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Joint Committee on Transport, Tourism and Sport debate -
Wednesday, 25 Jan 2017

Current Financial Situation at Bus Éireann, the Expressway Service and the Rural Transport Programme

I remind members, witnesses and those in the Gallery to ensure that mobile phones are turned off as they will interfere with the broadcasting equipment.

We will now discuss the current financial situation at Bus Éireann, the Expressway Service and the rural transport programme. The provision of a suitable and effective public transport service is integral to a functioning economy that seeks growth across all regions, not least in small towns and villages. Today, we have an important opportunity to discuss all matters pertaining to that.

The committee welcomes the opportunity to engage with Bus Éireann and Irish Rural Link. I hope today's discussion will identify some of the important issues which relate to this matter and on which we will be able to work. We are joined, from Bus Éireann, by Mr. Ray Hernan, acting CEO, and Mr. Stephen Kent and, from Irish Rural Link, by Mr. Seamus Boland, CEO, and Ms Louise Lennon, policy adviser. I thank them for attending.

By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of the evidence they are to give this committee. If they are directed by the committee to cease giving evidence in relation to a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any persons or entity by name or in such a way as to make him, her or it identifiable. Members are reminded of a long-standing parliamentary practice to the effect that Members should not comment on, criticise or make charges against a person outside the House, or any official by name in such a way as to make him or her identifiable.

The presentations should be no more than five minutes in duration and after that I will allow members to ask questions in the format agreed in private session. I invite Mr. Hernan to make his opening statement.

Mr. Ray Hernan

I thank the Chairman and members for their invitation which gives us the opportunity to update them on the serious financial difficulties that Bus Éireann is facing at this time.

Bus Éireann is committed to being the key provider of public transport services outside Dublin in close partnership with our stakeholders. We are the biggest provider of regional and rural transport in the country, connecting many rural and urban centres, and in doing so are supporting the Government's objective of fostering balanced regional economic development.

I only recently joined Bus Éireann and I have been surprised by the complexity and the scale of the logistical operation that is delivered to the public each day. Last year, my 2,600 colleagues directly employed and 7,000 indirectly engaged with us carried an average of 110,000 passengers per day on a fleet of over 600 buses across 60,000 locations. In addition 114,000 schoolchildren are brought to and from school each day on a fleet of 4,500 buses.

I am proud to say Bus Éireann has been providing this pivotal role for the 30 years since it was founded in 1987. Our anniversary is on 7 February, which is not far away. In 2016, we increased our passenger volumes by almost 6%, equating to an additional 2 million passenger journeys, which was the strongest growth of all public transport companies. However, this passenger growth did not deliver an improved financial performance, but actually higher losses. As a consequence of this, I wrote last week to our staff formally advising them that the company's finances are now in a critical state and that the company will be insolvent in a short period of time unless drastic and decisive action is taken. To do nothing would mean all of the company, not just Expressway, will go out of business and as a consequence all jobs will be lost. This is not scaremongering; this is the stark reality of what this organisation now faces.

As acting CEO, I want to assure the committee, our customers and staff that my immediate priority is to lead the company out of this financial crisis. Over the past ten days, I have outlined measures that are required to make our company more cost effective and efficient which, I believe, will deal successfully with the immediate risk of insolvency while also ensuring the long-term future competitiveness and sustainability of the company. I am confident that this can be achieved with the support of my staff, their representatives and key stakeholders to implement the measures announced last week.

A number of factors have contributed to our crisis and I would like to address those here. Losses in the order of €8 million to €9 million for 2016 will mean our total reserves are now depleted to approximately €7 million, which is less than one year's reserves at the current run rate of losses. Costs are increasing at a faster rate than revenue growth, driven by both payroll and non-payroll categories.

The competitive landscape is also changing. Customers expect more for a reasonable price, more routes are being put out to public tender and additional licences are being issued on existing routes.

As an organisation, we must accept that there will be more competition. Competition is good for the consumer and is good for us too. Competition ensures that businesses remain agile, customer focused and also cost focused.

In the context of the above, I have already commenced a root and branch review of all operational structures and every cost driver. Savings need to be achieved, to reduce our existing cost levels but also to compensate for cost inflation including projected increases in insurance claims, higher fuel costs and upward pressure on pay. My management team will be working hard during the next few weeks to finalise the most efficient structures and staffing numbers required to provide our services. Improved staff rostering and better utilisation of our fleet will provide the foundation for delivering a more efficient business that is capable of competing for all new tenders and contracts, and enable us to aggressively defend our position on existing commercial routes.

Expressway will continue to be an integral part of our business. The losses in Expressway, however, cannot be reviewed in isolation from the rest of the company. All of Bus Éireann’s businesses are tightly interlinked and as a consequence the solution to Expressway's financial difficulties can only be achieved as part of an overall company-wide solution. As a commercial entity, Expressway is restricted from receiving state aid. It has been made clear that Government cannot provide funding for these services; to do so would be in breach of EU laws on state aid.

An increase in free travel subventions has also been suggested as the way to fix Expressway. I strongly disagree. The challenges faced by Expressway can only permanently be fixed by addressing the cost inefficiencies and inefficient operational structures that exist within the company as a whole. Free travel did not cause our problems and an increase in revenues for such services will not fix all our problems. I note our former CEO had written to the Department of Social Protection before Christmas on this matter and I will follow this up in due course.

I wish to make it clear that my management team and I are not bluntly targeting our staff to fix the financial problems that exist within our organisation. As stated earlier, all structures and all cost drivers, including existing management structures, are being challenged and reviewed.

My undertaking to staff is that Bus Éireann will safeguard basic pay and seek to protect the maximum number of viable jobs. However, I also want to make it clear that significant opportunities for improved efficiency and cost competitiveness exist and are within our own control. We are focussed on delivering a long-term solution, not a short-term fix.

Bus Éireann is committed to providing a safe and sustainable public transport service to all communities outside Dublin in partnership with its stakeholders, and to this end we must now ensure the following. First, we need to engage urgently with our staff and unions to agree that measures must be taken in the best interests of a secure future. I have already presented a detailed offer which must be implemented. I am disappointed that unions declined our invitation to meet yesterday. I take this opportunity to ask the unions and all staff representatives to as a matter of urgency come to meet us and engage in meaningful dialogue.

Second, we must work within the level of funding that is made available for public transport and we must deliver more services which are enhanced and progressive, deploying more new fleet and higher customer standards. The committee should note that in the last 12 months over 200 services were either introduced or improved and further services will be rolled out this year, an example of which is an extension of the Athlone town service from Sunday next. We must continue to provide a value-for-money service, not only for our customers but also for the State and the taxpayer.

In terms of our future, Bus Éireann must play a central role in Irish public transport. Our network is a vital asset which we must protect and it is our intention to continue to provide connectivity currently served on our commercial and PSO routes. We must continually address the viability of all routes and where changes are required for commercial reasons on some Expressway routes we will only do so after full consultation with the NTA, which retains the responsibility for connectivity. I assure the public that we will do everything that can be done, in conjunction with the NTA, to ensure no passenger is discommoded by any decision made.

Bus Éireann must provide a value-for-money service for both the customer and the taxpayer. We must be able to compete on service and cost and we must achieve this through improved efficiencies. It is an opportune time to be involved in public transport. We are becoming an increasingly commuter-driven society, and congestion is a growing and frustrating daily experience for many. The need for a credible alternative to the private-car commuter provides an opportunity for Bus Éireann to enhance its position as the key party at the heart of public transport. With an efficient and competitive business model, I believe Bus Éireann can thrive and exceed on the expectations of our customers and staff in the future.

I thank Mr. Hernan. I now call on Mr. Seamus Boland, chief executive officer of Irish Rural Link, to make his opening statement.

Mr. Seamus Boland

With the Chairman's permission, I will provide a brief introduction, Ms Lennon will speak about what rural transport means and I will finish with recommendations.

