Róisín Shortall (Dublin North West, Labour)
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Question 50: To ask the Minister for Transport if he will review the decision to sell the majority State share in Aer Lingus in view of the strategic importance of the national airline to tourism and trade. [9518/06]

Seán Crowe (Dublin South West, Sinn Fein)
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Question 53: To ask the Minister for Transport when he proposes to end the uncertainty and speculation surrounding the future of Aer Lingus; and if he will make a statement regarding his intentions in respect of this company. [9566/06]

Martin Cullen (Waterford, Fianna Fail)
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I propose to take Questions Nos. 50 and 53 together.

As the Deputy will be aware, in its decision of 18 May 2005, the Government agreed to the State disposing of a majority shareholding in Aer Lingus and retaining a stake of at least 25% to protect strategic interests provided that the Minister for Finance and I are satisfied that this level of disposal is warranted on foot of the analysis prepared by the Departments' advisers for the transaction.

The decision to dispose of a majority shareholding in Aer Lingus was made following detailed and comprehensive consideration of the issue by me and my colleagues in Government. The Government agreed in its decision that the strategic development of the State airports and Aer Lingus was essential to underpin Ireland's competitiveness, industry and tourism. Furthermore, its consideration was based on an acknowledgement that the company had an immediate need for access to equity capital to enable it to compete effectively and to fund growth and that this investment could not, and should not, come from the Government. It is precisely because of the strategic importance to Ireland of a wide range of cost effective air services that a third party investment in the airline is being sought. The question of reviewing the Government's decision, therefore, does not arise. In accordance with the terms of Sustaining Progress, I had also engaged with the trade unions on the issue early in 2005 before the Government finalised its consideration of the matter.

Following a competitive tender process, UBS and AIB Capital Markets were appointed to provide financial advice and assistance to the Minister for Finance and me in respect of an Aer Lingus sale or investment transaction. William Fry and Freshfields Bruckhous Deringer were appointed as legal advisers for the assignment.

The first phase of the advisers' work was to recommend the most appropriate transaction mechanism and advise on the size and timing of a transaction. The advisers submitted their report before the end of last year and the key conclusions and recommendations are being considered by the Minister for Finance and me. No decision has yet been made on the basis on which the investment transaction will be implemented. I have instructed the company's management to engage intensively with the trade unions over the coming weeks to address issues relating to the company's pension schemes in advance of the planned investment transaction. It is my intention to revert to Government, in conjunction with my colleague the Minister for Finance, in the coming weeks.

Róisín Shortall (Dublin North West, Labour)
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The Minister did not answer the basic question. Why is he proposing to sell the State share in Aer Lingus? Aer Lingus is a very successful company. It is a profitable company which has served the interests of the country well in terms of tourism and trade. As taxpayers, we all own the company. There is no logical rationale for the Minister's proposal to sell the company. It recently replaced its short-haul fleet from its own resources. It has proposals to replace its long-haul fleet and expand that fleet over a number of years, and there are a number of options to fund the expansion. The Minister said that there is an immediate need for investment, but no one has claimed there is an immediate need for investment. There will be a need over the coming years to expand the long-haul fleet. We do not know how much the company will need. It certainly will not need it tomorrow and it will not need it in one lump sum. However, it will need investment.

The Minister also said that the Government should not and could not provide funding for this. Many people would argue that it should do so. If it makes sense for the private sector, it makes sense for the public sector to invest in a successful company. The statement that he could not provide funding is nonsense. Nothing prevents the Government from investing in Aer Lingus as a profitable company.

There are options for Aer Lingus in expanding its fleet. It can do so from its own resources because it would have no difficulty raising loans. It can enter into long-term leasing arrangements, which is what most airlines do. The State could provide the investment necessary or there could be a combination of all three. Why is the Minister pretending that there is an urgent need for a decision and that the money must be provided immediately? That is not the case. There is a strong likelihood that all of us as taxpayers will go from a position of owning a very successful company, which is valued at up to €1 billion, to probably having nothing. How can the Minister prevent Aer Lingus becoming Eircom mark II? What percentage of the State holding does the Minister intend disposing of this year and to what method of disposal is he referring?

