Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I move:

That Dáil Éireann, pursuant to section 3(5) of the Aer Lingus Act 2004, approves the general principles of the disposal of shares in Aer Lingus Group Plc by the Minister for Finance in accordance with section 3(2) of the Aer Lingus Act 2004, which were laid before Dáil Éireann on 27th May, 2015.

The motion seeks the approval of the House for the general principles of the disposal of shares in Aer Lingus. The Aer Lingus Act 2004 contains a provision stipulating that the Minister for Finance may not dispose of any shares in the company without the general principles of the disposal being laid before and approved by Dáil Éireann. A document setting out the general principles was laid before the House earlier this week.

At the outset of this debate I pay tribute to Aer Lingus and to its management and staff. I want to recognise the contribution Aer Lingus has made to Ireland and to emphasise that I see the IAG proposal as an opportunity to ensure this company has the opportunity to continue to grow, to develop and become stronger. As a country, we are proud of the fact that Aer Lingus is one of the oldest airlines in the world still operating today. It was one of the first State companies established by the newly independent State in 1936. It pre­dates the likes of CIE, and Bord na Móna. The decision to establish Aer Lingus was more than just the setting up of an airline. It was an expression to the rest of the world of the optimism and openness of a fledgling country finding its wings. More than 75 years later, that recognition of its heritage, its importance, its contribution and its potential holds true for this country and this generation. Since its establishment Aer Lingus has served and continues to serve the country well. Aer Lingus and its employees have played a huge part in the development of the Irish aviation sector into the vibrant industry that it is today. The Irish aviation sector is rightly recognised and respected around the world. One of the great successes of Irish aviation policy over the past 30 years is that the two largest Irish airlines now have roughly 80% of the market in and out of the country. In most countries the market is split more equally between domestic and foreign airlines. The success of the Irish airlines means that the majority of people flying in and out of our country do so on an Irish aircraft.

Alongside this recognition, I must emphasise three factors that have been decisive in my evaluation of the IAG proposal. First, the airline industry is inherently cyclical and has been severely impacted in the past by a number of global shocks such as 9/11 and the 2008 financial crisis. The industry is currently in its fifth consecutive year of positive global airline profitability. However, as a relatively small albeit currently well capitalised airline, Aer Lingus is dependent on the capacity decisions of its larger competitors and may be more vulnerable to future industry shocks or aggressive direct competition than the larger airlines. Second, the European airline industry remains relatively fragmented compared to the USA. Many of the European legacy carriers have been forced to implement significant restructuring plans in recent years. This has also driven consolidation amongst European airlines with many formerly State-owned airlines either becoming part of larger groups or having failed. I do not want to leave it to chance only to find that it is a forced decision in difficult times. Third, Aer Lingus is no longer our national flag carrier. That decision was taken nine years ago when 75% of the shareholding was sold. Nor is the State the majority shareholder in the company.

Jerry Buttimer (Cork South Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The Minister's speech is in transit.

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

We own a minority 25.1% shareholding and I want to use the opportunity now to maximise the benefit of that residual shareholding to put the company on a firm footing for the future while protecting key general national interests. In reality, the State has little or no influence today in relation to the company although it can, with the support of others, prevent the disposal, if not the transfer, of the Heathrow slots. I want to protect and strengthen that position. I want to ensure that, in the national interest, we have guarantees over the use of the Heathrow slots in a time of transition. I want to ensure the best opportunity for increased employment and growth in the company. I want to ensure that Ireland's essential links to the global economy are enhanced.

As background to the offer, I note that in 2012 the Government decided, in the context of the State asset disposal under the EU-IMF programme, that the State's 25.1% shareholding in Aer Lingus could be sold on terms and at a price that were satisfactory. Subsequently in June 2012, Ryanair indicated its intention to make an all-cash offer of €1.30 per share. For a number of reasons, this was unacceptable to the Government. No other bidder has emerged to date. While initial proposals were rejected, the board of Aer Lingus indicated to IAG in January 2015 that it would be willing to recommend the financial terms of a proposal based around a share price of €2.50. An inter-departmental steering group, which was established when the Aer Lingus shareholding was included in the State asset disposal programme, was asked to review the potential sale. The group was chaired by the Department of Transport Tourism and Sport and included representatives from the Department of Finance, the Department of Public Enterprise and Reform and NewEra. NewERA engaged expert external financial advisers, Credit Suisse and IBI Corporate Finance, and legal advisers, McCann FitzGerald, to assist the steering group in its work. The group has engaged in intensive work over the last few months and has recommended that the Government should accept the IAG offer. I have been briefed by the group over the intervening period and have also had discussions with IAG directly. All key stakeholders have been before the Joint Committee on Transport and Communications. I have also kept Government briefed on key developments. Yesterday, 26 May, the Government decided to proceed with a sale subject to Dáil approval of the general principles.

