Paul McGrath (Westmeath, Fine Gael)
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Question 93: To ask the Minister for Transport the Government's position on the landing slots at Heathrow Airport held by Aer Lingus; and if he will make a statement on the matter. [12744/07]

Martin Cullen (Waterford, Fianna Fail)
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The slots held by Aer Lingus at London Heathrow Airport currently serve an important role in ensuring connectivity between Irish airports and the extensive network of international air services to and from Heathrow.

In preparation for the Aer Lingus IPO last year, consideration was given to the possible need for measures to prevent the disposal of landing slots at London Heathrow.

Arrangements to safeguard Heathrow slots are built into the Company's Memorandum and Articles of Association. The effect of these arrangements, at present, is that any disposal of Heathrow slots can be prevented by 30.4% of the votes cast at an Extraordinary General Meeting. 25.4% of the shares in the Company are held by the Minister for Finance on behalf of the State.

The Articles of Association of the Company state that I will set out the criteria by reference to which I intend to make recommendations to the Minister for Finance in relation to the exercise of his functions as a shareholder in regard to any possible disposal of Heathrow slots. Following is my statement of 2 October 2006 which sets out these criteria.

Statement by the Minister for Transport

2 October, 2006

Heathrow Airport, London serves a unique role in ensuring connectivity to/from Ireland. This connectivity is fundamental both to provide connections to and from Dublin as well as to and from the regions. This is the reason for the mechanism providing for a possible consideration of slot disposals by extraordinary general meeting as set out in the Articles of Association of Aer Lingus Group plc. The Minister for Transport will not recommend that the Minister for Finance seek to convene an extraordinary general meeting to approve a slot disposal unless the disposal would result in the slots at London Heathrow falling below the level that is critical to ensuring connectivity to and from Ireland. Such an assessment will be conducted on a case-by-case basis in accordance with the criteria set out below.

Criteria

The Minister for Transport considers that four London Heathrow slot pairs for services to and from Cork and that four (summer season) and three (winter season) for services to and from Shannon would each be critical to ensuring connectivity to these airports because this is the minimum necessary to ensure a spread of flights throughout the day. On this basis, the Minister for Finance as a shareholder in the Company, acting on the advice of the Minister for Transport, is unlikely to support a proposed disposal of any slot pair such that there would be less than the existing London Heathrow slot pairs that relate to services between London Heathrow and Cork or Shannon and is likely to request the convening of an extraordinary general meeting, as provided for in the Articles of Association, to consider such matter. In the event of a proposed disposal of a slot pair subject to the above requirements, the Minister for Transport, when deciding how to advise the Minister for Finance, would take into account the services operated by other carriers from Cork and Shannon to London Heathrow and any evolution of services to other connecting airports from Cork and Shannon. The Minister for Transport would also take account of any relevant direct long haul flights from Cork or Shannon (as the case may be).

The Minister for Transport considers that the level of slots relating to Dublin that are critical to connectivity is that which ensures passengers from and to Dublin can connect throughout the course of the day with key long-haul destination flights to and from London Heathrow. The Minister for Finance, as a shareholder in the Company, acting on the advice of the Minister for Transport, is unlikely to support a proposed disposal of any slot pair relating to services between London Heathrow and Dublin that would result in the interval between air services operated using slots on this route exceeding 90 minutes (not reckoning any time between the last slot on one night and the first slot on the following day) and is likely to request the convening of an extraordinary general meeting to consider such proposal. In the event of a proposed disposal of a slot pair subject to the above requirements, the Minister for Transport, when deciding how to advise the Minister for Finance, would take into account the services operated by other carriers between Dublin and London Heathrow. The Minister for Transport would also take into account services which could be provided via other connecting airports, provided that there is relevant available capacity both from Dublin to the other airport and from that airport to key long haul destinations, and any relevant direct long haul flights from Dublin.

Any new slot (not being part of a swap arrangement) that may be acquired by the Company after the Offer would only become subject to the potential constraints on disposal set out above if the Company decides that any such new slot should be included. Where the Company has decided that any new slot should not be so included then the Minister for Transport shall not have regard to any air services being provided using that slot in considering a proposed disposal of any other slot.

Extract from the Articles of Association of Aer Lingus plc

10. Disposal of a LHR Slot

In this Article the following expressions have the following meanings:

"Disposal Transaction"

A transaction pursuant to which any member of the Group proposes to sell, transfer or otherwise dispose of, lease, surrender, mortgage or otherwise alienate or encumber any Existing Slot(s) held by it or any of its subsidiaries. PROVIDED HOWEVER that each of the following shall be excluded from this definition of a Disposal Transaction:

a Short Term Lease except as otherwise provided below;

a Permitted Security; and

a transaction related to the pair of slots which are the subject of the agreement dated 29 July 2005 between the Aer Lingus Limited and British Airways plc including any renewal or extension of that agreement.

"ESOT Option Shares"

The shares which are the subject of an Option Deed entered into on or about 11 September 2006 between the Minister for Finance, Aer Lingus ESOP Trustee Limited and the Company under which shares held by the Minister for Finance are put under option in favour of the ESOT, but only to the extent that that option remains exercisable

"Existing Slot(s)"

any Slot(s) held by a member of the group at the date of adoption of these Articles or any alternative or corresponding Slot(s) allocated to the group by the airport co-ordinator at London Heathrow Airport by reason of the Historical Precedence of any Slot(s) held by the Group at the date of adoption of these Articles. PROVIDED THAT

If the Group swaps an Existing Slot for another Slot, that other Slot shall however be regarded for all purposes hereof as an Existing Slot. It is recognized that different numbers of Slots are held for the summer season and the winter season and that notwithstanding that these Articles are being adopted during the summer season, the Slots which will accrue for the next winter season after the date of adoption of these Articles by reason of Historical Precedence from the preceding winter season are for the avoidance of doubt to be Existing Slots for all purposes hereof. The Company may choose to designate any future acquired Slot as an Existing Slot, whereupon the provisions of these presents will apply to that Slot.

