Seanad debates

Thursday, 2 December 2004

11:00 am

Photo of Martin CullenMartin Cullen (Waterford, Fianna Fail)
Link to this: Individually | In context

I am pleased to have this opportunity to update the Seanad on developments in Aer Lingus. Before I outline the current position relating to Aer Lingus, let me refer briefly to past performance.

Aer Lingus was for many years, and especially in its early days, the main provider of air access between Ireland and the rest of the world. It opened Ireland to the world and, through its efforts, it led the way in selling and promoting Ireland, making it the major tourism destination it is today. While that role is no longer exclusively filled by Aer Lingus, it is still a very important player in providing links to key destinations for business, tourism and trade. This is particularly so on the transatlantic routes. I understand that today there are more than 90 airlines providing services to Ireland. This clearly demonstrates the changes in the market over the years both in terms of overall capacity, range of services and the level of competition.

Aer Lingus has survived a number of major crises in its history and has had a number of survival plans. All resulted in the airline surviving to fight another day, very narrowly in 2001 as the Leader of the House will vividly recall, and in 1981 and 1993 with help from the Exchequer. Survival was only possible through the combined efforts of board, management and staff.

The history of Aer Lingus clearly demonstrates the massive challenges in the sector and the ongoing need to reposition and change in response to these changes. It is imperative that airlines try to anticipate and plan for those changes over which they have some element of control because, as has been clearly demonstrated, there will be many events impacting on performance such as terrorist attacks and global downturns over which airlines have no control.

From an operational point of view, Aer Lingus has been performing well this year in a difficult climate for aviation. However, given that this is a sector where nothing can be taken for granted and a good year can quickly be followed by a disastrous one, it is vital that there is ongoing focus on ensuring the success of the airline.

Globally, the aviation sector is in serious difficulty. Very few airlines are making profits. Aer Lingus is one of the few traditional airlines who will return a profit this year. The US industry is in turmoil with many of its largest airlines either bankrupt or close to it, despite significant Government assistance. In Europe, Olympic, Alitalia and Swiss Air are also in severe financial difficulty. Meanwhile, the competitive pressures grow with the ongoing growth of the low fares model and increasing oil prices. All this clearly demonstrates the myriad challenges facing airlines as they attempt to remain viable.

Turning now to recent events, I want to refer to the resignation of the three senior managers in Aer Lingus — the chief executive, chief operations officer and chief financial officer — which will take effect from May 2005. I have already placed on record my thanks to the three executives, Mr. Walsh, Mr. Kearney and Mr. Dunne, for their work and commitment over the past three years in conjunction with the board and staff. That work has resulted in the profitable and successful airline we see today.

Of course, the chairman and board of Aer Lingus are charged with ensuring the ongoing orderly management of the business and I have every confidence in them fulfilling this role, notwithstanding these resignations. Resignation of top management is nothing new in business, nor is it the first time this happened in Aer Lingus. Clearly, the board will ensure replacements for the top management team are recruited as quickly as possible. It would be preferable if such replacements could take office before next May.

I met the acting chairman, Mr. John Sharman, on 18 November 2004 to discuss this matter and clarify the arrangements for the replacement of the three senior executives. In that context, the board of Aer Lingus at its meeting on Monday last, 29 November 2004, decided to commence the process of recruiting a new chief executive by establishing a sub-committee comprising the chairman and two other non-executive directors which is charged with identifying and recommending to the board the appointment of a replacement chief executive. In addition, all of the three resigning executives confirmed to the board their full commitment to working with the airline to ensure a smooth transition to their replacements.

I make it clear on behalf of the Government that the recent developments will not deflect any of us from the necessary measures that need to be implemented in respect of Aer Lingus at both the operational and strategic levels. By the operational level, I mean that it will certainly be a matter for the board, management and trade unions to work through the implementation of the business plan by direct engagement with staff representatives and, where appropriate, with the assistance of the State's industrial relations machinery. It is therefore vital that the current engagement between management and staff continues to a successful conclusion.

As I stated, it should be clear to all that in the airline business in particular, companies must be continually prepared to adapt to the rapid changes that are now a standard feature of the commercial aviation environment. Simply put, fares are continuing to fall in the aviation market and if the airline is to compete in this marketplace, its costs must also fall.

This business plan, which covers the period 2004-07, was approved by the board of Aer Lingus last July. It is a growth plan and will deliver significant increases in passenger numbers based on average fares continuing to reduce year on year over the period of the plan. However, in order to support lower fares, it also involves a range of cost-cutting measures across the company including approximately 1,300 redundancies over the next three years. Approximately 1,600 staff have expressed interest in the scheme and I understand that, by the end of the year, approximately 500 will have left the company.

Implementation of the plan is crucial so the airline can position itself to respond in a timely manner to changing marketing conditions and to take advantage of future growth opportunities so as to ensure its viability in the future. I understand that in addition to commencing the recruitment process for a new chief executive, the board reiterated the need for the complete and early implementation of the business plan to address competitive pressures and build on progress to date. In addition, it approved a challenging budget for 2005, consistent with the implementation of this plan.

Turning to the strategic issues, I am determined to bring clarity as soon as possible on the key strategic issues which are unresolved at present. These are, essentially, the Government's perspective on the future ownership of the airline and the airline's ability to grow its services across the north Atlantic. This clarity is essential so that the airline has maximum freedom and flexibility to meet the challenges ahead and can grow and prosper into the future, thereby maximising its contribution to the economy. This can be done in terms of the sustainability of jobs in the airline itself and indirectly through the stimulation of the tourism and business sectors of the economy.

It is important, therefore, that the Government clearly outlines its position on the future of Aer Lingus as soon as possible. In this regard, the House will be aware that my predecessor was in the process of finalising his position on the options for the future of the company when advised of a request by senior management in Aer Lingus last June for permission to develop an investment proposal for the company. Consent to that request was not given and the request was subsequently withdrawn on 4 October 2004.

The Government subsequently established a Cabinet sub-committee to examine all the issues relating to the future of Aer Lingus and report back to Government as soon as possible. The Cabinet sub-committee decided that work on future options would continue with advisers, as necessary, and that the result of that work would be considered by the committee. Goldman Sachs was then engaged by my Department to provide advice and assistance regarding the future of Aer Lingus. This report, which was received on 6 October 2004, was considered by the Cabinet sub-committee at its meeting on 22 November following its review by relevant Ministers and Departments. It was recognised at that meeting that decisions on the future ownership should be made before Christmas in the interest of the airline and all its stakeholders. A further meeting of the committee will take place on 9 December 2004.

Prior to any final Government decision, there will be engagement between the Department of Transport and the social partners on the future of the airline. The House will be aware that the Goldman Sachs report was published by my Department on Tuesday last, 23 November 2004, with copies of the report laid in the Oireachtas Library, as well as being made available on my Department's website.

