Aer Lingus Bill, 2000: Order for Second Stage 21st June, 2000 Bill entitled an Act to provide for the holding, transfer, disposal, exchange and sale of shares in Aer Lingus Group public limited company by the Minister for Finance, to provide for the issue of shares by that company, to provide for matters relating to superannuation schemes of that company and its subsidiaries, to provide for matters relating to Aerlínte, to provide for the repeal of certain enactments and to provide for related matters. Mr. Moylan: I move: "That Second Stage be taken today." Question put and agreed to. Aer Lingus Bill, 2000: Second Stage. Question proposed: "That the Bill be now read a Second Time." Minister for Public Enterprise (Mrs. O'Rourke): I am very grateful to Senators for agreeing to take the Bill. I am aware that there was a fuss, which was Members' entitlement, as it was not on the agenda. The purpose of the Bill is to facilitate the sale of shares in Aer Lingus at a time to be determined. The Government authorised me on 14 December 1999 to initiate a process leading to a public offering of shares in Aer Lingus. Since the Government's decision the Minister for Finance and I have engaged Salomon Smith Barney and AIB Capital Markets as the joint global co-ordinators and underwriters for the transaction. During the past few months officials from my Department and the Department of Finance and the advisers have worked closely to prepare the necessary groundwork for the IPO. The enactment of the Bill is a crucial element of the process. I hope it may be possible to complete the offering in the latter half of the year or early 2001 depending on market conditions and the satisfactory finalisation of all preparatory stages for the IPO. Aer Lingus has made and continues to make a significant and valuable contribution to our economic and tourism development by providing a range of quality services to destinations in our main markets in the United Kingdom, Europe and the United States of America. It is the Government's wish that the airline should continue to play this key role for the future, irrespective of its ownership status. Irish people at home and abroad have taken great pride in the achievements of the national airline since its formation over 64 years ago. It has been clearly identified with our image as a nation at home and abroad and has in many ways grown up with the State. Its strength has always been the quality of staff and the warm and personal nature of the service which they provide. I am confident the company will long continue to provide this service for its customers. Since its establishment in the mid 1930s with one small propeller aircraft serving one route - Dublin to Bristol - the airline has developed into a thriving and profitable company earning good profits, employing over 6,200 people and operating 38 aircraft serving 34 destinations. In 1999, it carried over 6.5 million passengers. The company was structured into the present Aer Lingus Group plc in 1993 as part of the major restructuring programme commonly referred to as the Cahill plan. The restructuring period was a traumatic event for the company and staff. It involved cost savings, rationalisation, a once off cash injection of £175 million by the Government and the divestment of non-core assets. It could be said that the significant change involved led in essence to the creation of a new airline. I do not underestimate the impact of the crisis at that time. All of us in pubic life and many others will remember it and the various episodes which led to huge trauma for everyone, including those who worked in the company, those who were in Government or Opposition and those involved in the decision making process. I put on record my appreciation for the work done, the challenges met and the opportunities taken by both parties since then to produce the healthy, vibrant company of today. The trading performance of Aer Lingus has been positive over the last number of years, bolstered by the strong economic conditions in Ireland. Furthermore, the board and management have identified clear opportunities for profitable development well ahead of the forecast average growth for the sector internationally. This growth will be achieved through further development of existing routes, through capitalising on the good location of hubs at Dublin, Shannon and Cork and through the development of enhanced services in conjunction with its partners in the Oneworld alliance. I welcome the US decision to approve Aer Lingus's code-sharing with AA, American Airlines, one of its alliance partners, on routes to New York, Boston, Chicago and Los Angeles. I also welcome the news of US approval for Aer Lingus to operate on a new route to Baltimore, where services will commence in September next. This brings the number of routes the company operates to the US up to five. Notwithstanding this positive performance and the forecast for continued economic growth in Ireland, the Government wishes to ensure that the airline is fully and clearly positioned to compete successfully in the changing global air transport market and has the ability to respond effectively to the cyclical nature of the industry. The Government is satisfied that there are no longer compelling economic reasons underlying State ownership of Aer Lingus. The availability of private sector capital is now far more widespread than when the airline was originally set up and there is no shortage of operators willing to take on commercially viable routes. Across Europe, Governments have withdrawn from direct control and/or ownership of airlines. Privatisation of former flag carriers, such as British Airways, Lufthansa, Air France, KLM and TAP has either occurred or is underway. The only state airline in the medium to large size, other than Aer Lingus, which has not introduced private capital to date, is the Greek airline Olympic Airlines. However, it is understood that it too is now being prepared for privatisation. The air transport industry is particularly dynamic. It has been challenged over recent times by the opening of the European market, the adjustments required to deal with the new competitive environment and the strategy being pursued by the US for open skies policies. We have a particular policy in this regard which we do not intend to change. In making its decision for an IPO, the Government had regard to the aviation industry's response to change, including alliance consolidation, ownership changes, competition from low cost carriers and accelerated technological innovation. It also had regard to the significant capital needs that will be required by Aer Lingus, not only over the coming years, but shortly. In its report "Strength through alliance" published in April, 1999, which recommended entry to the Oneworld alliance, Aer Lingus identified a need for equity to meet existing growth plans, including the major fleet development programme currently underway, as well as to maximise the potential benefits of the alliance. Advisers appointed by the Minister for Finance and I who examined this matter at the time broadly concurred with this view and concluded that a minimum of £150 million was required to fulfil the company's needs going forward. That is based on the fact that the ratio of airplanes on hire and those owned is not tilted favourably in the case of Aer Lingus and on the clear need for massive capital injections to ensure that the airline can invest in the necessary airplanes to enable it continue to compete satisfactorily and, most importantly, to enable it fulfil now the challenges and advantages facing it in the Oneworld alliance.

