Seanad Éireann - Volume 175 - 03 March, 2004

Aer Lingus Bill 2003: Second Stage (Resumed).

Question again proposed: “That the Bill be now read a Second Time.”

  Mr. Morrissey: I welcome the Minister of State to the House to discuss the Aer Lingus Bill 2003. It has come as a great shock to Aer Lingus that it must operate in an ever-changing business environment. Gone are the days when the airline could operate with certainty. Changing times have demanded that airlines, and, more important, national airlines like Aer Lingus, are properly equipped with a business model which can cope with market forces. Thankfully, Aer Lingus is no longer allowed State investment under EU rules when in crisis. However, it needs investment, which will have to come from the marketplace rather than from national Governments as was the case heretofore.

Aer Lingus has dramatically turned around its fortunes over the past three years. Just three short years ago, it was facing bankruptcy and looking over its shoulder for a State handout. While being forced with the stark choice of going under or changing its structures to meet more demanding times, Aer Lingus and its staff have enjoyed a profitable existence in the past two years. I hope this will also be the case next year. However, it must be allowed to fund the resources necessary to cope with a demanding future. The 14.9% employee share option is to be welcomed and is a recognition of the commitment of the staff and management in recent years. In the coming years, Aer Lingus will have to cut costs further to continue in existence.

I recall a presentation to the Oireachtas transport committee 12 months ago by Aer Lingus management. They put forward a model of reducing costs as a way forward. Indeed, they made the presentation as if it were a new type of business model. I reminded them the model was in existence for many decades in the private sector. As I said at the outset, I believe it has come as a great shock to them that they must [1485]operate in this new business climate. I reminded them also that were it not for 11 September 2001 and the foot and mouth disease, they might not have come to this sudden realisation and the Government would be continually bailing them out. They agreed at the end of the debate that this was the case, that 11 September 2001 was a great realisation and a sudden shock when they saw other airlines going under.

The figure of 14.9% is being proposed because of a precedent in the ESB and Eircom. I sincerely hope Aer Lingus will be able to cope with the advent of the open skies policy, which will bring great benefits to the country. It should allow Aer Lingus the opportunity to explore new markets and new customers. An unfettered Aer Lingus, under its existing management, will be leaner and fitter to operate in the next decade. The only certainty that faces the company is an ever-changing marketplace for more travel and cheaper fares. Aer Lingus has woken up to a new reality. Let us hope it will continue in that vein and that the passing of the Bill will assist it.

My party and I sincerely hope the Government will allow Aer Lingus to manage its business unhindered by Government policy. The Government cannot have it both ways and allow Aer Lingus to enter the private sector, yet tie one of its hands behind its back by saying there are national strategic interests involved. I recall the Progressive Democrats national conference last year when the chief executive, Willie Walsh, made an admission that Aer Lingus had been ripping off its customers for years. It was a brave admission, which went unnoticed by many people. It must be asked how that was allowed to go on for so many years. It was allowed because of a lack of competition and because Aer Lingus was able to look over its shoulder for Government investment. It was allowed to have a huge workforce because it did not have to be competitive. The future demands that it enter the private sector but I hope Government policy will not hinder it that future.

  Mr. Higgins: Like other speakers, I welcome the Minister of State, Deputy McDaid, to the House. I support this good Bill, which was in gestation for a considerable time. I vividly recall being opposite the leader of the House in the Dáil when she was Minister for Public Enterprise. The Aer Lingus Bill had gone through the Seanad and had to be abandoned because of 11 September 2001. At the time, the outlook for Aer Lingus could not have been more bleak. Airlines were falling like nine pins all over the world. Some much larger carriers in the world, which ten years previously appeared to be even more viable and profitable than Aer Lingus, went to the wall literally overnight. The Minister’s hands were literally tied from the point of view of putting together any kind of rescue package because of EU rules and regulations.

[1486]  Ms O’Rourke: Commissioner Palacio is now saying she would like to consider airlines. She changes her mind pretty handy.

  Mr. Higgins: She certainly could not have been more rigid than she was at that time.

The 14.9% employee share option is excellent. We do not know whether it will be used as a carrot to induce the staff of Aer Lingus to accept privatisation, but it is a good principle.

The new pension arrangements are very welcome. Section 3 of the Bill relates to the power of the Minister to sell or dispose of the Minister’s shares. I worry to some extent about that because the Minister does not have to return to this House with separate legislation.

After Eircom, I do not know about the attractiveness of the sale. It does not seem to be as gilt-edged as Eircom looked at the time of the grandiose promotion to sell the company to the public. Of all businesses to try to sell, something in the airline industry is probably among the more risky offers one could put on the market. The question of saleability will have to be confronted on another day. At the end of the day, the Minister is the main shareholder.

Tributes have been paid to Mr. Willie Walsh, the chief executive of Aer Lingus, and rightly so. He has performed a miracle. He has brought Aer Lingus to the stage where it now competes directly with Ryanair, the other main Irish operator. That is a good thing. Senator Wilson said it is worth paying that little bit extra to Aer Lingus rather than to the airline he did not name. Aer Lingus is cheaper on a number of routes. If one goes to aerlingus.com one can sometimes get better value than one would get from its main competitor.

  Ms O’Rourke: I do not know why the Senator cannot utter Michael O’Leary’s name.

  Mr. Higgins: The sale of Aer Lingus will undoubtedly cause concern. Ryanair, Mr. O’Leary’s operation, does not have transatlantic flights. Ryanair cherry-picks the profitable lines and makes a good job of it, with profit as its motive. We do not begrudge the company its success. Regarding the transatlantic routes, it is crucial, as Senator Wilson said, that we have an airline which can guarantee direct access to Ireland rather than offer flights via Heathrow or Paris with connecting flights to Ireland. That is one of the reasons I have some qualms about the sell-off of the airline.

We must give credit to Mr. Willie Walsh, the management, pilots, cabin crews, ground staff and handlers. Everyone tightened their belts. I recall that when the crisis arose, I was taken to Liberty Hall to be confronted with people who were absolutely frantic regarding the future of the airline. In the space of two or three years, Mr. Walsh has taken the airline by the scruff of the neck. It is leaner, tighter, more effective and [1487]more efficient, and overall it is giving a better service.

