Closing remarks by Minister for Transport, Tourism & Sport, Paschal Donohoe TD, on Dáil Motion on disposal of Aer Lingus shareholding

Thursday 28 May 2015

Check Against Delivery

I want to thank all Deputies for their contributions.

Aer Lingus has a long history and a close association with the State.  For 70 of the nearly 80 years of its existence, it was State owned and although a majority stake in the airline was privatised some nine years ago, it still has a special place in the hearts of the Irish people. The Government has been very conscious of the very significant public interest in the future of the airline which has been clearly demonstrated by the extensive public debate that has taken place since IAG's proposed offer was first announced last December. 

This is the reason why the Government has taken such care in reaching a decision on the future of its shareholding in the airline.

We are doing so against the background of stunning tourism numbers announced yesterday – almost 1.8 million overseas visits to Ireland in the February to April period, an increase of 13.5%, which highlights the importance of connectivity and access to jobs in the tourism sector and throughout our economy.

On this subject, we don’t need any lectures from the opposition.

AN EVER-CHANGING AVIATION SECTOR

The international aviation market has changed immeasurably since 1936, with the most rapid changes occurring over the past three decades. For its first 70 years as a State owned company Aer Lingus served the country well. As a minority State owned company it has performed even better, in a highly competitive and volatile market.

And now the Government has decided to support IAG’s Offer as we are absolutely clear that this provides the best opportunity for Aer Lingus to continue to grow and prosper, serving the country as part of a larger privately owned airline group. Like any business, Aer Lingus has had to change with the times and likewise Government policy in relation to ownership of the airline is responding to changing circumstances.

At the heart of this debate is whether in 2015 the State should continue to own a significant minority shareholding in an airline. As I have pointed out already, the European airline industry remains relatively fragmented compared to the US. Many of the European legacy carriers have been forced to implement significant restructuring plans in recent years.

This has also driven consolidation amongst European airlines with many formerly State owned airlines either becoming part of larger groups or having failed. I do not want to leave it to chance that it will be a forced decision in difficult times.

The huge improvements in choice of routes, price and service levels are largely attributable to the opening up of the aviation market to real competition. Tourists, business people, friends and relatives can now fly in and out of more Irish airports to more destinations that could ever have been imagined 30 years ago.

The travelling public and the economy as a whole have benefited greatly from the very good competition and connectivity provided over recent decades. This Government's aviation policy is firmly aimed at ensuring this situation is maintained into the future.

A key aspect of IAG’s offer is that upon completion, the two largest Irish airlines would continue to operate as strong competitors in the Irish market.

BENEFITS OF THIS DEAL

As has been demonstrated clearly over the last two days, the Government decision to support IAG’s Offer has only been taken after very careful consideration and having secured very important guarantees from IAG in its offer.

I set out the main details of the offer in my opening statement and the key reasons why my Cabinet colleagues and I believe that supporting the IAG offer is the right decision for the travelling public, the airline and the State as shareholder.

·         It will create employment – it is envisaged that a net total of 635 additional jobs can be created by 2020 with 150 of those coming on stream by end 2016.

·         It strengthens the competitive position of Aer Lingus, reduces risk to the company and provides it with an opportunity within a larger group to grow and face the challenges in a changing aviation environment.

·         It gives greater certainty around our connectivity to Heathrow. It strengthens the guarantees we have around disposal of Heathrow slots and provides strong new guarantees around slot utilisation for at least seven years that we do not have today.

·         It promotes Ireland’s wider connectivity and can bring growth to our airports. It is anticipated that it will bring benefits to both Aer Lingus’s long-haul and short-haul networks. There will be a focus on sustaining and growing routes from Dublin, Cork, Shannon and Knock.

·         It will protect the iconic Aer Lingus brand and will keep its head office in Ireland.

I would now like to respond to some of the issues that have been raised in the debate here in the House over the last two days. 

LEADERSHIP OF GOVERNMENT PARTIES

I want, if I may, to comment on the debate we have witnessed here. I was happy to be here for the entirety of the debate over the last two days, as well as further contributions at Leaders Questions and so on.

Politics is about leadership, and doing what is right, rather than what is popular. Over the last two days, the leadership qualities of various members has been put into sharp focus.

I am particularly struck by the members from both Government parties who have indicated they will support this motion, as in the best interests of the State and the company.

Despite initial reservations – some of which I shared and which led to my rejection of the earlier offer by IAG - they engaged with me, with the company and with the unions to deal with those issues, in a forthright and responsible way.

Those Deputies chose not to play politics with workers’ livelihoods, but rather sought to use their roles as public representatives to seek assurances for those they have been elected to fight for.

I commend them for that.

I want to particularly note the contribution of Minister for Finance, Michael Noonan, Minister for Public Expenditure and Reform, Brendan Howlin and Minister of State in the Department of Jobs, Enterprise and Innovation, Ged Nash, who worked closely with me in recent days and weeks. They showed passion and ambition for this country, as did many colleagues.

LACK OF FIANNA FÁIL LEADERSHIP

That same passion and ambition was not in evidence elsewhere in this House.

I am particularly struck by the cowardly attitude of Fianna Fáil on this.

The party that privatised Aer Lingus and bankrupted the State is now playing politics with such a great company.

During this Fianna Fáil members have, on the one hand, praised Aer Lingus management for turning the company around and making it a success while on the other claiming that they are determined to sell out its interests and that of its workers and customers.

They cannot have it both ways.

Fianna Fáil, having secured practically no guarantees when they sold Aer Lingus, is now – for nakedly political purposes- opposing a deal which includes real guarantees and brings huge benefits to Ireland in terms of jobs and connectivity.

To make matters worse, Deputy Martin referred yesterday to the so-called Nyras report that he claimed was – and I quote- ‘commissioned early in February between Aer Lingus and IAG’.

