The principal object of the Bill is to authorise Aer Rianta to raise additional share capital to meet the current and future needs of the air transport companies. Aer Rianta's present authorised share capital of £2 million has been fully issued and paid up by the Minister for Finance. Aer Lingus and Aerlinte are subsidiaries of the parent company, Aer Rianta, the capital of which is used mainly for investment in them. The existing capital has been used by Aer Rianta for investment as to £571,194 in Aer Lingus and £1,425,000 in Aerlinte.
The main requirement of capital for which it is intended to make provision by means of the present Bill is an amount estimated at £5,868,000 (net) to finance the development of the Aerlinte transatlantic service, including the cost of acquiring jet aircraft.
Aer Rianta will require for its own purposes over the next few years a sum of £1,454,000, made up of £655,500 to repay moneys due to British European Airways as a result of the reduction of that Company's financial interest in Aer Lingus and of £798,500 to repay moneys borrowed from Aerlinte for the purpose of investment in Aer Lingus.
The Bill proposes to meet this situation by increasing Aer Rianta's share capital from £2 million to £10 million. Aer Rianta, as I shall explain, will also under the Bill have access to £1.5 million additional guaranteed loan capital. The total of the additional capital to be made available is, therefore, £9.5 million. The immediate requirements of Aer Rianta itself and of Aerlinte Éireann amount to £7,322,000. There is, therefore, a balance of £2,178,000 to provide for contingencies. The contingencies will probably include further capital for Aer Lingus, whose precise requirements have not yet been determined.
Section 75 of the Air Navigation and Transport Act, 1936, empowers the Minister for Finance to guarantee such debentures as may be issued by Aer Rianta to secure borrowings. Already, the Minister for Finance has guaranteed debentures issued by Aer Rianta in respect of commercial loans totalling £3.5 million. The present Bill proposes to limit the amount of borrowings which may thus be guaranteed and Section 3 of the Bill accordingly provides that the aggregate amount of such debentures which the Minister for Finance may guarantee will not, at any time, exceed £5 million.
The Aerlinte transatlantic service commenced operations on 28th April, 1958. The operating results and provisional financial returns, for the first eleven months of the service which ended on 31st March last, are well up to expectations. With the exception of freight traffic, the Company's forecasts, including their estimates of passenger revenue, have been generally realised.
Aerlinte originally estimated that development expenditure in the first three years of the service, to be charged to capital account, would amount to about £1 million, made up of a deficit of £800,000 in the first year of the service and of £200,000 in the second year. In the third year they expected to break even. These estimates are likely to prove correct for the first two years, but the prospects for the third year are not so clear. In that year, 1960/61, Aerlinte will be faced with intense competition from operators using jet aircraft, while their own jets will not be available until the early months of 1961. Nevertheless, the Aerlinte management is not unduly perturbed by the outlook for 1960, as they have found that the introduction of jet aircraft on the North Atlantic route has tended to generate a substantial increase in total air traffic, thus enabling the operators still using piston-engine aircraft to hold their own even in the face of competition from the pure jet services.
It has been estimated that air traffic on the North Atlantic will expand considerably over the next few years and that by 1965 the number of air travellers will have reached 2.4 million. Assuming that the present Irish share of 5½% of that traffic is maintained, some 132,000 passengers will be brought to and from this country by all operators. Aerlinte hope to obtain about 40% of that traffic, and, if that expectation is realised, there need be no doubts about the commercial success of the venture.
For future years Aerlinte estimate that their operations will earn them an annual financial surplus, ranging from £46,000 in 1961/62 to £287,000 in 1965/66, and will enable them to pay off their development expenditure in due course. It must be borne in mind that there are a number of factors, such as the degree of intensity of competition from other operators, the growth in the total volume of transatlantic traffic and the Aerlinte share of that traffic, that cannot be forecast with any measure of certainty.
The House will have gathered from my remarks that the future profit making ability of the service is dependent on a number of unknown factors, which, however, if they are resolved to our satisfaction, will place the service in a sound financial position within a few years. Notwithstanding this uncertainty, the Government are convinced that the potential advantages to the country of the Aerlinte service far outweigh the purely financial considerations of profit or loss.
First and foremost is the undoubted benefit to be derived by the Irish tourist industry. Over the past eight years, the number of North American visitors embarking and disembarking at Shannon Airport has increased five fold. A principal reason for that increase was the availability of regular air services between Shannon and North America.
With the advent of jet aircraft, the operators are now in a position to fly non-stop to and from Europe and to overfly Shannon at will. We are faced then with the possible loss of much of the lucrative American tourist traffic which has been so carefully built up over the years. If we are to retain this traffic and ensure its necessary expansion in the future, we must be prepared ourselves to provide an attractive transatlantic air service. By doing so, we will guarantee the availability of a service with satisfactory frequency for passenger traffic between Ireland and North America. At the same time, the competition which this service will generate will, we believe, require the airlines of other countries to route services into Shannon and make greater use of that Airport than would otherwise be the case.
A further consideration of importance is the likely consequence of the Aerlinte service on the operations of Aer Lingus. Aer Lingus has long felt itself cut off from its greatest traffic potential by the absence of a direct Irish transatlantic service to cities in the United States and Canada. The operation of the service gives Aer Lingus direct access to the greatest air traffic generating market in the world and already this development has borne fruit in an increase in the numbers of transatlantic passengers proceeding on to Britain and the Continent on Aer Lingus aircraft.