As those who have read the report will be aware, it summarises the global aviation market, the regulatory environment and Aer Lingus's history and current operation. It then moves on to Aer Lingus's funding requirement and capital structure. It identifies as a key issue the availability of capital in order to enable the airline to compete on an equal footing, pursue expansion plans and withstand external shocks. Moreover, Goldman Sachs stated that given the cyclical nature of the industry, access to equity capital is an important mitigant of financial risk. The report goes on to review the status quo, the implications of change with regard to strategic issues and the various ownership structure alternatives under complete or partial divestment.

The issue of funding for future growth is a major factor for consideration in any decision on ownership. As stated, this is clear from the Goldman Sachs report. A major issue for any airline is the upgrading and replacement of aircraft. Aer Lingus is funding the upgrade of its short-haul fleet from within existing resources, but this is of course based on meeting performance and profit targets, as set out in the business plan. In addition, the airline is currently examining its long-haul fleet requirements and expects to complete a proposal in the coming months which will have to be approved by my Department and the Department of Finance. Pending the outcome, the company has confirmed to the Department that the airline will require equity funding to replace the existing long-haul fleet and to support future growth.

I am aware of the arguments in the public arena in favour of the State investing in Aer Lingus and confusion over whether this would be allowed by the EU Commission. I want to clear up any misunderstanding on the subject. Under EU state aid rules, the Government could make a case under the market economy investor principle for an equity investment in Aer Lingus when the company is performing well and making profits. In all likelihood, however, there would be opposition from other airlines alleging state aid and a likely investigation by the European Commission before approval for such an investment would be forthcoming. On the other hand, the State cannot invest under EU state aid rules when the airline is in crisis, even if it was so disposed. Consideration of a State injection would have to take account of other competing demands such as in the areas of health, education and transport.

It is undoubted that concerns exist in regard to strategic issues in the context of the State exiting from ownership of Aer Lingus. These concerns relate to issues such as the Aer Lingus brand, direct services to and from Ireland and the slots at Heathrow. I assure the House that all these issues will be addressed in the context of finalising the Government's position on the future ownership of Aer Lingus.

I am also aware that increasing the commercial opportunities for Aer Lingus in terms of services between Ireland and the US is an important element in the overall strategic future for the airline. Aer Lingus has stated it could double traffic on US routes within a three to five-year period if the market is opened up. Currently, Aer Lingus can only operate scheduled services to five US points under the bilateral agreement, namely, New York, Boston, Chicago, Los Angeles and Baltimore. This restriction, which has been in place for many years, is the response of the US authorities to the requirement in the bilateral agreement that all airlines serve Shannon as often as they serve Dublin.

Addressing this issue involves making adjustments to the bilateral aviation agreement between Ireland and the US. In doing so, we must seek to secure the best outcome for Aer Lingus, our national tourism industry, Shannon Airport and the Shannon region. In particular I am conscious of the fact that the new board of Shannon Airport is now required to produce a business plan for the airport and that clarity on future transatlantic aviation policy would be very helpful to that business planning process. Expanding scheduled services across the Atlantic is of great importance to the growth of Irish airlines and Irish tourism, as well as for inward investment and trade generally.

Negotiations between the EU and the US on an aviation agreement which would bring in open skies across the Atlantic are set to recommence early in the new year. However, it is by no means clear how long these multilateral negotiations will take. In these circumstances, officials from my Department will meet the US authorities in the coming weeks for exploratory discussions.

My focus is on ensuring that Aer Lingus continues to have a viable future with the maximum number of sustainable jobs. It behoves all of us to work together to achieve this objective in this vulnerable and difficult global sector. The Government will endeavour to move forward in consultation with the social partners as soon as possible.

Photo of Paddy BurkePaddy Burke (Fine Gael)
Link to this: Individually | In context

I welcome the Minister to the House and wish him well in bringing a speedy conclusion to the serious situation involving Aer Lingus. The Minister's speech can be summarised in his comments on two issues. He stated:

A major issue for any airline is the upgrading and replacement of aircraft. Aer Lingus is funding the upgrade of its short-haul fleet, all from within existing resources, but this is of course based on meeting performance and profit targets as set out in the business plan. In addition, the airline is currently examining its long-haul fleet requirements and expects to complete a proposal in the coming months which will have to be approved by my Department and the Department of Finance. Pending the outcome, the company has confirmed to the Department that the airline will require equity funding to replace the existing long-haul fleet and to support future growth.

The Minister went on to state:

There is no doubt that there are concerns about strategic issues in the context of the State exiting from ownership of Aer Lingus. These concerns relate to issues such as the Aer Lingus brand, direct services to and from Ireland and the slots at Heathrow.

The problems at Aer Lingus are summarised in those two paragraphs. However, the Government has caused many of the problems by its inactivity in this area and the future of Aer Lingus has been severely jeopardised by the Government's ineptitude and incompetence. I make no bones about laying the responsibility for endangering the future of Aer Lingus squarely at the door of the Government.

Since this Government first took office in 1997 it has shifted from one position to another regarding Aer Lingus while steering clear of producing any viable proposals and development plans for the airline. All the current talk about the need for the Government to take a decision on whether the airline should be privatised is old hat. This has been announced at least three times since 2000 and nothing has happened.

One can go back even further. I have a statement from the then Minister for Public Enterprise, now Leader of this House, Senator O'Rourke announcing in December 1999 that, "the Government has given approval for the flotation of shares in Aer Lingus". Even as recently as last year, the passing of the Aer Lingus Act 2003 provided for the private issuing of shares in the company in addition to allowing for workers to obtain 14.9% of shares in the airline once the company has moved towards privatisation. It would appear that the decision to privatise at least a portion of the airline has already been taken by the Government, yet in its now typical fashion it is creating the appearance of being proactive and seizing the initiative when in fact it is merely rehashing old announcements. The dithering of this Government over Aer Lingus has reached epidemic proportions.

One of the worst outcomes of this inaction by the Government has been to lose our State airline its highly successful management team, headed by Mr. Willie Walsh. In co-operation with the staff and unions at Aer Lingus, the management team did a fantastic job in turning around the airline's fortunes from a company about to go under to an airline which is now one of the most successful carriers in Europe, the envy of many in the aviation sector.

The management team worked tirelessly to achieve this feat. It is less than three years since Aer Lingus faced a debt of €150 million while today it is heading for a profit of over €100 million. This is an extraordinary achievement. However, it is clear that the management team got sick of requesting the Government to take a decision on the airline's future and became increasingly frustrated by the wall of silence it met from the coalition partners on every occasion. In the end, the Government's inaction appears to have become too much for the management team and eventually the members walked away. Their decision to leave is more than just about losing an excellent force for progress and change at the airline since the loss of the management team is estimated to have knocked up to €200 million off the value of the airline. That sum, money badly needed in other areas of Irish society, is lost to the ordinary taxpayers of this country.