I will address the Shannon issue. It came as a bombshell last week when, on top of the redundancies already announced in Shannon, we learned that some 30 to 40 cargo and maintenance staff faced job losses. We have already had a cabin crew reduction at Shannon. Of the 45 staff let go, 29 who are rooted in the mid-west with families are now being asked to move to Dublin. This is decentralisation in reverse. We saw the announcement in the newspapers last Saturday that another 102 Aer Lingus staff are to go. Aer Lingus and Shannon have been synonymous long before Aer Lingus and Dublin became synonymous. Particularly with regard to the transatlantic routes, Aer Lingus and Shannon were inextricably entwined. The Minister for Transport, Deputy Brennan, now seems to be downsizing the operation at Shannon. The consequences for the mid-west are obviously catastrophic. The Minister wrongly said that tourists who come through Dublin all go to the west and the mid-west; they do not. Some do, but when one has a guaranteed direct transatlantic route into Shannon, tourists will at least start in the mid-west, perhaps go to Killarney, possibly up as far as Galway, hopefully as far as Mayo, and at least tour along the west coast. If everything is to be channelled through Dublin, we will get only a dribble of tourists in the west and mid-west regions.

For two reasons, we need a clear and decisive policy on the survival of Shannon. First, Shannon has served this country well. Second, an IBEC report was published this afternoon which was devastating regarding the neglect of the mid-west region. It showed that of the 102 industries in the region, very few had grown and not a single additional job had been created there in the past ten years. That is obviously a dire situation and if one removes from the equation one of the main arteries of development in the mid-west region, namely Shannon, with its potential growth, the job consequences will be considerably worse. Instead of Shannon being downsized, Aer Lingus should be working in co-operation with all the commercial and tourist interests in the region in an effort to grow Shannon so that it can realise its potential as a hub of major development.

Last night, in response to a debate in the other House, where this matter was addressed by Deputy Pat Breen and Deputy Jan O’Sullivan, the Minister of State, Deputy McDaid, did not give much grounds for optimism regarding Shannon’s position, or where it is going.

  Dr. McDaid: I do not think the Senator understands the point. If we pursued the Senator’s point, Shannon would have no future because of the EU-US debate that is ongoing. The Senator is trying to leave us outside, suggesting that we do not talk to the US. How [1488]will the US know what we want when it is not talking to the EU?

  Mr. Higgins: Regarding the open skies policy, the Department is talking to the US authorities on the basis of one gateway. We both know that gateway will be eight or ten miles from here, at Dublin Airport, while Shannon will be left out of the equation. Once transatlantic flights are withdrawn from Shannon, Shannon is dead and buried forever.

  Dr. McDaid: We are not doing that at all.

  Mr. Higgins: This is why I ask the Government to treat Shannon seriously as an area which is in crisis in terms of jobs and the airport and with regard to morale there.

  Dr. McDaid: We are doing that.

  Mr. Higgins: There is an atmosphere of gloom, doom and despair among the staff at Shannon. Rightly or wrongly on their part, there is a belief that there is an agenda not to treat Shannon seriously from the point of view of enhancing its development. I know the Department is constrained in terms of the amount of money it can invest, but it is possible to devise a coherent, integrated plan to develop and promote Shannon. That is why I ask the Minister to listen to what I say. Those working at Shannon, and the people of the mid-west generally, will take a great deal of convincing that action is being taken. These people picked up The Irish Times and the Irish Independent last Saturday and read of a further 100 jobs being axed at Shannon Airport. This will not do and is not acceptable.

  Ms O’Rourke: I am speaking on this Bill for the record. I hope that if my time is tight, the Acting Chairman will allow me to make my case and my points. I brought this Bill to Seanad Éireann as Minister for Public Enterprise, a fact to which Senator Higgins kindly referred. I remember it very vividly. One of my faults is that I have a good memory, which is currently proving a little uncomfortable.

When I brought this Bill to the House, everyone was full of high hopes because the future of Aer Lingus looked good, as it now does again, thankfully. The Bill will soon be on its merry way to Dáil Éireann. Just after the Bill was introduced, an international economic decline followed and then came the disastrous events of September 2001 which, as we all know, wrought devastation on airlines in particular and on all those who lost their lives, which none of us can forget. Large airlines tumbled disastrously. I remember the gloom which infected the entire airline industry. I recall perhaps half a dozen meetings in Brussels with Madame de Palacio and her firm statement — to say it was obdurate would be extreme — that not one euro or penny could go into Aer Lingus.

[1489]I distinctly remember the ensuing months during which there were tense meetings between me, my officials, the unions, the management, the Taoiseach and the Cabinet. The Taoiseach and I, in particular, kept in contact on a daily basis on the matter. If ever there was a time when close co-operation among everyone concerned would bring desired results, it was then. Everybody combined to save Aer Lingus.

Interestingly in August 2001, the Taoiseach and I had many telephone conversations about a new chairman. Sadly, Mr. Bernie Cahill had passed away and we had all gone to Cork to his funeral. Between the two of us, it was decided that we would approach Mr. Tom Mulcahy. I approached him, as did the Secretary General of my Department, and he said he would think about it over the weekend. We were coming to the end of August 2001. He thought about and agreed to become chairman. Nobody has paid tribute in the right way to the chairman of Aer Lingus who is a wonderful person. Nobody reads or hears about Tom Mulcahy or hears him, but he is doing a proper job as chairman. In the tense months between September and December of that year, he came into my office on a daily basis to report to me and I, in turn, would report to Cabinet. As he came in the door, he would always sing “If I knew then what I know now”. Unfortunately, due to the events of September 2001, Aer Lingus was going down the tubes. He always said I must have had seventh sense to get him before it all happened.

