Contribution to the Aer Lingus Disposal Motion

May 27th, 2015 - Pat Breen

Deputy Pat Breen: The empty Opposition benches speak volumes. I welcome the opportunity to contribute to this debate. The Government’s decision to recommend the sale of the State’s 25.1% stake in Aer Lingus to IAG brings an end to the uncertainty that has been there since December regarding the future of the company, which is very welcome. The initial offer was grounded because it did not satisfy concerns about jobs, connectivity and the Heathrow slots and I compliment the Minister for Transport, Tourism and Sport who has been here for most of the day. He played hardball on this issue and as a result, he secured significant concessions in a deal which is in the best interests of the future of Aer Lingus, connectivity to our regions and for the travelling public. We all remember the IAG chairman’s comments when he addressed the Oireachtas Joint Committee on Transport and Communication earlier this year when he said he did not do “second bids”; therefore, the Minister’s achievement in securing these concessions is all the more remarkable given the backdrop of Mr. Willie Walsh’s comments.

Both Government and Opposition Deputies have said that everybody in this country has a deep affinity with Aer Lingus and that is understandable given its long tradition as the driver of air services into this country. However, Aer Lingus is now a small player in the global aviation industry where mergers, strategic alliances and consolidation are now the norm. We have seen this in the mergers of Air France and KLM and Lufthansa and Austrian Airlines along with mergers in the United States. The aviation industry is very volatile and must adapt to the changing environment on a regular basis. If I said to somebody ten years ago that we would have 25 direct services per week to Abu Dhabi and Dubai, they might have laughed at me. We now have those services and they are very successful. Aer Lingus is a small airline that moves around ten million passengers per year. Ryanair moves 100 million passengers per year so the merger with IAG will be good for Aer Lingus and will provide the airline with greater growth opportunities than it would not have as a stand-alone airline. At the same time, it will retain its branding, a brand which has a strong international reputation.

I am particularly pleased that the issues I raised about Shannon Airport, about which everyone in the mid-west region was concerned, have been addressed and are enshrined in this deal.

Deputy Pat Breen: ] I listened to members of Fianna Fáil criticise the deal earlier. That party sold 75% of the company and retained the 25.1% shareholding, but it had received no guarantees whatsoever concerning the Heathrow Airport slots. As we know, Aer Lingus moved the slots from Shannon Airport to Belfast airport in 2007. When I questioned the then Minister for Transport about this, he told me that the State did not have the power to overrule management decisions on business matters. We have learned a lot since, which is why I am delighted that the Minister fought hard to have legally binding guarantees written into the articles of association from the outset. For the very first time we have secured a deal which guarantees the current level of Heathrow Airport services for the next seven years and effectively gives us a veto over any possible future disposal of the Heathrow Airport slots. Deputy Billy Kelleher and his colleagues failed to acknowledge the reality that if Aer Lingus was to decide to move a service from Shannon, Cork and Dublin airports, there would be nothing we could do to prevent it from doing so. Now, however, we will have security as we move forward.

The Shannon-Heathrow route is very profitable and extremely important in the context of foreign direct investment. There has been a lot of foreign direct investment in the mid-west region, including 70 US multinationals which employ over 10,000 people. Connectivity to both Heathrow Airport and the United States is extremely important. An indication of the opportunity for further growth on the route is the recent announcement that Aer Lingus is increasing capacity on the route by 25,000 seats this winter, representing an increase of 20% or an additional 65,000 passengers in a full year. If the route was not profitable, Aer Lingus would not be increasing capacity on it.

On the potential disposal of Heathrow Airport slots in the future, it is very significant that the Government has secured a guarantee by way of the retention of a golden share which will be controlled by the Minister for Finance, effectively giving him a veto. I have listened to criticisms inside and outside the House to the effect that this is not possible but it is. The Government has fought hard for this concession and despite the reservations expressed, I have no doubt that it will be copper fastened by the European Commission. It is hugely significant that the Government, as a golden shareholder in a private company, has secured this concession. This guarantee is exceptional in the aviation world and the Minister is to be commended for negotiating it.

The big concerns in my region centred on Heathrow Airport connectivity and the disposal of the Heathrow Airport slots, but these concerns have now been addressed comprehensively. I have listened to some Opposition Deputies questioning the commitments on Heathrow Airport connectivity, but the proof is in the response from the chairperson of the Shannon Airport Authority, Ms Rose Hynes, who said any IAG deal would open a new era, not just for Aer Lingus but also Shannon Airport. This is the airport authority which has transformed Shannon Airport and turned it into a successful enterprise. The airport was a shambles under the previous Fianna Fáil Administration when passenger numbers were falling. The authority is to be commended for the 17% increase in passenger numbers it has secured this year and the continuing growth in business at the airport. That is proof of the Government’s commitment to Shannon Airport.

We have nothing to fear from change and the proposed change will be for the good. Shannon Airport is looking forward to a new era in aviation and will be in a position to exploit new growth opportunities which arise. Aer Lingus has committed to enhancing the transatlantic services to Boston and New York and will replace the current 757 aircraft with the wide-bodied 767 aircraft on the Boston route, for example, thereby increasing capacity considerably. It is also considering the expansion of its twice daily service from London City Airport to JFK Airport, which has been very successful. This would benefit the business community across the west of Ireland.

IAG is also examining growth opportunities with tourism and business interests in the mid-west region which are being pursued with its US partner, American Airlines. I have spoken before about the importance of the oneworld alliance American Airlines has returned to Shannon Airport and will schedule 114 additional flights to Philadelphia which is a fantastic hub airport. Given that American Airlines is lAG’s partner, Shannon Airport is ideally placed to exploit growth opportunities which may arise from this partnership. In addition, it also has pre-clearance facilities and an uncongested airport supported by an excellent hotel and bed and breakfast sector. Even though Dublin Airport will be the hub in this deal, there are opportunities for Shannon Airport, too. Hotels in Dublin are congested and almost at full capacity, but there is spare hotel capacity in the mid-west region.

There will also be opportunities for Shannon Airport to further expand transatlantic services down the road. The sale of the State’s shareholding will realise €335 million and I very much hope the proposed connectivity fund will stimulate connectivity to Ireland because as an island nation connectivity is extremely important to us. I hope some of the connectivity fund will be used to push transatlantic services into Shannon Airport.
On the future of Aer Lingus employees, I would not be signing up to the agreement if I thought that it would negatively affect the jobs of the workers, particularly those at Shannon Airport who have given so much time and commitment to the company. I certainly would not want their jobs to be jeopardised. I am happy that the Minister has secured commitments from Aer Lingus that the workers’ concerns will be dealt with through the expansion of registered employment agreements and I expect Aer Lingus to live up to its commitment, as it has done previously, that there will be no outsourcing of employment.

Various Opposition Deputies have taken to their feet in the House today to criticise the deal. That is not surprising, given that some elements of the Opposition oppose everything. Fianna Fáil has no policy whatsoever, other than to oppose the Government for the sake of it. That has been proved here today by its arguments about Aer Lingus. It left Shannon Airport in limbo for seven years and is not looking to the future now either. It is not positive and its members do not see the potential for change and growth in the deal. I have received numerous calls from constituents who are complimenting the Government on securing these guarantees, particularly the commitment on the Heathrow Airport slots. I will be supporting the deal and commend the Minister for the work he has done on it.