Dáil Éireann debate -
Wednesday, 24 Nov 1965

Vol. 219 No. 2

State Guarantees Act, 1954 (Amendment of Schedule) Order, 1965.

Minister for Transport and Power (Mr. Childers)

I move:—

That Dáil Éireann approves the following Order in draft:—

State Guarantees Act, 1954 (Amendment of Schedule) Order, 1965,

a copy of which Order in draft has been laid before the House.

The purpose of the Order is to increase from £6,000,000 to £6,700,000 the maximum amount of borrowing by Aer Lingus that may be guaranteed by the Minister for Finance under the State Guarantees Act, 1954, as amended by the State Guarantees Act, 1954 (Amendment of Schedule) (No. 2) Order, 1964, and the State Guarantees (Amendment) Act, 1964. Aer Lingus have arranged short-term borrowing in Britain to meet the final payments of approximately £1,250,000 on two short-haul jet aircraft already delivered. This arrangement is subject to the issue of a State guarantee and £636,000 of the borrowing relating to one of these aircraft has been guaranteed under the State Guarantees Act, 1954, bringing the total amount guaranteed under that Act in respect of Aer Lingus to £5,993,000 approximately. To enable a State guarantee to be given in respect of the borrowing for the second aircraft it is necessary to increase the limit of £6,000,000 to £6,700,000.

The Air Companies Bill, 1965 which is at present before the House provides, inter alia, for future borrowings of the air companies and for guarantees by the State of such borrowings so that the machinery of the State Guarantees Act will not have to be availed of in respect of future borrowing transactions by Aer Lingus.

Mr. Lindsay

We appreciate that this Order is necessary and, because it is necessary, we agree with it. Nevertheless, I feel constrained to say that the tendency with regard to State companies generally, and particularly with regard to Aer Lingus, seems to be an upward trend all the time. Each year more and more money seems to be required. This trend cannot be welcome to anybody, not even to the Government. Could the Minister, I wonder, give us any indication as to whether he has any information from Aer Lingus that, within the reasonably foreseeable future, they will find themselves on the road towards saving, reducing or even paying back something? Otherwise, we shall have to continue this rather chaotic financial arrangement of increasing from year to year the amounts they are enabled to borrow. I do not think it is a healthy trend but, in view of the fact that the Minister says this £500,000 is required to pay the balance of £1¼ million for two short-haul jets, it would be unreasonable to withhold the money at this stage, but this is not a practice this Party would regard with favour in the future.

Mr. Dillon

On the occasion of the introduction of Orders of this kind, I find that, if we have any reason to complain about the services, this is the appropriate time to raise the matter. That being the case, I think it appropriate—

Mr. Childers

Is this relevant?

Mr. Dillon

The Minister need not look alarmed. I think it appropriate to avail of this occasion to say that, in view of the exceptional excellence of the services provided by Aer Lingus, we ought to lean backwards in helping them to make the service even better internationally than it already is. I sympathise with Deputy Lindsay's views, but I have often felt Aer Lingus were bearing an unreasonable handicap in having to compete with all the other continental air lines with propeller aircraft when most of the other continental air lines had available to them these medium jets. It does seem absurd to those of us who remember the time when there were available only railways and boats to realise that we have now become so accustomed to air transport that even when travelling a relatively short distance such as from Malaga to Madrid or Paris to Strasbourg, if you have to choose between propellor aircraft and jet aircraft, you are prepared to go to some inconvenience to avail of the jet aircraft and consequent shortening of the actual journey in the air.

The acquisition of this short-haul jet aircraft was very necessary to give Aer Lingus an opportunity of competing effectively with the very intense competition they have to meet on the continental and British air routes. In my experience I have found the service of Aer Lingus to be so excellent in comparison with the other air companies of which I have some considerable experience in other parts of the world that I am glad that we can find it financially possible to make available to them this improved equipment so that they may keep the place they have so hardly earned in the intensely competitive market in which they have been called upon to operate.

Mr. Norton

I should like on behalf of the Labour Party to welcome this motion by the Government and to say that we find no difficulty whatsoever in supporting it.

I should like to pay a brief tribute to Aer Lingus. The number of times in recent years I personally have travelled by Aer Lingus is very small but on those occasions I have always found the organisation efficient, the staff courteous and the service in every way such as to commend it. The main criterion in judging the service of Aer Lingus is the fact that people get to their destination. The accident-free record of Aer Lingus is unequalled by any other air company in the world and this is the main criterion by which they should be judged. There is no point in having an air company which can provide cheaper flight, faster flights or more comfortable flights if the accident rate is above what it might be. In my opinion, judged by that criterion, Aer Lingus are away beyond any other company in the world. If the borrowing of this money enables them to extend the service and develop further, we are only too glad to give our wholehearted support to it.

Mr. Childers

I thank Deputy Dillon, Deputy Norton and Deputy Lindsay for their comments on this Order. I should say that Aer Lingus are constantly growing in terms of numbers of passengers carried and in amount of freight taken as are Aerlinte, and for that reason capital must be found for increasing the number of aeroplanes and for providing the necessary equipment, spares and administrative facilities. For example, Aer Lingus recently spent some £850,000 on an air reservation system in the company's building and the interest on that capital will virtually be met by the savings resulting from a more efficient system of booking. As many Deputies know, unfortunately, people all over the world over-book for flights and very often people book as many as two or three seats on different flights for the same destination. The air reservations system worked by computer should be able to eliminate some of the cost to Aer Lingus of that kind of over-booking.

Deputy Lindsay will be glad to know, as I am sure he has appreciated already, that the Government had decided that the time had ended for issuing to the air companies direct State capital to be remunerated in fact by the taxpayer and upon which Aer Lingus and Aerlínte were paying no dividends or interest of any kind. The agreement with the Government to provide funds not exceeding £2 million for BAC 111 aircraft represented the last direct capital contribution of the Government towards the air companies. The remainder of the money, some £5 million, has to be raised by Aer Lingus from their own resources and, if necessary, guaranteed, as is indicated in the case of this Order. The capital requirements of the two air companies in the next four or five years have been indicated to the Government and I think I am right in saying that the air companies are keeping within the limits of the Second Programme for Economic Expansion in regard to these capital requirements.

The House will be glad to know that if Deputies should examine the last accounts of Aer Lingus and Aerlínte they will see depreciation reserves have been put aside, particularly in the case of Aerlínte, over and above those normally decreed in account keeping. I think a sum of £700,000 was put aside for extra depreciation reserves for Aerlínte and these were indicated in the published accounts.

So I do not think the capital of the air company is growing beyond their capacity to discharge their financial commitments. The capital growth reflects the growth of the company. In this particular case it was resulting from the difficulties that had been experienced in financing public capital programmes. Aer Lingus have now arranged to pay for this aircraft by deferred payments and these have been arranged with the British Aircraft Corporation and because of that it was necessary to increase the amount of money guaranteed by the State Guarantees (Amendment) Act, 1964. The arrangement is satisfactory financially and is good business. I thank the House for its approval of the Order.

Question put and agreed to.