Due tribute has been paid to Willie Walsh who was employed by Aer Lingus. The Minister or the Government of the day did not have any say in that. He is a wonderful chief executive whom I met on several occasions. Aer Lingus interviewed him and took him on. The chief executive and the chairman are a marvellous combination. Tom Mulcahy is a quiet man, a man of acumen and of keen financial views who has been able to steer Aer Lingus on to a straight path. Willie Walsh is not a bit afraid to take on anyone and to express his point of view and to ensure it holds weight.

October, November and December 2001 were tense months in the capital. As I said, there were daily meetings and telephone conversations between me and the Taoiseach. I have always admired how we worked together in that particular period. If we had not done so, if the workers of Aer Lingus had not decided it was their company and they were going to save it, which they did, and if the chairman, his board and Willie Walsh had not all worked together with the backbenchers in our party in what was a huge act of combined patriotism, it would not have been possible to bring that company out of what seemed to be a terminal spiral of decline and into a viable situation. I do not think that story has been written enough or that sufficient credit has been paid to all those people of whom I have spoken regarding what they have done for their company.

[1490]Sadly, it was necessary to seek 2,000 voluntary redundancies. It was not at all like the voluntary redundancy the late Bernie Cahill had been able to introduce in the early 1990s — in fact, it was approximately half that amount. We had to get over that huge chasm. Everyday I would get the numbers of people who had opted for voluntary redundancy, and I have such high regard for one of the officials here today for the way she handled that crisis along with me and others. I would telephone the Taoiseach to say how many had opted for it. It continued that way until, sadly, we had more than 2,000 people. I wish everybody could be employed; I am not at all in the business of cutting jobs. It is the wrong attitude to have, but it was necessary if we were to save Aer Lingus. In the end, it was done with decency and civility and with a proper sense of dignity about the people who were at the centre of it all. That was followed swiftly by all sorts of other events.

My husband had died a few months earlier and I travelled to the US with two women friends for a ten day visit. We were three days there when the disaster happened. I left and went to Brussels to a meeting. Of course, a particular airline person made much of that and of what it cost to bring me back. Thankfully, the EU paid for it, but that is a side issue. Only for the courage and the bravery of all concerned in the cameo of that three month period, we would not be here discussing this matter.

I welcome the Minister of State, Deputy McDaid. I have always had such regard for him. When we were in Cabinet together, we were friends. I noticed he said that the Government decided on 23 October 2001 to facilitate private sector investment. He went on to state that the Government decided on 16 September 2003 to facilitate private sector investment. Two years later, this echoes the Government memorandum I brought to Cabinet and on which a decision was taken. I stress there are people who, through no fault of their own, are not eligible for the ESOP arrangement as the Bill was not introduced in the House on time. I strongly urge that their needs be addressed. They have been in contact with me and I feel a duty to work to see whether their needs can be addressed.

This is a fine Bill. It is the resurrection of a previous Bill and is in effect — if the Minister of State does not mind my saying so — my Bill with a few twirls and tweaks to it. It is amazing that I am here talking about a Bill I brought forward some time ago. It is bound up with that crisis. We worked hard to turn the situation in Aer Lingus around, and thankfully we did. The backbenchers were marvellous as were the other parties. There was the ritual “yahoo”“boo boo” in the Dáil from time to time but there was a great mingling of the various parties because they all wanted the same thing; they wanted the company to be saved. My husband was dead a couple of months and it is caught up in huge dramatic and traumatic time in my mind.

[1491]I was always satisfied with the level of work and commitment obtained from everybody during that crisis point in the history of Aer Lingus. It will occupy a good chapter in my book. In that way, the events of this time will be shown for what they were. I often think people who go through particular periods, like the workers in Aer Lingus did at that time, should get due regard. The chairman is a great person — the best for that job. They say times throw up the person and that was the case with Mr. Mulcahy, the chief executive and all the others. However, it was the people on the ground who saved the company. Again, not enough regard has been given to the comradeship which flourished during those dark days and months.

That is my input into the legislation. I pay tribute to the two officials here today. Both of them were active in the Department during that period. I always had great faith in their competence and in the way matters were directed. I felt we were all sailing in the good ship enterprise, except in this case it was the good flight enterprise and I hoped it would eventually come to a decent landing. Now Aer Lingus is leaner, fitter and has a better website than that of another person whom we shall not name. Aer Lingus does not do people down by injurious advertisements or by shouting, bragging and roaring. It goes about its business and it has become financially solvent and successful again.

  Mr. Finucane: I welcome the Minister of State. I have studied the contents of the Bill. I would like to know about the future not only of Aer Lingus but of some of our airports which are intertwined with the success of Aer Lingus. The Minister of State said Aer Lingus was involved in opening up nine new European routes, but will he indicate in his reply whether any of those routes are to Shannon Airport?

There is a cloud hanging over the Irish aviation sector at present not concerning Aer Lingus so much as the situation that is evolving at Aer Rianta and what the Minister’s intentions are with regard to that company. We know that one of his intentions is to break it up into three different companies for Shannon, Cork and Dublin Airports. In that case, Shannon would operate as a separate entity. Limerick Chamber of Commerce and many other organisations accept this move. The boards were appointed months ago, but they are currently operating in a vacuum so what can they achieve? In proposing to dismantle Aer Rianta, the Minister has not considered a business plan under which the airports could operate with new directors. That is important in the context of Shannon.

I wish Aer Lingus well and compliment it on its recent success in generating a profit. However, what signal is being sent to the Shannon region, and to Aer Rianta workers, by the recent news that the company is seeking a further 103 voluntary redundancies at Shannon? The ground [1492]handling services, which are currently administered by Aer Lingus, are to be removed and, in addition, 29 cabin crew have been given six weeks to move to Dublin or lose their jobs. There are signs of depression in the area because of the situation that is evolving at Aer Lingus and the uncertainty over Aer Rianta in Shannon. It is time to create some certainty in this regard.

I am not sure what the commitment of Aer Lingus is to Shannon, but I know that the main objective of the Bill is to prepare Aer Lingus for privatisation. Some of our regional airports could be sucked into the slipstream created by such privatisation. I wonder if that is already happening at Shannon given the voluntary redundancies that may become compulsory if they are not taken up. If the Minister sheds such jobs, it will have a knock-on effect on other operations at the airport.