The Government's strategy for Aer Lingus is being undertaken in consultation with the Aer Lingus management and unions. I have no doubt that this strategy will secure a strong and viable Aer Lingus going forward, continuing to serve Ireland's main markets in the UK, Europe and the United States. I met with union representatives shortly after the Government decision. This was followed by a series of contacts primarily between advisers from both parties, which were helpful in shaping a framework for an ESOP. I believe that these contacts should now give way to formal discussions and I have written to the Aer Lingus unions inviting them to engage in formal discussions on an ESOP in the context of the IPO. Aer Lingus employees already enjoy the benefits of a profit sharing scheme implemented as part of the 1993-6 restructuring programme. The scheme was put in place by the then Government in recognition of the additional contribution asked of the workforce in the implementation of the Cahill Plan. Under the scheme, eligible employees are entitled to receive the equivalent of 10%, approximately £24.4 million, of the issued share capital of Aer Lingus at 31 December 1995, earned out of profits, of which 5% is by way of shares and 5% by way of cash. In the context of the IPO, the Government has authorised me to discuss an ESOP which would give the staff a stake of up to 14.9% in total, in the airline. I look forward to working with the staff representatives on this matter over the coming months. Turning to the main provisions of the Bill, section 1 is the definitions section and is self explanatory. Section 2 and the Schedule provides for the repeal of the existing legislation governing Aer Lingus. Section 3 provides for the sale of shares in the airline. Section 4 is intended to enable the company to issue and sell shares. Section 5 provides for agreements relating to the sale of shares in the airline. Section 6 provides that with effect from the commencement of this section, the scope of the Worker Participation (State Enterprises) Acts will no longer apply to the company and any worker director holding office on the board at that time will cease to hold such office. By law a company emerging into a flotation process is not allowed avail of the provisions of the Worker Participation (State Enterprises) Acts because they do not cover such a company. As in the case of Telecom Éireann, we were able to agree an arrangement with the unions. It may not have been perfect but it met what was needed at that time. There has not been an advancement on that, but in the talks with the unions, which I hope will commence when they reply to my letter to them, I hope we will include this as an item on our agenda. I intend to try to work out with the unions an equitable arrangement, as I was able to do with the Communications Workers' Union with regard to Telecom Éireann. It remains to be seen if a different type of formula will emerge through the ICTU and the other unions involved, such as SIPTU and IMPACT, but we have the time to engage in such a process. Section 7 is concerned with employee shareholding schemes. Section 8 provides for an exemption from section 60 of the Companies Act, 1963. Section 9 is an enabling provision to provide that Aer Lingus may establish a superannuation scheme for employees and former employees of Aer Lingus. Naturally that is an important issue. Last autumn because of a huge amount of correspondence, telephone calls and parliamentary questions, I engaged in a process whereby I met the trades unions. They voiced legitimate and worrying concerns regarding the pension schemes of Aer Lingus and Aer Rianta. I asked the chairmen of Aer Lingus and Aer Rianta to set up task forces to look into the companies' pension schemes and then report back to me. Last week I received that report. I have asked the two chairmen to meet me in the coming weeks to look at the arrangements they are putting in place to ensure whatever is required of a pension scheme in the State sector is adhered to. We have also sent the report for actuarial appraisal. In the months ahead I hope to come to grips with that. It is proper that it should be worked through. It is proper for the workers and those who worked there that a proper scheme be entered into. I thank all who contacted me and made me aware that there were challenges and difficulties in the existing schemes. In particular, I look forward to meeting the chairmen of Aer Lingus and Aer Rianta to hear their views on how they intend to come to grips with this and ensure that the pension schemes are properly worked out in order that proper arrangements are made. That is only right and I have a duty to ensure that happens. Section 10 is a standard provision regarding the expenses of the Minister for Finance and the Minister for Public Enterprise. Lest Members think that I will go off with a great deal of money from Aer Lingus, it has nothing to do with that but has to do with the expenses of running the IPO. Let the Senators all be clear on that. Section 11 provides for the repayment to the Exchequer of a loan - I think it is £5 million - and outstanding interest by Aerlinte. Section 12 provides for the disapplication of certain Acts to Aer Lingus. Section 13 gives the Short Title and commencement provisions. When I came into the Department this time three years ago - in fact, it was five days from this date - one of the first files put in front of me was the Aer Lingus file. My predecessor, Deputy Dukes, had written in April 1997 to the chairman, Mr. Bernie Cahill, to ask his and the board's views on the future of Aer Lingus. Time moves on and Governments come and go, and three years later here we are dealing with the response of the same chairman - it seems only elected people change. The chairman responded by letter to me, then Aer Lingus set up a study and there was the appraisal of that study. I took a memorandum to Cabinet, and a second memorandum, and there were exploratory talks between the advisers. There is now the invitation to the trades unions to come to real talks and I hope this will be taken up. I hope the issues of the pension scheme and the ESOP will be determined soon. I hope, having heard the views of this House and the Dáil, that we can arrive at a decent Bill containing whatever amendments may be felt necessary, and I am open to that. I commend the Bill to the House and look forward to hearing the views of the Members of the Seanad on this Bill. Mr. O'Dowd: Fáiltim roimh an tAire go dtí an Teach seo arís. Is Bille an-thábhachtach é. Aontaoím gur rud tábhachtach go mbeadh an mBille seo roimhinn, ach níl mé ró-shásta faoin modh ina tháinig sé isteach. My party supports the Bill and the principle behind it. We have no difficulty with the Bill, but I have some difficulty with it coming in at such short notice. As it is such an important Bill, I am not satisfied that I have had enough time to research all of the arguments which I should rehearse here. Perhaps on Committee Stage there may be other arguments I may make which I will not make now. I reiterate that my party welcomes the proposals in the Bill. There is no future for Aer Lingus except through this IPO. The future growth of this important company is tied to its new relationship with Oneworld alliance and, in particular, with the investment Aer Lingus must provide over the next five years to run successfully the current business and to improve, change, rationalise, modernise, etc. The company will need more than £1 billion. The sum of money it needs to raise is significant and obviously the IPO will produce some of that. The Bill will allow the IPO to proceed as quickly as possible, and that is appropriate. The questions within the company regarding pensions addressed by the Minister are important. The share of the company which its workers will be given, to which the Minister referred, is important also. No doubt that matter will be concluded successfully in terms similar to those used in the Eircom launch, where it was done successfully. I have every confidence that that will happen here also.

