Dáil debates

Wednesday, 18 October 2006

Adjournment Debate

Air Services.

9:00 pm

Seán Ryan (Dublin North, Labour)
Link to this: Individually | In context

I thank the Ceann Comhairle for the opportunity to raise this important issue, the future of Aer Lingus. I wish to share time with Deputies Broughan and Shortall.

The proposed takeover of Aer Lingus by Ryanair would be a disastrous development for the air travelling public, the strategic interests of our country and the workers in Aer Lingus. It is the type of situation we in the Labour Party warned could arise from the Government's ill-judged and unnecessary decision to privatise the national airline. It gives me no satisfaction, as a Deputy from the Dublin North constituency where thousands of Aer Lingus workers and their families live, to say "we told you so".

Last July, we had a successful and viable State airline in competition with a strong private airline which was to the benefit of the commuter. Now we are faced with the prospect of a privately-owned monopoly, with the bulk of its business located outside the State, controlling most of the air traffic in and out of Ireland. This is not in the strategic interests of this country and must be prevented. The privatisation of Aer Lingus is akin to selling the family jewels.

The Government assertion that the majority sale of Aer Lingus would increase competition, employment and the growth of Aer Lingus has been proved to be a smoke screen. I am not an economist but I share the view of many of my constituents who ask how come Aer Lingus was sold off at such a ridiculously low price, and who were the main beneficiaries because the State certainly was not one.

The revelation that Ryanair has acquired 20% of the shareholding in Aer Lingus and is intent on becoming the majority shareholder shows the immediate need for the Government to protect Aer Lingus from a takeover bid. The workers of Aer Lingus have lost confidence in the ability of the Minister to prevent a takeover. Apart from endeavouring to justify the sale of Aer Lingus, the Government seems to be concentrating on one avenue only, the regulatory appeals system within the European Union. If this fails, the State should seriously consider buying back shares to prevent the takeover of the company. We told the Minister he was going down the wrong road and have been proved correct. It is up to the Minister and everyone in this House to pull back and to prevent the takeover of Aer Lingus.

Photo of Tommy BroughanTommy Broughan (Dublin North East, Labour)
Link to this: Individually | In context

I thank the Minister for coming to the House for this debate. I have a file of e-mails, and have received many telephone calls, from Aer Lingus workers detailing their real distress and grave anxiety at the prospect of a predatory and hostile takeover by Ryanair. They repeat the unanswerable point about which the Minister was warned a few months ago and failed to take on board.

The takeover by Ryanair will be extremely bad for competition in this country and will deal a devastating blow to competition in aviation. In the early days of Ryanair, the State helped the company to stay afloat and in business to promote competition. Now the Minister has allowed a situation to arise in which there will be no competition.

The workers detail their own fine service and the hard work over the past ten to 20 years, and in one case 28 years, in helping to restructure Aer Lingus and make it competitive again. They look at the vicious track record of Michael O'Leary with the appalling treatment of Ryanair workers and the refusal to allow them professional representation. He has always had professional representation for his own emoluments, the millions of euro he has taken from the Ryanair company. At the same time, he will not allow the same rights to the workers of Ryanair. Apart from the Ryanair workers who have informed me of this, the High Court declared Michael O'Leary a classic bully.

In their communications to me, Aer Lingus workers have referred to the airline's valuable Dublin Airport assets and the importance of its London airport slots. What will be the impact on the Dublin Airport Authority being faced by a monopoly with a single large operator? This is what the Minister has allowed to happen. Aer Lingus workers refer to Ryanair's takeover of Buzz Airline where, despite Michael O'Leary's many promises to the workforce, in a short time 400 jobs went down the tubes. The letters also refer to the bilateral arrangement with the United States. What will happen to Aer Lingus if it becomes a company with less than 50% Irish ownership?

These letters show great and real distress. Many of the workers have also informed me how distressed they were that their local Fianna Fáil representatives refused to reply to their e-mails or telephone calls. This is particularly reprehensible as these Members trouped through the lobbies to vote through the privatisation of the company. This Saturday, all Aer Lingus workers must visit each of their Fianna Fáil representatives: Deputies Martin Brady and Woods of Dublin North-East; Deputies Haughey and Callely of Dublin North-Central; Deputies Carey and Noel Ahern of Dublin North-West; the outgoing — is it any wonder — Deputies Glennon and Wright of Dublin North; Deputy Brian Lenihan of Dublin West; and Deputy Fitzpatrick of Dublin Central. We must not forget the guy who styles himself the great Dublin northsider — the Taoiseach, Deputy Bertie Ahern. Each of these representatives allowed the privatisation of the airline that now threatens 3,500 jobs and families in Dublin's north side. This is what the Minister for Transport has achieved.

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

The Minister for Transport has played a personal role in the disaster we have on our hands. Over the past two years, he devoted a large amount of his time and energy to the privatisation of Aer Lingus, often to the detriment of many other areas of his responsibility. For purely ideological reasons, the Minister was determined to ram through the privatisation of our national airline. We are all reaping the rewards of that recklessness.

