A good deal of the Minister's speech was devoted to the question with which the Bill deals, that is, of tidying up the present relationship of the three air companies. I must say that when I listened to him and afterwards read carefully what he had to say, I found some of the reasons he gave somewhat unconvincing. There may be good reasons for this change. There probably are good reasons but, as I say, the reasons given did not seem very convincing.
First of all, he suggested that our existing arrangement of a holding company and two subsidiaries was undesirable because some people in the other House could not understand the balance sheets involving holding companies. This seems to me to be an extraordinary argument to put before even the House that apparently is not subject to this particular accusation! I wonder whether the Government intend to proceed to the logical conclusion of breaking up the relationship of CIE and Ostlanna Iompair Éireann, and of the Dairy Disposal Company with its subsidiaries, and carrying this through also with the Industrial Credit Company and its subsidiaries? I simply cannot understand why such an argument should be put forward as the reason for making a change.
The change may be justified on other grounds but certainly not on that particular ground. Another ground given for this change is that the existence of a holding company, holding shares in the two air companies, which is concerned with the management of an airport used by other competing airlines, is unsatisfactory. There certainly is something in this and it is true that at times other airlines have been dissatisfied with the fact that the holding company for the Aer Lingus and Aerlínte, operating companies has been running Dublin Airport, particularly in view of the close management links between the two companies. This has given grounds, perhaps, for some dissatisfaction. However, the Minister has indicated that the whole question of the management of the airport is under review, if I understood his words correctly. Indeed, it is widely reported that a review is under way out of which will emerge a national airports authority and that this will involve, in fact, taking away from Aer Rianta their existing function of the management of Dublin Airport. This national airports authority would probably be a civil service body which would take over the running of the three airports including running the airports at Cork and Shannon. If this is the intention in his mind, or even a possibility, then the position of Aer Rianta running the airport while also being the holding company for the airlines would no longer be a particular reason for breaking up the companies and would no longer apply. One would have thought if this was in contemplation by the Minister that the Government would have waited before breaking up the Aer Lingus-Aerlínte-Aer Rianta group on those grounds in order to see what solution, in fact, can be found with regard to the whole problem of airport management here and if, in fact, the solution found is handing them over to a national airports authority run by the Department or civil servants, as distinct from State bodies like Aer Rianta, then this reason, again, for making this change is simply not valid.
I think there was some other reason mentioned in the course of the Minister's remarks which again, did not seem to me to be an important one. This other reason given for the change was that under the existing arrangements between those three companies, which, presumably, could be altered in any event without the necessity of abolishing the holding company, when Aer Lingus or Aerlínte want to borrow money they must do so through Aer Rianta. This has never been an insuperable obstacle nor has it caused serious inconvenience. If there was a problem it might be possible to arrange for the subsidiary company to borrow direct without the necessity of breaking up the relationship between the three companies.
Therefore, none of the three reasons put forward by the Minister for the change is at all convincing. It could be, of course, that it is simply a tidyingup operation and that it does not matter much one way or the other. I am not convinced of that. The fact is that the two operating companies are separate and distinct for purely technical reasons and, indeed, to a purely technical extent. I think I am right in saying that the origin of the two separate operating airlines, with Aer Lingus operating as a separate company from Aerlínte, lay in the fact that in 1946-47 the Government of the day proposed to establish a trans-atlantic airline. Aer Lingus was then owned as to 40 per cent by BEA and BOAC. BOAC was a trans-atlantic operator which did not look with favour on the prospect of an Irish transatlantic operation but took the view that the Irish should know their place and stay within the general protection of the British sphere of operations. The Irish Government took a different view and found it necessary to establish Aerlínte, as a separate company, to overcome this difficulty. Now, as the Minister has pointed out, this British shareholding no longer exists. The only reason I know of today for having two separate airlines— separate as companies although operationally, they are not distinct but are united—is, and I am open to correction again on this if I am wrong, that the licence to operate to the United State as held by Aerlínte and to change that to Aer Lingus would raise the whole question of traffic rights, where we have been resisting American pressure for a long time. The Government, therefore, prefer to keep the two airlines distinct to avoid raising this legal difficulty. In fact, the two airlines are operationally united; they have the same management as far as I know although, in the early period, some managers of Aer Lingus were not managers of Aerlínte; the staffs are identical; they operate, as far as the public are concerned, under the title Aer Lingus Irish International Airlines, which applies to the activities of both; and, indeed, the aircraft can be shared at times as has been done in the past with regard to the transatlantic Boeings which have at times operated on Aer Lingus routes.