The reality is that on arriving in an aeroplane at Dublin Airport one will see many airlines operating. Many of them are competitors who internationally and locally forced down the price charged by the state airlines. The state airlines operated monopolies for far too long and the cost of a flight to London or France, for example, was exorbitant and unreal. It was not until the likes of Mr. Freddie Laker, Virgin Airlines and Ireland's Ryanair came into play that the prices fell. By selling this company through the IPO, it will make it much less reliant on the State and the involvement of the State will reduce considerably. I am unclear as to whether the Minister or her nominees will still hold an investment in the company, but it is right and proper that market forces will dictate to the consumers of the service exactly what price they will pay. I welcome the increased competition and deregulation and Aer Lingus's new alliance with British Airways and American Airlines. The real questions in people's minds will be whether they can or should buy Aer Lingus shares. The problem which the ordinary potential shareholder must think about is how attractive a prospect will Aer Lingus be. Some 550,000 people purchased shares in Eircom and, like many others, I encouraged everybody to buy only a small number of shares. Those who were sharp enough to sell quickly made a profit but many of the rest of them, who may not have known about the cyclical nature of telecoms until they read the financial press after they bought shares, are very unhappy now with their investment. It is not fair to say, as some people do, that they took that risk. To buy shares in Eircom was a big decision for the ordinary Irish punter. When they got involved, they did so thinking they were getting a good bargain and hoping they would make a reasonable profit in a reasonably short time. Many of them are sorry they got involved. It was not the Minister's wish, my wish or anyone's wish that that should have happened, but the fact is it did happen. The key issues in the Aer Lingus initial public offering will be the launch price of the shares and what the advisers, the Minister and others must take into account in determining the launch price. People will be concerned about that and rightly so because they want value for money. The value of Eircom shares was set too high and that has been shown to be the case in the context of telecommunications companies on the market throughout the world. The issue is the price at which people will buy, and people would like to own shares in Aer Lingus. The Minister said, when launching the Eircom shares, that it was an adventure for everyone. It will be a much more cautious adventure on this occasion, but it is one our party supports. We are in favour of and support the thrust of what the Minister is trying to do, but a great deal more thought must go into determining the price of shares. That will be the critical factor. They cannot be too cheap because the silverware cannot be sold for little or nothing, yet they cannot be overpriced. There are wise people whom the Minister will pay a great deal of money to give her advice on determining the price because it will be a critical factor in people's attitudes to the offer. One of the problems which arose with Eircom shares is that we assumed the strategic partners which Eircom took on board were locked in for a certain period. However, they are now trying to offload their shares on a market that does not want to buy them. This has been critical in the reduction of the price of Eircom shares. I am not completely clear on this because I only had a short time to inquire, but I understand that Aer Lingus will not take on a strategic partner to invest in the IPO. I understand British Airways and others offered to buy a 10% share in the company initially. Mrs. O'Rourke: We did not agree to that. Mr. O'Dowd: I accept that. I am trying to tease out the issues and perhaps the Minister will respond to them today or another day. If major players who are not strategic partners are to purchase Aer Lingus shares, we need to think that through and debate it because it is an important issue. Regarding the future control of Aer Lingus, I do not have a problem with it being part of a global alliance because it is a good thing. However, we must think strategically and identify what problems, if any, there may be in future. If there is an amalgamation of these massive, multi-faceted companies which will eventually control our major airline, we must consider how that will impact on services. Competition and deregulation in the industry will not be a problem. The nature of the aviation industry is cyclical. At present, things were never better. Never were there more passengers and never was it so busy, so everyone is happy. However, it will not always be that way. We must give consideration to when things change, as they inevitably will given the cyclical nature of the business. I have a criticism not just of Aer Lingus but of every airline. On short haul flights, one is only sitting in the aircraft for an hour or two hours, but when one travels the transatlantic routes, there is a problem in that there is a very small margin between one's seat and the person sitting in front. Mrs. O'Rourke: One's knees are buckled up. Mr. O'Dowd: Mine are anyway. Mrs. O'Rourke: So are mine. Mr. O'Dowd: When a good rugby supporter, such as Senator Glennon, or someone like me who wants to sit back in his seat, sits in front, there is a serious problem with personal space. I have written to Aer Lingus about this and I was told there had never been a complaint until my letter was received. I do not believe that. While the issue may seem amusing, medical evidence shows, however, that, in terms of long haul flights, there is a greater possibility of people having a stroke when they are crammed into the coach area where there is a mix of oxygen and air. I read about this recently and it showed that, in first class, there is no problem, but that the situation deteriorates as one moves down the plane. It is a serious medical issue. I was surprised when I read about it recently and perhaps Aer Lingus will take note of it. I hope I am not the only one concerned about the lack of space in coach class in which most of us travel. I want Aer Lingus to address that. The principle of packing people into aeroplanes is not acceptable, especially