Aer Lingus - 2
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Incentivising co-operation on Open Skies
OK, people, just a few thoughts on how we "encourage" the EU to see things our way on increased US access. A few points to include in your letters to TDs and MEPs:
- What EI is seeking is not unreasonable; even with the change to 3:1 in favour of DUB, EI has less US access than any other major EU carrier.
- The Commission, despite being (and having a responsibility to be) a standard bearer of competition, has succeeded in making EI's competitive position worse.
- The Commission's use of its discretion has been unfair; while it has taken no action against countries against whom it won cases in 2003 in relation to O/S (and is unlikely to take action against the Netherlands), it has taken action to stop Ireland moving forward.
- The Commission has interpreted the mandate given to it by the ECJ in 2003 to justify the imposition of a competitive disadvantage on a member state (and on airlines in that country); it's very unlikely that a mandate from the ECJ could be interpreted in such a way;
- The Commission cannot use the excuse of a potential or long term agreement with a third party (in this case the US) to justify the imposition of a competitive disadvantage on a member state.
So, what the govt needs to do is to offer the EU two alternatives, let's call them "easy way" and hard way".
Just a few thoughts on EU Law and how we need to handle the Commission; basically our trump card is the EU Constitution. We send a message to the EU Commission: easy way or hard way.
EASY WAY:
They accept that there was no way that letting Ireland go forward with a limited change to its bilateral could have any affect on (a) the competitive position of other member states or (b) its negotiating position with the US. The EU expresses no objection and gives its blessing to proceed.
HARD WAY:
They dig their heels in. No change. Even though everyone else has much more liberal access, there will be no change for Ireland.
The govt's response:
1) Proceed with new agreement with US, on basis of Nov 05 agreement.
2) Take EU Commission to ECJ and seek guidance on limits of its mandate, particularly arising from 2003 case. Also, extent of Commission's power of discretion. Also, test extent to which EU Commission can impose a competitive disadvantage on a member state.
3) This will take about 2-3 years to get to Court, but EU Constitution will not be put before people until ECJ gives ruling and govt will not put new Constitution before people (Ireland being one of the countries whose people need to approve it in referendum) unless protective clauses introduced to stop this kind of abuse in future.
I'm sorry to be bashing on at this ad nauseum, but it is SO important to EI's future that we get this right; why should YOUR airline be treated like this by the EU, held hostage to a situation which is totally beyond its control, to be prevented from competing effectively by the very people whom we thought would get us past all this stopover nonsense. So, get out those pens and start writing letters!
- What EI is seeking is not unreasonable; even with the change to 3:1 in favour of DUB, EI has less US access than any other major EU carrier.
- The Commission, despite being (and having a responsibility to be) a standard bearer of competition, has succeeded in making EI's competitive position worse.
- The Commission's use of its discretion has been unfair; while it has taken no action against countries against whom it won cases in 2003 in relation to O/S (and is unlikely to take action against the Netherlands), it has taken action to stop Ireland moving forward.
- The Commission has interpreted the mandate given to it by the ECJ in 2003 to justify the imposition of a competitive disadvantage on a member state (and on airlines in that country); it's very unlikely that a mandate from the ECJ could be interpreted in such a way;
- The Commission cannot use the excuse of a potential or long term agreement with a third party (in this case the US) to justify the imposition of a competitive disadvantage on a member state.
So, what the govt needs to do is to offer the EU two alternatives, let's call them "easy way" and hard way".
Just a few thoughts on EU Law and how we need to handle the Commission; basically our trump card is the EU Constitution. We send a message to the EU Commission: easy way or hard way.
EASY WAY:
They accept that there was no way that letting Ireland go forward with a limited change to its bilateral could have any affect on (a) the competitive position of other member states or (b) its negotiating position with the US. The EU expresses no objection and gives its blessing to proceed.
HARD WAY:
They dig their heels in. No change. Even though everyone else has much more liberal access, there will be no change for Ireland.
The govt's response:
1) Proceed with new agreement with US, on basis of Nov 05 agreement.
2) Take EU Commission to ECJ and seek guidance on limits of its mandate, particularly arising from 2003 case. Also, extent of Commission's power of discretion. Also, test extent to which EU Commission can impose a competitive disadvantage on a member state.
3) This will take about 2-3 years to get to Court, but EU Constitution will not be put before people until ECJ gives ruling and govt will not put new Constitution before people (Ireland being one of the countries whose people need to approve it in referendum) unless protective clauses introduced to stop this kind of abuse in future.
I'm sorry to be bashing on at this ad nauseum, but it is SO important to EI's future that we get this right; why should YOUR airline be treated like this by the EU, held hostage to a situation which is totally beyond its control, to be prevented from competing effectively by the very people whom we thought would get us past all this stopover nonsense. So, get out those pens and start writing letters!
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Aer Lingus aims for deals with Oneworld airlines
Sunday, November 26, 2006 By David Clerkin
Aer Lingus is in talks with other airlines in the Oneworld Alliance to allow its passengers to access their airport lounges and continue to earn frequent-flyer miles on their services after the airline quits the alliance next year.
