Topical Issues Debate: The necessity to maintaining Heathrow slots to ensure balanced development

20th January, 2015

Check Against Delivery

Firstly, I want to thank the Deputies for raising this issue. I am very keenly aware of the importance of this matter not just to the constituencies they represent but also to the wider economy.


I must preface my statements today by saying that following the announcements of recent approaches to Aer Lingus by IAG, the Irish Takeover Panel has deemed that Aer Lingus is now in an ‘offer period’.


The Takeover Panel Rules in relation to communications apply to all parties during such an offer period and all parties, including the Government as shareholder, must apply the highest standards of care to any statements made on the matter.


Specifically shareholders must take care in any of their communications to avoid revealing any information that could potentially impact either positively or negatively on the Aer Lingus share price.


Currently, no formal offer has been made to Aer Lingus’ shareholders.


That said, I wish to make clear that should such an offer be made, we will take great care and exercise great caution in examining the pros and cons to Ireland of such an offer. We will bear in mind the same issues we considered when faced with previous takeover bids;


–         We will consider the impact any change in ownership of Aer Lingus would have on the connectivity of Ireland – connectivity that is vital to our economy and our society.

–         We will consider the impact it would have on competition for passengers to and from Irish airports.

–         And we will consider the impact on the bases from which Aer Lingus currently operates,- namely our State and regional airports.


We will also, of course, consider the value put on the State’s shareholding in Aer Lingus by any offer.


Airport slots are a right granted to an airline which allows the airline to schedule a landing and departure during a specific time period. Airport slots are not ‘owned’ as such by the airlines, and are certainly not owned by Governments or states. However, at congested airports, such as Heathrow, a secondary market has developed that has allowed airlines trade slots with each other to meet their changing business needs.


In relation to any potential disposal of Heathrow slots, a specific mechanism was built into the company’s Memorandum and Articles of Association whereby any proposed disposal of Heathrow slots, over which the airline had rights at the time of listing on the stock exchange, may be subject to a requirement for a resolution approved by shareholders voting at an extraordinary general meeting.


Where a resolution by shareholders is called for, the voting threshold to prevent a disposal of Heathrow slots proposed by the Company is such that the percentage vote against disposal at the EGM must be greater than the percentage of the Company’s shares held by the Minister for Finance plus 5% (or 25% if greater).


The ability of the State’s shareholding to block a disposal of slots is not guaranteed under this mechanism, as the support of at least another 5% of shareholders is required.  Furthermore this mechanism relates only to a proposed disposal of slots – Aer Lingus does not require any shareholder approval to change the routes for which it uses the slots.


Connectivity remains critically important for Ireland as an island nation.  Heathrow remains a very important Hub for connectivity purposes but as it becomes more congested other Hub options are becoming available, including other European hubs and the rapidly growing Middle East hubs. In addition the number of destinations that can be reached directly from many of Ireland’s airports has also increased over the years.


The State retains a significant but, nonetheless, a minority shareholding in Aer Lingus – with just over 25% of the shares. The Government does not control the company, nor does it appoint the chairman or a majority of the board members. In 2012, the Government included this shareholding among the assets to be sold under the State Asset Disposal programme, but agreed that the stake would only be sold when market conditions were favourable and if acceptable terms and an acceptable price could be secured.


In late 2012, following a third hostile takeover bid for Aer Lingus by Ryanair, the Government indicated that it would not be prepared to sell the shareholding in circumstances which could significantly impact on competition and connectivity in the Irish market.


Such considerations would also be foremost in our minds if a further offer is made for the company.


I would like to thank the Deputies for raising this important matter. As I said Aer Lingus is deemed to be in an ‘offer period’ and therefore care must be taken in relation to what is said. As things stand no formal offer or intention to offer has been made for Aer Lingus.


The travelling public and the economy as a whole have benefited greatly from the very good competition and connectively that is currently provided in the market for air services in and out of Ireland. A new National Aviation Policy is currently being finalised and will be published shortly.


Maintaining competition and connectively will be key elements of that policy document. If an offer for Aer Lingus is made by IAG or any other party, such policy matters will be carefully considered before any decision is made on the future of the State’s shareholding in Aer Lingus.