Joe Costello (Dublin Central, Labour)
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I raise this issue because of the statement made in an interview in the German newspaper, Frankfurter Allgemeine Zeitung, today by Michael O'Leary, the chief executive officer of Ryanair, that he expects the Government to sell its 25% stake in Aer Lingus to his company. While this is alarming, the manner in which he made this statement is even more alarming because inherent in it is a presumption that the Government needs money and it is only a matter of him waiting before the stake falls into his hands.

The danger is that such a takeover would create a monopoly in the Irish aviation industry with Ryanair and Aer Lingus combined having 80% of the air traffic. This would be an unacceptable state of affairs as regards competition. It would be a disaster for the Irish consumer because the monopoly would immediately begin to exercise its muscle and the consumer would suffer.

This is an island nation and connectivity is essential for trade, travel and tourism. A monopoly would eliminate that competition and leave the country at the mercy of Ryanair's policies and shareholders. We have seen how ruthless Ryanair can be when it comes to implementing its policy and getting a dividend for its shareholders.

Last year, Ryanair made a derisory offer of €188 million for the Aer Lingus stake. This is all Ryanair was prepared to offer in 2009 for a 25% stake. It is clear that Mr. Michael O'Leary is still thinking of acquiring Aer Lingus for a bargain basement price. Given the exigencies of the budgetary situation, the fact that the economy is in dire straits and the Government desperately needs money, the State might dispose of some of the national assets or part of the private asset in the possession of the State. We must be very careful when dealing with this issue because we have seen what has happened in the financial institutions when we relied entirely on the private banking sector. We saw very quickly that greed took over and the national interest did not loom at all on the horizon. We must be very careful with the disposal of the State's share in this sector because it is the only way we can protect the national interest.

Aer Lingus has shown quite healthy and robust progress this year. The last quarter results surprised the market with better than expected profits. It is expected that Aer Lingus could make a profit of anything between €40 million and €50 million this year. It has been very effective and creative in its activities. It is looking for niche markets, especially in the area of transfer of passengers. Ireland is the only country in Europe with US immigration control rights at the point of departure as distinct from destination which is remarkably attractive to transatlantic passengers. It has linked up successfully with United Airlines and is doing well on the transatlantic routes.

The European Union has determined that such a takeover would be anti-competitive and would create a monopoly of 80% of air traffic which would not be regarded as complying with European directives. The State and the other stakeholders, including the employee share ownership trust, ESOT, have previously rejected an application from Ryanair. On this occasion, the Government should categorically state once and for all its position on the matter and assure the House that it will not sell the 25% stake which would allow Ryanair to take absolute control given that it currently owns 29.88% of the company.

Ciarán Cuffe (Dún Laoghaire, Green Party)
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I am taking this matter on behalf of the Minister for Transport, Deputy Dempsey, and I thank Deputy Costello for raising this matter on the Adjournment. I note Deputy Costello has drawn attention to Mr. Michael O'Leary's statement in the German press this morning but I learned long ago that it is important to take his statements with a large pinch, if not a pillar, of salt. That said, I have great admiration for his success in reducing carbon emissions per passenger kilometre within the airline industry.

The Government's aviation strategy is to promote regular, safe, cost-effective and competitive air services linking the country with key business and tourism markets. Promoting competition among airlines serving the Irish market has been the cornerstone of this strategy for many years. It has been proved that supporting competition and choice is in the best interests of consumers and the Irish economy. This policy has served Ireland well since the European air transport market was fully liberalised in the early 1990s. The success of the Government's pro-competition policies in the air transport market was demonstrated by the dramatic increase in the number of services into and out of Ireland and the rapid growth in passenger numbers over a 15-year period until the global recession hit the industry hard in 2008 and 2009.

The sector continues to respond to the dramatic fall-off in consumer demand for discretionary air travel. The two main Irish carriers, Aer Lingus and Ryanair, have taken the necessary steps to match carefully capacity with demand and have sought to reduce operating costs wherever possible. While this strategy has seen the reduction in capacity and services on certain routes, the Minister for Transport is hopeful that the long-term future of the Irish airline sector is secure and that growth in services and capacity will return when genuine seasonal demand warrants redeployment of airline capacity.

The Government wants to see a competitive dynamic maintained in the air transport market. To this end, it wants to see the continued presence of at least two strong competing airlines serving our air transport needs, both in the short-haul and long-haul markets.

In privatising Aer Lingus in 2006, the Government decided to retain a significant minority shareholding of 25% to protect our strategic aviation interests, particularly the company's valuable slot portfolio at London's Heathrow Airport. This policy has not changed and there has been no recent consideration of any change to that policy. The Government used its shareholding in Aer Lingus to block the attempted takeover of Aer Lingus by Ryanair in 2007 and again in 2008, primarily on the grounds that our competition concerns were not being addressed in the takeover proposals. Earlier this year, the European General Court delivered its judgment in an appeal by Ryanair against the European Commission's prohibition of its takeover of Aer Lingus in 2007. The court upheld the Commission's decision and noted that none of the arguments put forward by Ryanair was capable of calling into question the Commission's finding that the proposed merger would significantly impede effective competition. The Government welcomed this judgment of the European Court. In the absence of a satisfactory competition remedies package, the merger of the two largest airlines in the Irish air transport market would have had a significant detrimental effect on competition and consumer choice, with negative long-term consequences for Irish aviation.

As an island nation on the western fringes of Europe, international air links are of much greater importance for Ireland than for countries with land transport connections to their neighbours and trading partners. As a relatively small country and despite the ongoing recession, the Irish air transport market continues to enjoy a disproportionately high level of international air services. The Minister for Transport believes competition in the airline industry is the main factor underpinning this level of connectivity.

The aviation sector has always been cyclical in nature and is also especially susceptible to external shocks. In the last decade or so the global airline industry has been significantly affected by events such as the September 2001 terrorist attacks, the SARS outbreak in 2003 and the record peak in oil prices in 2008. The current recession is the latest crisis to hit the sector which, historically, has had low profitability. The Irish airline sector in particular, however, has shown remarkable resilience in the face of these challenges over the years. Irish airlines have repeatedly demonstrated innovation and flexibility in response to changing circumstances and, for this reason, the Minister for Transport is confident the sector will play a very important part in our economic recovery in the years ahead. For its part, the Government will continue to facilitate the development of as wide a range as possible of competitive air services for the benefit of Irish business and tourism and will continue to foster effective competition among all airlines operating in the Irish market.