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Dáil Éireann debate -
Wednesday, 7 Jun 1961

Vol. 189 No. 11

Committee on Finance. - Air Navigation and Transport Bill, 1961—Second Stage (Resumed).

Before the debate was adjourned, I said I would try to answer many of the questions that were put to me if possible and that what I had said on the opening of the Second Stage had been confined to the essential facts in view of the coming debate on the Estimate. I would like, first of all, to refer to some of the points made by Deputy Corish. Deputy Corish appeared to have no great faith in the American tourist potential market. While I agree with him that we must always pay attention to the very great market available at our door from Great Britain and although the effort of Bord Fáilte is rightly concentrated on attracting tourists from Great Britain, nevertheless there is a tremendous untapped American market available to us.

The Americans, in a recent year, were reckoned to have spent $17,000,000 in this country. At the moment, of those who cross the Atlantic by air only about five per cent. land in Ireland and although our Estimates are based on that general percentage continuing, we hope, by promoting good air services and by other tourist development, to attract an ever-larger number of Americans to our country. In fact the whole of the investment both in respect of Shannon Airport and in respect of Aerlínte, when considered in relation even to the present income which Americans leave behind in this country, is not exaggerated in any way. If one were even to relate the capital investment in jet planes, together with the investment in Shannon Airport, to the additional market made available to Irish farmers by Americans who stay in our hotels, I would still say it was a good investment.

One of the objectives in starting Aerlínte was to develop transatlantic air traffic as a whole, to stimulate other carriers to compete with Aerlínte so as to ensure a continual interest in the transatlantic services stopping at Shannon. We have succeeded in that. No fewer than eight air carriers have services regularly calling at Shannon this summer.

There is another aspect of the Aerlínte service which I think I should mention. The world is shrinking very rapidly and any Irish air service which looks only eastwards is not taking full advantage of the potential offered by modern travel. One of the purposes in starting the Aerlínte Boeing jet service was to encourage east-west traffic, to encourage people to cross the Atlantic and to move onwards to Europe in Aer Lingus planes and equally to return home from Europe, staying in Ireland and going on the same service to America. Everything that the Deputies have said in relation to the excellent service offered by Aer Lingus —and I would like to reply on behalf of the company and acknowledge the tribute that has been paid to Aer Lingus—can only be represented in this way: if the service is as good as that, we should encourage people to make a complete round trip from America to Ireland, to England, other parts of Europe and back again. It is in order to provide a complete service east and west that Aerlínte was started and I believe it is an essential feature of a modern Irish air service. The idea that we should go no further towards the west than Shannon is an utterly out-of-date conception.

Deputy Dillon and some other Deputies asked me to say something more about the statement in the Second Reading speech that for the financial year ending 31st March, 1961, it was likely that, taken as a whole, the Aer Lingus and Aerlínte services would balance each other financially. I can give approximate figures. Accounts have not been completed and I want to make it quite clear that the figures are only approximate, the anticipated surplus in the case of Aer Lingus is in the neighbourhood of £180,000 and the loss in the case of Aerlínte is in the neighbourhood of £80,000.

It is true that some years ago when highly speculative predictions were made of what would be the financial outturn in each of the first three years of Aerlínte's operation, it was hoped that in the year which has ended Aerlínte would break even. I think that to arrive at a loss of £80,000 after successive losses of over £800,000 and of over £500,000 indicated that the prediction was not inaccurate having regard to all the difficulties of making a prediction of this kind.

This year Aerlínte will have its fleet of three Boeing planes. It will be a year of transition and all I can say is that there has been a very great increase of traffic, as I indicated at the beginning of the debate, and that forward bookings are extremely satisfactory. I hope that although previous predictions were not fully realised the Company will progress.

I should make it clear that the idea that Aer Lingus is going to be bled by Aerlínte, which was suggested by several Deputies, is utterly without foundation. Both these companies are run by the same management group. Their accounts will be kept separate and one company will not be allowed bleed another.