Irish Rural Link, as the committee will be aware, is a national voluntary organisation with over 1,200 community groups which are active members. These are people who are actively engaged in providing a range of services and development in rural areas right across the country. We also have a link with our Northern Ireland counterparts.

Since the foundation of the State, transport has been a major issue for those living in rural areas. The establishment of Bus Éireann saw the development of a rural transport service that was able to connect people to other areas. However, it continues not to reach everyone.

Transport remains top of every person's list of grievances when it comes to rural communities. Irish Rural Link was one of the co-ordinators with The Wheel in the digital switch-over programme. During that programme we discovered some 93,000 households that do not have access to public transport - we believe the figure is higher but that was merely a factual discovery because we are involved in that programme. Overall, there were 120,000 people living in rural areas who had no access to public transport. Many of those households have the free transport pass but, unfortunately, it is not usable. The fact they cannot use the free transport pass is a major loss to those families.

Lack of public transport impacts both socially and economically on people's lives. For people who are unable to drive because they cannot afford a car, because of health reasons or because they are elderly, etc., this means almost imprisonment in their own homes for large parts of the year. In terms of social transfer, Bus Éireann receives funding from the Department of Social Protection for the free travel pass. However, as I stated, people all around the country are still not able to use that pass.

For many years, there have been warnings that Bus Éireann and Irish Rail services would be reduced in rural areas. While not necessarily caused by Bus Éireann or Irish Rail, such warnings always issue. Irish Rural Link is tired of the continuous use of the threat to rural services every time a dispute or a controversy arises in public transport. We believe it is an obligation of the State to provide public transport. Services, not only bus services but post office and other services, are always used as the bargaining tool, the threat, the meat in the sandwich. Irish Rural Link would call on the various parties involved to stop threatening rural communities with this kind of loss of service because this causes fear and worry among ordinary people who use the service on a daily or weekly basis.

We believe the community rural transport programme has been the Cinderella of transport in the last few years and has lost out heavily in terms of cutbacks and losses in revenue, but the importance of that programme cannot be underestimated. I ask Ms Lennon to go through why this is so important to so many people.

Ms Louise Lennon

I will reiterate what Mr. Boland was saying about the role that rural transport plays in combatting isolation for a lot of people. It is a lifeline for many people that do use it. Many people think that rural transport is for bringing older people into their local town or village to collect their pension on a Friday, but many other people use it as well. Younger people use it and in some cases, as one person said, they would not be able to get back into training and employment were it not for the bus. That goes a long way towards keeping younger people in rural areas as well.

The funding for the rural transport programme has increased in the last two years and it is €14 million for 2017, but it is still below what it was intended to be for 2016, at €18 million. It is carrying approximately 1.5 million passengers a year, so the service is vital for people. Also, some of the local links have contracts with the Health Service Executive, rehabilitation services and other services. They are linking into them, and people are dependent on the service to bring them to their hospital appointments. The importance and value that is placed on it cannot be measured monetarily, because people rely on it so much. It needs to play a greater role in the overall transport system.

Mr. Seamus Boland

Before I go into our recommendations, I want to read what a 77 year old woman in east Clare had to say:

This is my only way of getting anywhere. I use it every Saturday, without fail, to get my shopping and often on a Friday to get to my doctor. Without it, I just have to stay at home. It would take my entire pension to pay for a taxi. It would be very lonesome without it.

In that short statement one can see why it is so important to the average, ordinary person. It may or may not be profitable for the services, but it is essential under our national remit to provide public service transport. In terms of recommendations, Irish Rural Link has been involved in advocating rural transport for nearly 25 years of its existence and we have continually asked for the following transport recommendations to be looked at. We believe that there is a need for an overall transport review to look at making transport services fit for purpose. Therefore, within that review we want Bus Éireann, Irish Rail and the whole private sector to be looked at. We also, as part of this review, want an examination of the public service obligation. It may be fit for purpose, it may not be, but we need to review whether it is. The effectiveness of free transport passes needs to be examined too, with particular reference to the fact that many people living in rural areas are unable to use it because there is no public transport available.

There needs to be a new national transport survey on accessibility of rural transport, to update the information on the level of unmet transport needs in rural areas. As mentioned during the digital switch-over that we talked about, we believe that there is a minimum of 93,000 people affected by that unmet need. We believe that it is probably higher. We want to improve the integration of transport services between local rural transport and the national transport services, including Bus Éireann and other services, including health related and school transport services, to ensure full access to public transport and a seamless integration between services.

Could Mr. Boland conclude briefly?

Mr. Seamus Boland

There are solutions to providing the bus service, such as using the local community service to provide feeder services, setting up local transport forums, and making sure that there is adequate funding to deal with the free transport pass. Irish Rural Link is asking to be part of any dialogue, consultation or solution in terms of rural transport because of our record in advocating this over the last 25 years.

The points raised on Mr. Boland's recommendations have already been circulated to members. We need to stick strictly to the time allocated for questioning, because we have to be out of here for 1.15 p.m. to facilitate the next committee that is coming into this room. I ask members to please respect the time allocated. I call Deputy Fitzpatrick.

I welcome the witnesses.

My first questions are for Mr. Ray Hernan of Bus Éireann. He said in his opening statement that the company will be insolvent in a short period of time. Can he elaborate on this and inform the committee what time-frame he is looking at?

Mr. Ray Hernan

Based on the projected outcome for the year end of 2016, we will end up with reserves coming into 2017 of €7 million. Given that we lost between €8 million and €9 million last year, we will be insolvent before the end of this calendar year if that run-rate continues. That is why I am saying there is such urgency to implement what I regard as a survival plan.

I would also like to highlight, and it is a matter of urgency, that it is not just about potential insolvency by the end of the year. The other point that the committee needs to appreciate is that our board has fiduciary obligations to sign off on last year's annual accounts around the end of March. To allow it to sign off and to sign off for Bus Éireann as a going concern we need to present a plan that demonstrably highlights that we can turn to profitability in the very near future. If we cannot, then our board will not be able to sign off the accounts and the compnay as a going concern, and that creates a huge difficulty for the organisation.

Mr. Hernan also stated that a loss of between €8 million and €9 million was incurred in 2016. What were the losses in the previous years and why was the loss so high in 2016?

Mr. Ray Hernan

There are a number of factors. Last year we lost approximately €6 million. That was originally the projected outcome for this year as well.

One of the key areas of increase in the current year is the level of insurance claims that the company has had to deal with. Not only have we had increased insurance claims but we have also had increased payouts on those claims as well. That is something I have already identified as an area that we need to focus on. We cannot afford to see that escalating for future years, if we get through this year.

There are other costs as well that are increasing at a faster rate than the revenue growth, and unfortunately one of them is bus hire. This brings me back to the question of whether we have the most efficient operational structures in place in the organisation to minimise the bus hire costs that we are incurring, and also to minimise the level of overtime that we are also incurring across out staff network.

The solution to this is two-pronged. We must optimise the utilisation of two key resources. We need to optimise use of our bus fleet so that we have the maximum amount of buses at peak times, to meet peak demand. At the moment, we are not meeting that target. The second is that we must optimise the rostering schedules that we have for our drivers. That is not being done in the most efficient way to maximise the usage and utilisation of those key people within our organisation.

Mr. Hernan also stated that he has commenced a root and branch review of operational structures. When will this review be completed?

Mr. Ray Hernan

A root and branch review is under way and in terms of a culture, it must continue. Every organisation takes an ongoing root and branch approach to trying to deliver more efficiencies. In the context of our immediate financial crisis, that review will be completed by the end of March. However, we are not waiting until the end of March to start implementing measures to try to stem the losses. We announced measures to our staff at the beginning of last week. We also communicated to the trade unions a number of other measures we need to implement urgently. I appreciate, however, that these require negotiation with staff representatives. The announcement we made last Monday week was a list of 11 measures that were part of previous collective agreements and which, for whatever reason, were implemented only in certain areas and not across the whole Bus Éireann organisation. I have basically authorised that these measures be implemented with immediate effect.