The airline will leave the alliance at the end of March as part of a plan to streamline costs. But it has started negotiations with American Airlines, Qantas and Cathay Pacific, to strike bilateral deals that will ensure mutual recognition of frequent flyer points with effect from April.
Aer Lingus passengers will be eligible to collect points for their Aer Lingus account when they travel on the other airlines’ services and will also be able to use Aer Lingus points to qualify for free flights or upgrades on services operated by the three airlines.
The deal with American Airlines will also allow Aer Lingus passengers to access the airline’s lounges at US airports, although there are no plans to strike similar deals with Qantas or Cathay Pacific.
Aer Lingus also said it hoped to strike a similar deal with British Airways ‘‘in the near future’’. Agreements with other Oneworld members, which include Finnair, Spanish carrier Iberia and Chilean operator LAN, have yet to be put in place, however.
Passengers will also be able to carry forward frequent flyer miles from their existing accounts for use under the new arrangements. But flights with the Oneworld airlines that do not sign a bilateral deal with Aer Lingus can only be booked before the end of March.
Sunday, November 26, 2006 By David Clerkin
Aer Lingus is in talks with other airlines in the Oneworld Alliance to allow its passengers to access their airport lounges and continue to earn frequent-flyer miles on their services after the airline quits the alliance next year.
The airline will leave the alliance at the end of March as part of a plan to streamline costs. But it has started negotiations with American Airlines, Qantas and Cathay Pacific, to strike bilateral deals that will ensure mutual recognition of frequent flyer points with effect from April.
Aer Lingus passengers will be eligible to collect points for their Aer Lingus account when they travel on the other airlines’ services and will also be able to use Aer Lingus points to qualify for free flights or upgrades on services operated by the three airlines.
The deal with American Airlines will also allow Aer Lingus passengers to access the airline’s lounges at US airports, although there are no plans to strike similar deals with Qantas or Cathay Pacific.
Aer Lingus also said it hoped to strike a similar deal with British Airways ‘‘in the near future’’. Agreements with other Oneworld members, which include Finnair, Spanish carrier Iberia and Chilean operator LAN, have yet to be put in place, however.
Passengers will also be able to carry forward frequent flyer miles from their existing accounts for use under the new arrangements. But flights with the Oneworld airlines that do not sign a bilateral deal with Aer Lingus can only be booked before the end of March.
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and here is an interesting analysis by the Sunday Business Post on the takeover battle.
Aer Lingus game is far from over
Sunday, November 26, 2006 By David Clerkin
Horse-racing fans know the difficulty of picking a winner from a crowded field.
But as the smoke cleared after Ryanair’s swoop on Aer Lingus appeared doomed to failure last week, the task of identifying which of the drama’s main players came out ahead looked even more challenging.
Aer Lingus chief executive Dermot Mannion can be satisfied that he successfully battled to keep the airline out of Ryanair hands. The Aer Lingus Employee Share Ownership Trust (Esot) reinforced its position as protector of staff interests with a comprehensive rejection of the takeover.
The fringe players - the airline pilots’ pension fund, the pilots’ investment group and telecoms billionaire Denis O’Brien - are left to count substantial investment losses after seeing the Aer Lingus share price fall well below the levels at which they bought heavily. They can at least console themselves, however, that their building of a combined stake of 6 per cent achieved the strategic objective of blocking the Ryanair move for the time being.
But Ryanair chief executive Michael O’Leary, who wreaked havoc on Aer Lingus management by taking a significant 19 per cent share in the airline but ultimately fell short in his quest for overall control, is unlikely to be too disappointed with his position.
The extent of last week’s Esot landslide, which saw a 97 per cent vote against Ryanair’s approach, made O’Leary’s strategy, which included attempts to court Aer Lingus employees, seem even more curious than it had first appeared.
O’Leary had raised eyebrows in recent weeks by effectively conceding that the success of his takeover plan lay in the Esot’s hands and encouraging its members to back the deal. It is unlikely, however, that O’Leary had failed to see the rejection coming. He had never sugarcoated his plans for an Aer Lingus under his control, instead pledging to go to war on the airline’s cost base.
As recently as last Tuesday, the day before the result of the Esot vote was known, he derided Aer Lingus management for being ‘‘soft on staff costs’’ and for granting ‘‘excessive pay increases.
‘‘Ryanair believes Aer Lingus is over-staffed,” he wrote in a letter to shareholders - hardly the sentiment that he would have expressed if he seriously expected the Esot to get behind him.
But this was not the first of O’Leary’s tactics to suggest that he may not have been as committed to the goal of an immediate takeover of Aer Lingus as it first appeared.
The plan was always ambitious with less than 60 per cent of the company available to buy in the predictable event that the government and the Esot decided to retain their stakes.
He shunned the approach that proved successful on two occasions for buyers of Eircom, the other former state company in which employees had a significant interest.
Both deals saw the buyers, the Valentia consortium and more recently Babcock and Brown, strike partnership deals with the Eircom Esot to get them on board and retain them as part-owners of the acquired business.
