Tuesday, 24 May 2005
Private Members' Business.
Aer Lingus: Motion.
That Dáil Éireann:
—recognising the enormous contribution to the Irish economy made by the national airline, Aer Lingus, since its establishment;
—commending the workforce in Aer Lingus for building up the company over many years as one of the foremost airlines globally, and for their major contribution in returning the company to record profitability since 2001;
—noting that State funds, through the national pensions reserve fund, are currently being invested in aviation companies throughout the world, while the Government refuses to invest State funds in Aer Lingus;
—affirming the need to retain the national airline in public ownership as a vital strategic element of Ireland's infrastructure;
—asserting the responsibility of the Oireachtas to serve the public interest, including the convenience and safety of the travelling public and the livelihoods of workers in the national airline; and
—deplores the decision of the Government to sell the majority stake in Aer Lingus held by the State on behalf of the Irish people, thus leaving the company and the workforce open to exploitation by private commercial interests who will profit from the decades of investment by the Irish taxpayer in building up Aer Lingus and from the sacrifices of the workforce who saved the company in recent years;
calls on the Government to:
—retain the national airline, Aer Lingus, in State ownership;
—invest in Aer Lingus as required and on the basis of a business plan to secure the future of the airline, given that there is no impediment under EU competition rules to such investment;
—safeguard the employment, pay and conditions of all Aer Lingus workers; and
—develop Dublin, Cork and Shannon airports and the regional airports as part of an integrated all-Ireland transport policy, and in doing so fully comply with the agreement reached between the Taoiseach and the Irish Congress of Trade Unions in the context of the 2004 pay talks so as to ensure that pay and conditions won by workers at Dublin Airport are fully applicable to workers in the new terminal or terminals there.
I wish to share time with Deputies Morgan, Ferris, Sargent, Gregory, Finian McGrath, Cowley and Boyle.
Sinn Féin, in proposing this motion, is conscious that until now there has been no real opportunities for Deputies to discuss the cases for and against the privatisation of Aer Lingus and the ramifications it will have for Irish taxpayers, the airline workers and our island economy. It is in this spirit that Sinn Féin proposes to open this debate and give everyone, regardless of the dogma of his or her party leadership, a chance to put his or her position on record as to whether he or she supports the privatisation and sell-off of Aer Lingus.
I want to be clear on the Sinn Féin position. We believe that privatisation will not work for Aer Lingus. We have listened carefully to the arguments of those in favour of the privatisation route but believe they have got it wrong once again. In the long run privatisation costs the taxpayer more money. It results in a loss of jobs throughout the economy not only in the company that ends up being asset-stripped and sold off but in other economic sectors.
It has been amply demonstrated in the cases of Eircom and now the ESB that privatisation leads to higher costs, increased prices and a complete absence of the promised benefits of competition. In the Eircom case, we are witnessing a slow decline towards failure. Today, more than five years after the privatisation hype that accompanied the Eircom share launch, the company is clearly in difficulty. For the customer, privatisation has meant a more costly service, particularly in line charges, hand-sets and being levied for maintenance by Eircom.
The company has been on and off the Stock Exchange as its new owners found innovative ways to cash in on its value. They sold off the Eircell mobile phone licence to Vodafone. This is a company whose profits run to hundreds of thousands of euro daily and whose Irish customers pay more money into Vodafone's coffers than mobile users in any other Vodafone market. Eircom's new management then sold off the Golden Pages and the company's websites. Its members paid themselves a €500 million dividend but were unable to find the money to invest in a nationwide broadband roll-out. When the Government begged the company to run the broadband service, not being a public sector company, it was able to say "no". When the Taoiseach and other Cabinet Ministers offered to subsidise a State broadband roll-out programme, the privatised board of Eircom was again able say "no". Its members also tried to say "no" to their public service obligation to provide fixed line services to all households which was costing them €40 million a year. Last year leaked documents, prepared by Eircom's consultants and senior managers, showed the firm needed to spend at least €1 billion on upgrading its network, which was reporting up to a million line faults annually.
This is the reality of the privatisation of Eircom. A lucky few, like Tony O'Reilly, have been enriched while the original infrastructure is in decay and new investment in broadband is only emerging in a piecemeal way. I give the Government and Eircom credit for one aspect, the advertisements were good but it is a pity about the service.
There is the case of the ESB, not yet privatised but being prepared for sale, and the introduction of new private sector power stations. For the customer, this has meant four years of year-on-year price increases. That represents a 40% increase since the Government decided to privatise the electricity markets. These price increases were needed, according to the ESB regulator, to make the market more attractive for the private sector. That is a remarkable statement. A successful, profitable and efficient State company has to artificially increase its prices, screwing its customers in the process, to facilitate the entry of private profiteers to the market. That is nonsense.
This is the reality of the mad march towards privatisation in Ireland, spearheaded by the Progressive Democrats and their cheerleaders and bank-rollers, resulting in higher profits for the greedy select few and higher prices for customers. Where does that leave Aer Lingus? Will its privatisation be a different story? What safeguards have we that four or five years down the tarmac we will not have a repeat of the Eircom fiasco?
SIPTU tells us that the sale is a "grave strategic error". It highlighted the promise made to it over a year ago that the company needed a full business plan to grow its routes and passenger numbers, then plan the type of aircraft needed and the level of financial investment for the company.
At present, Aer Lingus management does not know what is needed because there is no business plan. The new chief executive will not take up his post until August. If the company does not know what is needed in terms of investment, what hope is there that the Government knows? The answer is none. However, this is not about investment in the airline, securing the future of Aer Lingus or the best interests of the travelling public or the Irish taxpayer, it is about giving in to the insatiable demands of the privatisation lobby.
Government members have a chance tonight to stand up and say whether they are planning a Ryanair mark II or whether they believe there is a future for Aer Lingus as a national carrier, handling cargo and playing a central role in the future of the Irish economy.
IMPACT has raised the issue of Ireland's status internationally in the airline market. It has pointed out that "very few countries of Ireland's size have direct flights to so many important destinations". According to IMPACT, huge strategic interests are at stake, especially in the tourist and investment sectors, if Ireland's ability to have direct flights internationally is not maintained. However, as of yet we have had no details or guarantees from Government, not even a hint that it has given these issues a moment's thought.
Another issue raised by IMPACT is that Aer Lingus could go the way of Manchester United, bought in a hostile take-over and saddled with debt to pay for the take-over.
There is the disclosure by ICTU that €27 million of taxpayers' money has been invested in airlines around the world through the pension reserve fund. Therefore, it is all right to invest in Air France, BA or even Ryanair. I am sure the strategic business plans of these airlines were checked out before any investment was made, or maybe they were not, as €7 million was invested in Ryanair without yet receiving a dividend from this firm. Perhaps it was all spent on the newspaper advertisements attacking the Taoiseach.
These are all cogent arguments as to why Aer Lingus should not be privatised. Aer Lingus is the airline of choice for Irish people, not only for those living in Ireland but throughout the world. For them, it is a symbol of safety, good customer care and value for money, and there is incredible goodwill from the people towards the airline because of this. Given a choice, I believe this is the airline on which most Irish people would choose to travel. That is not to say that an airline can be run on goodwill alone. Aer Lingus is in the successful position it is in today much to the sacrifices made by its workforce. It has adapted to the new challenges that emerged following 11 September and has come through where others failed.