The Minister put forward various arguments for the privatisation of Aer Lingus, all spurious. He cannot make any of them stand up. Over the past two years he was warned from this side of the House, the airline's workers and various commentators of the potential consequences of his actions. He ignored those warnings and went ahead recklessly, ceding all control of our national airline. We do not know what the future holds for it. We are facing the appalling vista of Ryanair gobbling up the company. We are moving from the situation where we have two healthy airlines, providing competition and choice for airline travellers, to a potential monopoly of 85% of the routes out of the country.

The Minister made several claims for the need to privatise Aer Lingus. The principal claim was in respect of the company's need for access to capital. That was based on the understanding that there would be agreements on the open skies policy. The Minister spoke about it as if the open skies policy was to be agreed in a matter of months. He claimed Aer Lingus urgently required capital to buy new aircraft to avail of the policy's opportunities. Those discussions have run into the sand and no one knows if the open skies will ever happen. The very basis for the Minister's argument was spurious.

This morning the Aer Lingus CEO, Mr. Dermot Mannion, confirmed that it will be purchasing two additional long-haul aircraft next year but it does not know the situation after that. There was no need for a flotation or additional capital. There were no difficulties in the Minister providing additional funding to the airline. Apart from that, the airline would have had no difficulty in raising funding through loans or leasing arrangements for new aircraft.

The Minister has jeopardised our national airline's future. He has thrown it to the wolves of the Stock Exchange. There is a serious risk of airline travellers having no choice and being tied into an airline that controls over 85% of the national aviation business. The Minister has been reckless in the extreme, but it is the Irish people who will have to pay the price. I am particularly concerned about the implications for the Aer Lingus staff. The Minister and his colleagues have thrown them to the wolves too with no regard for the critical role Aer Lingus plays in the life of the north side of Dublin. Shame on them.

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

Due to market and regulatory constraints I am restricted in what I can say to the House on the matter.

It is the Government's firm belief that Ireland's strategic interest in aviation is best served by the provision of regular, safe, cost-effective and competitive air services linking the country to key business and tourism markets around the world. In developing our overall aviation policy, the Government has sought to promote competitiveness, flexibility and consumer choice and, in particular, a diversity of product offerings to satisfy different consumer needs. This includes point-to-point services operated by low-cost carriers. It also provides for services that facilitate onward international connections through access to hubs and interlining with other carriers.

On the basis of the information available to date I do not consider the Government's and Ireland's strategic objectives would be well served by a takeover of Aer Lingus by Ryanair. It clearly raises fundamental questions for aviation policy, competition and regulation issues. All these questions are being examined carefully.

The Government remains fully committed to competition in aviation markets. It will not be selling its shares in Aer Lingus. It is rigorously opposed to the emergence of a new monopoly in Irish aviation. With the State's shareholding in excess of 25.1%, it ensures another company cannot acquire the 75% threshold that is required to force de-listing. The State's shareholding is 28.3%. It also means that the Aer Lingus's memorandum and articles of association cannot be changed.

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

That has yet to be tested.

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

When the Ryanair offer is formally made, it will be a matter for the board of directors of Aer Lingus to evaluate the offer and to express an opinion to shareholders. Aer Lingus has already said that the approach is wholly opportunistic and has advised shareholders to take no action on the offer.

Takeovers of listed companies are subject to regulatory controls, both under takeover rules and competition rules. The takeover code prescribes the timetable and procedures under which bids are conducted. There is a question as to whether jurisdiction for the purposes of merger clearance rests with the European Commission or member states. European jurisdiction applies where certain thresholds relating to the turnover of the entities concerned are exceeded both in aggregate terms and in at least three member states. While it is expected that jurisdiction will lie with the European Commission, the question of jurisdiction can only be resolved when a formal notification has been made and the Commission can access the necessary turnover information.

Under the applicable EU law, where it is established that a proposed merger falls within the jurisdiction of the European Commission, a member state may nevertheless request that the case be referred back to it for the application of its own national merger laws in certain limited circumstances. It is a matter for the Irish Competition Authority, which is independent in the exercise of its functions, to form a view as to whether such a request is appropriate. The decision on whether to grant such national jurisdiction lies with the European Commission.

My Department and the Department of Finance are working closely with advisers to prepare a case for submission to the European Commission. The Departments are also consulting with the Office of the Attorney General. Officials of my Department will meet the Competition Directorate of the European Commission later this week to make an initial presentation on the proposed take-over bid.

The Government is firmly of the view that Ireland's economic interests are best served by having as many airlines as possible competing vigorously and seeking to exploit all possible opportunities for new services. It wants to see a strong Aer Lingus and a strong Ryanair competing with each other.

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

That is what we have.

The Dáil adjourned at 9.20 p.m. until 10.30 a.m. on Thursday, 19 October 2006.