Although O’Leary said he was prepared to work with the Aer Lingus Esot as a fellow shareholder, he placed less emphasis on the need to sweeten the deal and instead lumped it in with other shareholders with a take the money or leave it approach.
His previous track record on union relations would have required him to be even more conciliatory, not less, than Valentia or Babcock.
But perhaps the most revealing sign of O’Leary’s true intentions, in retrospect, was the manner of his bid, which was made after he built up a 16 per cent stake within days of Aer Lingus making its stock-market debut.
News of the approach sent the share price soaring from €2.51 to over €2.80 immediately, removing the scope for Ryanair to meaningfully increase its stake. It could only acquire a further 3 per cent at prices less than €2.80 and was precluded from buying at prices above €2.80 under stock exchange rules.
O’Leary dismissed early questions over whether his bid was serious, saying he was spending the serious sum of €200 million on his initial stake in the airline. But he also considered the likely consequences of making the takeover offer with just 16 per cent of Aer Lingus in his pocket, when he could have simply disclosed his interest at that point without going as far as making a full bid. He would then have been free to build a stake without the €2.80 constraint, up to a maximum of almost 30 per cent - a much stronger position from which to mop up the remaining 20 per cent necessary to assume control.
It is also worth noting that Ryanair made no effort to increase its stake over the last two weeks, when the Aer Lingus share price dipped back below the crucial €2.80 threshold.
This was either a signal of acceptance that the bid had failed, or one of O’Leary being happy that he held as many aces as he needs for now.
As the Aer Lingus share price dipped towards the €2.65 mark last week, non-aligned shareholders were left to look towards Mannion’s team, which has spent considerable time arguing that €2.80 undervalued the company and that the best prospects for a higher share price lie in remaining independent.
Investors will make up their own minds over the weeks and months ahead. While Mannion now has one eye fixed on his share price and is reliant on an unlikely alliance of politicians, employees and billionaires to keep Ryanair at bay, O’Leary can sit and wait, comfortable in the knowledge that no one else can take over the main competitor in his home market.
If the share price continues its downward trend and the bottom line starts to hurt as the airline struggles with even more intense competition from Ryanair, his mantra that €2.80 per share is ‘‘a generous offer’’ may ring in shareholder ears, and look even more generous if Aer Lingus cannot deliver a higher price on its own.
Mannion, meanwhile, was given an unwelcome ultimatum last week by the Takeover Panel, which said he had just a week to provide more details on the cost-cutting plan he paraded as part of his defence strategy.
It will be difficult to do this without treading on union toes.
So, while Mannion and the Esot enjoy a slender lead, they may worry that the final whistle is now in O’Leary’s lips. And the game may just be beginning.
Aer Lingus game is far from over
Sunday, November 26, 2006 By David Clerkin
Horse-racing fans know the difficulty of picking a winner from a crowded field.
But as the smoke cleared after Ryanair’s swoop on Aer Lingus appeared doomed to failure last week, the task of identifying which of the drama’s main players came out ahead looked even more challenging.
Aer Lingus chief executive Dermot Mannion can be satisfied that he successfully battled to keep the airline out of Ryanair hands. The Aer Lingus Employee Share Ownership Trust (Esot) reinforced its position as protector of staff interests with a comprehensive rejection of the takeover.
The fringe players - the airline pilots’ pension fund, the pilots’ investment group and telecoms billionaire Denis O’Brien - are left to count substantial investment losses after seeing the Aer Lingus share price fall well below the levels at which they bought heavily. They can at least console themselves, however, that their building of a combined stake of 6 per cent achieved the strategic objective of blocking the Ryanair move for the time being.
But Ryanair chief executive Michael O’Leary, who wreaked havoc on Aer Lingus management by taking a significant 19 per cent share in the airline but ultimately fell short in his quest for overall control, is unlikely to be too disappointed with his position.
The extent of last week’s Esot landslide, which saw a 97 per cent vote against Ryanair’s approach, made O’Leary’s strategy, which included attempts to court Aer Lingus employees, seem even more curious than it had first appeared.
O’Leary had raised eyebrows in recent weeks by effectively conceding that the success of his takeover plan lay in the Esot’s hands and encouraging its members to back the deal. It is unlikely, however, that O’Leary had failed to see the rejection coming. He had never sugarcoated his plans for an Aer Lingus under his control, instead pledging to go to war on the airline’s cost base.
As recently as last Tuesday, the day before the result of the Esot vote was known, he derided Aer Lingus management for being ‘‘soft on staff costs’’ and for granting ‘‘excessive pay increases.
‘‘Ryanair believes Aer Lingus is over-staffed,” he wrote in a letter to shareholders - hardly the sentiment that he would have expressed if he seriously expected the Esot to get behind him.
But this was not the first of O’Leary’s tactics to suggest that he may not have been as committed to the goal of an immediate takeover of Aer Lingus as it first appeared.
The plan was always ambitious with less than 60 per cent of the company available to buy in the predictable event that the government and the Esot decided to retain their stakes.
