The main objects of the Bill are:—
(i) To increase the authorised share capital of Aer Rianta Teoranta from £10 million to £13 million; and
(ii) To provide for the issue by the Minister for Finance of repayable advances to the Company of such sums (not exceeding in the aggregate one million pounds) as the Company may from time to time request.
Aer Rianta's present authorised share capital is £10 million, of which £9,975,541 has been issued. Aer Lingus and Aerlínte are subsidiaries of Aer Rianta, the capital of which is used mainly for investment in the subsidiaries. The existing capital has been used by Aer Rianta as to £2,977,974 in Aer Lingus and £6,921,477 in Aerlínte, the balance being retained by the Company for its own capital purposes.
In the Bill, provision is made for an increase in the authorised capital to £13 million. Provision has been made in the Capital Budget for 1961/62 for the investment of £1,200,000 in the air companies and provisional estimates of capital requirements in the years 1962/63 and 1963/64 show that an additional investment of up to £1 million will be required, making a total investment of about £12,200,000. It is not possible to forecast for how long the increase now proposed will meet requirements. Because of the spectacular expansion in our air business—to which I will refer later—and the possibility that the increasing traffic may necessitate additions to the companies' fleets and equipment, precise forecasts of capital requirements are extremely difficult.
The amount of £1,200,000 in the Capital Budget for this year includes £150,000 in respect of Aer Rianta's investment in a hotel project. I shall deal with this project in more detail later. The Capital Budget also provides £850,000 which will enable Aer Lingus to liquidate a bank loan on which it has been operating for the past few years. The actual capital expenditure of Aer Lingus for this year is estimated at £450,000 but this will be met by the company from its own resources. Capital expenditure by Aerlínte in the current year is estimated at £600,000 of which £400,000 will be met from its own resources. The balance of £200,000 will be provided by the Exchequer. When these amounts have been issued, the capital of Aer Lingus will consist of £3,820,000 subscribed by the Exchequer and £1 million long-term loan from a commercial source, as compared with £2,970,000 Exchequer participation and £1,500,000 loan capital on 31st March, 1961. The capital subscribed to Aerlínte will be £7,120,000 as compared with £6,920,000 on 31st March, 1961. There will be an increase of £150,000 in the amount retained by Aer Rianta for its own capital requirements.
A sum of £250,000 will be required by Aer Rianta in the years 1961/62 and 1962/63 to cover its investment in Irish and Inter-Continental Hotels Limited, a company formed to undertake the construction, furnishing and equipping of three hotels to be erected in Dublin, Cork and Limerick. The total cost of the project is about £2,750,000 and the balance of the capital required is being provided by means of a guaranteed loan under the Tourist Traffic Acts and by a number of banking, commercial and private interests. I think I should explain that Aer Rianta will not enter the field of hotel operation as such. The hotels will be operated by the Inter-Continental Hotels Corporation, a subsidiary of Pan-American Airways.
The Corporation has very considerable experience of hotel management and has adapted American hotel management methods to international standards of service so as to provide flexible operation in accordance with local customs, style and habits in each country which it serves. The arrangement which is being made provides the maximum selling coverage on a world-wide basis and should be particularly valuable in developing airline traffic and tourism for Ireland in North America against the heavy competition of the more highly developed tourist countries of Europe and the near East.
Very considerable State funds have been invested in jet aircraft and in the development of a transatlantic service and it is considered that the full benefits of that investment cannot be reaped unless it is backed by further investment in the provision of suitable hotel accommodation. There is a serious imbalance between the greatly increased passenger capacity being provided by the air carriers in particular and suitable first-class hotel accommodation in which no worthwhile increase has been made in recent years. Private enterprise in Ireland is rather reluctant to go into this essential development but I am happy to say that one of our leading hotels will be a substantial shareholder in the project now under discussion. This is a happy instance of a union of public and private interests.
Participation by air companies in the hotel business is quite a feature of the international airline business because they appreciate that the provision of first-class hotel accommodation is a very necessary adjunct to the development of air passenger traffic. I am satisfied that Aer Rianta's investment which, in fact, represents only about 10 per cent. of the total cost of the project, is a very necessary one and that it will yield quite substantial benefits for Irish aviation business generally. I have dealt at some length with the hotels project so that Senators will be in a position to appreciate the significance and value of the Aer Rianta investment in the project.
The amount of capital allocated to Aer Lingus for 1961/62 covers the liquidation of the bank loan already referred to and the purchase of such items as fleet and ground equipment. The main ground for repaying the bank loan is the undesirability of the company having a large proportion of its capital in the form of loan capital. The capital required by Aerlínte in 1961/62 is for modifications in aircraft fleet, spares and equipment, ground equipment, premises and office furniture and repayment of working capital.
The provision for the issue of repayable advances from the Exchequer to Aer Rianta is a new feature, and will enable Aer Rianta to obtain capital for items which would normally be financed by means of bank overdraft. It is considered desirable that certain short term capital requirements should be met in some other way than by the issue of share capital. The provision in the Bill follows the lines of similar provisions in the Electricity (Supply) Acts and the Turf Development Acts.
Senators will, no doubt, be interested in a brief résumé of the results, financial and otherwise, achieved by the Irish air companies during the past two years. In the financial year ended 31st March, 1960, Aer Lingus had an operating surplus of about £170,000. The final accounts of the company for the year ended 31st March, 1961, will be published this week after the companies' annual general meeting, and I am glad to say that Aer Lingus will have an operating surplus considerably in excess of that achieved in 1959/60. Aerlínte which operates transatlantic services will have an operating deficit of £93,621 in the year ended 31st March, 1961.
There have been very significant and heartening increases in the numbers of passengers carried by the companies in 1960/61 and, also, quite a considerable increase in freight carried. The number of passengers carried by Aer Lingus in 1960/61 was 713,000, an increase of 25 per cent. on the 1959/60 figure. The total amount of cargo carried—12,000 tons—showed an increase of almost 40 per cent. on the 1959/60 figure. In the year ended 31st March, 1961 Aerlínte carried 35,176 passengers, an increase of about 50 per cent. on the 1959/60 figure, and the total amount of cargo carried at 244 tons was two and a half times more than the amount carried in 1959/60. In regard to the operating deficit of Aerlínte in the financial year 1960/61 it is well to point out that this compares with an operating loss of about £589,000 for the twelve months ended 31st March, 1960 and an operating loss of about £790,000 for the eleven months ended 31st March, 1959.
The traffic carried by both Aer Lingus and Aerlínte continues to expand in the first quarter of the current financial year, April to June inclusive, as compared with the corresponding period last year. Passengers carried by Aer Lingus increased by 16 per cent. as compared with last year and freight by 31 per cent. Passenger traffic on the transatlantic service increased by 57 per cent. I am happy to say that the trend is reflected in forward bookings.
I recommend the Bill for the approval of the House.