Dáil Éireann debate -
Thursday, 24 Jun 2004

Vol. 588 No. 1

State Airports Bill 2004: Second Stage.

Minister for Transport (Mr. Brennan)

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

The policy that underlies this legislation is in keeping with a wider package of Government policies designed to strengthen national and regional competitiveness. We want to ensure that the principal gateway airports of the State are in a position to provide cost-competitive services and appropriate infrastructure to meet the current and prospective needs of airline and other aviation companies while operating to a commercial mandate. We also want to encourage as wide a range as possible of reliable, regular and competitive commercial air services for Irish tourism, trade and industry.

Specifically the Government's reasons for restructuring the State airports, as provided for in this Bill, are as follows. First, we wish the three airports to be structured in a way that best equips them to deal with the new challenges and opportunities facing the whole aviation sector. Second, we believe that commercially successful airports in Shannon and Cork will better assist in the economic and tourism based development of their catchments areas. Third, autonomous regional boards in Cork and Shannon with the necessary commercial expertise and background will give strong and visionary regional leadership to the new airport companies so that both airports can adapt more quickly in a rapidly changing aviation environment. Fourth, in so far as market dynamics permit, the establishment of Shannon and Cork as separate commercially-focused entities, will place them in a position to promote and expand their range of services thereby leading to greater competition with Dublin Airport. Fifth, as the country's major airport, Dublin will be encouraged to continue to expand to meet Ireland's requirements for tourism and industrial growth. Sixth, the three State airports operating as separate successful commercial State companies have the potential to grow their business and enhance shareholder value.

Airports of similar size to Cork and Shannon have been successful elsewhere and we are confident that both independent airports will emulate best practice in comparable airports of similar scale and size.

In essence, the reforms that flow from this legislation are about new beginnings, more choices for the customers of the airports, growth in sustainable jobs and business and the opportunity to meet enthusiastically the challenges that lie ahead. I am proceeding with this legislation because I believe that the new airport authorities will bring a fresh impetus and drive to our major airports in the future. I must emphasise that the three new airport authorities will continue to be State-owned as the Government believes that the State is the most appropriate shareholder for such a vital part of our infrastructure. Dublin Airport is a European-scale airport and makes a vital contribution to our national economy because of the importance to us of international access for tourism and industrial development. It already has traffic of almost 16 million passengers and it is expected to reach 30 million passengers by 2020. As our major airport it needs strong leadership so it can continue to develop and grow in a way which engenders confidence in its customers and responds to the needs of its stakeholders. Those stakeholders include the State as shareholder, the airlines and other aviation companies, the aviation regulator and the public at large and the business and tourism interests, which rely on Dublin Airport for their essential links to a range of locations in European and North American markets and elsewhere.

I believe that a successful Dublin Airport will also be good for the airport's management and employees who are, of course, key to steering the airport through the many challenges that lie ahead. Cork Airport serves our largest provincial city and in Irish terms has a large and growing catchment area for its services. It is close to some of our most attractive tourism locations and under the national spatial strategy it will, of course, be a strong growth centre which would counterbalance Dublin's dominance. In recent years its traffic has been significantly expanding from 1.5 million passengers in 1999 to 2.2 million passengers in 2003. The airport is also benefiting from a major new terminal investment which will enable it to cater for even greater growth in the years ahead. I expect a new airport authority board to build on this potential and work with airport management in capitalising on the region's capacity for industrial and tourism growth.

Shannon Airport is unique in its location and the importance of its links with the North American markets. However, in the future I believe it will diversify and will not be unduly dependent on North America, the market that played such a large part in its history in Irish aviation. I know from my contacts with the board designate that they are confident that they can broaden its traffic mix and that, in particular, much can be done to attract low cost services to the airport from European locations. I share that confidence. It is no secret, however, that Shannon must make a lot of progress in tackling the problems of its cost base if it is to achieve the commercial success that is within its grasp. The new authority will be drawing up a comprehensive business plan to show how best to exploit its market opportunities and to realise the efficiencies which will ensure that it can reap those opportunities.

As the House will be aware, the setting-up of a new autonomous airport authority at Shannon will have implications for Shannon Development, the State agency charged with regional and economic development in the mid-west region. My colleague, the Tánaiste and Minister for Enterprise, Trade and Employment, has been in discussions with the chairman and board members of Shannon Development to explore how best the two bodies can contribute to furthering the interests of the mid-west region. The board shares the Tánaiste's view that a viable and sustainable Shannon Airport is a critical requirement for continuing the future competitiveness of that region. One of the options under consideration is the transfer of the assets of the Shannon free

zone to the new airport authority. I understand that other options have emerged in the course of the Tánaiste's discussions with the board and that these are also being considered. In reaching a decision on this issue, it is the intention to put in place the most sensible and efficient structures and to manage the region's most valuable and strategic assets so as to optimise their benefits to the entire region.

Before dealing with some of the detail of this legislation I wish to rebut any suggestion that somehow this legislation was formulated without any consultation with Aer Rianta. While, of course, the drafting of the legislation was the responsibility of the Parliamentary Counsel assisted by our team of advisers, the broad framework for this legislation emerged following extensive interaction with Aer Rianta and its advisers.

Notice taken that 20 Members were not present; House counted and 20 Members being present,

Mr. Brennan

Following the Government decision to restructure Aer Rianta in July 2003, the Department and its advisers and Aer Rianta and its advisers have been in contact about key aspects of the restructuring. From the earliest stages of those contacts it was apparent that the technical issues relating to restructuring were intricate and that close consultations would be necessary throughout the process. In particular, the availability of distributable reserves was recognised as critical to the distribution of the assets of Aer Rianta because of Irish and EU company law capital maintenance obligations. As a result of the insufficiency in Aer Rianta's distributable reserves, the constraints involved had a major impact on the phasing of the distribution of Cork and Shannon airport assets which at present would exceed those reserves.

Following a prolonged period of dialogue with Aer Rianta and its advisers the Department presented to Aer Rianta in February last its proposed framework for the restructuring. The essential features of that framework are reflected in the State Airports Bill, subject to the inevitable refinements that emerged following further detailed work by the Department and its advisers. Since February our advisers PWC compiled an analysis of the financial implications of stand-alone Shannon, Dublin and Cork airports and projections for the State airports in the future. The capacity of the Aer Rianta group to distribute the assets of Cork and Shannon and the necessary phasing of the transaction were also addressed. This analysis provided me with broad financial perspectives on the businesses of the three airports over the period ahead that were essential to determining the overall approach to restructuring and to this legislation. The PWC working papers were also shared with the trade unions' financial advisers.

These working papers confirm that there are pre-existing challenges surrounding the State airports regardless of the decision to restructure them. Dublin Airport requires dynamic effort by the new authority to invest to realise its growth potential and to maximise operational efficiencies. Shannon Airport must also confront its particular commercial challenges in any event. PWC believes that the establishment of three independent entities will allow the major issues identified to be addressed in a focused way with fresh ideas, a clearly defined capital pool allocated to each airport and an autonomous approach pertinent to the business priorities of each airport. It remains the Government's policy position that independence provides the best chance for each of the airports to be viable entities, responding effectively and efficiently to the business opportunities in their regions and consequently able to maintain the terms and conditions of employees. On that basis Government reaffirmed the decision to proceed with restructuring and agreed to publish the State Airports Bill.

I have already mentioned the financial information shared with the trade unions' financial advisers as part of the engagement with the trade unions on the decision to proceed with the restructuring. Prior to the sharing of this financial information discussions had taken place on the general issue of the restructuring proposals and on various other issues, including the terms and conditions of Aer Rianta staff post-restructuring. The restructuring proposals will not result in any downgrading of the terms and conditions of Aer Rianta employees on transfer to the new independent airport authorities. In line with commitments given to ICTU, appropriate provisions have been included in section 12 of the legislation to this effect.

I reaffirm that the trade unions will be fully consulted on all issues of concern, including the preparation of business plans for each airport with a view to maximising agreement prior to the transfer of assets and staff to Cork and Shannon airports. The legislation provides at section 12(11) that there will be discussions with recognised trade unions or staff associations for a period of up to six months from the date this Bill is enacted on the form of any new collective agreements and the bargaining structures through which they are arrived at and developed following the appointed days that is, the date the assets transfer to the Cork and Shannon airport authorities.

The State Airports Bill has been carefully designed to deploy the necessary mechanisms under company law to provide maximum flexibility to effect the restructuring in conformity with the capital maintenance provisions of the Companies Acts. It provides a framework to allow for an orderly approach to the distribution of assets and facilitates the phasing which will be necessary in respect of the distribution of Cork and Shannon because of the insufficiency in Aer Rianta's reserves. The Bill proposes an enabling framework for the restructuring which is in line with the existing provisions of company law. Aer Rianta will effectively transfer the assets relating to the airport businesses at Cork and Shannon to the new airport authorities established under the Bill in return for the issue of shares by the new companies to the Minister for Finance. For company law and accounting purposes the transfers will be regarded as distributions made by Aer Rianta cpt to its shareholder the Minister for Finance. Consequently, Aer Rianta cpt will be able to make the transfers only when it has available distributable reserves equal to the net value of the assets transferred.

As the distributable reserves available to Aer Rianta cpt are insufficient for this purpose, a phased approach is provided for in the Bill which will allow for one of the new airport authorities to be vested relatively soon after enactment, namely, Shannon Airport while the second will be vested once sufficient further distributable reserves have been built up within Aer Rianta cp., namely Cork Airport. A portion of the Cork Airport assets will remain in Aer Rianta cpt and be subject to a finance lease between Aer Rianta cpt and the Cork Airport authority.

After enactment of the legislation two companies will be established which will be designated as the Cork and Shannon airport authorities which will in due course own and operate their respective airports once sufficient distributable reserves are available to transfer the relevant assets. Prior to the assets being vested in those two companies their boards would be charged with preparing to assume responsibility for the management and development of the airports as well as being empowered to undertake functions delegated to them, on an agreed basis, by the Dublin Airport Authority for their respective airports during the interim period.

On the basis of the agreed sequence for the distribution of assets and compliance with the Companies Acts, the assets would then be distributed on or after 30 April 2005 when the Minister for Transport and the Minister for Finance, on the appropriate advice and subject to the appropriate resolutions of the distributing and receiving boards, are satisfied that operational and financial readiness has been achieved. The legislation provides that the required appointed day which triggers the vesting of assets in the airport authorities will be designated by ministerial order subject to the consent of the Minister for Finance. The formulation of comprehensive business plans by the new boards will be a key aspect of achieving operational and financial readiness and each authority will be required to submit to the Minister for Transport and the Minister for Finance for approval comprehensive business plans in respect of its airport.

The legislation provides that Aer Rianta cpt will be renamed the Dublin Airport Authority and will be given a formal mandate to take all appropriate measures to restructure the company. This new mandate will lead to the early statutory replacement of the Aer Rianta board members by the new airport authority board. The new Dublin board has therefore a highly sensitive and important role to act in accordance with Government policy and in doing so to ensure that the financial health of the Dublin Airport Authority remains a priority for the directors and management. The Dublin Airport Authority will also have the important task of formulating a strategic business and investment plan which will form the basis of the application to the Commission for Aviation Regulation for a new aeronautical price determination for Dublin Airport. These steps, which are necessary and prudent to ensure that the restructuring process is undertaken in full compliance with the capital maintenance provisions of company law, should also ensure, and reassure employees of Shannon and Cork airports in particular, that operational and financial readiness is a pre-requisite for assets, including staff, to be vested in new airport authorities.

