Dáil debates

Wednesday, 4 February 2015

1:25 pm

Photo of Joe CostelloJoe Costello (Dublin Central, Labour)
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I welcome the Minister. This is the first opportunity we have had to engage in dialogue on the floor of the House. I congratulate him on his appointment and have no doubt that he will continue to do a very good job.

There is some confusion over the negotiation of the IAG proposal to purchase Aer Lingus. Both the Minister and the Minister for Finance have stated that they are limited in what they can tell us in this House, that there are issues of confidentiality and so on. However, it appears that under the Irish takeover rules such requirements do not apply to shareholders and we are a shareholder. We in this House, as representatives of the people, seem to be entitled to know what is going on, the content of the offers that are made - we saw some extra commitments made the other day - and the state of play of the offers. For example, is it not appropriate that both the Committee of Public Accounts, which is the guardian of the public purse, and the committee that represents the Minister's own Department represent a considerable degree of the shareholders, as well as this House itself? Those advising the Government - Credit Suisse, a banking group, IBI Corporate Finance, another finance group, McCann FitzGerald, a body of solicitors - are all very fine corporate entities in their own right, but who is representing the shareholder and advising the Government? This House would and should be the appropriate body under the terms of the Irish takeover rules. There is nothing to prevent it.

In that context, will the Minister consider making available all the information that has been made available to him to date to one or other of the committees to which I have referred and to regard them as advisors to him in terms of the shareholding the citizens of this country hold in Aer Lingus? Many issues need to be addressed here in terms of the protection of the public purse, the issue of jobs, connectivity, and so on. If there is no activity of this kind it would be difficult for us to deny we are buying a pig in a poke if there is a recommendation from the Aer Lingus board to accept the IAG offer. It is would be seen by the people that there had not been adequate advice from the source that we all represent, namely the shareholders who own 25.1% of Aer Lingus.

Photo of Finian McGrathFinian McGrath (Dublin North Central, Independent)
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I thank the Acting Chairman for the opportunity to raise this important Topical Issue matter on Aer Lingus and the future of the company. We all have a high regard for Aer Lingus because it is steeped both in Irish economic history and the psyche of every Irish citizen, nationally and internationally. It is an important part of our life and we should not make any apologies for making informed decisions on it. I would like to see a fair, balanced and informed decision on this issue.

I immediately thought of the sugar company we let go, which produced excellent sugar in this country. We also grew beet for the farmers around the country, servicing sugar factories in Tuam, Carlow and Thurles. Now we are discovering, having let them go, that there is a European market for these products.

On Aer Lingus itself it must be asked if the offers is a good or bad one. The company has a fleet of approximately 50 aircraft. On the basis of last year's prices, these would cost in the region of €4.7 billion. If one assumes a 50% write-down, that would still value them at €2.35 billion. There is the significant costs of training pilots and cabin crew while the value of the Heathrow slots, which some people are dismissing in recent days, has been set at approximately €400 million. The company has cash reserves amounting to approximately €400 million. There are also the companies and employees dependent on Aer Lingus as a major economic transport carrier. Moving on from these broader, national issues the issue of the regions must be considered. Many are concerned that they will be devastated if there is a negative impact on Aer Lingus.

Given all these factors, it may be said that the real IAG offer would be in the region of €940 million, not the €1.34 billion that is being touted recently in public. We need an informed, balanced decision. I know where I stand on Aer Lingus - I support the staff and the company - but we must also ensure we have strong economic arguments to back up our case.

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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I thank my constituency colleague, Deputy Costello, and Deputy McGrath for raising this important matter. I have responded to many questions on this, here on the floor of the Dáil, in the Seanad and in the transport committee, and I look forward to continuing to do so while this matter is under consideration. I will first respond to the core question Deputy Costello put to me regarding the commentary that has appeared today on my status and the constraints upon me and my colleagues in regard to Aer Lingus throughout this bid period. While I will respond now to the points the Deputies have made, a text has also been circulated to them with other material.

The position as it stands, which I have checked very recently, is that I have received the clearest legal advice on the need for my comments and the comments of Government Ministers and our representatives to be cognisant of the fact that we are in a takeover period. The legal advice has been very strong on this aspect. It has been very clear to me that the Irish takeover rules impose a specific set of obligations on Ministers and our representatives, as substantial shareholders in Aer Lingus. This includes obligations on me of confidentiality and to ensure that statements made in connection with the possible offer are accurate and not in any way misleading.

This issue is particularly acute given the State's role in any proposed takeover bid for Aer Lingus. I confirm that the legal advice available to me makes clear that I am constrained in what I can say on the proposed offer because the Irish Takeover Panel has deemed that we are in an offer period.

