Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

I thank the Senator for raising this matter in the way he has today and in recent weeks. I am constrained in my ability to respond to a number of the points put to me by him. He is now used to this refrain, but because a takeover period has been declared, I am restrained in responding to some of the more detailed points made. I wish, however, to frame what is happening in the context of the development of aviation and aviation policy. These are matters in which the Senator is a genuine expert. As I have outlined from the very start of the process, connectivity and the future of Aer Lingus are important issues in which there is a great deal of public interest which has been heightened since the first proposed offer for Aer Lingus from IAG three months ago. I last addressed the Seanad on this matter on 28 February, but, as I have said, I am constrained in what I can say.

The Senator has spent a good part of his successful career as an economist championing the merits of market forces over Government intervention, particularly in the aviation sector. His work has highlighted the benefits of applying the so-called invisible hand of the market to previously State-dominated sectors such as aviation and his research has provided ample evidence during the years of the failures of State intervention in the market in Ireland and abroad. On the other hand, his work has also highlighted the benefits market liberalisation has brought as a whole. The aviation sector was a good case study for the Senator to have chosen. It is one of the best examples of the benefits that accrue when a monopolistic, State-dominated industry is gradually opened to competition. An important part of that process has been the reduction of State ownership in the sector. Most European states have now divested themselves of airline shareholdings and, in some cases, the state-owned airline no longer exists. However, there are still some significant state shareholdings such as our own in Aer Lingus.

The first significant deregulation of aviation took place in the United States. Since 1992 the European aviation market has been fully open for all EU airlines. It has been a genuine win-win for all concerned. Consumers, airlines and the wider economy have all reaped benefits in increased routes and connectivity and the significant lowering of prices for consumers. The Senator pointed to the issue of regional connectivity in the United Kingdom. The whole point of the open market is that any such gaps should be quickly filled by competitors. I suggest to the Senator that Aer Lingus's strategy of bringing traffic from UK regions through Ireland on transatlantic routes is a good example of this approach.

In terms of the structure of the airline industry, the opening up of the market has led to two trends. First, new operators such as Ryanair have expanded to become truly European airlines. Second, among legacy carriers, a process of cross-border consolidation has led to the emergence of three main multi-airline groups in Europe - IAG, Lufthansa and Air France-KLM. When Aer Lingus was State-owned, as the Senator is aware, it had to be heavily supported by the taxpayer on a number of occasions. That option is no longer available, which is partly why the State chose to sell its majority shareholding in 2006 in order that it could have access to capital to fund its growth. The company has had many ups and downs, but in recent years it has returned to profitability. That is the reason I wish to reiterate to the Senator that the Government's underlying position on its shareholding is that it will not be sold unless the terms of the sale are satisfactory to the Government and an acceptable price is secured.

Legitimate concerns have been voiced by many people, including the Senator, about lAG's proposed offer and the Government has outlined the details and clarification it needs from IAG in that regard. The interdepartmental group has continued discussions with IAG. I have made it clear that I wish to see this matter brought to a conclusion within a number of weeks. The ongoing engagement with IAG is taking place in that context and my representatives and I are fully focused on that objective. The outcome of this work will be examined very carefully by the Government against a set of public interest criteria before making any decision. Connectivity, including connectivity to the regions, and employment are exceptionally high among these criteria, as I have outlined on many occasions. I welcome the opportunity to respond to the Senator on this point and look forward to continuing to do so.