There is the question why Aer Lingus exists in the first place. The answer is that there were no private sector investors willing to take the risk in setting up the company. There was no one with the long-term strategic view of how important the airline industry would become to the Irish economy not only in terms of tourism but of importing and exporting goods. We are, after all, the most globalised economy in the world.
Aer Lingus became a vital part of the economic infrastructure of the State, and it still is today. As was the case in the 1930s, there are still no private sector businesses, domestically or internationally, with the long-term strategic view needed to secure the future of this company. There are the carpet-baggers who will gladly assist in the asset-stripping and dismembering of this company, turning it into a pale imitation of Ryanair. There is even a greater breadth of vision needed for Air Lingus in the time ahead. It needs to be developed in the context of a strategic direction for all the airline industry in Ireland that would include, on an all-Ireland basis, international and regional airports. However, unfortunately, unless Members support this motion none of this will ever come to pass. Instead we will have a quick sell-off and glossy advertisement campaign but no real thinking about the long term and no national strategy for the airline industry. Therefore, Members should get ready for another bumpy ride, lots of turbulence, jobs lost and, ultimately, a crash landing.
The decision to privatise Aer Lingus is scandalous, as Deputy Crowe outlined. It has the ability to seriously undermine the long-term strategic interests of this State. The decision is a slap in the face to the employees who are working to sustain the company's growth and profitability. This decision to sell a majority share in the State airline has been accurately described by SIPTU's national industrial secretary, Mick Halpenny, as a grave strategic error for the workforce and the country, and he is right.
Sinn Féin commends the workforce past and present for building that company over many years and making it one of the foremost airlines globally and a valuable State asset. This State should be very proud of its national airline and should realise what an asset it is to the country. Once we lose control of the national carrier, there is no guarantee that in an economic decline any airline would continue to serve the State if it deemed it was not profitable to do so.
What is the reason behind the sale of Aer Lingus? The truth is it is purely ideological. Opposition to public ownership of any kind is a core principle of the current Government, regardless of economic and social consequences of such actions. It does not even matter if such actions have the potential to seriously undermine the strategic interest of the State. We are told every other state is privatising its airline so we must do the same. That is absolute nonsense.
Many of those who salivate with desire to privatise Aer Lingus seek to emulate Ryanair. There is nothing glorious about an airline which treats its workers and, indeed, its customers with contempt, as Ryanair does. There is nothing to aspire to in its anti-union practices or its discriminatory policies towards the disabled. Workers at Aer Lingus, who have committed to restructuring the company and making it profitable once again, are now faced with the serious implications which this decision poses for job security and working conditions.
There is serious concern regarding reports that there is a deficit in the company's pension scheme which is shared with the Dublin Airport Authority. Media reports have claimed that this deficit was of the order of €243 million. I understand this was never signalled to the Aer Lingus unions and that they received an assurance from Willie Walsh that all was well with the pension fund. What happens to pension entitlements in the event of privatisation if there is this level of debt? I ask the Minister for Transport to clarify the status of the pension fund, if and when the Government intends to set up a separate Aer Lingus pension fund and how such a fund will be financed.
In 2003 my colleague, Deputy Crowe, correctly warned that the Aer Lingus Bill was paving the way for the break-up of a successful company, the loss of thousands of jobs and the destruction of a strategic pillar of the economy. That Bill enabled the Minister for Finance to sell the State's shares in Aer Lingus at any time. The Bill also provided for the employee share ownership plans at Aer Lingus. The Aer Lingus ESOP was disguised by the Government as a reward for the effort of the workers in Aer Lingus in turning the company around. The State has used employee ownership as a key element of its privatisation programme for Aer Lingus. It has been clearly stated by those who promote ESOPs that they offer a practical means to jump start the privatisation process by organising a shareholder group which has a vested interest in working for the full privatisation of the enterprise.
Sinn Féin will continue to oppose fully all plans to privatise Aer Lingus which, in the common good, must remain in public ownership.
Those who favour the privatisation of State companies often accuse their defenders of being purely driven by ideological motives. In fact, it is clear that ideological motivation is more often to be found on the side of the supporters of selling off State assets in combination, of course, with the desire to provide plump pickings for their friends in private companies who wish to take over successful public enterprises. They neglect the fact public ownership of utilities like transport was most often begun by Governments which were not ideologically of the left, including those in this State. They created those companies for the practical reason that private enterprise was unwilling or unable to do so because it did not believe essential public services could provide them with a profit.
On a basic level, the quality of life for ordinary people improved immensely when municipal and State authorities began to supply those services. That is why this State financed the building of local authority housing and established bodies such as the ESB, CIE, Bord na Móna, the sugar companies and Aer Lingus. The people who controlled the bulk of the wealth created in this State had no interest in long-term investment or in the development of State industry. Instead, they were happy to put their money into the London Stock Exchange. Now that those State enterprises have proved successful, we are faced with demands that they be privatised.
We have been here before with Irish Shipping. A Government made up of parties opposite decided that an island nation dependent on exports and imports could not run a shipping company. It did not need Irish Continental Lines and B&I. Where does that leave us today? In recent months, we saw another example of this kind of privatisation whereby employers have their ships registered under flags of convenience so they do not have to adhere to Irish or even EU labour laws. The workers on those ships work longer hours and get paid the princely sum of €1 per hour, as we saw only a few weeks ago. Is that what we want for Aer Lingus? If that happens, it will have all the effects described by my colleagues and it would also have implications for the provision of services.
What guarantees will there be that regional airports will be maintained if a private sector does not feel it is guaranteed sufficient returns? Not only would that affect tourism in areas dependent on airports, such as Counties Kerry, Mayo and Donegal, but it would also affect the local economy in other ways which would give rise to job losses. Kerry Airport at Farranfore is an example of a regional facility which provides excellent service to the county and the south west in general. It is an important access point for inward tourism but, more importantly, it is an amenity for local people who for personal or employment reasons are able to avail of the convenience of air travel in place of long, tedious road or rail journeys or, indeed, to connect from other airports.
I know the value of a regional airport as I use it continually coming to and from the House. It takes me approximately 40 minutes to get from Farranfore to Dublin Airport whereas it takes me over four hours to drive to Dublin. On a practical level, this means that a person flying from Farranfore can be in Manchester or London in an hour and a half. It could be pointed out that the London provider is a private company but I doubt very much if a private company could have built and maintained the airport. That is one of the points of this motion. The airport facilities need to be retained in State ownership and developed to provide what is overall a profitable enterprise but one where, like other public utilities, profit should not be the prime motivator.
Another issue which needs to be borne in mind when discussing the need to retain a State airline and overall authority in the sector is that private companies would have no interest in promoting an all-island approach to the provision of air travel. The overall long-term development of tourism and industry in a region like the north west requires co-operation on numerous levels, including transport, and that should be one of the factors taken into consideration in framing a strategy for the Irish aviation sector as a whole.
