Dáil debates

Tuesday, 27 November 2012

3:35 pm

Photo of Barry CowenBarry Cowen (Laois-Offaly, Fianna Fail)
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To ask the Minister for Transport, Tourism and Sport his plans for the State's holding in Aer Lingus; and if he will make a statement on the matter. [52626/12]

Photo of Leo VaradkarLeo Varadkar (Dublin West, Fine Gael)
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This question relates to the State's remaining shareholding in Aer Lingus. The State's shareholding in Aer Lingus is one of the assets included in the State asset disposal programme. The Government agreed that the shareholding would be sold at an appropriate time, but only when market conditions are favourable and at an acceptable price to be agreed by Government. A steering group has been established to examine the potential options for the disposal of the State's stake and the issues that may need to be addressed in the context of the disposal of the stake. The steering group is chaired by my Department and comprises representatives from the Department of Finance, the Department of Public Expenditure and Reform and NewERA.

There is no preferred option at this juncture for the sale of the State’s shareholding. All possible options are being considered and any final decision will be informed by the outcome of the steering group's analysis. As the Deputy will be aware, the European Commission is currently conducting an in-depth examination of Ryanair's offer for Aer Lingus under the EU merger control rules. The Commission's decision is due in early February 2013 and my Department continues to monitor the case closely.

Photo of Timmy DooleyTimmy Dooley (Clare, Fianna Fail)
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Does the Minister accept that in the event of the European Commission giving permission to Ryanair to purchase the Aer Lingus stock, this would represent a negative position from an Irish point of view, particularly as it would reduce the level of competition between us and our nearest neighbour, one of our biggest markets, and within the wider European context? Will the Minister also comment on the Cabinet decision today to separate Shannon Airport from the Dublin Airport Authority? How will this benefit our overall capacity to attract tourism to Ireland, considering the Minister has failed to give the appropriate level of support to Shannon by virtue of removing Aer Rianta International, the vital revenue source that has formed part of the Shannon operation for decades, from that airport?

Photo of Leo VaradkarLeo Varadkar (Dublin West, Fine Gael)
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Ryanair has submitted a number of remedies to the European Commission explaining how it proposes to get around any competition concerns. It is certainly not the case that the Commission would allow it to take over Aer Lingus just like that. Ryanair would have to give up quite a lot of routes, either Aer Lingus or Ryanair routes, to other airlines from overseas in order to reintroduce competition. It will be up to the Commission to determine whether it considers the remedies being put forward by Ryanair to be adequate. It is the policy of the Government to have as much competition as possible on routes in and out of Ireland. We do not wish to return to a situation where we have a monopoly provider of any sort in the airline business.

With regard to today's Cabinet discussion, a memo was discussed, but I am not yet in a position to make an announcement on it. One or two matters must be clarified and the issue must be discussed with some people. An announcement will be made in the near future. I am pleased Shannon is adding North American routes next year, to both Philadelphia and Chicago. Its ability to set its own charges again, if it is separated, will assist it in securing new business, which will be a positive for the airport. The 2004 Act, which was introduced by Fianna Fáil, always envisaged that Aer Rianta International would remain part of what was then the Aer Rianta Group, now DAA. That remains the case. The Act also requires that whatever happens, both entities must be viable. Shannon must be viable and the remaining DAA must be viable. For Shannon Airport to retain Aer Rianta International and have its debt written off, would bring the viability of both Dublin Airport and Cork Airport into question. It was never going to be a case that Shannon would get both a debt write-off and retain Aer Rianta International. Indeed, that is envisaged in the 2004 Act.

3:45 pm

Photo of Timmy DooleyTimmy Dooley (Clare, Fianna Fail)
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Does the Minister accept that Shannon Airport would be well and truly able to carry its current debt pile if Aer Rianta International was left there? He will be aware from company records that Aer Rianta International made a profit of almost €30 million last year when exceptional items are removed. It is clear that if Aer Rianta International were to be retained by the airport, the debt burden of approximately €100 million at Shannon Airport could be wiped out within three or three and a half years. Does the Minister accept that the removal of that revenue stream from a company that was created, developed and built in the Shannon region would represent a significant loss to the region? Many people would find its removal unacceptable.