The IAG board and the independent Aer Lingus directors have announced that they have reached agreement on the terms of a recommended cash offer to be made for Aer Lingus. This involves a cash payment of €2.50 per share and the payment of a cash dividend of 5 cent per share. This latter element is payable in any event this coming Friday, 29 May 2015. The offer will be subject to a number of conditions including the receipt of EU merger clearance of the transaction on terms satisfactory to IAG. It also requires the passing of a number of Aer Lingus shareholder resolutions to approve the provision of the connectivity commitments to the State, the making of amendments to the Aer Lingus articles and the re-designation of one Aer Lingus share held by the Minister for Finance as a "B" Share. All of these are necessary to implement the connectivity commitments offered by IAG. It is also subject to the Minister for Finance accepting the offer, which condition IAG may not waive, and to Ryanair accepting the offer, which condition IAG may not waive unless Ryanair's shareholding is 5% or less. I will come back to this point later.

The process to date has taken time. It should have. We are dealing with a hugely significant matter. Aer Lingus and its operations represent a significant and legitimate national interest. Aer Lingus plays a key role with almost 45% of the airline seats at Dublin, Cork and Shannon airports on Aer Lingus flights. It also supports significant numbers of jobs and is in the top 50 of Irish employers. I recognise the intrinsic value that Aer Lingus brings to the Irish economy. I recognise the importance of ensuring it has a viable future. I recognise the benefit and, indeed, the need to set it on a route to continued growth. The proposed merger with IAG provides the best opportunity to meet these objectives, which is a credit to the company's management and staff. However, I must emphasise that across Europe many formerly State owned airlines including Cyprus Airways, Malev, and Hungarian Airlines have now failed. While a number of European airlines remain under State control, some are undergoing significant restructuring or are open to potential disposal.

In fact, Finnair and the Portuguese airline TAP are the only other examples of a national, small independent carrier competing against generally larger companies. The Aer Lingus board and chief executive have clearly recognised and stated publicly that the IAG proposal presents the company's best opportunity to do so and reduce risk. I have to balance this against the limited role the State has now where, acting with others, it can prevent slot disposal but not use of these slots. I want to take the opportunity to strengthen this role while placing the company in a better position to compete.

The factors that the Government would take into account in considering any sale of its shareholding were clearly outlined at the outset. In addition to price, other issues that were identified were the potential impact of a sale on connectivity including transatlantic connectivity. We have also had regard to competition in the air transport market. Employment issues generally and jobs in Irish aviation were particularly important as was the future of the Aer Lingus brand. I will have regard to each of each of these aspects in outlining my rationale for this disposal.

There is one other aspect that I want to mention. Government aviation policy is based on competition between at least two airlines with significant home bases in the Irish market. We are fortunate to have in Aer Lingus and Ryanair two very successful companies based in Ireland. I recognise the outstanding achievement of Ryanair since its foundation and am proud to acknowledge its contribution not just in Ireland but also to the aviation sector and customers across Europe. However, given our status and the importance of connectivity, it has consistently been the Government's position that Ryanair should dispose of its shareholding in Aer Lingus. The Government would not wish to see Ryanair remain as a significant minority shareholder in Aer Lingus following a takeover by IAG. For this reason, we welcome the fact that the IAG offer will be conditional on Ryanair accepting the offer and it will not be possible to waive this condition unless Ryanair's shareholding is less than 5%.

I now want to turn to the issue of connectivity and the impact that the sale of the State's shareholding in Aer Lingus will have in this regard. I am convinced that a merger with IAG provides an excellent opportunity to strengthen Aer Lingus, to protect its brand and to enable it to grow and succeed as a commercial entity. However, in selling the State's shareholding in the airline there are other national interests that have been taken into account in reaching a decision. Primary to this is the question of connectivity and connectivity through Heathrow. Sometimes the depth of concern here is not always appreciated. It does not arise because of a fundamental disbelief in the commercial viability of these routes. It does not arise from a fear that our airports cannot deliver these services. It arises because right now, connection through Heathrow is a significant national interest.

Heathrow is the most significant destination airport from Dublin. It accounts for approximately 8% of air transport seats by destination. In comparison, the next largest hub airports from Dublin are Paris and Amsterdam, which account for about 3% and 2% of air transport seats respectively. The Heathrow route accounts for just under 20% of passengers at Cork Airport and nearly one quarter at Shannon. Heathrow is the UK's only airport with the requisite size and scale to deliver a comprehensive service to long-haul destinations across the globe. In 2013, it provided access to 180 destinations in 85 countries while being serviced by 82 airlines. The high level of frequencies of connecting flights from Dublin, Cork and Shannon helps passengers achieve attractive, time-minimising connectivity options. These are essential to our interests.

The commitments secured in our negotiation with IAG retain the protection that has been available for the last nine years and provides assurances for the coming seven years. On slot disposal, the Government can at present, with its existing shareholding plus 5% from others, prevent the disposal of slots. Under the new arrangements, the Minister for Finance in consultation with my Department would have that ability.

Róisín Shortall (Dublin North West, Independent)
Link to this: Individually | In context | Oireachtas source

That is not possible.