"Historical Precedence"

the entitlement of an air carrier which has been allocated a Slot to claim a corresponding Slot in the next equivalent scheduling period pursuant to the Regulations as same may be amended, revised, supplemented or substituted from time to time.

"Permitted Security"

Any fixed and/or floating debenture, given to a bank or financial institution or issued in connection with the securing of bonds, over a substantial part of the assets of the Group which are given as security for a funding advance to the Group.

"Regulations"

Council Regulation (EEC) No. 95/93 of 18 January 1993 on common rules for the allocation of slots at Community airports, as amended by Regulation (EC) No. 793/2004 of the European Parliament and of the Council of 21 April 2004.

"Short Term Lease"

A lease, temporary swap or temporary exchange (whether or not in return for consideration) of a Slot or a pair of Slots the term of which is no longer than 36 months; provided that a series of such leases (whether in favour of the same or different parties) in respect of [the same] Slot or pair of Slots shall not be regarded for purposes hereof as a Short Term Lease if in the aggregate they exceed 36 months over a 4 year period in respect of the relevant Slot. Provided further that if such a lease is to be put in place in relation to a Slot and there is already a Short Term Lease in place in relation to a pair of Slots, that lease should not be considered to be a Short Term Lease. A proposal to renew a Short Term Lease which has lasted for 36 months (whether continuous or discontinuous) shall be treated as a Disposal Transaction and subject to the provisions hereof. For the avoidance of doubt a lease of the slots referred to at © of the definition of "Disposal Transaction" shall not be taken into account for any purpose of this definition, in particular so that a lease of those Slots may be in place simultaneously with a Short Term Lease over another pair of Slots "Specified Percentage"

The Ordinary Shares at the date of the relevant meeting (or where a date is specified in the notice of the meeting for purposes of regulation 14 of the Companies Act 1990 (Uncertificated Securities) Regulations 1996, that date) held by the Minister for Finance (but excluding the ESOT Option Shares) expressed as a percentage of total issued Ordinary Shares plus 5% (thus if Ordinary Shares (excluding the ESOT Option Shares) held by the Minister for Finance represent 25.5% of total issued shares, the Specified Percentage is 30.5%).

"Slots"

The scheduled time of arrival or departure available or allocated by the co-ordinator to an aircraft movement on a specific date at London Heathrow Airport, being the permission to use the full range of airport infrastructure at such airport for purposes of landing or taking off.

If a member of the Group proposes to enter into a Disposal Transaction or enters into a Disposal Transaction conditional on the provisions of this Article, the Company shall notify all shareholders of the Company of its intention to do so or of the conditional Disposal Transaction. Such notification shall be by way of letter, explaining the details of the proposal to each shareholder who at the date of notification holds in excess of 10% of the issued Ordinary Shares in the capital of the Company. Particulars of this notification shall also be notified to the Irish Stock Exchange and London Stock Exchange via a Regulatory Information Service.

If within 28 days of the giving of the notification referred to in paragraph (b) (during which time the Disposal Transaction may not be effected), shareholders holding Ordinary Shares, amounting to at least 20% of the Ordinary Shares, so request in writing (such request can be in counterparts), the Company shall convene an extraordinary general meeting of shareholders to consider the Disposal Transaction. Such extraordinary general meeting shall be convened for a date occurring within two months of receipt of the request in writing from the shareholders holding at least 20% of the Ordinary Shares. Such an extraordinary general meeting may also be convened by the Company of its own volition, provided that it is fixed for a date which is no sooner than 21 days from the giving of the notices referred to in paragraph (b). If such shareholders so request or if the Company so convenes a meeting, the Disposal Transaction may not be concluded until it is approved in accordance with the following paragraphs (d) and (e). If no such request in writing is made, the Disposal Transaction may thereafter be concluded within twelve months of the expiry of the period of 28 days aforesaid.

The Disposal Transaction may proceed if at the extraordinary general meeting convened to consider the Disposal Transaction the relevant resolution shall have been passed by not less than X% of the votes cast by such members as, being entitled so to do, vote in person or by corporate representative or by proxy in respect of such resolution.

Where X is [100 — the Specified Percentage]

provided that if the value of X by reason of the application of this formula is greater than 75, it shall be deemed to be 75.

If such majority is obtained for the resolution, the Disposal Transaction may be concluded within twelve months of the date of passing of the resolution.

The Disposal Transaction may also be concluded within twelve months of the Company obtaining the consent in writing to such Disposal Transaction from the holders of at least 75% of the voting rights attaching to Ordinary Shares in the capital of the Company.

The exercise of any rights by the Minister for Finance under this article will be in accordance with the recommendations of the Minister for Transport. The Minister for Transport shall from time to time set out the criteria by reference to which he intends to make recommendations to the Minister for Finance as to whether to seek the convening of an extraordinary general meeting in respect of a Disposal Transaction and/or by reference to which he intends to make recommendations to the Minister for Finance concerning the casting of his votes on any such resolution. These criteria from time to time will be placed by the Company on the Company's website.