on long haul flights. I believe people would pay more if they had a little more space. It can be very uncomfortable, even if the price seems reasonable, and it can also be very unhealthy, so I would like that issue addressed. I welcome the thrust of the Bill. I understand from what the Minister said that she is prepared to consider amendments. That is good and positive. I reiterate my warning about the share price. People who invested money in Eircom are not happy. They feel they are getting poor value for money. We want to entice them to buy, but they have had a chastening experience. Is it intended that the Bill will be passed before the end of the session? If the debate is not concluded by 6 o'clock, I will not be available after 8 p.m. because I have a family commitment. If the debate is not concluded by 6 p.m., I would be happy to continue with it tomorrow, but not after 8 p.m. Acting Chairman (Dr. Henry): Only Second Stage has been ordered for today. Mr. O'Dowd: I understand that, but if the debate is not concluded by 6 o'clock, I would prefer that it did not continue after 8 o'clock. Acting Chairman: It would still only be Second Stage. Mrs. O'Rourke: If we resume after 8 p.m., the Senator would not be entitled to speak at any rate. Mr. O'Dowd: It is not that, it is just, out of courtesy, I would like to be present when the Minister sums up. Mrs. O'Rourke: I thank the Senator. Mr. O'Dowd: I note that Senator Glennon, who is from north County Dublin and who does not live too far from me, will make his inaugural speech. No doubt it will be as good to hear him on this playing field as it was to see him on the rugby field. I wish him the best in anticipation of his words of wisdom. Acting Chairman: I thank Senator O'Dowd for his courtesy to the Minister and Senator Glennon. Mr. Walsh: Ba mhaith liom fáilte a chur roimh an Aire go dtí an Teach. Aontaíom go hiomlán leis an Seanadóir O'Dowd agus cuirim fáilte roimh an mBille tábhachtach seo. The hallmark of the Minister since coming into office three years ago has been to bring pioneering legislation before us. The Eircom legislation set the framework for further IPOs and I am pleased the Minister is following on in an area which is of fundamental importance to the economy and the Irish air transport industry. She rightly pointed out the progress made by Aer Lingus. It is a credit to the board, the management, the staff, the Department and the Minister who all played their part in ensuring that Aer Lingus, especially in the past decade, has become a much more commercially focused organisation than it was previously. It had many economic, financial and industrial difficulties, which can often emerge when a company enjoys a monopoly and develops practices which would not be sustainable in a more competitive environment. The company underwent a traumatic and difficult period. It is gratifying that the hard work, effort and sacrifices made by many are now showing fruits and that this strong vibrant company can be confidently floated on the stock market where, no doubt, it will be subscribed to by people who are anxious to become involved in that sector of our economy. It would be remiss of me not to acknowledge the role played by Aer Lingus over the years. As the Minister rightly said, it has contributed to the economic life of the country and, in particular, tourism must be singled out. As an island it was essential to have our own airline and the provision of the necessary services and access to this country, particularly when the number of airlines worldwide was far less and they were less inclined to come here. People in general took an element of pride in the national airline. It was a flagship and was seen as such. Glasgow Celtic invariably uses Aer Lingus, as does another football club in Liverpool of dubious standard. We should remember particularly Seán Lemass, who was heavily involved in developing the emerging democracy of the 1930s and who played a significant and pivotal role in the development of many semi-State companies such as the ESB, Bord na Móna and, indeed, Aer Lingus. Seán Lemass and his generation had the vision to make these decisions and the courage to implement them. It is important that such people be credited with the success of the company. It will emerge as a strong private company with people wishing to invest in it to ensure its success for the future. The current health of Aer Lingus underlines in a real way the benefit of competition. That is not lost on the Minister, Deputy O'Rourke. Competition has played a significant and positive role in the strengthening of the commercial ethos of that company. At a time when we are suffering the effects of monopoly in our rail system there is a lesson that competition is the secret of success in ensuring a healthier rail and bus transport system in the future. Aer Lingus will also have to continue its progression to a more commercial focus. When it becomes a public limited company, internal cultural changes will have to take place to meet the needs of the market. Recently there was the Oneworld alliance and the involvement with American Airlines indicates it is preparing itself well for the transformation. We can feel confident that despite the challenges involved, it will successfully make the transition. Some people might question whether if the State loses its influence and involvement we will diminish to an extent our control as a peripheral island on the west coast of Europe. I would not subscribe to any doubts in that area. Undoubtedly, Aer Lingus can, as has been shown by Ryanair, become more successful and more progressive from a marketing point of view. Like Senator O'Dowd, I also feel that in the past the consumer did not get the best deal possible from our air transport system. That was probably due to insufficient competition on some of the more prominent routes. As a consequence, people were paying well in excess of what the economic and competitive fare should have been. Senator O'Dowd made an interesting point about the difficulties with his knees on some of the long haul flights. I will state again an argument in favour of competition. When I was in the US some years ago, TWA removed one or two rows of seats from their aeroplanes which they announced publicly and advertised that people would have greater leg room----- Mrs. O'Rourke: They are pot belly up now. Mr. Quinn: That is a great example.

