Air Companies (Amendment) Bill, 1978: [Certified Money Bill]: Second and Subsequent Stages.

Question proposed: "That the Bill be now read a Second Time."

Minister for Tourism and Transport (Mr. Faulkner)

The last capital injection in the air companies was made in 1969 under the Air Companies (Amendment) Act, 1969 when an injection of £15 million was made then to assist the financing of their capital programme at that time. Since then the capital structure of the air companies has been considerably altered. Capital expenditure on new aircraft and other assets has continued year by year while over the same period severe losses on revenue accounts have been incurred. These losses in the period from 1970 to 1977 amounted to £7.7 million or £14.4 million when provision is made for foreign currency losses and extraordinary items. The result is that at 31 March last the shareholders' equity in the companies amounted to £20 million and loan capital stood at £46 million. The equity injection of £15 million now proposed will restore the gearing between equity and borrowing to a more normal ratio and bring it into line with competitor airlines.

The years ahead will require a vast expenditure on new equipment. Because of the age of many of the aircraft in the present fleet and international noise requirements, it will be necessary to replace much of the fleet, while it will also be necessary to expand it to meet growing traffic. The companies estimate their capital requirements over the next decade at £250 million at present prices. It is necessary to put the companies on a sufficiently sound basis now to enable them to improve the present profitable trend and build up the necessary reserves to meet this expenditure.

This equity injection and the increased profitability and confidence it will generate are very necessary to enable the companies to plan for future developments and expansion to meet the needs of our growing economy. These plans indicate the generation of a very substantial increase in the number of visitors to Ireland with a consequent creation of a substantial number of jobs in the tourist industry and upwards of 1,000 new jobs in the airline itself. A reasonable capital structure is vital for the proper development of the airline to meet these future challenges.

In the context of this Bill it is appropriate that I should speak about the performance and prospects of the airline. Senators are fully aware of how difficult a period the seventies were for all airlines, especially on the north Atlantic routes. The main reasons for this adversity were the worldwide recession which caused a downturn in tourism and in travel generally, the sharp increase in oil prices, the steep rate of inflation, the disruptive effect of currency fluctuations, severe competition from charters, and the general over-capacity on the north Atlantic which led to an unremunerative fare structure.

Additionally, in our case, the violence in the North had an adverse effect on our trouist traffic. As I have indicated, the losses of the air companies totalled £14.4 million in the period from 1970 to 1977 including foreign currency losses. The turn around came in 1976-77 when a modest profit of £117,000 was made and the position improved significantly in 1977-78 when a net profit of £4.6 million was earned. This is a very welcome development but this level of profit is quite modest when viewed in proper perspective. On the gross turnover of the air companies of £160 million this profit represents a margin of only 3 per cent. In other words if there should be a downturn of as little as 3 per cent in the present bouyant level of the companies' activities the profit would disappear. I have already indicated that capital requirements over the next decade will be of the order of £250 million. For these reasons a greatly increased level of profits is required in the years ahead.

A further point I should stress is that the profits earned by the companies last year largely came from ancillary activities especially those closely related to aviation. The ancillary activities proved very successful and profitable but continued heavy losses, though reduced, were incurred on north Atlantic operations while the short haul European network, inluding cross-Channel, was marginally profitable. The ancillary activities are proving their worth in underpinning the air transport operations; they are providing a high level of skilled employment and earning substantial foreign exchange for the benefit of the national economy. Indeed, without these activities it would be difficult for the air companies to generate sufficient earnings from their air transport operation alone to promote an adequate reserve for the heavy investment which will be needed for fleet additions and replacements in the future.

It is proper in this context that I should mention the question of the level of air fares. A scheduled airline must provide a regular all-the-year round service taking the rough with the smooth to meet the on-demand needs of the business community and regular travellers. It must maintain a widespread sales network and, especially in our case, incur heavy expenditure on promotion of tourist traffic. A schedule airline cannot just cater for the peak traffic when full loads are guaranteed and cost their operations and fix their fare levels accordingly. This would be creaming the top of the market and while there are carriers who seek to engage in this activity it would be entirely inappropriate for a publicly owned national airline with obligations to the community as a whole. In this respect the north Atlantic is a source of continuing worry.

