Dáil debates

Wednesday, 3 May 2006

3:00 pm

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

Question 68: To ask the Minister for Transport his proposals to safeguard national transport interests in the context of the proposed sale of Aer Lingus. [16564/06]

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

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 fund growth and that this investment could and should not come from the Government. It is precisely because of national transport interests that a third party investment is sought. Without third party investment, there would be a far greater threat to these interests.

The Government also decided it would retain a significant stake of at least 25.1% to protect key strategic interests. This level of shareholding is significant in that provisions in company law will allow the State's interests to be protected while it retains a shareholding at this level. A shareholding of 25.1% in a public company is a major voting block and will ensure the State has significant influence. It will provide a strong basis on which to establish board representation which, in turn, will provide key access to information and influence on the key strategic and commercial decisions of the company.

A 25.1% shareholding also entitles the registered holder to deny the remaining shareholders the ability to pass special resolutions, for example, as required to change any terms of the memorandum and articles of association. Ownership of more than 20% of the issued share capital of a company also enables the registered holder to deny the right of third parties to compulsorily acquire 100% of the company.

The Minister for Finance and I appointed corporate finance and legal advisers on a third party investment in Aer Lingus. In their report on the nature, scale and timing of an investment transaction, the advisers considered the possible need for any measures going beyond the retention of a 25.1% shareholding to protect strategic interests. In the case of landing slots at Heathrow airport, the advisers suggest that some additional measures may be desirable to ensure the slots remain available for the provision of a reasonable level of service to and from Ireland. I am considering the manner in which such protection might be implemented in practice. Any measures that could restrict the commercial freedom of the company would have to be in accordance with the relevant EU rules.

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

The public's main concern in respect of the proposed sale of a majority holding in Aer Lingus is the threat this poses to the existing services Aer Lingus provides. We recognise we have been lucky with these services, which almost give us direct access to the centre of London through the Heathrow slots. While we can get to Stansted more cheaply, the accessibility of Heathrow to London is important for Irish travellers. Given there are over 20 flights to London every day, accessibility to the city centre is a critical issue.

The Heathrow slots also provide direct access to almost everywhere else in the world through the onward flights Aer Lingus has managed to arrange over many years. In the context of a privatised Aer Lingus, the main concern is that there is no guarantee these services will continue because we cannot ensure Aer Lingus holds onto the slots. Perhaps the new owners will decide it is expedient to sweat their assets and to cash in their chips as quickly as possible. The Heathrow slots would be a valuable sale commodity in that regard.

In the initial stages of the Government announcement of its intention to go ahead with the privatisation of Aer Lingus, the Minister mentioned the notion of a "golden share". He now accepts this is no longer regarded as legal. A spokesperson for Commissioner McCreevy said recently that golden shares have no place in the European Union Internal Market. When the Minister accepted that golden shares would no longer be legal he changed his language and spoke about a "blocking" share. Under existing company law provisions I do not know what strength a blocking share of 25.1% would give the Minister. It would allow him to prevent a 100% takeover, but that is not the issue.

The big danger is that those with a majority holding within Aer Lingus could, at some point in the future, decide to sell the slots or sell the brand and get rid of the shamrock. We do not know what will happen. The point is there is no way of ensuring Irish control of our national airline can be retained. Anything could happen in the future and generally speaking, where venture capitalists are involved, which may be the case, their intention will be to get in, get as much out of the company as quickly as possible and get out. In that context, valuable holdings like the Heathrow slots are in real danger and it has been accepted on all sides of the House that there is no way of safeguarding those.

The Minister's advisers, Goldman Sachs, who advised him on the future of the company when he set down the stipulation that they were to consider anything bar State investment in the company, said partial divestment, as they called it, would only make sense commercially if it was a precursor to full privatisation. Where does the Minister stand now in respect of that advice? Is it his intention to divest himself entirely of the holding in future? If not, will the Minister tell the House how he proposes to retain the 25.1% shareholding in the context of future share issues where it is inevitable——

Séamus Pattison (Carlow-Kilkenny, Labour)
Link to this: Individually | In context

I remind the Deputy that the time allowed for this question has expired.

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

——that shareholding will be diluted? Will the Minister explain that?

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

The Deputy is trying to put words in my mouth as usual. I never used the term "golden share" in this debate over the past 12 months.

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

It was used by the Minister's Department. It was used by several backbenchers on the Minister's side of the House.

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

I never used the phrase "golden share" from the start to the finish of this debate. I have not used the term "blocking share" in this debate. Those are the Deputy's words, not mine. I have spoken about the State keeping a shareholding in a company that is very substantial, the same as any other company or investor keeps a shareholding of substance in a company, and the public is well aware of that.

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

There is no safeguard.

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

Does the Deputy want me to answer the question? I have made it clear that the minimum the State will hold onto is 25.1%. It could be somewhat more than that; we will have to await the outcome. As far as the Government is concerned at this stage, the State is quite clear in that we will retain that share in Aer Lingus. Aer Lingus is now on a path for growth. We are not going for a trade sale, which would embody many of the concerns the Deputy has enunciated where another company in the business might come in, take a large shareholding in Aer Lingus and then strip the assets or sweat them, as the Deputy described it, for its own competitive advantage. Investors will invest in Aer Lingus because commercially it will be a good investment. I do not see them undermining that investment by selling the brand or undermining the Heathrow slots. To my knowledge, even though Aer Lingus is in State holding, I do not believe Aer Lingus travels to London on the basis of anything other than a commercial reality. In other words, there is a demand for the slots. I do not take the same view that Irish people will not want to go there anymore. That is something new to the debate as far as I am concerned.

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

I did not say that.

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

Aer Lingus——

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

I said they will not be able to.

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

Of course they will. Aer Lingus, and anybody who owns an involvement in Aer Lingus, will want to make sure the company is as viable commercially as it has always been and will be more commercially successful into the future.

The Deputy makes an interesting point. The world has changed dramatically. Aer Lingus and the Heathrow slots had a much higher value when there were no other airport operations in, say, France, Germany and elsewhere like the hubs that exist now. There is huge competition to Heathrow and an interesting example is the Irish dynamic where we have direct flights to the Middle East. That takes many passengers and requirements out of Heathrow and it is my determination that we will have direct flights and increased capacity into the United States, which will mean Irish people will be able to fly direct from Ireland to many more destinations in America without having to go to Heathrow. I sincerely hope, as other countries have indicated to me, that there will be direct flights to China, Singapore, Thailand and Australia. This has implications for Heathrow because — the Deputy is right — there will not be the volume of passengers who have to go to Heathrow to get connecting flights if there are direct connecting flights from Dublin. There is no doubt that changes the dynamic but I do not see the volume of traffic to Heathrow, in terms of what Aer Lingus does currently, diminishing because there is constant demand for that volume of traffic and I expect that to continue long into the future.

Séamus Pattison (Carlow-Kilkenny, Labour)
Link to this: Individually | In context

That concludes Priority Questions. We will now take other questions, which are subject to a maximum of six minutes. Supplementary questions and answers are subject to a maximum of one minute, as stated in Standing Orders.

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

May I ask another supplementary question?

Séamus Pattison (Carlow-Kilkenny, Labour)
Link to this: Individually | In context

We have spent 45 minutes on Priority Questions, far in excess of the time allowed, which is 30 minutes.

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

More time was spent on other questions than is allowed.

Séamus Pattison (Carlow-Kilkenny, Labour)
Link to this: Individually | In context

Deputy Shortall devoted ten minutes to a question with an allowed time of six minutes. We must proceed because it is unfair to Deputies waiting to ask questions if Deputies who are higher up the list take up more than their allotted time.