I hope Senators will excuse me. I have a very heavy cold and my voice will not sound too good.
The Bill deals mainly with the financial control of the air companies.
This legislation became necessary in the first instance because under existing law the capital of Aer Rianta is limited to £13 million. Of this amount, a total of £12,950,047 has been taken up. This total includes £1,300,000 of the £2 million Exchequer contribution towards the cost of Aer Lingus shorthaul jet aircraft. The balance of £700,000 has been advanced to Aer Rianta by way of a repayable advance pending the enactment of new legislation to enable the Minister for Finance to subscribe for share capital in Aer Lingus to this amount. The Bill, therefore, provides for the conversion of the repayable advance of £700,000 made to Aer Rianta into a share capital contribution in Aer Lingus. The opportunity has been taken in the amending legislation to relieve Aer Rianta of its functions as the holding company of Aer Lingus and Aerlínte so that the State investment in these Companies will now be held direct by the Minister for Finance. Another objective of the Bill is to incorporate in one consolidated Bill all the relevant legislation relating to the control and financing of the air companies at present contained in the Air Navigation and Transport Acts so that, on the enactment of the new Bill, these Acts will relate solely to the general law of air navigation and international conventions. The Bill provides for the necessary repeals in the existing legislation.
Under existing legislation the statutory provisions in respect of repayable advances by the State, and State guarantees of borrowings in respect of moneys required by the subsidiary companies—Aer Lingus and Aerlínte—are operated through the medium of Aer Rianta in its capacity as the holding company. Now that Aer Rianta is being relieved of its function as a holding company it is necessary to provide for the making of advances direct by the Minister for Finance to Aer Lingus and Aerlínte, for direct borrowings by these companies and for the guarantee by the State of such borrowings. Limits on advances and guaranteed borrowings have been fixed in relation to the likely requirements of Aer Lingus and Aerlínte in the next three years or so. No provision is being made for further share capital contributions from the Exchequer to these companies who have now reached a position in which they can reasonably be expected to meet their capital requirements either direct from their own resources or by borrowings serviced from those resources. No provision is made for advances or guarantee of borrowings in respect of Aer Rianta because under this legislation the functions of the company will be confined almost entirely to the management of Dublin Airport and the capital requirements of the Airport are financed direct from voted moneys. The Bill also applies to the air companies certain provisions, common to semi-State bodies generally, relating to the appointment of directors, the furnishing of accounts and approval by the Minister of new or amending superannuation schemes.
The arrangement under which Aer Rianta acts as holding company for Aer Lingus and Aerlínte derives from legislation some 30 years old and, at the time of enactment of that legislation, when the extent to which the operating companies would expand their activities over the years could not be reasonably foreseen, the system of State control through the medium of a holding company was administratively convenient. Aer Lingus and Aerlínte have now reached a stage of development where their operation as independent companies, freed from the complications inherent in their existing status as subsidiaries of Aer Rianta, is fully justified. Indeed, these companies had reached the necessary stage of development some time ago but steps to establish them as independent companies could not be conveniently taken because up to 31st March, 1964, BEA had a shareholding in Aer Lingus. The BEA shareholding was acquired on that date by the Minister for Finance by way of a share capital subscription to Aer Rianta of the purchase price of the BEA shareholding. The arrangement under which the channelling of capital subscriptions to Aer Lingus and Aerlínte through Aer Rianta as the holding company has in fact given rise to difficulty in distinguishing the capital position of each of the three companies. Of the issued share capital of £12,950,047 shown in the Aer Rianta accounts as at 31st March, 1965, £5,692,994 represents the shareholding in Aer Lingus and £6,921,477 the shareholding in Aerlínte. The balance of about £335,000 has been retained by Aer Rianta for investment in Irish and Intercontinental Hotels Limited and for its own capital purposes. The Aer Rianta shareholdings in Aer Lingus and Aerlínte are, of course, included in the issued share capital as shown in the accounts of those companies, and this duplicate showing of capital has resulted in misconceptions as to the total amount of capital invested in the air companies and has resulted in unfavourable comments in Dáil Éireann. The tendency is to assume that the capital invested in the air companies is double the real amount because the same quantum of money appears in the Aer Rianta accounts and again in the Aer Lingus and Aerlínte accounts. Moreover, loans, etc. required for the operating companies have to be negotiated through Aer Rianta so that the accounts of that company show liabilities which are really proper to the subsidiary operating companies. There is no reason why this situation should continue, particularly now that the BEA shareholding in Aer Lingus has been acquired. The termination of Aer Rianta as a holding company will result in Aer Lingus and Aerlínte being given the necessary statutory recognition to enable the Minister for Finance to have a direct shareholding in and guarantee borrowings by the companies without the necessity for channelling the transactions through Aer Rianta. The present legislation will achieve this purpose. The proposed change in the status of Aer Rianta will also have the effect of removing the undesirable situation under which Dublin Airport is managed by a company the vast bulk of whose capital is invested in operating companies one of which operates extensively at the airport; two-thirds of the landings made at Dublin Airport are by Aer Lingus aircraft. It is clearly bad in principle that the airport should be managed by a company so closely identified with a particular operating company.
