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Dáil Éireann debate -
Wednesday, 15 Oct 1997

Vol. 481 No. 5

Air Navigation and Transport (Amendment) Bill, 1997: Second Stage.

I move: "That the Bill be now read a Second Time."

This is a Bill about airports, but it covers much more than that. It will be the framework document for the operation of the State airports into the new millennium and beyond. Its main purpose is to provide for termination of the present State airport management arrangement and to set up Aer Rianta as a normal commercial State body. This involves the transfer of the assets at Dublin, Cork and Shannon Airports to Aer Rianta and the assignment to the company of certain functions previously undertaken by me and my predecessors in relation to the management and development of the three State airports. The opportunity is also being availed of to amend and update miscellaneous provisions in civil aviation legislation generally.

The previous Bill dealt with the consolidation of various tax Bills and this one is a type of mini consolidation Bill. Although this is not as macroeconomic as the previous bill, it is interesting. The history of Aer Rianta spans the period from the mid-1930s to today.

This is a long overdue measure to regularise the current agency position of Aer Rianta to put it on the same footing as other commercial State-sponsored bodies, such as the Electricity Supply Board and Bord Gáis. The existing arrangement is out-dated and out-moded. It involves Aer Rianta, which was set up as a limited company in 1937, became a public limited company in 1985 and whose shares are owned by the Minister for Finance, being the agent of the Minister for Public Enterprise and as such being merely a name under which the Minister acts. The company has no assets, functions, activities or revenues in its own right in the field of airport management. While Aer Rianta has funded all airport investment since 1988, the company simply holds those assets in trust for the Minister of the day, who is their legal owner. This Bill involves modernising the arrangements between the Minister and a commercial State body.

It is correct on Second Stage to put the matter in perspective. The company was originally incorporated in 1937 in accordance with the terms of the Air Navigation and Transport Act, 1936. The original purpose of Aer Rianta, as specified in that Act, was to serve as a holding company for Aer Lingus-Aerlínte and to promote aviation generally. The company was then given responsibility for the management of Dublin airport from its construction in 1940 and has exercised that duty ever since.

Unlike Dublin, neither Cork nor Shannon were managed by Aer Rianta when they opened. The construction of Shannon Airport began in 1936 and, although interrupted by World War II, the essential facilities for aircraft and passenger handling were completed in time for the post-war travel age. It is timely to remember the words of the then Deputy James Dillon who said in this House that he would live to see the day when the rabbits would run over the runways of Rineanna. I do not mean that in a political but in an alliterative historical sense. All big new ventures carry that aura and people doubt if they will come to fruition. They worry about the future. It is correct that matters should be debated in that sense, but it is interesting that Aer Lingus and Aer Rianta which had their beginnings in the mid-l930s are now major success stories.

The airport was managed by the then Department of Industry and Commerce and later by the Department of Transport and Power. Cork from its opening in 1961 was also managed directly by the Department of Transport and Power while commercial activities were carried out by various concessionaires under licence from the Minister. In 1969 an administrative arrangement was entered into under which Aer Rianta was given responsibility for managing Shannon and Cork as agents of the Minister. In l969 the late Erskine Childers, the then Minister for Transport and Power indicated that it was his intention to regularise the status of Aer Rianta at the earliest possible opportunity and 28 years later — that says much for us and our predecessors — we are finally doing that in this Bill.

Also in 1969 Derek Keogh, who was then a young man, left the then Department as a HEO and went to work with Aer Rianta. He brought the company to great heights through the assistance of his board, management, workers and various chairpersons and at the end of this year he will relinquish his post. I take this opportunity to wish him well in whatever further fields of activity he engages. He remains young in heart, mind and body. I hope he will gain fulfilment and success from whatever he chooses to do. I thank him on my behalf and that of the Department. He is a person of outstanding character, ability, probity and the essence of what a person holding public office should be.

It can fairly be said that the company has come a long way in its 60 years history. From what was, in reality, a close relative of Aer Lingus from the time it was set up until the companies were split by the Air Companies Act, 1966, Aer Rianta has now become a successful company in its own right. I compliment the management and staff of the company on the success achieved to date.

A successful business depends on the co-operation of both management and staff. I wish to single out one innovation in industrial relations within Aer Rianta which epitomises this spirit of co-operation between management, staff and their trade unions — the Compact for Constructive Participation. The compact involves staff and management on a partnership basis in all matters which affect the company. It has the active support and endorsement of the Irish Congress of Trade Unions, which is an indication of very progressive thinking.

The core business of Aer Rianta is obviously the operation and development of Dublin, Shannon and Cork airports. Through its subsidiaries and associate companies, however, it is involved in successful activities such as hotel ownership, duty free shopping and airport management and ownership from Parknasilla to Beijing. In 1996 the company and its subsidiaries employed over 2,700 people, had a turnover of £231 million and a profit of £39.4 million of which it surrendered £12.9 million to the Exchequer.

Last year Aer Rianta handled the awesome number of almost 12 million passengers and 146,000 tonnes of freight at the three State airports. This represents an increase of 13 per cent in passenger figures and 18 per cent in the freight carried, over the previous year. The trend in 1997 continues to be upward. The accounts for this will not be available until next year. Each of the airports handled a record number of passengers in 1996 and I expect that each will reach new record levels this year.

The growth in both passenger and freight traffic has been such over the last few years that the facilities, particularly at Dublin Airport, are stretched to the limit. For this reason, major development programmes are taking place at all three airports. Five year programmes, costing £225 million, were announced by Deputy Stagg at Shannon last year. The programmes are subject to periodic review by my Department by reference to traffic developments. Based on figures so far this year and medium term projections, the development programmes at the airports need to continue apace and are doing so.

Airport development, while much needed, does not come cheap. One of the major tasks facing Aer Rianta in the medium term will be financing these developments. I am confident the company is robust enough to undertake this successfully. I visited Aer Rianta, as I did all the semi-State bodies, and met the chairman, Noel Hanlon and the board, whose statements and actions are robust and innovative.

There is a misconception that all an airport management company has to do is sit back and wait for the customers to troop through its terminal building. This is not true. All airports compete with each other. Internationally, Irish airports compete for long haul and hub business with airports in the UK and on the Continent. Aer Rianta has no God-given right to be successful. It is successful but has to work hard to be so.