Aer Rianta should show us the business plan for Shannon Airport or at least give it to the new board of directors, so that the airport can operate debt-free. An injection of finance will be required so that the airport can be marketed to create new opportunities. The Leader of the House mentioned one company that she said should not be named, although I am sure she was referring to Ryanair. Some time ago, Ryanair left Shannon and went to Farranfore. Good luck to Farranfore, which is a private airport. Ryanair left Shannon because of what could be regarded as very moderate landing charges, which were introduced by Aer Rianta. Passengers using Farranfore airport will pay those charges in another way, however, because they will have to pay €6 each way to travel from that airport. That money goes to the airport’s private funding. It was a contradiction and a deception for Ryanair to say it was leaving Shannon because of the increased charges, which were moderate, and then increase charges at Farranfore because it is a private airport. Ryanair took that business, which was going to Hahn near Frankfurt in Germany, away from Shannon. It was a big loss to Shannon at the time because it had created so many bednights for the local hotel industry from German tourists. Good luck to Kerry in whose direction the business has moved.

Will the Minister of State confirm that Aer Lingus is due to announce four extra flights per week to Chicago? My information is that may be the case. While those four extra flights may be announced, the airline has reduced its weekly flights to Boston from seven to five. It has been proven, however, that there is a market for flights to other airports — Philadelphia, in particular — if we can get a real commitment to provide such links. We know what is happening in the international aviation business, as well as the effect of the end of the Shannon stopover, with passengers stopping at Dublin first before flying on to Shannon. There may be more such changes in future. The Minister may say that Shannon will have to change and adapt, but business people in the mid-west region are frustrated. Prestige [1493]employers such as Dell are operating in the area and they should be able to avail of the appropriate infrastructure and fly out of Shannon. The Minister of State knows the difficulty involved in getting connecting flights when one flies from Shannon to Dublin. One imagines that such connections would exist within the country. In the past, Aer Arann attempted to provided such a service but it later pulled out of Shannon.

There is an air of uncertainty hanging over Shannon at present, to which Aer Lingus has contributed. That uncertainty will have a domino effect on other employment unless something serious is done about it. It is all very fine preparing for an ESOP and other aspects of privatising Aer Lingus, but if it will impact on airports like Shannon, I wonder if it is such a good idea.

There is another argument going on with regard to the Government’s decentralisation policy, which involves getting civil servants to move out of Dublin. It is proposed to move the Department of Enterprise, Trade and Employment to Shannon, which is fine, but while the Government is decentralising, Aer Lingus will be pulling the plug on 103 jobs at Shannon Airport, and other jobs may also be affected. There is a contradiction, therefore, when one talks about decentralisation.

One may say that Aer Lingus has to make an operating profit but I wonder whether the serious commitment to expand Dublin Airport will be to the detriment of Shannon. Is it not contradictory to say that what Aer Rianta is doing will be to the long-term benefit of Shannon? Much of the business will be whisked away as a result and it will be difficult to find alternative businesses. The board of directors that was appointed months ago for the development of Shannon should at least be given some idea of the Minister’s future intentions for the airport.

I can remember sea-planes coming into Foynes, where I come from, up to the late 1940s. Aer Lingus started originally from Shannon, which was opened in the mid-1940s. There is a history of aviation in the area. IBEC, which represents business interests in the mid-west region, published a document today pointing out the barriers to success in the Shannon area. Senator Dooley is aware of the current infrastructural deficits there, which will be rectified in future. They include the Ennis bypass, which is important for development, and a tunnel under the river Shannon to remove the traffic logjam from Limerick city to the airport.

There have been dramatic improvements in the roads leading to Shannon and such infrastructural developments are necessary, including the development of the Limerick to Ennis railway line. While these developments can complement Shannon’s status, there is no point providing such infrastructure if the airport’s basic business activities are destined to decline. I am concerned about the long-term viability of Shannon. If Aer [1494]Lingus is to remove 103 jobs in the cargo handling sector, I hope some other company, such as Servisair, will replace them. Without such components at the airport, one cannot attract foreign business, including other airlines. The uncertainty surrounding the future of Shannon Airport must be lifted and the Aer Rianta controversy, which has dragged on for too long, must be decided. We need action on the airport. The new committee must meet and develop a business plan and avail of marketing expertise to secure the future of Shannon. The airport is important not only to Shannon but also to the entire mid-west region.

I am concerned about this region and I hope the Minister of state will outline Aer Lingus’s plans for Shannon Airport, which has been vitally important for a long time, when he replies.

  Mr. Daly: I thank the Minister of State for coming to the House and for his work in the aviation industry generally. I congratulate him and wish him well in the European elections following his selection as a candidate last Saturday. He will go to Europe at an important time for the aviation industry, given that negotiations are under way on an open skies policy and on the future of Europe-US travel.

  Mr. Bradford: The Deputy’s county might elect its own woman to Brussels.

  Mr. Daly: I agree with much of Senator Finucane’s contribution. I acknowledge the contribution Aer Lingus has made to the development of the economy nationally and regionally, especially in Shannon and Cork. The company emerged from a difficult period following 11 September when most airlines were in crisis. It was no different for Aer Lingus during this period of instability in international politics, uncertainty in many economies and intense competition. The company’s emergence from this traumatic period is a compliment to the board of management, chief executive, Willie Walsh and Tom McInerney and others at Shannon Airport for their work in stabilising the performance and financial health of the company. Aer Lingus lost €52 million in 2001 but, within a year, that was transformed into a profit of €25 million. That was a dramatic turnaround in a short period and it was due in the main to the company’s dedicated staff who made sacrifices and adapted to change so that the airline could survive in the national and local interests.

