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.