Aer Lingus puts aside in every year a very considerable sum for depreciation. The amount required under this Bill would be very much larger were it not, as I indicated in my speech, that Aer Lingus are financing part of their programme out of their own depreciation reserves. The Aer Lingus depreciation reserves are not being taken in order to finance the development loss of Aerlínte. I can assure the House that it would be the duty of the Minister for Transport and Power at all times to ensure a correct relationship between one company and another and that the development of one company will not in any way be restricted or hampered.

Deputy Dillon gave some figures in relation to the total loss that has been experienced so far in the operation of Shannon Airport. It is quite evident that any airport in its early stages, when traffic is developing, will lose considerable sums of money. I should point out that, not including depreciation and interest on capital in a recent year, the operating revenue at Shannon Airport was slightly in excess of the operating expenditure, showing that, as traffic has grown, the financial postion of the airport has improved.

In 1960, some 412,000 passengers passed through the airport. Insofar as raising the charges for planes landing at the airport is concerned, I should tell Deputy Dillon there is an upward limit to that process. So far as I know, there are no civil airports in the whole of Europe which pay their way. We have made comparative investigations of the deficits experienced here as compared with those in typical airports of Northern Europe. If you take Dublin or Shannon Airport, and take the receipts as a percentage of expenditure, we compare very favourably with the airports of Europe.

I personally believe that airports should be made to pay. I would dearly love to raise the landing charges of all the aircraft landings at Shannon and Dublin and to make up my mind that these institutions should pay their way. I do not see why they should be subsidised by the taxpayer when going in an airplane is becoming as common as going in a motor-car.

The position is quite different as between services that are purely internal, such as C.I.E., and where we depend on such services paying their way and services which relate to aircraft coming in from abroad. It would be impossible for me to insist on landing charges which would result in both airports paying their way and paying interest on depreciation and capital. If I were to do so, it would jeopardise the whole of the general growth of the numbers of aircraft calling at the two airports concerned.

I cannot raise landing fees so that they appear completely distorted in relation to the turn-over of the airport concerned and the facilities offered abroad. Anybody examining the position will find the same thing. I can predict that whoever takes charge of the two airports will find it impossible for us to do anything. As far as we can, we must try to make the airports run ecoomically, insist that the loss be as low as possible and maintain the trend of landing charge and fee which are reasonably comparable with those asked abroad.

Deputy Dillon also spoke about the whole question of stimulating the passage of freight through Shannon and using Shannon as an entrepôt. That was in the mind of the Minister for Industry and Commerce, now the Taoiseach, during the whole development of Shannon Airport. I should say that there has been some progress. In 1955, 12,498 tons of freight passed through Shannon Airport. By 1960, the figure had grown to 22,340 tons. The coming of freight-carrying jet planes may modify that picture to our disadvantage, but I hope the industrial estate at Shannon will generate new traffic to make up for any traffic that is lost. Whereas, in the old days, all freight planes had to call at Shannon on the way to America, now it will be possible for jet planes to fly right across. The future of Shannon as an entrepôt depends on the future structure of bulk freight rates across the Atlantic.

Quite considerable decreases in air freight rates were agreed to at the International Air Transport Association Conference held recently. We have not had the opportunity yet of analysing the full import of those reductions. We know that whereas before, in respect of the ordinary freight rates, there was no differential between the freight rate from New York-Shannon as compared with New York-London, now there is a slight differential. It is an extremely complex matter to describe how far a bulk rate will actually encourage consolidation of traffic at Shannon for onward movement and the breaking-up of bulk traffic for onward movement either westwards or eastwards. The costs have to be compared with sending a large volume of freight, not calling at Shannon, to further European ports and sending it to Shannon, breaking it up, incurring the handling charges involved and rerouting it through various channels of air transport to different parts in Europe. We are about to study that matter and Aerlínte and the Shannon Development Company are interested in it.