Since late 1995 responsibility for marketing all three State airports has been given to Aer Rianta. Prior to that the company marketed Dublin and Cork while responsibility at Shannon was split between Aer Rianta and Shannon Development. I am satisfied that responsibility for marketing the airports should rest with the company which operates and soon will own the airports. While I am aware of the particular difficulties facing Shannon, a co-ordinated marketing approach, taking the particular circumstances of each airport into consideration, is best.

With regard to transatlantic traffic, I am confident that developments such as the recent announcement by Aer Lingus that from next summer it will serve Newark all year round will succeed in increasing passenger numbers. I also understand from Aer Rianta that it expects an announcement shortly from Continental Airlines of the introduction of daily services from Newark commencing next June, one to Shannon and the other to Dublin.

I am heartened by Aer Rianta's initial report given to me by the chairman. It is Aer Rianta's job to make the formal announcement, which it will do next week. I recently met the mid-western lobby, consisting of various people drawn from agencies and the community, who are worried about the development of Shannon airport. They wish to see the mid-west continue on a progressive path and are worried at what they see as its decline. The formal announcement and my initial announcement today will be a considerable boost to that region. I am happy to say it is a one for one arrangement. There is no cherry picking and we are keeping in line with the commitment of the present and previous Governments that a flight to Shannon must be matched with a flight to Dublin and vice versa. This, combined with the recent Aer Lingus announcement, will mean that passenger numbers into Shannon will increase dramatically and have a knock-on effect on the region.

Duty free sales represent an important element of Aer Rianta's current financial strength. Intra-European Community duty free sales are scheduled to be abolished from 30 June 1999. This will have a major effect on the profitability not only of airports, but also of air and sea carriers — particularly low cost, low fare carriers.

In Aer Rianta's case, duty free sales help it to keep airport charges low, fund its discount schemes and finance development at the three airports. The company is playing a prominent role in the international campaign to retain duty free sales or at least to further defer abolition. At the same time, the company is pursuing other opportunities both to offset these possible lost revenues and, more generally, to assist in discharging the company's essential mandate from the shareholder of keeping Irish air access costs as low as possible.

The Programme for Government includes resistance to EU plans to abolish duty free shopping after June 1999 as a key priority under the transport heading. My own interest in the duty free issue is well documented. In my three and a half months in office I have been vigorous in heading up the campaign and working with the other interests involved.

I have called on the EU Commission to conduct an EU wide study into the economic and social effects on Europe of ending duty free. I am pleased that my colleague, the Minister for Finance, who has overall responsibility in this area, has commissioned a study into the consequences for Ireland of the abolition of intracommunity duty free sales. This study, which is expected to be completed by the end of the year, should provide a useful basis for further discussions. At Question Time the week before last, in answer to a question put by Deputy Stagg, the Taoiseach signalled his support for the retention of duty free. The previous Government has also worked on this issue.

I recently visited Brussels for a conference hosted by Forum Europe which 350 people attended, representing all the interests who would be adversely affected if the abolition of duty free went ahead. It was an enthusiastic meeting. All of us were in the one ship, as it were.

Was there duty free on the ship?

If there was, we did not have time to avail of it. Commissioner Monti issued a press release which stated that he was very adamant the situation would not change. One of the speakers was very dismissive of the whole duty free issue. It was very interesting to hear his remarks which showed the unreality which sometimes prevades bureaucracy at European level. I sometimes think that Europe has adopted an entire mantle of bureaucracy. The argument continues to be advanced that duty free is something which must be done away with. The proposition put forward by one of the speakers who did not favour the retention of duty free — the panel, as is proper in any debate was balanced, although the audience were in favour of the retention — was that only elitist people travelled by plane or ferry. He asserted that only politicians, civil servants and their ilk benefited from duty free. I wonder what dusty cupboard he took that argument from. The idea that in 1997 — or indeed in many years past — only well-heeled, articulate people use ferries or planes is so outdated that one wonders how anybody could actually utter such a fatuous banality. Quinnsworth and other supermarkets give out saving stamps which people can collect and use towards trips abroad. There are bargain holidays available and regular holiday competitions are run. The idea that planes and ferries are peopled by elitist society is quite ridiculous.

When duty free harmonisation was agreed in 1992, there was to be a harmonisation of other excise duties and matters within the finance remit in tandem with it. That did not happen. Europe did not live up to all the arrangements it made. A Europe-wide study was to be commissioned in 1992 on the possible effects of the abolition of duty free. That was not carried out either. I shall continue to make the case that we are fully entitled to seek the retention of duty free in the absence of the study which the Commission has now blatantly refused to carry out and the lack of harmonisation of other duties. I can only assume that this is a bureaucratic decision which the Commission wants to insert because it wants to "square an envelope" so to speak. By doing so, it would get rid of something which is affordable to people and very useful to air and ferry travel, enables access fares to be kept low, is competitive and employs a large number of people. In a Europe of the citizens — which the Commission claims to want — where the majority of people want this facility retained it seems that bureaucratic procedures are being excessively used by the Commission.

At a transport council meeting last week in Luxembourg I raised this issue at the table under the issue of airport charges; there was no specific item on the agenda as the agendas for such meetings are set well in advance of the meeting taking place. I spoke in some detail on the issue. Over lunch, I met Gavin Strong, the British Transport Minister. However, the person with overall responsibility in this area is the Deputy Prime Minister and Environment Secretary, John Prescott. I arranged a meeting for 10 November in London with both MPs to encourage the UK to take up the baton on this issue in their six month European presidency which commences in January. The purpose of the meeting is to show solidarity on this issue. I understand both men are very interested in the idea and want to give it a fillip during the British presidency.

I will continue to work among the transport Ministers and we hope to form a coherent lobby on this issue if we can get all of our colleagues on side. We would, in turn, lobby the Commission through the Finance Ministers. I know I will receive support on this issue which I would like to see being a cross-party one. I would like to be able to say that I speak with the mandate of Dáil Éireann. I do not intend to deal with this matter in any divisive way.

I have heard some criticism of the campaign to retain duty free sales on the basis that it is a subsidy to those who are better off. When one analyses that argument, it is obviously outdated. It used to be the case 20 years ago that air and ferry travel was the preserve of the wealthy few. However, today in the age of mass travel and package holidays, duty free can no longer be considered an exclusive perk of the elite. We are a small open economy, one of the most open in the EU. Our business, for the most part, is international trade. We are also an island beyond an island with no land borders with our major trading partners. Access costs to markets by sea and by air are an important element of our marketing costs. They affect all sectors of our economy — imports, exports and tourism. It makes sound economic sense, therefore, to keep access costs to our markets as low as possible.

