Michael Noonan
Question:7 Mr. Noonan asked the Minister for Transport his plans for the break up of Aer Rianta; and if he will make a statement on the matter. [27659/03]
Other Questions. - State Airports.
Trevor Sargent
Question:11 Mr. Sargent asked the Minister for Transport if he intends to outline a business case strategy for the proposed separation of Dublin, Cork and Shannon airports; if he intends to publish a recent report (details supplied) on the matter; and the proposed balance sheet structures he intends to put in place following the splitting up of Aer Rianta. [27811/03]
Michael Noonan
Question:24 Mr. Noonan asked the Minister for Transport his plans for Shannon Airport; and if he will make a statement on the matter. [27673/03]
Denis Naughten
Question:55 Mr. Naughten asked the Minister for Transport his plans for Dublin Airport; and if he will make a statement on the matter. [27674/03]
Bernard Allen
Question:56 Mr. Allen asked the Minister for Transport his plans for Cork Airport; and if he will make a statement on the matter. [27675/03]
Seán Crowe
Question:57 Mr. Crowe asked the Minister for Transport if he will reconsider his proposal to break up Aer Rianta. [27717/03]
Phil Hogan
Question:59 Mr. Hogan asked the Minister for Transport the business plan for the three independent airports at Dublin, Cork and Shannon; and if he will make a statement on the matter. [27702/03]
Pádraic McCormack
Question:65 Mr. McCormack asked the Minister for Transport his plans for the development of regional airports; and if he will make a statement on the matter. [27683/03]
Question:
75 Mr. O'Keeffe asked the Minister for Transport the situation in relation to Cork Airport and future plans therefor. [27651/03]
Finian McGrath
Question:175 Mr. F. McGrath asked the Minister for Transport the economic arguments for the proposed break up of Aer Rianta. [27893/03]
Bernard J. Durkan
Question:194 Mr. Durkan asked the Minister for Transport the position on the future of Aer Rianta, its operation at Dublin Airport and the other airports throughout the country; and if he will make a statement on the matter. [28040/03]
I propose to take Questions Nos. 7, 11, 24, 55 to 57, inclusive, 59, 65, 75, 175 and 194 together.
An Agreed Programme for Government included a commitment to continue to transform Aer Rianta and, as part of that process, to ensure that Shannon and Cork airports have greater autonomy and independence. In July last, the Government decided to establish the three State airports at Dublin, Shannon and Cork as fully independent and autonomous authorities under State ownership and I am now charged with implementing that decision. I will shortly seek Government approval for the publication of the necessary amending legislation to give effect to this decision.
Last month, I announced the full membership of the new board designate for Shannon Airport and I expect to be in a position shortly to announce the full boards for the new Cork and Dublin airport authorities. It is hoped that the three new State airport companies will be up and running on a statutory basis as early as possible next year. There has been a broad level of support for the Government's decision to establish the three airports as fully autonomous authorities under State ownership.
The new arrangements are designed to strengthen and expand each of the three airports and, in particular, to give both Shannon and Cork airports a fresh start under strong and visionary leadership. All three airports can perform even better than they have to date and, through more focused commercial operation, each can play a greater role in stimulating and supporting regional economic activity to the benefit of its customers, both airlines and passengers, as well as tourism, trade and industry.
The restructuring of Aer Rianta is a strategic decision which is in the best interests of the three State airports. The new boards designate for the three airports will work with the current Aer Rianta board and the Department on all issues involved in bringing about the transition to independent and autonomous authorities for Dublin, Shannon and Cork. My Department will continue to consult the representatives of the Aer Rianta unions as the implementation of the Government decision proceeds.
It is envisaged that the two new independent airport authorities for Shannon and Cork will both commence business free of debt and that the debts associated with these airports, including the debt associated with the major new investment programme at Cork Airport, will remain with Dublin Airport. In conjunction with Aer Rianta, my Department is giving urgent attention to the options for giving effect to the establishment of the three new airport authorities, including the optimum mechanisms for allocating airport assets among the three airports. These arrangements will ensure that the new airport companies at Shannon and Cork will have sound balance sheets, giving both of them a fresh start to develop and grow their business at a pace even greater than they have achieved in the past.
I am also giving detailed consideration to the implications for Dublin Airport of absorbing the debt of Shannon and Cork airports as currently envisaged. In this regard, the issue of other significant assets of the Aer Rianta Group such as the Great Southern Hotels and Aer Rianta International is being carefully examined.
