Seán Crowe (Dublin South West, Sinn Fein)
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Question 3: To ask the Minister for Transport the way he will protect the strategic interests of Ireland and address the concerns of Aer Lingus employees and the travelling public in view of the fiasco which has ensued after he and the Government chose to privatise Ireland's former national airline. [36006/06]

Pat Gallagher (Donegal South West, Fianna Fail)
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From the outset as regards the Aer Lingus IPO the Government has been committed to ensuring that our strategic interests are protected. It was always the intention that the State should retain a significant minority shareholding for this purpose. The State's shareholding currently stands at approximately 28.3% of the capital in Aer Lingus and will be approximately 25.4% from tomorrow following completion by the employee share ownership trust, ESOT, of the exercise of the share option agreed in advance of the IPO. A shareholding at this level is important for a number of reasons. It means that the company's memorandum and articles of association cannot be changed and other changes requiring special resolutions cannot be made, without Government support; the safeguard arrangements for Heathrow slots, while requiring the support of other shareholders, are linked to the State's minimum level of shareholding which was targeted at 25.1%. The safeguard arrangements are built into the company's memorandum and articles of association. It ensures that another company cannot acquire the 75% shareholding that is required to force delisting from the official list of the Irish Stock Exchange.

I reject Deputy Crowe's assertion that the IPO has been a fiasco. On the contrary, as a result of the successful flotation of the airline, Aer Lingus now has the means to fulfil its potential and contribute in a positive way to the country's economic development. The company's capital requirements have been met though the IPO which will enable it to implement its business plan.

The hostile bid for Aer Lingus by Ryanair has been the subject of much media comment since it was launched. My view is that the Ryanair bid is unlikely to succeed. Ryanair has yet to achieve the majority it requires to gain effective control of the company and the prospects of it doing so now seem limited. Indeed, the Ryanair chief executive stated at a press conference on 20 October that Ryanair would be "unlikely" to get 50.1% of the company without the support of the ESOT. While the ESOT has not publicly declared its position as regards the bid, it stated in a press release issued on 26 October that the figure quoted by Ryanair in its offer document as to the cash proceeds ESOT members would receive if the offer succeeded, was "inaccurate".

Additional information not given on the floor of the House.

In addition to the difficulties Ryanair faces in achieving the majority that it requires to gain control of the company, it is also the case that the proposal will require regulatory clearance from a competition perspective and it cannot be taken for granted that such approval will be forthcoming. I have previously stated that the Government's view is 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 and that the Government's strategic objectives would not be well served by a takeover of Aer Lingus by Ryanair.

Earlier this week Ryanair applied to the European Commission for approval of its bid. My officials have already had initial contacts with European Commission officials to outline the Government's position in relation to the proposed takeover and will make further representations to the EC on this in the coming weeks.

Seán Crowe (Dublin South West, Sinn Fein)
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I stand by my remarks about a fiasco as the airline is still in crisis. In his reply the Minister of State said the State had reduced its percentage share in the company from 28.3% to 24%. Is that correct?

Pat Gallagher (Donegal South West, Fianna Fail)
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That is correct.

Seán Crowe (Dublin South West, Sinn Fein)
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There is a crisis in the airline, certainly among the staff. We see the staff attempting to buy shares in the company and so on. The flotation has not created stability and certainly has not guaranteed jobs. Indeed the situation now is that Aer Lingus is talking about shedding more jobs. Is the Minister of State aware that last week's British-Irish study on an all-Ireland economy recommended an all-Ireland strategy on the development of the airports and aviation? Does he realise that as much as such a strategy is needed, so is a national plan for the development of Aer Lingus? As the Government is a major shareholder in the company, when will he discuss that strategy with the House? As a shareholder, will the Government continue to have an interest in the running of the company and staff relations? How will that right be exercised?

The Minister of State has spoken of the Heathrow slots etc. Has he a view on Dublin remaining as the airline's operating base? It seems that for now the airline is on course to become a Ryanair light, when it has a significant role to play in freight transport and in keeping Dublin and Ireland as a major hub of international air travel. When will we have the joined-up national aviation strategy with Aer Lingus at its centre? Are we just witnessing the beginning of asset-stripping and more shedding of jobs within Aer Lingus? That is a concern of the staff as we have seen venture capitalists moving in. Some people are certainly making money out of it, but the insecurity is still there for staff. There is also insecurity pertaining to our strategic interests as an island nation.

Instead of improving the lot of Aer Lingus as a company, we have undermined it. The Minister of State may indicate that everything is rosy for the future, but there are not very many people among the staff or on this side of the House who have a similar view.

Pat Gallagher (Donegal South West, Fianna Fail)
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The Government's overarching objective is to provide the company with access to new equity to enable Aer Lingus to compete effectively and fund the growth of its business. Through the IPO, the company now has new equity in the order of €500 million. Some €104 million goes towards the pension funds and there will be an additional €400 million plus to go to the business plan and to fund the future development of Aer Lingus.

Deputy Crowe referred to the reduction, which will happen tomorrow, from 28.3% of our capital in Aer Lingus to approximately 25.4%. I presume the Deputy knows the reasoning behind that. Before the IPO, the employee share ownership trust had 12.6% of Aer Lingus and with the new shares that would have reduced to 7%. The trust holds €30 million and it is using that to buy up further shares in the company which will bring it back up to the 12.6% level. We facilitated that option to permit the trust to purchase the additional shares and return it to the previous level.

The strategy is of course to ensure we have an airline that will compete effectively. We will not be involved in its daily running. We will hold 25.1% — I do not want to delay the House as I gave all the good reasons for that. It will ensure safeguard arrangements are in place. Not alone have we done that but we have built them into the company's memorandum and articles of association. We also ensured that a body cannot secure 75%, which would result in delisting.

The discussion of the strategy in the House is a matter for the Whips. If it is raised by question or by way of general debate, I will be only too happy to address the issues.