asked the Minister for Communications (1) the outstanding foreign debt of Aer Lingus at the latest available date; (2) the annual cost in £IR of debt servicing; and (3) whether, in his view, it would be feasible or desirable to add to this volume of debt by additional foreign borrowing to finance the planned replacement of the air fleet.

5.

asked the Minister for Communications (1) the net profits of Aer Lingus in each of the last two years; (2) if, in his view, such levels of profitability would be adequate to finance the planned replacement of the air fleet; and if he has been made aware by Aer Lingus of the estimated cost of replacement of the air fleet.

6.

asked the Minister for Communications if he will give details of Exchequer subventions to Aer Lingus over the last three years; and the proportion this was of the total operating cost.

7.

asked the Minister for Communications if he will give details of (a) the size of interest bearing and (b) non-interest bearing capital liabilities on Aer Lingus for each of the last three years; and if he will indicate whether in his view, Aer Lingus will be in a position to service such liabilities from its own activities.

I propose to take Questions Nos. 4 to 7, inclusive, together and to circulate in a form of a tabular statement the statistical data requested by the Deputy.

The Deputy has requested my views on a number of issues on which I would comment as follows.

After three years of losses, Aer Lingus moved back into profit in 1983-84, recording a net profit before tax of £IR8.5 million. Figures in the range IR$300 million to IR£500 million have been indicated as the likely level of capital expenditure which replacement of aircraft will call for by the end of this decade. Aer Lingus realise that to fund this expenditure much higher levels of profits sustained over a period of years will be essential and the attainment of higher profits is a fundamental objective of Aer Lingus corporate planning.

Over the past two years, the Government have invested IR£30 million additional equity in the airline. In addition, cost alleviation payments totalling IR£15 million are being provided in respect of the Aerlinte trans-Atlantic operation over the period 1983-1986. These investments are seen as the maximum contribution that can be made available from the Exchequer towards a strengthening of the airlines capital base and the Government will be expecting Aer Lingus to come forward in due course with specific proposals in respect of the acquisition and funding of replacement aircraft. Since Aer Lingus is a major net earner of foreign currency, I would expect that any financing strategy for fleet replacement would involve some recourse to foreign borrowing. Aer Lingus has traditionally had considerable recourse to borrowings, both on foreign and domestic markets, and I would have every confidence that as in the past Aer Lingus will meet any borrowing commitments which it enters into.

Following is the statement:

Aer Lingus Financial Data

3. Foreign Debt

The Aer Lingus foreign debt at 31 October, 1984 was IR£142.1m.

4. Cost of Debt Servicing

The annual cost of debt servicing is approximately IR£12.5m, of which approximately IR£1m relates to Irish pound borrowings.

5. Capital Liabilities

6. Cost Alleviation Payments in respect of Trans-Atlantic Service

Notes

(a) Statistics are in respect of Aer Lingus Group, including Aerlínte Éireann.

(b) Interest-bearing capital under (5) includes irredeemable capital of IR£5m provided by the Minister for Finance in accordance with section 3 (1) of the Air Companies (Amendment) Act, 1969. Equity investment by the Exchequer is not included.

(c) Total operating cost under (6) above includes all air transportation operating expenditure for Aer Lingus and Aerlínte Éireann.

As the Minister has taken four questions together, I hope I will be allowed one or two supplementaries. Is the Minister aware that although Aer Lingus do an excellent job for the State, they have an uphill climb in terms of replacing the fleet? In an article in the Sunday Independent in November the Minister told Aer Lingus not to come back to him with the begging bowl. A figure of £750 million was suggested — much higher than the Minister mentioned — as being necessary to replace the fleet. If we will not be relying on substantial borrowing to replace the fleet, the £8 million profit level would not cover its replacement and the Government do not appear to be in a position to make the massive injection of equity necessary to replace the fleet. How does the Minister see the £750 million fleet replacement programme being financed? I notice he mentioned some recourse to foreign borrowing. Is that effectively the answer he is giving? He also said that some specific proposals had been received from Aer Lingus as to how to achieve this. My information is that Aer Lingus are as much at a loss as the Minister appears to be as to how to get together the millions required to replace the fleet over the next few years. I am concerned for the future of Aer Lingus, as the Minister is, and to the size of the bill. He seems to expect Aer Lingus to provide the money.

A question, please, Deputy.

The Deputy is right. This is a major question.

Yes, it is.

It is exercising the minds of not only my Department but also of Aer Lingus. It is clear that in order to be able to cope with the challenge of replacing the fleet it will be necessary for Aer Lingus to improve their profits greatly. They returned to profitability last year. They will soon come to the end of the current financial year and I expect there will be an impoved profit margin for this year. However, it is clear that it will be necessary for them to increase their profits greatly in the coming year if they are to generate a significant part of the funds necessary for the replacement of the fleet.

Does the Minister accept that is extremely unlikely considering that they made a loss for three years in a row? They made a profit of £8 million after paying interest of £20 million. If they replace the fleet at the rate at which we would wish them to, those interest charges would be higher. It is extremely unlikely that they will reach a level of profitability which would be sufficient to replace the fleet. How will the fleet be replaced? What the Minister is saying is that he hopes Aer Lingus will have some suggestions about how to do that. It does not appear as if anyone has thought out precisely how we will get the money to replace the fleet.

We have not yet come to conclusions as to how the bill for replacement of the fleet will be met. We have been studying that for the last two years. I emphasise the need for Aer Lingus to return much higher profits if they are to be in a position to replace the fleet, and everyone working in the airline should be aware of that.

Does the Minister not agree that for Aer Lingus, after three years of losses, to return a profit last year in very bad trading conditions is a matter on which they should be complimented and that we must leave no cloud over the future of the airline? Does he agree that those working in the airline must be assured at this stage, if they are to continue their profit effort, that the future of the airline is secure? It is essential for us as an island nation to have a national carrier.

There is great sense in what the Deputy said. I want to be associated with the remarks he has made. Great credit is due to Aer Lingus for their performance in the financial year ended March 1984 and that includes not just management but everyone who works for Aer Lingus. There have been very unfair comments made, both inside and outside the House, about Aer Lingus.

Hear, hear.

I am not saying that it is perfect but it is an airline of which we can be proud. It has served the country well and I have every confidence that it will continue to do so for many decades.

Does the Minister agree that replacement of the fleet will be on a phased basis? If leasing is involved surely it will not require immediate massive capital?

That is one of the possibilities. We can contemplate direct purchase, lease purchase or pure leasing. They are all options that are open.

Surely they would not all need to be replaced in one go?

Everything would not be replaced together.

Have the Department given attention to using the facilities that aircraft manufacturing companies have in regard to lease purchase or leasing? Have they considered using the very valuable dollar earnings of Aer Lingus in the US to purchase, on a phased basis, the new fleet?

All these points have been considered in the Department and are among the options open to us. We are unlikely to come to any conclusions for some months.