He shunned the approach that proved successful on two occasions for buyers of Eircom, the other former state company in which employees had a significant interest.
Both deals saw the buyers, the Valentia consortium and more recently Babcock and Brown, strike partnership deals with the Eircom Esot to get them on board and retain them as part-owners of the acquired business.
Although O’Leary said he was prepared to work with the Aer Lingus Esot as a fellow shareholder, he placed less emphasis on the need to sweeten the deal and instead lumped it in with other shareholders with a take the money or leave it approach.
His previous track record on union relations would have required him to be even more conciliatory, not less, than Valentia or Babcock.
But perhaps the most revealing sign of O’Leary’s true intentions, in retrospect, was the manner of his bid, which was made after he built up a 16 per cent stake within days of Aer Lingus making its stock-market debut.
News of the approach sent the share price soaring from €2.51 to over €2.80 immediately, removing the scope for Ryanair to meaningfully increase its stake. It could only acquire a further 3 per cent at prices less than €2.80 and was precluded from buying at prices above €2.80 under stock exchange rules.
O’Leary dismissed early questions over whether his bid was serious, saying he was spending the serious sum of €200 million on his initial stake in the airline. But he also considered the likely consequences of making the takeover offer with just 16 per cent of Aer Lingus in his pocket, when he could have simply disclosed his interest at that point without going as far as making a full bid. He would then have been free to build a stake without the €2.80 constraint, up to a maximum of almost 30 per cent - a much stronger position from which to mop up the remaining 20 per cent necessary to assume control.
It is also worth noting that Ryanair made no effort to increase its stake over the last two weeks, when the Aer Lingus share price dipped back below the crucial €2.80 threshold.
This was either a signal of acceptance that the bid had failed, or one of O’Leary being happy that he held as many aces as he needs for now.
As the Aer Lingus share price dipped towards the €2.65 mark last week, non-aligned shareholders were left to look towards Mannion’s team, which has spent considerable time arguing that €2.80 undervalued the company and that the best prospects for a higher share price lie in remaining independent.
Investors will make up their own minds over the weeks and months ahead. While Mannion now has one eye fixed on his share price and is reliant on an unlikely alliance of politicians, employees and billionaires to keep Ryanair at bay, O’Leary can sit and wait, comfortable in the knowledge that no one else can take over the main competitor in his home market.
If the share price continues its downward trend and the bottom line starts to hurt as the airline struggles with even more intense competition from Ryanair, his mantra that €2.80 per share is ‘‘a generous offer’’ may ring in shareholder ears, and look even more generous if Aer Lingus cannot deliver a higher price on its own.
Mannion, meanwhile, was given an unwelcome ultimatum last week by the Takeover Panel, which said he had just a week to provide more details on the cost-cutting plan he paraded as part of his defence strategy.
It will be difficult to do this without treading on union toes.
So, while Mannion and the Esot enjoy a slender lead, they may worry that the final whistle is now in O’Leary’s lips. And the game may just be beginning.
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It's not over yet!
This is unexpected; I thought, after the rejection by ESOT, that FR would gradually begin to offload some of its shareholding, but they're not giving up yet. They seem to have conceded that they won't take over full control, so what is the gameplan here? Why buy more shares if they know they won't have full control; doesn't 19% say "we're interested in EI's future" just as well (and €85m cheaper) than 25%?
It's going to be interesting to see how this pans out ...
http://www.rte.ie/aertel/p107.htm
It's going to be interesting to see how this pans out ...
http://www.rte.ie/aertel/p107.htm
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It's actually 26.2%, not the 25% stated last night. FR can increase its shareholding to 29.9% without having to make another bid and since - once its bid lapses on the 4th Dec, it has to wait a year to make another bid - it will be interesting to see whether it does so. I think it will.
I think FR's behaviour towards EI over the next year will also dictate what it will do; if it's content just to be a long term minority shareholder, it won't want to be too harsh in competing with EI, BUT if its intention is, ultimately to buy out the airline, it will probably see it worthwhile to (a) drive the price down considerably (the lower it is, the easier for it to acquire more shares when the time comes) and (b) it will also persuade EI to make some of the cuts it has been suggesting; it probably makes more sense for EI to have to deal with SIPTU, because the prospects of SIPTU sitting down with FR are not encouraging.
And what of MOL's stance on other EI growth issues, such as long haul; will it be as reticent as DM in challenging the govt and the Commission on the whole Open Skies issue and EI's ability to build its transatlantic route network?
I think FR's behaviour towards EI over the next year will also dictate what it will do; if it's content just to be a long term minority shareholder, it won't want to be too harsh in competing with EI, BUT if its intention is, ultimately to buy out the airline, it will probably see it worthwhile to (a) drive the price down considerably (the lower it is, the easier for it to acquire more shares when the time comes) and (b) it will also persuade EI to make some of the cuts it has been suggesting; it probably makes more sense for EI to have to deal with SIPTU, because the prospects of SIPTU sitting down with FR are not encouraging.