We have implemented many other measures, for example, utilising technology to make our buses more fuel efficient. We have also outlined in greater detail other initiatives that will deliver immediate cost savings.

I am also confused by the statement that an increase in the free travel subvention would not help the challenges faced by the company. Surely Bus Éireann needs increased revenue and any increase in this subvention would help at this stage.

Mr. Ray Hernan

While it would help, it would not fix the underlying problem of the organisation. Bus Éireann is not fit for purpose to meet the demands, requirements and expectations of our customers at this point. It is for this reason that our root and branch review is examining structures and is not confined to trying to find savings. We are examining our operational structures to ensure we can effectively deliver the service we provide, while also achieving value for money.

Mr. Hernan stated the company would not bluntly target staff to fix its financial problems. I put it to him that this is precisely what he is doing. The letter circulated to staff on 16 January made clear that all options were being considered and each cost would be challenged and eliminated unless it could be established that it was essential for the operation of services. The 11 immediate actions advised to staff in the letter all bluntly target Bus Éireann staff. I ask Mr. Herman to explain the reasons these immediate actions directly target staff.

Mr. Ray Hernan

I reiterate that we are not bluntly looking at staff to fix our problems. That is absolutely not the case. We are looking at-----

In his letter, Mr. Hernan gave-----

Mr. Ray Hernan

The letter stated I am looking at all cost drivers within the organisation. We have already implemented 70 work streams across the organisation to try to achieve efficiencies. This covers, for example, improving maintenance scheduling for our bus fleet to ensure buses are available at peak times in the mornings and evenings. Currently, we do all our maintenance during the day. It is of no use having our buses being maintained in garages and depots during the day when they should be on the roads delivering passengers.

Unfortunately, staff costs account for approximately 40% of our total cost base and this cannot be ignored. We do not have the most efficient structures and we do not obtain best value for money from our staff structures. However, we have also identified many other areas which will deliver savings. It is not only about delivering savings to turn around the current financial crisis but also about placing the company in a much more competitive position for the future in terms of new tenders. We have already received our first tender for a public service obligation, PSO, route this year, namely, for the Waterford city service. I want Bus Éireann to be able to compete successfully to win that contract. We will probably be up against national and international competition.

Mr. Hernan also stated Bus Éireann would protect basic pay and seek to protect the maximum number of viable jobs. What does he mean when he uses the term "viable jobs"? Is the company planning to lay off workers?

Mr. Ray Hernan

As I indicated, we are doing a complete review of the whole organisation's structures. This review is ongoing and I hope to have it completed in full by the end of March. Arising from that, I hope to get the best structure in the organisation. What this means in terms of staff numbers, I cannot say at this point but I will say that we do not have, as part of an initial plan we presented to the trade unions, any intention to provide a voluntary severance package as part of that plan. Such a package is not in the plan. If voluntary redundancies are required after the completion of the review, I have outlined what these severance terms would be. However, this matter is not on the agenda at the moment.

Will Mr. Hernan elaborate on his comments on Expressway routes? Has the company identified routes that it considers to be unviable? If not, when will it be in a position to do so?

Mr. Ray Hernan

We are continuing the review across all of our 22 Expressway routes. As a commercial operation, Expressway must stand on its own two feet. We have identified a number of routes that are causing serious concern in terms of their commercial viability. However, we are looking at all options to try to minimise the number of routes that may be potentially withdrawn or reduced in terms of frequency, etc. We have commenced a detailed engagement with the National Transport Authority to ensure that where any service is withdrawn, a credible alterative will be put in place to ensure connectivity is maintained across the whole route network. I cannot give details of the routes in question because I have not yet finalised the commercial review of the Expressway routes.

Apart from commercial considerations, what other factors are considered when assessing the viability of a route?

Mr. Ray Hernan

I have to differentiate between Expressway and the PSO routes. We are obligated under the licence from the National Transport Authority to provide a public service to rural communities, which basically means all communities outside Dublin. We are committed to continuing to deliver this service and to improving it. I believe Bus Éireann can provide more services, rather than reduce services, which Mr. Boland stated is the issue in rural areas. We can increase services, even with the existing subvention, if we deliver a more efficient structure in Bus Éireann. That will be good for customers and taxpayers because we will provide more services for the same amount of money.

I thank Mr. Seamus Boland for his opening statements. He made a number of excellent proposals which deserve more consideration. I ask him to elaborate on his view that a new rural transport survey is needed? Will he also comment on his statement that the NTA and Departments of Health, Social Protection, and Education and Skills have an opportunity to examine the possibility of integrating their transport services to ensure full access to public transport is achievable? I also ask him to elaborate on his proposal to establish local and county based transport forums.

Mr. Seamus Boland

On the local and county based forums, the level of anger and disengagement about not being consulted at local level is such that people feel extremely disconnected in all sorts of ways when transport issues arise. The benefit of having a forum on which local communities would be represented is that when services in an area are threatened, the community would have a say in terms of how it could contribute to the solution.

I graciously accept Bus Éireann's declaration that there could be more services. When services have been threatened in the past, including those provided by Bus Éireann, one of the major problems has been that the first people hear about it is when their closure is suddenly announced in the media. This means they have no possibility of engaging with the provider. The committee should note that the rural charter, which is part of the rural programme announced this week, specifically seeks to have public services and those provided by banks and other private entities engage properly with the community before announcing closures. This would at least give people an adequate opportunity to contribute towards finding a solution. What was the second issue?

I asked Mr. Boland to elaborate on his statement that the NTA and Departments of Health, Social Protection and Education and Science have an opportunity to examine the possibility of integrating their transport services to ensure full access to public transport is achievable.

Mr. Seamus Boland

That was mentioned for a simple reason. All of those are stakeholders and contribute to the reality of transport. For example, the NTA plays a major role in organising. I know from previous experience that it will have to examine the services to be withdrawn, as it did in Wexford and elsewhere. It has a fundamental role in regulating transport and ensuring that there is public transport. Other relevant agencies include the HSE and the Department of Social Protection. In effect, the latter provides significant subsidisation of transport. We need a more transparent view of where that money is going, how it is being spent and how it benefits. It was mentioned that many people do not use these services.

I am sorry, but I missed the Deputy's first question.

It was on the need to carry out a new rural transport survey.

Mr. Seamus Boland

It has been stated that our organisation services 93,000 households, but we believe the number to be higher. It is time that a properly funded and resourced survey is done. I do not know how one can plan for rural transport unless the numbers are better known.

I am representing Deputy Troy at this meeting. I welcome Mr. Hernan and Mr. Boland and agree with the latter on a review of the travel pass.

My main focus will be on Bus Éireann. Mr. Hernan stated that the board had a fiduciary duty to act between now and the middle of March, but it also has a legal duty to the welfare of its staff. Let us not forget that. Surely the board had a duty in 2015. Bus Éireann had surpluses of €400,000 in 2013 and €7.2 million in 2014. That was a major jump, but it then made a loss of €5.6 million in 2015. Surely that was the time for the board to read up on its fiduciary duty and it should not have waited until Bus Éireann was, in Mr. Hernan's view, within months of insolvency to start proposing actions on which it claims there is no time for discussion.

Mr. Ray Hernan

Although my time in the organisation has been short, I am aware that the board and management have been highlighting the deterioration in its finances for a number of years. They also highlighted that significant cost pressures were coming on board. Between 2014 and 2015, the significant change that occurred within our cost base was the reinstatement of the pay reductions that were implemented in previous years in order to support the organisation during difficult times. Amounting to many millions of euro, this resulted in the deterioration from making a profit in 2014 to making a loss in 2015. It was the main change in our financial circumstances.

