Vol. 452 No. 4
1 Mrs. O'Rourke asked the Minister for Enterprise and Employment if the Government envisages opportunities for alliances in the Irish aircraft maintenance industry; and if he will make a statement on the short and medium term outlook for the Irish aircraft maintenance industry. [88198/95]
The aircraft maintenance industry has been in recession for some years mainly brought about by the Gulf War. The Gulf War had a dramatic negative impact on air travel worldwide and, consequently, aircraft utilisation rates fell to record low levels. With aircraft spending fewer hours in the air the requirement for airframe maintenance also plummeted. A situation of scarce supply rapidly turned around to significant overcapacity resulting in depressed market prices for maintenance work. The short and medium term outlook for the Irish aircraft maintenance industry should be looked at in this context where there is 30 per cent overcapacity. This has led to a progressive decline in market rates which have fallen significantly since 1990.
It is estimated that 3,600 are employed in aircraft maintenance, including components, in Ireland out of an estimated 5,200 in aerospace activities i.e. maintenance, manufacture and international services. This industry sector is thus an important one, not only for those workers and families dependent for their livelihoods in this area, but also to the Irish economy and the Exchequer.
The National Aerospace Task Force report of 1992 identified strategic alliances and joint ventures as opportunities for the aircraft maintenance industry. The report was prepared by representatives from industry, Government Departments and State agencies. At that time, market conditions were generally regarded as good not only in Ireland but worldwide. The Federation of Aerospace Enterprises in Ireland — established in 1994 under the auspices of the Irish Business and Employers Confederation — is reviewing the task force report and expects to complete this exercise by mid-summer. I look forward to the outcome of the federation's review and I expect that it would represent an important input to policy development in the aerospace industry.
The short and medium-term prospects for the Irish aircraft maintenance industry are bound up with prevailing international market conditions, at European and world level. Key factors in improving the industry's competitiveness and viability will be restructuring measures to increase cost efficiencies and productivity and measures to strengthen marketing and to secure long term contracts. Rationalisation is currently under way in Europe and elsewhere, which should benefit the industry here.
The view in the industry is that strategic alliances are still relevant and may figure in some company plans over the long term. The pursuit of such alliances is primarily a matter for the industry itself but the relevant industrial promotion agencies are available to assist the industry in this process.
On the question of the short and medium-term outlook, given the announcement of the new enhanced finance package, will the Government be represented, either directly or through a State agency, on the board of Shannon Aerospace? Is there any guarantee in relation to employment, in respect of which we are paying £12 million?
I am not seeking to evade them but I have a difficulty in that the questions the Deputy is raising are more properly related to Question No. 3.
If they impinge on Question No. 3 it would be better to await the reply to that question. I am concerned to preserve the integrity of Question No. 3 until we reach it.
The supplementaries I have prepared relate to the short and medium-term outlook for Shannon Aerospace and other aircraft maintenance industries.
I am happy to answer the supplementaries but this question does not relate specifically to Shannon Aerospace but rather to the aircraft maintenance industry. Provision has been made in the agreement for representation on the board of Shannon Aerospace.
Moneys are now being made available. Is there any guarantee in relation to employment not alone in Shannon Aerospace but in the aircraft maintenance industry in general? Will there be a clawback if employment is not created?
In the agreement with Shannon Aerospace there are guarantees in relation to employment. I will deal with this matter more fully when we come to Question No. 3.
If a major shareholder in the aircraft maintenance industry was to pull out, what implications would this have for the firm in question?
It would all depend on which firm and shareholder was involved and on the terms on which they withdrew.
The Minister mentioned the figures of 3,600 and 5,200 and that the aircraft maintenance industry was an important one. Is he satisfied with the arrangements which have been made for the financing of these companies and in particular the arrangements which have been made to provide public funds to a private company?
I am satisfied with the proposal which the Government has supported in relation to Shannon Aerospace. My colleague, the Minister for Transport, Energy and Communications, is working on a five-year plan produced by TEAM. This will have to be assessed. This industry is going through a difficult period. Some years ago it was projected that employment in this sector would double in the space of about five years. There is not the same level of optimism in the industry now. Considerable restructuring is taking place with a view to securing a good future for the industry. I am satisfied that the best advice has been obtained and that we have secured a future for the one company I have been dealing with. My colleague will do the same in respect of proposals presented to him.
The Minister stated that there is no longer a sense of utopia in the aircraft maintenance industry but can there be a level playing pitch?
I do not understand the import of the Deputy's question. This is a very competitive market where people will have to compete on quality. Shannon Aerospace is an extremely competitive company whose costs are comparable with those in virtually all Europe.