I wish to highlight some major elements of the Bill without repeating the aspects summarised in the explanatory and financial memorandum which has been circulated with the legislation. Part 2 focuses on the corporate governance and company law aspects of restructuring of Aer Rianta and the steps in the transition to full autonomy. Part 3 deals with complementary regulatory aspects and will make appropriate changes to the Aviation Regulation Act 2001 as considered necessary to effect the restructuring process and to complement the reforms I have described. Areas of change include the objectives of the Commission for Aviation Regulation in making a determination on maximum airport charges, the duration of such a determination and, significantly, the removal of Cork and Shannon from the scope of price cap regulation. Under the restructuring it will no longer be appropriate to price regulate Cork and Shannon airports because they will not have market dominance in the way that Dublin has and will continue to have.

Under the proposed legislation, it will be a function of the Commission on Aviation Regulation, in making a determination in respect of maximum airport charges, to adhere to three primary objectives set out in section 21(4), which is in effect an amendment to the commission's current remit. In making a determination, the objectives of the commission will be modified under the Bill as follows: to facilitate the efficient and economic development and operation of Dublin Airport which meet the requirements of current and prospective users of the airport; to protect the reasonable interests of current and prospective users of Dublin Airport; and to enable the Dublin Airport Authority to operate and develop it in a sustainable and financially viable manner. It is my intention that these primary objectives will oblige the commission to balance economic efficiency and the reasonable interests of users and to ensure the airport's financial sustainability in a way that will promote its long-term development, having regard to its contribution to the economy.

The commission will be required to conclude a new price determination for Dublin within 12 months of enactment of the Bill. I stress that it will be a matter for the commission, as independent regulator, to make an appropriate determination based on its new mandate. I am satisfied that the amendments to the regulatory framework strike an appropriate balance between the interests of the various stakeholders in Dublin Airport.

The policy which underpins this legislation has been well developed and is fully in line with the forward-looking policies of the Government to strengthen our transport infrastructure, promote efficiency in service provision and boost balanced regional development. The reforms provided in the Bill are focused on developing Dublin, Cork and Shannon airports, increasing airline business and significantly growing passenger traffic levels and jobs. The only sensible way to provide sustainable jobs going forward is to grow the business at the three State-owned airports. Under strong and focused regional leadership, Shannon and Cork airports will have a fresh start and can develop separate business strategies, including concentrated marketing initiatives. The new Dublin Airport Authority, combining international and national aviation expertise with proven financial and business acumen, will focus on meeting the urgent need for increased capacity at the airport.

There has been strong support at both national and regional level for restructuring. The support at regional level was especially evident before, during and after a number of visits I made to the Shannon, mid-west and Cork regions. The plan has strong support from public representatives, regional authorities, local authorities, the Shannon Free Airport Development Company, the chambers of commerce and consumer organisations.

I commend the Bill to the House.

Mr. Naughten

I welcome the belated publication of the Bill. I also welcome that, for the first time since the Minister made his comments, we have at least been presented with something in black and white. To date, the Minister has provided little if any information in respect of his plans for the aviation sector. This matter has not been thought through and the Government's approach remains rudderless.

This is the first occasion on which the Government has put pen to paper on this issue. It has dragged its heels in respect of the national aviation policy. The Minister has consistently stalled on this process since taking office. He previously confirmed that the legislation for the breaking up of Aer Rianta would be moved prior to the Dáil summer recess in 2003, prior to the Christmas recess in 2003 and prior to the Easter recess this year. However, it is only being introduced now.

This legislation appears to be little more than a face-saving exercise for the benefit of the Minister and the Progressive Democrats. If one is to believe media reports, the legislation will merely allow each of the three airports to prepare business plans to prove the merits of the break-up of Aer Rianta. Why is the legislation necessary at this stage? It would have been possible for the Minister, during the past 12 months, to instruct each of the airport authorities to establish business plans and present them within a certain timeframe. Members on all sides of the House have requested that the Minister do this during the period to which I refer. Now he wants to write it into legislation and bring it before the House having considered his plans for 12 months. This is Humpty Dumpty legislation which will break up Aer Rianta before it is put back together again at a later stage. Nothing relating to the Bill has been thought through.

Fine Gael has repeatedly called on the Minister to publish a White Paper on the future of the aviation sector to allow a proper debate and to flesh out the Government's skeletal aviation policies. The need for a White Paper has never been greater, especially in terms of addressing issues such as the new terminal at Dublin Airport, the future of Shannon Airport — particularly in light of the open skies policy and the stopover there — and the mooted proposal for a second airport for the Dublin region. Instead of a White Paper, we have been presented with a "make it up as we go" policy.

I had hoped that the Minister might outline his ideas in detail but he did not do so. He has claimed that the PricewaterhouseCoopers report stacks up in favour of his argument of breaking up the company. Why have we not seen the detail of that report? Why has the Minister not put forward proposals and set out, in concise terms, what he is talking about? Why has he failed to provide the relevant figures? This is a typical Fianna Fáil fudge. We have not been given any specific details and we are being asked to accept legislation on the nod on the understanding that we will be provided with the detail at some future date.

The Minister could simply have asked the three airport authorities to draw up their plans and proposals and present them to him. That did not happen. The Minister has dragged his heels in respect of this issue for 12 months. This typifies the lack of any semblance of leadership in the Government. The only decision the Cabinet appears capable of making is whether to have tea or coffee served at its meetings. No decision has been made and we are in a void in terms of the Government's thinking on these proposals.

Fine Gael has consistently stated that it supports the decision to establish three independent boards to manage the airports because this will have a positive benefit not only for the aviation section but more particularly for regional policy. Independently managed airports at Cork, Dublin and Shannon would represent great potential for development and would facilitate the involvement of local commercial interests in the development of airport services. This is a critical opportunity to begin to develop a policy of regionalisation and regional development. It is the contention of those who are opposed to the break-up of Aer Rianta that the airports at Cork and Shannon are inherently loss-making, surviving only on cross-subsidisation from Dublin. The Minister failed to address that point or even to support or reject it.

International studies suggest that airports such as Cork and Shannon with passenger volumes of 2 million can be viable as stand-alone entities. However, we have not been provided with any supporting evidence from the Minister that the opposite is the case. It must be remembered that publicly-owned airports primarily constitute a strategic infrastructure which serves local economic development. That is the key purpose of our State airports, which should remain in State ownership and which should be used for the purpose of developing local economies. Their purpose is not to create State assets. However, it is critically important that we ensure that all three airports will be commercially viable as stand-alone entities after the legislation is enacted. The Minister cannot provide supporting evidence in that regard.

These airports must become the engines for driving implementation of the policy of regional development. While there are risks associated with such a policy, there are also major benefits. That is why Fine Gael supported the Minister's initial announcement. However, it has consistently called for the detail in respect of these proposals. If properly structured, a regional policy should tip the scales in favour of air travellers and consumers.

On 9 October last in the debate on the Aer Lingus Bill, Fine Gael stated that it was imperative that the details of the Minister's proposals should be made public and that he should make a clear and concise argument as to why he believes the airports at Shannon, Cork and Dublin can each stand alone. To date, we have received no information from him in respect of this matter. We are still as wise today as we were on 9 October last.

If we want real competition we should focus on the key issue in that regard, namely, the second terminal at Dublin Airport and not the break-up of Aer Rianta. This is the only way to provide for real competition. The proposition of the break-up of Aer Rianta as a mechanism for providing competition is misleading. It is a mechanism for developing regional policy, if that is the objective of the Government, but we still do not know where the Government is going with this.

We must consider what difference the break-up of Aer Rianta into three separate operating companies will make to the level of effective competition. This is a key question that the Minister has failed to address or answer. The answer depends partly on the current level of competition. Observations suggest that there is only a limited degree of effective competition between the airports from the perspective of Irish consumers. Cork and Shannon airports have overlapping hinterlands and compete directly for airline services and passengers. Cork and Dublin airports compete similarly. Since they are approximately 160 miles apart, there is a substantial although relatively thinly populated stretch of country in which customers could be classified as indifferent as between the two airports.

In such cases, choice of airport will be determined by the range and suitability of the connections available from each. The key issue is whether the break-up would result in the expansion of services available at Shannon and Cork airports, particularly the expansion of services to European destinations which would not be secured by any other means within the existing ownership structure. We have no answer on this point and the Minister has failed to provide any supporting evidence.

If we want real and immediate competition, the urgent focus must be on securing a second terminal for Dublin Airport. As with every other decision he has faced, the Minister has long-fingered a decision on the second terminal. Dublin Airport was due to have a new pier D and a second terminal constructed at the airport. To date, neither has been delivered and the Government has failed to make a decision on whether a second terminal should be constructed and how it should be managed and operated. We still do not know what is happening despite that the Government received 13 submissions of interest to construct the terminal more than 18 months ago. The Government is dragging its heels. In the meantime, Dublin Airport is close to reaching full capacity.

The chairman of Aer Rianta stated that there are serious question marks over health and safety issues during the summer months. This problem will extend into 2005 when it will become even more critical. A decision on the break-up is essential and must be taken immediately. The future viability of Dublin Airport is dependent on the development of a second terminal and the delay in its development is detrimental to the future of the airport. As a result of the Government's dithering and it not being prepared to take decisive action, Aer Rianta has in this situation of uncertainty significantly downscaled its profits in 2003.

Fine Gael would support any proposals which promote competition and benefit the consumer. We have consistently raised questions about the break-up plan but are prepared to support Government strategy if the Minister can provide credible evidence of the viability of his proposals and that they will benefit the consumer. We have not received this; the Minister is asking us to accept a pig in a poke. We are asked to trust the Minister and accept the legislation without any evidence to support his plan. This is the wrong way around. The legislation is unnecessary at this time other than as a face-saving exercise for the Minister and his Progressive Democrats colleagues in Government. Fine Gael requires that evidence be produced and that the Government's case be articulated and supported. The Minister has had since last July to do this but no information has been provided and no decision has been made. We are required to take a leap of faith. If one relies on the Minister's pathetic record regarding the second terminal at Dublin Airport, one can have little confidence in taking that leap of faith.

There are important questions that must be answered. A major deficit exists in information regarding the plans and strategies for the new entities, the capital expenditure and investment plans, the management team and operational plans, the nature of the ongoing relationships within the existing Aer Rianta operations, the financial projections, cash and debt management, and pricing policies and interface with the regulator. Restructuring proposals for Aer Rianta must address the non-transparent subsidies between and differing priorities of the three airports and the serious constraints on the availability of capital. No details have been provided on any of these issues.

With regard to Cork Airport, it is envisaged that an affordable lease arrangement will be established, as indicated by the Minister in his speech. We have no information, however, regarding the type of lease to be put in place, who will take the financial risk associated with the lease, whether an adequate return will be earned and the conditions that will attach in the event of default. Such details are not available as negotiations have not yet taken place on this leasing arrangement.