I am glad to speak on this motion and I thank Sinn Féin for tabling it. It is an issue of considerable concern and a talking point for many people in my constituency of Dublin North. The company is very much at the heart of the economy of north County Dublin and has provided livelihoods for many people over a number of generations. People have a keen interest in Aer Lingus even though no member of the family may work in the airline. They understand its importance as the economic heart of Dublin Airport where much of Aer Lingus's activity is based. Why if that heart is pumping so well and is in such a healthy state is it necessary to undertake heart surgery? Neither the Government nor Aer Lingus management has fully explained why it is taking this course of action.
According to Aer Lingus executives who have appeared before various Oireachtas committees, there has been no specific evaluation of the fleet replacement needs of the company, no assessment of the capital needs for such a replacement when that is outlined in detail and no explanation of the options available to acquire the necessary capital. The Government has taken this course to dilute irreparably the State holding in the national airline to the point where it will perhaps be in more difficulty if, as is forecast, there is turbulence in the airline industry.
It would be right to make the investment with the State shareholding in place. The Green Party takes the line "if it ain't broke why fix it?" That is why we believe there is an ulterior motive behind the Government's decision. Some members of the media are infected by the prospect of nirvana if Aer Lingus is in private hands. They believe if the airline is in private hands it will somehow work better than if it is in State hands. There is no basis for this belief.
The Minister for Finance has outlined why Ireland is distinctive in so many areas, in terms of taxation and the particular needs of an island nation and an open economy. We should bring the same critical assessment to this issue rather than say that other countries have divested their State involvement in a national airline and therefore we must do so too. The only clear argument I have heard is that this move follows the example of others. The argument is insufficient given the serious implications for the staff of Aer Lingus and the economy as a whole of the Government's dilution of its shareholding.
The people who worked in Aer Lingus and with whom the Minister was closely involved at the time of the Cahill plan are angry about the pain they endured to put in place the necessary reorganisation. This is now to benefit profiteers, not people who regard the airline as integral to our national well-being and economic development.
This motion is tabled with sadness. I urge the Government to take on board the concerns expressed and recognise that Aer Lingus is more than a company or a national airline, it is at the heart of the country's economic development, and if it is damaged the country will be damaged. The Government should not take lightly its responsibility for that fate.
Tugaim tacaíocht iomlán don tairiscint thábhachtach seo atá curtha os ár gcomhair ag Páirtí Shinn Féin, is é sin, cur i gcoinne na bpleananna atá beartaithe ag an Rialtas tromlach Aer Lingus a dhíol le comhlachtaí príobháideacha. Táim glan i gcoinne a leithéid de rud a dhéanamh. Ba chóir an aerlíne náisiúnta a choimeád in úinéireacht an Stáit, agus ba chóir don Stát Éireannach cibé infheistiú atá ag teastáil a chur ar fáil d'Aer Lingus.
I wholeheartedly support the motion before us which seeks to retain and defend the national airline as an important State asset. I deplore the recent Fianna Fáil-Progressive Democrats decision to sell off 60% of the national airline which, as the motion states, is "held by the State on behalf of the Irish people". If this majority stake sell-off goes ahead it marks the beginning of the end of Aer Lingus. Despite all the talk about setting down certain conditions for the sale of the national asset, no doubt in time reasons will be found to sell off the remaining minority stake and in due course Aer Lingus will be stripped of its assets for the profit of private interests.
The Government's amendment with its grandiose words about "commitment to ensuring that Aer Lingus continues to make a significant and valuable contribution to the economic and tourism development of the country" rings hollow when we recall the sell-off of Telecom Éireann. In that sale a Fianna Fáil Government conned 500,000 people into believing that they would watch their investment grow in the privatised Eircom. Where is Eircom now? Who owns that great national asset and watches that investment grow? It is not the Irish people.
Anything the Government parties say about their comprehensive plan for the long-term success and growth of Irish aviation should be treated with the contempt it deserves. For an island nation in which the tourism industry plays such a critical economic role it defies logic to sell off the national airline, particularly when Aer Lingus has shown that, with a dedicated workforce, it can compete with low-cost airlines and make a significant profit.
I join those who proposed this motion in commending the workers in Aer Lingus who, over many years, built up the company and whose future may soon be in the hands of individuals who care nothing for workers' rights and less about public interest.
I commend Deputy Crowe and the Sinn Féin Members for bringing this important debate before the House. I totally oppose the privatisation of our national airline, Aer Lingus. The privatisation of Eircom in 1999 was, and the privatisation of Aer Lingus would also be, a strategic mistake. Aer Lingus is a strategic national asset, and I do not say that lightly.
I challenge those who spin privatisation as a solution to all our economic problems. We must deal head-on with this neo-conservative view of the economy and the world in tonight's debate. They are a pack of chancers, tax dodgers and gombeen men.
I apologise but I am deeply annoyed with the numerous scams in our society today, where regular taxpayers are punished while other people get away with dishonesty.
To return to the debate, I urge everybody involved to look at the facts and deal with the reality. When the State company, Eircom, was privatised 500,000 small investors lost one third of their investment. The loss to our economy and society from the privatisation of that company in a vital strategic area, which held a monopoly in many areas of its operations, had a greater long-term impact than the combined personal losses of those investors. At privatisation, Eircom was highly profitable, had no debt, was investing heavily in Ireland, reducing prices and providing an increasing variety of services. Today it is loss making and has cut its investment dramatically because it is heavily in debt as private investors extracted much capital from it.
Ireland is an island economy. Our largest trading partner across the water, the UK, and Heathrow is vital to Irish business. It is the key connection point for our much travelled people. Aer Lingus has valuable slots at Heathrow that the new owners will inevitably sell off to reduce the debt incurred by buying the airline. The new owners of Eircom sold off its fastest growing subsidiary, Eircell, to Vodafone, and many other assets shortly after privatisation. A pair of slotsin Heathrow sold recently for £10 million sterling and Aer Lingus has many of them, which are as vital as the airbridge between Dublin and London. They are more valuable for long distance operations. Business and other travellers will be ejected and have to use Gatwick and Stansted.
Ryanair has no particular commitment to Ireland and has demonstrated this again and again. Michael O'Leary makes a higher profit on his Irish routes than on any others and that is the main attraction to Ireland for him. He would be gone in the morning if it suited him. The venture capitalists and management will sell on Aer Lingus to the highest bidder within a few years of taking their gains. The new owner, and not necessarily an airline, could close Aer Lingus Irish headquarters and run it from offshore, ignoring the strategic concerns of Irish business, consumers and its workforce. These are important issues.
I support the motion because it is about Aer Lingus. It is also about the future of our island economy. It is about people and taxpayers but above all it is a commonsense motion about the future of the economy and the aviation industry.
I thank Sinn Féin for tabling this motion and particularly its call on the Government to develop the regional airports as part of an integrated all-Ireland transport policy. International research has proven that airports stimulate regional development. They are a strong catalyst and are a major economic driver in the western region, in particular. That is demonstrated by the fact that they supported 546,000 bed nights in the region in 2004. While Knock Airport continues to have international runway length capacity of 2,300 metres its potential will not be fully realised until the investment is made.