During that time, 2,000 people were displaced and, unfortunately, more redundancies have been threatened. Voluntary redundancies have been sought at Shannon Airport. I agree with Senator Finucane that there is deep anxiety and concern among the workers there at the recent job losses, especially as this legislation passes through the Oireachtas. There is a deep suspicion in Shannon and throughout the mid-west that the management of Aer Lingus is not fully committed [1495]to the development of the airport. That is not my view and I received an assurance from the general manager and others in Aer Lingus that this is not the case but, whether it is, the staff at the airport, together with the local population, feel the company is more concerned about opening new routes, expanding the business in Dublin and the financial survival of the company than the position of Shannon Airport. This feeling cannot be dispelled easily but its needs to be remedied and rectified soon.

At a time the Government is engaged in a decentralisation programme, Aer Lingus is centralising its services, as Senator Finucane said. This is contrary to Government policy. Young people working for the company are being offered the option of moving to Dublin to continue their employment. This is tantamount to saying there are no jobs for them in the company but that is not the case.

I refer to the share option scheme. The share option arrangement should be offered to those who are considering voluntary redundancy at Shannon Airport. Even though I am critical of these redundancies, it is important that the stability, development and long-term survival of the airline should be ensured. If there must be redundancies so that the company remains viable, we are prepared to live with them in the hope that when it is financially viable again, it will be possible to restore these jobs quickly.

I have not read Senator O’Toole’s amendment but I agree with its spirit. Flexibility is provided in the proposed arrangement. Many of the people who recently left the airline are part of the share option scheme introduced in 1996 and they should be accommodated. The new arrangements should apply to them. Senator O’Toole stated the electricity supply Bill provided a mechanism to deal with such a scenario and I urge the Minister of State to examine whether such a mechanism could be provided in this legislation.

The management of Aer Lingus succeeded, in its efforts to restructure the airline, to reduce the cost base by 22%. The workers at Shannon Airport are concerned by the new arrangements for transatlantic routes during the upcoming season. Senator Dooley and I met employees last Friday and they were distraught at the news of redundancies and transfers from Shannon to Dublin. They put forward a proposition whereby Aer Lingus could base flight EI111, which currently operates between Dublin, Shannon and New York, at Shannon Airport and put the passengers who travel between Dublin and Shannon on the Chicago route. By basing flight EI111 in Shannon Airport, many of the voluntary redundancies would not be necessary and many of the employees who are being offered transfers to Dublin Airport could remain at Shannon.

The Shannon-Dublin transfer proposal has been deferred as part of the discussions in the Labour Court. The employees’ proposal should be examined again in the context of the loyalty [1496]the staff has shown to the airline in accepting voluntary and compulsory redundancies and significant inconvenience.

It would be a small measure of recognition that the board and management of Aer Lingus in Dublin are concerned about the future of Shannon. We believe the future of Shannon is linked to the future of Aer Lingus. Shannon is as important to Aer Lingus as Aer Lingus is to Shannon. To centralise the company entirely in Dublin would be detrimental to the airline, which would not be able to cater for the numbers involved.

Aer Lingus should consolidate its business in the United States and look at the prospect of establishing a central base in Europe for the development of business there. This would copperfasten the future security of the airline.

The Bill will be wholeheartedly welcomed by the staff of Aer Lingus, provided we make the small adjustments necessary to underpin the confidence of the company’s employees.

  Mr. Quinn: I welcome the Minister. I have the odd feeling tonight of having gone to a funeral only to find myself saying, “Is this not the same poor fellow we buried four years ago?” That has never happened to me in real life and until today it had not happened to me in my 11 year career as a legislator. Talking about funerals is not inappropriate on this occasion. Many Members will remember the atmosphere in this House on a sunny day in June 2000 when we rushed through the Aer Lingus Bill 2000. I am sure the Leader remembers it well because she was the Minister responsible at the time. There was the air of a wake on that evening as Member after Member recalled their nostalgic memories of the Aer Lingus we had grown up to love and be proud of.

The purpose of that Bill was to approve the Government’s decision to sell off the airline by means of an initial public offering, an IPO. There was some urgency about passing the Bill because it was felt there was a window of opportunity which had to be taken advantage of. Most of us felt that selling off the airline in that way was inevitable and that we did not have a choice in the matter. We saw it as the only way forward if the airline was to survive.

What do we find today? The airline we waked with such enthusiasm four years ago is not dead at all. It is not even at death’s door. Despite having had a close brush with failure in the meantime, it has transformed itself, through a survival plan, into a highly successful and profitable company. What is more, it has succeeded in doing this while remaining in public ownership. Our reaction to this should be to congratulate everyone concerned. They deserve that. The Minister of State, Deputy McDaid, has been actively involved in this area in the past few years. I congratulate the management and, particularly, the staff of the airline. The staff have made many sacrifices to make the survival [1497]happen. I do not begrudge them the 15% share in the company, which is one of the purposes of the Bill.

We must look again at the need to sell off the airline. It may seem inconsistent to have been in favour of an IPO four years ago and now to ask questions about the issue of a sell-off. However, there is an important difference, which is a cardinal point of principle. When the Leader brought the previous Bill before us, we were presented with a done deal. The Government had approved the IPO, consultants had been engaged to start the process and make it happen and the purpose of the Bill was to give legislative sanction to that process. The House was asked to endorse a Government decision that had already been taken and it did so. It was, to us, the correct thing to do.

Time has passed, circumstances have changed and the idea of an IPO died a death along the way. So did the Aer Lingus Bill 2000. We are now being asked to buy a horse of a different colour. The question of selling the airline has been put on the table again, not through an IPO but probably through a trade sale. However, no Government decision on this matter has yet been taken. Let me say that again. No Government decision on this matter has yet been taken. The Minister for Transport has not decided what is the right way forward. Until he decides, the Government as a whole will not become involved. In discussions about the matter the Minister has freely acknowledged there is much to be said on both sides of the issue.

The question of the future of the slots Aer Lingus holds at Heathrow has been raised repeatedly. They are an important national asset but the country does not own them. Aer Lingus owns them.

  Dr. McDaid: We do not own them.