Martin Cullen (Waterford, Fianna Fail)
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I am taking this action for precisely the reasons the Deputy outlined. As I said on numerous occasions, I am seeking to position the airline for growth, increase the number of jobs——

Róisín Shortall (Dublin North West, Labour)
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The Minister should stop giving us this old waffle. The company is positioned for growth. He should justify what he is proposing.

Pat Carey (Dublin North West, Fianna Fail)
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The Deputy should allow the Minister to continue.

Martin Cullen (Waterford, Fianna Fail)
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To position the company for growth, it is essential that substantial funding is available, not just in the short term but in the medium to long term. As the Deputy knows, the purchase or lease of aircraft, which has the same effect on a balance sheet, can take a number of years in lead-in time in terms of purchasing aircraft, planning new routes and getting new destinations. In fairness to Aer Lingus, it has been very successful in adding a number of new short-haul routes in recent years. All the international evidence——

Róisín Shortall (Dublin North West, Labour)
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On a point of order, in spite of what he said, the Minister accepts there is not an immediate need for investment.

Martin Cullen (Waterford, Fianna Fail)
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I said that there is an immediate, medium and short-term need for investment in the company. The company is planning to invest approximately €2 billion in aircraft purchase in the medium term. It is examining many new routes into the United States, which will be available under the open skies policy. The competition for and on these routes will be great. The agreement I succeeded in getting from the Americans, and agreed by my European colleagues in the transition period from Shannon, will provide a good opportunity for a stepped-up approach from Aer Lingus to expand substantially on what will become a very competitive route on the North Atlantic.

This month, Aer Lingus will begin its new services into the Middle East. This is the first new major long-haul destination in that direction by the airline. Clearly there are further opportunities that Aer Lingus needs and must exploit to remain competitive and successful into the Far East, Australia and South Africa. This planning must take place now. The potential for purchasing aircraft in bulk can change substantially the cost to the airline. If the airline is now in a position to do a major deal with a big supplier based on its needs over the coming years, it will be in a position to do so because we are providing the resources.

I am not taking an ideological position on this issue. Everyone, including the trade unions, know that I take a very pragmatic approach to ensuring that Aer Lingus will survive. If Aer Lingus remains in its current construct, it will have no chance of survival. The evidence for this is that almost no airline remains in state ownership as we know it. All the international airlines in state ownership are either gone or are going down the tubes rapidly.

Eamon Ryan (Dublin South, Green Party)
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Ours is one of the most successful. It is a huge success.

Martin Cullen (Waterford, Fianna Fail)
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It is a relative term. I acknowledge the huge effort of the staff, trade unions and management. They have been the most successful in turning around a national airline since 9/11, for which they must be congratulated. I want to secure that effort and ensure that Aer Lingus grows in terms of jobs, tourism, industry and the development of this country. The only way it can be achieved is by way of a substantial cash injection.

Róisín Shortall (Dublin North West, Labour)
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Why does the Minister not do that?

Pat Carey (Dublin North West, Fianna Fail)
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I will allow the Deputy in again if there is time.

Seán Crowe (Dublin South West, Sinn Fein)
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I asked when does the Minister propose to end the uncertainty and speculation surrounding the future of Aer Lingus, to which he did not respond. Does he accept that Aer Lingus is not an airline in crisis? Does he accept it is a State asset, not a State liability and, if so, that selling off the airline does not make sense?

The only beneficiaries of the privatisation of the airline will be a small number of wealthy friends of the Government. The State needs an airline which is dedicated to the needs of our island economy. We need a cargo carrier of which there are very few left. It is vital to our island economy to have such a service. Taxpayers' money is being invested in other airlines around the world through the pension reserve fund, yet Aer Lingus is not getting the proper investment. Has the Minister a view on the whole concept of a State holding company as an alternative way forward for Aer Lingus? Has research been done in this regard? Perhaps this could be the way forward rather than selling off the airline to a few select friends and not going in the direction desired by the people. While we need a national airline that operates successfully, the Minister's proposals will mean that a coterie of friends of the Government will benefit from the privatisation of the airline and not the Irish people as a whole.