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Furthermore, in the new proposal commitments that are being given for at least seven years post-acquisition, all Aer Lingus's current winter and summer daily scheduled frequencies on routes between Heathrow and each of Dublin, Cork and Shannon will be maintained. In addition, all of Aer Lingus's other London Heathrow slots will be operated on routes to and from Ireland in the first five years. These are guarantees we do not have at present.

I should also mention that under the proposal, the Aer Lingus group will not change its name and Aer Lingus will operate all its scheduled international air transport services under the Aer Lingus name. Aer Lingus will also maintain its head office in Ireland. Again, these improve the protections currently in place.

I would like to draw to the attention of the Dáil that, in addition to these commitments, IAG has confirmed, as outlined in the formal announcement, that for the 2016 summer season two new transatlantic destinations can be added and that by 2020 four transatlantic routes will be in place, delivering up to 2.4 million additional passengers. This will enable Ireland to become an important hub for European traffic across the Atlantic. As part of the north Atlantic Joint Business with American Airlines, Iberia, British Airways and Finnair, Aer Lingus will benefit directly from the sales and marketing of the bigger group, in particular in the United States. In addition, Aer Lingus's planned long haul growth would benefit from being part of lAG's global cargo network and customer loyalty unit, Avios.

Turning to the benefits of the deal for other airports, IAG plans to sustain and grow business at Cork, Shannon and Ireland West Airport Knock and have, in particular, referenced the Cork-Amsterdam and Cork-Paris routes, the transatlantic routes from Shannon and the Knock-London route. For example, IAG has a strong presence in Paris with 56 daily flights, 45,000 active frequent flyer members and a strong sales force. I am assured that growth opportunities with tourism and business interests in the Munster region will be pursued to exploit the potential that exists in all the short haul routes currently operated by Aer Lingus from Cork. Aer Lingus has indicated that a combination with IAG would also underpin a new Cork-Germany service, which will be announced shortly.

In Shannon, in the context of sustaining and growing its business, IAG will consider options, including Aer Lingus codeshare and accepting customers originating from Shannon, that could enhance existing all-business British Airways two daily services from Heathrow to JFK via Shannon. The Aer Lingus Shannon flights to Boston and New York are expected to be strengthened as a result of the company becoming part of the North Atlantic Joint Business. Aer Lingus support for existing American Airlines flights to Philadelphia will provide opportunities for additional capacity and increased connectivity to the US. In addition to the Gatwick route becoming more sustainable, Aer Lingus will also actively work with Knock airport to explore new growth opportunities that will be available as part of the IAG group.

I want to assure the House that IAG has confirmed that existing employment rights of the employees of Aer Lingus will be fully safeguarded upon completion of the offer. It has also confirmed that it endorses Aer Lingus statements that it will honour its collective agreements and is prepared to confirm that it will re-register existing registered employment agreements, REAs, under the new legislative framework when it is introduced. The chief executive of Aer Lingus confirmed Aer Lingus's position on REAs in a letter to me yesterday, indicating that Aer Lingus considers that having clear registered employment agreements that safeguard the respective interests of employees and the company is mutually beneficial. In addition, Aer Lingus has committed to expanding the scope of REAs, where appropriate, to include staff groups not covered by the current agreements. The letter also indicates that Aer Lingus will engage in a process of consultation governed by agreed structures with staff and its representatives when any restructuring is required and that it does not foresee a likelihood of either compulsory redundancy or non-direct employment.

This, together with the expected increase in direct employment in Aer Lingus as a result of this deal, is a very compelling proposition and a significant improvement on what is now there. International Airlines Group has also stated clearly that under its ownership there will be significant job opportunities in the Aer Lingus business. In the coming year alone the assessment is that there will be net employment growth of approximately 150 jobs in Aer Lingus. By 2020, growth in Aer Lingus could lead to the creation of up to 635 new highly skilled jobs, including over 400 pilots, as well as engineers and ground staff.

Róisín Shortall (Dublin North West, Independent)
Link to this: Individually | In context | Oireachtas source

Good.

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I want to address each of the principles contained in the Dáil resolution. The first provides that the Minister for Finance may dispose of all but one part of the remaining minority shareholding in Aer Lingus under the offer or any renewed or revised offer made by IAG on the same or improved terms. This is to facilitate the retention of one share which would be redesignated as a B share in Aer Lingus, as detailed in the announcement. The rights attached to this B share would be enshrined in the Aer Lingus articles and allow the Minister for Finance, in consultation with the Minister for Transport, Tourism and Sport, to object to any proposed disposal of Heathrow Airport slots, any proposed cessation of the operation of Aer Lingus Heathrow Airport slots on certain Irish routes for a specified future period and any proposed change of the Aer Lingus company name, brand, head office location or place of incorporation outside Ireland.

Róisín Shortall (Dublin North West, Independent)
Link to this: Individually | In context | Oireachtas source

That is nonsense.

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

As the B shareholder, the Minister for Finance would have no rights to dividends or votes at general meetings.