The Minister for Finance is sceptical about the Minister's strategy and that is why we have seen such a fudge in terms of the proposed legislation. As Aer Rianta is a public limited company, there are issues with revenue reserve and with the ownership and distribution of assets. There are many complicated financial transactions that must be addressed. Again we are being asked to trust the Minister on the basis that there will be a business plan by April 2005 and everything will be rosy in the garden.

What will happen to staff employed by Aer Rianta International, ARI, based at Shannon Airport? Will they remain in Shannon or will they be transferred to other locations? Aer Rianta International is regarded as a global force in airport ownership and duty-free retailing. The future of this valuable asset has still not been decided upon in terms of whether it remains at Shannon Airport and whether it will be under the control of the Shannon Airport Authority.

The value of ARI will be damaged not only because it will be removed from the Aer Rianta umbrella but also because the legislation waters down its value. Section 8 allows the three new companies to compete directly for ARI business outside the State. This will significantly devalue the ARI brand name and threaten the employment security of ARI's employees. The expertise available from the three airports under Aer Rianta which can be utilised by ARI to bring expertise to far-flung parts of the world will no longer be available. If Cork and Dublin airports can now independently establish and manage their own duty-free and airport service operations throughout the world, they will not make those skills available to ARI. The proposed legislation will significantly damage the future of Aer Rianta and will presage the development of two competitors.

The Bill also proposes that the new airport authorities at Shannon and Cork will compete directly with Dublin Airport. In the short term, overall control will continue to be exercised from Dublin for a short period after the dissolution of Aer Rianta. One cannot be certain that the Dublin Airport Authority will act in the best interests of the other two State airports before they are granted full independence. There must be a guarantee that the board members of the Cork and Shannon airport authorities can contribute to the decisions made by the Dublin Airport Authority before the break-up of Aer Rianta is complete.

Section 8(1) stipulates that the Dublin Airport Authority has a veto over any proposals brought forward by the other two authorities. Under the legislation, the proposal that will be brought forward by the boards of either Shannon or Cork airports must be agreed by both parties before they can be enacted. There is an in-built veto. The Minister is establishing a board in Dublin, the responsibility of which is to develop Dublin Airport and make it an efficient operation that would compete, not only internationally, but against Shannon and Cork airports. That board would have responsibility for the restructuring of Cork and Shannon airports in the short term. No change or proposal could be implemented in either Cork or Shannon without the approval of the Dublin board, the specific responsibility of which is to develop Dublin Airport. It is in its interests to ensure no developments take place at Cork and Shannon in the short term. The legislation appears to be a complete mess because the whole thing has not been thought out and no one appears to know exactly what is going on, including the Minister.

All staff and assets are to be transferred to this authority from Aer Rianta. Section 13 deals with this area, but does not specifically deal with the chief executive of Aer Rianta, Margaret Sweetman, who under section 29 of the Air Navigation and Transport (Amendment) Act 1998, is appointed by the Aer Rianta board and can only be removed from office by the directors of the Air Rianta board. Where does the new legislation leave her? The Aer Rianta board will not get rid of her. Will she be left in limbo? This is another anomaly in the legislation, which has been cobbled together as a reaction to what happened on 11 June 2004 when the Government got its answer on the doorsteps from the electorate. The Tánaiste commented some days later that she wanted to see action and all of a sudden the legislation was pulled out of a hat. Because it was produced in haste it has resulted in a number of significant anomalies.

What structures will be put in place for Aer Rianta subsidiaries such as Aer Rianta International and the ownership of the Great Southern Hotel group? The Bill does not explain how their ownership structures will be decided. Will they be divided between the three separate authorities?

The Farrell Grant Sparks report commissioned by the unions suggests the combined value of Shannon and Cork airports will drop by €110 million following the break-up. The value of Aer Rianta International following the enactment of this legislation will also be devalued. No answers have been provided in this regard. The Minister referred to security of employment but he did not provide any detail of what will happen to Aer Rianta International or the Great Southern Hotel group.

Aer Rianta's profits fell from €36 million in 2002 to €20 million in 2003. The profits of Aer Rianta International fell from €13 million to €5 million over the same period, while profits at the Great Southern Hotel group fell from €2.85 million to €1 million. There is no doubt that a contributory factor to the fall in profits has been the question mark hanging over Aer Rianta and its subsidiaries for the past two years. The Minister has not provided answers to our questions. He is now bringing forward legislation that postpones any decision for a further 12 months, which may further damage the group of companies in the intervening period. The prevailing uncertainty has already had an impact and will continue to do so.

What will be the position for the next 12 months regarding debt and borrowings for the three State airports? Because there is such ambiguity over their future, it will be very difficult in the short-term to get any financial institution to back them. Neither is there any indication in the legislation of whether Cork or Shannon airports will be able to borrow against Dublin Airport's balance sheet. What impact will the debt have on Dublin's balance sheet?

The State Airports Bill will result in the aviation regulator now only having responsibility for charges at Dublin Airport. This raises the prospect that the airport authorities will be forced to fund capital developments by raising airports charges, as no other mechanism is available to them. In the past, prior to setting the charges, the regulator had taken into consideration all income that had been generated by Aer Rianta. This will force Dublin Airport, which has a significant need for capital investment in the short to medium term, to increase its charges in order to fund this. Cork and Shannon airports will also have to introduce more expensive charges to fund their capital developments. This could have a significant impact on the ability of all three airports to attract low cost carriers.

The whole objective, especially in regard to Shannon and Cork airports, is that they will be more attractive to low cost carriers and can compete directly with Dublin Airport for business. However, we have not received any answers from the Minister on this matter. There are clear disparities between operations at the three airports. Everyone accepts the cost base at Shannon is significantly higher and needs to be addressed. It is difficult to see how Shannon can attract low cost airlines. The majority of passengers go through Dublin Airport and 85% of Aer Rianta's profits have been made there.

Significant question marks remain over the viability of Cork and Shannon airports as stand-alone entities outside of the Aer Rianta umbrella. The principal challenge facing the three airports is to develop and facilitate the growth in passenger traffic, but if the break-up proceeds as planned, Dublin Airport could be saddled with enormous debt and may need a substantial increase in its landing charges to fund the improvements needed, which is the exact opposite of what is required to attract more airlines to them. Everybody would accept that neither Shannon nor Cork airport is financially strong and they would be cut adrift and made to do without Government funding or guarantees. The Minister failed to mention the issue of guarantees in his speech. I raised this critical issue with him regarding the future of Cork and Shannon airports on 9 October 2003. I asked what guarantees would be provided to those airports. I also raised a significant number of questions with the Minister, none of which has been answered to date. We are being asked to accept this legislation and to trust the Minister for Transport and the Department of Finance that they will put the proper structures in place.

What would happen next April following the drafting of business plans and experts being brought in if the boards of Cork and Shannon airports decided they could not break even? They might decide they need to stay under the umbrella of Dublin Airport. What would become of this legislation? Would we have to come back to the drawing board, or would it be the case that any decision taken by the boards of Cork and Shannon airports from April 2005 would be sent to Dublin for approval? That is not what people have been talking about in regard to developing the regions. The objective of regional development is for decisions to be taken locally in the interests of the local community. It is not in the interest of Cork and Shannon airports to have to run back and forth to get the approval of Dublin Airport for every single change that would take place but that is the structure that will be in place from now on according to the legislation before us. Dublin Airport has a vested interest in ensuring that as little as possible happens in Cork and Shannon in the intervening period.

The boards of both Cork and Shannon will be in a difficult situation next year if they decide that, based on the current structures, it is not feasible for them to go it alone. Will they have to report to the Minister and the Department for Finance that, based on the finances available to them, they cannot go it alone without a significant level of subsidy from the State, which will be very difficult to provide under EU regulations? In doing so, will the boards be admitting that they will have to get permission from Dublin Airport for each change they make? Any board established in the interests of Cork and Shannon will not say to the Minister that it is satisfied with the current structure of having to get permission for everything from Dublin Airport. The boards will have no choice but to draw up some type of business plan which will support the Minister's proposals. Whether the business plan can be implemented in the medium to long term is questionable. As was said earlier, will the Minister for Finance at the time, it may even be Deputy Brennan, say the figures do not add up after sponsoring the legislation?

There are serious and significant questions to be answered and the Minister has to date failed to do so. I hope when he responds we will get the details we have been seeking for the past 12 months. It is not something we have concocted over the last couple of days, even though the House has not been given too much respect by publishing legislation on Tuesday afternoon and expecting us to deal with it on Thursday.

Ms Shortall

I want to register my strong objection to the manner in which the legislation is being rushed through the Houses. It is a highly technical and complex Bill consisting of 32 pages. The break-up of Aer Rianta will have the most profound ramifications for the aviation industry, the three airports and thousands of people who depend on the airports for the livelihoods. It is completely unacceptable that within 48 hours of publication of the Bill people are expected to contribute to the debate and take crucial decisions on its content.

Over the past couple of years the Minister, Deputy Brennan, has been going around the place peddling a number of myths about Aer Rianta. He probably has the idea that if he says them often enough people will start believing them. The strategy appears to have worked in regard to some people and certainly in regard to some commentators. I take this opportunity to address some of these myths.

Myth No. 1 is that the policy to break up Aer Rianta is part of An Agreed Programme for Government. The fact of the matter is that An Agreed Programme for Government promises to ensure that Shannon and Cork airports have greater autonomy and independence, not that they would be cut adrift as the Minister is proposing. Myth No. 2 from the Minister, Deputy Brennan, is that Fianna Fáil has a mandate to break up Aer Rianta. The fact is that the Fianna Fáil manifesto for the 2002 general election said that Fianna Fáil will establish regional boards for Shannon and Cork which will operate the airports and report to Aer Rianta.

Myth No. 3 is that the break-up is necessary to solve a growth problem. The fact is that there is no growth problem in Aer Rianta. Aer Rianta has grown its business by double digits over the past ten years. There has been a 150% growth rate in the three airports in that period. Myth No. 4 is that the State cannot continue to subsidise Aer Rianta. The fact is that Aer Rianta has returned a surplus each year. It has given back €400 million to taxpayers in the past 20 years.

Myth No. 5 is that breaking up Aer Rianta will provide competition. The fact is that, despite the Minister's often repeated mantra, these airports do not compete with each other. If people in Dublin, for example, want to travel to Brussels, they will hardly go down to Cork if they can get the flight for €5 cheaper there. Our three airports have their own natural hinterlands. There is already competition in all the crucial services which airlines require at airports, such as passenger handling, baggage handling, fuel, catering and so on. Strong competition already exists within all our airports.

Myth No. 6 is that the break-up will lead to lower charges. The fact is that charges have been found by all the expert reports to be the lowest in Europe. The same experts predict that charges will increase if Aer Rianta is broken up. It is clear that the Minister accepts this because he provides for raising the cap on charges in the Bill. Why is he putting out the nonsense that he is doing this for the sake of competition because it will decrease charges when we know it will do the exact opposite?