As I stated in response to a separate question today, having consulted Aer Rianta, I have made the contents of the PricewaterhouseCoopers report available to an economist nominated by the Aer Rianta unions. This was done on the understanding that the report continues to be commercially sensitive and is not for general release, and in order that the economist concerned would be enabled to brief senior trade union officials appropriately on the contents of the report.
In case the Minister throws the issue back at me, I make clear that the Fine Gael Party agrees with the decision to establish three independent boards for Cork, Shannon and Dublin airports. Is the Minister not, as in the case of Aer Lingus, making up policy as he goes along? How does he envisage Dublin Airport competing with an independent terminal if it is encumbered with debt? What will be the mandated criteria for the three airports regarding profit? Will they have to break even or are they expected to make returns to the Exchequer? Has the Minister presented to the European Commission any of his proposals on establishing three independent boards? Will the State provide subvention for capital investments required at the three airports and secure their loans? I ask the Minister to provide for Members greater detail on his proposals.
I appreciate the Deputy's expression of support in principle for the proposal, while acknowledging that he has genuine questions and concerns about its implementation and mechanics. We are working through these issues as best we can with the board of Aer Rianta, employees of the company and the Department of Finance, and I am confident we will resolve them at an early date.
The mandate given to the airports will be that they will have to operate commercially, which is the current mandate of the boards of Aer Rianta, Aer Lingus and other State companies. A provision to this effect, similar to one in the current legislation on Aer Rianta, will be included in the new legislation. I did not formally consult the European Union on the proposals because this restructuring decision comes within the competence of the Government rather than the Commission.
Has the Minister informed the Commission that this matter is within the Government's competence?
It is within our competence.
The Minister stated that the policy was based on a strategic decision taken by the Government. What are the strategic advantages or benefits of restructuring and what strategic change is the Government hoping to achieve? Once the debts of Cork and Shannon airports have been transferred to Dublin Airport, what will be the gearing ratio of Dublin Airport? Will the burden of its debt affect the company's operations in terms of further investment decisions?
With regard to strategic thinking, the three airports, in particular Cork and Shannon airports, were established originally as drivers of economic growth in their respective regions. Over a long period, they became more centralised and were managed in Dublin, effectively creating an airport monopoly in strategic international airport terms. Combined, they had about 97% of business. The fundamental strategic thinking behind the decision was that by returning authority to Shannon and Cork airports, the airports would develop their respective regions in a dynamic manner and harness the leadership and vision in those regions.
I would be happy to deal in facts and figures on these issues. However, much more important than an accountancy assessment of the strengths of the balance sheets involved is an assessment of the determination and pride of the people in the regions. They desperately want to make these airports into what they could have been, namely, major strategic regional assets for stimulating growth in the regions. That is their raison d'être.The final debt position has been worked out among the airports. With Aer Rianta predicting an increase in passenger turnover at Dublin Airport from 15 million to 30 million over the next 20 years, I am confident the company will be in a position easily to handle the debt. Deputies should also note that even if I did not touch Aer Rianta, the debt would still remain with Dublin Airport.
Pardon me.
The reality is that the debt of the Aer Rianta Group is effectively a burden for Dublin airport because Cork and Shannon airports would not be able to handle it. Regardless of whether one decides to restructure the company or leave it as it is, the repayment of the company's debts always depended on the future growth of Dublin Airport. By all accounts, it has an exciting future.
Surely the Minister is also seeking to increase passenger throughput in Cork and Shannon airports. If this is the case, clearly part of the debt should be assumed by those two airports, rather than Dublin Airport alone.
The Minister explained the strategic thinking behind his decision. The confusing issue for the public is that the company in question is profitable. Aer Rianta recorded an increase in profits of 300% during a period in which other companies in the aviation industry were going to the wall following the events of 11 September 2001. For some reason the Minister wants to break up a profitable company. Why? He stated that the decision was taken for strategic reasons. Was it based on reports? One can quote various reports, but one of them, the Warburg Dillon Reid report commissioned in 1999, concluded decisively that Aer Rianta should not be broken up on the grounds of economic, strategic and national interests. What has changed to persuade the Minister to engage in what some people would consider ideological vandalism? He may claim to be neutral on privatisation but his actions appear to speak louder than his words.