Airport charges are an important element of such costs. Studies carried out in recent years indicate that airport charges at the three State airports are competitive when compared to airports in Europe. I see the necessity to keep these charges under control and, where possible, to improve their competitiveness as being central to all strategic planning by Aer Rianta.

This Bill, in regularising Aer Rianta's commercial and financial affairs, presents the company with the opportunities and challenges which will allow it to continue to be competitive and enable it to share the benefits of its competitiveness with its customers, airlines and travelling public.

Before I turn to the main elements of the Bill, I remind Deputies that the general scheme of the Bill was approved by the previous Government late last year. The text before the House follows closely on that general scheme. I hope the Bill will not be controversial and I hope for the support of Deputies from all sides of the House. I look forward to listening to what I know will be a progressive debate.

The main effect of the Bill will, of course, be to transfer all of the assets held in the Minister's name at the three State airports to Aer Rianta's balance sheet. Heretofore, because all the assets were vested in the Minister, neither corporation tax — an issue which was raised recently at Fingal County Council — nor local authority rates were payable by the company, though a small amount of corporation tax was paid by subsidiaries. The position will, of course, change following the change of status and full corporation tax and rates will be paid by Aer Rianta.

The Bill is in six parts. Part one, which is the preliminary part, is made up of such standard provisions as the interpretation of terms used in the Bill, the making of regulations, the disposal of money received by the Minister for Finance, offences under the Bill and the power of the company to institute proceedings. Part two deals with the issue of shares in the company to the Minister for Finance. The value of these shares will be equal to the value of the assets on the company's balance sheet, less the liabilities. It also provides that the Minister for Finance may transfer a share to one or more persons for the purpose of complying with the provisions of the Companies Act as regards the minimum number of members of a company. This Bill has nothing to do with privatising Aer Rianta.

I am also making provision in this part for the payment of dividends to the Exchequer by the company where profits allow, and for the regulation of the borrowings of Aer Rianta and its subsidiaries. Controls of this type are fairly standard among semi-State companies and are useful in protecting the interests of the taxpayers who are the ultimate owners of the company.

Part three transfers to the company all of the land and property previously vested in me as Minister. Most of these assets were acquired by the company and are held in trust. Some property, however, was funded directly by the Exchequer. It is only fair, on the occasion of the transfer of that property to the company, that this fact be recognised. I have included a provision requiring Aer Rianta to pay for the assets being transferred. The amount in question will be a matter for consideration by me and the Minister for Finance, but I expect it will reflect the written down value of the property in question.

The remainder of this part is concerned with ending the outmoded agency arrangement between Aer Rianta and me and transfers to the company a number of powers such as the right to establish airports and to acquire or enter onto land, which up to now were exercised by the Minister of the day.

Part four updates a number of provisions of existing legislation in regard to the administration of the company. It sets down the powers and duties of the company, deals with the appointment and removal from office of the chairperson, directors and chief executive, with reporting procedures to me and with the conduct of directors and employees of the company and its subsidiaries.

This is an important part of the Bill because it draws the lines for all concerned and reflects up-to-date thinking on corporate governance and responsibility. Importantly, it also provides that I will retain the right to approve changes in airport charges to ensure that all factors are considered in deciding on any adjustments.

Part five relates to the regulation of airports including the making of by-laws and the appointment of authorised officers. These provisions deal with issues of safety and security and again are mainly an updating and consolidation of existing legislation.

The opportunity is being taken to amend a number of other aviation related Acts. These changes are necessary either because of the knock on effects of the provisions of this Bill or because some lacuna has been discovered in the legislation in question. They are included in part six of the Bill. This is a developmental Bill, it is important and long overdue. It provides Aer Rianta with a measure of commercial freedom and responsibility, while at the same time regulating those areas in which the exposure of the Exchequer, and thereby the taxpayer, is greatest. It has, I hope, got the balance right.

I have found Aer Rianta steadfast. It is developmental in what it is doing, as evidenced by its success in buying into managing airports in other lands. It is currently engaged in another such exercise which I hope will have a fruitful outcome. It is constantly innovative and constantly looking ahead, but with the national interest in mind and the bottom line of finance. I thank all who work or who have ever worked in Aer Rianta. I include the chief executive who has been with Aer Rianta since l969 and who leaves at the end of this year, to our great regret. I am sure he will have a worthy replacement, but my remarks on the service he has given will be echoed by everyone in this House.

The Bill is keenly awaited. It is of great interest to Deputies who live in the vicinity of Dublin Airport. I freely acknowledge that Deputies on all sides of the House have a great interest in seeing this Bill come to fruition. I look forward to the debate.

My party supports this Bill. I hope on Second Stage to cover some elements of airport policy here, air navigation policy, safety, and the future of our airports and the aviation business generally.

The main thrust of the Bill, to provide a corporate structure for the assets and basis of operation of Aer Rianta, is something we support, not only because the heads of the Bill were approved by the previous Cabinet but because there has been a broad consensus for some time that we should move away from the agency structure to a singular corporate body that can trade as a public liability company in a totally commercial fashion.

There are elements of the Bill that involve great change for Aer Rianta and require close scrutiny. Over recent weeks I met a number of chief executives and others connected to the various semi-State companies under the Department of Public Enterprise, and I find it difficult to find a coherent policy on dividends, growth abroad, equity and gearing — all the things shareholders are normally concerned about. I hope under the new Department there will be clear-sighted thinking on these issues.

I wholeheartedly join the Minister in paying tribute to the staff of Aer Rianta. Their performance since the establishment of the company has been quite remarkable. Over the past two decades in particular, its growth, its successful development of business abroad, its successful management of the Great Southern Hotel Group, its pioneering approach, as well as its balance sheet performance have been excellent. It certainly is a model among semi-State companies.

However, if one were to cast a cold, critical eye on this Bill, one could see it as an attempt to grab £15 million per annum in taxation from Aer Rianta. If in addition to that there is a loss of income from duty free sales, we could be facing a completely different Aer Rianta in two or three years' time. While we can look at the present snapshot in time and be positive about Aer Rianta, it is important that we have a long-term strategic view for overcoming difficulties.