Myth No. 7 is that the break-up is necessary because of the financial position of Aer Rianta. The fact is that all other industries are currently consolidating, including low-fare airlines and multinationals. The break-up will undoubtedly lead to serious loss of economies of scale and scope and will worsen the finances of Aer Rianta. All one needs to do is examine what happened in the case of the break-up of the Eastern Health Board. There are now four separate boards, all top heavy with management, while the delivery of services has seriously disimproved.

The Minister, Deputy Brennan, is proceeding with his hare-brained proposals to break up Aer Rianta in order to satisfy the distinctly right-wing leanings of a number of his Cabinet colleagues. It is quite clear that other Ministers, who in recent days professed to have more social democratic tendencies, have been completely overruled in the case of Aer Rianta. They have been overruled in this case, yet again, by their colleagues. We know that Ministers such as Deputy Harney, Deputy McDowell, Deputy Cullen and the Minister, Deputy Brennan, are ideological bedfellows, personal friends and beneficiaries of the largesse of some of the leading people in Irish business. It is quite clear that the Ministers concerned are doing the bidding of these interests.

No one can deny that Mr. Michael O'Leary has revolutionised air travel, for which he must be given credit. However, it should be remembered that Mr. O'Leary's interest, first and last, is the Ryanair share price and good luck to him for that. He and his colleagues should not be allowed to dictate aviation policy in this country. This is exactly what is happening in the legislation. Cabinet Ministers have a responsibility to look to the national interest, not personal or sectoral interests, in deciding Government policy.

Mr. Brennan

I ask the Deputy to withdraw the suggestion that I have any personal interest in policy making.

Ms Shortall

If certain sectors are funding certain political parties and those political parties introduce legislation which will benefit those sectors, there is a clear conflict of interest. Whoever pays the piper calls the tune. That seems to be working in this case. I agree with Senator O'Rourke that Members of this House who have received payments from those who stand to benefit from the break-up of Aer Rianta should declare that interest before voting on this legislation.

The decision to break up Aer Rianta is not a business decision. It withstands no scrutiny and is right up there with the trams on stilts at the Red Cow roundabout. Aer Rianta undoubtedly has its shortcomings but none will be solved by this decision. Regional development will not be assisted, nor will the pressing problems of overcrowding at Dublin Airport be addressed. If this Minister had not meddled, pier D would have been open this summer. I hope that when members of the public find themselves in long queues at Dublin Airport in the next few months when they are setting off on their summer holidays, they will remember that this Minister is responsible for the serious problem of lack of capacity and that it would have been solved if he had not interfered.

The second terminal at Dublin Airport is what lies behind this legislation. Aer Rianta in Dublin is to be lumbered with debt, stripped of its assets and weakened to the point where it will have enormous difficulty competing with the second terminal owned by the private sector. Let us wait and see who gets to build and operate that terminal. Meanwhile, good quality jobs will be lost, taxpayers will have to fund large-scale redundancies and the leading lights of Irish business will be gifted a share of the action.

This Bill proposes to enact bad law which is neither reasoned or fact-based and will hit ordinary people, especially users of Dublin Airport, in the pocket. This will happen as a result of the sharp increase in airport charges which it will trigger. It is bad law because it introduces unnecessary uncertainty in respect of the future of Aer Rianta's highly successful international subsidiary, Aer Rianta International. It is bad law because, in respect of Dublin, it effectively dismantles the system of State economic regulation of airports, only recently introduced, and because it has been shown repeatedly that the specific reorganisation that it proposes to implement is well nigh impossible to achieve within the framework of accounting conventions and company law. Furthermore, the cost of this policy is to be explicitly assigned to one airport, Dublin, something that under European law arguably amounts to an illegal state aid for the other two State airports.

From the outset, the Labour Party has opposed the plan of the Minister, Deputy Brennan, for the break-up of Aer Rianta. The one important reason for that was that the Minister presented no business case for his plan to create three separate companies to run independently the three State-owned airports, Dublin, Cork and Shannon. His express justification for his proposal was an economically naive notion of competition.

His initial hare-brained scheme comprised proposals that were simply impossible to implement, for example, his idea that he could give or gift Aer Rianta International to the proposed Shannon Airport company. The Minister was clearly blissfully unaware of accounting conventions, the Companies Acts and, critically, the fact that limited companies have their own legal identity. His proposals, which were blindly adopted by his Cabinet colleagues a year ago, do not address the real problems that exist within the Aer Rianta group in respect of its operations in this country, such as the overcrowding in Dublin, the high cost base of Shannon and the extravagant level of capital expenditure associated with modernising and expanding Cork Airport.

We warned at the time that the Minister would not be able readily to implement his scheme as announced. He would discover the legal complexities associated with carrying through the break-up or, technically, the demerger of a public limited company. He would also discover the financial and legal problems connected with duties to foreign investors in Aer Rianta, the bond holders and so forth. So it has come to pass.

The Minister's vision of having everything done and dusted by last Christmas was no more than a mirage, and an expensive one given the amount of specialist consultancy he has had to hire in his Department to help him out of the hole he dug for himself. Over the past 12 months, armies of financial and legal consultants have pored over the problem. The reports and papers they have penned that have been leaked into the public domain have all made the same point that was made by the Labour Party, that there did not exist in the Department, in Aer Rianta head office or anywhere a business case or plan of any description for the break-up. In the Minister's words, his proposals were based on a hunch.

There is an additional problem, which is highly technical. For a demerger to take place there must be a capital reduction in the core company and, associated with this, a distribution to the shareholder. It should be noted that the shareholder is not the Minister, Deputy Brennan, but the Minister for Finance. This raises questions about the vires of the Minister for Transport in respect of these proposals. The problem with the distribution was and remains that Aer Rianta did not and does not have sufficient distributable reserves commensurate with the distribution required equivalent to the value of the assets to be transferred out of the company while at the same time complying with the requirements of the Companies Acts, specifically Part IV of those Acts, as well as accounting conventions.

The legislative proposal before the House does not change that situation. In fact, in a sense it copperfastens the problem in that section 7(1) of the Bill explicitly makes everything now proposed subject to Part IV of the 1983 Act. The Minister has yet to find a way around this problem. In part, the delay in implementing the transfer of assets until at least 30 April 2005 may well be more intended to give the Minister and his advisers more time to try to find an answer to this problem than it has to do with the drawing up of business plans for Cork and Shannon.

The Labour Party remains opposed to the Minister's proposals and is opposed to this Bill. It is also opposed to the Bill because it proposes, inter alia, to implement the break-up with more or less immediate effect on it being signed into law by the President in spite of the impression created that it was contingent on the Minister for Finance approving business plans and that this would not happen until April next year. It is not, perhaps, widely understood but the object of this Bill in respect of Aer Rianta is to require it to demerge immediately its businesses at Cork and Shannon and then, if a formula can be found and approved by the Minister for Finance, tocarry through the transfer of assets after next April.

The Minister for Finance is the only member of the Government who has, from an early stage, cautioned against the Minister for Transport's proposals and his haste to legislate. That the Minister has been much delayed in implementing his scheme can probably be attributed to the Minister, Deputy McCreevy, exercising his concerns as well as the difficulties the Minister, Deputy Brennan, has caused himself through his disregard for both the simple and finer points of company law. Will the Minister now reveal how much has been spent on consultancy fees by his Department? Have those consultants left the Department or are they being retained?

From the point of view of the Minister's project section 8 of the Bill is the most important, although section 7 is also critical from the point of view of company law and accounting conventions. Section 8 provides for the more or less immediate implementation of the break-up of Aer Rianta, to be renamed the Dublin Airport Authority plc, and states that the authority "shall" not "may" enter into arrangements with the Cork and Shannon authorities under which both those bodies, in effect, become the operating agents of the Dublin Airport Authority in respect of its assets and businesses at Cork and Shannon airports.

Section 8(3) provides that the functions covered by such transfer arrangements may be performed by the Cork and Shannon companies in their own names to the extent permitted by the arrangement. Section 8(4) provides that the Dublin Airport Authority may pay fees to the Cork and Shannon companies in consideration of services provided by those two companies under any such arrangement. Section 8(11) leaves the way open for the assignment of the business of Aer Rianta International to the Shannon Airport authority, if the distributable reserves problem associated with the demerger can be overcome. Section 8(17) ensures that the Dublin Airport Authority picks up the tab associated with the establishment and running of the Cork and Shannon companies.

Section 24(1) of the Bill arranges for the transfer of the Shannon industrial estate to the new Shannon Airport company. When this is considered together with the other actual and proposed changes to SFADCo, such as the changes in respect of Enterprise Ireland and the assignment of SFADCo's housing stock to Clare County Council, and subject to all of this being in conformity with company law requirements, it is clear that with the enactment of this measure there is no point in keeping that agency alive. It might as well be wound up. One may also read into section 9(4)(a)(ii) a proposal to enact a measure that puts public private partnerships, if not part-privatisation, on the agenda. The section states: “It shall be the general duty of each company from its appointed day ... to take such steps either alone or in conjunction with other persons as are necessary for the efficient operation, safety, management and development of its airports”.

The trade unions seem to have received assurances from their negotiations with the Minister and his officials that there will be no change in respect of pay, conditions of service and pension arrangements. Section 12 of the Bill deals with this area. What is the real effect of the section? From the point of view of the comfort sought by the unions, sections 12(8), (9) and (10) are the relevant provisions. These do no more than enact the established situation in the case of transfers of engagement. They provide in statute something that already exists for the present employees of Aer Rianta — the key word is "present" — who are to receive terms no less beneficial on their transfer from Aer Rianta to any of the three new entities.

This does not apply to new employees hired by the companies. There are some intriguing riders in the legislation. In section 12(10) we find that pay scales are protected but only until, "such time as the scales of pay and conditions of service of persons transferred to a company in accordance with subsection (4), (5) or (6), are varied by the company, following consultation with any recognised trade union”. It is clear that this is not what we thought it would be. There is a similar provision in section 12(9) in respect of conditions of service.

In section 12(11), in respect of the future Shannon and Cork companies, the Bill states:

Without prejudice to subsections (9) and (10), the form of any new collective agreements and the bargaining structures through which they are arrived at and developed ... shall be the subject of discussions with the recognised trade union or staff association concerned for the period of not more than 6 months from the passing of this Act.

This brings back memories of the famous letter of comfort the Minister gave to the employees of Team Aer Lingus. Change is certainly on the way. It appears the transfer of engagement arrangements are, in the cases of Cork and Shannon, likely to be short lived. Dublin will also be picking up the tab for some of the labour costs of the other two airport companies. Section 12(5) of the Bill proposes to give statutory effect to the idea first floated in an attempt to come up with a viable business model for Cork, namely, shared services, with Dublin carrying the labour costs associated with them.

As a consequence of his refusal to give up on his break-up project, the Minister, Deputy Brennan, has now decided to virtually dismantle the entire system of economic regulation for aviation established in Ireland in 2001. This will ensure that passengers in airlines using Dublin Airport pay for the break-up through higher airport charges. The Minister's proposals in this respect are contained in Part 3 of the Bill. The Bill provides for a fundamental change in the airport regulatory regime, so fundamental as to effectively dismantle it. Instead of only allowing for the inclusion of recognised assets and only acting in the consumer interest in calculating the price cap, section 21(4) proposes that the Commission for Aviation Regulation shall in future have due regard to the restructuring, including the modified functions of the Dublin Airport Authority and, critically, costs or liabilities for which the Dublin Airport Authority is responsible, as well as policy statements published by or on behalf of the Government.

