Tuesday 27 September 2016

Our pride in the airline only distorts our view of the reality

The sale of Aer Lingus will add jobs to the economy and enhance our connectivity

Paschal Donohoe

Published 31/05/2015 | 02:30

Like any business, Aer Lingus has had to change with the times. Likewise, government policy in relation to ownership of the airline has responded to that change (Niall Carson/PA Wire)
Like any business, Aer Lingus has had to change with the times. Likewise, government policy in relation to ownership of the airline has responded to that change (Niall Carson/PA Wire)

On May 27, 1936, Aer Lingus set off on its inaugural flight from Baldonnel to Bristol. Seventy nine years later, on that same day, the Dáil debated a motion that would approve the sale of the State's remaining minority shareholding in that company. Like any business, Aer Lingus has had to change with the times. Likewise, government policy in relation to ownership of the airline has responded to that change.

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This Dáil decision this week to approve the sale of the State's share in Aer Lingus is a move that is expected to add jobs to the economy, enhance our connectivity as an island nation and secure the future of the airline. Coupled with this, our aviation policy favours competition through at least two major airlines with significant home bases competing in the Irish market. Aer Lingus, within IAG, strengthens that objective.

As one of the most volatile and fast-changing sectors of our economy, the aviation sector has been increasingly consolidating across Europe in recent years. This has seen many smaller airlines become part of larger groups or, unfortunately, go to the wall.

Aer Lingus is a fantastic airline which has served our country well. It has weathered many storms and shown great resilience in the face of adversity. In considering a proposed offer from IAG to acquire the State's 25.1pc shareholding, our priority has always been the best interests of Irish citizens and the long-term future of the airline.

Aer Lingus has a special place in the nation's heart and IAG's proposal has understandably generated much debate. However, our pride in the airline sometimes distorts our view of the reality that exists. Nine years ago when the Fianna Fáil government sold a 75pc stake of the company, our influence as a minority shareholder was dramatically reduced. We had limited power to prevent a disposal of the company's landing slots at Heathrow Airport , which are so important for Ireland's connectivity, and no say in how they were actually used.

The decision taken this week to support the proposed offer by IAG for the airline was arrived at after many months of negotiation. Careful consideration of what might happen in the years ahead, and an unwillingness by Government to leave Aer Lingus' future to chance that any sale down the line might be a forced decision in difficult times, were facts in our deliberations. Instead, we negotiated a deal for the best possible outcome for the company, the economy and the Irish people.

In doing so, we secured a number of commitments and guarantees, which the State didn't have before, many of which have not been a feature of other deals struck in the European aviation sector. Under the IAG proposal, plans to grow the airline expect to see approximately 635 new jobs created by 2020. This will lead to the creation of many more jobs indirectly in the tourism sector and the broader economy.

We will also see our influence strengthened in a number of areas under this deal. Until now, our ability to block the disposal of slots held by Aer Lingus at London Heathrow was dependent on agreement with another 5pc of shareholders. Under the new deal, the Minister for Finance will be able to prevent such a move. This commitment is unlimited in time and provides a protection that does not currently exist.

In respect of the use of those slots, we have no say right now in how they are used. Under the new deal, all Aer Lingus' daily services between Heathrow and Dublin, Cork and Shannon will be maintained for at least a seven-year period, with plans to enhance and grow both long and short-haul services further. This is a legally binding guarantee we do not currently have as a minority shareholder.

We have also secured legally binding commitments that protect the Aer Lingus brand and head-office location in Ireland. The legality of these commitments is underpinned through the redesignation of a single share, known as a B share, which will be held by the Minister for Finance and by the fact that they will be written into the company's Articles of Association.

Despite the fact that these commitments have absolute legal effect, questions have been raised by some about their durability if, for example, IAG is taken over or there is an attempt to, in some way, change the Articles of Association. The fact is that any change to the rights attached to this special share or to the articles themselves would require the agreement of the Minister for Finance.

This gives the State absolute control over what happens in the future in relation to the guarantees it has secured. Consultation that my department has had with the EU Commission satisfies me entirely about the robustness of these mechanisms which have been put in place.

Employment rights of staff at Aer Lingus will also be safeguarded and the CEO of Aer Lingus, Stephen Kavanagh, this week committed to expanding the scope of registered employment agreements, stating that compulsory redundancy or non-direct employment is not foreseen at the company.

Ireland is changing and changing for the better. We are a stronger, more confident nation that is increasingly positive about the future. This is highlighted by the fact that last year, over 25 million passengers used our airports; up 7pc on 2013.

In January of this year, Ireland's aviation safety oversight regime was also placed second in Europe, and fourth in the world, amongst major aviation world players by the International Civil Aviation Organisation.

I am passionate about this country and I have ambitions for it. I want to see those numbers grow, and Ireland to lead the way in aviation globally. Figures this week, too, show an increase in the number of overseas visitors coming to Ireland are up by 13.5pc on the same time last year. Stronger airlines will help us to continue to build on that.

The decision, almost 80 years ago, to establish Aer Lingus was an expression to the rest of the world of the optimism and openness of a fledgling country finding its wings. Now is the right time to allow Aer Lingus to fully spread those wings, and to chart a course to a brighter and a better future.

Paschal Donohoe TD is the Minister for Transport, Tourism & Sport

Sunday Independent

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