In addition to this significant loss in value to the airline it is likely that there will also be a long delay of up to two years in updating the airline. Time will be needed to acquire a new management team and allow it sufficient time to bed down before any outside investors would have confidence in the new management team and would be willing to invest in the airline. By driving out the successful management team, this Government has done what it had always intended to do, namely, to stall a decision on the future of Aer Lingus until after the next general election in 2007.

The total funding required by the company is more than €1 billion. Even the Goldman Sachs report has pointed out that maintaining the status quo is not a viable option for the company. The extent of the finance required effectively rules out the possibility of the State providing it, particularly when one considers the need for increased investment in areas of greater priority such as our health and education services. Regardless of how greatly investment of this level would stretch Exchequer finances, I am far from convinced that the EU would even permit the State to invest in the company. We could still find ourselves coming under the scrutiny of EU competition rules, as is currently the case with the Italian state airline.

The Goldman Sachs report, while setting out the range of options which could be availed of by the Government, and while not coming down conclusively in favour of any one option, appears to favour the IPO or initial public offering. Fine Gael supports such an option and will support a limited sell-off of the company to raise private funding for future growth, with the State retaining a significant stake in the company that would protect our national strategic interests yet remain attractive to outside investors. We remain confident that Ireland's strategic interests in terms of maintaining key routes into and out of Ireland, the transatlantic routes, the slots of Heathrow, the maintenance of key areas of importance to Ireland in terms of interconnectivity with the US and Europe, the needs of our business community and the continued success of our tourism sector can be retained. It is clear that mechanisms can be tied into any flotation, which will allow this to be the case. In addition, as the Goldman Sachs report notes, if the Government retains a shareholding of above 25%, the State can be assured of continuing to exert influence over the keeping to the fore of the national strategic interests.

Time is of the essence if Aer Lingus is to retain its strategic and economic position of strength and if it is to continue to grow and expand. I call on the Government to fulfil its commitment and to announce a definite decision on Aer Lingus before Christmas, as promised. I hope the Minister will stick to the deadline he set in the past week or so. Once this decision is declared, the Government must move quickly to see it is carried through. If the Government fails to do this, its inaction will threaten the future of this company. This would not be acceptable to the travelling public or to the taxpayer.

I was disappointed by the Taoiseach's comments about the chief executive, Mr. Walsh, and the management team of Aer Lingus to the effect that they were out to make a quick buck. I do not know how he could say that when he had not met or spoken to the management team of Aer Lingus. However, he used the privilege of the Dáil to say that this was all about the management team of Aer Lingus making a quick buck for itself.

The management and the staff of Aer Lingus have done a wonderful job in turning the airline around. Each day we see airlines going under but Aer Lingus is a credit to the management and staff who have turned the company around. Costs have been cut and there have been redundancies but the airline has no other way to cut costs. For this company to survive, it must grow and expand and to do so, it needs an immediate input of cash, whether from the State or from a private source. That is of the essence.

Mr. Walsh spoke about he would like to grow the transatlantic routes. It is very important for this country that there is competition on the transatlantic routes. I have no doubt if they were opened, they would bring a huge number of tourists from the United States. Considerable finance is required to do that, which is one of the problems. The chief executive of Aer Lingus, Mr. Walsh, recognises that but obviously his message did not get through to the Government. If it had got through, the Government would have acted sooner.

This Government has dithered on the issue of Aer Lingus. I am very disappointed, as are the people in Aer Lingus, that the Government has not taken a decision on the future and stability of the airline. I call on the Minister to stick to the deadline he set. The airline is in crisis. It has no chairman, although it has a vice-chairman, and its management team has tendered its resignation. For investors to have confidence in a company, it needs a chairman and a management team. However, the Government has left the company without a chairman and with a management team which has tendered its resignation. It is now looking for investors. The position in which Aer Lingus finds itself is quite serious. The management and staff have played their part and it is now up to the Government to act. I call on the Minister to act with haste.

12:00 pm

Photo of Timmy DooleyTimmy Dooley (Fianna Fail)
Link to this: Individually | In context

I welcome the Minister. It is tremendous that he is available to us at what is a very critical juncture in the life of Aer Lingus and that we have the opportunity to discuss the options and issues relevant to the company and to feed into the thought process of the Cabinet. From time to time, we are somewhat critical of Ministers for not listening to us enough and it is good the Minister is with us today.

There is no doubt Aer Lingus is performing very well, despite Senator Paddy Burke's comments on the inaction of Government. As the Minister said, over the past three years, Aer Lingus has come back from the brink on a number of occasions. The most critical time Aer Lingus faced in its entire history was that following 11 September 2001. The actions of all concerned at the time to bring the company back to profitability were a true sign of the commitment of not only the management, the board and the workers, but of Government and of its policy to allow the management team to operate as it did in returning the company to profitability.

The company has been doing particularly well. This year it will return a profit in excess of €90 million, which is exceptional when one considers that the aviation sector worldwide is in turmoil, as the Minister pointed out. Many of the major flag carriers and best known brands in the United States are operating under chapter 11. They are on the verge of bankruptcy and would be bankrupt were it not for the protection of the Government and the courts of the United States. It would be very wrong to castigate Aer Lingus and the Government for policies which have been pursued. In fact, the Government should be congratulated on the work it has done in this regard.

It is important a review takes place on the future growth and development of Aer Lingus, on which the Minister is working. The business plan in place is aggressive in terms of its targets for the future. There is a requirement in regard to funding and the Minister has rightly taken a very cautious approach to making a decision. Senator Paddy Burke is right that it is important a decision is made but it is also important the right decision is made. The right decision cannot be based on a relatively quick analysis of the issues as there are some very strategic issues at hand about which the Minister has spoken. It is not only about looking at the asset value. A number of commentators over the past six to eight weeks made statements that the Government's inaction had written value off the airline. It is not about writing value off the airline, it is about protecting a strategic national asset.

Aer Lingus is strategic for the most basic of reasons. This is an island nation and we need direct connections and access to markets for tourism, as the Minister said, for trade and for general business. That is critically important. It is a factor highlighted even more clearly by decisions taken by a previous Administration in regard to Irish Shipping. At present there is the potential for a crisis in the export of live cattle. It is a particularly difficult trade and later this month P & O Ferries will pull out of the Rosslare to Cherbourg route, making it virtually impossible to ship live cattle to the Continent. We can see the consequences of not having State involvement in shipping. It is abundantly clear from that example that there is a need for State control over Aer Lingus, particularly since so many other airlines are in financial trouble and there is a recognition worldwide that there will be some level of consolidation. If, at some stage in the future, Aer Lingus was totally privatised, none of us would want people in some boardroom in Chicago or Boston deciding it was no longer necessary to have direct flights to Ireland and that people should travel through London, Paris or wherever. For that reason, the strategic value of Aer Lingus is critical and should be maintained when the Government decides what the future ownership of the airline will be.