  Mr. Quinn: They are a national asset owned by Aer Lingus. If we lose control of the airline we lose control of the slots, which could have a devastating impact on our tourism industry. This is not a fanciful scenario. Consider what has happened in the past few years on the telecommunications front where the privatised Eircom has been systematically obstructing and undermining the key national priority to roll out broadband and to make it accessible to the whole country at a reasonable price.

There is much to be argued on both sides of the Aer Lingus issue. The Minister and the Government have not made up their minds. Nevertheless, we are being asked to make our minds up and give a blank cheque to the Government on this critical matter of national importance. Why the need for this blank cheque? Thanks to the uproar in the other House and the way Deputies greeted the original Bill the amended Bill includes a saving clause, section 3(5), which states: “The Minister for Finance may not dispose of any shares in the company without [1498]the general principles of the disposal being laid before and approved by Dáil Éireann”. However, now that this concession has been squeezed out of the Minister, the need to include the power to sell shares in this Bill is fatally undermined. As the measure has come to the Oireachtas for approval, why not do so by means of a two section Bill? On many occasions in the past the Oireachtas has shown it is capable of responding quickly and urgently, so urgency cannot be pleaded in objection.

8 o’clock

I cannot stress too much my objection to incorporating a blank cheque into legislation, especially into legislation concerned with the future of one of our main national assets. If the Government brings a decision before the Legislature for approval it gets that approval after the necessary scrutiny. Putting a complete blank cheque into a Bill removes that essential element of legislative scrutiny. We must not — I hope we will not — make laws on the principle of “whatever you’re having yourself, sir”. This is the important issue which lies at the heart of the Bill before the House and it is why I cannot support it in its present form.

I urge the Minister to think again and to follow through the natural consequence of the amendment already accepted by deleting section 3 altogether.

  Ms White: I would like to share my time with Senator Mansergh.

  An Cathaoirleach: Is that agreed? Agreed.

  Ms White: I welcome the Minister of State and the officials. I wish the Minister of State every success in the forthcoming European election. I am privileged to know Aer Lingus from many different angles, first as a young person coming to the city in the 1960s, as a customer and as a supplier. When I came to Dublin in 1962, the Aer Lingus air hostess was an icon for young Irish women, in the way that the Russian ballerinas are icons and role models for Russian women. Right through time they have been impeccably groomed, professional and role models for women. Due to the marriage bar, I had to give up my job in the Civil Service in 1969, but I had a skill and was able to walk into a job in the architects’ department in Aer Rianta after my honeymoon. In 1969, I experienced modern management for the first time when the then chief executive of Aer Lingus, Mr. Michael Dargan, would join the staff for lunch at a different table each day. This was revolutionary, as the style of management here as in the UK was hierarchical, with the bosses having their own restaurant, carpark and so on. I was spellbound to be sitting at lunch with Mr. Dargan.

I have listened to all the contributions on this Bill but my interpretation is different. Senator Ross said the 14.9% staff equity would be off-putting to private investors. I do not see why that [1499]is the case. The Aer Lingus staff have earned their share of the company. Aer Lingus is a flag ship company and was the first to brand the image of Ireland abroad. Long before Baileys was ever heard of, Aer Lingus was the most well known brand and everything about it was perfection and professional.

Public sector expansion was the culture of the mid-1970s and was encouraged in the 1977 Fianna Fáil budget as a way of dealing with unemployment. I do not condemn Aer Lingus management for the company’s financial difficulties because the culture was to take on more public sector employees. With the benefit of hindsight, one can say that was not the correct thing to do. However, the company had to face the stark reality of competition and the late Mr. Bernie Cahill, who was outstanding, put forward a plan and succeeded in getting Aer Lingus back on track. It was a tragedy that he died suddenly. Let me say categorically that I do not blame anybody in Aer Lingus for the over expansion because, among others, I benefited from public sector expansion.

In the late 1990s, the economy contracted. At a time when the Government intended to prepare Aer Lingus for the initial offering, industrial relations problems arose in Aer Lingus, as well as foot and mouth disease and the events of 11 September 2001 in the US. With the effects of foot and mouth and 11 September 2001, the contraction in business at the airport was frightening. My experience of trading with Lir chocolates in Dublin Airport at that time was a disaster. The contraction in international air travel put pressure on all airlines around the world.

Senator McDowell presented a pessimistic scenario, but people will come to Ireland if we have something good to offer them. It is the law of supply and demand. The purpose of the Bill is to ensure that Aer Lingus employees benefit from 14.9% in the employee share ownership trust. As I said already, one of the main factors driving the success of the Celtic tiger has been the relationship between unions and employers.

  Dr. Mansergh: I welcome the Minister to the House and I support the Bill. I think Senator Quinn used the wrong metaphor. When one is buying or spending, one can talk about the blank cheque but when one is selling, the blank cheque metaphor does not make sense.

Air transport is of significant strategic importance to this country. Mr. Seán Lemass saw it as the most important innovation in his lifetime in reducing peripherality. I am personally very proud that the previous Government and our Leader introduced the employee share ownership plan, ESOP, mechanism for a 14.9% worker shareholding in State companies. That was a highly progressive social measure. It was also a tremendous achievement to overcome the crisis of the events of 11 September 2001 and the [1500]Leader has spoken most eloquently about that aspect.

I share the concerns expressed in the House on two issues. While I accept that Ryanair has had great success in getting people to visit the country, Aer Lingus has the strategic routes and the slots at Heathrow and flies to mainstream airports. It is very important and I would hate to see, in a future privatised company, the slots or routes sold off for short-term monetary gain. I also share concerns about the mid-west and the role of Shannon Airport. While I do not think the protectionism resorted to in the past is the answer to Shannon Airport, which is very important for the whole of west Munster, the arrangements have to guarantee its future role. It is not purely a question of air transport. It is also a question of the national spatial strategy, balanced growth and development and proper industry and services for Shannon. It is one of the regrets of my lifetime that where Shannon was the country’s premier growth centre during my childhood and up to the 1960s, it is not any more. Shannon Airport should play an important role and I want to see it do so.