Mr. Walsh: That company used it as a marketing device, probably about ten years ago. Perhaps as the Minister said, the step taken to improve competition was ill-advised. It shows the innovative initiatives airlines and, indeed, any industry in a competitive environment will have to take to outsmart others. This can be achieved not only on price but also on quality, value and service. I note from section 3 of the Bill that any funds received will obviously be to the benefit of the Exchequer. I suggest the Minister might give consideration to ensuring that any funds received should be re-invested in regional airports and regional air routes. Given the tremendous traffic congestion in our capital city it behoves us to look at other ways of diverting traffic away from one centre of population. Our ports have been addressed but our regional airports need investment and focus to ensure people can travel to any part of Ireland, Britain and any other major European centre where business takes place. It would be a significant contribution for the dispersal of industry. One of the attractions for many industries coming to Ireland is ease and speed of access. We would benefit if we could counterbalance our regional development in that manner. It would be good to see profits recouped from investment and diverted into a similar area of transport which requires it, such as the sale of shares in Aer Lingus, which for a long time was our only source of investment, other than Aer Rianta, in air transport. Senator Ross, in particular, did not necessarily subscribe to the notion that employees in Telecom should have got 15% in shares. I compliment the Minister on this provision and it is an enlightened approach. It is important that people working in a company have an absolute commitment, and one of the best ways of ensuring that is to allow them participate in the shareholding of the company. Therefore, their fortunes, so to speak, will fluctuate with the fortunes of the company. It is a good coincidence of interests and one I would advocate. I compliment the Minister for taking this approach. I am sure this will be the blueprint for other IBOs and other public sector companies. Aer Lingus has served this country well but it has had its difficulties. It has shown great resourcefulness in overcoming these difficulties and I have no doubt the Bill will open up a new chapter of development for the airline and, I hope, for the island. As I said, this is a peripheral country and it is essential that we have the best possible competitive access, be it for tourism, business, goods and so on, to our European partners and, indeed, to the wider world. Mr. Quinn: I welcome the Minister and the Bill, not only with a sense of joy but with a sense of relief that we are facing up to reality. I am delighted this Bill bites the bullet. Although it was rushed before us today, I can understand why---- Mrs. O'Rourke: I will come another time. Mr. Quinn: We did not know until this morning that we would have to speak on this Bill and felt we might not be prepared for it. It was interesting to listen to the Minister and to read through her paper. I am in a different business but I looked at the similarity between the two. Some of the words the Minister used like "consolidation, globalisation, alliances, a need for massive capital investment" also relate to my type of business. It is interesting to note that the words used by the Minister regarding the airline business relate to so many other businesses. The Minister referred to companies which start-up from nowhere and succeed and the challenge of technology. Safety is as important a factor in the airline business as food safety is in the food business. The word "competition" cropped up a number of times in the Minister's speech. The area of competition, about which Senator Walsh spoke when he referred to TWA, is customer driven and market driven. I cannot think of a better example of this than the airlines. Senator O'Dowd referred to the fact that we had two airlines operating between Dublin and London at a cost of £239. Look what happened. We now have competition. One has a right to run an airline between any two cities in Europe if you can meet the safety regulations, etc. The change is dramatic. Many people spoke of the doom and gloom awaiting us if we allowed competition in. We ended up with many airlines, some of which suceeded while some failed. We now have far more passengers, far lower prices and far more people employed than ever before. All the threats of doom vanished because of competition. We are looking for a debate in this House on rising inflation. One of the challenges facing us is the control of inflation. One way of doing that is to introduce competition. A great example of that is what has happened in the airlines over the last 15 years. We have heard the complaints people have about having their knees stuck in their mouth while in an aeroplane. The Minister said TWA are no longer in business. I am not sure about that; I think they are. Mrs. O'Rourke: Maybe they revived themselves. Mr. Quinn: They did run into trouble. Pan Am did something similar and went out of business. There is no rule which points the way to success in this or any business. I travelled with Southwest Airlines in the United States on one occasion and had to squeeze into a seat with a man much bigger than I who could not fit into two seats. I do not have the same problem as Senator O'Dowd. Southwest Airlines state that what they look for is core competence and that meant getting into an airport and out again within 30 minutes. They decided on that basis they would not serve something which had to be cleaned up. They did not have time to clean the planes. I know that is happening within Ryanair also. Other airlines overwhelm you with service for a higher price. I have drifted somewhat but it appears to me that some of those examples are the way to succeed. I love the story - it may not be quite true - of an aircraft in the United States which, having driven out to the end of the tarmacadam, could not take off as a light was flashing in the cockpit. An unhappy passenger said, 'That means a two hour delay,' but within five minutes of turning around they came out again and he said to the hostess, 'That's wonderful, you must have changed the engine very quickly,' and she replied, 'No, we just changed the pilot.' There are some things one does not compete with. One should not compete on safety. What a great record Aer Lingus has. No airline ever stands up and shouts about what a great safety record it has. We are proud of what Aer Lingus has done in that area. This biting of the bullet is interesting. To anyone of my generation, Aer Lingus is part of what we are. When I was growing up the idea of having a national airline was seen as an essential badge of nationhood. If you did not have one you were not seen as a real nation. We followed the fortunes of our national airline with a sense of pride throughout those years. I was delighted to hear Senator Walsh referring to Séan Lemass. We could add to that people like Gerry Dempsey, Michael Dargan and others. They must feel a sense of pride now. We rejoiced in the successes of Aer Lingus and we continued to lend it sympathetic support as it went through those difficult times. Aer Lingus played a key role in the development of our tourism industry. It is easy to be casual about our success in tourism and in attracting business, but it was not always like this. I grew up in a business which depended on tourism. I remember the difficult times in the 1950s and 1960s. The promotional efforts of Aer Lingus in the main markets for Irish tourism were a central part of the national effort which brought tourism to the level it has reached today. I was always proud of the advertisements I saw abroad for Ireland. It did not have to advertise Aer Lingus, it only had to advertise Ireland because