Written answers

Tuesday, 17 February 2009

Department of Transport

Aviation Policy

9:00 pm

Photo of Ciarán LynchCiarán Lynch (Cork South Central, Labour)
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Question 84: To ask the Minister for Transport if he will report on the recent decision to reject a takeover bid by an airline (details supplied) for Aer Lingus; if he will publish a White Paper on national aviation policy in view of the recent turmoil in the sector as a result of that airline's takeover bid and the challenging global aviation environment; and if he will make a statement on the matter. [5817/09]

Photo of Noel DempseyNoel Dempsey (Meath West, Fianna Fail)
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The Government's aviation strategy is to facilitate the development of as wide a range as possible of competitive, safe and reliable air services for the benefit of business and tourism. In this context, at the time of the Aer Lingus IPO, the State retained a 25% shareholding in Aer Lingus to protect our strategic interests in a number of ways. Firstly, having a shareholding at this level acts as a block against a hostile takeover. The value of the State's shareholding in this regard has already been demonstrated and has ensured that the aviation market in Ireland will continue to be served by at least two strong competing airlines thus ensuring consumer choice and competition.

Secondly, the shareholding also ensures that the Memorandum and Articles of Association of the Company cannot be changed without the approval of the State. This, in turn, means that the safeguard measures relating to a disposal of Heathrow slots cannot be changed by other shareholders. Also, the provision whereby the State can appoint three directors to the Board cannot be changed by other shareholders.

As the Deputy will be aware, the Government recently rejected Ryanair's Cash Offer of €1.40 per share for the State's 25.1% shareholding in Aer Lingus. The Government took the view that the Ryanair Offer greatly undervalued Aer Lingus. The implications of the proposed takeover for competition in the Irish airline sector was also a major consideration. The cornerstone of Irish aviation policy is, and has been for many years, to encourage competition. Because we live on an island Irish consumers depend very heavily on air transport. The virtual monopoly that would have resulted if the Offer had been accepted would not have been in the best interests of Irish consumers. The Offer by Ryanair did not include any remedies to address the negative impact the takeover would have had on competition. The Government will continue to exercise its shareholder role in Aer Lingus with a view to protecting Ireland's strategic interests.

The global economic downturn and the reduction in consumer demand for air travel are currently having a negative impact on the airline industry globally. From an Irish economy perspective, the overarching priority is to maintain the highest possible levels of connectivity between Ireland and key markets around the world and my Department will continue to closely monitor developments in the aviation sector that impact on that objective.

I am satisfied that our strategy for aviation is appropriate and that a major review along the lines proposed by the Deputy is not warranted at this time.

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