The Government should have supported Knock Airport in the same way as it has supported Aer Rianta airports. The Government provides approximately €3 per passenger to Aer Rianta airports each year while the European norm is as high as €8 or €10. If the minimum Aer Rianta standard had been applied to Knock Airport it would have received a capital investment of between €115 million and €190 million in the past decade. Instead it has received investment of less than €5 million.
The Minister for Transport needs to have a vision for Knock Airport. The actions taken up to now have not addressed the problem and will not do so if they continue. It is obvious the western region has been deprived of funding of €2 million, which will have to be made up. When the Government puts together its capital envelope it should include the €2 billion deficit and ring fence whatever else is for the BMW area under the national development plan, otherwise it will go elsewhere.
Given that, say, 20 million passengers land on one side of the country and only 0.5 million on the other side, it is in the interests of balanced regional development that the Government would put this €30 million to €40 million investment into Knock International Airport. Knock International Airport is Ireland's fourth international airport, serving up to 13 counties. Some 21 million passengers per year travel through airports in the south and east, 6 million passengers travel through airports in Northern Ireland, which has almost the same population as the border midlands and west region. Knock Airport, however, with a projected figure of 500,000 passengers this year is the starkest example of the failure to develop the BMW region. It is an example of unbalanced regional development and we are paying for it. Knock Airport has a longer runway than Cork Airport yet it has been the poor relation for Government investments.
In the south and east, airport investment is directed towards expanding the existing airports rather than airport safety and security as at Knock. For years Dublin has benefited from public sector support and is now capable of supporting substantial investment in other airports, such as Cork and Shannon. Knock has no such relationship with the large cash cow. Between now and 2007 an investment of at least €18 million is required at Knock to provide the airport with category 2 status, which would greatly reduce any chance of plane diversions. A total investment of €40 million would also provide an expanded airport apron so that there would be adequate space for large aircraft such as Airbus, which now uses Knock Airport. This apron would ensure airplanes with a fast turnaround time were not delayed and therefore schedules would be kept. In that way Knock could compete with other airports and those millions of passengers could be diverted to the west.
Given that Knock is well-placed, being less than a one-hour drive from nine regional urban centres or gateways, it the only effective international airport for most of them. Traffic numbers at Knock Airport in January and February 2005 grew by 101% compared to the same period last year. During the past six months, two new Gatwick routes, a Liverpool route and a second Birmingham route have been added to the existing routes at the airport. Despite this the Government intends to provide a second terminal and even a third terminal at a cost of €150 million plus, say €250 million, which is projected to suck in 38 million passengers by 2025 and will further congest Dublin where already traffic is at ass and cart pace. This is madness when one considers the wonderful international airport at Knock lying under-developed and under-utilised with one-fortieth of the passenger numbers of Dublin Airport. It does not make sense.
There is a need also for the 5,000 new jobs to be created at Knock rather in Dublin, which already has too many people and has half our graduates. Surely those jobs should be at Knock where net industrial output grew by 3.7% annually between 1990 and 1997 in the BMW area compared to 12.7% growth nationally elsewhere. Bed nights and tourist accommodation are down by 20% in the west although tourist numbers rose by 6% nationally. There is a great need for proper investment and a tax incentive scheme in Knock. I hope the Minister will look at all this area. I support the motion.
On the airport aspect of the motion, the Taoiseach on Leaders' Questions told the House that he had not been informed of any change in Government policy on the issue of the transfer of debt to Dublin Airport in regard to developments at Shannon Airport and most particularly at Cork Airport. That may well be the case. In Cork the south-west regional authority holds regular meetings and there is an airport consultative committee that holds meetings of local Deputies and management of airport staff. We have been told in the past fortnight that the business plan being prepared by Cork Airport management committee that will be presented to the Dublin Airport Authority must include a proviso that the operation of Cork Airport takes into account a starting debt of €160 million in respect of the new terminal development at the airport. Either the airport authorities, the meetings at which we are informed as constituency Deputies or the Taoiseach is misinformed. The Minister for Finance needs to clarify that aspect of the debate.
Not only is there confusion about that but there is an imbalance in terms of passenger numbers between our international airports and national and regional airports. Cork Airport suffers as it is not included in the EU-US agreement in terms of landing rights and schedule flights between Cork Airport and locations in North America. There has been an attempt to use charter flights to overcome that difficulty. The lack of a real national aviation policy means Dublin Airport is over burdened and that resources at Cork, Shannon and the regional airports are not being properly used. The Government appears unwilling to tackle this imbalance, possibly because it is preoccupied in straddling the two ideological horses within the two Government parties.
We have an agreement to build a second terminal in Dublin Airport. According to the Taoiseach, it may happen in 2009 but according to the Dublin Airport Authority it may happen in 2010. Given Ireland's recent history in the area of infrastructure none of us can be confident this terminal will be built in the next decade. Even if that building is finished on time and within budget there is the tantalising prospect of the ideologically pure third terminal which appears to be sating the Progressive Democrats in particular. Where it is supposed to be located and who will run it are questions being left float in the ether for us to interpret. Will it be a new airport authority? Is it a Dublin Airport plus authority which will run this new third terminal? Will national aviation policy be determined by an interminable number of terminals at Dublin Airport before we have any degree of balance between Dublin Airport and the other international airports in this country?
On behalf of the Minister for Transport, I welcome this opportunity to address the recent Government decision on key aviation matters. In particular, I wish to rebut the distortions and scare tactics of some members of the Opposition. Unlike them, the Government has confidence in the future of our aviation sector and for that reason has set out a clear strategic direction and an unambiguous mandate for growth. The net result will be a stronger aviation sector and a better future for the economy, customers and staff.
I will first deal with Aer Lingus. Last Wednesday, the Government decided in principle to allow the sale of a majority shareholding in Aer Lingus while retaining a significant stake in the company to protect the State's key strategic interests. The Government also decided to appoint advisers to advise on the size, type and timing of the Aer Lingus sale transaction. This decision is the culmination of detailed and comprehensive consideration of the various options facing the company that has taken place over the past year.
The Minister for Transport and I will move quickly to engage advisers and to consult with the company and staff as appropriate. In selecting the most appropriate transaction mechanism, regard will be had to a range of key issues including the price achievable. The timing of a transaction will be dictated by the company's needs, its performance, the state of the aviation sector and market conditions.
A key part of the decision is the mandate to the board of Aer Lingus to prepare and submit a plan for future profitable growth as soon as possible on the basis that additional equity capital will be available within a reasonable timescale. This decision allows Aer Lingus to secure funding for new aircraft and in turn to open and compete on new, particularly long haul, routes.
For many years Aer Lingus was the main provider of air services between Ireland and the outside world. It led the way in selling and promoting Ireland, making it the major tourism destination it is today. With access to funds and a competitive cost base, Aer Lingus can continue to make a major contribution, flying to more destinations, offering more choice to consumers and opening new markets for tourism and employment.
Over its history Aer Lingus has had its share of crises and has come close to failure. That this did not happen is a testimony to the efforts of successive management and dedicated staff. However, the Minister for Transport wants to end these crisis cycles where every few years a crisis is followed by survival followed by stagnation and back to crisis again. The Government decision means that for the first time, there can be investment for growth and not just a short-term response to a crisis.