And what of MOL's stance on other EI growth issues, such as long haul; will it be as reticent as DM in challenging the govt and the Commission on the whole Open Skies issue and EI's ability to build its transatlantic route network?
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agree 84O...in the short term the plus is it gives DM the slash hook re jobs as the unions will side with DM. The other option is siding with leo and he'll blitz the place.
very interesting times....the big thing here is by purchasing such a vast tranch of shares in AL, FR now is king of the roost re what goes at Dub airport and if another suitor comes into town. If there were potential big player investors out there, they'll back off as they'd have to cozy in with FR.
AL share price will be based now on performance of the co. and not on potential bidders.
Board meeting may become very interesting. Can FR demand a place at the table??
very interesting times....the big thing here is by purchasing such a vast tranch of shares in AL, FR now is king of the roost re what goes at Dub airport and if another suitor comes into town. If there were potential big player investors out there, they'll back off as they'd have to cozy in with FR.
AL share price will be based now on performance of the co. and not on potential bidders.
Board meeting may become very interesting. Can FR demand a place at the table??
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I'm sure there must be rules as to how many directors shareholders are entitled to appoint, based on their holding. I think that in EI's case, this will have to be reviewed, because (apart from the worker directors), all directors are appointed by the govt, which now holds about 28% (?). FR can bring its holding to that amount - indeed to 29.9% - and once it gets to that level, it could probably insist on two.
Then there are the others: IALPA/Tailwind, the ESOT, etc? I wonder if the govt could appoint Denis O'Brien as a director, even though his own holding isn't sufficient to justify a seat?
Incidentally, I came across this speech by one Mr. James Oberstar, a member of the US House of Representatives and head of the powerful transport cttee, which will be involved in the open skies issue. Basically, he is opposed to any change to the rule which increases the ability of foreign carriers to own shares in US carriers. Call it protectionism, but that's the way it is; anything that the DOT proposes in the new rule which goes beyond this will probably be shot down. Translation: Open Skies is on ice.
http://www.oberstar.house.gov/index.asp?Type=B_PR&SEC={00ED92DA-AC14-4AFA-8792-FAEA4515297B}&DE={0E3FD783-88AC-4CC1-9716-A1D25718E118}
That's not necessarily bad news for us; if this is the case, then the ability of the Commission to tell us to hold back and keep to 50/50 (and now new US routes) will be undermined; the govt will probably tell them to sod off and there are legal grounds for it to take action against the Commission, if it gets in the way.
However, what we don't yet know is when this decision will be made; the sooner the better, from our vantage point, because the sooner EI knows when it can add new routes (and consequently, when it needs to add more aircraft), the better.
Then there are the others: IALPA/Tailwind, the ESOT, etc? I wonder if the govt could appoint Denis O'Brien as a director, even though his own holding isn't sufficient to justify a seat?
Incidentally, I came across this speech by one Mr. James Oberstar, a member of the US House of Representatives and head of the powerful transport cttee, which will be involved in the open skies issue. Basically, he is opposed to any change to the rule which increases the ability of foreign carriers to own shares in US carriers. Call it protectionism, but that's the way it is; anything that the DOT proposes in the new rule which goes beyond this will probably be shot down. Translation: Open Skies is on ice.
http://www.oberstar.house.gov/index.asp?Type=B_PR&SEC={00ED92DA-AC14-4AFA-8792-FAEA4515297B}&DE={0E3FD783-88AC-4CC1-9716-A1D25718E118}
That's not necessarily bad news for us; if this is the case, then the ability of the Commission to tell us to hold back and keep to 50/50 (and now new US routes) will be undermined; the govt will probably tell them to sod off and there are legal grounds for it to take action against the Commission, if it gets in the way.
However, what we don't yet know is when this decision will be made; the sooner the better, from our vantage point, because the sooner EI knows when it can add new routes (and consequently, when it needs to add more aircraft), the better.
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EU delays decision on FR takeover of EI
The EU has delayed until the 20th December a decision on Ryanair's planned takeover of EI, which was originally scheduled for the 6th; the EU move has apparently been triggered by FR's decision to increase its shareholding to 25%. The airline can still, under Irish takeover rules, increase its holding to 29.9% without having to make another bid.
So, what can the EU do? Well, for a start, it will need to consider the opposition and the likelihood of FR actually being able to take over the airline, as it wishes; with over 46% of shares against it, that will be difficult, so it's hard to argue that competition will be undermined and I can't see FR being asked to axe routes on which both airlines compete, as there is no evidence of collusion or of fares being controlled?
http://investing.reuters.co.uk/news/...U-UPDATE-1.XML
So, what can the EU do? Well, for a start, it will need to consider the opposition and the likelihood of FR actually being able to take over the airline, as it wishes; with over 46% of shares against it, that will be difficult, so it's hard to argue that competition will be undermined and I can't see FR being asked to axe routes on which both airlines compete, as there is no evidence of collusion or of fares being controlled?
http://investing.reuters.co.uk/news/...U-UPDATE-1.XML
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PQ on Shannon stopover issue
Here's a PQ tabled by FG's Olivia Mitchell on the SNN stopover issue, which gives some indication of the govt's position.