On the role of the Oireachtas and its committees in respect of the proposed offer, I emphasise that the House has a role in any potential disposal by the Government of the Aer Lingus stake. The Aer Lingus Act 2004 requires that the principles of any disposal be laid before Dáil Éireann and approved before any sale of the Government's 25.1% shareholding may proceed. The legislation is clear that any sale requires Dáil approval. I have been transparent on this point throughout.

Deputy Finian McGrath spoke of the need to carry out a fair and balanced assessment of the offer. He stated that in his view, having considered the relevant issues, the sale of the State's stake in Aer Lingus should not proceed. He is entitled to that view. I have repeatedly emphasised that there is much more at stake than the price of a share. As important as the price is - none of us should dismiss the possibility of money being made available to taxpayers - many other factors must also be considered. I have emphasised, for example, the role of access, competition on routes and the impact of any disposal on general economic development. If an offer is made, I will evaluate all relevant information and make a recommendation to Cabinet. Any decision on the sale of State's shareholding would have to come before the Dáil.

1:35 pm

Photo of Joe CostelloJoe Costello (Dublin Central, Labour)
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I thank the Minister for his response in which he indicated that any offer would have to come before the Dáil for its approval. This means the Dáil will not have any say in the negotiations leading up to a decision, which places a significant limitation on the role the House would play in such a decision. I ask the Minister to consider bringing the matter to the attention of the Committee of Public Accounts in order that it can examine the issue in its role as guardian of the public purse and the need to obtain value for money. The Joint Committee on Transport and Communications could act as the adviser to the shareholder. The Minister is entitled to appoint advisers and the rules do not stipulate that shareholders could not be advised in such a capacity.

Does a serious issue of insider trading not arise in respect of the chief executive officer of IAG, Mr. Willie Walsh, given that he was in charge of Aer Lingus until recently and currently chairs the National Treasury Management Agency which has responsibility for NewERA, the holding company for State assets? Do Mr. Walsh's various roles not give rise to a serious conflict of interest? Should he not be told he cannot have a role in both areas? This is a serious issue which must be addressed.

In my view, IAG is seeking to secure Aer Lingus's brand, pre-clearance facility and Healthrow slots. The best way to protect the slots is to increase the State's shareholding from 25.1% to 30%. Will the Minister consider purchasing the additional 5% required to guarantee the slots in future? We should also bear in mind the bumper returns from Aer Lingus in January.

Photo of Finian McGrathFinian McGrath (Dublin North Central, Independent)
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I thank the Minister for his response. I am glad Dáil approval is required for any sale under the legislation as Deputies need to have a say on the issue.

I ask the Minister to be cautious in respect of those who are advising him. He indicated he will make a decision and bring a recommendation to Cabinet. A previous Government appointed advisers from the financial services sector to provide advice on the banking crisis. We have all seen the cock-up they made. I am sounding a note of caution on this issue. Given the rapid change under way in the aviation industry, the Minister will need to be on top of his brief when making a recommendation to the Cabinet and Dáil.

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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On our choice of adviser, we are being advised on this issue by private sector companies, the names of which are on the public record. The interdepartmental group includes representatives of the various Departments affected by this issue, including the Departments of Finance, Public Expenditure and Reform, and is chaired by an official from my Department. I am confident that we have achieved the right mix of private and public sector representation on the group. The entities we have appointed in an advisory role are genuinely independent and able to offer expertise in this area. I have seen evidence of this in my personal engagement with the group.

Deputy Costello proposed that committees take a role in this matter. The Joint Committee on Transport and Communications has concluded several days of hearings on the proposed sale of Aer Lingus. I have been made aware of the points made by the various groups which appeared before the committee.

I am a former member of the Committee of Public Accounts, of which Deputy Costello is a current member. The role the committee plays in respect of any matter is very much a decision for its members based on the structure of their work plan. I recall, however, that the work of the Committee of Public Accounts must be related to the work of the Comptroller and Auditor General. This is the stricture within which the committee operates, as Deputy Costello will be aware. The Joint Committee on Transport and Communications is playing an active role in this matter.

As to the Deputy's suggestion that an Oireachtas committee act as an adviser to me on this issue, I am receiving extensive advice on this matter from many corners. Given the nature of aviation, professional advice and expertise is required in a number of areas. We have procured such advice.

On the role of Mr. Willie Walsh, the legislation on the National Treasury Management Agency is clear on the separation that must apply in respect of the work of any individual who chairs the body and other interests he or she may have. I am fully confident that NewERA, which is part of the advisory group being chaired by my Department, is performing its work in an impartial and professional manner that would meet any standards sought by the Deputy or anybody else.