The airline is still suffering heavy, though reduced, losses on the Atlantic due to the very uneconomic fares now obtaining in that theatre. It is difficult to see an early improvement in the economics of transatlantic services because of the strong and rapid trends towards the dismantling of the regulatory framework and towards uncontrolled competition. Fair competition can, of course, help to stimulate the market and promote efficiency but the airline industry, because of its capital intensity, seasonal and cyclical nature and its public service obligations, cannot operate economically in conditions of uncontrolled and excessive competition.

Because of the present intention on the part of the US authorities to deregulate air transport, and the fragmentation of policy among western European states, I can at present see only a continuing price war on the north Atlantic. It is to be hoped that there will be a return to a more rational regulatory framework before too long within which the airlines can compete fairly, provide an adequate and reasonably priced service for the travelling public and earn moderate returns. This can be done only by international action. There is little that a small state such as ours can do on its own. We will, nevertheless, continue to do our utmost to secure a return to a more sensible regulation of the market.

Encouraged no doubt by what has happened on the north Atlantic a demand is at present being widely made for a reduction of fares on the European network, particularly cross-Channel. I know that Aer Lingus are conscious of the need to keep fares at the lowest possible level consistent with providing an efficient and viable service. It must be borne in mind, however, that the Aer Lingus short-haul operations are only marginally profitable. All applications for fares adjustments are examined in detail by me and I am concerned in considering proposed increases to ensure that the essential balance is kept between the natural demands of the travelling public and the need to meet continually rising airline costs.

Aer Lingus must operate commercially and must generate profits if it is to face future expansion plans with confidence. The company also has an obligation to provide a fare structure which will help to stimulate tourism; this it does by offering a range of special fares including excursion and advance booking fares as well as reduced fares for families, all designed to cater for the price-conscious traveller. As Minister responsible for both aviation and tourism I am particularly anxious that services, including fares, offered by Aer Lingus do not act as a disincentive to tourism growth. I am satisfied that at present this is not the case but I will continue to keep fare levels under review so that the air traveller may have the benefit of the lowest possible fares consistent with the economics of the airline and the development of tourism.

Perhaps I have dwelt at too great a length on the problems which arise in the aviation industry. By and large it must be seen as a young but very vigorous industry and one in which, notwithstanding temporary fluctuations, continued growth is assured. Its importance to a small island community, such as ours, cannot be overstressed. It plays an important role in the servicing of our industry, trade and tourism and, indeed, has provided important developments in our economy. Our national airline plays an important role in our national development. It provides an important part of the national infrastructure vital to the development of our trade and industry in general and tourism in particular. Its primary task of providing a wide network of air services is done efficiently and safely.

Its work on behalf of other airlines, which earned revenue of about £23 million last year, is proof in itself of the airline's efficiency and good international standing. Other measures of the airline's contribution to the economy include an expenditure of £7 million on tourist promotion, the provision of high grade employment for 6,000 people and a contribution of £60 million in foreign exchange earned abroad. Our national airline has truly served us well in the past and the additional equity capital now proposed will provide a reasonable capital structure for it to continue to do so in the future.

I commend this Bill to the House.

Mr. Cooney

As far as my party are concerned this Bill is acceptable to us. We agree to the injection which is proposed of extra capital into Aer Lingus. There are many aspects of the operation of Aer Lingus which will possibly have to be looked at fundamentally in the near future. It is primarily an airline, but it is quite clear that any profitability that has been accruing to it has been coming primarily and principally from its ancillary activities in other fields marginally connected with its prime task of providing an air service. The dilemmas that face CIE are beginning to show themselves now in the context of Aer Lingus. It may be time to look at the entire scene before those dilemmas become of the magnitude that now face CIE, the dilemma, for instance, of having to provide a service which is essentially apparently non-profitable in the national interest and at the same time be expected to operate on commercial lines. This dilemma comes out clearly from what the Minister has been saying to us.

As far as the public are concerned the vast majority of people who use Aer Lingus use it on the short-haul routes and the majority of those use it on the London to Dublin route. I make no apology to the House for raising a matter which has been raised frequently in the other House, and raised frequently at public meetings of emigrants' associations in England, and that is the level of fares between here and London. There has been a call for a sort of shuttle service, as, for example from London to Glasgow. It is now being introduced, I think from London to Belfast. It is thought that we should have a service of that kind between London and Dublin. The calls are consistently resisted and the Ministers argument appears to be that Aer Lingus is a national airline, that it cannot engage in low-grade, commercial activities such as that, because it has an obligation to ensure that a certain standard of service is provided all the year round and that it cannot take the cream and leave the rest to be looked after or not looked after, that Aer Lingus must balance its operations.