The steering group has received detailed financial advice from its advisers on the question of price. The financial advisers have considered a range of valuation methodologies which they consider to be relevant. The steering group has concluded that a price of €2.50 is acceptable. The Dáil is being asked to approve in principle the disposal of the shares for a cash payment of at least €2.50 per share, payable on completion of the transaction. The proposed offer also refers to the payment by Aer Lingus of a cash dividend of 5 cent per share. The dividend will be paid on 29 May to Aer Lingus shareholders on the Aer Lingus share register on 1 May. Obviously, this is payable, irrespective of whether the proposed offer proceeds.

Price has been an important but not an exclusive consideration in the State's evaluation of the proposal. It would generate proceeds for the State of approximately €335 million. It represents a premium on the share price on the day prior to the announcement of lAG's initial approach and the Aer Lingus initial public offering price of €2.20 in 2006. Prior to the IAG approach, the Aer Lingus share price had not traded at this level since late 2007. The board of Aer Lingus has publicly stated the financial terms of the proposal are at a level which it would be willing to recommend to its shareholders.

It is a principle of the proposed sale that the Minister for Finance's acceptance of the offer will be on the basis that the legally binding commitments agreed by IAG and detailed in the announcement are conferred on the State as the holder of a B share in Aer Lingus. This was a significant area of negotiation. In essence, the commitment is that the existing Aer Lingus winter and summer daily scheduled frequencies to Heathrow Airport from Dublin, Cork and Shannon airports would be maintained for a period of seven years from completion of the transaction, the final two years of this period being subject to a condition that airport charges at these airports would remain at or below 2014 levels, adjusted for inflation. Furthermore, for the first five years Aer Lingus would operate the remainder of its slots on routes between these or other airports on the island of Ireland. Furthermore, lAG's proposed offer includes a legally binding commitment that the Minister for Finance would be entitled to block a proposal by Aer Lingus to change the company name, brand, head office location and place of incorporation from Ireland. This is unlimited in time and provides protection that is not currently provided.

If IAG proceeds to make a formal offer, the impact on competition will be subject to review by the European Commission under the EU merger regulation. While we believe no significant adverse impact on existing competition is likely to arise, given the relatively limited overlap of existing route networks, we cannot prejudge the Commission's review. If, as part of that review, IAG is required to offer remedies that are unacceptable to the Minister for Finance, the principles of the disposal recognise our right not to proceed with a sale in these circumstances.

Another issue that the Government considered was the potential use of the proceeds of any sale of the State's shareholding. The Government has agreed that the proceeds should be used to establish a new connectivity fund as part of the Ireland strategic investment fund. The Minister for Finance will seek the approval of the Oireachtas in due course for the payment of the proceeds of any sale of the State's shareholding into this fund in accordance with section 46(2) of the National Treasury Management Agency (Amendment) Act 2014 should the sale proceed.

The chief executive of Aer Lingus has confirmed to me that the strong expressed preference of Aer Lingus is to utilise direct labour wherever efficient and effective. In addition, the company's clearly demonstrated preference and practice for many years to restructure only in a manner as required and so as to avoid compulsory redundancies is noted.

Róisín Shortall (Dublin North West, Independent)
Link to this: Individually | In context | Oireachtas source

That is pathetic. I trust Deputy Alan Farrell is not falling for that one.

Ruth Coppinger (Dublin West, Socialist Party)
Link to this: Individually | In context | Oireachtas source

It is disgraceful.

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Furthermore, it is noted that Aer Lingus's current collective agreements provide for flexibility and mobility throughout its workforce without unduly restricting other possible approaches. The company's stated position that having clear registered employment agreements, REAs, which safeguard the respective interests of employees and the company is mutually beneficial is noted, as is its commitment to extend and expand the scope of REAs, where appropriate, to include groups not covered by the current agreements. The commitment of Aer Lingus to engage in a process of consultation governed by agreed structures with its staff and their representatives should any restriction be required is noted, as is its current position that it does not foresee a likelihood of compulsory redundancies or non-direct employment.

Róisín Shortall (Dublin North West, Independent)
Link to this: Individually | In context | Oireachtas source

That is reassuring.

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The sale of the State's residual shareholding in Aer Lingus is a landmark decision.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source

It is more like a landmark betrayal.

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Aer Lingus is a great company. It has been Ireland's flag carrier State airline and served the country well. As a private company in the past nine years, it has flourished and grown in the face of stiff competition. However, as a small carrier competing against larger companies in a changing European environment, it faces difficult challenges and risks. Its board and senior management recognise this and see IAG's proposal as a means to address it and enhance the company's opportunities to grow and develop. It can do so and as part of IAG. The Government believes a sale of the State's shareholding on the basis of the IAG proposal is the right decision in the interests of the country and the company.