One airline operating as two companies without any common link of a technical legal character and, indeed, with different Boards, seems an untidy arrangement and, yet, this is what is now proposed. We have at the moment a situation where you have the holding company, Aer Rianta, with its Board and then the two operating companies — Aerlínte and Aer Lingus with their Boards. For some reason, Board membership is not common to the three; there are two Board members common to all three; another which is common to both companies, and each company then has separate directors of its own. It is difficult to understand this when Aer Lingus and Aerlínte are operating as a single airline in all respects, even as to the title by which they sell themselves to the public, and the purpose of having different Boards is obscure. In the past it has, at times, given rise to some difficulties because of divergences of the view at Board level. It would seem more appropriate, in these circumstances, if, for technical reasons, you must have two companies but one airline in all operational respects—to have a common link and have them at least owned by Aer Rianta and have a common Board for all three. Instead of this, eight years after the start of Aerlínte operations to the United States, we still have these different Boards and, instead of moving towards having a common Board for the three companies, the Government have done nothing whatever about this, but now propose to break the common link and to have them operating as separate companies with no common link between them although they are Irish airlines with a common name, common management and common activities. The reasons given for making this change are that the Dáil cannot understand the balance sheet, that there is a problem arising out of Aer Rianta managing the airport, which may well disappear if the review at present in progress is carried through, and that there is a little difficulty about borrowing money through Aer Rianta.
I have no very strong views about this—I was quite prepared to hear the Minister say there were good reasons for this and to give good reasons. If there are good reasons, then the complication caused by dividing up these companies goes and might be justified or overcome. It probably will not give rise to very many difficulties but I do think the Minister would need to satisfy the House a little further on why this is being done. One almost wonders if there is some other reason because these reasons are, as I have said, so very unconvincing.
On the question of airport management, to which the Minister has referred, I should like to have some more information about this review. Is there a review in progress? The Minister's words seem to be ambiguous; they seem to imply that without specifically saying so. If so, who is carrying out the review? One would hope that the review is not being carried out simply by his own Department which would be concerned in the results of that review. I would have thought it would be inappropriate that his Department, without any further views being expressed or without any outside opinions, should decide the issue of whether or not they should manage the airport. The arrangement under which Aer Rianta have managed the airport has not been entirely satisfactory for the delegation to Aer Rianta by the Department has not been sufficient at times to enable the airport to be run in the flexible way in which an airport should be run. But that could be overcome. If this review is being carried out by the Department itself and if the outcome of the review, then, is that the Department will take over Dublin Airport—which at present is run by Aer Rianta—this would seem to be inappropriate. I would have thought that if the possible outcome of this is that the Department should take it over and run it through a national airports authority, we would need an independent and partial view. The Department should not be sitting in judgment as to whether Aer Rianta have managed the airport well or whether this is the best arrangement. There should be some other views expressed on that change over, if the Department were to take direct responsibility for managing the airport. I think the Minister should tell us more about this review and what is involved in it.
Another question I should like to ask the Minister—for his explanation was singularly unconvincing—is why the Government's shareholding in the Intercontinental Hotels is being transferred to Aerlínte. The Minister dismisses this in a single line:
The Bill transfers this holding from Aer Rianta to Aerlínte as the company most closely identified with the operation of the hotels.
I am not quite sure what this means, unless it means that a statistical survey has shown that more people who stay in the Intercontinental Hotels have entered the country by Aerlínte than by Aer Lingus.
The Board of Aer Rianta have been very assiduous in protecting the Government's interest in this project, which has not been very successful so far. I am not quite clear as to why this should now be transferred to Aerlínte. In fact, the whole operation suggests that the Minister has decided, or has in mind, even before this review is completed, that the management of Dublin Airport will be handed over to a national airports authority, and that he is making this change in order to strip Aer Rianta of every function in respect of the management of the airport, not only to remove this function of holding shares in the two operating companies, but also to transfer the hotel interest to Aerlínte on grounds which seem to be extremely poor. If the Minister intends handing over Dublin Airport to a single authority, he should explain more fully the reasons for the decision that has been taken, which was inadequately explained yesterday.