------------------------------------------------------------------------
*To ask the Minister for Transport if he will make representations at EU
level pointing out the competitive disadvantage imposed on Ireland by
prohibiting a bilateral pending the completion of the stalled EU wide
open skies deal with the US in view of the fact that other EU countries
already have bilateral open skies agreements with the US
- Olivia Mitchell.
* For WRITTEN answer on Wednesday, 29th November, 2006.
Ref No: 40869/06 Proof: 142
Transferred (from) Taoiseach -- 29/11/2006 -- Question No 642 (Written)
Answered by the Minister for Transport
(Martin Cullen)
Reply
The liberalisation of air transport services between Ireland and the US
would deliver major benefits for Irish business and tourism. I have
drawn to the attention of the Commission and colleagues in the Council
of Ministers that the conclusion of an open skies agreement would have
particular benefits for Ireland compared to Member States (15 of 25)
that already have open-skies agreements with the US. Those Member States
already enjoy an advantage in unrestricted access to route rights for
the development of air services to and from the US.
Following the agreement reached with the US Authorities to providing for
an orderly change to the Shannon-stop arrangements in the context of the
proposed EU US Open Skies agreement it is very disappointing that that
agreement has still not been finalized. This is due to problems that
have arisen on the US side in making changes to the US rules on
ownership and control restrictions for airlines. Following the US
mid-term elections earlier this month it is widely perceived that the
rulemaking procedures will, at a minimum, be delayed further. I should
point out however that the US administration has not yet stated how it
intends to proceed in this matter following those elections.
I informed Government in September this year of my intention to pursue
all possible avenues to provide for the entry into force at the earliest
possible date of the EU US open skies agreement including the
transitional arrangements relating to Ireland already agreed between the
EU and the US I also indicated that, in the event that an EU US
agreement is not achievable within a reasonable timeframe, I intend to
seek to implement, in accordance with applicable Community law, the
essential elements of the transitional arrangements relating to Ireland
by way of an amendment to the Ireland US bilateral air services
agreement.
While allowing some time for clarification of the intentions of the US
administration following the US elections, I am considering all of the
options to progress this matter as soon as possible including the legal
issues arising under Community law in relation to an amendment of the
Ireland US bilateral air services agreement.
------------------------------------------------------------------------
*To ask the Minister for Transport if he will make representations at EU
level pointing out the competitive disadvantage imposed on Ireland by
prohibiting a bilateral pending the completion of the stalled EU wide
open skies deal with the US in view of the fact that other EU countries
already have bilateral open skies agreements with the US
- Olivia Mitchell.
* For WRITTEN answer on Wednesday, 29th November, 2006.
Ref No: 40869/06 Proof: 142
Transferred (from) Taoiseach -- 29/11/2006 -- Question No 642 (Written)
Answered by the Minister for Transport
(Martin Cullen)
Reply
The liberalisation of air transport services between Ireland and the US
would deliver major benefits for Irish business and tourism. I have
drawn to the attention of the Commission and colleagues in the Council
of Ministers that the conclusion of an open skies agreement would have
particular benefits for Ireland compared to Member States (15 of 25)
that already have open-skies agreements with the US. Those Member States
already enjoy an advantage in unrestricted access to route rights for
the development of air services to and from the US.
Following the agreement reached with the US Authorities to providing for
an orderly change to the Shannon-stop arrangements in the context of the
proposed EU US Open Skies agreement it is very disappointing that that
agreement has still not been finalized. This is due to problems that
have arisen on the US side in making changes to the US rules on
ownership and control restrictions for airlines. Following the US
mid-term elections earlier this month it is widely perceived that the
rulemaking procedures will, at a minimum, be delayed further. I should
point out however that the US administration has not yet stated how it
intends to proceed in this matter following those elections.
I informed Government in September this year of my intention to pursue
all possible avenues to provide for the entry into force at the earliest
possible date of the EU US open skies agreement including the
transitional arrangements relating to Ireland already agreed between the
EU and the US I also indicated that, in the event that an EU US
agreement is not achievable within a reasonable timeframe, I intend to
seek to implement, in accordance with applicable Community law, the
essential elements of the transitional arrangements relating to Ireland
by way of an amendment to the Ireland US bilateral air services
agreement.
While allowing some time for clarification of the intentions of the US
administration following the US elections, I am considering all of the
options to progress this matter as soon as possible including the legal
issues arising under Community law in relation to an amendment of the
Ireland US bilateral air services agreement.
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FR Pilots bragging rights?
heard an FR flight into cork circa 2200 hrs local bragging how much %age they owned of Aer Lingus over the air to AL crews on approach. How pathetic and nobody is impressed.
Actually Suasdaguna; some Rynanir pilots have been buying EI shares as part of the tailwind scheme - The aim is to STOP O'Leary taking over Aer Lingus ! I am not quite sure of your intention with your last post but I hope the comment supposedly heard by a Ryanair pilot was one of support...