It will be interesting to see if any projections have been made as to the financial implications of running the shuttle-type service between London and Dublin. It is a very high density route. There is no question of the service not being availed of and there is a very high density level right throughout the 12 months of the year. There would be no question of having it only for part of the year and leaving the route badly served for the remaining part of the year. This particular route, I understand, has a density as high as any short-haul in Europe. We are entitled at this stage to have the facts and figures regarding the financial implications of changing the nature of that service now presented to the public so that they would know once and for all what the arguments are for and against the changing of that service. A national air company has an obligation to provide as cheap a service as possible and if this particular route has the potential for service to be provided at a much cheaper rate than is being provided at the moment—and a great body of opinion feels that it has—then it is for the national airline to ensure that the very best value is offered to the customers.

I would appeal to the Minister to put it to Aer Lingus to let the public know the situation in facts and figures, have a public debate, or arrange some sort of a forum so that the entire matter of changing the nature of the London-Dublin air service to ensure cheaper fares is fully thrashed out and that the public will be totally aware of the implications of it. It is no consolation for people paying what they think are exorbitant fares on that route to know that they are keeping the national flag flying across the Atlantic. That is stretching the demands of patriotism possibly too much. It is something that will have to be looked at to see if the cost of keeping the national flag flying across the Atlantic is now justified by the other benefits to the economy which the Minister mentions. Possibly it is so linked up with the other services which Aer Longus provide in terms of service contracts and charter work for other airlines that it cannot be avoided and has to be carried on even at a loss. The whole thing is a complicated financial package of balance and counter-balance. It is something that will have to be examined pretty fundamentally. Possibly the Joint Committee on State-Sponsored Bodies will be the proper forum for looking at the fundamental role of Aer Lingus and seeing whether that role has been substantially changed by reason of these so-called ancillary activities. They could look at that role to see what is the primary duty of a national airline and try to resolve this essential dilemma of the commercial viability with the social service that is inherent in what the Minister said as being the role of a national airline.

The arguments on both sides are very strong and it is a very difficult dilemma to resolve. However, there is great confidence in Aer Lingus, in the expertise, the business acumen and in the general level of professionalism which that company brings to its operation vis-a-vis the general understanding and attitude towards the company. There is a feeling that money invested in the company which appears to be well and efficiently run is money that is properly invested. I am sure the Minister is satisfied that that is the case. The general public and we on this side of the House are satisfied, by and large, that that is the case.

As I have said, the operations of this new body, the Joint Oireachtas Committee on Semi-State Bodies, will give an opportunity to Parliament to probe more deeply into those areas so that we can be fully sure that we are getting full value for money from Aer Lingus.

Mr. Crowley

I, like Senator Cooney, welcome this Bill. I am very well aware of the excellent job that Aer Lingus are generally doing on behalf of the State. I would also like to compliment Aer Lingus on having the foresight, if you like, to invite Members of the Oireachtas last week to a briefing session in the Shelbourne to make us more aware of the problems and difficulties that they are facing as an airline.

I should like to compliment the Chief Executive Officer, Mr. Kennedy, for the way he put the case and the clarity with which he put it. Indeed, it was a very enlightening experience for all of us. We recognise, of course, that in Ireland as an airline is a very essential operation we must at all times try to ensure that we are giving value for money. Because of our island position it is one of the few ways in which our emigrants and others can come to visit us. It is very important that the price structure of Aer Lingus be constantly kept under review and that the prices being charged are the most competitive and fairest prices that can be worked out.

It is rather surprising, looking through the figures, to find such a poor return on capital investment. For such an enormous turnover to have a return of only 3 per cent indicates in commercial terms a non-viable business. But then we must look upon Aer Lingus as also having social obligations. Their ancillary companies make a substantial amount of money and make the whole thing appear that much better. We must, then, encourage Aer Lingus to continue looking at their price structure and continue to give good value for money.

I also welcome the news that they are establishing a factory for the overhaul of aeroplane engines which is going to give considerable employment in the Dublin area. It will make them pioneers in this type of work. Certainly, this shows the type of initiative and foresight that we have come to expect from Aer Lingus. I am sure all Irish people are very proud of their airline and those of us who travel abroad are always delighted to see the Aer Lingus planes in so many airports throughout Europe, giving such a good service to the Irish community.