The utmost advantage will be taken of any changes in the freight rates which will benefit Shannon. At the moment, I cannot be over-optimistic in regard to the result of these freight-rate decreases. I would not say they will necessarily have any beneficial effect so far as the use of Shannon as an entrepôt is concerned. I should also state that the Shannon Free Airport Development Company is doing propaganda and promoting the use of Shannon as a freight centre and has sent organisers to America to interest people there in the project. We are completing a freight terminal building. Everything is being done to encourage the idea that Shannon should be a centre for freight on the route from the United States to Europe.

Much may depend on the comparative efficiency with which goods can be transhipped to Shannon as compared with some of the airports in Europe where very considerable delays are experienced. A great deal depends on the attitude of industrialists towards air freight. Much of the economy that can be secured by air freight relates to the outstanding interest on raw materials moving into a factory and the finished goods moving out of a factory. A great many manufactures are beginning to use air freight. Although the actual freight rate is greater than the surface rate, the interest saved often makes it advantageous to use air freight. That is a matter which is being pushed by Aer Lingus. I have already indicated that the volume of air freight increased enormously in 1960 compared with 1959 and is growing steadily.

Deputy Russell referred to the position of the catering suppliers at Shannon. Although there has been a decline because of the coming of the jet planes, the receipts for the year ending January 31st, 1961, were as high as or slightly higher than in any year since and including 1957, with the exception of the year 1959, so that although there has been a reduction from 1959, the receipts have not been unsatisfactory of recent date.

Deputy Briscoe referred to the restrictions imposed by the International Air Transport Association on the freight rate structure of Aer Lingus. There is nothing we can do about that. I believe, and my predecessor believed, it is to our net advantage to subscribe to I.A.T.A. As a result, the rules have to be kept and there are minimum freight rates that have to be observed. Advantage can be taken of bulk cargoes within that system, but it would be no use my pretending that Aer Lingus can go below the rates prescribed by I.A.T.A.

Deputy Briscoe also referred to the handling charges for the export of lamb by air to Switzerland. I have had no complaints in regard to that matter, but I have asked Deputy Briscoe to give me full particulars of the handling charges which have to be met at the airport. I shall be glad to examine any suggestion that excessive handling charges are being asked from companies seeking to export lamb by air to Switzerland.

Charter flights are engaged from companies other than Aer Lingus for special flights and Aer Lingus also does charter work itself. I should make it clear there is not a monopoly of freight carriage by Aer Lingus which, as far as I know, could possibly impede the development of new exports by air freight. In fact, a great many industries are making use of air freight for their exports. These include some very remarkable commodities which one would imagine would not pay. One of the most recent examples of that I heard of was the export of very large quantities of footwear manufactured in Ireland and sent by air to Great Britain.

Deputies raised the desirability of Aer Rianta investing in the three new hotels. I should say that their investment is comparatively small compared with the total capital required, £2¼ million. The investment by Aer Rianta was necessary to ensure the interest of all the shareholders who made it clear they would not take part unless Irish Air Lines took up part of the subscription. As everybody knows, the main company constructing these hotels is connected with Pan-American Airways. Quite apart from any conditions suggested by the other investors, I would think it an excellent thing for our air holding company to have an interest in hotels which have been constructed, partly as a result of the interest of Pan-American Airways in order that they could take advantage of hotel development here and in order to ensure that they will have part of the reservation facilities in these hotels.

I should make it clear that since 1947 only a few hundred bedrooms with bath had been constructed in this country until Bord Fáilte, as part of the economic programme of the Government, arranged to provide grants and loans for hotel development. There has been a very great lack of hotel accommodation with bath in this country. The estimate we have whereby we hope that by, I think, 1963, 132,000 Americans will come to Ireland will not be realised, unless we have a great many more rooms with baths. It is believed that this plan to construct three luxury hotels is an excellent one and that it is wise for Aer Rianta to have a modest investment in it, in view of the international character of the undertaking and in view of the importance of being able to reserve luxury accommodation for the many Americans whom we hope to bring to this country.