I firmly rebut any suggestion that the transaction will result in a debt-laden Aer Lingus. This is untrue. The investment will result in a strengthening of the Aer Lingus balance sheet and will ensure that equity funds are available to Aer Lingus as part of its overall funding mix. This is a key issue. It is clear that to compete effectively, Aer Lingus must have the same funding flexibility as its competitors. This was clearly identified in the Goldman Sachs report as being crucial to the future success of the airline and essential for financial stability.
In the motion put forward by the Opposition, mention is made of the fact that State funds, through the national pensions reserve fund, are currently being invested in aviation companies throughout the world. I wish to make it absolutely clear that investment decisions are solely a matter for the National Pensions Reserve Fund Commission, having regard to its statutory remit. Decisions on investment are made by the independent commission which is required to invest for maximum return, subject to risk. The commission could not in fact invest in Aer Lingus at present because it is not publicly quoted. Were it publicly quoted, that option would be open to the commission.
I also wish to make it clear that for Aer Lingus to maximise its growth potential, in addition to having access to funds, it must have a competitive cost base. It is, therefore, vitally important that the existing business plan is implemented in full. Since 2001, 30% has been taken out of the cost base of the company. This will ensure that the airline has an appropriate cost base to support the growth plan which the board has been mandated to complete. It will be critical over the next few months that management and staff work together to achieve this objective. With access to funds and continued progress toward greater productivity, Aer Lingus will be able to compete aggressively and grow profitably both on short haul and long haul routes.
The history of Aer Lingus demonstrates clearly the massive challenges in the sector and the ongoing need to reposition and change in order to survive. It is imperative that airlines try to anticipate and plan for those changes over which they have some element of control because, as has been clearly demonstrated, there will be many events impacting on performance such as terrorist attacks and global downturns over which airlines have no control. That is why it is so important to put in place a forward-looking strategic plan for growth based on a sound cost foundation.
From an operational point of view, Aer Lingus has been performing well in recent years in a difficult climate for aviation. However, given that this is a sector where nothing can be taken for granted, there must be ongoing focus on the key issues that will ensure the success of the airline. The success of any airline is not guaranteed as is shown in the examples of the amalgamation of KLM and Air France, the loss of Sabena, Swissair gone to the wall, Alitalia in serious difficulties and thousands of jobs being lost in Iberia Airlines in Spain. To ensure the success of the airline two key issues are funding and flexibility which the Government is now addressing. This means access to equity from private funds which is available to its competitors and the company's cost base is being addressed by management and staff.
Concerns have been expressed about strategic issues in the context of the State exiting from ownership of Aer Lingus. These concerns relate to issues such as the Aer Lingus brand, direct transatlantic services and the slots at Heathrow. Apart from maintaining a significant minority shareholding, options such as specific shareholder agreement covenants or commercial arrangements between the State and the company will be examined to ensure key concerns are addressed where necessary.
The Minister for Transport and I do not, however, share the doomsday thinking on the future expressed by the Opposition this evening. Have they no confidence in the airline and its ability to serve a growing market? The Minister for Transport has no concerns that any prudent investor would want to destroy a premium brand such as Aer Lingus or would cease to operate profitable direct transatlantic services to and from Ireland. New investors will want to see Aer Lingus flourishing in all its existing markets as well as exploiting the potential which new long haul routes present.
However, both the Minister for Transport and I accept there are some legitimate concerns. I assure the House that these issues will be addressed in the context of the selected transaction. I also want to clarify the issue in respect of the minority shareholding which the Government will retain. The rights attached to this will be no more or less than that which applies to any shareholder under company law. This means that with the ownership of 25%, the Government cannot be forced to sell its shares and can also deny other shareholders the ability to pass special and extraordinary resolutions such as making changes to the memorandum and articles of association of the company.
I am also aware that increasing the commercial opportunities for Aer Lingus in terms of services between Ireland and the US is an important element in the overall strategic future for the airline. My colleague, the Minister for Transport, will endeavour to achieve this outcome over the coming months. Aer Lingus has stated it could double traffic on US routes within a three to five year period if the market is opened up. Currently, Aer Lingus can only operate scheduled services to five US points under the bilateral agreement, namely New York, Boston, Chicago, Los Angeles and Baltimore. This restriction, which has been in place for many years, is the response of the US authorities to the requirement in the bilateral agreement that all airlines serve Shannon as often as they serve Dublin. Addressing this issue involves making adjustments to the bilateral aviation agreement between Ireland and the US. In doing so, we must seek to secure the best outcome for Aer Lingus, our national tourism industry, Shannon Airport and the Shannon region. In particular, I am conscious that the new board of the Shannon Airport Authority is producing a business plan for the airport and that clarity on future transatlantic aviation policy would be very helpful to that business planning process. While negotiations between the European Union and the US on an aviation agreement, which would introduce "open skies" across the Atlantic, are not active at present, it is likely they will resume after the June Transport Council where the Council will review the possible elements of an EU-US agreement. In the meantime, the Minister for Transport is keeping the Ireland-US aviation agreement under review, having regard to the EU-US negotiations.
Deputy Morgan raised the issue of pensions. Obviously Aer Lingus has two pension schemes, one for pilots, with which no difficulties exist, and one for general employees in the company. The pension scheme is a multi-employer scheme, which involves the Dublin Airport Authority and a private company, SR Technics, formerly TEAM Aer Lingus. The administration of that general scheme is a matter for the trustees of the scheme and the company concerned having regard to the rules of the scheme. The problem with the scheme is that because it is a multi-employer scheme it cannot be amended without the consent of all participating employers and a majority of members so that no employer is in a position to negotiate exclusively with employees as to his or her pension entitlements.
Actuarial valuations on the scheme are carried out every three years, with the last valuation completed in March 2003. At that time the scheme satisfied the minimum funding standard included in the Pensions Act 1990. The valuation due in 2006 has been brought forward by a year and is expected to be completed by the end of June. Unions and others have been speculating that the scheme is in deficit. However, indications are that a deficit does not arise under the terms of the present scheme. If the rules were changed to allow for mandatory CPI increases it is likely that a deficit would arise. The Aer Lingus Act 2004 contains enabling provisions which allow Aer Lingus to establish new pension schemes for its employees and pensioners. The Act also ensures that the benefits granted under such a scheme or schemes shall not be less favourable than those granted under the existing scheme. It is a matter for Aer Lingus to decide if and when a new pension scheme or schemes should be established, and the terms of any scheme would be a matter for negotiation with unions. Discussions are ongoing between management and unions on the existing pension scheme as well as a new pension scheme.
I express my appreciation and that of the Minister for Transport to the chairman and board for their ongoing efforts in directing the airline. The staff in particular are due our thanks for their efforts. They work in a difficult industry and have had to continually adjust to change. I assure them that we will engage with the unions and the ESOT in a spirit of partnership to progress the Government decision to ensure a viable future for Aer Lingus with the maximum number of sustainable jobs.
