Breen raises Shannon Heathrow Debacle on the Adjournment Debate

October 9th, 2007 - Pat Breen

 

 I am sorry the Minister for Transport, Deputy Dempsey, is not here to take this very important matter. It shows the way he treats it. However, I am delighted the Minister for Education and Science, Deputy Hanafin, is here on his behalf. Being a Tipperary woman, she will be very supportive of what I have to say.

Weekend media reports reveal the Minister for Transport is about to appoint two new directors to the board of Aer Lingus with a mandate to block the transfer of Heathrow slots from Cork and Dublin Airports and is set to abandon Shannon Airport to the west. We all welcome the move to safeguard the slots at Cork and Dublin Airports but to abandon Shannon Airport and leave the entire region without connectivity to Heathrow is unbelievable and will not be accepted in the region.

The Minister for Transport told us we were exaggerating. When he finally accepted there was a crisis, he said there was nothing he could do about it. The Minister has told us it is too late for Shannon, but it is not. Two weeks ago in the House, the Minister said the Government believed it would be inappropriate to intervene in the decision-making of a private company and that to do so would ultimately be damaging both to the company and its customers. I remind the Minister for Transport that he also said shareholders do not have the power to overrule management decisions on business matters. He said this was based on legal advice. Will he publish this legal advice so we can examine same? It is extraordinary that the legal advice last week was that one cannot intervene but that this week, the Minister will appoint two board members and, as quoted in the newspapers, he would not give management carte blanche in regard to what it could do with the slots. The Minister, however, will not intervene in the Shannon issue.

Last week during the debate on Aer Lingus there were rumours that a new airline was coming into Shannon and that a deal would be done in the near future but the reality is very different. Anybody who knows the airline business will know that BMI had already committed two fleets flying long-haul to the Middle East and would not be in a position to change its aircraft rotations in respect of any incentive it was offered. The rumour was just a face-saving spin coming from the Government.

The Minister is to appoint two directors to Aer Lingus which he should have done on his first day in office. However, he failed to realise how important this was until my colleague, Deputy O’Dowd, pointed it out to him. Will the Minister appoint somebody from the mid-west to the board? The mid-west has been marginalised at Government and board levels. While various Government Deputies in the mid-west were happy to jump up and down in constituencies and talk about the issue none stood by us in terms of their commitments when there was a crucial vote last week. It is important the mid-west is given a voice at board level in Aer Lingus. It would provide a direct input for the region at the forthcoming extraordinary general meeting to discuss fleet expansion.

Already a number of investments in the region have been cancelled. Ballykilty Manor in Quin has put its expansion project on hold and this comes on top of the decisions by Dromoland and Doonbeg.

The reality is that Aer Lingus is the only airline in respect of the Heathrow slots. There is no alternative. If the decision by Aer Lingus is not reversed, it will have huge consequences for the Shannon and entire west region. Day by day confidence is being diluted in our region and yet no action is being taken in defence of Shannon. There are commitments to future investment in Transport 21 and there was a commitment in the tourism and economic development plan, but nothing has happened. Not one cent has been spent on this promised tourism and economic development plan.

Having conceded that it can intervene in Aer Lingus, I call on the Government to use its 25% shareholding in the company to have the Aer Lingus Shannon-Heathrow service restored. Time is running out in terms of airline scheduling for 13 January 2008 but it is also running out for the Minister for Transport and the Government on this issue. It is a critical issue in the region and it will not go away.

Minister for Education and Science (Deputy Mary Hanafin):

I am responding on behalf of my colleague, the Minister for Transport, Deputy Dempsey. Under the memorandum and articles of association the State is entitled to appoint three directors to the board of Aer Lingus. Currently, there is only one State appointed director serving on the board and it is now proposed that two further appointments be made. The State’s representatives will not, as has been reported, have a mandate to block any future slot transfers. Under company law all directors have legal responsibilities to protect the interests of the company which, in practice, means advancing the interests of all shareholders.

Immediately after the IPO, Ryanair’s attempted takeover bid was launched. Under the applicable law the State representative on the board was excluded from board meetings at which the takeover was discussed. It would not have made any sense in such circumstances to have appointed all three State directors at that time.

The circumstances are now different and it is appropriate to make those appointments in the near future. The State appointees will seek to ensure that all future decisions of the company that have implications for wider Government, aviation or regional development policies are considered and decided at board level. This will give the State appointees the opportunity to raise the public policy implications of each decision and to ensure that the full commercial implications for the company are taken into account. The State appointees to the board do not have a veto on board decisions. It is not possible for the State, even as a shareholder, to seek to impose non-commercial obligations on the company.

Aer Lingus has stated that it made its decision to transfer the Shannon-Heathrow slots for commercial reasons and the company has confirmed that this decision is commercially robust. Under company law it is not possible for the State or any other shareholder to overturn a decision taken by the company on day to day business matters. The legal advice to the Government has been clear and unequivocal on this. The Minister has made it clear to the company that this decision goes against national aviation and regional policy but it has made it clear that it will not change that decision. By appointing our full board complement it will be possible to ensure that the full ramifications of all significant strategic decisions are fully discussed and decided by the board.

In regard to connectivity, the report of senior officials group, which has now been published, examined all the implications of the Aer Lingus decision. It concluded that while the withdrawal of the Heathrow service is a loss to the Shannon region, the negative impact from a connectivity point of view almost completely relates to one stop connectivity and flight duration to key destinations in Asia, the Middle East, Africa and Australia, as such destinations must generally be accessed through a major hub. This has obvious adverse effects in terms of business travellers and other users from the Shannon region.

However, the senior officials group confirms there should be little impact on connectivity with destinations in the Americas as the best route is as likely to be through one of the US hubs served directly from Shannon. Services between Ireland and US are enhanced when one takes into account the link up by Aer Lingus with the US carrier, Jet Blue, which makes possible access to and from Shannon to 50 airports in the US, Mexico and the Caribbean.

This is in addition to the new direct services being provided under the open skies arrangements. In the case of European origins or destinations, the analysis found that there is no loss of one-stop connectivity but travel via Heathrow was found in general to be faster.

The Minister commends the Shannon Airport Authority for its positive response to the present difficulties. The authority has specifically identified airline services to the key European hub airports of London-Heathrow, Paris, Amsterdam and Frankfurt as being of key strategic importance to its ongoing development. The airport recently published a European hub airport incentive scheme for services to come into operation in 2008 which provides for significant discounts in airport charges and for the possibility of marketing support to be provided by Shannon Airport for new services.

The Minister is very committed to ensuring that the mid-west region will continue to have the widest possible range of connectivity options available for the benefit of business and tourism throughout the region.