The Bill proposes a requirement that the regulator include liabilities, in this case politically-created liabilities, in calculating the price cap. This is nonsense. It is also proposed that the commission take account of general Government policy for the economic and social development of the State. Economic regulation of Dublin Airport is to be perverted. It is required that the commission allow for the cost of the Government's decision to assign the cost of its break-up policy to Dublin Airport. With the enactment of this Bill, the entire body of the Commission for Aviation Regulation should resign en masse because its role will have been undermined. They will be reduced to clerical officers, doing the occasional sum.

Through its subsidiary, Aer Rianta International, Aer Rianta is an impressive performer in the international airport business. It has increased its business through participation in airport ownership and management and its operations in specialist niches such as duty free and airport retailing. Aer Rianta has also shown the capacity to increase passenger volumes significantly at both Cork and Shannon airports. Both airports handled more than 2 million passengers last year, which is a record. Growth at Cork since 1999 is particularly impressive. However, Aer Rianta has been weak on capital expenditure. Over many years it has had a tendency to overspend on capital projects, thus causing commercial problems for itself. The criticism of gold-plating has some weight. For too long, Governments did nothing about this. However, it was dealt with through the introduction of economic regulation, whose structure is now to be dismantled within a matter of weeks. I urge Members to reject this legislation.

Mr. Eamon Ryan

I wish to share my time with Deputies Crowe, McHugh and Joe Higgins.

An Leas-Cheann Comhairle

Is that agreed? Agreed.

Mr. Eamon Ryan

The policy the Minister is proposing in this Bill is remarkable. He stated in the first sentence of his speech today that the Bill is about developing strengths in national and regional competitiveness. However, the essence of the criticism of this Bill is that from a competitive and business perspective this is a crazy proposal which will do nothing but hinder competitive development opportunities. The business case has not been made. If there is any business case to be made it is that rather than being about new beginnings as the Minister stated, this is the end of one of the most successful examples of public enterprise we have. On the back of its base here, which is a natural monopoly in terms of the provision, operation and direction of the airports, Aer Rianta was able in recent decades to expand across the world, purchase airports elsewhere and manage them very successfully, and manage similar duty free and other services all over the world. It is a hugely successful Irish business, which we are now taking apart for reasons the Minister cannot clearly outline.

In many ways Aer Rianta is similar to other very large Irish companies that have been successful in overseas expansion, companies such as AIB or Cement Roadstone Holdings which used a very strong base here for major international expansion. Aer Rianta is a similar example of that. Breaking up Aer Rianta for reasons I do not understand, and I do not see the Minister's business case, would be akin to breaking up AIB because the banking service in Cork was not as dynamic as we might like. It is akin to the board of directors of AIB deciding to break up AIB and return to the old Munster and Leinster and all the other small constituent banks, and lumping all the international arrangements with one of the smaller constituent banks. It is a crazy strategic business decision. Regardless of where the international division is put, it will be diminished. It will not have the necessary capital base. It will not have the experience base which allowed it to become a world player. If this Bill goes through we will lose our position as a world player in the airport business. That would be an incredible strategic mistake by the Minister.

This policy has nothing to do with providing national and regional competitiveness. I will come to the reasons I believe the policy is being pursued. It certainly makes no business sense. The only hope on this side of the House is that the Minister for Finance, who as previous speakers have outlined is the holder of the shares in this case, and the officials in the Department of Finance, will realise that what we are doing is taking a valuable State asset and breaking it up and reducing its value. That is a bad business decision for taxpayers which I hope the Department of Finance is wise enough and clear-sighted enough to see.

If the Minister believed there was a lack of flexibility and imagination, a lack of drive, a lack of initiative regarding the management of Shannon Airport and Cork Airport, there was nothing stopping him, as the person who is ultimately responsible for the board of Aer Rianta, informing the existing board that he was unhappy with the direction it was taking regarding the development of Shannon or Cork Airports and requesting it to set up a subcommittee or sub-board to examine ways of developing business there. That is not the approach the Minister is taking. I am sorry I am not party to the negotiations between the Minister and Aer Rianta. I can only surmise from the outside, as an outsider looking on, that what seems to be an ongoing feud between the Minister and the chairman of Aer Rianta is the reason such an approach was not taken. If the Minister has a difficulty with the board it is within his power to change the board, to change the policy and set a new direction. Instead he is dismantling a company at huge expense to the State and huge expense in terms of the long-term development of airport business in this country. That makes no sense.

There was initially much public support for some of the Minister's initiatives at Dublin Airport because of significant problems at Dublin Airport. However, the responsibility for those problems of queuing and chaos in the airport in recent years lies firmly in the hands of the Fianna Fáil-Progressive Democrats Government which took a very definite decision not to put the necessary investment that was asked for into the infrastructure in time. Instead it followed a policy of sweating the assets in Dublin Airport. In the end everybody paid for that as the traffic grew, as predicted at the time. The lack of timely investment meant Dublin Airport was not able to cope, and the public understandably feel this is a company that is not working, that our airports are now badly managed. However, the bad management was in the refusal by the Government to invest despite clear signs that this was the correct policy. That is where the blame should lie.

Furthermore, Deputy Shortall made the point, which I believe to be true, that airports do not compete. People do not suddenly change their plans and decide to go to Shannon because there is a slightly lower cost flight. The primary decision in terms of airports is based on geography. Nor do I believe terminals compete. There cannot be proper competition between two different terminals in Dublin Airport. If the operation of terminals were opened up to full competition one terminal might marginally undercut another and 90% or 100% of the business would switch from one to the other. That would be a very idiotic use of the assets we have there at present. If that is the reason the Minister is pursuing this policy, it makes no sense whatsoever.

There is one general point, which no one seems to mention or take into account but which will become a very strong reality in the coming years. Much of the investment policy for airports and decisions around that are based on the prediction that air traffic volumes will grow. The prediction which is the basis on which investment decisions on Dublin Airport are being made is that air traffic volumes will double somewhat in the next 15 years from some 16 million passengers a year now to some 30 million passengers a year.

It is not a politically popular thing to say, but it behoves parties like mine to say it, and that is that the environmental costs involved in aviation travel will, sooner rather than later, start to be taken into account. When that happens it will have a major effect on the volume growth in air travel. In those circumstances I would advocate caution regarding any investment or policy decisions based on the belief that a doubling in growth will automatically occur within the medium term. In long-term planning for air travel the Minister must take into account that the environmental costs will be taken into account at some stage. I do not have any sense of that in Government decision making at present.

The Minister says he does not have a personal interest in this issue. I am sure his decisions are being made without financial or other issues clouding his views. However, he has a personal interest in the following regard. The Minister had responsibility for transport before. However, this recent ministry began with a range of transport initiatives in which he boldly set out a whole new direction in Irish transport policy which would enable him to achieve miracles in a range of different areas. He got much credit initially for measures such as the introduction of the penalty points system. I myself gave the Minister credit for that bold initiative. However, over the past two years each of those initiatives, which were announced rapidly with no real thought behind them, have in turn become mired in a ministry that is going nowhere, that is achieving nothing.

Even in the one area where the penalty points system was introduced, all the gains have been lost because of lack of co-ordination in the Garda Síochána and elsewhere. It is likewise in terms of the metro which is hugely important for the development of Dublin Airport. We on this side of the House have heard a remarkable series of answers over the past 12 months to the effect that change is about to happen within weeks and it has not occurred. It is the same in terms of bus deregulation.

In circumstances where all the bold promises the Minister made have come to nought, where his ministry is mired and going nowhere, it is vitally important, in order for him to be seen to be successful as a Minister, that he get at least one of these initiatives up and running. This it seems is the reason this Bill is before us and is being given such urgency when there is no business case behind it and no strategic thinking behind it. That is a bad way to run a Government and make policy decisions and I very much regret that.

Mr. Crowe

I listened carefully to the Minister's speech . It contains all the buzzwords like "flexibility", "competition", and even "successful market dynamics" gets a mention. What is more interesting is what was not in the speech. Does this Bill make sense? Why is it being rushed through? It is important to reflect on what we thought would be in the Bill and what was signalled.

The Minister's elaborately signalled proposals for the break-up of Aer Rianta have produced nothing more than a rewrite and renaming, though at considerable cost in financial terms, in stress to employees of Aer Rianta, to trade unionists, in time consumed at Departments and in the real cost to the taxpayer. Why was this done? It just puts another name on a dilemma that is sure to resurrect its head in the not too distant future. Will the Dublin Airport Authority bring greater value in financial terms than Aer Rianta? Are the Government's proposed changes in this Bill creating yet more financial waste, more uncertainty and instability in the industry?

We do not know why the Minister is driving these changes. We do not know how much these glossy reports on the proposed changes and break-up of Aer Rianta have cost the hard-pressed Irish taxpayer, but it is safe to say millions of euro. We have a new name, a new logo, new headed paper, new uniforms and new boards. Ironically, many of us are relying on the Minister for Finance, Deputy McCreevy, for common sense to prevent this new direction.

Surely there is a serious absence of forward thinking here. Many would claim that there is serious evidence of a lack of any logical thinking. This Government and the Minister have failed to present a credible rationale for the proposed break-up of Aer Rianta and the whole proposition is probably one of the most glaring examples of the Government's drive towards appeasing the private sector and vested interests. The Minister seems to have an almost fatal belief in the benefits of competition and ironically he is not even certain that the interests of competition will actually be served in this case.

There has been little real analysis of its business as the interests of the airline shareholders stand to be prioritised over the best prospects for the airports. The three airports will become mutually competitive, leading inevitably to shortcuts. In an industry such as air travel, shortcuts can be dangerous. The Minister is pushing the privatisation agenda despite the fact that large sums of money have been spent on research indicating that the break-up is potentially disastrous. The break-up will not only affect Aer Rianta workers but the thousands of other workers that service the respective airports.

The assurances given to staff on remuneration and transfer are not cast in stone and will be dependent on whatever the unions and staff associations will be able to extract during the six-month period after the Bill is passed. The Bill states that employees transferring to Cork or Shannon cannot be reduced to lower beneficial terms except by collective agreement. The challenge to arrive at collective agreements is one with which trade unions and workers are well accustomed and we will see a similar battle on the proposal to break up CIE. According to the Minister's analysis, the break-up of Aer Rianta will produce a more efficient company which is less costly and which has a competitive edge. In reality this will not be the case.

Aer Rianta has been a relatively successful company. Its airport charges are currently among the lowest in Europe; about 15% below the average for European airports. Consultants assigned by the Minister for Transport to investigate the value of installing a private terminal at Dublin Airport indicated that charges were notably low. Other reports from different consultancies indicate that, although Aer Rianta's charges are extremely low, the company still manages to be profitable with a profit of €36.2 million after tax in 2001. In 2002, Dublin Airport was one of the three highest growth airports in Europe with increased passenger traffic of 80% since 1995.