The Goldman Sachs report set out a series of options and carries out a fairly decent analysis of the position of the airline sector and of Aer Lingus. From my reading of it, it did not seem to come down in favour of one option in a forceful way. It did not make it easy for the Minister or for the Cabinet sub-committee in terms of identifying one option. The critical option is for the State to retain an interest in the airline to protect a vital national interest. It will become an even more vital national interest if the expected consolidation in the aviation industry takes place. That will happen as sure as night follows day because no matter how much state support the American Government continues to give to its airlines, the crazy situation that exists cannot continue for very long and similar issues are arising for European airlines.

At times, I have been critical of Aer Lingus and the way in which it has set about managing its business. To some extent it has neglected Shannon Airport, the mid-west and the entire western region by failing to recognise the existing key airport infrastructure. Ryanair has grasped that nettle and has shown tremendous vision and confidence in the region. That company has recognised that there is a capacity to use Shannon and the west generally as a low-fares base for bringing a large number of passengers from the UK and Europe to Ireland. That development is part of a tourism promotional programme. The importance of Ryanair in the market as a market maker has forced Aer Lingus to compete for business. Ryanair has sharpened the attitude of Aer Lingus by ensuring that it is competing to a best practice model throughout the world. Marketing Ireland is not the core work of Ryanair but the net result of increased competition in the domestic airline industry is that the level of tourism being generated for Ireland will increase dramatically. The kind of numbers Ryanair is projecting for the mid-west region as a result of the announcement of new routes on Monday this week will result in an additional 1 million passengers coming through Shannon in the next year. That figure will rise to 2 million within five years, which represents a tremendous increase in passengers compared to current figures.

Shannon Airport's new board of directors must be congratulated on the work they have done in such a short period to encourage this new business. There is no exclusive deal with Ryanair; it is open to every airline, including Aer Lingus, that is prepared to make the commitment Ryanair has. I have been critical of Aer Lingus because deals like the one at Shannon could be availed of by Aer Lingus. In its past business plans, Aer Lingus set about halving its workers at Shannon Airport but there was absolutely no need for that. Ryanair is proving that the business is there so Aer Lingus will have to change its mindset which focuses on the east coast and the transatlantic routes.

For far too long Aer Lingus has fished where the large concentration of business is, rather than doing what other airlines have done in trying to create and develop a market. Ryanair, easyJet and other low-cost carriers have proved that if one is serious about business, cutting costs and providing imaginative routes, the customers will follow. That is the kind of business Ireland needs. It is not just about keeping airports open but also about getting additional tourism. Ryanair is saying that 80% of passengers will be inward bound, which is of great importance for Ireland.

Much has been said about the management's role in the survival of Aer Lingus, which is correct. There is no doubt about the tremendous work that has been carried out by Mr. Willie Walsh and his management team. It must be recognised, however, that the unions and staff generally have made a significant contribution to that survival plan not alone through accepting pay cuts, but also through changes in work practices. Many people might say it is their duty to do that but their efforts should be recognised along with their capacity to ensure the continued growth of the airline.

I welcome the Minister's swift decision on the recruitment process. As soon as he realised the Aer Lingus management team was not for turning, he called in the acting chairman and insisted that the process should begin immediately. Some concern has been expressed, however, about the management team and the fact that they are continuing to run the company for the next six months. The Minister should consider appointing the acting chairman, or one of the directors of the board, to act in an executive role in the intervening period to protect the interests of the company. That is not to suggest that Mr. Walsh or his management team would in any way work against the company but it would give greater confidence if a member of the board sat in some kind of executive position as an acting chief executive officer until such time as a successor is found.

Senator Paddy Burke said that Aer Lingus is rudderless at the moment but nothing could be further from the truth. The acting chairman is an exceptionally experienced individual in the aviation sector. He has tremendous knowledge and brings a great depth of international experience to the board at a time when international markets are critical to the future growth and development of Aer Lingus

The Minister made some important points about the transatlantic business and the bilateral arrangement. There is considerable concern in Clare and the mid-west about the future of the bilateral arrangement. Most people accept that an open skies policy is coming but we are concerned about the rate of change. We have great confidence in the Minister and his negotiating team to put in place a package of measures to ensure the future growth and survival of the transatlantic business. That business is hugely important to the west of Ireland. Statistics show that where restrictions are removed, airlines that currently fly into a number of airports may ultimately re-route to one destination. I have more confidence than others, however, because County Clare, the mid-west and the west generally constitute a destination. Statistics from the US east coast show there is a critical demand for such services for eight to ten months per year. We are mainly concerned about the winter months. I hope that with some element of Aer Lingus being retained under State control, arrangements can be put in place to ensure we have direct access all year round. That is critical from the tourism viewpoint to some extent, but it is more critical for local business.

Shannon has the biggest industrial park outside Dublin so it is crucial that business people who have invested there should have confidence that direct air connections to and from Shannon will continue. I have spoken about this matter to the Minister on a number of occasions and he is acutely aware of the issues involved. Hopefully a package of measures can be put in place in the short term on bilateral arrangements to allow Shannon Airport to move from being mainly a transatlantic destination. It now has the capacity to grow in other directions due to the European markets that are opening up through Ryanair and, hopefully, through other low-cost carriers, including Aer Lingus. An open skies arrangement will be foisted upon us at some stage through the negotiations between the US and the EU, but in return for the commitment of Aer Lingus, being controlled or owned to some extent by the Government, there should be an assurance that direct daily flights will continue to the mid-west region.

The Shannon area comprises a tremendous piece of infrastructure for the aviation industry. Unfortunately, over the decades, roads in the region have suffered from a lack of investment by successive Governments. However, the construction of the Ennis bypass is a critical development in this regard. It is under way and is progressing well. Another key infrastructural element involves opening up access from Galway city to Shannon. The Minister is aware of the proposals for the N18 to ensure that Galway city is within one hour's journey of an international airport. Currently, people in Galway find it easier to travel to Dublin Airport than to Shannon Airport. That is a crazy situation when one considers we are trying to take pressure off the east coast. It is bad enough to have the M50 clogged up with people getting to or from work in Dublin or travelling to the airport, but people from the west and midlands should be facilitated to fly via Shannon Airport. If the N18 development can be opened up it would be very welcome.