  Mr. Ryan: Everyone in Ireland feels an emotional twinge about Aer Lingus in a way that was never true of Eircom. I am not sure why that is the case. Perhaps it is because Aer Lingus is the company we identify most with our achievement of a degree of modernisation or perhaps it is a symbol of our independence.

I was born long after Aer Lingus was founded and I remember the return of its cancelled transatlantic service. The country felt an enormous sense of pride about the return of the service. Looking back, it is difficult to understand how anybody could have considered the provision by our national airline of a direct transatlantic service to be unsustainable given the extent of connections between this country and the USA. On the parts of the west coast that I know best, people identify more closely with the eastern United States than they do with London as that is where their families have moved. There are people I know whose knowledge of the geography of Springfield, Massachusetts, is much better than their knowledge of areas of London. Indeed, 20 years ago, their knowledge of Springfield was greater than their knowledge of Dublin. Aer Lingus pushes buttons with us which is why we must be careful not to allow emotion, or its absence, to determine how we consider it.

The employees of Aer Lingus have earned the right to their 14.9%. They have responded extraordinarily well to very difficult circumstances. It is worthwhile making a random check on the Internet to compare Aer Lingus fares to those of other airlines which claim to provide low fares. It is one of the unfortunate facts of my life that my name forms part of the name of an airline the achievements of which I am not inclined to praise too highly. I cannot do anything about it as I do not own the copyright. If one picks a date a fortnight from now and [1501]compares available prices, one will find that the difference is insignificant. In fact, the highest airfare I have seen paid on my behalf for travel to Britain was to Ryanair. I was travelling on Oireachtas business and the cost of the flight was €220 single from Cork Airport to Stansted due to late booking. I hasten to add that I was not paying. Had I known about the cost, I would have objected, but by the time it was booked I had no say in the matter.

While Aer Lingus has achieved a great deal, I am unpersuaded that share options for employees should be any more than a just reward and a stake in the company’s future. As a preliminary to privatisation, I am unconvinced of their utility. I do not have a great deal of ideological baggage when it comes to public ownership or privatisation. As Seán Lemass always said, one should look at the merits and demerits of each case. We would never have had a national airline if the State had not established it. We would never have had modern airports if the State had not set them up and there would be no railway network if the State had not sustained it. There is a very long list one can go through while questioning the wisdom of the State with a significant degree of 20-20 hindsight. Without the State there are many things our society would not have. We would not have our high technology industries if the State, in the person of Dr. Patrick Hillery, had not established the regional technical colleges. The colleges represented the most revolutionary change in Irish third level education in 100 years.

The State’s decisions to get involved in areas some people nowadays regard as unusual were largely justified by the outcome. Aer Lingus is a classic example. I am very reluctant to concede fundamental changes which transfer ownership of airports or the national airline until I hear a coherent case for doing so. I need to be convinced. I would like to see the business case in each instance and the economic arguments. I am very sceptical about the gung-ho beliefs of individuals and business communities in Cork and Limerick that if the burden called Aer Rianta was lifted from their shoulders, we would see wonderful, thriving airlines. I am entitled, as a citizen of Cork, to be convinced that what these people want will be good for my region. I am profoundly unconvinced at present. The leaked proposal of a mish-mash of interlinked, confusing debts will make Aer Rianta four times more complicated with half the accountability.

I do not care who owns our airports as long as they do what they are supposed to, but I am unconvinced about the current proposals. I take a similar view on Aer Lingus. It is much too easy to blame Aer Lingus for its own woes. It is worth reminding ourselves that in the 1980s, it was instructed by Governments of different political complexions to retain a transatlantic service which was losing vast quantities of money. The airline was subsequently blamed when the losses threatened its balance sheet. It is hard to blame [1502]the airline for the crises which followed 11 September 2001 and the foot and mouth disease outbreak. The company was not at fault, but its response was remarkable and considerable.

The high prices which everybody talks about were wrong. However, they were not the fault of Aer Lingus. We should remember that the Dublin-London route was a cosy cartel between Aer Lingus and British Airways, sustained enthusiastically for years by Mrs. Thatcher to fatten up BA before she privatised it. We would not have been permitted to introduce competition by the other sovereign state involved because it would have undermined Mrs. Thatcher’s pet project. It is rich to blame Aer Lingus for cashing in on an established scenario which both Governments, particularly the British, supported.

I am not convinced in principle that efficiency, flexibility or future funding are reasons to privatise Aer Lingus. Already, its decoupling from the large local airports at Cork and Shannon is a matter of great concern. It is now impossible to fly on an Aer Lingus flight and have one’s baggage transferred directly to Cork. Aer Lingus will not transfer baggage from its flights to Aer Arann or from Aer Arann flights. That adds two hours to a journey to or from Cork. It is a decision Aer Lingus has taken for the sake of efficiency but it is not in the public interest.

As Senator Ross said, and I agree with him, a privatised Aer Lingus will either be tied up in a series of knots which will make it impossible for it to function or, once sold off, will be very vulnerable. Some of its most attractive assets, in particular, the Heathrow slots, might be sold off in precisely the way Eircom sold off its best asset, Eircell. There are reasons of real national interest to prevent that and the best way to do it is to retain Aer Lingus in public ownership.

  Mr. Browne: I need to ask a question of the Minister of State. In the Dáil, an amendment was put down previously to the effect that any decision about the future disposal of Aer Lingus would come before the Dáil.

  An Cathaoirleach: We are in the Seanad.

  Mr. Browne: In fairness——

  An Cathaoirleach: According to the business ordered today, the Minister must reply now.

  Mr. Browne: This is a factor in the voting. Will it come before the Seanad as well?

  An Cathaoirleach: Will the Senator please resume his seat? I call the Minister to reply.

  Mr. Browne: There are two Houses of Parliament. It is a major factor in our voting.

  Dr. McDaid: After all the debate this afternoon I find it impossible to [1503]deal with all the issues, including the slots about which there is much confusion. I shall deal first with those who are opposed to the Bill, namely, the Labour Party and Senator Quinn. Senator Quinn commenced by saying he felt there was a wake in regard to four years ago. If there is a wake, the person tends to be dead. I would rather describe it by saying the person, or the company in this instance, was quite ill. It came back and recovered through the good work of all who have been associated with it. I would like to be associated with it as well.

