Paddy Burke (Fine Gael)

I welcome the Minister to the House. Some of the decisions the Government has taken over the past couple of weeks are to be welcomed, belated as they may be. I am pleased to have the opportunity to speak on the Government's recent announcement regarding the aviation sector. However, the so-called "package" is very disappointing and extremely short-sighted. It is typical of the half-hearted and ultimately weak approach that the Government takes to all the serious problems and challenges facing the country's strategic and economic development. There are two major aspects to the Government's recent announcement, namely, the sale of Aer Lingus and the decision to proceed with a second terminal at Dublin Airport. These decisions have resolved little and they have created more questions than they have answered.

With regard to Aer Lingus, I welcome the decision to sell a majority stake in the company. This is a straightforward and economically rational proposal. The facts speak for themselves. Aer Lingus needs over €1 billion in capital to replace and expand its long-haul fleet. It has already self-financed the replacement of its short-haul fleet from within its existing resources but it is clear it is incapable of stretching its resources to fund the long-haul fleet. It is equally clear that the Government cannot — or should not — endeavour to propose to fund Aer Lingus's long-haul fleet expansion. The Government's resources are needed in more high priority areas such as health, roads and education.

We cannot afford to continue to bankroll Aer Lingus. I am sure other Members will remind the House of the airline's current profitability and no one can argue with that. However, we must also remember that Aer Lingus has been through a number of economic downturns in recent years and the State can no longer afford to take chances with it. It is time to allow the private sector to step in and offer greater investment leverage to the company.

I am sure many Senators will argue that the selling of a majority stake in Aer Lingus will be disastrous for Ireland and that it will result in the danger of losing our airline connections to the wider world, including Europe and the USA. Again, I do not believe this and am confident that the market will dictate.

There has been an enormous growth in the volume of traffic into and out of our airports in recent years. We are all too well aware of the phenomenal growth in travel, foreign holidays or city breaks taken by members of the public. The market exists and is growing. I am confident that no airline, particularly Aer Lingus, is about to walk away from the Irish market while it is undergoing such tremendous growth.

The Irish market remains buoyant and it will continue to be there for Aer Lingus to tap into and exploit. A domestic market leader, such as Aer Lingus, stands to greatly benefit if a significant capital injection to allow it to increase the number and type of routes it is offering to the travelling public is provided. The company has indicated a wish to open new routes to the US, South Africa and Asia. Such ambitious plans offer a major potential for the company's growth and I hope that it will now have to opportunity to advance these plans, which appear to have been under consideration for several years.

Concerns have been expressed that Aer Lingus will lose its identity and that its world famous brands will be diluted. This can be avoided provided the Government puts in place a deal which contains terms of contract that ensure the Aer Lingus brand will be retained. It is crucial that the Government crafts the right type of agreement to ensue that this is the case.

In terms of the landing slots at Heathrow, again, any deal must contain the caveat that Aer Lingus's landing slots may only be used for passengers travelling into and out of Ireland. As regards fears that the slots will be lost to Ireland, such concern relates to my earlier argument that a buoyant Irish aviation market will ensure that the Dublin to Heathrow route will continue to remain much travelled. It is currently one of the busiest and most profitable in Europe and I do not foresee this changing. Indeed, any private sector investor involved with Aer Lingus is most likely to be eager not only to continue with the route, but to seek to expand it.

If it is accepted that private sector investment in Aer Lingus is on the way there is an urgent need to consider the value of the company, particularly at the time of its eventual sale. Its value will be crucial if the company is to continue to grow, fulfil its ambitious expansion plans and complete its survival plan. This is the real issue and it is one about which most people are appalled by the behaviour of the Government in recent years. The figure of €700 million is now being bandied about by analysts and experts as the company's estimated value. This is despite the fact that it made an operating profit of over €100 million in 2004. This time last year its valuation was much higher, with figures of more than €900 million being regularly quoted. The only answer to Aer Lingus's sudden fall in value lies solely in the Government's corner. It has completely botched the handling of the Aer Lingus issue. For years the Government has promised that it would act and decide on Aer Lingus's future but instead it has dithered and the company has lost more than €200 million in market value.

