We on this side of the House support this Bill, the objective of which is to provide additional equity capital for the national airline. While supporting the Bill we do not look on this exercise here today as a mere rubber stamping by Dáil Éireann of a demand by one of our State-sponsored bodies for £15 million, a considerable amount of money. The manner in which the Bill has been presented focuses attention on the almost impossible situation with which Opposition spokesmen are confronted when it comes to debating an issue of this kind. I received this Bill in the post yesterday morning, and Monday is a very busy day for any Deputy with constituency work and so on. I came up here this morning and now we have to debate this Bill. It focuses attention on the extreme difficulty with which Opposition spokesmen are confronted. We have to assess whether it is worthwhile to allocate £15 million of the taxpayers' money to a State-sponsored body and we have had no opportunity and no back-up services to enable us to assess the performance of the company in a proper manner and deliver an informed judgment as to whether or not this is the right thing to do, whether or not we are justified in giving this money to Aer Lingus. I acknowledge the fact that there is now a parliamentary committee on State-sponsored bodies and that Aer Lingus, in common with other State-sponsored bodies, will in due course be coming before that committee. I am glad that I have the privilege of being a member of that committee because it gives us more time and opportunity and we will have the necessary expertise at our disposal to examine in depth the performance of companies such as this. In this case we have had to rely mainly on the published annual report of Aer Lingus.
The Minister has come before the House and sought permission to take steps to give, in effect, £15 million to the national airline. The purpose of this additional financial injection is twofold. One is to enable the national airline to re-equip itself and to carry out its very impressive expansion plans over the next decade. The second objective of the Bill, and a natural consequence of the first, is that it will restore some semblance of normality to the very serious imbalance that has developed in the financial structure of Aer Lingus as between the equity capital and the loan capital.
I am sure everybody is very pleased to read of the successful year which was reported on in the 1977-78 annual report of Aer Lingus where there was a very impressive performance and a net profit of £4.6 million. But when I started to examine and make inquiries about the actual profitability and the operating profits and so forth it came as rather a shock to me to find that in that same year the cost of the combined interest charges for the loan capital was £3.6 million, which is roughly 50 per cent of the total operating profit. No air company in the modern competitive field in which the aviation business is carried on can be faced with this exorbitant figure for loan charges every year and continue to operate. For that reason I support the present Bill. The most desirable result of it will be, as the Minister pointed out in his speech, to restore this imbalance to a normal ratio as between equity capital and loan capital.
Air transport and air fares have been very much in the news at present and for a long time past. The Minister in his speech referred to what I would describe as the total jungle of air fares on the North Atlantic. Somebody told me recently there were something like 17 different air fares on the North Atlantic. The figure could be 17 or 15 or 20. The actual figure is not important. What is significant is that it indicates the crazy situation that obtains on the Atlantic air routes. This situation has very serious implications for national scheduled carriers like Aer Lingus.
A scheduled carrier has to maintain schedules and flights have to go out irrespective of the number of passengers on board. We accept all this. The performance of Aer Lingus as we find it in the 1977-78 annual report is very impressive despite the fact that they are saddled with having to pay a figure of £3.6 million in loan charges. We talk about a £4.6 million net profit. To the average person this means that in carrying passengers, cargo and so on Aer Lingus made £4.6 million. This is not a fact at all because the interesting thing is that, as is clearly reflected in the financial summary in the annual report for 1977-78, one striking factor emerges. In relation to carrying passengers, cargo and mail, the purely air transport part of the business, the revenue was £96 million and the profit was only £.2 million, that is, .2 per cent. This was the profit on the purely air transport part of the business.
This highlights the dramatic way in which what has been described as the ancillary activities have contributed to the overall profitability of the national airline. For example, aviation related activities contributed £6 million profit on a revenue of £29 million. That is a really striking figure. Hotels, leisure and catering contributed £2.4 million profit on £35 million revenue and financial and computer services contributed £.9 million out of £3 million, which is equivalent to over 30 per cent profit.