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Charges
Interesting to read that EI are seeking to renegotiate charges at Irish Airports.
It seems everybody is trying to reduce costs except the King Canute like DAA and their minions in Shannon and Cork!
To be fair the Shannon board looked for cost cuts when the reality of the Ryanair deal became clear but the Unions won't budge and no doubt the issue will be kicked into touch untill after the next election and most probably the one after that as well.
It seems everybody is trying to reduce costs except the King Canute like DAA and their minions in Shannon and Cork!
To be fair the Shannon board looked for cost cuts when the reality of the Ryanair deal became clear but the Unions won't budge and no doubt the issue will be kicked into touch untill after the next election and most probably the one after that as well.
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Here's an article from this week's Flight, which summarises very well the position between the EU and the US on Open Skies:
http://www.flightglobal.com/Articles...prospects.html
Rough translation: stalemate. There seems to be absolutely no room for movement, so it's absolutely vital that the govt pushes as hard as possible on this. Ultimately, there is absolutely nothing to be gained by the Commission holding us back, because the issue blocking agreement really has nothing to do with us. If they do dig their heels in, then the Constitution (which Ireland has to approve by referendum) will need to be brought into the mix. It's completely up to the Commission as to whether it wants this to happen ...
Just by way of addition, I received a response from an MEP to whom I wrote and she had got feedback from the Commission; clearly, they are going to play hardball on this and are completely unsympathetic to the Irish position:
* We have been informed by Commissioner Barrot that "the transitional
period foreseen for Shannon airport will commence as and from the date
that full agreement has been reached and Open Skies is in operation".
* By taking Germany and seven other member states to the ECJ the
Commission acted functionally as upholder of EC Law. It could be argued
that the Commission has yet to take action in accordance with the
Court's ruling because it still believes it will get an EU/US agreement
soon. The Commission is of the view that a positive outcome will result
from the negotiations. Therefore, initiating proceedings against Germany
and others might not be necessary because all bilaterals will be
replaced when Open Skies begins.
* As you mention the Commission has recently taken a case against the
Netherlands. The Commission claims that modifications to the original
1957 agreement in 1992 resulted in the Netherlands entering into a "new
agreement" which fell within the Community's exclusive competence
following the adoption of Community Regulations in this field. Moreover,
the Commission claims that the agreement could lead to non-Dutch
Community airlines being treated differently to Dutch airlines, thereby
breaching Article 52 of the EC Treaty.The Advocate General has ruled in
favour of the Commission against the Netherlands. From this it would
appear that for Ireland to have its own bilateral deal would also be
contra to EC law.
* The possibly of using the Constitution as a bargaining chip
notwithstanding, it is most probable that the Open Skies talks may well
be concluded before the Constitution treaty talks are.
I enclose below the latest statement to Parliament of the European
Council in relation to Open Skies:
* 'The negotiations on the aviation agreement between the EU and
the United States were concluded in March 2005. The EU is now awaiting
the outcome of the internal procedures to be carried out by the US
authorities. These procedures are intended to bring up to date the
'amended rules' governing the administration of data concerning foreign
nationals by US airlines. In the meantime, all the discussion partners
have emphasised the importance of complying with the negotiated
agreement, since it offers all the EU Member States an 'open skies'
arrangement with the United States and clears the way for the removal of
restrictions on transatlantic flights in the future. Relations between
Ireland and the United States are dealt with only as one component of EU
-US agreement to be concluded in the near future. At all events, the
discussions will not encompass the possibility of a bilateral agreement
between Ireland and the United States.'
-----------------------------------------------------------------------------------------------------
The basic thrust is that the Commission is entirely satisfied to see Ireland stuck with its 50/50 for the next 2-3 years and it could easily be that length of time - the duration of the new Congress at least - before this issue is sorted out. Bear in mind also that part of the reason for the delay is that the EU Commission is seeking concessions which (a) it knows are politically unacceptable in the US (see the Flight article above) and (b) are of interest only to a minority of EU member states and yet, it sees it as completely justifiable to maintain a competitive disadvantage in place against Ireland. There are very significant grounds here for legal action to be taken against the Commission at the ECJ.
http://www.flightglobal.com/Articles...prospects.html
Rough translation: stalemate. There seems to be absolutely no room for movement, so it's absolutely vital that the govt pushes as hard as possible on this. Ultimately, there is absolutely nothing to be gained by the Commission holding us back, because the issue blocking agreement really has nothing to do with us. If they do dig their heels in, then the Constitution (which Ireland has to approve by referendum) will need to be brought into the mix. It's completely up to the Commission as to whether it wants this to happen ...
Just by way of addition, I received a response from an MEP to whom I wrote and she had got feedback from the Commission; clearly, they are going to play hardball on this and are completely unsympathetic to the Irish position:
* We have been informed by Commissioner Barrot that "the transitional
period foreseen for Shannon airport will commence as and from the date
that full agreement has been reached and Open Skies is in operation".
