Argument for Aer Lingus privatisation doesn’t stand up
During Leaders Questions in the Irish parliament (Dail), on 21 March, Joe Higgins TD (Socialist Party MP), challenged the Taoiseach (Irish Prime Minister) over the privatisation of the state airline Aer Lingus. The following is the record of their exchange.
Socialist MP fights privatisation of state airline
Joe Higgins (Socialist Party):
In the past few weeks the Taoiseach has got many letters from Aer Lingus workers asking him to step away from privatisation of the company. Will he agree that as the financial experts of the Government say, privatisation would realise only approximately €400 million, the price of a mere four aeroplanes? The argument that this vital strategic public asset should be privatised does not stand up.
I ask the Taoiseach to reflect on a number of issues. The European Commission has clarified there is no barrier to the State investing in the national airline. The chairman of the National Development Finance Agency, Dr. Somers, told me at the Committee of Public Accounts that if the Government asked it, it would have full powers to source funding for equity into Aer Lingus and would have the expertise. We were also told that the National Pensions Reserve Fund, on the directions of the Government, invests billions of euro in private industries throughout the world including, shamefully, in the armaments industries and big tobacco "killer" industries yet it will not be asked to invest in the socially useful underpinning of the national airline.
An Ceann Comhairle [Speaker of the Dail]:
The Deputy’s time has concluded.
Will the Taoiseach reflect on the inglorious record on privatisation of Fianna Fáil and the Progressive Democrats [party in governing coalition]? Eircom [Irish telecommunications industry] involved an orgy of asset stripping and speculation, with huge detriment to investment in that industry. The Irish Sugar privatisation has wiped out the beet industry to be replaced not by small holders from the Third World but sweated sugar. We had the B&I Line [shipping] privatisation and last year’s spectacle of Irish Ferries replacing trade union workers with virtual galley slaves.
When it comes to the privatisation of public assets, Fianna Fáil and the Progressive Democrats have shown themselves to be the Podge and Rodge of Irish politics, reinforcing one another’s ideological banalities and prejudices and the backbenchers, like their audience, do not know whether they should laugh or squirm in embarrassment. They should squirm in embarrassment if they are prepared to tolerate the sell-out of thousands of Aer Lingus workers, their communities and the national airline.
Why will the Taoiseach not show the same commitment to a publicly owned airline as that shown by the Aer Lingus workers? All the Independent Deputies, who have different ideological viewpoints, are opposed to the privatisation of Aer Lingus, as are the vast majority of Irish people. I ask the Taoiseach to reflect again on where he is going and adopt a different tactic of maintaining the airline fully in public ownership and investing in it.
The Taoiseach [Prime Minister]:
For Aer Lingus to grow, develop and expand in the immediate future, to get access to many new locations which it wants, and to avail of the opportunities of the European-US open skies agreement as against the current position where it can only fly into the five airports, it needs the flexibility and the competitive advantage to be able to operate on that basis for its employees and the other issues. It needs approximately €2 billion, not €400 million, over the period ahead to successfully operate on that basis.
Mr. Broughan (Labour):
What about leasing?
Mr. Cullen (FF) [Fianna Fáil – main governing party]:
It is the same effect.
It is still a charge. The Ministers for Transport and Finance are completing the review of the report prepared by the advisers on the nature, scale and timing of the investment transaction and will shortly advise the Government of their consideration of the issue. Third party investment is necessary to provide the company with access to equity to fund its business expansion plans and ensure it has the strength on its balance sheet to withstand the recurring downturns and external shocks that are a recognised feature. In the future, unlike the last two occasions when the State was able to help when the airline ran into difficulties, the State will not be able, on those day to day issues, to put in resources.
The National Treasury Management Agency is an independent body. Because of a wise decision made by this Government some years ago to put 1% of our national growth into a fund, we now have €15 billion in the National Pensions Reserve Fund. I am aware that in the first few years, because of Y2K, the returns were not good but last year I understand the figure was 19%. We have €15 billion which we can write off against our national debt and bring it down to a very low figure. They are independent in their decision making. We are talking about a number of international figures. If they believe, and I am sure Dr. Somers would have told the Deputy this – that is a good strategic investment for them in Aer Lingus when the options become available, they can make that decision. There is nothing barring them from doing that. I want to see Aer Lingus grow and expand and not remain in its current position or to decline. There is a good opportunity for it to do that with an increasing number of passengers and locations, good opportunities in the future and more employment, not only in Aer Lingus but in the related areas of tourism throughout the country, which is a very good employer.
Dr. Somers said the NTMA can raise up to €5 billion and that this money could, in theory, be invested. He said that is a policy issue and not a decision for him to make. He said that simply put, while it is technically possible it is not his call. It is the Government’s call. The Government could make the call. A combination of borrowing in this way and leasing is entirely possible to kit out the national airline with all the aeroplanes it needs in the future.
Is it because the Taoiseach does not have any confidence in the future of Aer Lingus that he is not prepared to do this or is it that he is hamstrung by the Fianna Fáil-Progressive Democrats ideology? How does the Taoiseach explain what happened to the other industries he privatised? Is he not ashamed of what has happened to B&I, Irish Sugar and Eircom? Does he not realise it is inevitable that if he privatises Aer Lingus, it will finish up in the hands of the same sharks that moved in, with dreadful consequences for workers and for this State, to take control? Does the Taoiseach want his contribution to Irish history to be that of a facilitator for the asset stripping of the national airline?
An Ceann Comhairle:
The Deputy’s time has concluded.
He may have moved on at that stage but that is what will happen. Is the Taoiseach aware of the history of New Zealand Air, which was privatised with disastrous consequences and then had to be bought back by the New Zealand state?
I ask the Taoiseach to listen to those workers who have been in touch with him and who have shown tremendous commitment to this public asset and will continue to do so. Instead of taking a direction of privatisation, will he bring them into the heart of the management of the airline, together with the investment, so that we can build up this even more powerful company which will be beneficial for the economy and the people of Ireland?
I made the point to Deputy Higgins that the workers will have 15% of the company. The workers are part of it and the State will retain whatever percentage it decides to get. I do not believe that will hold back or result in a decline in Aer Lingus. When I was Minister for Finance in 1993, Aer Lingus had to let several thousand workers go and it happened again a few years ago. At the same time, Aer Lingus was not allowed to develop, expand and move ahead in the market. It should be allowed to do so given the opportunities that exist in the aviation market.
I understand the point the Deputy is making. I referred to the National Pensions Reserve Fund, whereas the Deputy spoke about the NTMA raising funds for the State. However, my first answer still applies. If the NTMA wants to use money from the reserve fund, that is a strategic decision that can be made. The employment potential is great for Aer Lingus and that has a knock-on effect. There have been difficulties with airlines around the world due to terrorism and other factors, but Aer Lingus can still expand and grow. The EU-US open skies policy will allow us to access many more airports in the US