That was a recommendation of the Labour Court.

Mr. Ray Hernan

It was.

It was recommended independently and with full knowledge of the organisation's financial position.

Mr. Ray Hernan

It was the re-implementation of a 19-month deal.

Mr. Stephen Kent

The deal lasted for 19 months. It was a temporary solution to get us over a hurdle. Significantly, competition in the marketplace also changed, which impacted on our commercial routes to some extent. We had to deal with new competition on routes, which slowed our revenue growth. Some of the steam was taken out of the revenue line, which placed more pressure on the cost line. The temporary fix addressed some of that, but we are now back in an environment in which many of those costs that had once been in our favour no longer are. I am referring to fuel, the level of insurance premiums in the marketplace - members will know what has happened in that regard - and competition. These three major factors combined to create more pressure and dilute profitability in the past 12 months.

Payroll costs in 2014 amounted to €123.9 million. How much were they in 2015?

Mr. Ray Hernan

Close to €130 million.

Bus Éireann is directly attributing the loss to payroll.

Mr. Ray Hernan

There were ups and downs. Our insurance increased over the period. The cost of insurance claims in 2014 was €1.5 million but was close to €7 million in 2016. Unfortunately, that is the environment in which we are working. People have become more litigious. We are a public transport provider that carries 40 million people per year. Our claims are increasing. We are trying to manage those as effectively as we can, but we are exposed. That is just the way that the market is.

As public representatives, we are operating in the dark. We understand that there is a grand plan to address this.

Mr. Ray Hernan


The Minister for Transport, Tourism and Sport has said that he has not seen it. Has it been finalised and submitted to the Department and the NTA?

Mr. Ray Hernan

No plan has been finalised at this point. I have given a commitment to our board that we will have a final plan to present to it for approval by some time in March. However, given the organisation's financial situation, I have been given approval to implement as urgently as possible elements that will be included in the final plan. This is why I announced various initiatives to the unions and staff last week. We cannot wait for the broad, final plan to be approved to seek cost efficiencies across the organisation.

Was it advisable to go over the heads of the unions? Mr. Hernan is now seeking a partnership with them to address the issue. They have indicated that they will work in partnership with Bus Éireann, but Mr. Hernan undermined that partnership by going over their heads and communicating directly with staff before communicating with them. Would it not have been better to communicate directly with the unions before communicating with staff in order to create the kind of partnership conditions that he wants?

Mr. Ray Hernan

No. I am sorry but I must say that, as CEO of Bus Éireann and previously of other organisations, my immediate relationship is with my staff. They are my No. 1 point of contact. They are the people who must provide the service. I have given a commitment to all of them that I will continue to engage with them before I engage with anyone else. Of course the staff have entitlements in terms of representation. There are ten unions within the Bus Éireann company, all of which have been contacted.

I tried to lay out as clearly as I could the facts and the challenges that we faced. I did so as well with the unions subsequently. Unfortunately, I am looking for the unions to take a responsible stance in terms of the leadership and representation of their staff and to come to the table urgently so that we can agree a plan for implementation. I cannot implement this plan without the support of the staff and the unions. I do not have that at this time. The longer trying to achieve an agreement goes on, the more precarious our financial position becomes.

Plans being leaked to the media before staff are informed does not assist the atmosphere either.

Mr. Ray Hernan

I can categorically say that there were no leaks of information relating to our plan from our company.

In terms of Bus Éireann's warning of insolvency, what interaction has it had with the NTA? Has the NTA engaged with it in light of the fact that the largest public bus transport company in the country could be insolvent?

Mr. Ray Hernan

We are the operator of the public service routes and take a close partnership approach with the NTA. We made it aware of challenges that we may face on our commercial routes and what support we might need from it to provide an alternative mechanism under the public service obligation in order to offset the possible loss of connectivity on the Expressway routes and ensure that, as Mr. Boland said, our rural communities are not discommoded and left without services in future.

Mr. Kent made reference to the increase in competition. The Government claims that only eight licences have been issued in recent years and that competition, in the Minister's view, is not really an issue. How many extra routes or extra services do those eight licences open up and how many are in direct competition with Expressway?

Mr. Stephen Kent

We have only 22 commercial routes, as I have said. Some might say there is only a slight difference but one difference is that while there were a number of new licences issued there were also amendments to existing licences issued. When amendments were issued on existing licences some of the operators would have increased their service. For example, an operator might have been going to a place 15 times a day and would have increased its service to 30 times a day. That obviously pulls out of it. While this is good for passengers at both ends, and while they have a wider variety of choice, it means there are a lot more buses going up and down corridors where we are trying to fill capacity. Our issue is that while we are continuing to deliver our level of service there is obviously some diminishment of the capacity and the cost recovery on those routes. That is part of the issue. To a certain extent it is not necessarily about the number of licences but Bus Éireann has to recognise that over one quarter of its routes have been directly impacted. When 25% of our commercial routes have been affected it does have an impact.

Given that it has a public service obligation, does Bus Éireann consider it is on a level playing pitch with regard to the commercial routes and Expressway routes? Other operators do not have that obligation.

Mr. Stephen Kent

We do not have any issue at the moment. We have to play within the rules of the game. The NTA are acting within the legislation. If an operator applies for a licence it can get the licence if it is prepared to take on the commercial risk. We have to accept that this is something that is more inevitable as we go forward and that the prospect of competition could actually increase. As to whether we are on a level playing field, if we want to seek to expand our services we have the same ability and freedoms to apply for changes if it is within our ability to deliver those changes cost effectively.

With regard to the playing field we are stuck in, the operation of Bus Éireann and the commercial part of the services is part of the wider infrastructure within Bus Éireann. Bus Éireann has a number of issues that are not within the remit of private operators. The number of depots and garages we occupy and the number of stations we operate from all add overhead to our commercial business, which would not be within the realm of the private operator. They all add costs that must be recovered. Our issue is that we try to recover some of those costs where we can on our fare box and to a large extent we are not the cheapest operator in the market and we do not pretend to be. We offer good value where we can and we are trying to be competitive on our fares. At the same time we have a cost base that at the moment is simply too high relative to some of those commercial operators and we have to put ourselves back in the frame in order to compete better with them. This is what we are trying to recognise in this plan.

Going back to the target savings and the plans at the moment, what is the overall target for savings and what percentage of that target will come from staff costs versus insurance or other costs?

Mr. Ray Hernan

I do not have a definitive number yet. The objective is to maximise the amount of non-payroll savings that we can achieve so that we minimise the impact on our staff and their take-home pay. The issue that we need to address within our payroll, however, is not the basic pay. I do not have an issue with the basic pay levels that exist within our organisation. The challenge, and what causes the higher cost from a payroll perspective for us, are the premia payments that we pay. That is overtime rates, shift allowances, rota allowances and lunch expenses. There is a significant amount of these. We need to engage with the unions to bring us back more in line with what I believe exists in the rest of the marketplace.

The witness said that Bus Éireann does do not have resources for a voluntary redundancy scheme. Mr. Hernan's predecessor retired very quickly before Christmas. What was his severance package?

Mr. Ray Hernan

I do not know. It was confidential. I was not privy to that and it must remain confidential, as I understand it. It was presented to him.

Is it not difficult? The staff on the ground, drivers, mechanics and the clerical officers are Bus Éireann. They are the people with whom the public interacts and the management is asking them to take very severe cuts and then maybe give them a 2% rise in a few years' time if cash flow allows. In the interests of asking people to share that pain, should that information not be available?