This Bill provides that corporation profits tax will be paid for the first time by Aer Rianta and that local authority rates will be payable on its three airports. It is estimated that at Cork, Dublin and Shannon, some £4.5 million will now be payable in rates to the local authorities. Taking the l996 balance sheet performance, there would be a minimal corporation profits tax liability in excess of £10 million. If a similar policy vis-a-vis dividends is to be applied, as a cash surrender policy was previously applied, this would starve Aer Rianta of the necessary resources to finance its borrowings and to develop the airports appropriately given the phenomenal growth in aviation to which the Minister has referred. If we put on top of that the loss of income from duty free sales, which in revenue terms within Europe is worth £100 million, a completely different picture emerges. All the good work could be set at naught. I will come back to some of these issues in detail.

I have a series of wide-ranging questions for the Minister to which I hope she will take the opportunity on Second Stage to reply because some of them relate to clarification that I require. The first is in relation to the transfer of assets. These assets, the lands at the airport and so on, are owned by the Government, and they are to be transferred. At what charge will they be transferred? This is relevant in the context of the vesting day of this legislation, because if the vesting day was 1 January l998, under the Companies Act the company would not be able to declare a dividend within that year but would have to wait until the following year. Is it the Government's intention to obtain a return in 1998 approximate to the cash surrender dividend, circa £14 million, through the transfer of assets or will there be a double penalty whereby Aer Rianta will be required to pay a dividend as well as the value of the assets transferred? These are important questions for Aer Rianta in terms of its financial performance.

On the question of duty free sales, there is deep concern among the staff of Aer Rianta. While I commend the Minister to whom I offer my support, her efforts would be unnecessary if the Taoiseach, then Minister for Finance, had rejected the tax harmonisation proposal at ECOFIN in 1994. That was the appropriate time to mount a vigorous campaign. It is estimated that 40 per cent of Aer Rianta's profits and 400 staff will be directly affected by the abolition of duty free sales from July 1999. This will result in higher charges to its customers, including airlines and those who use its car parks. Car ferry companies will be affected in a similar way.

I note the comments of Commissioner Mario Monti which are almost theological in terms of his approach to the Single Market which we support. This proposal was predicated on the basis that there would be tax harmonisation of duty and VAT rates but this has not happened. His arguments are, therefore, not sustainable. Within the European Union 140,000 jobs are directly or indirectly dependent on the continuation of duty free sales. For peripheral locations access transport costs are linked to duty free sales revenues. Those involved in the production of duty free goods see their income under major threat. Approximately 130 million Europeans purchase such goods every year. While Germany may be the driving force behind the Single Market, some of the ferry companies operating out of Baltic ports may become uneconomic because of the loss of duty free sales revenues.

Some key committees in the European Parliament recently adopted resolutions calling on the Commission to review this proposal. The Commission and ECOFIN have a vital role to play. The Government should engage in a diplomatic offensive and use all its charm to ensure this proposal is not implemented because of its serious implications for Aer Rianta and our car ferry companies. We will be more exposed given our island status.

Aer Rianta International is one of the real success stories. It provides as part of its core business duty free shopping facilities in Hong Kong and other diverse locations. These must be retained. In 1994, 1999 must have seemed a long time away but the hour of reckoning is at hand. The matter must be raised at the highest level and, if necessary, at the European Council by the Taoiseach.

I will table an amendment on Committee Stage to ensure the chief executive is a member of the board of Aer Rianta plc. As the Minister is aware, her predecessor, Deputy Dukes, appointed Mr. Derek Keogh to whom she paid tribute to this position. Both he and his team in Aer Rianta have been very successful. If a chief executive is to function effectively he or she should be a member of the board. It is impossible to run a company if one is not present when decisions are made and one does not have the same entitlements as everyone else. No private or publicly quoted company would operate in this way. Given that workers are represented on the board through worker directors I support the introduction of primary legislation to ensure the chief executive is appointed to the board of Aer Rianta plc at the earliest opportunity. Given that the chief executive is a member of the current board this would not mean that some other member would have to be shifted off it.

I have discussed with Aer Rianta the terms of its capital development programme outlined in its annual report and other strategic documents. It encompasses the provision of a new pier at Dublin Airport where there has been phenomenal growth. Given that primary legislation is not produced every day of the week and legislation can act as an impediment there should be an enabling provision to allow the cap on borrowing of £250 million to be raised without the need for primary legislation. Over £200 million has been invested in airport facilities, including the new terminal at Cork Airport and various facilities at Shannon Airport. A further £200 million is to be invested over the next five years, including pier C, terminal west, Dublin Airport where the main terminal is to be extended at a cost of £60 million; a new passenger terminal at Shannon Airport and the development of freight facilities at Cork Airport. Aer Rianta also operates a hotel group and other subsidiaries.

I do not believe the board or the executive team will act irresponsibly but if Aer Rianta is raped and pillaged by the Department of Finance for dividends and corporation profits tax the borrowing structure will change. Unlike seaports and regional airports, Aer Rianta has not received Structural Funds and has funded all existing developments from borrowings. This is the time to take a hard look at the matter.

The Minister said that the liabilities will also be transferred. This is normal practice. What do these amount to? I would like some account of the liabilities because I was at CIE yesterday and was quite shocked to discover that its fleet replacement was financed out of the cashflow of claims, which is extraordinary. I am not saying it is wrong but it is extraordinary. I would like to know the liabilities of Aer Rianta. If somebody trips over a pavement at Dublin or Shannon Airport does it incur a claims liability we need to know about or are there other liabilities? We have not had a clear financial picture of what they will be on vesting day.

That takes me on to dividend policy. We are now moving into a new structure within which the State will become a shareholder in Aer Rianta. I note that in the case of some State companies, such as Telecom and the ESB, we are moving progressively from circumstances in which there was no dividend policy to a 10 per cent, 30 per cent, 50 per cent dividend over a set number of years. I suppose there are other State companies, such as CIE, An Post and others where dividend dare not raise its head for different reasons. I see some merit in endeavouring to put some shape on these circumstances since we are in a rapidly changing era within which these public enterprises must operate. Therefore, new management and boards should have a clear view of the requirement of the State as a shareholder.