While this support for 1977-78 reflects a very healthy overall performance by Aer Lingus, in relation to air transport and their ancillary activities, it pinpoints a very significant factor, the extreme competitiveness and very narrow marginal profitability of modern air transport. We should appreciate the difficulties Aer Lingus had to contend with during the world economic recession, as the Minister outlined in his speech. We should compliment Aer Lingus for their performance in 1977 as revealed by their annual report. The board, the chief executive, the management and all categories of workers in the air company have done a tremendous job for which they are due great credit.
This debate takes place against the background of a world debate in relation to the whole future of international aviation. The Minister referred in passing to the problems created for Aer Lingus and for other scheduled carriers in the western world because of the move towards deregulation. Now that the traditional IATA price-fixing policy appears to have gone by the board the Minister, Aer Lingus and public representatives in general, not merely here but throughout the entire western world, are today faced with a growing and very vocal demand for cheaper air travel side by side with the mandate of our national carriers to be commercially viable and pay their way. The Minister in his speech today revealed his thinking in relation to this issue when he said:
Aer Lingus must operate commercially and must generate profits if they are to face future expansion plans with confidence. The company also have an obligation to provide a fare structure which will help to stimulate tourism.
There is a contradiction here. This particular passage in the Minister's speech reflects the conflict between the demand for cheaper air travel and a growing increase in the amount of charter traffic which is creating major problems for the scheduled carriers.
The Minister seems to create the impression that he hoped that this jungle in relation to the Atlantic air fares would rationalise itself in due course. I do not agree with him here. I believe we can never expect a return to the former IATA situation. We will have more and more public demand by the consumer lobby for cheaper air travel. Governments, air lines and public representatives will be subjected to more and more pressure by the public, tourist interests and others for lower air fares. The Minister was confronted with this in London a few evenings ago. I had practically the same experience a month ago when I attended the annual dinner of the Limerick Men's Association in London. I will deal with what the Minister's countymen and my countrymen from Limerick were complaining about in London. Those things deal with an aspect which is peculiar to the situation as it affects our people in Britain.
I do not agree with the Minister that the former IATA situation of international fare-fixing and a club-type approach to air fares will return. I believe we will have, especially now that the USA have decided to deregulate, a free for all. At the moment Aer Lingus have a mandate, which I do not think has changed since they were established, that they must be commercially viable and must pay their way. At the same time they have some kind of undefined social obligation. The Minister referred to it when he said that Aer Lingus have an obligation to fix air fares at a level which will not inhibit tourism.
I am aware—the Minister must also be aware of this—that Bord Fáilte and the Irish Tourist industry in general have for some time past been seriously concerned about the impact of high air fares on the development of the tourist industry here. I do not think that Aer Lingus, restricted as they are by the very narrow commercial viability mandate which they have, will be able to play their full role and make a proper, optimum contribution to the development of the tourist industry. I understand the Minister has received reports from Bord Fáilte on the question of access transport, which is a vital element in the development of the economy of a small country like ours with a very large tourist dimension.
The mandate of Bord Fáilte to promote tourism into Ireland and the mandate of Aer Lingus to be commercially viable beyond anything else are now definitely in conflict. The Minister is in an ideal position now to do something because he is the Minister for Tourism as well as Minister for Transport. I hoped he would have availed of this opportunity to reassess the role of our national airline vis-à-vis the tourist industry. There are complaints every day from people involved in the industry, travel agencies, the public and so forth, about the high cost of air fares.
I was in London at the annual dinner of the Limerick Men's Association the day the announcement was made that the return air fare between London and Shannon had been increased to £86. I had spoken before the comment was made and I had not referred to this fact because I had spoken about it over the years both in Government and in Opposition. It had become an embarrassment because I was never in a position to do anything about it. It is very difficult to explain why my neighbours in Limerick city and county who travel from Shannon to London must pay £86, while for very little more they could travel to New York and back on a Laker DC 10. A full study should be made of the relationship between air fares and the volume of tourist traffic.
The real complaint of our emigrants in Britain existed before the present problems arose in relation to the deregulation of transatlantic air fares. It is estimated that over 1 million people born in this country now live in the UK. If one takes account of the second generation, there are several million people. This is very significant from the point of view of tourism, if one takes the lowest denominator. No attempt has been made to design air fares which would be appropriate to the special needs of our own people in the UK.