* By taking Germany and seven other member states to the ECJ the
Commission acted functionally as upholder of EC Law. It could be argued
that the Commission has yet to take action in accordance with the
Court's ruling because it still believes it will get an EU/US agreement
soon. The Commission is of the view that a positive outcome will result
from the negotiations. Therefore, initiating proceedings against Germany
and others might not be necessary because all bilaterals will be
replaced when Open Skies begins.
* As you mention the Commission has recently taken a case against the
Netherlands. The Commission claims that modifications to the original
1957 agreement in 1992 resulted in the Netherlands entering into a "new
agreement" which fell within the Community's exclusive competence
following the adoption of Community Regulations in this field. Moreover,
the Commission claims that the agreement could lead to non-Dutch
Community airlines being treated differently to Dutch airlines, thereby
breaching Article 52 of the EC Treaty.The Advocate General has ruled in
favour of the Commission against the Netherlands. From this it would
appear that for Ireland to have its own bilateral deal would also be
contra to EC law.
* The possibly of using the Constitution as a bargaining chip
notwithstanding, it is most probable that the Open Skies talks may well
be concluded before the Constitution treaty talks are.
I enclose below the latest statement to Parliament of the European
Council in relation to Open Skies:
* 'The negotiations on the aviation agreement between the EU and
the United States were concluded in March 2005. The EU is now awaiting
the outcome of the internal procedures to be carried out by the US
authorities. These procedures are intended to bring up to date the
'amended rules' governing the administration of data concerning foreign
nationals by US airlines. In the meantime, all the discussion partners
have emphasised the importance of complying with the negotiated
agreement, since it offers all the EU Member States an 'open skies'
arrangement with the United States and clears the way for the removal of
restrictions on transatlantic flights in the future. Relations between
Ireland and the United States are dealt with only as one component of EU
-US agreement to be concluded in the near future. At all events, the
discussions will not encompass the possibility of a bilateral agreement
between Ireland and the United States.'
-----------------------------------------------------------------------------------------------------
The basic thrust is that the Commission is entirely satisfied to see Ireland stuck with its 50/50 for the next 2-3 years and it could easily be that length of time - the duration of the new Congress at least - before this issue is sorted out. Bear in mind also that part of the reason for the delay is that the EU Commission is seeking concessions which (a) it knows are politically unacceptable in the US (see the Flight article above) and (b) are of interest only to a minority of EU member states and yet, it sees it as completely justifiable to maintain a competitive disadvantage in place against Ireland. There are very significant grounds here for legal action to be taken against the Commission at the ECJ.
Last edited by akerosid; 4th Dec 2006 at 21:55. Reason: Addition of comments from EU Commission
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Ryan2000
Ireland maintained this competitive disadvantage against itself for decades. They have now got caught up in an EU US wrangle due to Irish governments dragging their feet for so long.
The fact that AA CO and DL has increased its flights to Ireland ( SNN stopovers) has completely undermined the case for amending the bilateral
agreement.
Why hasn't the bilateral with Canada been amended if the Government is really interested in open skies. Aerlingus could make Dublin Toronto work at least during the summer months.
We also need to hear more from the EI board in relation to these matters.
The fact that AA CO and DL has increased its flights to Ireland ( SNN stopovers) has completely undermined the case for amending the bilateral
agreement.
Why hasn't the bilateral with Canada been amended if the Government is really interested in open skies. Aerlingus could make Dublin Toronto work at least during the summer months.
We also need to hear more from the EI board in relation to these matters.
Last edited by ryan2000; 5th Dec 2006 at 06:11.
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I can't see the government threatening to block the EU constitution on this one. In fact if the EU wasn't involved, I can't imagine them trying to amend the bilateral. Although they can see the economic sense in dropping the stopover, they are far too worried about vote loss in Clare, Limerick East and Tipp North and want to present this as a decision that has been forced by Brussels.
In 9 years of being Taoiseach, I can never remember Bertie Ahern sticking his neck out over an issue. I wouldn't hold out much hope of him setting a precedent here.
In 9 years of being Taoiseach, I can never remember Bertie Ahern sticking his neck out over an issue. I wouldn't hold out much hope of him setting a precedent here.
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Cork and Knock
Does anyone know what the status of Cork and Knock is in relation to scheduled transatlantic flights. In 2004 the Department were ready to give Aer Arann permission to operate to JFK from ORK.
It appears that their is a loophole in the bilateral which allows an Irish Airliine to operate from any Irish Airport to BOS JFK or ORD.
There were further reports that further changes were made last year at the time of the negotitions in relation to the transition period at SNN.
It appears that their is a loophole in the bilateral which allows an Irish Airliine to operate from any Irish Airport to BOS JFK or ORD.
There were further reports that further changes were made last year at the time of the negotitions in relation to the transition period at SNN.
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Well, this adds fuel to the fire, but it may well clarify matters as well. If the whole airlines ownership issue is off the table (and it was never of any interest to EI anyway), it should hopefully "encourage" the Commission to take a more rational view.
http://www.rte.ie/business/2006/1205/airlines.html
http://www.rte.ie/business/2006/1205/airlines.html