Joint Committee on Transport - Privatisation of Aer Lingus: Ministerial Presentation - 31st May 2006

Joint Committee on Transport:
Privatisation of Aer Lingus: Ministerial Presentation - 31st May 2006
Senator Norris: I apologise to the Minister and the committee for missing the early part of the meeting. I was with other members of the Joint Committee on Foreign Affairs at a private meeting with the Iranian ambassador. The committee will be pleased to learn that from my part, the exchanges were as robust as they apparently were here this afternoon.
I welcome the Minister’s commitment to Aer Lingus, which he put on the record. We all feel that commitment and, by and large, feel well served by Aer Lingus as a national airline. The situation has become difficult. The Minister is correct that we have witnessed the collapse, for various reasons, of national airlines throughout the world. We want to avoid this by whatever means possible. The Minister said we will need €2 billion to invest in long-haul aircraft and I am sure that is reasonable. I also know one cannot expect the Minister to give an estimate of what he imagines he will get from the sale because that could be financially prejudicial. However, the newspapers have suggested it could be approximately €400 million, so it will certainly be very far short of the €2 billion needed. That raises the question of from where the money will come.
As an observer, I noticed it was authoritatively stated at one stage that the State could not invest in Aer Lingus but this turned out to be incorrect. Under European Union rules, one cannot invest in the airline if it is in a financially negative situation. However, the market would not do so either. The market would be much more ruthless. It might not be prevented by legal restrictions from investing in a disastrous situation but I cannot imagine anyone investing in something which would be a dead end. There is a certain level of contradiction there.
It is also worrying to those of us who are not experts on the stock market to read comments suggesting that as the year progresses, the situation appears to be getting less favourable. Like Deputy Connaughton, I would be concerned. He asked a very good question which was not answered to my satisfaction. He asked if it is possible, even at a late stage, to pull out even if Aer Lingus has been put on the market and the machinery has been set in train. Is there a point at which it becomes impossible to take Aer Lingus off the table, because the auctioneer’s hammer has come down, and even if it must be sold at a bad price?
I am not ideologically committed one way or the other. I am not a member of a political party nor will I ever become one.
Deputy Glennon: The Senator is welcome to join us.
Senator Norris: I thank the Deputy for the invitation which I will graciously decline.
Remarkable allegations were made in the Dáil suggesting that senior management had attempted to steal the assets of the airline. I know that was modified subsequently but it raises the question of parallel situations where utilities were privatised. We are right to have concerns about it given, for example, the Eircom situation. Were the same advisers, who were consulted on the Eircom sale, consulted? It turned out to be a bit of a stinker. The net result of that is that we have a thoroughly rotten public utility in terms of Eircom. It gives hopeless service to the public and it was clearly asset stripped in the interests of wealthy people. Ordinary punters like myself would be very concerned that something comparable should not be allowed to happen to Aer Lingus.
There is also the question of pensions. Again, the Minister went part of the way - I will not get involved in a badinage - but I still have a slight concern. The type of talk I heard today was about fulfilling the legal requirements. The legal requirements may be less than the moral ones. A week or so ago, two gentlemen of a certain age, who had retired from the successor to TEAM Aer Lingus, appeared before the committee. What they were looking for was not only the minimum required by law but what they felt was their moral entitlement which was parity with other Aer Lingus employees because they believed they were, in essence, although perhaps not in law, employees of Aer Lingus. What the Minister has said suggests they will be treated in accordance with the requirements of the law which might create a difference between them and other Aer Lingus employees.
As an observer on the sidelines, I am concerned. I like Aer Lingus and fly with it whenever I can by choice. It is important we have a national airline. I am concerned about the privatisation of utilities precisely because I believe the citizen has often been shown not to get as good and as appropriate a service. I would not like to think this would happen to our national airline. We should treat all former employees equitably.
Deputy Cullen: The Senator raises a number of issues, some of which we have covered. We have had a debate on the EU rules on State aid and whether the Government could invest in a company. The rules are complex and while State investment might be possible in principle, in practice this may not be the case. It is a complex legal area and the matter is not as straightforward as some of the advocates of State investment might suggest. While it is possible that State aid rules might facilitate Government investment in Aer Lingus on the basis of the market investor principle, the application of the principle is certainly not straightforward. Even without State notification of such investment, the European Commission might seek to challenge any such investment. If, in the prevailing circumstances at the airline, the State aid rules did not prove an impediment to investment, there is no certainty this would be always the case.
I would be on very solid grounds in saying that if the State were to invest, it would be challenged. I think it is clear who would challenge it and I never limited the raising of such a challenge to the Commission or the EU. The Government would end up in the courts for a number of years and by the time the process would be complete we would have crippled Aer Lingus. I have no doubt that, like us, the Belgians probably held exactly the same views about their national airline, but sadly Sabina no longer exists. To the best of my knowledge none of the other traditional State carriers remains in State hands. That tells us something. I am not in the business of tying the hands of Aer Lingus behind its back and then sending it out to compete in the marketplace. That would be disingenuous. I would be failing in my duty to the staff and, as Deputy Shortall stated, to the taxpayer. I am not prepared to allow that happen. I have no doubt the best way forward for all, the staff, the national airline and the economy, is to ensure Aer Lingus has the necessary resources to compete in future.
The figure of €2 billion has been mentioned. That investment can be funded in different ways. However, one needs strong investment in the company to fund part of it, the company can then borrow on the strength of what it is doing and there are various ways of funding the purchase of aeroplanes. We are not trying to raise €2 billion from the sale of the company, as that would be neither feasible nor realistic.
Pensions are an issue for the company. The staff is not in receipt of State pensions. That is not to say I am a passive observer of what is involved. Obviously, I want to ensure the pension fund is in a strong and robust state going forward, not alone to cater for those employed at present but to ensure existing pensioners are catered for. We will come to the final conclusion of how the figures break down. A number of issues fit into the parameters, only one of which has been mentioned in regard to the resolution of the pension fund. I do not want to speculate beyond that.
Senator Norris: I am not an expert in the law, but I know that in certain areas of law in Ireland, and I assume it may be applicable internationally, in regard to commercial competition - I presume the Minister was talking about other airlines seeking to damage Aer Lingus - that if such action was lost and-or held to be vexatious for the purpose of wasting the assets of the opponent, the person taking the initial action could be required to lodge in court sufficient funds to compensate the party for the injury suffered. I would have thought this might be a line the Government might take up. The Minister referred to tying its hands behind its back but it seems that unless it has been aggressive in pursuing the possibility, there may be an ideological reservation about that slightly pusillanimous position being taken up by the Government in regard to whether it can legitimately invest in Aer Lingus. I think it would be worth looking at that possibility in a vigorous light.