I was first asked to come before the committee on 5 October 2005 but I had arranged to visit my mother in Los Angeles following the completion of our determination. The Chairman of the committee suggested that our delegation's appearance before the committee could be deferred, for which my mother and I thank the committee.
I read the transcript of the meeting held on 5 October and will address in my introductory remarks some of the issues discussed on that occasion. I will then briefly discuss denied boarding and airport charges. The topic which largely occupied the committee on 5 October was illegal trading in the travel industry, which I will put in context to illustrate the problem we face and what we have attempted to do about this very important area.
I must reluctantly state that the travel trade frequently acts in contravention of the licensing regime. The bonding scheme was established as a result of the concern that if a travel agent or tour operator went bankrupt, consumers would be out of pocket and unable to travel and people who had already reached their destination could be left stranded. The bonding scheme requires an annual renewal of the licence application, which is generally carried out at the end of April and the end of October. At the end of the licensing period, a significant number of existing tour operators and travel agents invariably do not send in their paperwork, accounts and bonds on time. Following an examination of this file this morning, I discovered that approximately one-third of those travel agents and tour operators whose licences have expired at the end of October have not completed their paperwork so that they can have their licences renewed.
We often hear calls from the travel industry for us to aggressively enforce the existing legislation and we take these calls very seriously. It must be pointed out that many in the industry do not give sufficient care and attention to getting their own houses in order. This inevitably leads to these tour operators and travel agents operating without a licence for a period of time, which is generally short, leading to an increase in the burden on our office because we must chase them for the paperwork. It also undermines the integrity of the entire system.
The Commission on Aviation Regulation has taken the prosecution of illegal trading very seriously and has devoted a significant amount of resources to it. Prosecuting illegal trading is costly and time-consuming. It requires the collection of evidence. Witness statements, documentation demonstrating actual transfer of money, banking statements and cancelled cheques must be collected by the commission. This inevitably means going to court to seek search warrants. We must build up a book of evidence, which must be sent to the Director of Public Prosecutions, who then gives us a direction. On foot of that, we must initiate a legal process. The entire process is very time-consuming and costly and requires the investment of an intensive amount of resources on the part of the commission. Some speakers at the committee meeting on 5 October stated that they wished we could carry out matters more quickly. We operate through the legal process, which is costly and time-consuming.
Once a case is prepared, we go to court and the court imposes the fine. In one high-profile case in Limerick, we finally went to court after going through a very lengthy and costly process. The judge heard all the evidence and levied a fine of €1,000 on the individual who was trading without a licence. An award of €500 was made for our costs and I do not need to tell anyone here that our costs were far in excess of this figure. These are the circumstances in which we operate.
The question arises as to the extent to which the travel industry and consumers are willing to pay more for vigorous enforcement. It is not clear to us that consumers are fully aware of the benefits of the statutory regime. The fact that increasing numbers of consumers book their holidays with airlines on the Internet, which operates outside the bonding scheme, is evidence of this. This phenomenon exists throughout the developed world. These consumers are effectively bypassing the licensing regime and indicating that they are unaware of or unwilling to pay more for the protection afforded by licensing.
In these circumstances, we have attempted to be proactive and have initiated and successfully completed seven prosecutions since the establishment of the Commission for Aviation Regulation. Prior to the establishment of the commission, these functions were the responsibility of the Department of Transport. We are not aware of any prosecutions before the establishment of the commission. We have brought prosecutions but we are not funded by the Exchequer. We are only funded by the licence fees we collect from the travel industry. The fee for a licence renewal for travel agents is €300, which has not increased since the establishment of the commission. We are presenting the industry with a regulatory contract. Travel agents and tour operators pay us the fee and we administer and enforce it. We have kept up our side of the contract. We have not raised the fee and have brought more enforcement but would like to see the industry take a more proactive role in setting its own house in order and bringing the advantages of going through a licensed travel agent or tour operator to the attention of the travelling public. The advantages are that travellers receive statutory protection and we can administer this regime very efficiently and effectively to ensure that no individual is stranded abroad. These are the major issues we face that relate to the regulatory regime. I wished to put them in context because they were discussed in this committee on 5 October 2005.
I will briefly discuss two matters in which the committee is interested. We are happy to address any follow-up questions. The denied boarding compensation regime was established pursuant to Regulation (EC) 261/2004. This function was transferred to the commission only on 31 May 2005. The commission has one staff member who deals with this matter, in conjunction with some members of our existing legal team. The committee may be aware that there is some uncertainty about the application of the regulation in question. Some consumers believe they are entitled to compensation any time there is a delay.
That is not what the scheme states. There are exemptions for extraordinary circumstances. I am aware some issues have been raised about when precisely these circumstances arise. This is a matter on which there is a degree of uncertainty, not only in the public mind but also among member states. We have actively studied the matter and have liaised with other European jurisdictions and with the Commission itself. Members may be aware that as this EU regulation has been subjected to a legal challenge, some uncertainty still exists. However, I can assure members we are examining the issue very carefully. We take our responsibilities seriously and are actively working with the airports and the airlines to ensure this regulation is enforced in Ireland. At present, enforcement is a work in progress, because the relevant airline is the first port of call for a passenger who believes he or she is entitled to compensation. If such passengers do not receive satisfaction, they can then complain to the Commission for Aviation Regulation and we will take up the matter with the airline. We have certain powers to issue directions or ultimately to go to court seeking fines. That process is working itself out, but we are pleased to report there is an ongoing process and we are optimistic this regime can be enforced in Ireland.
The last issue in which I believe members will be interested is that of airport charges. I will introduce it by way of providing some background on our office and what we have done to date. The office was established in February 2001 and our primary statutory obligations are the setting of maximum levels of airport charges and — a matter which receives somewhat less attention — the setting of aviation terminal services charges. These are charges levied by the Irish Aviation Authority. We were given six months to put in place the first price cap, which we did at the end of August 2001. That price cap was to run for five years, until the end of September 2006. The State Airports Act 2004 directed us to put in place a new determination by 1 October 2005, which we have done.
Under the old price cap, the maximum level of charges per passenger at Dublin Airport for the year 2005 was €4.90. According to the new price cap, which comes into effect in January 2006, that will rise to €6 per passenger and will then increase in stages for a four year period. Hence, our work is done. However, the price cap can be considered a work in progress for a couple of reasons. The legislation provides for an appeal of our determination and it must be set in motion by the end of the year. It provides that once the Minister has received an application from an interested party which he believes to be substantive, he may establish an appeals panel, which has two months to consider any issues before making a referral to the commission. Hence, there is potential for the determination to be amended in the relatively short term.
The legislation also provides that the commission may review the price cap on its own initiative at any time we see fit, providing we believe there are substantial grounds for so doing. In our most recent determination, we stated that because of a number of factors, there was considerable uncertainty about the capital expenditure programme at Dublin Airport. We were presented with a programme extremely late in the day and could not examine it adequately. We have stated we will examine the programme and if we feel there are substantial grounds arising from that, we can start a review on our own initiative. Without detaining the joint committee with too much detail, the State Airports Act also provides that we must perform a review after restructuring of the airports takes place. The State Airports Act contemplates that at some time in the future, Cork Airport and Shannon Airport will be separately vested as independent airports and if this were to happen, we would perform a review of the determination.