A rail spur would be another key infrastructural development of major benefit to Shannon's future growth. Proposals in this regard have been circulated to the Department which has asked Iarnród Éireann to examine the feasibility of such a project. We must be imaginative in this respect.

Management at Ryanair recently announced that the airline envisages 2 million passengers travelling through Shannon within five years. Hopefully, other airlines will follow. In this context, the numbers already there are blown out the window. There is now a demand and a sustainable business case for a rail link to Shannon Airport. I thank the Minister for his efforts in meeting people from the region in his short time in the Department. This has been significant in bringing all players to the table and will ensure there is an effective outcome that keeps everybody on side.

Photo of Shane RossShane Ross (Independent)
Link to this: Individually | In context

I propose to share my time with Senator O'Toole.

Photo of Terry LeydenTerry Leyden (Fianna Fail)
Link to this: Individually | In context

Is that agreed? Agreed.

Photo of Shane RossShane Ross (Independent)
Link to this: Individually | In context

I sometimes wonder whether Aer Lingus is in crisis. For a company that is earning more than €100 million per year and with prospective earnings of similar amounts next year, it is difficult to paint it as being in a critical situation. Financially, it is not in a critical situation. The crisis is of a different type, which could provoke a financial crisis quickly.

I am not talking about the global aviation sector, to which several speakers have referred. I refer to the extraordinary propensity of employees, from top to bottom, to want to get out of Aer Lingus. Senator Dooley referred to the great strength, ability and talent of Mr. John Sharman, the acting chairman of Aer Lingus. Such a description is undoubtedly correct. However, Mr. Sharman does not want to stay in Aer Lingus. He wants out very quickly. Moreover, successive Ministers have been unable to find any suitable replacement for Mr. Sharman. According to reliable reports, Mr. Pat Molloy has turned down the post, as have Mr. Niall Fitzgerald and several others.

The difficulty, therefore, is that there is a chairman who is very able but whose heart and soul is not in the job and who wishes to exit. It is also the case that at least 1,600 members of the workforce have expressed an interest in exiting. I am diluting the probable figure in this regard as far as I can. Likewise, the chief executive officer, chief operations officer and finance officer want to leave. Why do 1,600 members of the workforce and the three talented members of the top management want to go? Why does the chairman of a company that makes €100 million per annum want to go and nobody wishes to take his place?

The three executives are tactful and do not wish to be undiplomatic because they will stay in their posts until May. They have a real commitment to the airline and will not do anything to damage it in that period. However, reading between the lines, it is obvious there is one obstacle to the progress of Aer Lingus. That obstacle is the State. This is the reason Mr. Walsh and his colleagues want to leave the airline. I find it difficult to listen to the great tributes paid to Mr. Walsh by those who have provoked his departure. We are good at this type of sentiment in Ireland. Such was evident yesterday in the Dáil where the greatest applause was reserved for the former Minister for Finance, Deputy McCreevy. The loudest applause came from Members on the Fianna Fáil backbenches, the people who most wanted him out. Likewise, great plaudits are given to Mr. Walsh and his colleagues by those who have obstructed his path.

The situation is difficult. We have three committed entrepreneurs who find the State an obstacle to their progress. They have made a significant amount of money and turned around the fortunes of Aer Lingus. However, they now find they will be unable to take the actions they wish in the future. Senator Dooley referred to the situation in Aer Lingus as State control while others have described it as political interference in the commercial process. The two are not compatible.

What approach will we now take? The Minister claims he will make a decision by Christmas. I may be wrong but I feel confident in predicting what that decision will be. It was probably made a long time ago. The Government will decide to retain a majority stake in Aer Lingus but will seek external private investment. There is no mystery in the case. Such a decision has been inevitable for years. The Goldman Sachs report was published in October and it has taken two months for it to be properly considered. The report provided options and the Government will choose the option it was always going to take. It will try to find a chief executive officer who will accept those marching orders. That is a difficult position for any chief executive officer. It is a case of the State directing an entrepreneur from time to time to take actions in which commercial interests are not paramount. This is the reality.

We must ask a question that has not been asked in this House but has been asked regularly elsewhere. Is the concept of a national airline still valid? A national airline is a sentimental and emotional concept that no longer has a place in the commercial world. I understand there is no national airline in the Unites States. I may be incorrect in this but I cannot think of one that qualifies as such. When one refers to a national airline, one is often thinking of a strategic airline. Those in favour of State control of the airline paint a subliminal picture whereby the loss of the national airline will cut us off from the world. There will no flights going out of Ireland for some reason, perhaps because of industrial troubles, a difficult management or bankruptcy of the airline. In this scenario, we will be marooned.

We all know this is not going to happen. Other airlines will fly in and out. We will still be able to travel if Aer Lingus is removed from State ownership. We will not be stuck here together, unable to leave the country or transport goods, in some type of import-export paralysis. This is the nightmare scenario conjured by those who want a national airline to exist under State ownership for completely different reasons. State ownership is promoted because it suits politicians. It is a non-commercial decision. It serves politicians to use the State airline for local political purposes. Politicians play around with the situation of the State airports, the workforce in the airports and the airlines to protect constituency seats.

What is happening at Aer Lingus is simple. The Taoiseach has got involved and is using the airline as a plaything. His purpose is to promote his new and successful agenda, the type of happy-clappy economics to which we have already referred in this House. The Taoiseach's only interest is to save the Fianna Fáil seats in north Dublin. He has established a Cabinet sub-committee, commissioned the Goldman Sachs report and taken various other initiatives. His sole objective, however, is to protect the seats of Deputies Wright, Glennon, Haughey and Callely. Any decisions regarding Aer Lingus will be based on the consideration of holding those Dáil seats in north Dublin. As a result, the commercial mandate given to people such as Mr. Willie Walsh is irrelevant.

Photo of Terry LeydenTerry Leyden (Fianna Fail)
Link to this: Individually | In context

I am afraid Senator Ross's time has come to an end.

Photo of Timmy DooleyTimmy Dooley (Fianna Fail)
Link to this: Individually | In context

The end has come five minutes too late.

Photo of Shane RossShane Ross (Independent)
Link to this: Individually | In context

Can the Minister indicate the type of person he imagines will take Mr. Walsh's job? What qualities will a replacement possess that Mr. Walsh did not, and vice versa? If Mr. Walsh and his crew are fed up with the difficulties in the State sector because the Government is in the way, what kind of man or woman will take on this job? The frustrations felt by Mr. Walsh will be even greater when the Government takes the decision to remain in control and in the way. We will have a chairman who is politically appointed and politically acceptable and who will put through the measures which a political party wants. We will have a chief executive who also fits that bill. Everyone knows the next chief executive will be politically approved and will be acceptable not to the board, which is also politically appointed, but to the Taoiseach. He must have the philosophy which will tie in with the current philosophy of Fianna Fáil. As a result, the commercial mandate of Aer Lingus will be diluted.