Having said that, there are a few criticisms that I must make of Aer Lingus. It is something on the lines of what Senator Cooney was saying, except that my concern is not with Dublin; it is with Cork. I feel that we in Cork are not getting the type of service from Aer Lingus that we should be getting and that Aer Lingus are capable of giving us. We are looked upon very much as the poor relation and I must urge Aer Lingus to have a public debate as to why a diminished service is operating out of Cork. I would question the latest price increases. I wonder are they necessary, I wonder is it still possible to operate with profit at the old prices. It seems as if there are commercial people available to undertake the enterprises that Aer Lingus have abandoned and indeed to continue to give the service out of Cork. I wonder why Aer Lingus will not allow this. I would urge the Minister to look carefully into any proposals that come before his Department in relation to the provision of alternative services.

If Aer Lingus do not want to operate certain routes, and if there are companies prepared to operate them, they should be allowed to operate them. After all, our interest here as legislators and representatives of the people is to make sure that the people are getting value for money and they are getting the most economic air travel available.

I know that there are commercial companies prepared to operate in and out of Cork who have been debarred from doing that. I must protest in the strongest possible manner at this debarring because it is not serving the country well and it certainly is not serving well the people of Cork and the people in the surrounding counties who would use Cork Airport. I do not think we can take it that Aer Lingus have any monopoly rights, or should have any monopoly rights, in relation to air transport. If there are Irish entrepreneurs prepared to come along and offer alternative services, indeed offer services where Aer Lingus have refused to provide services, then they should be encouraged and allowed to do so. Rather than obstacles being put in their way they should be regarded as an asset to the State rather than a liability, as some people in the Department of Tourism and Transport seem to think. We must have at all times healthy competition. I am never satisfied with any company that has a monopoly of any product. Equally my feelings are the same in relation to air transport. If there are commercial enterprises available, with the necessary expertise, know-how and of course the quality aeroplanes to undertake the task, they should be allowed do so. If they are not allowed to do it I should like to ask a lot of questions as to why they have not been allowed. Like Senator Cooney I say: why not have public debate on the issue? Why not create a forum to debate why these commercial enterprises are not allowed to operate? It is very bad if we are seen here to institutionalise—if you like—a monopoly, to give it the backing of the whole weight of legislation.

We are moving into an era in which efficiency will count more and more and there will be efficiency where there is competition. Where there is not competition there will be inefficiency. I will be asking questions in relation to the non-granting of licences to operate charter planes or regular planes on routes out of Cork.

We can be proud of the fact that we have such an enormous amount of management expertise in Aer Lingus in that they are called on to transfer some of this expertise to other airlines in some of the developing countries. I know that is a profitable part of their business. We must commend those who had the foresight to ensure that such a situation arose. I would be mildly critical of the front-line operators of Aer Lingus. Personnel at ticket desks and the hostesses on the planes generally are of a high standard. However, in former years there was a higher standard; there was more concern for the welfare of the traveller than there is now. Maybe it is the era in which we live. Nevertheless one of the best selling points and strongest assets of Aer Lingus was in the charm of their personnel. I should like to see that aspect re-emphasised and brought to its former pitch. If that kind of service is provided, there will be more and more people travelling on routes where it can be seen that the operator cares about the welfare of the passengers. Generally, I am very much in favour of this Bill and welcome it.

Mrs. Robinson

Basically, this is a Bill seeking an additional £15 million of taxpayers' money so that the Minister for Finance can take an additional stake in Aer Lingus. The Labour Members of the House support the general thrust of the Bill, are confident that Aer Lingus are worthy of public support and ought be given the kind of confidence which this additional equity stake by the Minister would provide. Nevertheless we are not happy about the details available to us in the Minister's opening remarks.

Like other Senators, I would like to put a number of questions to the Minister. Although this Bill refers to a stake that will be taken by the Minister for Finance it is appropriate that the Minister in the House today is the Minister for Tourism and Transport, that he has in his speech at least in a very general way referred to the operation and activities of Aer Lingus. Since we do not have many opportunities in this House to assess the performance of our national airline and to ask the kinds of questions which concern and occupy us I welcome this opportunity to put a number of questions to the Minister. Firstly, I should like to ask the Minister for a more detailed explanation of why the decision was taken to apply for a further £15 million in an equity stake in Aer Lingus. As I understand that, this would bring the stake of the Minister for Finance up to £35 million against a loan capital standing at present at £46 million. I deduce that from the figures given to us by the Minister. He indicated that the companies estimate their capital requirements over the next decade at £250 million at present prices. If it is over the next decade it may be more than that when we get closer to the actual tying of capital expenditure and re-equipping of Aer Lingus. I would like to have a little relation between the sum of £15 million here and its obvious impact on the general balance and confidence to the company. Why is there that figure and how is it proposed that this much larger figure of £250 million would be acquired, or in some way earned, by Aer Lingus over the next decade? Even with this additional stake in the company it is very hard to see how the profit margin would rise from the present figure of 3 per cent of the £160 million turnover to a sufficient profit to allow the accumulation of revenue anywhere approaching £250 million. That is the first major clarification I would seek from the Minister.