I will conclude with five key reasons we should do so. First, it would strengthen the competitive position of Aer Lingus. It would reduce risk the company faces. It would provide the company with an opportunity within a larger group to grow and face challenges in a changing aviation environment. Second, it would give greater certainty around connectivity with Heathrow Airport. It would strengthen the guarantees we have around the disposal of slots and, furthermore, provide new guarantees around slot use for at least seven years. Third, it would promote Ireland's wider connectivity and bring growth to our airports. It is anticipated this move would bring benefits to the Aer Lingus long-haul and short-haul networks with IAG. There would be a focus on sustaining and growing routes from Dublin, Cork, Shannon and Knock airports. The fourth reason relates to the reason it would create employment. It is envisaged that by the end of 2016, 150 new net jobs would be created in Aer Lingus, rising to a total of 635 new net jobs by 2020. Fifth, it would protect the Aer Lingus brand and keeps its head office in Ireland.

Under the terms of the deal, Aer Lingus Group plc will not change its name and Aer Lingus will operate all scheduled international air transport services under the Aer Lingus name. Aer Lingus will maintain its head office in Ireland. We are seeking the approval of the House to proceed to do so on the basis of the principles I have laid before Members and which have been presented today. In the interests of the company and the country I call on Members to do so.

Timmy Dooley (Clare, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

I welcome the Minister and thank him for beginning a process of informing us about this particular deal. My party and I are deeply disappointed that the Government did not afford the transport committee an opportunity to engage with it, the Department and the various stakeholders in order to discuss the background and details of this deal. Deputy O'Mahony, as Chairman of the transport committee, has performed his function to date in an independent and transparent way and sought to add to the discourse on the decision the Government is ultimately taking. He will be disappointed that the committee was not given an opportunity to parse the finer details of this deal so that Members of the House could take a collective view rather than having the Minister present Members with some of the more positive and salient points of the deal but little about the associated risks. There has been a lot of talk in the past couple of days from those on the Government side of the House and others regarding the previous decision to sell 75% of the company. On that occasion, the transport committee was afforded an opportunity to debate the matter in detail.

For the life of me, I cannot understand the haste with which the Government is moving, considering that it has had six months to address the overall offer. I cannot see the necessity to have the debate over the next two days and have a vote on it on Thursday, before we leave. The House is not sitting next week. Next week could be used well by the transport committee to go through the matter in detail. It has shown the capacity over recent months to meet at short notice and on days the House is not sitting in an effort to add to the broader debate and afford a better understanding to the people whom we represent as to why we take decisions. The approach shows what the Government thinks of the commitments it made in regard to transparency and affording the House an opportunity to exercise the mandate its Members were given, particularly regarding the teasing through of important decisions and the discussion of legislation. In saying this, I am not attacking the Minister personally.

It is often said that our Parliament is weak by comparison with others across Europe. In the Minister's previous role as Minister of State responsible for European affairs, he will be well briefed and will understand that many parliaments operate really effectively because they show regard for their individual members by giving them a say in decisions that are taken and by allowing them to analyse in detail the background to the decisions that must be taken. More often than not, they make mature decisions. The Government, comprising Fine Gael and the Labour Party, talked a lot about a revolution in the way in which it would do business. Today, that revolution is on its knees. Sadly, we are not allowing this Parliament the kind of input I believe is important in this debate.

From the very start, I could never really get my head around the necessity, from the Minister's perspective, to sell the remaining 25% stake. A decision was taken in 2006 to change Aer Lingus's semi-State status and trade it publicly, thereby ensuring it would be run on a commercial basis in the best interest of all, including workers, passengers and the country. I supported the decision and believed it was correct. One aspect of the decision was to retain a 25% shareholding in the company for strategic interests. From where I am looking at the matter, granted without the benefit of all the information the Minister has, I do not believe the State has any less of a strategic interest in the airline than it had back in 2006. For the life of me, I cannot understand how the Government has failed to realise the importance of retaining the shareholding and having control, although not absolute control, over the direction of the company, or an input into it. The Minister now tells us the State will have a B share, one share, and that this will somehow have attached to it all the rights, responsibilities and benefits as obtained previously, with the exception of profit and voting rights. If that is the case, I am somewhat amused that IAG would want to purchase the 25% that the Minister is selling. What benefit will it ultimately derive if the State still retains all that control?

The company was performing exceptionally well as an independent company, which really underpins the view that the right decision was taken in 2006. Since then, passenger numbers have grown from 7 million to 11 million, as the Minister knows. Aer Lingus has developed important access to the north of England and has managed to develop business there and take passengers through the hub in Dublin. In addition to seeing a growth in passenger numbers, the company's costs have been reduced significantly. It is now a much leaner and fitter independent entity and is able to take on the challenges the Minister talks about. It is well capitalised and profitable.

Some years ago, Ryanair and easyJet would have had passenger numbers of 11 million. Their respective figures are now 100 million and 60 million. Through strategic alliances and various other corporate tie-ups, there is no reason Aer Lingus could not be such an entity. While the Minister talks about possible difficult periods ahead in the aviation sector, he should realise those threats have always existed. Other airlines have survived. Therefore, I cannot understand the necessity to proceed with the deal at this time.

The current growth trajectory of the company is such that remaining an independent carrier would not be the tragedy some proponents of this deal have depicted. As I stated, the company carried up to 11.1 million passengers last year. In 2014, revenue was up 9%, and there was an operating profit of €71 million. I accept that is attributable to the efforts of the staff, management and chief executive of the company.

