Cullen asked to explain claim on airline funding

Minister for Transport Martin Cullen is being pressed by Siptu to explain his claim in the Dáil this week that the Government would be "immediately" challenged by the European Commission were it to invest in Aer Lingus.

The union has provided Mr Cullen's department with a letter from former EU commissioner Mario Monti which says the Government is entitled to make a capital investment in the State-owned airline.

Mr Cullen told the Dáil last Tuesday, during an exchange with Labour's Róisín Shortall, that the future of Aer Lingus could only be secured through private investment. "The deputy seemed to suggest that even now the Government could invest. That would be challenged in Brussels immediately," he said.

Ms Shortall responded that there was nothing to stop the Government injecting funds "as a rational investor".

Mr Cullen's statement has also been challenged by Siptu national industrial secretary Michael Halpenny, in a letter to Department of Transport assistant secretary John Murphy.

Mr Halpenny said it was Siptu's clear understanding that the Government could invest in Aer Lingus on the basis that the airline was a going and profitable concern. "Therefore, no issue of state aid arises. I would be grateful if it could be explained to us by return as to how such a decision could or would be challenged in Brussels as the Minister states," he wrote.

In a second letter to Mr Murphy, who has responsibility for aviation, Mr Halpenny attached correspondence between Labour MEP Proinsias De Rossa and Mr Monti in 2004.

Mr De Rossa asked the then competition commissioner to outline the circumstances under which a capital investment could legally be made by a member state into a profitable, state-owned company.

Mr Monti replied that the Commission had explained its general approach on such capital investments in a communication in 1984. "This communication foresees that if a member state injects fresh capital into an existing public enterprise in circumstances that would be acceptable to a private investor operating under normal market conditions, no state aid is involved.

"The Commission has no objection of principle to capital injections effected by a member state as a shareholder in a public company, provided it conforms with the 'market economy investor principle'," the letter stated.

Siptu says that Mr Monti's letter exposes as a fallacy the claim made by supporters of privatisation that the Government is prevented by EU law from investing in Aer Lingus.

The union is opposed to the Government's decision to sell a majority shareholding in the airline and is to begin a ballot next week for industrial action in the event of changes being imposed without agreement.