I do not note any clear policy in relation to gearing. There are accepted norms in relation to the debt-equity ratio of companies quoted on the Stock Exchange and accepted norms for other types of small and medium enterprises. In the case of Bord na Móna and other companies where equity has been injected, there appears to be no coherent approach to gearing which, at best, appears to be ad hoc. In endeavouring to pick up clues as to whether we have a transport policy at all, it appears one must revert to the 1980s when there was a green paper published but no white paper. However, I will have other opportunities to deal with that and find any coherent thinking on an overall framework for transport policy in the context of macro economic policy and the various bottlenecks that obtain.

I note that section 41 obliges Aer Rianta to do whatever the Minister or her Department tells it to do. Circumstances may arise in which such a direction will be necessary but I do not know what the Minister has in mind in this respect. There spring to mind immediately our 12 regional airports at various stages of development and success. Is it the Minister's intention that perhaps Aer Rianta will be told to take over one or two of these? One can imagine circumstances arising in which an Independent Deputy, someone in a pivotal position of influence, perhaps some minority party in Government, would require a major fillip for a particular constituency and poor Aer Rianta would be obliged to take over God knows what airport.

Would the Deputy care to mention one?

There are not any in Wexford so I am not in that invidious position. It is opportune to review regional airports——

We are in the middle of doing so.

——since we have invested a lot of Structural Funds in them. Some have developed services, through Ryanair and other smaller carriers, some are feeder services from Aer Lingus, but any such development has been very patchy. We need to focus investment on those airports which will yield a return in the future and perhaps grade or tier them. I need to know whether it is the Minister's intention that these regional airports will come within the future remit of Aer Rianta.

That takes me to the question of Baldonnel. Some people have argued that the growth of Dublin Airport has been so dynamic it simply cannot cope and that, as in the case of London, we should develop another airport at Baldonnel. Of course, it is a military airport and the demarcation line between its military and civil usage has been clearly established, to put it at its kindest. Has the Government any proposal to develop Baldonnel or is it to be the exclusive preserve of Ministers, civil servants and the military? What is to be its role? In other words, what does the Minister envisage in relation to the provisions of section 41 and will Aer Rianta will be a three airport structure or more? It would also be very helpful if the Minister would set out her policy in relation to these regional airports when replying so that we may have some clear view.

Another very important question is the overall position of Shannon where there has been a change in the stopover. For every one flight in and out of Dublin Airport there must be one flight in and out of Shannon Airport. Within the context of the EU negotiations, bilateral negotiations between Europe and the United States and bilateral negotiations between Ireland and the United States can the Minister tell us whether it is intended to review this again? Is it Government policy to retain the status quo or has it reviewed the position? I understand that some people are lobbying for a two to one ratio.

There is also the question of the evolution of an open skies policy between Europe and the European Union. These are very important questions for one of the three airports that come under the jurisdiction of Aer Rianta and should be addressed within the context of this Bill.

This Bill is not a policy one and can be fairly described as mechanical. As such, I have no difficulty in supporting it. Given that it was mooted in 1969 and only now introduced, perhaps there are some omissions warranting examination. I refer to two EU directives. The first refers to the obligation vis-a-vis handling, which also warrants examination. This direction is now in place in relation to self-handling and other aspects. I am not sure whether it necessitates primary legislation or can be effected by ministerial order. Perhaps an enabling provision should be included in the Bill to meet that need. I understand the purpose of that directive is to introduce competition, a level playing pitch, fair dealing in the case of baggage handling and so on, and to prevent airlines abusing a dominant position within an airport or a public utility applying a monopoly in some cases.

An EU directive is in gestation in relation to charges at airports. I have looked at a league table, kindly provided by Aer Rianta, showing that within the 40 European airports, we feature among the bottom four most competitive on charges, number one being the worst, which I think was Belfast City Airport. This overall matter of charges is very important. While the directive is only in draft form——

No, we discussed it last week at the Council of Transport Ministers.

Yes, it is progressing. It is a worthy directive but I am sure Aer Rianta is not ecstatic about it. Notwithstanding that there are at present heavy discounts here and we are competitive in terms of airport charges, we need to ensure transparency, that charges are related to costs and that there is no discrimination. These are all very important aspirations worthy of our support. When this directive is in place, perhaps the Minister would clarify whether it is her intention to put it into effect by ministerial order or primary legislation.

I want to raise a number of other questions. I understand one of the Minister's predecessors got a consultant's report into the establishment of a civil aviation authority — separate to the safety aspects of the IAA — to regulate all aspects of airline-airport charges and so on. Will the Minister indicate if she is in favour of establishing a CAA? Many of these functions are carried out by the Department and they exist in many other member states.

Will the Minister indicate what is intended in relation to the superannuation fund for the staff at Aer Rianta? I understand the fund is currently combined with that of Aer Lingus but is it intended to set up a separate scheme? I would like an assurance that there will not be any diminution of the pension and superannuation entitlements of the 2050 staff working directly in Aer Rianta and the 2700 wider staff involved. I am not raising a particular fear in this regard. The matter was not referred to in the Minister's contribution but was referred to in the legislation.

We support the Bill which provides an opportunity to clarify a number of important areas in relation to aviation. I note the Minister's comment that this Bill was not about privatisation. I take a totally pragmatic attitude to this.

So do I.

There has been enormous growth in overseas business, particularly that of Aer Rianta International which is involved in Birmingham Airport and has taken on franchise operations, consultancy contracts and so on. My experience as Minister for Agriculture, Food and Forestry was that the future price of milk or meat would be sustained by the profits of these food companies abroad. In many cases organisations such as CRH, the banks, Telecom and the ESB cannot grow their Irish market share which is at 100 per cent. When companies like ESAT and various EU directives come into place there is only one way that market share can go, and that is down.

We must support these public enterprises and allow them grow, even if that means they will have to develop more skills as the shareholder. I am in favour of allowing the ESB use its skills abroad. I have no problem with Aer Rianta getting involved in a major joint venture deal abroad involving such cross shareholding and an ESSOP deal to give the workers share entitlements. This is a modern reality of the turn of the century.

I see this legislation as facilitating a less strict Civil Service approach where ministerial sanction must be given for A, B and C and allowing the dynamism and success of our corporate semi-State companies to grow and flourish. While I am spokesperson for my party, the Minister will have every encouragement for the dynamic development of our semi-State companies at home and abroad.

