I would remind Deputies that in conjunction with amendment No. 2 we are dealing with amendments Nos. 26, 29, 33 and 36.
Air Transport Bill, 1984: Committee Stage (Resumed).
SECTION 3.
Debate resumed on amendment No. 2.
In page 2, line 31, to delete "mail or other cargo".
—(Desmond O'Malley).
The last day I proposed this amendment the purpose of which was to delete "mail or other cargo" from the provisions of this Bill. We had a very short debate, a few minutes, before the debate concluded. The Minister said in reply that at the moment there was no control on cargo and mail rates but that it was thought appropriate to extend these powers and he referred to the danger of what he called predatory pricing and said he wished to have these powers. His position seems to be perfectly clear. He is concerned that rates charged for mail and cargo might be too low. He made no mention of seeking powers or being anxious to have powers, in respect of cargo and mail rates which might be too high, which I would have thought would be the more appropriate approach.
I sought to inquire as best I could who wants this proposal to introduce control of cargo and mail rates, to keep the rates up rather than down, because when we talk about control in this Bill we are not talking about price control in the normal way, which is to keep prices down, but about control to keep prices up. I cannot find anybody who asked for this control, other than, presumably, the Department of Communications who would see it as ideal to have further control in this area, to have it spelled out more clearly, and to have their already extensive powers in relation to the regulation of airlines made more extensive and copperfastened to an even greater extent.
The CII, one of the groups most affected, have not asked for this. They have not had very much to say. Some major airlines are members, and in particular one major airline, and as a result they do not want to comment, as a matter of policy, in a way that would not have the approval of the airline. As a result, they have not been commenting publicly but other members have been making it very clear that they are concerned about what will arise from this situation.
We have the unusual situation that when the Second Stage debate on this Bill was taken last June it was described as an emergency measure, but this year the Minister said that some of the most important powers in this Bill are not intended to be exercised. It is very hard to reconcile what we were told last June with what we were told here the last day. If it is not intended to exercise these powers, I ask the Minister why have them? Is it not an example that from a bureaucratic viewpoint everything must be tied up and every t crossed and i dotted? Is it appropriate to our general economic needs?
The Minister is asking industry to accept for no good reason he has given and against the wishes of industry, the possibility that fines, originally of £100,000 but now proposed to be reduced to £50,000, can be imposed for the crime of charging too little, not too much, for air freight. It was intended that two years in jail would also be imposed but in a ministerial amendment it is intended to drop that. Therefore nobody will get two years in jail for charging too much for air freight, but a person can be fined £50,000. I wonder what the attitude of the IDA and other promotional bodies would be to measures like this. Will they have to go to some lengths to try to keep them secret, or will they try to give the impression that they are of no consequence because these measures will be a deterrent to our development drive? There is no doubt that all industry will lose under this provision if this amendment is not accepted.
In particular the Minister has made Shannon the target for his urge to control prices in the sense of keeping them up. At present Shannon is endeavouring to develop a hub of freight services which was recently described by Mr. Tony Ryan of Guinness Peat Aviation, the most successful individual in Irish aviation. He described the efforts being made to bring large cargo aircraft flying the Atlantic to Shannon——
I do not want to interrupt the Deputy but he is beginning to make a Second Stage speech. We are dealing with one specific amendment.
Yes, we are dealing with cargo and mail, and I am discussing cargo. There is a proposal which has been negotiated on and off over the last few years. When I was in Government I recall being involved in it to some extent. It died after a while but happily I understand it is being actively negotiated again. This is a proposal by an American company, Federal Express based in Memphis, Tennessee, to use Shannon as their European base for cargo distribution throughout Europe. A company like that would be very frightened by the provisions suggested in this Bill and would be reassured if the Minister were to indicate that he would accept this amendment. That would make it clear that they would not be subject to penalties of £50,000 for charging too little for their services. I understand another American organisation, United Parcels Services, a company which is not as big as Federal Express but would be a valuable acquisition to Ireland, have shown an interest. The idea is that each day flights of large aircraft would arrive from the United States with various cargo which would be distributed in smaller aircraft from Shannon to different European destinations. This would ba a most valuable acquisition for Shannon. If we subject cargo operations to this kind of minimum charges as suggested in this Bill, we could well frighten off any such proposals which, hopefully, might come about.
Failure to accept this amendment would be a major blow to the negotiations and perhaps to the project. The Minister, who has agreed that no rules in relation to cargo charges are in force at the moment, would be rewriting the rules at this late stage in any way which would be incomprehensible to Americans in particular and, indeed, to very many Europeans. It would be the direct opposite to their own experience in the operation of cargo.
