serve them within 18 months, in addition to what it already has flying into the US. Equally there are opportunities in the Middle East, South Africa and, the Far East.

Róisín Shortall (Dublin North West, Labour)
Link to this: Individually | In context

Has the Minister a figure?

Martin Cullen (Waterford, Fianna Fail)
Link to this: Individually | In context

It is not for me to put figures on it at this stage.

Róisín Shortall (Dublin North West, Labour)
Link to this: Individually | In context

It is, since the Minister has been talking about floating part of the company.

Martin Cullen (Waterford, Fianna Fail)
Link to this: Individually | In context

It is public knowledge that every plane costs about €110 million, so it is easy to work out.

Róisín Shortall (Dublin North West, Labour)
Link to this: Individually | In context

We are not talking about an up-front payment.

Martin Cullen (Waterford, Fianna Fail)
Link to this: Individually | In context

The sort of capacity scale, at a very minimum is indicative of €1.1 billion to €1.2 billion.

Róisín Shortall (Dublin North West, Labour)
Link to this: Individually | In context

This is over a considerable period.

Martin Cullen (Waterford, Fianna Fail)
Link to this: Individually | In context

No, the Deputy should listen to what I am saying.

Róisín Shortall (Dublin North West, Labour)
Link to this: Individually | In context

They are all lease agreements now.

Martin Cullen (Waterford, Fianna Fail)
Link to this: Individually | In context

It does not matter. In terms of the balance sheet and the airline's viability it is a misnomer to suggest that somehow a leasing arrangement in terms of the financial base effect is fundamentally different to purchasing. It is not. My advice is that it is almost the same effect, so the argument is spurious. Airlines will make decisions on a ratio of purchasing to leasing aircraft for different reasons, but not for the one which the Deputy suggested. I am not making that point in an argumentative way, just stating that those are the facts as I understand them.

Róisín Shortall (Dublin North West, Labour)
Link to this: Individually | In context

The key issue is that the Minister does not know the company's capital requirements. If there is a case for part privatisation, it should be made. Let us have the figures on the table to see what the capital requirements will be over the next ten years and the best ways of meeting them. I want the Minister to tell the House whether he is considering at least a part privatisation of the company, as he seems to be. I want him to outline how he can guarantee the strategic interests of the State will be protected in that type of scenario. The Goldman Sachs report seems to indicate that they cannot be and that the notion of a golden share is nonsense.

What type of mechanism has the Minister in mind? The figure of €300 million has been bandied about in the media. If, for example, he was to sell €300 million worth of the company, what happens to that money? As matters stand, in a straight deal that goes into the Government coffers. It does nothing to help the company. What type of mechanism does he therefore have in mind? Is he talking about the State reinvesting the €300 million in the company or what exactly has he in mind? Is this just a mechanism for boosting the Government coffers?

Martin Cullen (Waterford, Fianna Fail)
Link to this: Individually | In context

I am not about to start speculating in the House at this point about the financial situation as regards Aer Lingus. I will not signal to the market this afternoon what I believe the company is worth or not worth.

Róisín Shortall (Dublin North West, Labour)
Link to this: Individually | In context

The Minister is very vague. He does not know the company's capital requirements.

Pat Carey (Dublin North West, Fianna Fail)
Link to this: Individually | In context

The Minister must conclude his reply.

Martin Cullen (Waterford, Fianna Fail)
Link to this: Individually | In context

I do and I have stated in my reply to the Deputy that when a decision is made under the Act, I will set it all out for her. There is nothing vague about what I have said as regards the immediate requirements of the long haul fleet of Aer Lingus, which cannot be funded from within its own resources. It is funding its expansion into Europe at the moment from its own resources, which is putting a great strain on the company.

Róisín Shortall (Dublin North West, Labour)
Link to this: Individually | In context

What about this figure of €300 million?

Martin Cullen (Waterford, Fianna Fail)
Link to this: Individually | In context

I cannot speculate on the figures the Deputy is speculating on.

Róisín Shortall (Dublin North West, Labour)
Link to this: Individually | In context

The Minister most certainly can.

Pat Carey (Dublin North West, Fianna Fail)
Link to this: Individually | In context

We are moving on to the next question.

Martin Cullen (Waterford, Fianna Fail)
Link to this: Individually | In context

Clearly, in any sale or any involvement, the idea is to get the funds for Aer Lingus.

Róisín Shortall (Dublin North West, Labour)
Link to this: Individually | In context

The Minister is talking about State investment.

Martin Cullen (Waterford, Fianna Fail)
Link to this: Individually | In context

The Deputy misunderstands how the mechanism works.

Róisín Shortall (Dublin North West, Labour)
Link to this: Individually | In context

The Minister should please explain it to us.

Martin Cullen (Waterford, Fianna Fail)
Link to this: Individually | In context

I will. The Deputy is being disingenuous.