Photo of Leo VaradkarLeo Varadkar (Dublin West, Fine Gael)
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The revenue stream goes to the Dublin Airport Authority, rather than to the region. As far as I am concerned, the Aer Rianta International jobs that are in the region will stay in the region. It has never been the case that the revenue stream goes to the region. An important detail was missing from the figures mentioned by the Deputy. As a consequence of its own investments, Aer Rianta International will have considerable capital expenses in the next couple of years, involving a capital outlay of approximately €60 million. It can only do its business when it has the big balance sheet of the Dublin Airport Authority to borrow against. If it were to remain part of the Shannon entity, it would have great difficulty finding the €60 million it will need to continue to do its own business.

Photo of Dessie EllisDessie Ellis (Dublin North West, Sinn Fein)
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I am opposed to the sell-off of Aer Lingus. Has the Minister or the steering group carried out an assessment to ascertain the impact of the sale of the State's share in Aer Lingus in terms of both jobs and the wider community, particularly given that a relatively low sale price is likely to be agreed for a company that has provided so much for this country and its image? Will the money received from the sale of Aer Lingus end up in the pension fund? We know there have been huge problems with the pension fund. The Minister has been heavily involved in negotiations in this regard. Will all of this money end up in the pension fund? Is it intended to address this issue in a way that would have a massive effect on the workers in the airport, who are under pressure as they face into the future?

Photo of Leo VaradkarLeo Varadkar (Dublin West, Fine Gael)
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The 25% stake in Aer Lingus belongs to the State and to the taxpayer. That is where it will go. It will not go to a private pension fund. As I have said, the steering group is doing its work on the sale of the stake at the moment. It is fair to say we will be careful in this area. It would not be my view that the stake should be sold quickly or cheaply. This asset belongs to the people, and that must be taken into account. At the same time, we have to bear in mind that 75% of the company is in private ownership already. Any other shareholder that reaches 30% ownership will be in a position to present a takeover bid, and any shareholder that reaches 50% ownership will be in a position to force the State to sell its stake to it. We must be aware that it would make more sense to sell our stake at a time of our choosing than to be forced to do so.

Photo of Timmy DooleyTimmy Dooley (Clare, Fianna Fail)
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The Minister said earlier that the State Airports Act 2004 always envisaged that Aer Rianta International would transfer to the Dublin Airport Authority. Does he accept that the same legislation envisaged that separation would not take place until viable business plans were in place for both Cork Airport and Shannon Airport? He is now proposing to separate Shannon Airport. Can he explain how he considers the business plan that has been produced to be viable? I understand the business plan is based on an anticipated level of growth that is considerably in excess of the underlying growth in the total Irish market. It involves holding on to all existing routes and winning back traffic lost to Knock Airport and Kerry Airport. Is the Government proposing to give the new entity the capacity to target those airports? Is that the viable business plan that is being accepted by the Government? Is it realistic to expect that existing carriers on transatlantic routes will add additional routes on a phased basis from 2013? Is the Government about to agree a plan that targets Knock Airport and Kerry Airport?

3:50 pm

Photo of Leo VaradkarLeo Varadkar (Dublin West, Fine Gael)
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The legislation requires that there be business plans for both Shannon and Cork, if Cork is to be separated, and then also for the residual entity. It is not a case of just having a business plan for one; there has to be a business plan for two.

Photo of Timmy DooleyTimmy Dooley (Clare, Fianna Fail)
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I know that. The Minister should stick to the question, which concerns a business plan for Shannon.

Photo of Leo VaradkarLeo Varadkar (Dublin West, Fine Gael)
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In terms of passenger numbers and volume, what has to be envisaged for Shannon to do well is to recover some of the lost ground. It has lost almost half of its passenger numbers and it needs to recover that, either by growing new business or competing with other airports, and that includes Dublin and Cork.