Aer Lingus has successfully emerged from the worst financial crisis in the history of this State, or one of the deepest in the OECD, as a lean and growth-oriented company with very significant cash reserves to take on the kinds of challenges that arise. Any company facing a difficult trading period would love to find itself with the balance sheet, growth strategy and cost base of Aer Lingus. Over recent years, Aer Lingus's passenger numbers have grown remarkably. Perhaps the growth has something to do with IAG's interest, particularly because Aer Lingus's growth is concentrated on the north of England. This has effectively highlighted the weakness of British Airways' approach to the regions. Senator Sean Barrett has made much of the fact that the entire north of England and Scotland have no direct access to the United States, even though British Airways is the dominant player in that market. It has routed every flight through Heathrow. There are some concerns that it may wish to do the same with Irish passengers. Much has been made about the limited capacity at Heathrow but this has been the case since I entered public life and politics. Despite the shortage of slot access, it always manages to squeeze an extra aircraft in and continues to grow successfully without the additional runway. I am not so sure the bulk of the business involving direct flights from Ireland to the United States could not be pushed through if there were sufficient desire on the part of IAG or British Airways. I have some concerns in that regard. They are certainly not mollified by anything I have said here today. I would have believed that, by remaining independent, Aer Lingus could do more than just survive over the longer term and could emerge as a very strong carrier in the region.

I have never really got into the debate on the share price offered by IAG because, quite frankly, I took the view that it was the wrong decision and that the strategic interest of retaining a shareholding was principally the most important point we should consider. However, now that the Minister has taken the decision, I will comment on this. Twenty-four Heathrow–London landing slots are worth a possible €400 million, depending on whom one is prepared to listen to. Acquiring the slots will, as the Minister knows, give IAG 55% of all the slots at Heathrow, where space is at a premium. There is a very real benefit to IAG in that regard.

The Minister talks about the guarantees and I will address them later in my contribution. I am not as enthusiastic about those guarantees as the Minister seems to be.

Pádraig Ó Céidigh, who is an expert in this area having founded Aer Arann and is also a serial investor in a range of sectors, believes that the share price should be in excess of €3, which would give the company a valuation of about €1.7 billion. However, the Minister seems to accept that what is on offer at the moment, namely, €2.50 plus the 5% dividend which was already on its way to the Government, is adequate. I do not believe that the takeover is better for the future of Aer Lingus as a company. Aer Lingus has done a good job to date in competing with British Airways and other much larger rivals. I understand that British Airways is trying to expand into the Irish market because it sees the lucrative business that is there as we emerge from recession. It is not out-competing its Irish rivals. It is attempting to buy in. This is very much as a result of the very strong presence of Aer Lingus in the north of England routing passengers through Dublin onwards to the US.

The reality is that Ryanair and easyJet are two very considerable airlines. In fact, they are bigger than British Airways in terms of passenger numbers. This demonstrates to me that if another option was put forward by the Government as a strong shareholder, we could see the retention of an independent airline with a strategic tie up with somebody like IAG or somebody else. IAG has a strategic partnership with American Airlines that works really well. It talked about how that has worked in some of its statements to the stock exchange last night. There is no reason the same could not have been done here.

I believe the takeover deal is anti-competitive and bad for consumers. Virgin Atlantic seems to be of the same view and has expressed its position. I understand it is in the process of lodging a complaint with the EU competition authority. Virgin Atlantic appeared before the Oireachtas Committee on Transport and Communications and set out very clearly how it believes a tie up between British Airways and Aer Lingus would limit the product offering to Irish consumers travelling to the US. I have not heard the Minister or Government address this issue at any point. The trend in the aviation sector is toward consolidation. I believe this is anti-competitive and bad for the consumer. These trends have come and gone. We have previously seen consolidation in the aviation sector. Large companies emerge, enter financial difficulty and sell off bits and pieces of the company at a later stage. Consolidation and fragmentation of corporations throughout history has been cyclical. We may be going through a phase of consolidation but as sure as night follows day and boom and bust or turnaround occur in economies, we will see fragmentation at some point. It is not clear how Aer Lingus will fare when the fragmentation happens within that larger group and the shareholders want to release the value that has been built up over time. This is a real concern and I remain to be convinced that the Government's approach is in the long-term interest, particularly because of our status as an island nation and the need to retain that strategic carrier. It is a fact that while a smaller number of large airlines in a market might increase net margins for airlines, it reduces competition, increases fares and makes it more difficult for new airlines to enter the market. It takes fragmentation at a later stage to address that and it is not clear how or in what form Aer Lingus would emerge from that.

Regional connectivity is the one area about which I have had the greatest concerns from the start having seen the difficulties that emerged when Aer Lingus decided to re-allocate slots to Heathrow from Shannon to Belfast in August 2007. I saw the impact this had on companies and tourism interests in the region and the damage it did to efforts to attract and maintain foreign investment in the region. This is where I have always seen the limitations of the 25% shareholding. At the time, the fact that the State had public interest directors or was in a position to appoint them after that, had a presence in the boardroom and over time was able to change the articles of association so that a decision like that became a board decision rather than a management decision and the retention of that shareholding allowed for the reversal of that decision. That was a good decision and the right decision.