Does the Minister seriously expect a large cargo airline to submit to the same kind of outdated regulatory regime which operates in this country in respect of passengers? Carriers of that type simply will not do so, and we should remind ourselves that there is no shortage of other airports in Europe which are quite prepared to take this business away from Shannon and certainly would not seek to make rules of this kind. The one which obviously springs to mind is Schipol in Holland. That airport is prepared to accommodate anybody, as the Dutch regularly are in respect of any matter like this that will be beneficial to their economy.
On this question of cargo rates, which this amendment is trying to avoid, I refer the Minister to page 64 of the CAB report on airline deregulation of 1984, which states:
The domestic cargo rates were deregulated in 1977 as a result of the cargo deregulation amendments of the 9th of November, 1977. Tariff filings were eliminated by rule in the United States in 1977.
We are now seeking to introduce in 1985 the very matters that were done away with in the United States, who are the people that we will have to do the most business with in regard to cargo — and the most important business. They find these kinds of provisions incomprehensible. That is why it is important that this amendment be accepted. That report goes on to say that on 27 February 1983 and on 3 June 1983 the Civil Aeronautics Board established an international rate flexibility policy which created "a zone of flexibility within which rates may be set without a requirement for economic justification".
My efforts on this Bill to get something similar introduced here by fixing maxima, where there would be flexibility below the maximum fare in respect of passenger traffic, have failed so far. My amendment on the last day was rejected by the Minister. By seeking to apply these provisions to freight, I suggest that the Minister is seeking an unnecessary confrontation with US cargo airlines internationally. By accepting the amendment, the Minister would be retaining some credibility in his claims to be a friend of the consumer and, in this case, of industry.
Cargo deregulation gave us an early example of the wider deregulation which subsequently followed in the United States. By introducing fines, which are very substantial indeed for rate cutting in cargo, the Minister would be turning his back on what has become the accepted practice in much of the western world over the last seven or eight years. It is worth noting that industry here — the business sector generally who are the people mainly affected by this and who would mainly benefit by the amendment — have been very badly hit in terms of their ability to avail of air transport in recent years. Some interesting figures were published by the Central Statistics Office, some of which I should like to quote. They show the number of trips and the expenditure on overseas business trips by Irish residents in the years 1980-83. We are constantly given the idea that air transport is increasing and going from strength to strength, but the number of cross-channel business trips made by Irish residents in 1980 was 149,000 and the number of such trips made in 1983 was 114,000.
Deputy, we are still dealing with cargo.
I am aware of that. The people making these trips who, unfortunately, are declining very substantially in numbers, as those figures show, are the people for whom even further difficulties and hardship will be created by the introduction of these provisions applying minimum rates to cargo where no rates apply at the moment.
On the question of mail, there is no demand whatever for any legislation governing this. An Post have not sought it, nor have the CII nor anybody else to my knowledge. It seems very bad economics and also very bad proposed law for this reason. International mail carriage is, and has to be, by competitive tender. Many Governments, including the UK Government, require the postal authorities to accept the lowest tender that they get for the carriage of mail. However, the Minister here, if he does not accept this amendment, proposes effectively to fine the applicant with the lowest tender if this part of the Bill is applied to him, because if you have a lower tender than the controlled figure or rate prescribed by the Minister, you are in breach of this Act. On the other hand, if you do not tender below what others abroad are tendering, you will not get the business. Other Governments will give the business, irrespective of nationality, to the lowest tenderer.
It puts people operating from this country — and this primarily includes Aer Lingus — in a very invidious situation. If they want to comply with the law of other countries, they inevitably have to breach the law here because if this amendment is not accepted the law here is quite at odds with what it is in every other country where the encouragement, understandably enough, is to keep prices down and get people to tender as low as possible. Here you have to keep prices up and cannot go below a certain figure or you will be in breach of the Act. Inevitably, this measure will push up postal and freight rates, just as in the past this kind of approach, as we well know, pushed up passenger rates to and from this country.
Under the EC rules governing tendering for public service contracts, such tendering cannot be the subject of ministerial interference in the way proposed here by the Minister. That will be rejected by the EC. Public service tendering under the EC must be open to all members of the Community in a nondiscriminatory fashion. I would think it pretty certain that, for example, the Commissioner who is currently responsible for competition would feel it his duty to intervene if this measure were passed and implemented in the way in which it is set out, if this amendment were not accepted. Commissioner Sutherland would be bound to intervene because it would be a breach of the EC rules on public tendering.
The enforceability of this provision, if this amendment is not accepted, is quite clearly in the most serious doubt because I have demonstrated that it would be in breach of EC rules which insist on competitive tendering and one would have to justify pretty strongly not giving the contract to the lowest tenderer.
It is also interesting to read the statement of the chairman of Aer Rianta in their annual report for 1984, published in the last week or so, on the question of cargo:
Over the years we have been disappointed with the volume of freight business at our three airports. This also lagged behind the developments worldwide.