Mr. Ray Hernan

My overall objective is to maximise the number of viable jobs that can be maintained in this organisation which is facing a financial crisis. I am doing everything in my power to make sure we get this company into a much better operational and structural efficiency perspective. This would allow me to minimise the potential voluntary redundancies that may arise at some point in the future. The more I can pull out of all other non-payroll costs the more flexibility it gives me to engage with the staff representatives and the staff themselves. I want jobs to remain. I must emphasise that I believe Bus Éireann is a premium employer and I am committed to making sure that basic pay is not impacted as a result of this plan. I am committed to maximising the number of viable jobs that remain in this organisation. That is my ultimate goal in all of this

I thank Mr. Ray Hernan and Mr. Seamus Boland for their presentations. My main focus is on Bus Éireann but having listened to Mr. Boland, in his words and his presentation, he has actually got the definition of what a public transport network should be about. It is about public transport service provision and not profit. That was my first observation.

I first want to address the ultimatum that was given to workers last week. In the first instance I found it inflammatory, provocative and very demeaning to workers who did not create this crisis. According to its correspondence with workers management is seeking to reduce the average pay by upwards of 30%, reduce Sunday premium hours from 100% to 20%, cut out overtime pay which would be gone completely, cut extra pay for shift work and change all drivers current contracts. It is also seeking to introduce the casualisation of workers by bringing in part-time and casual workers who would be on the minimum wage. The company also seeks the introduction of outside contractors to be brought in whenever and wherever and entirely at the discretion of the company. This would leave Bus Éireann drivers sitting at home while the company enters into contracts with private operators, casual drivers and part-time drivers all on minimum wage.

The witness said that he sees Bus Éireann as a premium employer. That statement is a farce in light of the correspondence he sent to staff last week. For a semi-State company to be instigating and implementing a race to the bottom for workers, as outlined in these proposals, is shocking. The 2% that management had proposed in its correspondence is insulting. It would be considered an allowance and would not be taken into consideration for the pension. It is also stated that it would be paid when the cashflow is there. Staff might never get it. Those workers have not received a pay rise since 2009.

When is the management going to take responsibility for this financial crisis? Everybody knows that the workers did not create the crisis. The first factor that contributed to the crisis was the over-saturation of routes but that has been flagged up continually and ignored. The NTA's licence application and the criteria or the objectives of it say that it will take account of demand or potential demand and the services already being provided by the existing bus passenger service.

The company's actions of recent years have therefore directly contradicted its own objectives. They have contributed directly to the financial loss in the company. On the Dublin–Cork route, seat capacity has grown by 120%. The seat capacity on the Dublin–Limerick route has grown by 111%, and that on the Dublin–Waterford and other routes has also grown. Between 2011 and 2015-16, the company issued five more licences. That amounted to 104 services. How in God's name did the company not think that introducing licence after licence would not have any financial effect on the Expressway service? A child could see that. One has to ask whether it was deliberate.

Let us examine the other aspect of the cause of the financial crisis rather than sticking it on the workers. In this regard, let us consider the free-travel pass. The Department of Social Protection contributes 41% of the average fare. That has contributed to loss-making within the company.

According to Bus Éireann's annual accounts, the company pumped €41 million of its own Expressway funds into the PSO business because of the lack of State funding. It was said there were losses of €5 million last year and €6 million this year. The delegates are completely confused about the amount for last year and possibly for this year. Had the revenue from the Expressway service not been pumping up Bus Éireann services because of the lack of State funding, we might not be in the predicament we are in. The PSO funding has been slashed from €49 million in 2009 to €33 million. Sticking it all to the workers just does not cut it; management needs to take responsibility itself.

The press release that was issued some days ago is nothing other than scaremongering. The delegates have said otherwise. The company has been repeatedly called upon to engage with all stakeholders. The Department of Transport, Tourism and Sport and the Government have consistently called on the company to engage with all stakeholders.

In its press release some days ago, Bus Éireann stated 2,600 jobs may be at risk. In saying this, it referred to the entire staff of Bus Éireann. We were told three weeks ago in the Chamber of Leinster House, and through press releases, that the losses incurred for 2016 amounted to €6 million. Within the space of three weeks, however, that figure has been bumped up to €9 million. One has to ask whether the facts were wrong three weeks ago when the figure of €6 million was issued. Why is there such a discrepancy? The difference of €3 million is approximately 30% of €9 million. Who got that wrong? Who is responsible? Does management not know what the loss was?

There are three minutes left in which to respond.

I will ask my questions all together and then the delegation can answer them.

With regard to the targeting of the workers, is management going to receive a 30% pay cut? Will its allowances be cut, as with the workers? Since this affects the public purse, what is the salary of the CEO by comparison with the average salary of a bus driver of 20 years? Somebody asked about the details of the recent severance packages. Since public money is involved, information should be put into the public domain. Will the delegates put it into the public domain?

Bus Éireann recently hired HR consultants. What did this cost? What were the terms of reference of the consultants' contracts? What is the general expenditure on HR consultants right across the entire CIE group?

I am allowing only two minutes for the answers.

I just want to ask two more questions very quickly.

The delegates said they have not identified what routes will be cut. That seems a bit strange seeing that they have identified what needs to be done with the workers. It raises the question as to whether management is keeping the information hidden until it is too late to do anything.

I want answers to all my questions but my main question concerns the fact that we have called repeatedly for all stakeholders to be involved. Does management agree to set aside the inflammatory preconditions it put to workers and sent to unions last week to allow space for third-party intervention? If the delegates are genuine and serious, as they say they are, they will realise it is not unreasonable to allow a space to be created for engagement. Will they commit today on the public record to allowing for third-party intervention and for engagement to begin without preconditions? If they do not, this will head down only one road, and they know where that road is. If they do not give a commitment today to engage without preconditions, one can only ask whether this was the plan all along. If they are sincere and genuine, they should commit on the public record today, given what they know lies ahead. Perhaps their stance is deliberate but they should prove to me it is not by giving on the public record an absolute commitment to engage in such a way as to allow for third-party intervention without the derogatory, demeaning and provocative preconditions.

The ten minutes is used up. I must now proceed to Deputy Mick Barry. There will be time allowed afterwards for the responses to the questions.

Could I get responses to my questions?

The ten minutes is used up. It was for questions and answers; I made that clear.

I did not come in here just to-----

I shall proceed to Deputy Barry. There will be time afterwards for the answers. Deputy Munster had ten minutes for questions and answers.

I would like answers to all those questions.

It is Deputy Barry's time now. We have to be out of here by 1.15 p.m. I stated that categorically. During Deputy Munster's contribution, I told her when there were four minutes left and when there were two minutes left.

Yes, but the objective is for the questions to be answered.

Deputy Barry has ten minutes for questions and answers.

I will not be going anywhere until I get the answers.

My questions are exclusively for Mr. Hernan. I will start by picking up on his comment that his plan that is being formulated does not specifically target staff. I will come back to an issue that has already been raised because it deserves to be re-raised. I have had a chance to reflect on it for a number of minutes. Can Mr. Hernan tell us, approximately if not exactly, the percentage of the cuts or, as he would probably put it, the cost savings he intends to achieve overall that will come from workers' wages and the payroll?

Mr. Ray Hernan

I cannot tell the Deputy the exact figure because it is still work in progress. However, as I said on record here earlier, one will appreciate that staff costs represent 40% of our total cost base. Other costs, non-payroll costs, total 60%. I am absolutely committed to maximising the recovery or reduction in costs by focusing on the non-payroll aspect. I want to maximise that so I do minimise the amount of change that is required in terms of staff savings. I need to emphasise, however, that this is not about trying to go after the staff whom I must later ask to implement the service with a smile. I am not targeting them in that regard. The Deputy must appreciate that we are in a precarious financial position. The marketplace has changed and we have got to prepare ourselves for an open marketplace, which is required under the legislation.

I find it incredible that Mr. Hernan is not even able to give a rough idea. I put it to him that the percentage he is looking for from staff and payroll is far greater than 40%. In fact, it represents the overwhelming bulk of the changes.

Mr. Ray Hernan

I am prepared to put on record that that is not the case. I cannot state categorically what the numbers will be.