I want to pay tribute to everybody involved in the Aer Rianta success story and assure them that my contribution is towards enhancing that future development. I do not want to see anything, be it a raid in the form of taxation or rates, a change in dividend policy, a pricing of the assets on the date of transfer, a cap on borrowings or the removal from the board of the chief executive, that will inhibit the future growth of the Aer Rianta success story. I will support the Minister on the duty free argument but if she does not deliver I will be the first to consult her further.

Unfortunately I cannot personally deliver.

As somebody who was involved in the drafting and examination of the Bill in my previous incarnation in the Department of Transport, Energy and Communications, I welcome the Bill but I would not like to see it being pursued with undue haste. Given that the gestation period of this Bill has been 28 years, we should take time to ensure that we do the job properly.

In the short period since the Minister came into office, it would seem she has caved in to the Department of Finance on a number of aspects of the Bill and what appear to be small but significant changes were made to it in that period. The Bill will establish Aer Rianta as a normal commercial State body. That is to be welcomed. The Bill will give a legislative framework to what is currently a de facto situation in Aer Rianta, but it contains a number of serious flaws.

Aer Rianta is a highly successful State company at home and abroad. It could be described as the jewel in the crown of the commercial State enterprises. I join the Minister and the other spokespersons in complimenting both the staff and the management in Aer Rianta. I cannot remember an industrial dispute at Aer Rianta and that is a tribute to the staff and the management in the way they carry on their affairs.

Aer Rianta was incorporated in 1937 as the holding company for the Irish national airlines. It was separated from Aer Lingus in 1966 taking responsibility for the operation and management of Dublin Airport — Cork and Shannon Airports were added in 1969. Since 1969 Aer Rianta has contributed £207 million to the Exchequer, £136 million since 1987. Up to 1986 the Exchequer funded capital investment to the tune of £57 million at the three airports. Since 1987 all capital expenditure has been funded directly by Aer Rianta with a total of £224 million. These figures are a tribute to the management and the staff of Aer Rianta. Over the next five years further capital expenditure of £230 million will be invested in airport facilities at Dublin, Shannon and Cork from their own resources. Passenger traffic in 1996 was 11.9 million. Passenger numbers have doubled in recent years but the staff numbers in Aer Rianta have remained the same. The productivity level from the existing staff has also doubled.

Aer Rianta International, which is highly successful, operates airport management and duty free shops abroad as well as the management of some airports. Aer Rianta is now operating in 14 countries outside Ireland including a 40 per cent stake in Birmingham International Airport. The successful operation and management of our airports has meant that airport charges have not increased since 1987 and in some instances have been reduced. The successful operation of Aer Rianta has also seen profits rise to £42 million in 1996.

I want to raise the duty free issue which was referred to at some length by the Minister. Aer Rianta developed the whole concept of duty free and has made it a huge commercial success. It exported the idea abroad and it is now an internationally popular facility available at airports throughout the world. Over half of Aer Rianta's £42 million profits comes from the duty free operation which amounted to £26 million in 1996. Because of the success of the duty free operation we have one of the lowest systems of airport charges in Europe, additional customers have been attracted and there has been an increase in the number of jobs in manufacturing, sales and tourism.

Why would we agree to give all that away? At the ECOFIN meeting in 1992, the then Minister, Deputy Bertie Ahern, voted for the abolition of duty free. That decision amazes me. He was aware of the consequences of that decision for jobs, commerce, tourism, the ferry companies, Ryanair, Aer Lingus and Aer Rianta. That decision has been described by the Minister as having serious effects. Even though he was aware of all these consequences the then Minister voted for the proposal to abolish duty free. He knew at the meeting that he could not be outvoted as a unanimous decision was required. He had a veto but by failing to use it he voted for the abolition of duty free.

The Minister has been given the near impossible task of recovering that position. I have no doubt about her concern and enthusiasm and the genuine nature of the campaign she has mounted and I assure her of my full and absolute support.

When the Taoiseach was Minister for Finance he voted away the duty free industry.

There was a study.

The study was a face saver.

And harmonisation.

If the study was carried out at that time the Government would have no argument left. However, the study was not carried out and at least it gives the Government an argument. The study was a face saver. The critical point is that the then Minister voted for a packet of tax measures which have not been implemented——

——and which included the abolition of duty free.

The Minister has the difficult task of going to Europe and trying to convince other Ministers and Commissioners to reverse this decision. She will be told that the leader of her party, the Taoiseach and then Minister, voted for this proposal.

Every other country voted for it and now they are fighting to reverse the decision.

If all countries were fighting to have the decision reversed it would be reversed.

Unfortunately not at Transport Minister level.

I know from experience that the problem is that everything agreed at European level has to be agreed by the Finance Ministers. Thankfully my constituency colleague, the Minister for Finance, is strongly in favour of reversing the decision. The then Government gave the Commission a stick with which to beat us on this issue and they are beating us with it.

We might yet win.

The Minister's comments demonstrate that they are beating us. This is another fine mess the Taoiseach has got us into. The Minister has the difficult job of getting us out of this mess and while I will support her in every way I can we should not underestimate the difficulties in doing this. We require unanimous agreement to force the Commission to re-examine this matter. It will be very difficult to reach unanimous agreement and Aer Rianta must be ready to deal with the reality.

The Deputy should be of stout heart.

I am of stout heart but I am also a realist and pragmatist. Aer Rianta must be prepared for the loss of the £26 million they make from the duty free industry every year. I hope my message is clear: I will support the Minister but the Taoiseach has made her task virtually impossible as a result of his decision at the ECOFIN meeting.

Nothing is impossible.

The Labour Party fully supports public enterprise and wants to see it developed and expanded. We do not want to do this in a straitjacket system of State ownership or State dictation to companies. Rather companies should have freedom, as decided by the Dail, to operate in a commercial sense. The Dáil represents the owners of these companies and this is where decisions should be made on the degree of freedom companies should have. Companies should have a very large measure of commercial freedom and I would be supportive of joint ventures or partnerships, as required, while retaining the core business within public ownership.

One of the criteria we should use in determining this is the level of service provided by companies to the public and customers and the best mechanism for providing it. This is the type of criteria which should be used rather than any ideological criteria. If the formalities and format are to be changed it is a matter for this House and no one else. Any legislation which gives power to a future Minister to make that decision will go too far.