I will now deal with State and regional airports. The decisions on terminal capacity at Dublin form a key part of the aviation action plan announced last week. In terms of access, inward investment, economic development and tourism generally, Dublin Airport is, and will remain, the metropolitan gateway to the State. Ireland's island status creates a greater dependency for the country and a much greater requirement for adequate modern airport infrastructure, with associated air services, than in the case of other European countries with significant land borders. The national spatial strategy has acknowledged that the expansion of the level of air services from Dublin Airport to a wider range of destinations is essential in the interests of underpinning Ireland's future international competitiveness. Notwithstanding the greatly welcome increase over recent years in traffic at Shannon and Cork airports, and indeed at some of the regional airports, Dublin Airport will remain crucial to the national economy as a vital strategic component of national infrastructure.
At its meeting last week, the Government recognised the urgent need to provide for additional terminal and pier capacity at Dublin Airport. It agreed that the Dublin Airport Authority would build and own the new second terminal and the objective is to have the new facility operational in 2009. Following consultation with its customers, the Dublin Airport Authority will develop the most cost-effective options for the design, building, financing and operation of the terminal. Recognised independent experts with appropriate aviation and financial expertise will be approved by the Government to verify the proposal on its behalf.
Under current legislation, the operator of the new terminal will be selected through a fully open competition, which will be organised by an appropriate independent group or body. Selection of the successful tenderer will be on the basis of the most economically advantageous proposal. The agreement between the Government and the Irish Congress of Trade Unions, which formed part of last year's mid-term review of Sustaining Progress, will also be reflected appropriately in arrangements for the conduct of the competition. The Commission for Aviation Regulation will of course also ensure that the level of investment is appropriate through its statutory role in setting airport charges.
In the longer term, the Government recognises that, based on current projections for growth in passenger numbers, further terminal capacity will be required at Dublin Airport by around the middle of the next decade. In this regard, the Government decided that preparatory work should begin on examining the current legal and regulatory framework governing the airport for the purpose of identifying changes that may be necessary to facilitate the delivery of the next tranche of terminal capacity, namely, terminal 3. It is the objective of Government policy to underpin the most cost-effective, efficient and timely delivery of that terminal in line with emerging aviation trends through an open, transparent and competitive process. With regard to contact stands for aircraft, the Government recognises the priority associated with the provision by the Dublin Airport Authority of new pier capacity at Dublin Airport and in this regard the Minister for Transport has ensured that the Dublin Airport Authority has the necessary flexibility to respond appropriately to customer requirements in this area.
The Government also agreed that proceeding to finalise the independence of Dublin, Cork and Shannon airports on the basis of viable business plans is critical to achieving the strategic goals of aviation policy. The Minister for Transport and I will progress the restructuring of State airports on foot of assessment of the business plans currently being prepared by the airport authorities. The Dublin and Shannon airport authorities have been working intensively to identify new business opportunities for Shannon and concluded an agreement last year with Ryanair that will result in significant new business on European routes. Securing access from Shannon to additional destinations can provide new business opportunities for Shannon, and this is one pillar of the approach to future growth by the Shannon Airport Authority.
The two authorities have also indicated that addressing the long-standing unsustainable cost base at Shannon is an essential precondition for the future viability and development of the airport. The authority is satisfied that necessary cost savings can be achieved and in this regard I expect that discussions with the trade unions will begin shortly. In consultation with his colleagues and in the context of the business planning process provided for under the State Airports Act, the Minister for Transport will consider how best to enable the Shannon Airport Authority to carry out its commercial mandate and to maximise its contribution to regional development in the mid-west.
Cork Airport is one of the fastest growing airports in Europe. Since 1994, Cork Airport's traffic has risen nearly threefold to 2.25 million passengers last year. With its relatively large catchment area, it has good growth potential as evidenced by new routes launched last year and this year. Cork Airport will also benefit from the major capital development under way, including the construction of a new terminal, which will have a capacity of 3 million passengers per annum, with the facility to expand to 5 million passengers as demand requires. New multi-storey and surface level car parks are also being provided and a new internal road system is being developed. Cork Airport will therefore be well positioned to respond to the region's growth potential.
The business planning process currently under way will provide a basis for effecting the restructuring and separating of Shannon and Cork as fully independent airports. As required under the State Airports Act, the ability of both Shannon and Cork to operate on a completely commercial basis will be fully assessed as part of this process and will be factored into the decisions made.
The Minister for Transport and I believe that when taken together, this package of measures will position the State airports, as well as Aer Lingus, to realise their full potential in delivering international air access to the country. I am sure many will agree that this strategic approach is necessary to underpin Ireland's competitiveness, industry and tourism, and to enable the economy to maximise sustainable employment opportunities. With regard to the smaller regional airports, the Department of Transport's policy is to assist in optimising the contribution they can make to balanced regional development.
The three State airports, which operate to a commercial mandate, currently account for 97% of all air traffic and are capable of serving the country's primary air transport needs. The size and scale of the State airports mean they inevitably attract a range of airline services commensurate with their location and catchment areas. The reforms introduced in the State Airports Act 2004 are intended to strengthen and stimulate those airports in achieving greater efficiency and promoting further air traffic development. That strategic role for the State airports is complemented by the regional development role of regional airports, and the current grant assistance schemes operated by the Department of Transport are therefore targeted towards the latter.
Exchequer support for the six regional airports in Donegal, Sligo, Knock, Galway, Kerry and Waterford falls under two categories. First, support for essential, safety-related capital investment is available under the BMW and southern and eastern regional operational programmes of the national development plan. It is expected that total capital assistance for the six regional airports will amount to approximately €20 million by the end of the current NDP. Grants are also available towards operational expenditure incurred by the airports on marketing, safety and security, and approximately €2.24 million is allocated for that purpose each year. The Department of Transport also supports regional air access through the public service obligation regime by providing financial compensation to air carriers on regional routes where carriers would not otherwise be prepared to operate to the required standards on a commercial basis. The outcome of a recent procurement process for the next round of PSO contracts for the period July 2005 to July 2008 will be announced shortly.
Regarding suggestions of a wider, all-Ireland, strategy on aviation, Deputies will appreciate that, since the full liberalisation of the European aviation market in the 1990s, there have no longer been any Government or EU controls in the Irish aviation market. That obviously influences the overall approach to that market. Liberalisation of the European air transport sector has ensured that fares, routes and frequency of services operated by carriers at all airports on the island of Ireland are entirely commercial decisions for each airline in consultation with the relevant airport authorities. That basic fact has not been incorporated into the rationale or argument I have heard from the Opposition benches regarding the motion they are proposing to the House.
However, the Government has a long-standing policy of assisting, for example, Derry Airport, in the interests of North-South co-operation and recognition of the fact that the natural catchment area of the airport includes east Donegal. The Government, at my suggestion, recently approved proposals for the allocation of capital funding for City of Derry Airport in co-operation with the British Government. A joint funding package totalling €15 million was approved in principle in response to requests from Derry City Council. Since 2001, the Department of Transport has been supporting scheduled air services between Derry and Dublin through the PSO air service programme, and proposals for the operation of services on the route for the next three years will be announced shortly.