Is it not the case that the proportion is more than 40% of the savings?

Mr. Ray Hernan

Absolutely not.

That is interesting.

I am going to talk about John and Brendan. John is a friend of mine and a neighbour. He has been a Bus Éireann driver for many years and has given many years of quality service to the company. He drives on Sundays and gets double time.

Under the proposal, he would get basic time plus 20%. He would lose €96 per week. He works overtime. The proposed overtime cuts would result in him losing a further €30 per week. He drives into the county and is entitled to a meal allowance. Under the proposals, he would lose a further €10 in that regard. That is a total of €136 per week. In the course of a year, this would amount to somewhere between €6,500 and €7,000 and that is after having no increase in basic pay for eight years. Mr. Hernan might reflect on that and realise that guarantees about safeguarding pay and not targeting staff sound a bit hollow in the context of a €6,500 a year pay cut. There is talk about competition. In effect, however, this is a race to the bottom.

Mr. Hernan spoke about responsible unions. Is there a union in Ireland which takes its responsibilities to its members seriously and which would consider accepting cutbacks that are far in excess of any wage reduction proposals put forward by the troika when it was in charge of running the country? In fact, that is a recipe not just for provoking a reaction from Bus Éireann staff but from all public transport staff and, perhaps, all other workers, particularly as a horrendous precedent would be set if Mr. Hernan's proposals are carried through.

In contrast, we have secrecy in terms of the severance package for the former CEO, Martin Nolan, and the former HR boss, Joe Kenny. I referred to Brendan McCarthy, the new HR boss who runs the Stratis Consulting company-----

At the start of the meeting, I asked that people who are not here to defend themselves would not be named.

I am giving Mr. Hernan a chance to clarify something because there were reports in the Sunday newspapers that the new HR boss of the company is being paid €2,000 per day, which over a year would be the equivalent of €750,000. Perhaps Mr. Hernan might clarify whether that is the case or indicate if it is other than that. I have a few other questions, so I urge him to be fairly brief in his response in order that I can ask them.

Mr. Ray Hernan

Do I respond to both?

Mr. Hernan should be general in his response.

This is on my time. My questions should be addressed and the other points can be dealt with separately.

Mr. Hernan should please address the questions that were put but avoid identifying individuals.

Mr. Ray Hernan

I am responding to Deputy Munster's point as well. First and foremost, I take my responsibilities as CEO of this organisation extremely seriously. My priority is to make sure that if any redundancies are to be made, they will be kept to a minimum. None of us can avoid the situation that exists in this organisation, which is a serious financial predicament. It is my obligation as CEO to make sure we come up with a credible plan that safeguards the future of Bus Éireann not only for this year but long into the future. I do take my responsibilities extremely seriously. Severance packages that have been entered into are confidential. I do not know what they are. That is the case, as I understand it. Unfortunately, I am not able to say what was within the agreements.

We engage, as required, with a number of consultants. We do not have a new head of HR. We have an acting head of HR. What we enter into with consultants is on an ad hoc basis or as required. Any consultancy agreements that we enter into follow normal procurement procedures. I accept that in some in instances we also get derogations based on exceptional circumstances that are already clearly outlined under State rules.

Were there exceptional circumstances involved here? Was it put out to tender?

Mr. Ray Hernan

In terms of the company to which Deputy Barry referred, we obtained a derogation in light of the seriousness of our predicament and the need to get the specific advice that was required for this organisation in terms of the matters with which we are trying to deal.

I will ask the following questions in the time remaining. The Government is trying to distance itself from the issue when, in reality, it has a huge influence on events. I wish to establish the level of contact Mr. Hernan has had with the Minister, Deputy Ross, since he assumed the position of acting CEO. I include in that e-mails, telephone calls, conversations and face-to-face meetings. Could he give us some indication of the level of contact between them?

I have two other questions and I will then conclude. I suggest that the cuts Mr. Hernan is making are costing Bus Éireann money. I will give a quick example.

The Deputy has one minute remaining.

Services were cancelled in the past two days because of bans on overtime. On Monday, the 103 from Beresford Place to Rathoath via Ashbourne at 6.10 p.m., 7.22 p.m., 8.28 p.m. and 11.32 p.m. and the Belfast service from Busáras at 11 p.m. were all cancelled. Most of these services were cancelled in both directions. Yesterday, the 6 p.m. service to Kells from Busáras, the 4.30 p.m. service to Navan from Dublin and the 5 p.m. service were cancelled. The PSO will be reduced for services not operated and Bus Éireann will be fined for lost kilometres. I submit that the cuts Mr. Hernan is making in overtime and the other cuts will cost the organisation money. Could he comment on that?

My final question is if Mr. Hernan could clarify the amount of State funding Bus Éireann received last year. I know it was €49.4 million in 2009. What was the figure for 2016? Was it higher or lower than that?

Mr. Ray Hernan

Could Deputy Barry just restate his final question? I apologise but I missed it.

The funding from the Department in 2009 was €49.4 million. What was the figure for last year? Was it higher or lower than the figure for seven years ago?

Mr. Ray Hernan

The subvention in total for PSO routes last year was €40 million. That was an increase of €7 million on the previous year.

It was €10 million less than in 2009.

Mr. Ray Hernan

Yes, it was €9 million less. We must appreciate that not only Bus Éireann but the country was going through extremely difficult circumstances and we all have to provide increased value for money. That is not just value for money for customers but also for taxpayers.

I ask Deputy O'Rourke to be brief because we have other speakers offering.

There was a question about moneys lost as a result of the commitments for those routes not being fulfilled on Monday and Tuesday, and again this morning, by the way, according to information coming in.

Mr. Ray Hernan

I am more than happy to answer that question. We provide more than 6,000 unique services a day. As part of any organisation of this size we are always going to have some late cancellations or eventualities that cannot be covered immediately. We have spare drivers and we try to apply them where necessary but it is unfortunate-----

Were the cancellations the result of cutbacks?

Mr. Ray Hernan

Absolutely not. It is my commitment that that is the case.

I know the Chair is keen to move on but a specific question was asked.

There will be time for supplementary questions.

This is not a supplementary. It is a question that was asked and, quite pointedly, not answered. It is the question regarding the level of contact with the Minister for Transport, Tourism and Sport, Deputy Ross – either face to face or by telephone or e-mail.

Mr. Ray Hernan

I am more than happy to answer the question. Since I have taken over this position, which is roughly nine days ago, I met the Minister, Deputy Ross, once. I outlined the seriousness of the situation to him. I did not get into any details of what we are doing but he understands the predicament. My chairman has continually kept the Department up to speed on the situation, again, without getting into detail.

I thank the witnesses for their presentations. At this point, everything of critical importance has been touched on but it is worth highlighting again the point my colleague, Deputy Calleary, made. It is extremely difficult to see how a company could get to this point and then all of a sudden press the crisis button, as has happened in recent days and weeks. I have worked in companies at senior management level for years. I have engaged with unions and various stakeholders to ensure companies pull through difficult situations in bad times, as we have seen in recent years. It beggars belief to see how the warning signals were there for a number of years but no proper action was taken until now. All of a sudden there is a huge crisis and it is either one extreme or the other.

It is difficult to comprehend. I am speaking from experience rather than looking in from the outside.

Other speakers mentioned having a facilitator. If we are serious about bringing everyone on board to get a positive outcome that protects the staff and the public transport user, we must have facilitators to assist the stakeholders. We must engage with the staff. I have done that myself and my experience is that it works well, but the unions, which represent the staff, cannot be ignored. If we are serious about achieving a positive outcome, given today's information, we must examine all options to bring about that positive outcome and nothing should be excluded. There is no question about it: if Bus Éireann provides an efficient and effective public transport system that connects all areas, both nationally and locally, for instance in my area of Kildare North, it will attract more public transport users. This has been proven. In the past 12 months, I have worked with all stakeholders and we have got improved services on the 115 route from Kilcock and the 120 route from Clane servicing UCD. This has proven successful.