Will the Minister outline the thinking behind this matter? The Taoiseach said there was a number of reports. Are they reports from the chamber of commerce in Shannon or the local Fianna Fáil cumann in Cork? Where do the reports originate that suggest this is the way forward for Aer Rianta? Anybody who has examined this matter has pointed out that this enterprise is working well. Some people argue that State companies never work but it is clear that this company is working well and is profitable. The Minister wants to tinker with this. Is he working on the basis of a hunch that it will work? What are the economic arguments for it? What consultants' reports are influencing the Minister?
I could get involved in a debate with the Deputy about profit and loss and the financial health of Aer Rianta. I am bombarded by opposing arguments on this issue. When I meet the trade union movement I am told that it is a highly profitable company and am asked why I am touching it. However, the PricewaterhouseCoopers report says that Shannon and Cork Airports are not viable and that Dublin Airport cannot carry the debt it has. It says that Aer Rianta is not particularly profitable, especially in its core business, and has substantial debts. The company has grown traffic enormously, and all credit to it for that, but its profitability is minuscule compared with the growth in traffic it has generated.
I am not sure which argument I should accept. People who are looking at the same set of figures are arriving at two different conclusions. One is that the company is highly profitable and a rising star. The other, the PricewaterhouseCoopers view, is that there is too much financial pressure on the company, the airports cannot stand alone and that Dublin Airport cannot carry the debt. The truth is probably somewhere in the middle. Aer Rianta has made substantial funds on its ancillary investments but the return on capital in its core business is, arguably, not as strong as it should be when international comparisons are made. That is likely to be closer to the truth.
I did not ask the consultants to advise me on what the policy should be. The policy was outlined in An Agreed Programme for Government and it is that the Government will give greater autonomy to Shannon and Cork Airports. There are many reports. There is the Warburg Dillon Read AIB Capital Marketing report of December 1999, the famous Doganis report of January 2002 and the PricewaterhouseCoopers document we have discussed. I have received submissions from approximately 40 regional groups and I have discussed this with Aer Rianta, the trade unions, local groups and interested parties throughout the country. The programme for Government indicated this policy, which is based on our confidence in the regions. That is the strategic thinking behind this.
Is it not the case that the real game plan is to destroy Aer Rianta and Dublin Airport? The Minister could have achieved a strong future for Cork and Shannon by establishing separate boards at those airports with separate marketing strategies. He could have helped Shannon by providing decent rail access to the airport, which is the airport's biggest problem at present. He could have done all this within the Aer Rianta company. Instead, he targeted the operation at Dublin Airport. He intends to lumber it with serious debt, to strip it of its assets and to destroy its credit rating. Is it not the case that the reason for doing that is to clear the way for private sector operators who want a share of the action at Dublin Airport?
Last week, when the Minister came under pressure about his plans for Shannon when the PWC report was quoted as showing that Shannon Airport did not have a future and could not make an operating profit with the current figures, he said he was thinking of transferring Aer Rianta International to Shannon. What is the status of his thinking in that regard? Has he sought legal advice on it? What is that advice? Who are the three teams of consultants the Minister recently appointed to advise him and can he give an estimate of the cost of those consultancies?
I am not seeking to destroy Dublin Airport. I have a fundamentally different view from the Deputy on these matters. I am not an admirer of monopolies—
Irrespective of how good a job they do?
—and I have made that clear. I have no hidden agenda. The Deputy's party has long been a supporter of monopolies and I understand that position. I hope the Irish people understand it. However, I am not in that corner.
There are some natural monopolies.
I am a strong supporter of regional autonomy and giving people in the west and south the type of authority and support they need to develop their airports. The Deputy and I can agree to differ on that.
The Deputy suggested that the hidden agenda was private sector investment in the airport. That is ironic because I am doing the opposite. I am keeping the airports in State ownership. I have correspondence from the board of Aer Rianta which suggested that private sector investment, of up to €1 billion, should be accepted in the airport. This occurred about a year ago. The suggestion from the board was that I sell up to one third of Aer Rianta, after which, no doubt, the rest of it would go.
Was that the Minister's friend, Mr. Hanlon?
I opposed that proposition. Ironically, in years to come the trade union movement might, instead of castigating me about this along with the Deputy and the Labour Party, look again at what would have happened if I did not take this course. Almost certainly, the pressure to sell a share and put Aer Rianta into an IPO for purchase by the big companies in Europe would have resulted in the airports ending up in private hands.
It is what the Minister wanted in 1988.