The Minister referred to the general profits earned by the companies during last year and stated that these largely came from ancillary activities. He referred especially to those closely related to aviation. This is very general and rather vague and does not convey anything to Members of the House. I should like from the Minister a breakdown of the profits earned from these ancillary activities, of their scope in terms of the major activity of Aer Lingus to provide a national airline, a service to those travelling by air, and I should like some indication of the Government's approach to the various kinds of services and of the ancillary activities undertaken by the air companies.

What are the standards which the Government deem to be appropriate for our national airline? This is fundamental to our understanding, as Members of the House, of what we are being asked to do in approving a further injection of taxpayers' money to the sum of £15 million. We are entitled to know to what extent the Government are in favour of an extension of these ancillary activities to which the Minister has referred as being largely accounting for the profits of Aer Lingus, or is there concern at too much diversification by the company? Is the Minister in a position to give us a more detailed account of some of these ancillary activities? For example, I became aware some time ago that Aer Lingus had acquired substantial property in Teneriffe. I have never heard of anything being done about this. It must have involved a very substantial expenditure of public money at the time. Is there building going on there? Is there a plan in process of evolution at present? Is this something which it is anticipated might result in further profitability to the overall air companies or is it something that has not been so successful and from which perhaps Aer Lingus are thinking of disengaging or from which they have already decided to disengage? These are the questions which Members of the House need to know in order to be able to approach this Bill responsibly and have adequate background information.

Like Senator Crowley, I was invited to the briefing by the management of Aer Lingus recently. Unfortunately, because of other commitments, I was unable to go. In any case that must always be a background briefing which is not a substitute for having here in this House and on the record of the House the adequate information on which to base our evaluation of the figure sought in this Bill, of the Government's attitude towards the primary role of Aer Lingus, its ancillary activities and some assessment of what the needs of the company may be over the next decade. For example, is this £15 million a request for public moneys now? Will there be a further request within a year or so to enable Aer Lingus to commence this programme of re-equipment, this very large capital expenditure, or how is the company to re-equip itself if this is deemed to be necessary?

In the same way, a better understanding of the situation would allow Members of the House to consider the very important matter raised by Senator Cooney and Senator Crowley, the question of the air fares, particularly between Ireland and Britain. Senator Cooney referred specifically to flights from Dublin to London. Senator Crowley expanded this to Cork. I would take in the whole spectrum of cross-channel air fares—from Dublin or Cork, or indeed other parts of this island, to the various cities in Britain where there is a substantial cross-traffic of our own citizens and where obviously we want to draw very considerable tourist traffic. These are extremely important links, important from the economic point of view, from the point of view even of the family links between those living in Birmingham, in Manchester, in London, who have relatives here and who would very much like to, and in some cases need to, travel over and back, and not always for pleasant reasons, perhaps to come back for funerals, for family occasions or to help out in a particular difficult situation at home.

I speak with the immediate knowledge of somebody who travelled back from London this morning on an Aer Lingus flight. It did strike me that the £72 return fare to London is a dramatic increase in very few years from a return fare of approximately £35 to £37. This is socially undesirable. I am not satisfied with the references made to the need for minimum profitability, the very tight margins within which Aer Lingus operates. I am not satisfied because I do not think we have been given a sufficient, overall picture in the Minister's opening speech. We have not been given a sufficient indication of Government values in the matter.

This leads me to what would be very much the approach of the Labour Party to the service provided by Aer Lingus. That would certainly be to try for the degree of profitability that was possible but also to emphasise the social service that must be provided, particularly for an island like Ireland, for a country that has such a high rate of emigration of its population, for a country so dependent on tourists coming from outside to generate the other jobs and economic security for our people generally. We need a much better sense of the present Government's attitude towards these problems. It may be that Aer Lingus themselves would benefit from guidance in this matter.

