Aer Lingus chief executive Dermot Mannion declared yesterday that the State airline's privatisation would go ahead, despite union opposition. Barry O'Halloran and Arthur Beesley report.

More than 60 per cent of the membership of the carrier's biggest union, Siptu, last week voted to strike if the Government goes ahead and floats a majority stake in the company on the Irish Stock Exchange.

The airline intends to get €400 million from the proceeds of the flotation, which in turn will support further borrowing of €1.6 billion to fund a €2 billion development plan. Speaking after an Oireachtas Joint Transport Committee hearing yesterday, Mr Mannion made it clear that the part-privatisation of the airline was going to go ahead. "The decision is made, and the unions can make their own decision," he said.

However, he added that he was confident that all the airline's "internal constituencies" would ultimately support the move.

At the hearing, Mr Mannion refused to give assurances about the long-term fate of Aer Lingus' valuable slots at Heathrow. However, he stressed that, as they were profitable and strategically important, there was no possibility of the airline selling them for now.

"I do not see any realistic possibility of the Heathrow slots being sold," he said. "Aer Lingus and Heathrow have had a very good relationship."

The main concern about the slots is that they allow access between a range of economically important centres and the Republic. Aer Lingus chairman, John Sharman, warned that the airline should not maintain its relationship with Heathrow at the expense of other hubs that may develop in the future.

He pointed out that Dubai, to where the airline launched a new direct service from Dublin last week, acts as a hub for 21 destinations. "In 15 years time, Dubai is planning on doubling this, so you will be able to connect to double the number of places," he said.

Mr Sharman also argued that Aer Lingus could continue to open new routes to similarly strategically located destinations in the future.

Both Shay Cody, deputy general secretary of Impact, which represents pilots and cabin crew, and Michael Halpenny, national industrial secretary of Siptu, expressed concerns at the committee at the deficit in the Aer Lingus pension fund.

Mr Mannion said that the airline's share of the shortfall was €171 million. He reiterated that a contribution from the flotation and increased contributions from the company and its workers would be used to make up the deficit. Finance minister Brian Cowen said yesterday that staff would have to contribute to eliminating the shortfall.

Speaking at the Irish Management Institute national conference, Mr Cowen said: "Where you have a deficit in a pension fund, the way you close the gap is by contributions being made by the stakeholders concerned.

"Obviously, that will involve finalising arrangements with the employer and the employees on those issues."

Mr Cowen insisted that the Government would keep at least 25.1 per cent of the airline as a "long-term investment" after the flotation.

But he would not be drawn on whether or not the Government would buy additional shares if the airline issued further stock in the future to avoid the dilution of its stake below 25.1 per cent.

Mr Cody warned that last year's Goldman Sachs report on the airline's future made it clear that, if the State's holding fell below the 25 per cent mark, it would cease to have any influence on the airline's future.

He argued that in order to stop this happening, it would have to do a U-turn on its current policy and actually invest in the airline if it offered further new shares after its flotation.