Vol. 472 No. 5
6 Mr. S. Brennan asked the Minister for Transport, Energy and Communications if he will give details of his recent meeting with the board of Aer Rianta; and if he is concerned at the threat posed to Irish airports by the EU plan to abolish duty-free shopping. [23530/96]
82 Mr. B. O'Keeffe asked the Minister for Transport, Energy and Communications if he has satisfied himself with the profit base of Aer Rianta; and his views on its future. [23086/96]
I propose to take Questions Nos. 6 and 82 together.
I understand my predecessor's recent meeting with the board of Aer Rianta ranged over the key current issues in the airports sector.
My predecessor told the board that while charges at the country's three main airports compare favourably with charges elsewhere in Europe, the more important question was whether, in the circumstances of growth in passengers and revenues at Irish airports, especially Dublin, Aer Rianta could not be even more competitive on airport charges. He asked the board to consider that issue.
With reference to the profit base of Aer Rianta, my predecessor went on to acknowledge that as things stand, the abolition of duty-free facilities on intra-European Union flights from mid-1999 would impact substantially on Aer Rianta's bottom line. He also pointed out that, whether or not duty free goes, he would always urge Aer Rianta to so conduct its business strategies as to make prudent provision for necessary renewal of airport assets into the future without recourse to the Exchequer. He urged the board to examine how it could compensate for much of the potential revenue losses from the abolition of duty-free facilities by a combination of increased cost efficiencies and new business strategies.
The Minister also informed the board that he had obtained Government approval for the drafting of a Bill to change the anachronistic status of Aer Rianta from that of agent of the Minister to that of a normal commercial State body. The drafting work is now in hands and the Bill is a priority in my Department's substantial legislative programme. The new legislation will have the effect of transferring ownership of Dublin, Shannon and Cork Airports from the State to Aer Rianta. My predecessor stressed this development, and the resulting increase in Aer Rianta's commercial autonomy, would call for a review of the present airports' regulatory regime. The whole business environments today, in both the private and commercial public sectors, demands clear and transparent regulatory arrangements independent of ownership. This is particularly necessary where, notwithstanding the generally increased competitive environment, virtual monopolies such as Dublin Airports would remain in place.
An important part of my predecessor's overall message to the board was that new business opportunities, organically linked to the core business, should continue to be exploited, both to anticipate possible duty-free abolition and more generally to assist in discharging the company's essential mandate from the shareholder to keep Irish air access costs as low as possible.
My predecessor stressed that, in any proposals for developing new business, the board should balance two principal considerations: on the one hand, the new opportunities that may be presented, assuming a valid business case can be made and on the other, the need to ensure that any such new opportunity is not at the expense of the primary focus of the board and management which, of course, must continue to be on the proper management and development of Dublin, Shannon and Cork Airports.
I have outlined for the House the main points my predecessor made to the Aer Rianta board at his recent meeting. I have considered these points and I can endorse them as a general statement of the policies I will follow in relation to Aer Rianta.
The Minister mentioned the monopoly is to stay in place. Did the questions of private sector investment in airports arise at the meeting with his predecessor or during his preparation for dealing with these questions? I refer to the proposal from Ryanair to develop Baldonnel and the proposal from another group to use a runway in Dublin Airport to provide an alternative type of airport system. Has the Minister had time to consider either of those proposals? What would be his general philosophy on them?
I am not aware there was any discussion of those issues between my predecessor and the board of Aer Rianta on the occasion that is the subject of the question. I have had only a very brief opportunity to consider the second of the proposals to which the Deputy referred which is under close examination in my Department. I will reflect further on it as that work progresses. It would be wrong to say I have not had any discussion on the first proposal. It has come up in conversation but not as a primary matter of investigation. It seems the vigour behind the proposal is a good deal less than it seemed to be originally.
I will come back to that proposal another time. I take it the Minister wants time to discuss it. I sense he has an open mind about it and I will wait to see what happens.
How vigorously is the Government trying to defend the retention of the duty-free facility? I remind the Minister that the Minister for Finance recently failed to get his European ministerial colleagues to agree to put a study in place to examine the effects of the loss of the duty-free facility. Given his good but nevertheless unsuccessful attempt, how confident is the Minister that the duty-free facility will be retained or could he put a date on when it might be abolished? What battle will he put up to retain that facility?
As the Deputy knows, although the duty-free facility affects very considerably a number of the companies that come within my ambit, so to speak, it is a matter which falls to be decided by the Ministers for Finance. The Minister for Finance recently revived the issue at a meeting of the ECOFIN Council and found there was no support among any of the other member states at that point for a review of a decision that has so far been taken that would lead to the ending of the duty-free facility on the target date set. That situation was a little surprising in that one had expected a more supportive reaction from some other member states which, for their own reasons, seem to have decided not to maintain the position they had previously taken in relation to duty-free.