I do not have full confidence in her party but I have full confidence in the Minister on this issue. I have regularly heard her speak on the issue of public enterprise and I have full confidence in her support for this area. Fianna Fáil has traditionally paid lip service to the commercial public sector. I am sure the Minister will disagree but the real agenda seems to be to prepare this sector for sale. We have already seen this happen to various public enterprises.

Does the Deputy remember his Telecom legislation?

I am very proud of that legislation and am glad it was decided to give me the job of handling it. I did a very good job for Telecom Éireann, its workers and customers and I stand over every dot on every "i" and every stroke on every "t" in the legislation, including the special provision for worker directors.

The Progressive Democrats Party, which has probably more authority in Government than its numbers indicate, has an ideological hatred of anything public, co-operative or community. It is almost a mirror image of the shadow of Maggie Thatcher in that it regards the words "community" and "co-operative" as a sin and the idea of public enterprise as a mortal sin which should be confessed not to the local parish priest but to a bishop.

That day is long gone.

The Bill is typical of the old Fianna Fáil modus operandi, what you see is not what you get. The Minister praised the public sector but sections of the Bill will allow it to be set up for the slaughter. I will deal with this point in more detail later.

The Bill will enable the Minister, or more likely her successor, to sell the company without further reference to the Dáil. There is nothing in the Bill to prevent the Minister from disposing of his or her shares. Under the Bill all the rights of a shareholder are transferred to the Minister without the strictures contained in similar legislation. Equally there is no core activity of the company or any restrictions on the sale of assets by the company. This means that Aer Rianta could sell the airports; there is nothing in the legislation to prevent it from doing this. The Minister's consent is not even required for a subsidiary set up for Cork Airport to sell the airport. It could flog the airport without the Minister's consent. This is a colossal change from the legislation dealing with other commercial public bodies. There is nothing in the Bill to prevent the sale or alienation of shares by the main company. The Minister has full shareholder rights and does not have to refer to the Dáil in future. The Minister is not seeking this power but it is contained in the Bill.

There is no provision in the Bill on worker directors.

They are on the board.

Despite the Worker Participation Act, 1997, there is no reference to worker directors in the Schedule. The issue of worker directors is watered down. The Bill prepared by the previous Government contained an excellent section on this matter. Perhaps the advice was that it was a duplication of the 1977 Act, but it fortified the Bill and indicated clearly our intention to ensure workers were properly represented on the board of the company. There is no provision for worker directors on the boards of subsidiaries, and that is a major flaw. Perhaps the Minister will address that matter. Why have those provisions been excluded? Does it demonstrate the real agenda of the Government or does it demonstrate the real agenda of the permanent government? I do not wish to attack public servants, but there is an agenda in the Department of Finance to privatise the commercial public sector. I am aware the Minister is experienced and well able to deal with these matters, but I warn her to be aware of sections being slipped into Bills to facilitate that in future. Otherwise, why are the detailed provisions on worker directors, which we had included in the Bill, withdrawn? The Minister can send a clear signal to the workers on how they are perceived by the Government by ensuring clarity on the worker directors' position on the main board and the boards of subsidiaries.

Aer Rianta is included in the Worker Participation Act, 1977. I am interested in the Deputy's remarks about fortification and I will consider that matter.

The opportunity was taken to include that provision in previous Bills, including the draft Bill prepared by the last Government. It is a matter that is worth considering.

We must consider the stakeholder concept. If there was a negative attitude to worker directors it would not be surprising that an attempt was made to develop the stakeholder concept. There is no mention of shares for workers. Aer Lingus employees will have a right to shares in the company while Aer Rianta employees working side by side with them will have no such right.

Was that included in the last Government's Bill?

It was not in the draft of the Bill, but only the heads of the Bill had been prepared and passed by the Government. The Minister should consider including a provision similar to that in the 1993 Act which gives a right to Aer Lingus employees to shares in the company.

Deputy Yates referred to the provision that on the handing over of the assets from the Minister to the company a charge would be imposed on the company. Section 14(5), which deals with that matter, is extraordinary. The Minister will own the whole company, including the assets. It is proposed to transfer the assets to Aer Rianta, and the Minister will be the sole shareholder. Under section 14(5) the Department of Finance will be allowed to do a smash and grab raid on Aer Rianta, grabbing £12 million, £15 million or £20 million for the notional value of the assets to be transferred. There is not a whit of justification for that. The company will pay corporation tax, rates and dividends as available.

With 1999 looming and the Taoiseach's decision hanging over the company's head, it will be raided for an extra £15 million to £20 million. The Department of Finance should not be let away with that. We did not let it away with it when we were drawing up our Bill. If the Minister tells the Department she will not agree to it, there is nothing the Department can do, and Aer Rianta will continue as it did for the past 28 years. The Minister has power to prevent the Department from getting the money. This smash and grab by the Department of Finance is extraordinary and unacceptable and I ask the Minister not to surrender to it.

I will outline briefly the important changes made from the original draft of the Bill. Under section 7 the provision that a confiscation order shall not have effect until after an appeal has been deleted. Under section 10 the provision that the Minister shall certify the value of the company's property for the purpose of share issue has been deleted. Under section 10 also the provision relating to the issue of one share for the Minister for Public Enterprise has been deleted.

I thought the last Government had prepared only the heads of the Bill.

Yes, very detailed heads of the Bill. Under section 13 the provision for guarantee of the company's debts has been deleted. Under section 18 there is a new paragraph for the purposes for which land may be acquired, and that is welcome. Under section 21 the general power for Aer Rianta to construct roads, approaches, bridges and tunnels has been deleted. That section is now very narrow. Under section 22 the provision defining a director as including the chairperson has been deleted. Under section 24 the provision that the Minister may stipulate financial targets and set the amount of dividends has been deleted. Under section 29 the provision that the chief executive shall be a director has been deleted. I will support Deputy Yates' amendment in that regard. If the Minister looks at the files she will see why that provision was included and will agree to the inclusion of the chief executive on the board.

Under section 10 the detailed provision dealing with worker directors has been deleted. Under section 30 the provision for annual reports of the company as opposed to the chairperson has been deleted. The section 30 requirement that the auditor be approved by the Minister has been deleted. Most of section 32 is new and deals with superannuation schemes. Under the sections dealing with the disclosure of confidential information to staff, it is provided that a breach of these sections is an offence, with no regard to the Freedom of Information Act. Under section 41(1)(b) the term "national interests" has been replaced by "interests of the State". That is a most unjustifiable change.