Photo of Joe O'TooleJoe O'Toole (Independent)
Link to this: Individually | In context

I thank Senator Ross for sharing his time with me. If the Minister needs a chairman for Aer Lingus I am available.

Photo of Diarmuid WilsonDiarmuid Wilson (Fianna Fail)
Link to this: Individually | In context

Agreed.

Photo of Martin CullenMartin Cullen (Waterford, Fianna Fail)
Link to this: Individually | In context

I will take Senator O'Toole on the advice of the House.

Photo of Mary O'RourkeMary O'Rourke (Fianna Fail)
Link to this: Individually | In context

What about Senator Ross?

Photo of Joe O'TooleJoe O'Toole (Independent)
Link to this: Individually | In context

When the news of the retirement of the three Aer Lingus executives broke, one would have thought only three people were working in Aer Lingus. It is all very well to say Mr. Walsh is a great entrepreneur, as Senator Ross has done, but Mr. Walsh received his training, career, future and everything he has from the public service. He has much to learn about the ethics of good governance. If he had acted as he did in a private sector company he would have been dismissed six months ago. Is it not appalling that the main stakeholder of a company — in this case the Taoiseach — should hear of a management buy-out proposal by his chief executive in the newspapers? This would not be accepted anywhere. Regulators would look very seriously at such a situation.

It is unbelievable that the chief stakeholder should read in the newspapers of a huge redundancy plan which had not been discussed with the Minister or with the Taoiseach. The fact that the three executives announced their retirement in the newspapers before discussing it with their main stakeholders reflects badly on these three men. They might have great difficulty finding employment in the future if this is how they treat their board and their stakeholders. These are the realities of life. Such an operation would not be acceptable in a private company.

The management team did a good job. However, they had the total support of their staff, the Government, the trade union movement and their board. This support was gained following tough negotiations but when given it was total. If one could not do a good job with that level of support one could never do a good job. What management team would have failed in such circumstances? The Minister's predecessors, including the Leader of the House, and previous governments have always been supportive of Aer Lingus.

Seats in north Dublin will not be determined by the ownership of Aer Lingus but by its viability. The days of long principled arguments about whether an enterprise should be in private or public hands have gone. We want a good service where workers are treated well and the State also has its control.

Icelandair is hoarding money at present and is looking for somewhere to spend it. The company has stakes in several FTSE 100 companies and more money than it can handle. Such an airline would look favourably at a possible investment in Aer Lingus. Iceland is a small country with much entrepreneurial zeal. I would not object if the Government attracts private investment in Aer Lingus. I am interested in the "hows" and not in "isms". The world has moved on from there.

I was glad to hear the Minister deal with the question of the replacement of staff. I would also like to hear about the costing of fleet replacement. Like Senator Dooley, I welcomed what the Minister said about transatlantic routes. However, I would be happier to see Shannon opening links to western and eastern Europe. An open skies policy is dependent on the United States Government, which put billions of dollars into supporting its airlines in the last three years. The US Government is notoriously anti-competitive. It has not allowed Canadian airlines to have access to the United States and has brought down the shutters on the steel industry. No other large market in the world has such protectionism. The US Government cannot be trusted to do deals on an open skies policy. I would prefer to see us looking eastward and towards Europe.

It is good that we have Aer Lingus and Ryanair. It should be noted that easyJet is opening new routes from Knock. In this regard I would like to know what deal Ryanair has done with Shannon. Can the Minister confirm that it would be utterly uncompetitive and against European regulation if a part of that deal prohibited easyJet for example, from getting a similar deal with Shannon?

Photo of Martin CullenMartin Cullen (Waterford, Fianna Fail)
Link to this: Individually | In context

I understand that is not the case.

Photo of Joe O'TooleJoe O'Toole (Independent)
Link to this: Individually | In context

I thank the Minister and I am glad to have that clarification on the record. We also need the easyJet service in Ireland.

Aer Lingus is opening European routes on the basis of removing planes from UK routes. The company has a shortage of planes at present. Fleet replacement is crucially important and must happen. The pre-Christmas deadline is an important one and should be met.

Every time Aer Lingus has been in trouble or needed support it has received it. As president of the Irish Congress of Trade Unions I spent many hours negotiating with trade unions and with Government on this issue. I have never seen a time when trade unions, in particular, have not been prepared to take difficult decisions. Credit should be given to trade union leaders who, with great difficulty, convinced their members to accept hard deals. As many as six deals were signed in the past 15 years whereby workers accepted cutbacks, flexible work practices and competitiveness and productivity measures.

I hope to see a bright future for Aer Lingus. The workers will give their total loyalty to the company, as they have always done. The three senior people who have walked away with six months' notice are not loyal to Aer Lingus. They were committed to creating a success, which is somewhat different from creating a success in Aer Lingus. They have not shown their commitment to the airline. They could not have walked away if they had put so much into it and cared so much for it.

Tom Morrissey (Progressive Democrats)
Link to this: Individually | In context

I welcome the Minister to the House for this timely debate. It is timely because a decision must soon be made on where the Government stands on the issue.

A comment recently made by Mr. Willie Walsh at the Joint Committee on Transport finds common sentiment with what the Minister said today. The Minister said the global aviation sector is in serious difficulty. That was Mr. Walsh's opening comment to the joint committee on 6 October last. While Aer Lingus itself may be doing very well, the aviation sector is not. If we look at North America we see the proof of that statement.

The Progressive Democrats believe private equity should be brought into Aer Lingus and that the airline should be allowed seek that equity. This is not for any ideological reason but for strategic considerations. There was a time when the Government needed to become involved in setting up a national airline because others would not do so. There are now many investors who are willing to invest in airlines. They know how the business operates and they know, as Mr. Walsh and the Government have discovered, that it is brutally competitive. No shareholder involved in it can stand idly by or simply be a sleeping partner.

The Government has been a sleeping partner for too long on this issue. We have looked at Aer Lingus in the past two years and felt it has been going very well. While some people believe the task is over, the task is only beginning, which signifies the differences in many of our contributions. While some people believe Aer Lingus has been saved already, it is necessary to continually work at it to ensure its success. To ensure its success, as with Ryanair, it needs a source of equity. In other words it needs money in the bank in the event of a downturn. No Government should give Aer Lingus money for such a purpose. Unlike other airlines, Ryanair has such money, which is why every few months it can forecast a bloodbath in the market safe in the knowledge that it will last longer than any other airline in such circumstances.