Unfortunately, when one has a severe illness, there is another phrase that can be used, that one is in remission. Currently, Aer Lingus is in excellent health; it is in remission. There are numerous viruses circulating all the time which I would put under the aviation volatility virus umbrella, which encompasses SARS, foot and mouth disease, Iraq and 11 September 2001. We have a healthy company at present in a volatile area. The Government has not made any final decision on this matter and is leaving it open. This has been provided for in the Bill because, in the event of a decision to privatise this company, the ideal situation is that we would be able to proceed within a time as matters can drag on. The previous Act was in 2000.

With regard to the other issues raised by Senator Ryan, I like the words “emotional twinge” about Shannon. I wish to be associated with it. Most people would have an emotional twinge about Shannon Airport and we would all like to see the future of Shannon secured. I take into consideration the genuine fears expressed by Senators Daly, Dooley and Finucane, who are from the region, and by others about the sensitivity of Shannon and the perception concerning the position there in recent weeks.

Senator McDowell referred to the loss of direct services at Shannon. I do not necessarily feel we should privatise all areas. I have no hang-ups about privatising certain areas. I see no reason that the State should have an interest in forestry, ports and other areas. There are certain other semi-State companies for which I would have an objection to privatisation, as I had when Minister for Tourism, Sport and Recreation. I do not have any problem with the privatisation of Aer Lingus. I do not have any problem with the privatisation of airlines, but I have a certain reservation about the privatisation of airports. As Senator White pointed out, Aer Lingus is a strong brand with an equally strong Irish identity. I do not believe an investor in that brand would abandon its core market and cease to operate direct services on very profitable routes, thereby leaving a gap for a competitor to come in and exploit. Such a decision would not make economic sense. Certain people appear to think that suddenly the island of Ireland will disappear from the map. Direct [1504]services will always outperform indirect services if the fares are competitive. That is the type of Aer Lingus we have today. I do not necessarily agree with that part of it.

With regard to the ESOP, I have asked my officials to look at what is being proposed in the amendment. I would have reason to believe we should go along with this issue. The Senator has made a good case for it. I have some statistics from Senator Dooley which indicate that the number of people involved — this will have to be verified — would be approximately 300. Therefore, we are talking about 4,000 workers who have a certain number of shares. Those shares amount to 7,700 shares per employee. If the other 300 are included, that would be reduced to 7,200. Where is the major problem with accepting the amendment?

There are other issues that have been pointed out to me also. On a quick perusal of the legal documentation of the ESOP deal which was signed by all the parties, in other words, the Department of Finance, the Department of Transport, the unions and Aer Lingus, amending this legislation would have no impact on who is entitled to receive the shares. I will take a look at it because in the original legal documentation on ESOP there is a definition of “eligible employees” and a definition regarding the relevant date. I will take a look at that area to see what can be done because the shares are required by the trust. As I indicated, Senators may also get their own legal advice on the matter.

I understand there is some confusion in regard to the slots at Heathrow Airport. I should clarify that Ireland does not own any Heathrow slots. These slots are held by Aer Lingus on the basis of grandfather rights, which are rights of historic precedence. Heathrow is the largest international hub in the world and is an important part of the Aer Lingus network. It is, therefore, essential that we continue to have access to this hub even though there is an increase in direct services from Paris, Frankfurt and Amsterdam. I have been involved in all the meetings of the Council of Ministers and this matter is being discussed at a ministerial level. The rules being discussed by the EU are silent on the issue of the sale of slots. However, my reading of the situation, from the way the EU is discussing the issue of slots and a change of ownership — if an airline happens to be taken over — is that these slots would be transferred to the new owner.

Aer Lingus has been a successful company. Concerns have been expressed following the recent announcements of job transfers and job losses at Shannon Airport. As I said last night, I do not propose to comment on individual industrial relations matters which are ongoing. As already mentioned, Senators must appreciate that Aer Lingus operates in an environment which is becoming more competitive with ongoing [1505]pressure to reduce its fares. This can only be achieved if costs are reduced. Where would the Shannon area be without Aer Lingus and vice versa? However, I reiterate that we have been at all times informed by Aer Lingus that it is committed to maintaining operations at Shannon, especially its US services. I accept the reservations of Senators but I will not make a political point. My party and its representatives in the Shannon region have shown their commitment to the region by putting their positions at stake. I assure Members that the Government has no intention of abandoning Shannon.

Members referred to the EU-US discussion on the open skies policy. Fine Gael and the Labour Party in the Dáil asked the Government to abandon its talks with the United States. A court of justice has decided on this issue and it is inevitable that the United States will negotiate with European in regard to airspace. We are in constant talks with the United States. If there is an inevitability about the EU-US talks, where would Ireland be if not talking to the United States so that it takes our concerns on board when negotiating in an EU context? The Opposition in the Dáil yesterday asked the Government to abandon that position. This issue is misunderstood. The Opposition sought to have the talks abandoned but, if that was the case, how could the US know our position when negotiating on an EU-US basis?

  Mr. B. Hayes: They are shaking in their boots.

  Dr. McDaid: I will bring the points raised to the attention of the Minister and they can be discussed on Committee Stage.

Question put: “That the Bill be now read a Second Time.”

  Senators: Vótáil.

  An Cathaoirleach: Will the Senators claiming a division please rise?

Senators McCarthy, McDowell, O’Meara and Ryan rose.

  An Cathaoirleach: As fewer than five Members have risen, I declare the question carried. The names of the Senators who stood will be recorded in the Journal of the Proceedings of the Seanad.

When is it proposed to take Committee Stage?

  Ms O’Rourke: Next Tuesday.

Committee Stage ordered for Tuesday, 9 March 2004.

  An Cathaoirleach: When is it proposed to sit again?

[1506]  Ms O’Rourke: Tomorrow at 10.30 a.m.