Under section 42 the provision relating to by-laws for private airports is new. The Minister may make by-laws in regard to private airports. Under section 47 the provision restricting the use of land in the vicinity of the airport has been deleted, which is amazing. Under section 50(1) the provision prohibiting nuclear materials, which was recently debated inside and outside the House, has been deleted. The Schedule dealing with the election of worker directors has been deleted.

Worker directors are included in the 1977 Act, which outlines the range of companies eligible.

I have not dealt with all the changes made. I would nearly compliment the Minister on the number of changes made in a short time, but many of them are dictated by the Department of Finance which has its own agenda. The Bill has been fundamentally changed. Most changes are because of the actions of the Department of Finance, the fact that the Minister did not have enough time to resist it and the pressure the Government would naturally be under coming into power to introduce legislation. I appreciate that.

There are always amendments.

I know there are, but I am sure the Minister can make amendments too and that she will do so when she has more time to study the legislation.

I was talking about my amendments.

The Bill fulfils the agenda of the Department of Finance to tidy up and sell off. I ask the Minister not to allow herself be clawed into that. The Bill as it stands is a charter for privatisation. I want the Minister to change that because I do not think it is necessarily her agenda. I will table amendments on Committee Stage which will do the following: remove the power of the Minister to privatise the company, core activities or core subsidiaries of the company; require the company to carry out core activity and retain assets for that purpose; clarify the position on worker-directors and their place on subsidiaries; allow for worker shareholding; prevent the Department of Finance raiding the finances of Aer Rianta on handover; ensure the terms of the Freedom of Information Act apply to employees and others; and delete a reference in a Schedule to an Act already repealed by the Oireachtas.

I welcome the thrust of this Bill. It is not an earth-shattering matter. If it were never introduced, Aer Rianta would continue being as successful as it is now. However, it does tidy up the matter and 28 years is a long time to wait for it to happen. We have all been involved in that delay and two of us here are involved in bringing the Bill to fruition. I compliment the staff who worked on this under a number of different Ministers who regrettably failed to introduce the Bill and I compliment the Minister, therefore, on having introduced it. There are flaws in the Bill and dangers for the future of Aer Rianta, its shareholder and its customers. I ask the Minister to examine the points I raise. I see this Bill as a charter for privatisation and I do not think that is the Minister's intention.

I congratulate the Minister on presenting the Bill today and the way she made it easy to understand, which was useful for me as a new Deputy. Deputy Yates and I are of like mind on Aer Rianta. On Second Stage, there are arguments and counter-arguments which will be taken in the form of amendments at a later stage.

The Bill is an effort by the Minister to further remove the operation of Aer Rianta from State control by transferring its assets, liabilities, obligations and duties to a normal commercial State body. This is done with the intention of setting up a company which will be self-sufficient, self-supporting and a contributor to the State's coffers by way of dividend. It is good legislation which I wholeheartedly support. The company will be master of its destiny but will also be under the direct control of the State, should that control need to be exercised. I am pleased the Minister has retained a degree of control of the affairs of the company, that she is the final arbiter of important issues, such as disposal and acquisition of lands, and is the 100 per cent shareholder of the company.

A concern for us who represent the areas in which the regional airports are located will be to ensure Aer Rianta promotes the use of and activities of the regional airports. Heretofore, services in Cork have traditionally lagged behind those provided in Dublin, both in the quality and cost of the service. It is well known that the cost of getting to London or to any European city from Cork is far in excess of making the same journey from Dublin. The cost of the fare from Cork to

Dublin is also excessive. These are matters I would like to see addressed by the new company. However, I compliment Aer Rianta on the improvements over the years in the services provided at the much improved Cork Airport facility.

It is the nicest airport in the world.

Thank you. I hope the new company will continue to improve standards, service and cost efficiency. It is gratifying to see that from the vesting day the property will cease to be exempt from local authority rates and will bear its fair share by contributing funds to Cork County Council in no small measure. I hope such increased costs will not be passed on to the travelling public and other users of the airport facility as an easy option. I would like to see an amendment to the Bill ensuring the company is a net contributor to the State by way of dividend and that, as it becomes self-sufficient, it will in future repay to the State the cost of the facilities now being handed over to it. I do not wish to see this commercial State body relying on subvention, grants or State aid for survival.

That said, we should have no fears of the commercial transformation of Aer Rianta. Its management and staff at both national and regional level have shown in the past the initiative to encourage us in relation to the future. We should not forget that the Shannon duty free zone and shops have been a model for others in the world. Aer Rianta's expertise has been called on to advise in the transformation of travel shops worldwide, from the emerging Third World nations to the eastern bloc countries and the duty free management of the Channel Tunnel. Aer Rianta is a model of a company which needs to be allowed more freedom. We should not forget that many of the top management of hotels in this country and worldwide have been trained in the Aer Rianta-operated Shannon hotel management school.

There are still aspects of the travel industry which frustrate the development of inward tourism, business and even holiday travel. A new style Aer Rianta must lead the way in encouraging more competitive air fares and, as one based outside Dublin, fairer fares. Why should Dublin have the pick of the services and fares? Why should a business person travelling from Cork, Shannon, Knock or even Farranfore be penalised for living outside the capital? Why should almost all continental links be directed through Dublin, which has already benefited from creaming off much of the Shannon transatlantic business? If Aer Rianta is to be a commercially-driven operation, it must also be seen to ensure that, wherever we live, we are offered equal rights in air travel.

I am confident Aer Rianta will be a success. I look forward to the growth of Cork Airport, the development of related business in the immediate area and investment in projects which will not alone create jobs in the area but generate the business which will keep the airport successful, as it is under the excellent management team and staff based there. I want us to learn from others. Airlines are offering special deals out of this country to airports near London, Brussels, Paris, New York and better fares to smaller airports less central to the major city. Is it not ironic that, if one wants to fly into or out of Cork rather than Dublin, one pays more?

We must support a campaign to retain duty free. It is the core of Aer Rianta income and will be crucial as the support funding for a new style organisation based on this legislation. We should be excited about the development for we are in a booming economy in a country which is seen as a model environmental and investment nation.

Sitting suspended at 1.30 p.m. and resumed at 2.30 p.m.
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