The Minister for Transport and I are delighted that an outcome to the aviation issues has been decided in an inclusive way. The Minister for Transport's approach has been to engage with all stakeholders, listen to all views and put forward a proposal that best delivers for the country. As a result of the Government's recent decisions, for the first time Irish aviation is positioned for long-term growth.
I was Minister for Transport in 1993 and 1994. I recall when Aer Lingus was in very serious difficulties and the future of the company was at risk. When the Government obtained a once-off State investment for the company in compliance with EU rules, dealing with Commissioner van Meert at the time, many continued to say that the company could not flourish. In recent years, when one sees what has happened to long-standing brands in international aviation on both sides of the Atlantic and in Asia, one must recognise that the company is operating in a totally new environment. None of us is here to argue for the demise of a company that has served us well.
People quite rightly spoke of the vision of the pioneers who founded these companies when there were no capital formation markets in this country — a development with which my party was particularly associated — but it is incumbent on us, given contemporary realities, not to allow policy to be driven by sentimentality or emotion. If we allow that to happen, we put at risk those very jobs that we argue we must protect and expand. We must ensure that Aer Lingus can get out in that more liberalised aviation environment in which it now operates, with dog-eat-dog competition on short-haul routes.
There is now also the real prospect of long-haul route expansion following changes to the air transport agreements between the European Union, which now has that competence, and the United States, opening us up to far more than the existing five routes. We all know that, given the goodwill that exists towards Ireland, the knowledge of the country, the diaspora throughout the United States, and the ability to develop working with the hub structure of American airlines in the myriad airports of the country, we can greatly increase the number of tourists that come to this country. The role that transatlantic tourism has played in the development of the business across the country is something of which we must be cognisant.
Looking east, there are very ambitious and visionary proposals that could come to a successful conclusion. The concepts must be robustly analysed so we can determine how we can develop those routes. However, there can be a role for Aer Lingus in all that, once again with a resultant benefit to the economy, our competitiveness and our reach throughout the world when getting more people to visit this country and experience our tourism products developed over many years. That is what we can do.
We must face the challenges and ensure we minimise the risks, robustly analyse the options, tread carefully as we move forward, work with stakeholders, and all try to reach a common analysis of what is in the interests not only of the company and the workers but the country and tourism. That means that we must open our minds to new avenues, approaches and possibilities not based on the capital formation of a company whose origins lie in the 1940s and 1950s. We must deal with competitors which have access to such funds in private markets, putting Aer Lingus at a disadvantage as matters stand.
That Aer Lingus is not publicly quoted may deny an opportunity to some pension funds in this country to consider investing in the company to obtain a long-term return. Such funds should at least have that option, given their statutory obligation to get the best possible return for the pension scheme members for whom they hold money in trust. The arguments are precisely those that I heard ten years ago, all doom and gloom and an inability to recognise that Irish business management and the Irish trade union movement are capable, under the social partnership model and maintaining its principles, of developing a world-class infrastructure in all our airports, providing for a commercial remit and giving them an opportunity to expand. That will bring more growth and more employment, not only directly in the airline business but in subsidiary businesses too.
Ultimately, airports are about a myriad of services that must be integrated. That is why the Dublin Airport Authority must retain operational autonomy and responsibility for developing the airport in an integrated fashion. However, in doing so, we must ensure we develop an infrastructure that is commensurate with the needs of customers and airlines, remains competitive, levies cheap and competitive charges, ensures more airlines are interested in doing business in this country, and allows Aer Lingus to expand its commercial horizons and opportunities by accessing funds that, under EU rules — when one talks about rational investment by the State — can be provided only in good times. We need to factor in these new parts of the equation. We cannot continue a discussion which does not provide the comprehensive range of options available by suggesting that those committed exclusively to State ownership have the interests of workers or the country at heart. Those who recognise the commercial realities agree with the retention of a minority shareholding for the State so that we can retain those strategic interests but can enable the company to access other funds from private equity sources. The ultimate transaction will be dependent upon the best available aviation and financial advice available to the Government and will be of a world class standard.
Despite the barbs from the Opposition, we have treaded carefully in recent months——
——will continue to serve us well. Swissair is no longer in a position to serve Switzerland well. Sabena is no longer in a position to serve Belgium well. We allowed ourselves to be blinkered in our approach and we did not see what was happening in the market. If we do not take cognisance of the market, we will put at risk the great contribution that has been made thus far and we will deprive workers of jobs. Those workers are as good at their job in the company as any other that I know, and I flew with quite a few airlines in my role as Minister for Foreign Affairs. We can give the direction for people to work together co-operatively. We must avoid phoney confrontations and focus on the business of building an airline and airports, increasing tourism, creating jobs and making sure that people see that these were the correct choices made after robust analysis and careful consideration, and after ensuring a co-operative approach all round.
I move amendment No. 1:
To delete all words after "Dáil Éireann" and substitute the following:
"—notes the Government's commitment to ensuring that Aer Lingus continues to make a significant and valuable contribution to the economic and tourism development of the country;
—recognises the significant contribution made by the board, management and staff in the continuing turnaround in Aer Lingus' finances;
—notes that Aer Lingus can only continue to make this contribution if it can compete successfully on a level playing field, operate profitably and has access to a variety of funding sources to facilitate growth and provide financial security;
—recognises that decisions on investment by the national pensions reserve fund are solely matters for that board having regard to their statutory remit;
—welcomes the Government's recent decision in principle for the sale of a majority shareholding in Aer Lingus to provide the funds needed by the company;
—welcomes the Government decision to maintain a significant minority stake in the airline to protect the State's key strategic interests;
—notes that Government also decided to appoint advisors to advise on the size, type and timing of the Aer Lingus sale transaction;
—welcomes the Government's strategic approach which gives Irish aviation a clear direction for the future and an unambiguous mandate for growth;
—notes that these decisions are part of a comprehensive plan which will allow for the long-term success and growth of Irish aviation, the result of which will be a stronger aviation sector and a better future for the economy, customers and staff;
—notes that the Minister for Transport will progress the restructuring of the State airports and further notes that the national network of State and regional airports is contributing to a thriving aviation sector for the benefit of trade, business and tourism development; and
—notes that the agreement between the Government and the ICTU, which formed part of last year's mid-term review of Sustaining Progress, will be reflected appropriately in the arrangements for the tender competition to select the operator of the second terminal at Dublin Airport."
I welcome the opportunity to contribute to the debate, although I find myself unable to support the motion or the amendment. I agree with the statement that an airline is a vital strategic element of our infrastructure. However, I do not believe that, to be that, the airline needs to be State owned. The Oireachtas should serve the public interest, as stipulated in the motion, but I do not believe that the interest of the public, the workers or the aviation sector is best served by State ownership. I do not know how anyone could think that such is the case after the experience of the past few years and the manner in which the airline has been abused under State ownership. Its performance has been hobbled and its future prosperity jeopardised by the absence of the willingness of the State to make decisions about the future of the airline.
I have no problem with the investment of the national pension fund in low risk public projects. If this airline was publicly quoted, I would have no objection to the national pension fund being invested in it. However, investing in an airline is extremely risky and I would not like to see my pension dependent on the future of something as liable to market fluctuations as an airline.