the only way one could travel there was through Aer Lingus. We are living in a changing world. We were right to want a nationally owned airline in the 1930s and 1940s. We wanted it, we needed it and it did very well for us in those days, but to continue to cling on to that vision in today's shrinking world would be nothing more than nostalgia. The future for Aer Lingus in its present form would be very short. Few fundamental things change and we touched on them today. We are ending the notion of a State airline kept afloat by repeated injections of State money. Aer Lingus was kept afloat out of a sense of national pride and an imperative demand that every country should have a state-owned airline. I did not know that Olympic is the only remaining state-owned airline. That concept is gone forever. The notion that the European Union would consist of a grouping of different states all supporting their costly badges of nationhood in the form of heavily subsidised airlines has no future. The cost of maintaining such a family of albatrosses would hold back the European Union's growth and undermine its competitive position. The second concept to be eliminated is the notion of an airline restricted by national boundaries. Just as we have seen the revolution in telecommunications destroy our long held concept of distance, we will see the effect of globalisation on the airline business. The future of the world's airline industry is a marketplace with fewer players than before. Even those players will tend to be bound together in an ever smaller groupings or alliances. We may not like this concentration of our world industry - and I am talking about my own business - but it is a reality. We cannot fight it. The cold reality is that there is no future for Aer Lingus as a State-owned airline. The Minister has faced up to that. Aer Lingus must be privatised. I understand that there is a narrow window of opportunity to do that at the right time. I trust the Minister has identified that and that is the reason we are putting this Bill through this week. Privatising the airline is today's business but let no one be in any doubt that it is the final step. They should not think that is the end of it. It is instead an intermediate step before the airline becomes part of a much larger entity serving a wider marketplace than before and from a different perspective. I welcome this move because there is no alternative to it. We do not have a choice other than to watch helplessly while the airline slides into bankruptcy and irrelevance in a world that is changing too fast for it. That is what will happen if we do not do something, no matter how well-meaning we are. Aer Lingus has served Ireland well and let us be thankful for that. Now let us stand back and watch with pride as it fends for itself in the world marketplace, where I believe it will not merely make its way. I like the word "flotation", although that would be the right word if we were launching a ship - perhaps "soaring into the air" would be better. Senator O'Dowd mentioned the price. This is a business and business involves risk. I have no problems with those who invested in Eircom. They knew what they were doing and if they did not they should not have invested. When one invests in an airline or telecommunications company one knows one is taking a risk that might or might not succeed. Let us make sure we support this and that we give it the start it deserves. I trust the Minister in this area and on that basis I believe it will succeed. Let us remember it is a risk and there is no guarantee of success. I wish the privatisation and Aer Lingus itself well. It is only the first step on a much longer journey. I was going to say I was looking forward to a maiden speech, but then I realised it was not a maiden speech so I wondered what the alternative was, perhaps a virgin speech. Mrs. O'Rourke: A virgin he was never. Mr. Quinn: Whatever it is, it would not be acceptable in the airline business to give a plug to another company. I look forward to an inaugural speech and I thank the Minister for bringing this Bill to the House. I am sorry it was rushed today, but I am delighted to see it is being grasped and I wish Aer Lingus well. Mr. Glennon: I also welcome the Minister and this important legislation, not just for Aer Lingus but for the country as a whole. Previous speakers have touched on the importance of Aer Lingus in the fabric of Irish life since its foundation in the 1930s. It is not just a matter of the economic life of the country, although we all know how important it has been in that regard, but the social fabric of the area I come from has been hugely dependent on the prosperity of Dublin Airport and Aer Lingus in particular. My earliest recollection of Aer Lingus is of being six years old and sitting on my poor father's shoulders as he carried me across fields. We got the bus from Skerries into the city as there was no link road then from where the main roundabout is now, although this was not 100 years ago. We traipsed through fields in which the corn was higher than I was and, for fear of losing me, my father carried me on his shoulders for half a mile or so. Some Senators may recall there was just one access road - the old Collinstown Road, which was a direct extension of the Santry Road. At the time Farranfore was somewhere in Kerry and Cork was a place that would probably complain if it did not get an airport eventually, while airports in Galway, Sligo and Carrickfin were absolutely unheard of. Times have changed. Senators on all sides have alluded to pride and that is appropriate, as there was not just national pride but also local pride in north County Dublin in the success of Aer Lingus. My father was a good Fianna Fáil man and, given Seán Lemass's strong links with Skerries, it was a matter of huge personal pride to everyone in north County Dublin then and now that Aer Lingus was our flagship carrier, carrying the shamrock across the airways of the world in a positive manner and providing a high quality service, which it continues to do. It has created the standard to which all other Irish airlines in particular must aspire. From the late 1960s to 1990s Aer Lingus was on a roller coaster ride - if that is possible for an airline - which culminated in the mid 1990s and the rescue package we know as the Cahill plan. That plan was the major turning point for Aer Lingus and it is important that due tribute be paid to the team headed by Mr. Cahill which drafted the plan, the employees who took it on board courageously and the Government which supported it so strongly. If that plan had not been produced and adopted as it was we would not have this Bill and it would not be possible for Aer Lingus to develop commercially as we hope it will. Aer Lingus has 6,200 employees, which makes it a giant employer by Irish standards and a major employer by any international standard. Spin-off industries employ probably double that number, directly and indirectly, within a 20 mile radius of Dublin Airport. We should reflect on those figures as they are staggering in an Irish context. The importance of a vibrant Aer Lingus to Dublin Airport and, by extension, to the country cannot be ignored. I will restate those figures - Aer Lingus employs 6,200 employees worldwide and it is estimated that approximately double that number of workers are employed in ancillary industries within 20 miles of Dublin Airport, never mind the other airports around the country. Aer Lingus has been the forerunner of and has set standards for Ryanair, Aer Arann and other Irish airlines. Even allowing for the fierce competition in which these companies are involved, there is more than a grudging acknowledgment of the success of Aer Lingus and those airlines are happy to have Aer Lingus to be measured against. Ryanair's budget strategy, in particular, can only be measured in comparison with a quality carrier.