Questions were asked by some Deputies, including Deputy Dillon, in regard to the efficiency of the Boeing aircraft purchased by Aerlínte. I should say that the Boeing 720 aircraft has been able to take advantage of the experience gained during the earlier flights of the Boeing 707 and has had a number of modifications incorporated in it. Therefore, when Aerlínte took over these Boeings, they already had modifications applied to them which otherwise would have had to have been applied during their flights under the auspices of Aerlínte. Naturally, these planes passed through some teething troubles but they are now operating up to specification.

Deputy Lynch challenged me on the ground that occasionally I say that questions in regard to State companies are matters of day to day administration. I think it is equally true that I have answered a very great number of detailed questions in this House, as my predecessor did, on many aspects of the administration and financing of the State companies. It is for the Minister to judge what is day to day administration. I do not think I have been illiberal in my attitude in that matter.

That is the Minister's opinion.

Deputy Russell referred to the comparative air fares between Belfast and London and Dublin and London. There is nothing we can do about it. Internal air fares within Great Britain are not subject to I.A.T.A. rules and, unfortunately, Belfast to London is considered by I.A.T.A. to be an internal air route and, as such, we cannot compete with that particular fare.

Deputy Russell also suggested that the Aerlínte flights should end at Shannon. Quite a large percentage of the passengers, both east- and westbound, desire to leave or arrive at Dublin and the service is attractive from that standpoint. Anybody who studies the general habits of tourists in other countries know they frequently want to go to the capital city in the first instance. We could make no change in regard to that. It is quite essential that the service should commence at Dublin.

Questions were also asked about the development of an air ferry service. As the House knows the B.K.S. Company are running an air ferry for cars between Liverpool and Dublin and both Aer Lingus and my Department are engaged in exploring how additional services could be started. One of the difficulties is to find a suitable air field in Great Britain for that purpose and another difficulty is to find the right kind of plane which will economically carry a large number of cars and passengers. We believe a plane will be available sometime later in 1962, or early in 1963, which will make the proposals more attractive. In the meantime, the potential accommodation for cars on the surface routes has been increased this year by 50 per cent., which should encourage tourists to come here with their cars.

Deputy Esmonde said I gave insufficient information on the proportion of this capital to be devoted to Aer Lingus and to Aerlínte. Very roughly, and excluding the amount of the capital replacing a bank loan, the amount of capital for Aerlínte is some £200,000 and for Aer Lingus, some £800,000, showing that there is no prejudice in favour of Aerlínte in that regard. Several Deputies complained about the facilities at Busarus. I should say the use of Busaras as the centre for transport arrivals from Dublin Airport is obviously of some advantage to tourists. It is, first of all, near to the bus station, it is near Amiens Street Station, and close to Westland Row, and it brings travellers within close contact of three very important surface transport centres. I am going to have inquiries made with regard to the inadequacy of the taxi service. I quite agree it is most unfortunate if a large number of travellers arrive and are unable to get taxis to their destinations.

A Deputy suggested that there was not enough done to encourage passengers on transatlantic aircraft to purchase goods in the shop at Shannon Airport and that no advance propaganda was used. I can assure the Deputy that the Shannon Free Airport Development Company do a large amount of publicity, both on our own line and on other air lines, in order to advise people of the facilities at Shannon. Deputy O'Sullivan regretted the delay in completing Cork Airport. I am afraid there is absolutely nothing we can do about that. It is not a question of overtime, it is simply a question of the technical results of the delays experienced through the recent industrial dispute. We hope that the first departure will take place on October 15th or 16th. If we could do anything in the meantime within reason we would do it.

A number of Deputies asked whether we could not develop some other airports in addition to Cork, Shannon and Dublin. We must allow Cork to develop in the first instance before we study any further projects. If you look at the map of Europe and examine the relationship between airports and population and tourist facilities, it will be found that with three airports we are doing fairly well. Quite evidently, we must continually examine the position and if it appears that another airport is desirable, one presumably in the west or north-west, I am sure we would take the same forward-looking attitude as we did in Cork.

You must always look to the west.

I think I have answered the questions put to me and I confidently recommend the Bill to the House.

Question put and agreed.
Committee Stage ordered for Wednesday, 14th June, 1961.