I am ensuring regional authority and autonomy and that Dublin Airport remains in State ownership. I am not sure what the role of worker directors would have been under the proposal I mentioned. I have no information on it.
The Deputy says that Shannon Airport cannot make a profit. I have been there many times recently. The people there are determined to do so. My faith in that board, the region and the people is enormous.
Why did the Minister say he would give Shannon Aer Rianta International?
They will make a go of Shannon. I take their word on this issue before that of the accountants and the scribes. The Deputy and I will agree to differ. She does not believe Shannon will succeed, I believe it will.
Why did the Minister say he would bail them out with Aer Rianta International?
That is the next question. Shannon can and will succeed. That is on the record and we will see who is right in years to come.
With regard to Aer Rianta International and the Great Southern Hotels, I am talking to legal advisers about how to unravel them. It is not simple. They are complicated.
The Minister realises that now.
I never said it was simple. It is complicated but we are getting through it. To suggest that these are complicated issues that can be dealt with is not a reason to laugh.
The Minister is talking about introducing legislation in the next two weeks.
We will see. The advisers are Matheson Ormsby Prentice, PricewaterhouseCoopers and Steer Davies Gleave. I do not have a costing for the consultancies.
Has the Minister an estimate?
I do not. As soon as I have it, I will give it to the Deputy.
The Minister must have a ballpark figure.
As soon as I have it, I will give it to the Deputy.
I hope Steer Davies Gleave does a better job on its figures than it did on the last report it produced. With regard to Dublin Airport and the debt it will have of approximately €400 million, how does that balance with a competing terminal in Dublin and what will its economic impact be on the repayment of the debt that will be accrued from both Shannon and Cork? What capital funds will be made available or will the Government provide security for loans at both Shannon and Cork? Significant capital investment is required, especially for the runway at Shannon Airport.
Why did the Minister not dispel the claims emanating from the PricewaterhouseCoopers report if they are inaccurate? It is imperative that he should put everything on the table to clarify the issues. Will the Minister guarantee that he will have a firm mind on these issues prior to bringing legislation to this House, unlike what happened with the Aer Lingus Bill?
The issue of the second terminal will be back before the Government in the coming weeks. The Deputy is correct to refer to it. We must carefully assess the economic implications of a second terminal proposal in the context of a Dublin Airport authority. My view is clear. I am in favour of proceeding with a second terminal. The Cabinet will discuss the issue in the coming weeks. It is interlinked with the future of the airport and I would like to have an opportunity to discuss the matter with the new Dublin Airport authority as soon as it takes office.
On the question of investment in Shannon Airport, including removing the €70 million debt currently ascribed to it and giving it a clean balance sheet, given that, on the figures available, the airport caters for passenger numbers in excess of 2.2 billion it will be able to generate sufficient funds to keep its capital investment going. On the security of the debts, whatever is in the present Aer Rianta legislation will be replicated for each of the three airports.
So there will be security.
Whatever security is included in the current Aer Rianta legislation will be replicated in the legislation for the three autonomous airports – no more and no less.
The Deputy asked if I will have a firm mind on certain issues.
I asked if the Minister will have a firm mind on all the issues and concerns raised prior to the introduction of legislation, which would be contrary to his position on the Aer Lingus Bill.
My position on the Aer Lingus Bill—
We will not go down that road because the Minister has no clue what to do.
I am studying a few options in that regard. It is right that I should do so because it is an important issue. I will firm up on the matter shortly.
On the issue the Deputy raised, I do not think anyone can accuse me of not being firm. I know exactly what we are doing and I am determined to press ahead with the legislation as soon as possible.
Will the Minister make the economic argument regarding the independent terminal versus a Dublin Airport authority prior to the introduction of the legislation?
The legislation to which the Deputy refers is the State Airports Bill 2003. The legislation will proceed as soon as we finalise the final text, deal with some technical issues, decide what technical issues can stay over for the new authority and get Dáil time to introduce it. The second terminal is a separate issue, which does not require legislation.
That is correct. It is the only opportunity we will get. In other words, the Minister will come back here hemming and hawing again.
I will not be hemming and hawing. I am making it clear that the legislation will go ahead. I favour the second terminal, which does not require legislation. The Government will make a decision on the matter. What is hemming and hawing about that?
That is hemming.
The Minister will not make an economic case for it before he introduces the legislation
I hope the Minister will not put the second terminal on stilts.