Last summer matters came to a head when the management team was unable to tolerate any longer having its pleas for a swift decision on Aer Lingus fall on deaf ears. The members of that management team, headed by Willie Walsh whom I wish well in his new position with British Airways, decided the Government had no intention of acting and they cut their losses and left the company. That management team was central to the revival of the airline and it had the potential to grow the company further. This is not to take from the vital role played by members of the staff of the company who must also be congratulated on the work they did in recent years to turn around the company. However, it is true that the management team provided valuable leadership to the company.

Even the Government's report produced by Goldman Sachs acknowledged the importance of the management team and its significance in terms of ensuring continuity during the sale period. Instead the Government's incompetence has meant that management team has walked away and the company has been devalued by €200 million. This is disgraceful. It is a further example, if one was needed, of the Government's inability to effectively govern and secure the national interest. It has squandered €200 million of taxpayers' money.

The situation gets even worse when one considers the Government's approach towards the development of a second terminal at Dublin Airport. Similar to its attitude towards Aer Lingus, it has procrastinated, hesitated and avoided taking a decision on a second terminal at all costs. When it was pushed into a corner of having to act, largely as a result of pressure from the Opposition, and conscious of the appalling overcrowding developing at the existing terminal, it was forced to make a decision.

The result has been a political fudge by the Government and an embarrassing climbdown by the so-called watchdog of the Government, the PDs. The Government has moved from the farcical position of being utterly incapable of deciding on one terminal to proposing a third terminal or two further terminals. A third terminal, as everyone knows, may never see the light of day, but at least it has the appearance of the PDs having gained a crumb from the Fianna Fáil master table. Nothing could be further from the truth. The PDs have promised competition at the terminals, in the aviation sector and in public transport, but three years on we have not seen a shred of competition.

The PDs have rolled over to Fianna Fáil, whose agenda is to appease the constituents of north Dublin. No one can argue that Dublin Airport has a much wider remit. It is a vital piece of national infrastructure and is a crucial generator of economic, business and tourism revenue. The decision on the terminal should have been decided in the national interest, with a fair and rounded consideration of all the issues. This did not happen. We have had a retention of the status quo and no prospect of real competition at the airport.

However, what concerns me most is the decision to locate a second terminal on existing Dublin Airport Authority lands. In my view and that of my party, this is a wrong decision. Report after report has come out against such a measure. Such reports include those commissioned by Fingal County Council and the Dublin Airport Authority, which did not favour siting a second terminal on Dublin Airport Authority lands. The reason is simple. The Dublin Airport Authority sites available are too constrained and do not have enough capacity to build the terminal we need. If a second terminal was built on Dublin Airport Authority lands, it would run out of capacity in a short period and we would be back to the current position at the airport, which is one of chronic overcrowding which poses a safety hazard.

Passenger numbers at Dublin Airport are expected to rise to more than 20 million this year alone. I do not see the value in building a second terminal which would cater for only an additional 10 million passengers. If the terminal is not completed until 2010, we will be well on the way to reaching that figure before it opens, given that passenger numbers at the airport have grown by more than 8% in the first quarter of this year alone. Passenger numbers at the airport are rapidly increasing. We need a solution to address provision for such growth, rather than a half-hearted approach to dealing with this issue.

We should adopt best international practice in our development plans for a second terminal. Best practice for the siting of new terminals indicates that they should be on a greenfield site which allows for future expansion. We are pitching our sights too low. We need to plan for at least 40 million passengers at Dublin Airport. We are all too aware of the failure to estimate the growth in traffic, particularly on the M50. We are aware of what has happened on that motorway. The congestion on it is a nightmare for motorists. We are faced with funding the upgrade of this motorway which it is estimated will cost €500 million.

The Minister said that a group will be established to oversee the advertising of the sale of Aer Lingus, securing the best deal for the company and selecting the most appropriate transaction mechanism with regard to key issues, including the price achievable. The Minister also said that the open skies policy could have a big impact in opening up more routes. Under the bilateral agreement with the US, we are currently only flying to New York, Boston, Chicago, Los Angeles and Baltimore. Will a decision on the open skies policy be made before the sale of Aer Lingus or will all these details be taken into account by the review group being set up to advise on the best possible deal for the taxpayer?