The Minister believes that the break-up of Aer Rianta would allow Dublin, Shannon and Cork airports to compete against each other for custom. That analysis is based on the notion that Aer Rianta is too focused on Dublin Airport, thereby leaving operations at Cork and Shannon at a disadvantage. I reject that notion. Cork Airport is developing at a continuous rate with passenger figures having grown by 5.6% in recent years. The figures for passengers travelling to Britain increased by at least 10% and up to 29% to London Stansted and there was an increase of 16% in passengers to Europe. Figures for Shannon Airport showed a small decline, except of course for American troops using the airport heading off to Iraq. This might have caused a certain nervousness with some ordinary passengers using the airport. However, a decrease was anticipated given the reduction in transatlantic services. There are, nevertheless, indications of a likely increase in European traffic.

Regional airports will suffer seriously from the break-up of Aer Rianta and there is nothing to encourage one to believe that Shannon will benefit in any way. It is often thought that company mergers can reduce costs as administrative and support services are combined. On the other hand, by splitting the company into three, the individual airports would not be able to share central administration, accounting and middle management costs, thereby placing heavier costs on the emerging companies. This is still a better position than any company that would attempt to stand alone. Dublin Airport will be saddled with the debt for the entire Aer Rianta group, a move that will inevitably hamper the future development of the airport. Following the break-up, Dublin Airport will be left with a debt of at least €500 million. Shannon and Cork airports will have to cope with rising costs.

If we need international examples where privatisation of publicly-owned services proved to be regressive, we can look at the experience in New Zealand, an island nation like our own. The Government there finally had to buy back Air New Zealand for twice the price at which it was originally sold. Aer Rianta debts, which were around €377 million last year, will rest with Dublin Airport. Is this a level playing field? Is this the brand new beginning that the Minister envisages? All the indicators are that Shannon will be the big loser, with Cork doing slightly better. It is quite conceivable that Dublin Airport will push for an end to the stop-over in Shannon for transatlantic flights, which will create further difficulties and thwart development at that airport. There will also be the likely loss of profit by a reduction in the use of Shannon's catering service and there have been further suggestions of large staff reductions at Shannon and the consequent voluntary redundancies could cost up to €25 million. Will these redundancies be put on hold by this new proposal? Like hell they will.

Sinn Féin has called for the production of a White Paper on air transport because a credible policy paper needs to be produced as a matter of urgency. There is a need for an improved infrastructure at regional level. Ireland needs a solid, forward-looking aviation strategy and the money spent so far by the Minister in tabling amendments to the State Airports Bill 2004 would have been better used in research and consultation to devise such a strategy.

The proposals contained in this Bill will not improve services for passengers and workers in the industry. They will serve vested interests and inevitably lead to greater privatisation, greater cost to passengers and a downgrading of services at these airports. There is no financial plan or clear vision coming from this legislation. It is all smoke and mirrors but we still do not know who is pulling the strings and on behalf of whose interests.

Mr. J. Higgins

The State Airports Bill 2004 is driven exclusively by the right-wing neoliberal agenda of the Minister for Transport and his soul mates in the Progressive Democrats. The Minister is pushing a nakedly right-wing ideology which detests all things in public ownership and has been manoeuvring this break-up for some time. The only logic behind it is that Aer Rianta is being fitted out for privatisation and our national airports are to be handed over to big business interests down the line. It is incredible, notwithstanding the fact that this is a right-wing Government, that it is prepared to go along with this attack on Aer Rianta without a shred of evidence that it will help airports develop or airport workers carry out their services more efficiently or assist communities depending on the airports.

It beggars belief that legislation is introduced to the Dáil to create three airport authorities, something that could be justified only if there were overwhelming evidence after serious study that they would be beneficial to the development of aviation, transport by plane and the workers and communities dependent thereon. However, the studies to determine that will take place only after the break-up process has begun. This Bill is being pushed through the Dáil at the instigation of the Minister for Transport, Deputy Brennan, and the Tánaiste, Deputy Harney. It is a scary coalition of would-be bagman and plunder woman exclusively in the interest of leading to the future privatisation of our national airports.

The trade union leaders, who have unfortunately capitulated as usual despite the outright opposition of thousands of Aer Lingus workers, are making a serious mistake. They may be working on the idea that the Bill and today's exercise in the Dáil are a charade to save face for the Minister, the Tánaiste and others. They may be working on the hypothesis that the Minister, Deputy Brennan, will not be in situ next April when further crucial decisions will be made. The Taoiseach, Deputy Bertie Ahern, nobbled by an angry electorate, in part because of this Government’s right-wing economic policies, may give the Minister a rest, if the Taoiseach is not himself off in the political flesh-pots of Brussels at that stage. Nevertheless, that is a dangerous gamble by a trade union leadership which should instead stand up and mobilise its membership, not just in Aer Rianta but widely — the workers who are the real wealth creators in society — to stop this attempted vandalism of a crucial national asset. When the Bill is on the Statute Book, the forces which have been relentlessly pushing to break up Aer Rianta will keep doing so.

The Minister, Deputy Brennan, has been deliberately working in an ideological manner to their benefit. He has deliberately obstructed pier D in Dublin Airport so that the cries of anguish from passengers in overcrowded conditions will lead to further pressure for the creation of a terminal which he wishes to be run by private capitalists in the near future. The Minister will bear responsibility for the discomfort in Dublin Airport this summer and in future. It is the likes of McEvaddy and Ryanair, the capitalists red in tooth and claw, who are waiting in the wings to pounce on our national assets. Their agenda is being facilitated here.

Aer Rianta should be maintained in public ownership and the workers at Cork, Shannon, Dublin and in other areas brought to the centre of its management so that——

An Ceann Comhairle

Five minutes remain.

Mr. J. Higgins

Beidh díomá ar phobal labhartha na Gaeilge go bhfuil an tAire ag cur eagraíochta leis an ainm "Dublin Airport Authority" in ionad "Aer Rianta", ainm a bhí sothuigthe do gach duine, is cuma an raibh siad líofa sa Ghaeilge nó nach raibh. Is mór an náire é, nuair atá an oiread sin brú ar an Ghaeilge agus ar phobal labhartha na Gaeilge, go bhfuil an tAire ag caitheamh ainm a bhfuil eolas ag cách air do áis ríthábhachtach do mhuintir na cathrach ar leataobh.

Mr. McHugh

In a nutshell, I welcome the introduction of this Bill and its main provision. There are some issues of concern which can be fleshed out later. What is at issue is that a monopoly is being broken up. In effect, this Bill proposes the creation of competition between our three main airports, Dublin, Cork and Shannon, and the opportunity for each to work to its strengths. Competition is good, no matter what sector one speaks about. It is the way forward. There is no future for protectionism or monopolies in a small country such as ours.

No sector will ever welcome deregulation with open arms, since naturally there are threats to the cosy operations that exist before deregulation. Therefore it comes as no surprise that both Aer Rianta and the trade unions oppose a more competitive airport sector. Their kingdom is being put under the microscope and such scrutiny is not welcome from their point of view. This Bill will bring about a requirement that the various players streamline their operations, that inefficiencies be got rid of, and that a slimmer, more effective regime be put in place for the benefit of the wider public, the consumer and the regions, the last being particularly important.

The Bill will help them and help promote badly needed, balanced regional development. The opportunity being created by the Bill will provide for the creation of three stand-alone airports, and that is good for the regions since it will provide the opportunity for them to become directly involved in their airport and the significant negative impact of Dublin on the regions will be minimised. That is good for the future of this country. We want balanced regional development and the opportunity for progress to be spread throughout the country rather than having all the development focused on Dublin with only the crumbs from the table distributed to the regions.

Yesterday the chairman of Aer Rianta told us about a ten-year plan for the development of the company under existing structures, but we are not aware of the detail making it impossible to comment. However, we are aware of part of the contents of the PricewaterhouseCoopers report, elements of which I wish to refer to. It relates to the future for aviation and in particular for Dublin, Cork and Shannon airports. The Minister has come under fire for proposing the break-up of Aer Rianta because of the contents of the PWC report. However, further consideration must be given to it and important elements of the report must be considered.

I feel strongly that a strategic plan geared towards the management of the airports must govern their future. At its core must be the notions of service, viability and profitability. Owing to the great need for balanced regional development, a regional focus must be employed. If necessary, compensation must be made to address the disparity between Dublin and the regions in aviation terms.

Just because the PWC report forecasts a continued loss-making situation for Shannon and Dublin for the initial years after the break-up does not mean that the first reaction should be to retreat to the bunkers and cry: "No surrender. No change." The no-change option is never credible in a changing world, and it is certainly not so in a progressive Ireland. The PWC report is based on the aftermath of the break-up where nothing else changes, but that scenario is not sustainable. Where the cost base in one of the airports is too high, an examination should be carried out to establish why and subsequent adjustments made to correct the situation.

The PWC report contains comparisons between Shannon Airport and Bristol Airport. Similar passenger numbers are carried. In 2001, Shannon carried 2.4 million passengers, compared with Bristol's 2.1 million. In that year, Shannon made an operating loss of €1.1 million, while Bristol made an operating profit of €16.9 million, the difference of €18 million amounting to a startling difference in financial fortunes. Surely it is appropriate to ask the reason.

Similarly, a comparison between Cork and Cardiff airports reveals the following: in 2001, Cork carried 1.7 million passengers while Cardiff carried 1.5 million passengers; and Cork made an operating loss of €3.2 million while Cardiff made a profit of €15.7 million, a difference of €18.9 million. Surely the key message is one of inefficiency in the running of our airports. The outcry should be for efficiencies, not taking a dog in the manger attitude or burying our heads in the sand while crying, "No change, no surrender".

Mr. P. Power

I wish to share time with Deputy Fiona O'Malley. There has been considerable debate over a number of years about the future of Irish aviation, in what is now one of the most volatile and fast-changing businesses in the world. I do not come to this debate with any ideological hang-ups. I come with the realisation that there are new and powerful competitive forces in the aviation sector which we will ignore at our peril.

Before discussing the detailed contents of the legislation it is important to set out clearly the new environment in which the modern aviation sector operates. Unlike the time when Aer Rianta was founded, the aviation sector operates in an environment which is now ultra-competitive. In many cases the margin between success and failure of some of the world's largest airlines is wafer thin. Not long ago we saw US airlines in serious trouble. National flag carriers throughout Europe have gone to the wall. The increasing dominance of low-cost and low-fare airlines is now a major factor in aviation policy.

What are the factors influencing and driving the aviation sector in the modern world? First, all international studies and aviation experts indicate that the boom in airline travel over the last 30 years will continue for the next two decades, at least. This means that literally millions more passengers throughout Europe and the rest of the world will want to travel by air, provided the price remains affordable. Deputy Ryan made the point that he is not certain whether those figures will be realised. We on this side of the House do not have the luxury of second guessing what the trends are. All we can do is rely on the trends that have occurred over the last 30 years and the projections for the next 20. To abdicate responsibility for formulating policy on that basis would be foolhardy. Unfortunately, Deputy Ryan does not have that luxury.