In the excellent briefing document issued recently to Member of the Oireachtas, Aer Lingus list a number of special travel bargains. A weekend in London costs £62.90 and this includes two nights bed and breakfast, provided that two people travel together. Various other special bargain fares are offered. This special fare of £62.90 is not of benefit to the parents of an Irish person living and working in London because such people will not normally stay in an hotel but with relatives or friends. Yet they would have to pay £62.90. This is a real injustice.
Generally speaking, the package offered is an attractive one but it is not of any use to an elderly couple who may wish to visit their children in London. The same thing applies to the huge numbers of Irish people who come home on holidays every year. They usually stay with relatives or friends and must pay the full air fare. They are not interested in staying in hotels. This is the real complaint of Irish people living in the UK. The Minister heard it the other night and I have been listening to it for years. Something should be done and it is not beyond the inventiveness of Aer Lingus to devise a suitable fare.
The London weekend fare of £62.90 includes travel plus two nights' accommodation and breakfast. It must cost a minimum of £24 for the hotel, thus the fare content is about £40. Allowing for the fact that the hotel room must be used by two people, it is possible that the fare content may be £50. I cannot understand why an Irish couple travelling to or from London for a weekend cannot be offered a fare of £50. There is no reason why a special emigrant fare could not be offered. I feel very strongly that something definite must be done to cater properly and realistically for the large Irish population in Britain. An Irish worker, his wife and two children who come to Limerick are charged £86 each. That is the return air fare between London and Shannon. I am satisfied that Aer Lingus can devise an appropriate fare.
In relation to the future of Aer Lingus, I believe the international situation will continue to worsen. There is an enormously strong and powerful lobby demanding cheaper air transport. The emergence of people like Sir Freddy Laker is proof of this demand which governments now find it impossible to ignore. This has very serious implications for our national airline and for all major carriers. Some international air carriers have annual budgets which are greater than the national budget here. The problems facing our comparatively small airline are enormous. We on this side of the House are prepared to support Aer Lingus in every possible way to ensure that the airline will be able to meet the enormous challenge confronting them and overcome the difficulties.
I do not adopt the simplistic attitude which the Minister appears to have adopted to this problem. He expressed the hope, as I do, that there will be a return to more rational thinking and a more rational regulation of international air fares. The classic answer trotted out by Aer Lingus in justifying the return fare of £86 between Shannon and London is the cost per mile. The Minister attempted to put forward that explanation, as I gathered from reading a report of his visit to London at the weekend.
This is not credible or acceptable. It is much more than a simple X pence per mile. When we compare it with what other international airlines charge it is invalid. It is important at this stage that Aer Lingus be able to meet the present challenge. The fact that the company could report a very successful year for 1977 gives us confidence in their ability to take on the challenge but the time has come for the Minister and the Government to review the role of the national airline in relation to national development. They must accept the vital importance of access transport not merely in relation to tourism but in relation to international trade. This is a small nation, a member of the EEC which will shortly become a member of the EMS and we are widely dependent on exports. Tourism is also a vital part of the national economy and access transport at the most competitive rates is essential to the future development of tourism and exports.
The mandate of Aer Lingus should be changed. It is impossible in present circumstances, in the international aviation field, to reconcile the situation of the commercially viable airline making at the same time a maximum contribution to the development of tourism. It is time for new approaches to the whole question of aviation development. The narrow, purely commercial mandate of Aer Lingus, the balance sheet criteria mandate, should be changed to a new formula based on cost/benefit analysis. There is strong justification for this. Apart from the direct contribution of Aer Lingus from their earnings, their promotion of tourism and their ancillary activities Aer Lingus make an enormous indirect contribution to the economy. It should be possible to broaden the method of assessment of the performance of Aer Lingus to include consideration of their indirect contribution to the economy.
When talking to a leading tour operator at Shannon Airport some time ago he remarked that a 747 coming in had 416 passengers who would spend three weeks here. I asked him to calculate the revenue we would get as a result of their spending and he said that the economy would gain if we brought those passengers free of charge to spend three weeks here in hotels and spending money in various ways. That is a very simplistic and dramatic way of expressing the vital relationship between the level of air fares and the volume of traffic coming in. The Minister might discuss with Aer Lingus the possibility of devising a cost/benefit formula to assess the performance of Aer Lingus in a more realistic fashion. A more flexible mandate would give greater scope to the national airline to introduce the type of emigrant fares to which I referred, to offer more attractive fares to tour operators and so on.