I have one further question. I met representatives of the NTA and we are working towards having improved and additional services on those routes. Additional services in the morning and evening, which have proved hugely successful, have already been delivered. Will those additional services go ahead because the 120 Clane to UCD route is at crisis point at the moment? People are left behind every morning. Will the additional services be funded and put in place or is everything on hold because of the crisis and the panic button that has been pressed over recent weeks?

Mr. Ray Hernan

I can confirm to Deputy O'Keeffe that everything that is in play in terms of extra services will be rolled out.

It was Deputy O'Rourke-----

Mr. Ray Hernan

My apologies.

I do not speak with a Cork accent.

Mr. Ray Hernan

We have close engagement with the NTA. The NTA decides what extra services are to be applied and we operate them. Once we have approval to progress those services, we do it. I can confirm that extra services on the 115 route will come on board in March. Everything that was put out there and planned will continue to be rolled out. We are not cutting back on services.

The 120 route is hugely important but it is at crisis point at the moment. Additional services were meant to be delivered earlier this week.

Mr. Ray Hernan

My colleague is confirming to me that we are engaging with the NTA to increase the service on the 120 route as well. We will roll that out this year too.

Mr. Ray Hernan


Perhaps Mr. Hernan will address Deputy Imelda Munster's questions before I revert to other members for questions.

Mr. Ray Hernan

Apart from the questions, I also need to clarify some facts. There is no-----

Perhaps Mr. Hernan would just answer the questions first. The first question-----

Mr. Ray Hernan

The first question was whether management had incurred any reductions or was planning to-----

Mr. Ray Hernan

As I stated at the outset, a root and branch review of all structures within the organisation-----

The specific question I asked-----

Mr. Ray Hernan

Specifically, on the question about allowances, none of the management has any allowances.

I had a specific question about an equivalent 30% cut.

Mr. Ray Hernan

To be clear, this 30% figure has been thrown around by the unions but, on my calculations, it is not based on fact.

Will Mr. Hernan be taking a reduction of anywhere between 25% and 30% in his take-home salary?

Mr. Ray Hernan

Everything is on the table.

So, to date, no.

Mr. Ray Hernan

I have just taken over and am being paid a salary to carry out my role and that is what I intend to honour.

So, thus far, the answer is, "No". I had another question. If Mr. Hernan does not mind us asking, what is the salary of the CEO?

Mr. Ray Hernan

My salary has not been agreed, so I can only reference last year's accounts where the salary of the CEO who has just left was, I think, approximately €180,000 or €190,000.

Mr. Hernan is not prepared to give details of the recent severance packages. Would he consider putting those details in the public domain?

Mr. Ray Hernan

I cannot do so given the commitments and clauses within the confidentiality agreements.

I have requested the terms of reference of the HR consultants that were hired and the overall cost involved. It is fair enough if Mr. Hernan does not have those details to hand, but will he put those details as well as the figures in the public domain?

Mr. Ray Hernan

Again, all of those terms of reference are confidential and commercially sensitive and I do not intend to put them into the public domain. I will say, as I stated to Deputy Barry, that they go through due process and that in some instances derogations are applied but that is done within strict criteria.

Perhaps it is something that could be taken up with the Minister. I had also asked about what services would be cut but Mr. Hernan stated that such services have not been identified. Surely he has identified some services. It is not a case of not knowing which are loss making and which are not. Surely they have been identified.

Mr. Ray Hernan

We have identified a number of services. To avoid causing unnecessary concern, I am now making a statement on this until such time as we have a definitive plan in place with the NTA. As I stated at the outset, my commitment is to ensure that none of our customers is discommoded as a result of any changes that occur.

If I could respond to that reply, I will then get to my final question. Mr. Hernan stated that he does not want to cause unnecessary concern, but he issued a press release recently stating that 2,600 jobs could be at risk. What about those bus workers and their families who have mortgages to pay? Mr. Hernan did not seem to be too worried about causing them stress or concern. To put it mildly, it is unsatisfactory that he is not prepared. The purpose of bringing in people if they are not prepared to answer questions was questioned earlier. If he cannot identify the routes that he knows he fully intends to cut-----

Mr. Ray Hernan

If I could say, because it is important-----

If Mr. Hernan is not answering, he is not answering.

Mr. Ray Hernan

On the routes that we have identified, my commitment is that no connectivity will be lost as a result of any route changes. That was our commitment.

This is my final and most important question: Will Mr. Hernan commit here today to engage without any preconditions to having a third party negotiator who can chair negotiations? He knows what lies ahead by bulldozing ahead. In the interests of protecting and preserving the workers and the public transport network and services, will he agree to having third party intervention and to engage with the unions and the workers without any preconditions? If he is sincere and genuine in what he says, it is not an unreasonable ask. Will he put it on the public record today? "Yes" or "No" will suffice.

Mr. Ray Hernan

It is not as straightforward as giving a "Yes" or "No" answer. I must state that I do not consider the detailed letter I issued to unions as imposing preconditions. It outlines what I believe we need to do to safeguard-----

They do and that is where the stalemate lies. Will Mr. Hernan give a commitment to third party intervention without preconditions with the stakeholders to avoid the chaos that lies ahead? By refusing, is he quite happy to let his intransigence about meeting without preconditions allow this chaos to happen across our public transport network?

Mr. Ray Hernan

As stated already, as far as I am concerned those are not preconditions. I am ready and available to meet the unions day or night.

Without preconditions?

Mr. Ray Hernan

Day or night. We need to be implement these changes. Otherwise this company will not exist this time next year.

They will not meet with preconditions. Will Mr. Hernan facilitate third party intervention without preconditions rather than allow the chaos and what will happen in a matter of weeks? Will he show a willingness, as CEO of Bus Éireann, to prevent the chaos that lies ahead? Will he show a willingness to engage with the stakeholders without those preconditions? "Yes" or "No"?

Mr. Ray Hernan

We mean to engage with whatever party that will get us to a point where these things are implemented, as soon as possible.

I am losing patience. I have asked for a "Yes" or "No" answer. It is a straightforward question. Is he prepared for the chaos given his unwillingness or is he prepared to say that, as CEO of Bus Éireann, he will engage a third party negotiator without preconditions in order to find a resolution to this crisis? "Yes" or "No", please.

Mr. Ray Hernan

I am prepared to engage in order to ensure that the terms that are necessary-----

Without preconditions?

Mr. Ray Hernan

We may disagree here and we may have to leave it at this. What I indicated in my letter to the unions was a list of issues that need to be addressed to make us more efficient and ensure the board does not end up unable to sign off the accounts as a going concern and that we become insolvent at the end of the year.

So the answer is "No" and Mr. Hernan in quite happy to state his unwillingness and he is fully prepared to take responsibility for the chaos that will ensue because of his unwillingness.

I call Deputy O'Keeffe and ask him to be brief because we are almost out of time.

I welcome Mr. Hernan and I also welcome Mr. Boland and his colleagues. We all see the dilemma Mr. Hernan is in, and he seems to have been thrown in at the deep end. It is ironic that this week the Taoiseach launched a programme for the rejuvenation of our towns and villages and spoke about the importance of services being kept in place and here we have the threat of a reduction of services, and more importantly redundancies, in Bus Éireann. Has Bus Éireann approached the Government to seek a top-up in funding? I will base my questions on the document that management gave to staff on 18 January. It states the Government cannot and will not provide support. Has the Government been asked to provide support to the organisation? Having read the document, if we were here ten years ago-----

We are almost out of time.

This is my first question.

The Deputy's party had 15 minutes.