The Minister has put a lot of stock in the fact that individual airports have welcomed this decision. He is joined by some of his departmental advisers today and they will have a knowledge of all of this. The reason the management of Aer Lingus moved the slots from Shannon to Belfast in 2007 was because the then management of the airport decided to give sweetheart deals to Ryanair, much to the annoyance of the management of Aer Lingus. The airport treated the management of Aer Lingus poorly and as a result, it left. The approach that was taken in Shannon at the time was largely responsible for the removal of those slots so to some extent, I must take the Minister's acceptance of management's support for this with a grain of salt. Management got it wrong in the past so there is no reason it is infallible on this move. I would much prefer to see the State retaining its shareholding and having that input at board level, which resulted in the reversal of that management decision and has benefited everyone. The same situation happens in Cork and the mid west. There has been a significant amount of investment in that region involving IDA and Enterprise Ireland-supported businesses. It is not just about passenger numbers. There has been much discussion and effort relating only to the workers at the airport. Yes, they are a hugely important component of this debate but there are people working in other enterprises and business and tourism interests in those regions who are completely dependent on the services operated through the airport. One of the most important services is the access to Heathrow. It is not just about the impact on workers at the airport. The entire micro-economy of those regions could be fundamentally affected by any change to slot access to Heathrow. This is why I remain unconvinced that this is in the best interests of the overall economy of this State or the regional balance that is so important to keep people living outside the city.

Of course, I am not surprised that Dublin Chamber of Commerce weighed in relatively quickly in support of this deal. All along the way, Dublin Chamber of Commerce failed to reveal that Aer Lingus is a member and a very significant partner of Dublin Chamber of Commerce and Cork Chamber of Commerce so it has a significant say in the position of those chambers of commerce. It is a conflict of interest. Dublin Chamber of Commerce is presented as some kind of independent external adviser that sees all the benefits but it does so largely in the interests of a very significant member.

Very sizeable cities in the UK do not have a presence on the north Atlantic route. I find it difficult to see anything in the cast-iron assurances that have been offered by IAG that would either stand up to legal challenge in the long run or would ultimately be enforceable over time. While the Minister says that the Government has done a deal and managed to get from five to seven years, I do not believe that if an event occurred in the running of IAG or if it had some financial difficulties, it would not be in a position to move on. If one looks at the document that was presented to the Stock Exchange - a document that does not seem to form any part of the Government's deliberations, it refers to cautionary statements regarding forward-looking statements. Much of what the Minister has been talking about for the past day concerns the forward-looking aspect of this deal.

Within this there are certain assumptions. I wish to read the caution that forms part of the document:

All forward-looking statements in this announcement made by the IAG Group are based upon information known to the IAG Group on the date of this announcement and all forward-looking statements in this announcement made by the Aer Lingus Group are based upon information known to the Aer Lingus Group on the date of this announcement. In particular, statements are made in this announcement as to IAG’s approach and plans for growth of Aer Lingus’ business, the addition of new destinations to Aer Lingus’ route network and to related implications for employment. These statements are based on certain assumptions as to economic, business and operational conditions prevailing at the time Aer Lingus will decide to make the associated investment in new aircraft and additional employees. In the event that these conditions are significantly different from the ones envisaged at the date hereof, IAG may need to make changes in its approach and plans. Neither the IAG Group nor the Aer Lingus Group undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, save as may be required by law.

However, we can see no logic in any of the documents produced by the Government or anybody else that would suggest now is the time to cast away the strategic interest the State has in an airline, notwithstanding the limitations of such shareholding. Nonetheless, it is critical in retaining boardroom representation, which, of course, feeds into the strategic direction of the company.

Jerry Buttimer (Cork South Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I remind Deputy Dessie Ellis that he will be asked to adjourn the debate at noon.

Dessie Ellis (Dublin North West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

It is a little messy.

Jerry Buttimer (Cork South Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Under Standing Orders, Leaders' Questions will be taken at noon.

Dessie Ellis (Dublin North West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

I understand.

I object to this process, as we have not been furnished with proper documents. My party leader made this objection this morning. It was also agreed that this matter would come before the Joint Committee on Transport and Communications before a vote was taken or a decision made. The Minister's colleagues and Labour Party Deputies agreed to the issue being discussed at the joint committee.

It is very sad that we have to express our opinions on what is a done deal that nobody outside of IAG and Fine Gael wants. For one thing, it is utterly pointless and makes a mockery of democratic debate. The Government has made its decision behind the closed doors in a shrewd media operation which shows blatant disregard for the Oireachtas and its role in dealing with issues of such importance. No matter what anyone says, the Government will seek to sell its share in Aer Lingus and the weak and cowed Labour Party Members will go along with it. This is a sham.