I raised with the Minister during Question Time some time ago the possibility of introducing a shuttle service between London and Dublin, which is a high density route. The Minister explained that some of the top people in Aer Lingus indicated that that was not on at present, but the general public find it hard to understand why a shuttle service such as that between London and Glasgow is not possible between London and Dublin which carries more traffic than most other European routes. If it is possible to operate such a service between London and Glasgow it ought to be possible to operate one between London and Dublin. This would make it possible to charge a more economic fare and it would give some kind of consideration to the people in relation to what they have been asked to pay to travel home.
Aer Lingus are now faced with an enormous growth in charter traffic. There is a growing demand for this and a more liberal attitude has been adopted by Governments towards granting permission to charter. In the Shannon region because the Government are more liberal in relation to charter traffic, Shannon Airport has done well because of the increased volume of traffic even though this has created a difficulty for Aer Lingus. The problem of charters vis-à-vis the scheduled airlines has been met by some international carriers who now have charter subsidiaries. I referred to this here a good many years ago when the Viscount aircraft were phased out and they were lying idle at Dublin Airport.
I do not know what happened in the end. The market was not good for Viscounts then. They were probably dismembered and sold for spares. I remember putting forward the idea at the time of Aer Lingus setting up a subsidiary charter company to go into charter business and make maximum use of the charter era, so to speak. Whether this is feasible or not I do not know but I believe that, confronted as we are with the present international situation and now that part of the purpose for which money is being allocated to Aer Lingus is to enable them to buy new Boeing 737s, I presume they will be disposing of some of their present equipment and it may be an opportune time to look at the possibility of having a subsidiary company engaged exclusively in charter business.
To sum up—I congratulate Aer Lingus on its progress and say to them that so far as my party and I are concerned we are anxious to support them in every possible way. We recognise the difficulties which confront them at present and I am putting a certain suggestion to the Minister that the whole of the purely commercial balance sheet mandate be reviewed and a more liberal or broader mandate based on cost-benefit analysis might be considered. I plead with the Minister and Aer Lingus for special consideration of the air travel needs of Irish people in the United Kingdom. The possibility of a shuttle service between Dublin and London should be kept in mind and be periodically reviewed. I also want to throw out the possibility of Aer Lingus setting up a subsidiary charter company.
I would be remiss in concluding without reference to what I might call the astonishing growth of the ancillary aviation activities and the great success with which Aer Lingus is developing this sector. It has now come to the stage where there is really cross-fertilisation almost to the stage where the ancillary activities are balancing the difficulties of a very narrow profit margin in the air transport section. I am particularly pleased to find this happening. Here again one may be critical but it is only fair to acknowledge initiative and new development in the case of a State-sponsored body. I have been greatly impressed by the manner in which Aer Lingus have developed their maintenance and overhaul service. Not only that, but they now have 170 airline customers covering 48 countries with 1,000 foreign trainees which brought in a revenue of £11 million and a profit of £3 million. It is a great credit to Aer Lingus also that they now have senior management teams in many developing countries advising on management and they have engineering and technical teams working in eight countries. This is an area that can be developed still further. It is a great tribute to Aer Lingus and an indication of the latent talent and expertise available here that a small country with a relatively small airline is now providing technical, managerial, engineering, maintenance and back-up services of a wide variety to the airlines of so many countries. I hope that aspect of their development will continue to make progress.
Mar fhocal scoir ba mhaith liomsa mo dhea-mhéin a léiriú le Aer Lingus agus comhgháirdeas a dhéanmh leo as ucht an deá-scéal atá á insint ins an tuarascáil bhliantiúil do 1977. Tá súil agam go gcabhróidh an Bille seo agus go h-áirithe an t-airgead atá curtha ar fáil ag an Aire do Aer Lingus chun dul chun cinn sásúil a dhéanamh sna blianta atá romhainn.