The aviation industry in Ireland is thriving and it is also a very exciting time for the industry internationally. Aviation is an essential element in the national infrastructure which has been the basis of our recent economic resurgence. I may be guilty of repetition, but in discussing a Bill of this importance to Aer Lingus, due cognisance should be taken of the importance of the company to the national economy. When we want the volume of international trade to grow, a successful airline of the quality of Aer Lingus is a huge aid in portraying an image of Ireland abroad as a progressive and dynamic country. Section 9 deals with the superannuation scheme. I note the Minister's comments and would like to reiterate that this section is a source of major concern to the employees. In my short career in public service, I have already received many representations on this issue. I know the matter is in hand and that a task force has been established. I look forward to a successful conclusion to the difficulty. I cannot, nor do I think we should, underestimate the importance of a well motivated workforce in a company at such a critical juncture in its history. It is very important that issues of shareholding - I congratulate the Minister on the manner in which it has been dealt with in the Bill - and pensions are not confused. Shareholding is an entirely separate issue from pensions. A significant proportion of the 6,200 employees have particularly long service. One of the characteristics of Aer Lingus is lengthy service. It is not a company from which people move too readily and that, in itself, is a tribute to the history of good staff relations within the company. I strongly urge that the issue of pensions be dealt with as positively as possible and that the goodwill of the workforce is harnessed because it will be needed at this stage in the company's development. As I have said, these are exciting times internationally in relation to the aviation industry generally. I am told there are no longer Government controls on the number of carriers which may operate particular routes or on the capacity to be offered or the fares to be charged. The open market, I understand, is to be extended later this year with the conclusion of an agreement between the European Union and ten central and eastern European countries. The Department of Public Enterprise has already received inquiries from a number of these countries which are interested in operating air services to Ireland. I do not have to go into detail on the importance of Aer Lingus to tourism in Ireland and, particularly, to tourism in the Dublin area. Across Europe governments are withdrawing from direct control of airlines and only the Greek airline, Olympic Airlines, has been left in public ownership. As the Minister has said, its days in public ownership appear to be numbered. I agree with the comments of my colleague, Senator Walsh, in relation to investment in regional airports. The flotation of Aer Lingus is an ideal opportunity to direct some of the funds generated to this area. If the expansion which has taken place at Dublin Airport could be replicated, even to a small degree, in some of the provincial airports, it would not only make a huge difference to the quality of air travel in this country and to facilitating such travel, but would also, hopefully, be a major advantage to the local economies around those regional airports of which there is such a strong network. I thank Senator O'Dowd for his good wishes. I share his views on the lack of space which a certain percentage of our population have to endure on flights. Senator O'Dowd limited his comments to long haul flights but, unfortunately, I have the difficulty all the time. Perhaps he and I could do a deal with Aer Lingus that in return for shedding a few stone, it might give us a few extra cubic inches. I will not get involved in the issues raised in relation to the stock market. I note Senator Ross has joined us and, while I will not agree in advance to everything he will say, I will listen to him intently. Mrs. O'Rourke: He is listening to the Senator. Mr. Glennon: As intently as I will listen to him, I hope. I wish the Minister well with this legislation which is of huge importance not only to the company, Aer Lingus, but to the country. There are many clichés which could be used such as bon voyage, God speed and speedy passage, but I hope whatever it takes will be available to the Minister and that this Bill will enjoy a successful, smooth and quick passage through the Houses. It creates tremendous possibilities, not only for the company but for the country. Acting Chairman (Mr. R. Kiely): Thank you, Senator. I congratulate you on your maiden speech, which was very good. The previous Acting Chairman also conveys her congratulations. Mr. Ross: I join in the unanimous congratulations to Senator Glennon on his speech, one of the best and most interesting maiden speeches we have heard in this House in a very long time. I welcome the Minister and the Bill. While the contents of the Bill are enabling and, therefore, tell us very little about the Minister's and the Government's plans, we should welcome the principle that Aer Lingus is to be privatised soon, that the Government is not frightened of going down this privatisation road and that that ideological taboo has now been conquered. We are very happy to privatise companies where we think it is appropriate and in the interests of the industry, the Government, the workforce and the country. I do not want to say very much about this Bill because there is very little in it. However, I congratulate the Minister on bringing it forward early because there is a fear among some of the doom mongers in the financial community and some of the press that somehow after Eircom, privatisation will not go ahead. I would like to nail one lie here and now which I see appearing in every organ and amongst the Opposition and a few others about Eircom. The Eircom flotation, contrary to what everybody says when they describe it as a fiasco and a disaster, was an extraordinary success and it is about time people realised that. Eircom shares were floated at around 3.90 euro and went to a price of about 5 euro. If anything, the Government could be criticised for selling it a little too cheaply. Every private investor should have been satisfied for many months that they were sitting on profits. All we have heard in the last few weeks is their bellyaching and being encouraged by the ignorant and agents provocateur in the media to be dissatisfied because they have shares which are now somehow showing a loss. They thought, and were led to believe by the Opposition, that shares go up a euro every day. That is not what privatisation is about. Eircom was a thundering success for the Government, the Minister and for those who bought shares, but it does not mean they are going to make money forever. It is a very good thing that they are now below water because if they were not, the great shareholding public would think, for some reason, that buying privatised shares was a guarantee for a 20% to 50% gain overnight. It is not and it never has been. Those who did not take it are the mugs and I am one of them - I did not take it. I have a shareholding in it and I did not take the profits - I sat on them. I could have taken a very nice profit at 5 euro or at 4.90 euro, 4.80 euro or 4.60 euro, but I did not. I am sitting on them at 3 euro or 2.95 euro today and I am perfectly happy because I am used to losing and