The looming Cabinet discussion on the future ownership of Aer Lingus has raised the potential for serious tensions between the Taoiseach and Tánaiste after they publicly differed yesterday on the issue, write Mark Brennock, Emmet Oliver & Arthur Beesley.
The Tánaiste insisted that all options for the future of the airline should be kept open, only hours after the Taoiseach dismissed a management buyout proposal as "inappropriate".
While the Aer Lingus chief executive, Mr Willie Walsh, later announced he had withdrawn the management buyout (MBO) proposal last Monday, the public disagreement between Mr Ahern and Ms Harney signals potential for Cabinet tensions on whether the State airline should be sold in whole or in part.
Ms Harney said yesterday that a report by consultants Goldman Sachs on the future of Aer Lingus would be presented to the Cabinet very shortly, and that all options must be kept open.
A Cabinet sub-committee will consider within weeks whether to sell, in whole or in part, the company to private owners. A final decision was initially promised for the autumn, but with the MBO proposal now off the agenda, it is unclear when it will be made.
Some industry sources believe such a sale could net €500 million, and the airline says it needs substantial investment to allow it buy aircraft for new services and to replace its fleet. However, the Government is concerned that any sale could endanger strategically important services such as access to London's Heathrow Airport.
While Mr Walsh yesterday acknowledged that any investment proposal promoted by management was off the agenda, he insisted the airline's normal activities would continue. He said the company was still seeking 1,325 redundancies and it is believed about 800 staff have already indicated their interest in a severance scheme. He said fares would continue to be driven down and costs would be further reduced until Aer Lingus was in line with competitors such as Ryanair.
Mr Ahern told the Dáil yesterday that he did not believe an MBO was "appropriate in the situation of Aer Lingus. I do not think that is a solution I do not believe it is compatible with the mandate of Aer Lingus to have a management buyout."
Asked to comment yesterday on the Taoiseach's statement that an MBO would be inappropriate, Ms Harney said: "I don't think the Taoiseach said that." She then said that all the options, including an MBO, had to be examined "fairly and objectively".
Within an hour, the Aer Lingus chief executive, Mr Willie Walsh, told an Oireachtas Committee that the Aer Lingus management team "has no interest in pursuing that issue, so our request for consent was withdrawn on Monday of this week".
The IMPACT trade union last night welcomed the Taoiseach's statement that an MBO would not be appropriate. The union, which represents pilots, cabin crew and middle managers, said the proposal involved "a clear conflict of interest" on the part of the airline's management.
In July, Mr Walsh, Aer Lingus' chief financial officer, Mr Brian Dunne, and chief operations officer, Mr Séamus Kearney, wrote to the Minister for Transport seeking consent to develop an investment proposal for the company.
A spokesman for the Tánaiste said last night that Ms Harney was speaking before being told that the MBO proposal had been withdrawn. It could not be ascertained last night whether the Taoiseach knew of this development before speaking in the Dáil, as he left Ireland yesterday on a visit to the Far East and his spokeswoman could not be contacted for comment.
While the Taoiseach has carefully avoided expressing a view on the airline's future, speculation persists that he does not favour a sale.
However, the Cabinet sub-committee, which first met in July, was believed to have a majority sympathetic to the sale proposal.
It consisted of the Taoiseach, the Tánaiste, the then Minister for Finance, Mr McCreevy, the then Minister for Transport, Mr Brennan, and the Minister for Arts, Sport and Tourism, Mr O'Donoghue. Mr Brennan and Mr McCreevy were both believed to be in favour of a total or partial sale.
Ms Harney was also said to be favourably disposed to ending the State's 100 per cent ownership, and said she believed the airline needed private investment.