The Bill provides for the conversion of that part of the present shareholding of the Minister for Finance in Aer Rianta which is represented by shareholdings in Aer Lingus and Aerlínte into direct shareholdings by the Minister for Finance in those companies. Furthermore, the Minister for Finance has taken up shares in Aer Rianta to enable that company to take up shares and mortgage debenture stocks to a like amount in Irish and Intercontinental Hotels, Ltd. The Bill transfers this holding from Aer Rianta to Aerlínte as the company most closely identified with the operation of the hotels.
The House may find it useful to have a short résumé of the capital position of the air companies as a whole. With the conversion into share capital of the £700,000 referred to in section 3 of the Bill the total state investment in the three air companies will be £13.66 million, of which all but about £50,000 is represented by the investment in the operating companies, Aer Lingus and Aerlínte. The State investment in the air companies has not so far been remunerated because the Companies' requirements of capital to finance their extensive operational developments over the years have absorbed any funds becoming available by way of depreciation or operating surpluses. The total amount of depreciation and net operating surpluses of Aer Lingus and Aerlínte in the period 1960-61 to 1964-65 amounted to £7.65 million. These internal resources of the companies have had to be supplemented by further State investment and by extensive borrowing from commercial sources. The present Bill does not provide for any further subscription to share capital beyond the £700,000 already referred to, and accordingly the companies will have to finance their capital projects from their own resources and from commercial borrowings as foreshadowed in the Second Programme for Economic Expansion. With this method of financing the proportion of remunerated capital, that is, loan capital, to total capital, that is, share and loan capital combined, will be substantially increased. The total share and loan capital of Aer Lingus and Aerlínte amounted to nearly £14 million at 31st March, 1965, of which 7 per cent was loan capital; at the end of the period of the Second Programme for Economic Expansion it is estimated that the total of share and loan capital will be in the region of £30 million of which over 50 per cent will be loan capital. Loan capital is remunerated at prevailing commercial rates of interest.
Section 3 of the Air Navigation and Transport Act 1961, provides for the payment of repayable advances to Aer Rianta by the Minister for Finance up to a limit of £1 million. Instead of this provision, repayable advances of up to £1 million may now be paid in the case of each of the operating companies on such terms as to repayment as the Minister for Finance may determine.
The Bill provides for borrowing by the operating companies on such terms and up to such limits as are approved by the Minister for Finance. Under section 75 of the Air Navigation and Transport Act, 1936, as amended by section 3 of the Air Navigation and Transport (No. 2) Act, 1959, the Minister for Finance could guarantee the payment of principal moneys up to a limit of £5 million together with interest secured by debentures issued by Aer Rianta. A corresponding provision is included in the new legislation except that the limits for future transactions have been revised as to £5 million in the case of Aer Lingus and £6 million in the case of Aerlínte, including the limit of £1 million on repayable advances in each case. These limits take account of borrowings which may be necessary in the next three years or so to supplement the companies' own resources for the purchase of new aircraft and other capital expenditure.
At present the method of appointment of directors of the three companies differs as between Aer Rianta, Aer Lingus and Aerlínte. The appointment of directors of Aer Rianta is regulated by paragraph 4 of the Second Schedule to the Air Navigation and Transport Act, 1936, whereas the appointment of directors of the operating companies is regulated under the Articles of Association of the companies. The Bill lays down uniform conditions for each company under which the number of directors and the terms and conditions of their appointment are determined by the Minister for Transport and Power in consultation with the Minister for Finance— conditions which are, of course, entirely appropriate in the circumstances that the capital of the companies has been provided by the State.
Under existing legislation the accounts of the air companies are submitted to the Minister for Finance who presents them to the Dáil. Under this Bill responsibility for laying copies of the Reports and Accounts before each House of the Oireachtas is transferred to the Minister for Transport and Power. The appointment of auditors, which heretofore required the approval of the Minister for Finance, will now be subject to my approval after consultation with the Minister for Finance. These provisions are similar to those already obtaining in the case of a number of other State companies.
The remaining provisions in the Bill are generally consequential on the provisions which I have referred to and do not raise issues which require special mention.
In summary, this Bill can be described as a tidying-up process which has become necessary due to the changes which have occurred over the years since the passing of the first Air Navigation and Transport Act almost 30 years ago. I should explain that the Bill does not purport to effect any change in the management of Dublin Airport, and as I have already stated in Dáil Éireann no worsening of the conditions of any employees at the airport is contemplated. However, should a review of the system of management of the three State airports disclose that the airports would be better and more economically managed on an integrated basis, then the constitution of Aer Rianta as a purely management body would facilitate the changeover.
I recommend the Bill for the approval of the House.