making money in stocks and shares. Let us nail the lie that because they are below water at this time, the privatisation has not worked. It worked brilliantly for the Government and small shareholders up to now, and they have been making money 80% to 90% of the time. That flotation was a great success but it was a difficult flotation because so much money was involved. It was a global flotation, which Aer Lingus will be, but on a smaller scale. The Eircom flotation succeeded in getting institutions around the world to buy shares and to put a large amount of money into the hands of taxpayers. We must also remember that whereas 500,000 people bought Eircom shares, many people did not buy shares. What are our obligations to those people? Has the Minister got a single obligation to the 500,000 people who bought shares at the expense of the 2.5 million people who did not buy them? They would have been the losers. Let us put the lie to those who claim the Eircom flotation was not a success. It was a thundering success and remains so. One cannot measure the success of a flotation by the fact that it goes down for a few weeks almost one year later. That is ridiculous and is the gospel of the utterly ignorant trying to create trouble. That is what happened with the Opposition. I do not blame it, but it should be exposed for doing so. Let us learn the lesson in the context of Aer Lingus and not be frightened by the prophets of doom or those who can jog backwards and foresee what was going to happen after it happens. Let us not be frightened by those who claim it was a disaster. It was not a disaster, it was a success. Let us go ahead with the Aer Lingus flotation as soon as possible. It is dangerous to do so but I will offer a hostage to fortune and predict that when Aer Lingus is sold it will not flop but will fly. The reason will be that the controversy over the price of Eircom is a bogus controversy. According to reports, the Minister was advised to sell at £4.30 by some people and at £3.70 by others, all of whom had vested interests. The people who advised £4.30 would have received larger fees if the shares sold at that price and those who said £3.70 tended to be the management's advisers in whose interests it is to have a low figure because they look better if the share price goes up, and their options are probably more valuable, if they get them. The same will happen with the Aer Lingus flotation. The Minister will receive conflicting advice but the price will be determined by whether the shares will sell. People will look at the market, do a book-building exercise and ask what people will pay for the shares. The institutions will decide, not the retailers. They know what they will pay and the shares will be sold at that price. The flotation will not be a failure because that would be an extraordinary indictment of the advisers and the Government. They cannot afford such a failure because there are so many other privatisations to take place. A failure with one of these flotations would put the others in trouble. I am concerned that, because we are being told we have done so badly with Eircom, the retail element will be far smaller and the price will be dictated by the institutions which are very clever at these things. One fund manager - I think it was Hibernian - tried to railroad the Government and its advisers into valuing Aer Lingus at, I think, e300 million. This manager said the company is not worth much more than that and is already talking down the price. That is a legitimate tactic but if we allow people to do so by saying Eircom was such a failure, which it was not, we will be forcing ourselves to sell the company short. That would be a tragedy. The company would still be sold as the institutions would decide the price. The problem is that retailers may not be interested and that would be a great pity. There is an opportunity for small investors to join in what could be a very profitable enterprise. I do not know whether it will be a good investment but nor does anyone else if we do not know the price. However, people should not be told this is a bad opportunity. There is so much ignorant talk to the effect that there is no way Aer Lingus can be sold now. It is only a matter of price. Advisers will look at the price of the company and the price of a few airlines around the world, they will take a price earnings ratio and price the company a little below that. Then they will claim it is an attractive offer, take it and dictate the price. As a small investor, I would not mind institutions dictating a price to the Government and would be happy to piggy-back on them. The Minister might consider copying the Deutsche Telekom third issue last week which priced the shares to institutions at e66.50. The retail investors, of which I was one - I have to keep declaring my interests - bought shares at e3 cheaper than the institutions. This guaranteed a large retail subscription and all those who came in at a discount of e3 are sitting on a small profit. I sold on the first day as there is nothing wrong with 3% over night. It is better than one gets in the banks and a bit more than inflation. There was great attraction in that offer. In addition, there was an offer of getting one share for every ten if one held the shares for 18 months. That is another way of involving retailers, even though it is slightly less honest as there can be a reflection on the share price coming up to that time. However, there is a great attraction in encouraging people to come in by offering them a discount over institutions. This option should be considered. One is giving retail investors a real discount and can let the cowards like myself get out with a small amount. However, retail investors are getting a good start and one knows institutions will still pay above that level on the second, third and fourth days, all other elements of the market being equal. Aer Lingus has great possibilities and will be a great success. This is a good, ideological Bill. I would like the Minister to answer a few questions in which I am particularly interested. I assume that 100% of Aer Lingus will be sold. I do not know whether the Government has given a commitment on this issue or whether it will only sell a certain amount of the company. I assume the intention is to sell 100% of the company. However, I understand that less than 50% of Aer Rianta will be sold. I do not understand why the Government sells 100% of Eircom and less than 50% of Aer Rianta. The Minister will probably say Aer Rianta is a vital national interest and we have to keep the airports open. However, that is a serious commercial problem for any investor, particularly an institutional investor, if it is going to take an interest and then finds the Government has what is, in effect, a golden share. My concern is that the Government will maintain control of Aer Rianta. If it does so it will not be a good commercial investment because successive Governments will appoint cronies to the board, make commercial decisions for the company and put pressure on it to do all sorts of things which will mean it is not subject to normal commercial criteria. What is the difference with Aer Lingus? Are investors expected to pay a high commercial price and still have the Government breathing down their necks? That is the nanny state making political decisions. In the case of Eircom, the Minister tactfully managed to persuade some directors that their best interests lay in moving to other areas and then made suitable commercial appointments.