Second, the drive towards lower fares will continue unabated while this results in welcome increases in passenger numbers. A corollary of this is that the dominance and power of low-fare airlines will increase inexorably over the next ten to 15 years. This is a key factor which, again, we cannot ignore. Third, the cost of aviation fuel is likely to increase as world fuel supplies dwindle. Fourth, deregulation of the global aviation business on the ground and in the air will continue, especially in the Pacific Rim area. The US-EU open aviation area will have a major impact on Irish airports over the coming years, particularly on Shannon, with its dependence on the North American market.

Finally, the rise of regional airports throughout Europe is being driven by the requirements of low-fares airlines. These are the critical factors now driving the aviation sector. Not one of them was there when Aer Rianta was formed and if we ignore those in the formulation of our new aviation policy, we do so at our peril. All of these factors mean that the aviation sector is now moving into an ultra-competitive phase where only those airlines and airports offering the most competitive and attractive packages will survive. All experts in the international aviation field agree on this basic premise. As matters stand the manner in which Irish airports are structured does not allow them to compete in the new modern aviation environment. The question for this House, therefore, is how the Government and the country responds to this new reality. Some would suggest, and they have done so today, that we simply do nothing and carry on as before. I submit that this is simply not an option. Airports and airlines need to be flexible to adapt to a rapidly changing environment.

A clear analogy can now be drawn between the status of Aer Rianta at this stage and that of Aer Lingus and some other national flag carriers throughout Europe a number of years ago. Previously Aer Lingus, among other airlines, refused to adapt to the new aviation environment which resulted from airline deregulation in the 1980s. This almost led to the collapse of Aer Lingus. It was only when new enlightened management was put in place that the national flag carrier embraced the new environment I have spoken about earlier and now that airline has flourished. A clear comparison may be drawn between what happened to Aer Lingus and what will happen to Irish airlines unless we embrace the new reality of ultra-competition in the aviation sector generally.

One only has to look at the UK and Europe to see the benefits to be derived from autonomous competing airports. Less than half the passengers flying to London now use Heathrow compared to ten years ago. As we all know Heathrow Airport has not suffered the slightest damage to its bottom line or profits but the surrounding airports have gained significantly. The fact is Heathrow was not in a position to absorb the increased demand. A direct comparison may be drawn between Heathrow then and Dublin Airport now. Dublin Airport is operating at over-capacity. Shannon and Cork airports are operating at under-capacity.

Every informed commentator in the mid-west region knows that Dublin is simply not letting Shannon cut the sort of deals necessary to grow the business. In this regard Deputies Ryan and Shortall made a point pretty fundamental to this whole debate, which in effect was that airports do not compete in a modern environment. That sounds right if one is talking about competing for passengers. It is correct. However, fundamentally airports do not compete for passengers. Airports compete for airlines. Let us take a passenger in Roscrea who wonders if he or she will go to Dublin or Shannon and then decides to go Dublin because it is five euro cheaper, or vice versa. The reason that passenger decides to go to Dublin or Shannon is because those individual airports have contractual arrangements with airlines in each airport. If the airports do not have arrangements in place to bring the airlines in, the consumer has no choice and pays the price for that. All the arguments made take this point as their basis and I believe this is fundamentally flawed.

In Britain, with an economy growing at a much slower rate than ours, the regional airports are expanding at a much faster rate because of independent expert management. I am referring to airports such as Prestwick, Belfast, Cardiff and Luton. All of these are thriving under independent management. I welcome Deputy McHugh's contribution on this point, a man who represents regional Ireland and knows the factors driving regional development in this country. His views should be taken on board by some of the more urban-based Deputies who have spoken already on the subject.

It is because good management is the key to success that I am happy that the legislation makes one important proviso, namely, that each of the new authorities must produce viable plans to the satisfaction of the Ministers for Transport and Finance. This will be no small task and will be entirely a matter for the new authorities to cross this first hurdle. In this regard the new authorities should be under no misunderstanding or illusion as regards the threshold required to satisfy the conditions set out in section 5. It will be high, let there be no doubt about that.

The mere passing of the legislation is no guarantee that the Second Stage is automatic. Furthermore, the proper, effective and successful implementation of the business plan will require examination and scrutiny to ensure that the business is developed and defined targets are met. The authorities should be in no doubt that if they do not meet the defined targets, appropriate remedial action will be forthcoming. In this regard I am suggesting to the Minister that the Joint Committee on Transport should have a role in scrutinising the authorities to ensure they are performing. I also believe the committee should have a role as regards scrutiny of the business plans which will be forthcoming in the next few months.

The memorandum and articles of association of the new authorities are referred to in section 9 of the Bill. The primary objective in the memorandum and articles of association should be the proper implementation of Government policy and business plans.

l am dismayed by some of the comments from the existing Aer Rianta board in recent weeks and months. It is not appropriate or acceptable for Government appointed directors to question general Government policy, as their job is to implement that policy on the board. The new authorities should not doubt that they are in place to serve the interests of the public as expressed through Government policy. That reality should be reflected by section 9 and the memorandum and articles.

I would be grateful if the Minister would provide some clarification about section 24 which relates to the Customs-Free Airport Act 1947. It has been suggested that the Shannon free zone may form part of the authority at some stage. Is section 24 an enabling section in that regard? My concern is that any such proposal would be premature. Decisions or proposals of that nature should not be made before publication and analysis of a major review of industrial policy which is being undertaken by the Government

There has been some talk in the Chamber and in other fora in recent days about the disclosure of interests in respect of this legislation. Although I do not feel I have an obligation to do so, I would point out at this stage, if only for the record, that a member of my family is employed by Ryanair and has a minor shareholding in that company.

As I said at the beginning of my contribution, I have no ideological hang-ups in this regard. I am speaking in this debate in the realisation that if we do not act now, our airports will suffer the same fate as many airlines suffered between the late 1980s and the mid-1990s. The vast majority of airports operate successfully and profitably and employ more people than ever throughout Europe. They are autonomous and are not part of larger groups. Ireland is a small island that depends on the growing aviation industry. It would be foolish to lock the three airports together, so that they are unable to develop their businesses within the sector, in the type of environment that was outlined at length at our recent meeting. Such a move would be detrimental to our regional airports, in particular.

Ms F. O’Malley

I compliment Deputy McHugh on his contribution, which was particularly impressive when one considers the constituency he represents. He knows what he is talking about. Deputy Ring asked to be given a copy of Deputy McHugh's speech. I hope he will dwell on the wisdom in it when he receives it.

Mr. Ring

Deputy McHugh thinks he will get a job supporting the Government when it gets rid of the Progressive Democrats.

Ms F. O’Malley

The Deputy will learn a thing or two from the speech made by Deputy McHugh.

Mr. Ring

He is playing for a position when the Government dumps Deputy O'Malley's party.

Ms F. O’Malley

I am sure the Deputy will see the good points that were made. I welcome the publication of the State Airports Bill 2004 and the commencement of the debate on it in the House this afternoon. The break-up of Aer Rianta has been spoken about for far too long, but we are finally seeing some action. Caution and resistance to change on the part of those within the existing structure has grown over time, as it does in any sector that faces change. To his credit, the Minister has taken time to alleviate such problems. He has addressed the anxieties of the workers and the resistance to change of the Government appointed board.

Deputy Peter Power highlighted the fact that it is rather inconsistent that resistance should be shown by a Government appointed board, the sole function of which is to implement Government policy. It is disappointing that the board has behaved in such a manner. I am sure the Bill is better for the time the Minister has spent dwelling on some of the anxieties and ironing them out.

Some Members of the House remain hostile to deregulation wherever they meet it, largely for ideological reasons. There cannot be too many Deputies who, having experienced deregulation in the taxi and airline industries, continue to cling doggedly to their comfort blanket. It is clear that deregulation has worked. It is not hyperbole to describe the deregulation of the skies as one of the major successes of the 1980s and 1990s.

The economic spin-off from deregulation is best illustrated by assessing the example of tourism figures. Irish tourism figures were static for 20 years before deregulation, remaining at approximately 2 million. The figure climbed, significantly, to 6 million when access to the country was deregulated. That is clear evidence of the positive effect of unregulated access on the Irish economy. A more direct result was the plummeting of air fares, which were brought into everybody's reach. People started to fly from Dublin Airport and the regional airports.

We have focused on the three airports which are the subject of this Bill, but we have forgotten about the many private regional airports which operate in many Deputies' constituencies. Such airports have brought substantial economic benefits to the areas in question. I am sure Deputy Ring will want to comment on the significant benefits brought by Knock Airport to his constituency. Tourists are flying directly to County Mayo and do not have to come via Dublin any more.

Mr. Ring

We have to battle to keep Knock Airport alive.

Ms F. O’Malley

Indeed.

Mr. Naughten

The problem is the fog.

Ms F. O’Malley

The terms of this Bill will make life much easier. As Deputy Peter Power pointed out, the airports are not competing for passengers but for airlines. The Bill will make Ireland a far more attractive place for people to fly into, generally speaking.

The three airports which are the subject of this Bill will greatly benefit from the reforms proposed. The legislation constitutes a sincere effort to give the airports at Shannon and Cork the autonomy to allow them to take decisions locally. Such autonomy will contribute greatly to proper regional development in the areas in question. The word "subsidiarity" was often used in this Chamber in previous years. Deputies argued that decisions should be made locally. It was suggested that people whose businesses and livelihoods depend on local decision making should have the power to make decisions. The legislation before the House is commendable because it supports regional development.

The establishment of the three airport authorities will lead to competition between them. The ultimate beneficiary of competition will be the public. All operatives smarten up their operations to attract more customers in a competitive environment. Customers can be airlines in this instance. Competition may lead to an expansion of flight connections and an extension of the services provided at airports. A more commercially focused airport will deliver better results for the shareholder, who is the Minister for Finance, operating in trust for the Irish people.

I agree with Deputy Naughten, who lamented earlier the fact that real competition is not being dealt with in this Bill because it does not provide for a second terminal in Dublin. Competition will thrive in a more deregulated environment, however. The case for having a second terminal at Dublin Airport will be made in such an environment. There is a case for a third terminal.

Mr. Naughten

It is hard enough for the Government to decide on a second terminal, never mind a third terminal.

Ms F. O’Malley

The Government has committed to examining the case for a second terminal. I am not as familiar with Cork Airport as I am with Shannon Airport, which is in a lamentable state because its potential for growth is not being met as a result of orders coming from Dublin.

Ms Shortall

And orders from the Minister.

Ms F. O’Malley

Those who have spent some time at Shannon Airport will know that the changes proposed in this Bill will provide much better services for the people of the mid-west region. I am sure the same is the case in Cork and the southern region.

Deputy Peter Power mentioned that a disgraceful innuendo has been introduced to the debates on this issue in the Dáil, the Seanad and on the national airwaves. The allegation that policies are being pursued by the Government, particularly by the Progressive Democrats, to benefit one company and one individual is quite deplorable and false. Such tactics are being pursued by those on the left and those who have been left behind. None of the people who have made such allegations can hold a candle to the record of Deputy Harney as Tánaiste. She has achieved great improvements in this country's public service.

