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.