Mulcahy resignation: The Minister for Transport, Mr Brennan, has said the resignation of the Aer Lingus chairman, Mr Tom Mulcahy, will not interrupt plans to prepare the State airline for privatisation, writes Arthur Beesley, Political Reporter

The former AIB chief executive resigned on Saturday morning soon after it emerged that he was one of five bank executives who had "tax issues" relating to periods up to 1998, which were not linked to Faldor Ltd, the offshore investment scheme.

Mr Brennan said the Government would this week begin the task of selecting a successor to Mr Mulcahy.

While senior sources said the Anglo Irish Bank chief executive Mr Seán Fitzpatrick was regarded as the strongest of the airline's current board of directors, they suggested it was not certain that Mr Fitzpatrick would accept the post if the Government approached him. The Irish Times was unable to reach Mr Fitzpatrick last night.

At a Fianna Fáil press conference in Dublin, Mr Brennan said he had not spoken with Mr Mulcahy.

However, the Minister indicated that Mr Mulcahy had contacted his department on Thursday in the hours after AIB disclosed that an investigation into Faldor Ltd found that five executives had "tax issues" unconnected to Faldor.

"Mr Mulcahy contacted my secretary general late on Thursday evening and indicated the difficulty to the secretary general, who briefed me on it late on Thursday. I asked the secretary general to get a full statement from the chairman as to what the overall position was. In response to that on Friday came the press statement which you all have. And then, hot on the heels of that, came his resignation on Saturday."

Mr Mulcahy said: "I am fully tax compliant" in his statement on Friday.

In his letter of resignation, Mr Mulcahy said he was standing down "in order to enjoy privacy for myself and my family in my retirement years" and in the light of negative publicity to Aer Lingus.

"Notwithstanding that my statement to the media in response to AIB's press release of May 27th, 2004, clearly states that I am tax compliant and that I have had no knowledge whatsoever or involvement in Faldor Ltd, nevertheless I am of the view that this whole issue draws adverse publicity on Aer Lingus as a State company by association."

Mr Mulcahy was appointed late in August 2001 by the then Minister for Public Enterprise, Ms Mary O'Rourke, after the sudden death of Mr Bernie Cahill. He had retired from AIB a month previously and his appointment as Aer Lingus chairman was for three years.

The company had already reported losses of €38 million for the first half of 2001.

But the September 11th, 2001 attack, which came less than a fortnight after Mr Mulcahy's appointment, prompted a further severe downturn in business.

The airline's recovery came only after major job losses and significant cost-cutting. The company made an operating profit last year of €83 million and it has projected a €95 million operating profit this year.

The Government has yet to decide to proceed with the privatisation of Aer Lingus, although the 2003 Aer Lingus Bill which has passed all stages of the Oireachtas empowers the Minister for Finance to sell his company shares.

While Mr Mulcahy and the Aer Lingus chief executive, Mr Willie Walsh, have favoured a private institutional placing over a stock market flotation, no sale is expected until the autumn at the earliest.

Mr Brennan said: "Tom Mulcahy did a really fine job at Aer Lingus. He turned it around with Willie Walsh and their board and their staff. They took a lot of pain. They brought the airline from the brink to a successful airline today, one that still needs a lot of attention.

"My job now is to find a new chairperson in the weeks ahead who can continue that work."