With regard to the Intercontinental Hotels and our interest in them, so far as I am aware the Board of Aer Rianta have carried out their functions as effectively as they could. I cannot, however, compliment them on the manner in which they have treated this project in their annual report and accounts. So far as the accounts are concerned the interest in the hotels is shown at £284,307, at cost. I cannot detect any dividend in the profit and loss accounts of Aer Rianta. This could be explained by the absence of a dividend. If that is the case, the public should be told that the investment is not paying off. We have been told:
The Intercontinental Hotels in Dublin, Cork and Limerick which were opened in 1963 are now in their second full season. Business is developing normally in each and they are already playing an important role in the promotion and expansion of tourism envisaged in the Second Programme for Economic Expansion. Their steady progress is expected to continue.
This was written last summer. Anyone who has had any reason to read the reports of State bodies and, indeed, of private companies, cannot but be a little suspicious as to precisely what is happening, and as to whether, in fact, this very substantial State investment is paying off. If it is not paying off, I do not think we should be given platitudes about steady progress of the kind I have referred to.
I note that in the Dáil when this Bill was under consideration some Deputies expressed puzzlement as to what exactly was a profit in the case of a company like Aer Lingus, whether there was a profit and how it should be calculated. I was disturbed to see that the Minister endorsed the confusion of mind shown by some Deputies on this point. When he was summing up he said:
...if you compare it with a private company, you will have to take from that profit what represents the remuneration of the capital, as in the case of the ESB, whose capital is repaid over a period of years.
There is persistent confusion about the question of what is a profit in a State company. That statement by the Minister does not seem to agree with normal company practice. In the case of private companies in which there is a share holding and loan capital, profit is shown after deducting interest on loan capital. There is no question of calculating the profit of the private company by deducting notional interest on the share capital at, say, 6½ per cent, and showing what is left as profit. There is no reason to apply a more stringent calculation to the profits of a State company than to the profits of a private company. It is unfortunate that the Minister should have endorsed this idea which is misleading in regard to the air company.
Any attempt by the Minister or by anyone else to play down the profitability of these companies should be rejected and rebutted. These companies have reached the stage where no further State capital is required, and they can develop using their own resources, and by borrowing. That is certainly good news and, in fact, over the years since 1949-50 these companies have been profitable. There has been no subsidy since 1959-60, apart from a technical payment arising out of a revision of the BEA shares in 1957. If the companies were to pay a dividend, they would have less money available for expansion, and the Government would have to subscribe more towards share capital. The fact that this has been the policy rather than paying a dividend and injecting extra capital, is no reflection on the companies or on the Government.
There is one other point, about comparing the profitability of State companies. It should be possible to make valid comparisons of their profitability by examining their accounts. Unfortunately these accounts are prepared on widely different bases. In one company, the Dairy Disposal Company, no profit and loss accounts are published or given to the Dáil— at least they were not when I looked into this question several years ago. No report is published, and this company's affairs have never, to my knowledge, been discussed in the Dáil, in recent years at any rate.
That is one extreme case, but most companies do publish profit and loss accounts at least, and naturally all publish balance sheets. From these one can discover quite an extraordinary variety of treatment of different elements in the accounts, with no homogeniety and a very obvious desire on the part of the companies to present the profit and loss accounts and the balance sheets in the manner that will make their performance most attractive. Companies making small profits adopt a more devious technique while those doing better do not have to use such subterfuges.
It is reasonable that State companies, like private companies, should be left free to present their accounts in whatever manner they wish, so long as it is in a form that is legally permissible. But the country has a right to see the performances of these companies presented in such a way as to make it possible to measure them against each other on a comparable basis. Some arrangement should be made by the Department of Finance—and in view of the Minister's interest in such a number of the State companies, it would not be inappropriate for him to discuss it with the Department— to introduce a standard accounting form for all the companies, not to replace their present systems—let these continue, if they wish—but so that side by side with the accounts presented in any legal form they like, their accounts will be presented in a strictly comparable form so that anybody can pick them up and say: "The profits of this company on the same basis, CIE, ESB, Aer Lingus or Irish Shipping, are so much and represent a return on capital of so much compared with the figure on a similar basis for other State companies."
That cannot be done at present. To attempt to assess the relative performance of State companies in this country is a major research project. It would be all right for a postgraduate student of economics to attempt this for an MA thesis, but I do not think that a Deputy, a Senator or a member of the public should be forced to employ MA students to carry out research of that kind. The figures should be provided on the basis of presenting them in a manner that can be readily understood, which is not the case in existing balance sheets, and in a manner which makes them comparable to each other.