Aer Lingus will have more flights through Cork Airport in 2004 than it had through Dublin Airport in 2001, which indicates the job it has done. As Willie Walsh has said, it also shows that Heathrow Airport is not as significant now as it was then because of the number of direct flights from Cork Airport to destinations other than Heathrow. This brings me around to the strategic value of the Heathrow slots. We believe the market will dictate the value of those slots. Those wanting to fly to Heathrow should recognise that a premium will apply and Aer Lingus should be able to charge for that. Passengers will pay one price for flying by Ryanair from Shannon to other regional airports and those wanting to fly to Heathrow should pay a different price, which is how the strategic value of the Heathrow slots will come into the equation.

On the last occasion Willie Walsh appeared before the Oireachtas Joint Committee on Transport I asked him how long he would stay at Aer Lingus. I am not surprised that he departed given that Aer Lingus was crying out for a Government decision. He said he felt he had brought Aer Lingus as far as he could. That meeting only took place one month ago and while people's perceptions and perspectives may have changed in that time, Willie Walsh was getting no political support for the business plan he wanted implemented. Only 12 months ago the Labour Party representative on that committee, Deputy Shortall, asked Willie Walsh when he would have a recruitment drive given that Aer Lingus had been saved. His reply was that he would not be recruiting and would offer another model seeking additional redundancies.

It is demonstrably clear that the old model under which Aer Lingus operated of a national airline to which some people wanted to cling is no longer feasible. Passengers now have a considerable choice of flights from this country and are more willing to fly mainly because of competition that has forced prices down, which is how it will continue. Reform of the aviation sector should not be couched in anti-worker terms. Many people automatically state the workforce must be protected and employment levels must be maintained. The first objective of any successful business is to create customers, from which employment can be created. It makes no sense to start the other way around which some people have effectively demanded. It cannot be a commercial success by starting with a pool of employment regardless of its market.

While Aer Lingus has made huge savings in the past three years, only 20% of these savings came about as result of staff redundancies in that time with 80% coming from other efficiencies in the system. At a Progressive Democrats conference approximately two years ago, Willie Walsh said that Aer Lingus had ripped off its customers for decades because it could afford to do so owing to having no competition. I have asked the unions a simple question, but have been unable to get an answer. Now that Aer Lingus is operating with 3,000 fewer employees, what were those people doing?

We cannot simply look at Aer Lingus from a north Dublin perspective and see it as an employment agency. It must be a service driven customer-focused supplier of aviation services. The management team must be allowed to let it be a commercially focused airline without one hand tied behind its back and Government looking to ensure it has a certain employment level. For too long some of our semi-State bodies have been over-manned and with the cold winds of competition those issues need to be addressed.

The position of the Progressive Democrats is not one of ideology, rather we are pragmatic in determining the strategy we should adopt to ensure that Aer Lingus survives and is strengthened. It can only be strengthened if it has access to private capital. It should not need to go cap in hand to the Government and wait for a decision. Michael O'Leary certainly does not need to——

Rory Kiely (Fianna Fail)
Link to this: Individually | In context

Individuals should not be named as some people might take a contrary view on the matter.

Tom Morrissey (Progressive Democrats)
Link to this: Individually | In context

I am sorry; I should have referred to Ryanair. Ryanair does not need to wait long for a decision as to where it might invest as has been evidenced by its recent announcement with the authority at Shannon Airport. The unbundling of the airport authorities only took place three or four months ago against the wishes of many in this House. We have now seen what competition can do. Competition works and will ensure the survival of Shannon Airport. Competition will ensure that what Senator Dooley and other representatives from Clare want will happen. We will see a rail link and an improved road to Shannon Airport because the customers now exist and these facilities will need to be provided.

Derek McDowell (Labour)
Link to this: Individually | In context

They will need to be provided by the State.

Tom Morrissey (Progressive Democrats)
Link to this: Individually | In context

They could not be provided based on the level of customers now using that airport. Aer Lingus will again need to refocus itself following this week's announcement. Nine additional flights out of Shannon will put further stress on Aer Lingus operating from Dublin. Such are the decisions the management team needs to confront on a daily basis. Until the Government makes a decision, management will be continually frustrated.

The nature of the Government decision will define the types of candidates that will be attracted to replace the current management team. We will obviously have a different type of management team depending on whether it can, unhindered by requirements on employment levels, be a commercially focused airline or be required to work to the bidding of a Government, which can change from time to time and whose Ministers can also change. In a competitive sector where prices are coming down, costs must also come down. In such a situation, a Government by nature has a slower decision making process than a group of shareholders. That is the frustrating thing about Aer Lingus, it has gone so far but could go much further. I appeal to the Government and the Minister to ensure that the decision on attracting the right type of candidate to Aer Lingus is made before Christmas.

The Goldman Sachs report listed options for how the Government should approach this issue. The report was based on the current management team being in place, a demonstration of how quickly things change in the sector. It even suggested that the current management team might be given a share incentive. Aer Lingus is already 15% privately owned by the workforce but people do not see that as privatisation. If 10% or 20% was floated for institutional investors or the public, it would be seen as privatisation. The only way the 15% currently privatised can grow is if the balance of Aer Lingus also grows. It cannot grow under the current model and, therefore, a decision is vital.

The magazine Flight International last week contained an article on the departure of the Aer Lingus management trio. It stated that it has become clear that the trio's future strategy was incompatible with the views of Ireland's left-wing Government.

Photo of Mary O'RourkeMary O'Rourke (Fianna Fail)
Link to this: Individually | In context

The Taoiseach will be pleased.

Tom Morrissey (Progressive Democrats)
Link to this: Individually | In context

It continued that the Government has not got the stomach for the further cost and job cutting envisaged, let alone full-scale privatisation with or without the executives. If that is how others in the sector see us, what type of investors and management will be attracted without a clear decision in the short term?

Derek McDowell (Labour)
Link to this: Individually | In context

We all agree there is a need for a decision. It is now five years since the Leader announced there would be an IPO of Aer Lingus, we have gone through a number of contortions since and we still do not have a final decision from the Government. All of us agree that the delay is damaging the company's market value and the morale of staff and management, who do not know where they or the company will be in a few years time.

Senator Morrissey said that he and his party do not take an ideological approach, although it sounded ideological to me. I am not nervous about being described as having ideological views; I believe it is the role of the State to safeguard certain strategic interests of the State and its people. It is important that we define those strategic interests. I agree with the items mentioned by the Minister when he said that we have to look at connectivity, that we need as many direct flights to as many destinations as possible and serving as many destinations in Ireland as possible, something that is hugely important for business and tourism. We all agree on that. It is also important that we safeguard the Heathrow slots, although I agree with Senator Morrissey that it is less important than it once was.

I do not know why the management team left. We can guess that a Government decision and the botched effort at the MBO had something to do with it. It is important that we get over this and put a new management team in place but we cannot do that until there is certainty about the future. The Goldman Sachs report clearly linked two issues — future capital requirements and ownership. That is fair. It is not so persuasive in suggesting that we need additional equity, that it should come from a private investor or that strategic interests can necessarily be guaranteed by retaining 25% or 25% plus one share of the company.