Martin Cullen (Waterford, Fianna Fail)
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As the Deputy and his colleagues will be aware, almost every plan for Aer Lingus over the past decade and beyond have been crisis plans. This is the first time we had an opportunity to position the company for growth and development. The Deputy is correct because if Aer Lingus was in crisis, there would not be much point approaching anyone as nobody would be interested in it. We must take account of the fact that the company is currently in a very good state, the markets are in a good position and there is a strong management team in place.

Aer Lingus must compete in the aviation sector which is probably one of the most volatile business sectors worldwide. As it is a hugely cyclical market, I have no doubt that the ups and downs for the company will continue. In a downward trend, it would be impossible for this or any Government to invest in Aer Lingus. Therefore, we must give the company the commercial freedom and the mandate to develop and be flexible enough in a true commercial sense to compete in one of the most cut-throat commercial sectors of industry worldwide. All the international evidence suggests that the only way this can happen is by allowing a company to be free of the state and to be operable in a highly commercial environment in the most flexible and commercial way possible.

Róisín Shortall (Dublin North West, Labour)
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The Minister is operating from an ideological position. There is a deeply held view in his Department and in the Cabinet that the State has no business being in business and that it wants to off-load as many of the State's involvements in enterprise as possible. The Minister has still not provided any type of rationale for the proposed sale of Aer Lingus. Will he confirm that there is nothing preventing him under EU law from investing in Aer Lingus as it stands as a profitable company? Will he accept that the reason Aer Lingus has been successful is that it has been a State-owned company, that there has been a remarkable record in recent years of staff and management working together in the interests of the company and that there is no reason that cannot continue into the future?

Will the Minister explain how he will avoid the sale of Aer Lingus becoming "Eircom mark two" given that the adviser to the Government is the same? As taxpayers, we have a successful asset valued at €1 billion. Will the Minister also explain how we will avoid ending up with nothing and without control over our air services?

Martin Cullen (Waterford, Fianna Fail)
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I do not accept the thesis the Deputy put forward. Others may have an ideological view, I do not. Based on all the credible evidence — there is as much as one can read — the future of Aer Lingus can only be secured in a highly volatile market if we position it to bring in investment from——

Róisín Shortall (Dublin North West, Labour)
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No adviser said that.

Martin Cullen (Waterford, Fianna Fail)
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If we position it to bring in investment from the private sector——

Róisín Shortall (Dublin North West, Labour)
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Who said that?

Pat Carey (Dublin North West, Fianna Fail)
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I ask Deputy Shortall to allow the Minister to conclude.

Martin Cullen (Waterford, Fianna Fail)
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That is the reality.

Róisín Shortall (Dublin North West, Labour)
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Who is saying that?

Martin Cullen (Waterford, Fianna Fail)
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The Deputy seemed to suggest that even now the Government could invest. That would be challenged in Brussels immediately.

Róisín Shortall (Dublin North West, Labour)
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Not as a rational investor.

Pat Carey (Dublin North West, Fianna Fail)
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Deputy Shortall's colleagues have tabled questions.

Martin Cullen (Waterford, Fianna Fail)
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Does Deputy Shortall want me to answer the question or does she want to ask and answer the question?

Pat Carey (Dublin North West, Fianna Fail)
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I ask the Minister to conclude.

Róisín Shortall (Dublin North West, Labour)
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The Minister is making points which are fundamentally untrue.

Martin Cullen (Waterford, Fianna Fail)
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Unlike Deputy Shortall, I expect Deputy Olivia Mitchell and myself are almost on the same page. We are trying to position this airline for growth, development, the best interests of the staff, growth in jobs, tourism, customers who fly out of this country and for the economic development of this country. That is what the hard decisions are about. It would be easy to take other decisions and be irresponsible but I will not go down that road.

Róisín Shortall (Dublin North West, Labour)
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They are being served with the airline in State ownership and they will continue to be.