It was nothing of the sort. Deputy Martin either did not know the facts, which shows a shameful inadequacy in his own leadership, or did know and misled the house. 

The work of Nyras was commissioned solely by Aer Lingus and had nothing to do with IAG, nor has it anything to do with the deal currently being debated by Dáil Éireann.

Deputy Martin’s contribution was only matched in its absurdity another claim about Aer Lingus - and I again quote- “tomorrow it will be owned by the Arabs”.

Complete and utter nonsense.

Fianna Fáil now stands separately to every major business organisation in this country in not welcoming this deal. The Party that bankrupted the State is now itself bankrupt of economic vision.

Senator Averil Power was right – you are unfit to govern.

ECONOMIC ILLITERACY OF SINN FEIN AND THE INDEPENDENTS

As for Sinn Féin, the same old tired proposals were brought out again. Nationalise the airline. Nationalise everything that moves. How, I wonder, would we pay for these nationalisations?

The answer is, no doubt, a wealth tax. That tax would not only be levied on the companies they despise, but also every individual in this country – including the workers in Aer Lingus.

Their colleagues on the independent benches- the cheerleaders of the boom like Deputy Ross and the cheerleaders of gloom, like Deputies Daly and Coppinger, have engaged in their usual strategy of parliamentary indignation.

Had almost every other issue upon which they have spoken in the past not generated similar indignation, one might have taken their words in recent days more seriously.

OVERSIGHT MEASURES FOR COMMITMENTS – ARE THEY ROBUST?

A number of Deputies have questioned the proposed oversight measures for the legally binding commitments we have secured to maintain connectivity to Heathrow, retain the Aer Lingus brand and its head office in Ireland.

Subject to the approval of Aer Lingus shareholders, these connectivity commitments will be enshrined in Aer Lingus’ Articles of Association thus giving them legal effect.

The Minister for Finance will retain one share in the company (which will be redesignated as a new class B share), which will be redesignated as a new class of share and have certain rights attached to it.

The prior consent of the Minister for Finance, in consultation with the Minister for Transport, Tourism and Sport of the day, will be required by Aer Lingus before taking any action inconsistent with the connectivity commitments.

Some Deputies have suggested that there would be nothing to prevent the Articles being changed in future under IAG ownership, negating the value of this B share.  That is absolutely not the case.  Under the provisions of the proposed Articles, which have been agreed with IAG, any alteration of either:

·         the rights attaching to the B Share; or

·         the Articles themselves that affect the rights attaching to the B Share in any way

would require the consent of the B shareholder, i.e. the Minister for Finance.

In other words, the proposed protections to be enshrined in the Articles cannot be changed into the future without the agreement of the State shareholder.

COMPARISONS TO JOB LOSSES AT IBERIA

Despite the clear network development plans and job creation plans outlined the offer, some Deputies continue to try to scaremonger by referring to job losses that happened at Iberia following its merger with BA to create IAG. 

Attempting to draw a direct comparison between Aer Lingus and Iberia is completely inappropriate and those Deputies know that. The respective position of the two companies is vastly different - Iberia was in financial distress at the time of the merger with BA and had been loss making for several years. 

Aer Lingus is profitable having undergone significant restructuring over many years. 

It is clear that the overall impact of the transaction should be very positive for employment in Aer Lingus, with the opportunity for an additional net 635 new jobs to be created by 2020. 

CONCERNS REGARDING TERMS AND CONDITIONS OF EXISTING EMPLOYEES

In relation to the terms and conditions of existing employees, the Chief Executive of Aer Lingus has confirmed Aer Lingus’ position on Registered Employment Agreements and has committed to expanding the scope of registered employment agreements where appropriate to include staff groups not covered by the current agreements. 

Mr. Kavanagh has also indicated that Aer Lingus will engage in a process of consultation with staff and their representatives governed by agreed structures when any restructuring is required and that Aer Lingus  does not foresee a likelihood of either compulsory redundancy or non-direct employment.

AER LINGUS IN THE FUTURE

Aer Lingus has been successful in recent years in meeting the challenges of the global financial crisis and its management and staff have done a very good job in this regard, as evidenced by the approach from IAG. 

However, the airline industry is volatile and consolidation is taking place and Government believes that there will be significant benefits for future growth and connectivity in the company joining a larger group such as IAG while remaining as a separate business with its own brand, management and operations. 

In addition, the Board of Aer Lingus has expressed the view that, as part of the IAG group, it would have improved opportunities to de-risk and accelerate its growth plans and should be in a stronger position to meet the commercial challenges of increasing competition than as a standalone airline.

CLOSING COMMENTS

To conclude I want to remind the House what I said yesterday.

Aer Lingus was one of the first State companies established by the newly independent State in 1936. It pre-dates the likes of CIÉ, and Bord na Móna. The decision to establish Aer Lingus was more than just the setting up of an airline - it was an expression to the rest of the world of the optimism and openness of a fledgling country finding its wings.

Today, that optimism and openness remains.

Optimism that change is not something to be feared, but to be examined and, if appropriate and after reflection, embraced.

Openness to new opportunities, while admitting that there are no certainties in life and risk is ever present.

Ireland and Aer Lingus are ready for this change.

I am absolutely confident that supporting IAG’s offer is the right decision for us to take and is in the best interests of the airline, its employees, the travelling public, job creation and the economy overall.  

We are seeking the approval of this House to proceed on the basis of the General Principles that have been laid before you.  I commend this motion to the House.

Ends
Press Office, Department of Transport, Tourism and Sport, 01 604 1090 / 01 604 1093 www.dttas.ie pressoffice@dttas.ie

Date of Speech: 
Thursday, 28 May 2015