The past two years were interesting. Previously, I was happy to allow the management of Aer Lingus to make commercial decisions based on the need to maintain connectivity. I was concerned, however, at the dumbing down of the company. Do we want Aer Lingus to be dumbed down? I am not sure we do. The brand commands a loyalty that is extremely unusual in this country, over and above any other State owned enterprise or private company. It evokes a certain pride and loyalty among Irish people that should not be easily discarded because it is of significant commercial value. That loyalty is likely to be diminished if Aer Lingus becomes another Ryanair. The reaction to the decision not to repatriate human remains a few months ago demonstrated it. People felt that it was an insensitive decision and that our national airline should do that sort of job. They also want courier, postal and cargo services to be maintained. There are some who feel there is a need to maintain business services too. Even issues such as the uniform have somehow taken on an almost symbolic importance which should not be disregarded.

We have come to a stage where the low fare airlines, particularly Ryanair, co-exist with Aer Lingus, which is a lesser-frills airline. They do not compete to any great extent except to a few British airports, Paris and Brussels. They have developed niches in the market that satisfy most customers. The new management, however, has driven Aer Lingus into the same market as Ryanair, the low fares market, based on the assumption that customers are only interested in fares and getting from A to B as quickly as possible. That is not entirely the case. There are some customers who like frills such as designated seats and knowing their bags will get from A to B to C without having to pick them up themselves.

Photo of Mary O'RourkeMary O'Rourke (Fianna Fail)
Link to this: Individually | In context

Passengers can never be sure of that.

Derek McDowell (Labour)
Link to this: Individually | In context

There are people who are prepared to pay for those frills. There are two distinct markets which are served adequately by Aer Lingus and Ryanair. I doubt there is room in this country for two directly competing low fare airlines that have no distinctions other than fare. That is what customers actually want, not that we would necessarily be any better off because of that.

The issue of equity is very important. It was possible in 1992 and again in 2001 for Aer Lingus to get through its crises simply because people appreciated that is what they were. Demonstrably the airline was in serious financial difficulty on both occasions and could conceivably have closed.

The problem now is there is not a general acceptance within Aer Lingus that a crisis exists. The workers do not actually see the company is in crisis and who can blame them? The airline has been quite profitable over the past three years and has made a profit every year since 1992, apart from 2001. The need for the dumbing down, redundancies and all of the various changes argued for by management is not clear and neither is the need for equity into the future. The case for this, as I understand it, has been made on three grounds. The first is that the long-haul fleet needs to be replaced. Even if it does need to be replaced, everyone accepts that this will not need to happen until 2008 to 2010 at the earliest. It is dependent, in any event, on a change in the bilateral arrangement with the United States. The immediate need, therefore, for money for fleet replacement is not clear. It is being spoken of as an obvious necessity, but it is not all that obvious.

As I understand it the short-haul fleet, as per the report, is on average just three years old. The peer review highlighted in the report suggests that in fact it is newer than virtually any other fleet owned by the major airlines in Europe. There is no need to replace that in the near future, although it could perhaps be added to. In terms of aeroplanes, therefore, the equity need is not clear-cut. There are basically two capital structure models in play. One is the low fares model, where the requirement appears to be cash rich and perhaps more flexible in terms of responding to crises, different markets, etc. The other is the more traditional model. It is pointed out that if the status quo is opted for and the traditional model for capital structure retained, Aer Lingus will surely have a debt in ten years time, but at a lower gearing level relative to other comparable European national airlines or former national airlines.

The most persuasive reason suggested for equity being required is to confront the possibility of future financial crises. I do not have a crystal ball and cannot say there will be a financial crisis in the next ten years, but one cannot say there will not be either. On balance, I accept there is likely to be a requirement for equity. However, there is not a crisis here. It is not a need that screams out from the paper and is interesting that even Goldman Sachs accepts this is basically the case. If we accept, for the sake of argument, that there is a need for equity, there are a number of different ways it can be done. The one that gives me most concern, to which I am absolutely opposed, is essentially the sale of Aer Lingus to a competitor. If, for the sake of argument, we were to sell Aer Lingus to British Airways, I would bet any money that within ten years the number of directors in Dublin, Cork or Shannon will be greatly reduced and we will find ourselves being routed through some hub in the UK, whether Manchester, Prestwick, Heathrow or whatever. That certainly is not in our interests. A direct sale to a competitor should be excluded absolutely from the start.

A second option, mentioned by Senators Ross and Morrissey, is to basically sell either a majority or minority by placing equity with a private investor. That would bring tensions to bear in terms of the role and the mandate of the company, with which I am uncomfortable. The company would have difficulty in working with such an arrangement as well, I believe. On the one hand are private investors, who might very well want to get out within a relatively short period of time, seeking to maximise their profit and wanting perhaps to strip assets out of the company. On the other hand there is the State, obviously seeking to maintain the country's strategic interests. I am not sure whether those two competing aims can sit comfortably side by side in a company for long. Goldman Sachs seems to anticipate that. If that were to happen, then the State should really only divest itself of part of the company, with a view to getting rid of the rest in good time.

The third option is an IPO. I presume this was the one favoured by the Leader when she made that announcement a few years ago. On the face of it, to opt for a partial IPO has certain attractions if it were possible to attract a reasonably varied level of investment so that one does not end up with one particular company. One needs to have a number of investors, whether institutional, private or individuals. If it were possible to get that type of share ownership of a minority shareholding, I would not have any ideological problem. I have no real confidence, however, that it is. Senator Morrissey expressed confidence to the effect that if Aer Lingus were floated there would be no shortage of takers. I am not entirely sure that is so. The airline business is going through a difficult time and a pretty favourable coincidence is needed of good stock market conditions and timing in terms of global aviation, specifically as regards Aer Lingus. I am not sure we have reached that point currently.

While I do not have a problem, in principle, with the notion of an IPO of a minority shareholding, there are real practical difficulties involved. This is something that should be approached with serious caution. This has been a useful debate. The Minister of State undertook in his contribution, earlier, that there would be "engagement", his word, between the Department of Transport and the social partners on the future of the airline, following the meeting on 9 December at which I assume the sub-committee will make some type of recommendation. I hope this will be meaningful engagement. It is important that the workforce, which has given so much over the past ten years, is brought into discussions in a serious way. While none of us wants to see a decision delayed for much longer, it is nonetheless important that there should be some type of meaningful consultation with the partners in Aer Lingus before the decision is taken or announced. I will leave it at that. I hope the Department makes the right decision, but for goodness sake, let it make a decision of some kind.