The notion of re-declaring political donations has been mentioned. The Tánaiste has never had a problem making any declarations about party finances. However, this is not so true of the Labour Party, which is financed heavily by the trade unions. That fact has never been declared before the House. It is hypocritical of the Labour Party to suggest that the funding from the trade unions works for the lofty democratic process, yet anybody financing any other political organisations could not possibly have such a lofty ideal in mind. That is hypocrisy and a double standard. It also casts a shadow on the private donations the Labour Party receives from individuals. Such donations form part of how democracy is funded. Although I would prefer the system to be funded by the State, we make our declarations honestly and are glad to accept donations.

With this legislation we find ourselves at the departure gates of new and exciting opportunities for our regional airports. The future will see these possibilities take flight. I commend the Bill to the House.

Mr. Ring

I am glad Deputy Fiona O'Malley has made a strong case for the Progressive Democrats. I do not know how Fine Gael survives. We do not get Michael O'Leary's money, nor do we get money from the unions. We are a great party to survive at all.

Having heard Deputy Peter Power speak, I never thought the day would come that I would defend a Fianna Fáil appointee, the chairman of Aer Rianta. If in the past those on boards and in banking institutions had spoken out at what they saw was not right, we might not have needed half the current tribunals. There is nothing wrong with the chairman of Aer Rianta speaking out. The Bill will affect him, his board and the workers. Nobody should question his right to speak out, particularly at a time when such major changes are taking place.

I say to Deputy Fiona O'Malley that I am all in favour of competition and of getting the best value. I supported the privatisation of Eircom and changing the ESB to a semi-State body to try to get a better service for the whole country, not just the rural areas. We saw the way the ordinary decent people were robbed because of the flotation fiasco handled by the Government. Big business subsequently took it over and made a fortune. Those business people were not robbed because they knew and were told what was going on. However, the poor investors were robbed.

At one time Ministers used to go around the country at election time with telephones in the boots of their cars. Mark Killilea was the man who brought them around in his car and he could connect up a telephone there and then.

Mr. Brennan

Mobile phones.

Mr. Ring

He was 25 years ahead of his time and was there before the mobile phone. If he had known what he was doing at the time he could have been a billionaire by now. In my constituency those wanting phones willl be lucky to get one in 12 months' time.

I have no worry about Dublin, which has the population. The political will exists such that, regardless of which party is in Government, it will be looked after. Dublin will be protected, as we saw in the past with the banks when emergency legislation was rushed through and there was no difficulty for big business. When someone in a remote area wants a phone, Eircom will point out that 12 or 15 poles would be required and that such an installation would not be economical. This is exactly what will happen with the airports.

I want Shannon Airport to succeed, develop and stand alone. My county has an airport that got very little support from the State. Aer Rianta was not very helpful to Knock Airport and put every obstacle in the way to ensure it would be a failure and to prevent regional airports from setting up. For Shannon, Cork, Knock and Sligo it is important to have regional airports. People want to be able to leave New York in the evening and be in their destination the following morning. They do not want to be in Heathrow or Dublin Airport. When travelling to Cork, Shannon or Mayo, they want to get there in the quickest time and at the cheapest price.

While we can talk about airports and bring people here, we all have a problem now with the price of our product. On Monday a constituent told me he was planning to go to Kerry on holidays this year. He rang an establishment, which I will not name, and was quoted €1,100 for a two-bedroom apartment for the week, which did not include a cup of tea or a glass of milk. The same family subsequently booked a full board cruise holiday for €1,500 for the week. Regardless of how cheap the flight is, where will someone coming to this country go? They will certainly not come to this country unless we do something about the cost of the product.

The Minister has spoken for a long time about the break up of Aer Rianta and the local and European elections two weeks ago certainly stirred up the Government parties. Michael O'Leary has been very good to the Independent group of newspapers in recent years. He has been one of its best clients in taking out advertisements critical of the Taoiseach and the Government in general. I do not believe he was ever critical of the Tánaiste, whom he seems to like for some reason. I praise him for the good job he did for the country as a second carrier offering cheap flights. It was he, not the Government, who sorted out Aer Lingus, which got into difficulty in the first place because he put it under competitive pressure and took away its customers. Aer Lingus had to reform and compete.

For some time the bloodstock industry has controlled Government policy on taxation. Those involved in that industry meet the Taoiseach and Ministers at football matches and race meetings. They have the influence and do not care about the small guy in the street. All they care about is looking after their bank balances so that they can make more money to maintain their lifestyles living outside the State, paying no tax in the State and still having influence on what happens here, which is wrong. The people spoke two weeks ago and are waiting in the long grass to speak again in two and a half years time when they will deal with certain people with whom they could not deal two weeks ago, although they dealt with their parties.

What will happen to airports like Knock? I am not sure about Sligo Airport, which might be privately run. Will such airports get the same level of support the Government will have to give to Dublin, Shannon and Cork Airports? These three airports will now receive major subsidies while our airport in Knock, for which we have struggled and battled over the years, will not. I compliment the chairman, board and management, who are doing an excellent job. The Minister has met them on many occasions. They had to fight to bring in the airlines, no thanks to Aer Lingus or Aer Rianta. They had to use their own Mayo contacts throughout the world, and the Mayo mafia worked on this occasion. Thank God the Mayo mafia had those contacts and we were able to deliver. We did not depend on Government or anybody else.

We got the airlines in at a time when Michael O'Leary threatened the airports and said that if they did not take what he was offering them, he would pull out. I have great respect for Michael O'Leary but he should not control Government policy on our airports. Regardless of how good or powerful he is, that should not be allowed to happen. When the day comes that we have a second terminal in Dublin Airport, I hope Michael O'Leary will not have control of it because if that happens, we will be back to the bad old days. At least there is competition now among the airlines but it would be wrong for Dublin Airport to be controlled by one person, with another person controlling the other part. That aspect will have to be carefully examined.

I hope the Minister has thought out this proposal because he has not given us the answers. I compliment Deputy Naughten on his contribution this morning and also that of my colleague, Deputy Shortall, from the Labour Party. Both Deputies spelt out the position very well. Everybody wants this proposal to work but they are worried because we do not have the facts, and the Minister has not given us the answers. That is dangerous. The Minister and the Department spent a good deal of money bringing in consultants and so on, yet we still do not have the answers.

I am worried about Shannon, which has gone through a difficult time over the past few years. Deputy O'Malley will remember the three Fianna Fáil backbenchers who did not support the Government. They were put out into the long grass but they were soon back in again, and they were strongly supported in Shannon. When the Shannon stopover ceased and aircraft were allowed fly into Dublin, it had an adverse effect on tourism for a number of years, and nobody can say otherwise. At the same time, I accept that somebody travelling to Dublin from Chicago, New York or wherever does not want to stop over in Shannon. They want to fly direct to Dublin to do their business.

I am concerned about what will happen. I am worried about Cork also. I am not worried about Dublin because it has the population and the infrastructure. It will survive because the city is growing so fast. It is important that the Minister should answer the questions asked of him and that we know how Shannon, Cork, Knock, Sligo and all the other airports will be protected.

I have seen how valuable Knock Airport is to the west. There is no doubt that it is one of the best pieces of infrastructure ever put in place. The board struggled for a good many years but at last it has seen a turnaround and they are working hard at it. I want to know if Knock Airport will get the same level of support as these other airports with this break-up. That is a question the Minister and the Department have to answer.

We all want competition. The Lord have mercy on the late Deputy Jim Mitchell because when he was Minister for Communications he allowed competition here when many people were opposed to it, yet I have never heard Michael O'Leary compliment the job he did over the years. Michael O'Leary would never be heard of if the late Jim Mitchell had not done what he did, yet he appears to have great time for the Progressive Democrats and people in Fianna Fáil — not that we want him to praise us; that might not be a good thing.

On the question of Michael O'Leary's influence on this proposal, I hope Government policy is for the good of the people, the country and the business sector and not for one individual who has the power, money and resources to publish advertisements in two or three newspapers on a daily basis. If that is the way Government policy were being determined, it would be wrong.

Despite all its faults Aer Rianta has not done a bad job for this State. It has kept the operation running over the years and it has done it well. People who were appointed by Fianna Fáil, including the chairman of that board, have voiced their concerns because they know there is something wrong with this proposal. I have no problem with competition but I am concerned about what the Minister is proposing. I am worried about the fact that certain people have influence over Government.

Dr. Devins

I am delighted to have this opportunity to speak on the State Airports Bill 2004. The reforms which this Bill will provide for are aimed at developing Dublin, Shannon and Cork airports so that they can achieve their true potential.

Is it necessary to improve the delivery of service at these airports? In trying to answer that question one must first fall back on one's own experience. The one airport of the three that I use most is Dublin Airport but I have to say that of all the airports I have travelled through, Dublin Airport is the one I least like. I say that because my experience of using Dublin Airport, for both domestic and international travel, is associated with delays, long queues and car parking that is either very expensive or a long distance from the main concourse. Over the past few years, the airport has resembled a building site.

I am sure the supporters of the current arrangement will say that these building projects are an example of an airport that has expanded rapidly, but why was expansion not foreseen and planned for? It has been obvious for some time that the traffic through Dublin was increasing and with any degree of professional forward planning, the ability of the airport management to expand could have been achieved within a much shorter timescale.

Dublin is the main airport of this State and it is the airport through which most of our business and tourists come. It is their first experience of Ireland and, until recently, I am sure that is an experience which did not reflect well on our country. Matters have improved recently but why has it taken so long? The answer to that question may be unpleasant but the question must be asked. I believe it does not reflect well on the management of Dublin Airport.

I live in Sligo, which is roughly equidistant from Shannon and Dublin. During the past few years I have become aware that more and more people from the north-west are using Shannon rather than Dublin and, almost invariably, they are loud in their praise of Shannon. It is still easy to park there, check in and use the shops and restaurants. Generally, it is a much better experience than using Dublin Airport. That may well have something to do with the untapped potential of Shannon Airport. I understand that approximately 2 million people use Shannon, and that figure can be realistically expanded to 4 million. This can be done if the airport is marketed in the right manner, something that has not been done so far.

As an example of what I mean we have to look no further than Knock International Airport. This is an airport located in the middle of a rural area, an airport that all the pundits laughed at and said would never succeed but succeed it has, and it has grown exponentially. It has done so because of the commitment of a small group of people and by having a chairman on board who is focused on Knock alone.

I recently attended a briefing in the House by the airport management board and I was very impressed by its vision and strategic planning. Its focus is totally on its own airport, and I have no doubt its realistic goals will be achieved. There is nothing to stop either Cork or Shannon achieving similar growth. In fact, their advantage in being located close to large urban areas is even further proof that under their own boards, the current growth figures are not only achievable but may well be on the modest side.

This Bill is the enabling legislation which will allow for the restructuring of Aer Rianta and the establishment of independent airport authorities at Dublin, Cork and Shannon. There is strong support for this and nowhere is this stronger than at local level. Local people, not just in Shannon and Cork but also in Dublin, have seen the success of the independent airports such as Knock and those in the UK and on the Continent.

The long-term viability of each of these airports and the procedure according to which the assets of Aer Rianta can be dispersed in an equitable fashion have been raised. The Minister for Transport has wisely taken these issues into account. Once the separate authorities have been established, they will have to prepare a realistic plan on their future development.

Debate adjourned.