I have no problem with most of the Government's amendment to the motion. However, I cannot agree to that part of the amendment that welcomes the Government's strategic approach that allegedly gives Irish aviation a clear direction for the future and an unambiguous mandate for growth. That really makes me despair. We have witnessed a classic example of the Government's inability to make a decision or give clear direction to this industry in recent years. That part of the amendment must have been written by someone with a great sense of humour, or it is an indication that the Government has lost touch with reality.
For the past three years, the Government has prevaricated, procrastinated and obfuscated. It has done anything but make a decision. The result is that the airline has lost its management, growth opportunities and approximately 25% of the value of the airline, according to the market. The restructuring planned for the airline and essential for its future has completely stalled. The business plan has gone to ground because there has been no clear direction about where the company was going.
To call this a strategic approach is to stretch the imagination. The indecision about the terminal is similar. The aviation sector must grow if it is to survive and prosper. It must get new routes, and to do that, we need a bigger runway to take larger aeroplanes that do not require load constraints when they take off. We must have growth capacity and we do not have that. We do not have the runways, we do not have the terminals and we do not have an airline with enough aeroplanes. We have no chance to capitalise on the opportunities afforded to other airports and other airlines with the coming open skies policy. The industry is moving on. Other airlines and airports are making decisions. They are moving in and capturing routes that are being lost to us as our airlines and terminals are not in a position to respond to market conditions.
The sale of Aer Lingus is essential and it will serve everyone's interest well. An airline must be able to react to market conditions in an industry that is volatile. It must have commercial freedom. Over the past few years, it has been unable to make decisions on facing changes in market conditions, and that cannot be tolerated. We have been very lucky that Aer Lingus has survived this difficult few years. However, it is not out of the woods yet. The airline also needs equity capital. It cannot carry any more debt as an airline. It has already invested heavily in the replacement of its short-haul fleet. The State could invest in it now, but not if the airline got into trouble. Its long-haul fleet needs to be replaced. Some Deputies have stated that nobody knows how much that will cost, but the company has been negotiating for a long time with aircraft providers and it should have a fair idea of the cost. The chairman of the company indicated that about €1 billion would be needed. Another €1 billion is required for expansion if the airline is to develop new routes. Aer Lingus operates in an environment in which there is a significant demand for travel services. Passenger growth for the company is 6% compared with Ryanair's figure of almost 50%. An increase in business of the order enjoyed by Ryanair is required if Aer Lingus is to compete successfully. The company is currently profitable but this has been achieved largely on the basis of downsizing and it cannot continue with this approach indefinitely. There must be investment for growth. The business plan, which is the only game in town, requires Aer Lingus to expand and that requires equity capital.
Members who spoke for the motion argued that State ownership of Aer Lingus is essential for tourism and the economy. However, the reality is that tourism and the economy do not depend on the existence of a complacent terminal-provider or a State-owned airline. What is required is an aviation sector in which airline operators are aware they must compete not only with other airlines, terminals and airports but with other states. We must compete and prosper on a European and worldwide scale and we must aggressively seek new business. New airlines must be encouraged to use our airports and existing airlines must provide new routes. That is the best hope for tourism and the economy but it cannot currently be achieved.
Our experience in regard to Telecom Éireann gives us every reason to pause for thought and does not inspire confidence as we contemplate the future of Aer Lingus. There are no guarantees in respect of either State or private ownership. State ownership is not a guarantee of a company's survival even if the taxpayer could prop it up when it gets into trouble. Good management and the ability to grow are the best prospects we can offer to Aer Lingus. We must afford the airline the opportunity to make its own commercial decisions, give it access to capital and allow it to expand into new markets.
I despair in regard to the decision on a second terminal. Reports were commissioned at great cost from all quarters which examined every criteria upon which that decision should be made. None of those reports was considered when it came time to make the decision. The only criterion was the question of party political interests. The Government has badly served the aviation industry in this regard. One wonders about the purpose of the protracted and painful debate and the associated hype when one considers that the Taoiseach had apparently already negotiated away even the possibility of a competing terminal when he promised conditions and pay in the new facility would be similar to those in the existing and dismally failed terminal. How are we expected to believe there was ever a possibility of a competing terminal if the Taoiseach had already decided the pay and conditions that must prevail?
This is a sorry saga of the mistreatment and abuse of both the airports and Aer Lingus. I cannot in conscious support either the motion or the Government's amendment.
I thank my colleague, Deputy Olivia Mitchell, for affording me the opportunity to speak on this motion. Like many other Members, my constituency consists of many Aer Lingus workers with a long history of support for the State airline. It is important that we encourage competition. Any State or semi-State body should be able to accept competition and compete effectively in a commercial environment by providing a service that is efficient and cost-effective.
I am confused about the outcome of the discussions which took place within the Cabinet in recent weeks. The Minister for Finance said in his reply that the Government decided in principle last Wednesday to allow the sale of a majority shareholding in Aer Lingus while retaining a significant stake in the company to protect the State's key strategic interests. The last time I heard something similar was when the Minister spoke in this House some years ago about Irish Sugar. That issue involved discussion of the golden share and strategic interests. In that instance, great hope and confidence were placed in the reassurances given that such an approach would provide the security necessary to allow us move forward.
This approach worked up to a point and until the recent events of which we are all aware. We all acknowledge that changing times have affected the situation of Irish Sugar. I have no problem with the reasoning now prevalent in the commercial arena that the public sector must compete effectively with the private sector and must be capable of meeting on an ongoing basis all the relevant commercial challenges. The discussions which took place over the last number of weeks between the two Government parties have been reflected in daily discussions on "Morning Ireland" of the competing merits of the opposing cases. One wonders which party won the debate.
It appears the proposal put forward for a second terminal in private ownership has lost out. At the same time, we are told a third terminal may be built after the next general election. The public will not know in the forthcoming election what will eventually transpire in this regard. Will the second terminal compete against the third or the first terminal? I simply do not know. The Minister for Finance is a hurling fan from a strong hurling county where the players are exponents of ground hurling. A good deal of ground hurling must have taken place in Cabinet when this issue was discussed. I am somewhat askance at the outcome because it came almost as a heave against the head. It seemed initially there would be a second terminal which would be in private ownership and would compete with the existing facility, and that the customer would be the beneficiary. I am not convinced that will be the case and I am not sure such an outcome will prevail in the future.
I must declare an interest in view of the references made to the criticisms of the Government's plan by Mr. Ulick McEvaddy who is a relative of mine. I listened with interest to the proposal put forward by Mr. McEvaddy and could see nothing wrong with it economically or commercially. All the indicators suggested it was a solid and sound proposal. I do not know what happened to change the Government's attitude in this matter. The sound approach is to take account of the economics of the situation and the fact that all international airlines and airports must operate under the dictates of the requirement for profitability and competitiveness.
Looking to the future, I cannot say how Mr. McEvaddy's proposal will weigh up against the proposal before the House in terms of the Government's amendment. Economists abound in this country and they usually tell us ten or 15 years later how we all went wrong in regard to some particular matter. I have much more to say on this matter but there is no time to do so.