Labour Party Deputies really saw the Minister coming, but in reality they knew the Government would sell out and allow this deal. That is why they raised concerns rather than express opposition. They hoped they would get a deal which looked better. To be fair, it does look better than what was previously offered, but it is still not the right thing to do and the Labour Party will be punished by the people for it. Have they not yet realised that the spin is only working in Fine Gael's favour, while the Labour Party's subservience and silence are destroying it from the inside? This is the wrong deal for Ireland and Labour Party Members know it, but they do not have the courage to act on that knowledge. Fine Gael and IAG are as thick as thieves and Labour Party Members having been given the run-around are being trotted out to say how all of their concerns have been allayed.

Aer Lingus is worth infinitely more to Ireland than the €335 million the Government will get for cashing in on the 25% Fianna Fáil left the State with after its calamitous reign. It ensures secure and consistent connectivity for Ireland, which is vital for any island but particularly a country that has attracted major multinational companies. A country is only attractive for investment when it boasts the facilities that make doing business easy and secure. For years Aer Lingus has made Ireland, at the far west of Europe and a vast ocean away from the United States, a place which can be reached without too much trouble or planning. It also has a reputation as a quality airline, with high customer satisfaction, which promotes a positive image of Ireland across the world. Irish people have taken and continue to take pride in Aer Lingus. Thanks to Fine Gael's desire to sell out as many of the State’s assets as possible and the Labour Party's pathetic subservience to it, Aer Lingus is facing into an uncertain seven years which very possibly will be its last, certainly as we know it. It will also be a very uncertain time for the thousands of workers who make their living in Aer Lingus or peripheral to Aer Lingus’s operations in Ireland.

The Government claims it has received assurances from IAG that it will not sell the Heathrow Airport slots, which was not a major concern owing to their strategic importance to the company. It also claims to have received a commitment that the Aer Lingus slots will remain under the company's control for seven years. On the face of it, that is a stay of execution which should have never been entered into, but behind it there is a major question about whether these assurances can be enforced or fulfilled. We are talking about the international air travel industry which is subject to considerable oversight in terms of the rules by which companies operate, particularly rules which govern competition. Do we really believe it is possible for the State in selling 25% of a company to hold a major multinational conglomerate to agreements in our interests for seven years and beyond? IAG is not a charity which has been set up to provide connectivity and jobs on island nations. It is a private for-profit operation with only two interests - its bottom line and its shareholders, of which Ireland is not one. It does not care about the interests of Ireland, its people or the workers who make up the nearly 4,000 employees of Aer Lingus which would represent less than 5% of IAG staff worldwide.

Aer Lingus is a small but successful airline. It weathered the storms of the downturn in air travel in the early 2000s and the economic collapse at the end of that decade. It has shown resilience and served the people of the country well since the 1930s. It has provided connectivity and good jobs. Under this deal, sooner or later that will be a thing of the past and Aer Lingus, as we know it, will only be a memory. It has remained such a company, despite privatisation, owing to the State's remaining share which has represented the interests of Ireland until now.

IAG has a track record that shows its interest is not in providing jobs or supporting the countries from which its airlines come. When Iberia was privatised, it was a good employer. It became part of IAG in 2011. Less than one year later it announced that 4,500 jobs would be cut. That is more than the entire staff of Aer Lingus. This was done without batting an eyelid and IAG has carried on regardless making huge profits for its shareholders at the expense of the Spanish state which had to help the 4,500 workers to pick up the pieces. Guarantees that a company will do this or that are only believable on the basis that its shareholders will argue for such a practice. No one on IAG’s board or among its shareholders will be arguing for the interests of Ireland.

I want to quote Mr. Willie Walsh, CEO of IAG, because he has frequently made clear what his intentions are for companies such as Aer Lingus that has vital slots at Heathrow Airport. In an interview with Flightglobal, an industry website, he stated:

It’s no secret that we’ve been interested in bmi, but largely because of its slot position at Heathrow rather than the brand. Similarly, when I look at Virgin, what I see are slots at Heathrow...

Virgin hasn’t got an exciting fleet. What it has got are slots and a network at Heathrow, so if they conclude that what they’re selling is, in effect, their slots at Heathrow, then we’d be very interested.

Where the UK will lose out is that Heathrow will not be able to service the new, booming destinations in the developing markets of the Far East, Africa and Latin America. We just won’t have the slots at Heathrow.

The CEO of Aer Lingus who supports the deal and will be handsomely rewarded for his shares failed to play down the value of the Heathrow Airport slots when he admitted that they were worth nearly €500 million alone. This means that more than one third of the value IAG places on Aer Lingus is based on the slots at Heathrow Airport.

This clearly shows where IAG interests lie if the Government was fooled into thinking his hunger for slots extended only to Virgin. These slots at Heathrow are crucial to the importance of Aer Lingus to Ireland. They provide excellent connectivity with one of our main sources of trade, which is one of the major concerns, after job security, people have regarding this sell-off. The Government will get just over €300 million for its 25% stake, which is less than the value of the Aer Lingus Heathrow slots alone. If IAG decide to sell Aer Lingus or to wind up the company who knows what will happen to these wafer thin assurances the Government is heralding.