Going back less than ten years, the Croke Park agreement would be more satisfactory than what is being asked of the workers in this document. The cuts have been covered, but I am at a loss because one part of the document states what is in the retirement pension and another part of the document states the pension issue must be addressed by the overall CIE group. I want clarification on this point.

Mention has been made of sorting out the workers' jobs but has management investigated its own operations at the top, with regard to the fleet itself and the operation of the fleet? We all appreciate fair competition and private operators being in the game, but are they able to operate on a level playing pitch with regard to buses? Bus Éireann buses must be up to standard with regard to wheelchair access whereas some private operators do not have these facilities.

Bus Éireann is spending money on buying new school buses when the buses they have replaced could have lasted for another ten years. Some of the buses are in use by private operators providing school services. We are here today because of the loss of routes and the potential reduction in services. I will give an example of what is proposed in Cork, and other members have mentioned their counties.

I want to allow the Deputy's colleague to speak.

I seek clarification.

He will not have time otherwise.

The Cork to Waterford route could lose up to 130 services per week with regard to Youghal and Midleton. On route 51 from Cork to Limerick, services to Mallow and Buttevant could be reduced by 206 services per week. This is an astronomical cutback, when it provides a social service more than a transport service.

What impact, if any, will the discussions today and over recent weeks have on the school transport programme?

Mr. Ray Hernan

To answer Deputy Byrne's question first, we have an obligation to provide a service to the Department of Education and Skills. We carry 114,000 students to and from school every day. This service is not under threat, but we do have people who are part of our organisation and approximately 10% of the total number of buses used are driven by our drivers. I cannot say what those drivers may do, but I have been in close contact with the Department of Education and Skills to assure it we are doing everything in our control to ensure there is no disruption. It is my understanding that at no point in the past did any engagement or industrial action that may have arisen from a dispute in Bus Éireann impact on school services.

Separate to industrial action, would the financial problems in Bus Éireann have an impact on the school bus transport service or would the company seek to renegotiate the contract with the Department?

Mr. Ray Hernan

We provide the service and all costs we have are covered by the Department. However, it is a very important point that, as I said at the beginning with regard to the Expressway service, the solution can only be achieved through savings throughout a significant proportion of our cost base in the organisation, because we share so many services, including school services, PSO routes and the Expressway service. If we achieve savings, we do so not only for the Expressway service but also for PSO routes and school services. My view is we will maintain services but we will provide more value for money for the taxpayer.

There might be an effect on school services.

Mr. Ray Hernan

There is no intention to seek to change the service we provide.

To answer Deputy O'Keeffe, there are three mechanisms to get aid. The Expressway service is a commercial organisation. EU state aid rules are very clear that it cannot receive any subvention of any type to protect its operation. With regard to the other two, we have a subvention from the NTA to cover all of our PSO routes and the school services are covered by the Department of Education and Skills. We cannot get any more income or any type of subvention, state aid or otherwise, for the Expressway service. However, it is on file with the Department of Social Protection that our previous CEO was concerned about the level of support for free travel. This is on file in the Department. As I stated in my opening statement, we will follow up to see whether we can get an increase. It will not fix the overall underlying problem that exists in Bus Éireann.

Mr. Hernan mentioned insurance costs. Every transport operator is being affected by insurance premium increases and claim increases. They cannot just go back to their customers and stop the service or increase prices. Surely Bus Éireann has a mechanism to overcome this so that given time it will roll over and come back to normality. Why is insurance a big issue?

Mr. Ray Hernan

Unfortunately it is the reality that our costs have increased significantly. We have a situation where our current policy is to self-insure. This is something I am looking at with regard to whether there are alternative models to protect the organisation from claims that reduce the amount of risk to the company with regard to these claims.

Why is Bus Éireann prone to extra claims?

Is there a particular reason the company is prone to extra claims? Has something changed?

Mr. Ray Hernan

I can only say we have incurred increased claims through property damage. It is a stated fact that buses are getting bigger. We are engaging in more driver training to ensure incidents do not happen but we do have slips and falls. As I stated earlier, people tend to be more litigious in the current climate.

It was stated the free travel scheme is not the cause of all of the company's problems but it is the cause of some of the problems. If Mr. Hernan does not have time to answer today perhaps he will furnish us with the information. I can furnish him with a synopsis of comments made by employees of the company on the "Liveline" programme broadcast on 19 January, which raised serious concerns about the implementation of the programme and possible abuse of it. Perhaps Mr. Hernan will comment on this. Does he believe this is costing the company money?

Does Irish Rural Link believe people in rural areas where there is no public transport should have an optional monetary payment in lieu of a free travel pass?

Would it be a positive step?

Mr. Seamus Boland

As far as we are concerned, there is a major waste for people who cannot use their passes. We could make better use of the existing community transport programme. We do not care how it is done. It needs to be done so people can benefit from this entitlement.

Could Mr. Boland furnish us with a response to the synopsis of the comments on it? What is the annual rate of absenteeism in Bus Éireann and what does it cost?

Mr. Ray Hernan

The rate of absenteeism is between 6% and 7%. It is approximately double the national average. As part of a review we must ask how we can better manage the situation. It has a direct impact on our cost base and availability to provide the service we are obliged to provide.

When Mr. Hernan was asked about severance packages, he said he understood he was not able to give details. Could he categorically find out and correspond with the committee? It is in the public interest that people would know about those severance packages and the full details of salaries for all executives. When comparing the salaries of Bus Éireann workers with the market, executives and management should also be compared with the market. Could Mr. Hernan give the committee an analysis of them? Regarding the fuel and the in-cab telematic system, what is it and why is it being implemented immediately? Has it been implemented, and if not, why not?

Mr. Ray Hernan

I cannot look backwards. Telematics is an environmentally-friendly fuel efficiency system which we have on 270 of our buses. Some of them have had it for a number of years but it was not turned on.

What are the potential savings per annum?

Mr. Ray Hernan

If we save 1%, it is the equivalent of €350,000 per year. We immediately implemented it when I came on board and it should, hopefully, achieve significant savings.

Mr. Hernan referred to clerical staff and said he had no permanent staff on grade A. What is the basic grade A salary?

Mr. Ray Hernan

It is €25,000.

Mr. Hernan said 45% of staff were on the staff officer grade.

Mr. Ray Hernan

The staff officer salary is €42,000 or €43,000.

Has Mr. Hernan considered cameras on buses and terminals where there is a high level of insurance claims?

Mr. Ray Hernan

We have cameras on our buses, front and back. It has helped challenge and defend some of the claims being made. We must do more. If we reduce the number of claims, we will benefit.

Mr. Hernan brings great experience in the private sector to the role. In his experience of restructuring companies, is it usual for the principal shareholder to distance himself or herself from the restructuring of a company that has been identified as being on the verge of insolvency?

Earlier, Mr. Hernan indicated that whereas in 2009 there was State funding of €49.4 million, it was currently €9 million or €10 million less than that. During the period, Bus Éireann and Expressway would have made surpluses which would have been given back to help fund the PSO network. How much would those surpluses have been?

Mr. Ray Hernan

I have been involved in only one reorganisation before, in my role as CEO and, previously, CFO with Arnotts. The shareholders were two banks, one of which is no longer with us. The essential piece of my plan was, "you are getting no more money". That was the way we had to reorganise. We achieved a turnaround in that organisation of which I am extremely proud. We brought our staff with us and modernised an organisation that needed to be changed. It was successfully sold to a third party. That was private industry. I am not talking about privatisation at all. I am just saying we turned it around, and we did it with the support and engagement of the management and staff as a team.

Could all witnesses furnish the committee with the responses we did not get an opportunity to hear in writing as soon as possible? We will continue our examination of the issue with further witnesses coming before the committee. I thank members and apologise for the brevity of the meeting. We have to be out of here now. I thank the witnesses for their attendance and contributions.

The joint committee adjourned at 1.15 p.m. until 1.30 p.m. on Wednesday, 1 February 2017.