Regarding Question No. 6, Aer Rianta is bidding for contracts all over the world. I appreciate it is early days for the Minister, but I would like to establish today, if possible, some of his general approaches to policy issues. Is he of the same view as his predecessor, that State companies like Aer Rianta should stick to their knitting as opposed to spreading their wings? Which of those schools of thought does the Minister support? The Minister's predecessor appeared to support the "stick to their knitting" school and lectured State companies regularly about that. It would be useful if the Minister told us in regard to Question No. 6 his general approach to that matter. Does he want State companies to stick to their core business or to expand?
The Deputy would be mistaken if he presents the choices as being either that they should stick to their core business or expand. There are companies which can stick to their core business and expand at the same time.
I meant diversify. Should that company stick to its core business of landing aeroplanes at Dublin Airport or should it diversify to Australia to run an airport which it is presently seeking to do?
I dealt with that at some length in my original answer.
The Minister knows what I mean.
I do not want to be tedious and read it again. I said that my predecessor in his discussion with the board, and I agree with his view, stressed that in any proposals for developing new business, the board should balance two principal considerations: on the one hand——
The Minister has decided to scrap it.
——the new business opportunities that may be presented, assuming a valid business case can be made and, on the other, the need to ensure that any such new opportunity is not at the expense of the primary focus of the board and management, which must continue to be on the proper management of the three airports in the care of Aer Rianta at present. The Deputy agrees that we would not wish diversification at the expense of the proper running of the core business of the company. My expectation of the management of Aer Rianta is that they would not come forward with a proposal that would diversify at the expense of their core business.
Aer Lingus did it.
To paraphrase the abilities of a previous President of the United States and using Deputy Séamus Brennan's terms, this is a company that can knit and chew gum at the same time.
Like the Minister.
The proposed termination date——
The tragedy is that the Minister has been whistling past the graveyard.
——for duty free is 1 July 1999.
First, I congratulate Deputy Dukes on his appointment as Minister. As far as diversification is concerned, I am delighted to see the Great Southern Hotel developing at Dublin Airport.
With nearly 20 million people unemployed in the EU and given that the abolition of duty free will put a further 140,000 people out of work in the EU, does the Minister agree that this is no more than intellectual purity for the Eurocrats?
Furthermore, is the Minister aware that the abolition of duty free will put some 300 people at Dublin Airport out of work, recording a loss of £60 million in turnover in Dublin Airport alone? Given that the Minister said: "Possible duty free abolition and whether or not duty free goes", could he outline what he can do to ensure this decision can be overturned?
I appreciate the Deputy's concerns about the effects of ending the duty free facility. I am disappointed at how this has evolved. It is now almost 20 years since the abolition of those facilities was only a gleam in the eye of bureaucrats in the Commission in Brussels. I regret that the contagion seems to have spread and that it is now a view held by many Governments in the EU. Last month, the Minister for Finance endeavoured to bring the question of duty free back into discussion with a view to encouraging other States to taking a different view.
He got no help.
He got a very muted response but he will bring the issue up again. There is some time before it comes into effect on 1 July 1999 and the Minister for Finance should have opportunities to encourage other countries to maintain the facility. For all its intellectual purity, as the Deputy put it, it is much loved by the travelling public.
The previous Minister is reported to have urged the board of Aer Rianta to reduce airport charges further. Will the Minister agree that one of the effects of reducing charges in Dublin might be that instead of winning extra business from elsewhere it might reduce business in Cork and Shannon and increase the need for infrastructural change in Dublin? It could have the effect of reducing the overall level of income to Aer Rianta, which would be clearly damaging. In relation to capital works at Shannon, will the Minister give an undertaking, as his predecessors did, that if it cannot be paid for by profits from Shannon, it will paid for by the company? That will be extremely important. I wish the Minister well.
My predecessor asked Aer Rianta if they could not be even more competitive on airport charges at all their airports than they are already. The level of charges at our three main airports compares very favourably with charges elsewhere. I would not expect Aer Rianta to come forward with a proposal that would reduce its overall revenue. If there were a proposal to reduce charges, the objective should be to increase business overall at the airports.
My predecessor also urged Aer Rianta to conduct its business strategies to make prudent and proper provision for the necessary renewal of airport assets in future without recourse to the Exchequer. That policy would apply generally to the company.
Progress is slow and time is fast fading. There are a number of Deputies present I would like to accommodate. Brevity all around would help to achieve that.
