Wednesday, 28 January 2015
Possible Sale of Aer Lingus: Statements
I repeat that I am glad to have this opportunity to address the Seanad on what I know to be a very important matter. I thank everybody for their contributions. I must repeat that I must take great care in what I say at the moment. There are a number of matters that have been brought up about which I am not in position to comment at this time.
Connectivity is a common theme as Senators Darragh O'Brien, O'Neill, Barrett and Whelan have touched on it. The travelling public and the economy have benefited greatly from the very good competition and connectivity provided for air services in and out of Ireland. Maintaining competition and connectivity is a key issue for the Government and will be given appropriate consideration. I note what Senators Whelan and Barrett said about the importance of competition on important routes for our country.
Aer Lingus's Heathrow slots were raised by all Senators. These slots are a right granted to the airline. Airport slots are not owned by airlines as such and are certainly not owned by governments or States. However, at congested airports such as Heathrow, a secondary market has developed that has allowed airlines to trade slots with each other to meet their changing business needs. On this basis, such slots are very valuable. In respect of any potential disposal of slots by Aer Lingus, a specific mechanism was built into the company's memorandum and articles of association at the time of the initial public offering. It is very important to be clear regarding what those conditions are.
Where a resolution by shareholders is called for on a slot disposal, the voting threshold to prevent such disposal must be greater than the percentage of the company shares held by the Minister for Finance plus 5%, or 25% if greater. In other words, with the current State shareholding of 25.1% that threshold is 30.1% of the votes cast. The ability of the State shareholding to block a disposal of slots is therefore not guaranteed under the existing mechanism. Furthermore, the mechanism relates only to a proposed disposal of slots. Aer Lingus does not require any shareholder approval to change the routes for which it uses those slots. As all Senators have said, connectivity remains critically important for Ireland as an island nation. Heathrow remains a very important hub for connectivity purposes, but as it becomes more congested other hub options are becoming available. In addition, the number of destinations that can be reached directly from many of Ireland's airports has increased over the years.
The State retains a significant but nonetheless minority shareholding in Aer Lingus with just over 25% of the shares. The Government does not control the company, nor does it appoint the chairman or a majority of the board members. In 2012, the Government included the shareholding among the assets to be sold under the State assets disposal programme. However, the Government agreed that the shareholding would only be sold when market conditions were favourable and if acceptable terms and an acceptable price could be secured. Such circumstances did not arise during the period of the EU-IMF programme and the State has remained as an active shareholder in the company. Following a third hostile bid for Aer Lingus by Ryanair, the Government indicated in late 2012 that it would not be prepared to sell the shareholding in circumstances which could significantly impact on competition and connectivity in the Irish market. The previous two takeover bids were opposed by the previous Government on similar grounds. Such considerations would also be foremost in our minds in the Government's consideration of this matter.
NewERA has conducted a procurement process for both financial and legal advices to help the steering group in its work. This is a specialist and complex area of work and the aviation industry is by its nature a global business. Given the importance of the matters at stake, it is important that the Government has the best advice available during this process. I understand that the contracts for this engagement have not been fully signed up by all parties but I believe the engagement process will be confirmed later today. Some of the names have been reported in the media. Credit Suisse and IBI Corporate Finance, which is part of the Bank of Ireland Group, are the selected financial advisors and McCann Fitzgerald is the selected legal advisor.
As I said at the outset, I must be constrained in regard to how I can refer to this matter. What I wanted to do at the earliest point of convenience to the House was attend to outline the framework within which this matter has been dealt with previously so that all Senators can be clear about the care with which I am dealing with this matter and also on the way in which it will be treated.