He went on to say:
I am glad to report that the gap was closed slightly last year when a 9 per cent improvement was achieved over 1983. The hope now is that this positive trend will be sustained by the airlines and by the cargo industry generally.
I concur with the chairman in that hope. I say to him and to anyone else who is interested that if these controls are brought in we will be back to the situation we were in up to 1984, of no growth or an actual decline in cargo at a time when air cargo is increasing significantly throughout the world. For example, there are huge increases annually in the amount of air cargo to and from the United States, and the same applies in respect of Britain. We are between the two countries but we have had no increase other than one increase last year after several years of decline or a static situation.
For these reasons there is a compelling case, in terms of economics and of law, why this amendment should be accepted. If it is not, we will be in breach of the EC rules with regard to competitive public tendering. It is futile to try to enact into law provisions that will be of no effect or that will have the harmful effect of frightening off possible developments for Shannon airport which would be most beneficial not only for Shannon but for the country.
I make the point that on this simple amendment Deputy O'Malley has spoken for 25 minutes. It is clear he is filibustering this Bill. He has made a Second Stage speech, an attempt at a filibuster by one Member of this House who is the only person in opposition to this Bill. He is a lone ranger, jumping fences that are figments of his imagination. The points he has raised have no validity.
I wish to draw the attention of the House to the fact that on the last day we discussed this Bill there were banner headlines in The Evening Press that quoted the Deputy as saying that Aer Lingus had stopped Dan Air. The Deputy has not apologised or made a personal statement withdrawing the allegations he made, which had no substance in fact. I told the House what I knew. No cheap fare application was filed with me, as the Deputy had suggested. Aer Lingus were subsequently asked to comment and they vehemently denied the allegation made by the Deputy that they had blocked Dan Air's cheap fare, and Dan Air themselves issued a statement denying what the Deputy said. It is important that I make all of this clear. It was one of three major points made by the Deputy which were absolutely incorrect. He also talked about the famous London-Amsterdam fare now accounting for about 30 per cent of the number of seats, perhaps going to 50 per cent in 1985, but the figure is much lower. I told the House I understood it was of the order of 5 per cent but I am told now it is about 7 per cent.
When Deputy O'Malley was talking about his previous amendment dealing with the insertion of the word "maximum", he said that most countries had this provision in their regulations. I asked him to name one such country but, of course, he could not do so. I am making this point to give the background to the points now being made by Deputy O'Malley.
He talked about flexible rates for cargo agreed by the CAB in the United States. The fact is that the CAB have the power to control rates and to allow for flexible rates. That is the kind of power we are seeking. As I have said, what is important is how the power is used. We have the power under the 1965 Act and we are repeating it in this Bill to clear up any doubt about the powers in the 1965 Act. Up to now we have not used that power. We have had an uncontrolled situation in the cargo area and that is what we propose to continue. However, it is important that we have contingency power if predatory pricing takes place which would mean that people were charging too low a price. Deputy O'Malley has made a meal of this, that we were going to send people to jail for charging too little. That is an emotive way of describing the situation and one that is totally at odds with the truth.
All of us want fares and charges to be as low as possible. Since I became Minister I have insisted on increases below the rate of inflation, and I note that Deputy O'Malley does not dispute that. However, we have to guard against predatory pricing that could scuttle all services to this country, as we have to guard against overcharging. This contingency power will give us the right to intervene in the event of people charging too much or of predatory pricing in order to push out all competition on particular routes, with the operator subsequently being able to charge what he liked.
I should like Deputy O'Malley to realise that 1984 was the best year ever for Shannon airport. That was because of policies we have pursued and allowed, not least because of the big influx of Aeroflot aircraft into Shannon. Despite the very difficult situation following the Korean air disaster, that operation has continued to grow. It took some considerable deft diplomatic handling because, as Deputies will remember, the situation was extremely tense and the pressure was great to boycott Aeroflot completely. That operation, among other factors, has contributed to the enormous success of Shannon. Our policies have allowed the airport to prosper and to have had the best year since 1946.
It is wise to have this contingency power. Of course it is important how it will be used. I can only assure the House that I and my predecessors from all the parties, so far as I can check, have used this power prudently and in the national interest.
Since the matter was raised, I should like to ask the Minister the position with regard to Federal Express. When I was Minister for Transport the Federal Express venture was mooted but I gathered that at that time and since there were considerable obstacles either on this side or in the United States. Am I right in thinking the Federal Express people finally made a decision not to go ahead at Shannon or is the matter still ongoing?
Progress reported; Committee to sit again.
Sitting suspended at 1.30 p.m. and resumed at 2.30 p.m.