Timmy Dooley (Clare, Fianna Fail)
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Question 21: To ask the Minister for Transport; Tourism and Sport if he is committed to protecting the State's current shareholding in Aer Lingus; and if he will make a statement on the matter. [8717/11]

Leo Varadkar (Dublin West, Fine Gael)
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This question relates to the State's current shareholding in Aer Lingus. The McCarthy report which was published at 2 p.m. recommends that the Government dispose of its shareholding in Aer Lingus as soon as is opportune. During the coming months the Government will consider the recommendations set out in the report in the context of the ongoing budgetary challenge that we face.

The Government retained a minority stake of 25.1% in Aer Lingus in the initial public offering, IPO, of shares in the group in 2006 to protect the State's strategic aviation interests, especially access to London Heathrow services and the onward connectivity available through the company's significant slot portfolio at Heathrow Airport. In designing the investment transaction a specific mechanism was built into the company's memorandum and articles of association in advance of the IPO to protect against disposal of the Heathrow Airport slots by the company. Therefore, in considering any disposal of the State's shareholding it would be necessary to evaluate whether the protections considered necessary for London Heathrow services at the time of the IPO in 2006 were still relevant in the light of market developments since and, if they were still relevant, whether there would be any means of protecting them in a disposal. The effect of any disposal on competition in the airline market in the State would also have to be considered.

It should be noted that the review group also points out that the objective of any disposal of the State's shareholding should be the realisation of maximum value. This would also be a key consideration for the State if a disposal of its shareholding was to be considered.

Timmy Dooley (Clare, Fianna Fail)
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I thank the Minister for the clarification. I am somewhat disappointed that Dr. McCarthy has included Aer Lingus, considering that it is of strategic interest to retain the 25% shareholding. The Minister outlined the decision taken at the time of the initial public offering of shares in Aer Lingus and, in particular, why the 25% holding was retained. Notwithstanding this and the comments the Minister made about the London Heathrow slots, the fact that we are an island nation and that effective competition in domestic air services is of vital strategic national interest, I trust the Government will give broader consideration to the issue rather than simply considering the Heathrow Airport slots in themselves. They are vital, but there is a wider necessity to maintain effective competition in the airline sector.

In the past Aer Lingus effectively had a monopoly. Without the emergence of Ryanair there would be a lesser service and higher fares. The concern is that the disposal of the State's 25% shareholding would be damaging in terms of direct connectivity to London Heathrow and the onward services provided and, more especially, the lack of effective competition from a business and tourism perspective. Whatever discussions take place at Government level or whatever considerations the Minister and his Department put together in the coming weeks in respect of this proposal, I call on him to look specifically at these two aspects, that is to say, the necessity to maintain what is a vital link and the broader issue of effective competition in the aviation sector here.

Leo Varadkar (Dublin West, Fine Gael)
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The Deputy can rest assured in that regard. As I outlined in my initial answer, we have the 25.1% stake for two reasons, first, to ensure connectivity from through Heathrow Airport and retain access to the slots and, second, to ensure Aer Lingus is not taken over inappropriately by another airline. The Deputy will be aware that the European Commission ruled that Ryanair could not take over Aer Lingus. I am determined that we will still have competition and continue to have two significant airlines operating out of Ireland, not one. Any decision on the disposal of the stake must bear this in mind and retain the assurance that we will retain the slots at Heathrow Airport and that we will continue to have competition between at least two major airlines in the State.

The airline business is changing a good deal and there is consolidation in the sector. It is somewhat like the case of mobile phones. Throughout the world, even if different names are used, the companies involved are Vodafone, Telefónica and Hutchison. This is increasingly taking place in the airline industry. We have seen Air France and KLM come together as well as Lufthansa and BMI. British Airways has formed a strategic alliance also. In the longer term one will have to question where Aer Lingus will fit into this picture. Any disposal of a shareholding must include an assurance that the reasons we hold the shareholding in the first place will be assured, that there will continue to be competition among scheduled airlines in and out of Ireland and that we will not lose access to the crucial Heathrow Airport slots which give us connectivity to the rest of the world.