There is a certain conflict—if not conflict, certainly ambiguity—in some of the statements made by the Minister in his opening speech. He referred to the hard times that Aer Lingus suffered during the recession, that it has come back now into a situation of profitability— marginal profits in 1976-77 and last year a profit margin of 3 per cent on a fairly substantial turnover. This is a reasonably vulnerable position. Obviously it has heavy local capital. The question arises as to how far it should expand ancillary services which appear to be more profitable and by doing so subsidise to that extent the social provision of an airline service at a kind of cost which makes it possible for people to travel. This is a very important value and is not one that is at all clear in the Minister's speech. I would welcome his expansion on this point.

It would be an important social service to our people to provide very accessible rates especially for cross-channel traffic, and to generate a greater density of traffic by so doing. If one were to generate a greater density of traffic, then it would be possible to go a step further and consider the suggestion Senator Cooney made of having a shuttle service to cut down on administrative costs and overheads on the busier cross-channel routes. I would welcome some comment by the Minister on this suggestion, on its feasibility, because undoubtedly there is an increasing contrast between the competitive rates that can be offered on other routes in other contexts. I appreciate that some of these very competitive prices are offered by private companies creaming-off the peak times on a market. Certainly I accept that a national airline like Aer Lingus must offer a balanced all-year-round service and must operate on the less attractive routes as well as on the more profitable ones.

Unlike Senator Crowley I do not think the way to provide this necessary and vital social service to our people is to start licensing private enterprise companies to cream-off the peak periods and make the situation all the more difficult for a national airline. I agree with Senator Crowley that we need to have a much fuller debate and discussion and we need more evaluation of the various criteria. In particular we need a better understanding of the Government's attitude and policy.

From my experience of examining Bills submitted to the Seanad, there is none I dislike more to have to respond to and debate than this type of minimal, in the sense of minimal content, just a few short sections. Bill seeking a set amount of further money by way of a grant or loan. In this case it is providing a facility for the Minister for Finance effectively to put £15 million of taxpayers' money into Aer Lingus by increasing his stake in the company. I dislike these Bills intensely. They come very rapidly from the Lower House to this House. It is very difficult indeed to get adequate briefing in order to examine the implications. It is particularly unsatisfactory when the Minister, in his opening speech, states the position in such unclear and minimal language that it is very difficult indeed to relate the situation. It would not have been at all taxing on the Minister to have supplied the Seanad with a basic, overall picture of the income-loan situation, profitability and expenditures of the air companies and the difference that this £15 million would make. This could be done by way of graphs if necessary. Certainly it seems to me to be the very minimum that Members of the House need if we are to fulfil our duty of examining responsibly what the Government have in mind and responding to it.

The Minister has a duty to make these matters very clear to the House. For example, I would refer to a sentence in his speech:

It must be borne in mind, however, that the Aer Lingus short-haul operations are only marginally profitable. All applications for fares adjustments are examined in detail by me and I am concerned in considering proposed increases to ensure that the essential balance is kept between the natural demands of the travelling public and the need to meet continually rising airline costs.

That is not an arbitrary or unreasonable statement, nor is it a very revealing one. It merely gives a very vague idea of very general criteria. But it does not really tell us to what extent the Minister is concerned, as the Senators who have spoken so far are about sharply rising fares, particularly on the cross-channel routes. It does not tell us how the Minister is prepared to evaluate the overall situation of Aer Lingus, or give an indication of the Government's approach to the priorities of the air companies which are basically those of providing the national airline services, freight services, and also various ancillary activities such as acquiring property, hotels and a fairly substantial property in Teneriffe about which I would specifically welcome some more information. This is a pity because having asked a number of questions and sought clarification I should like to end on a note of approval—certainly from my personal experience, from an assessment, particularly of the problems in recent years—in general terms of the overall approach of Aer Lingus to its problems. Unlike Senator Crowley I think the standard of service, courtesy and kindness to old people, or to mothers with young children, or to young children travelling alone, is quite remarkable on an Aer Lingus flight and is sometimes in striking contrast to the much colder, more sophisticated, more artificial attitude of some stewards and stewardesses on other airlines. On that kind of standard the staff of Aer Lingus come out very well whether they are the hostesses on the airlines or the personnel staff in the airports.

It is not enough just to say that. Indeed in a sense it is a subjective assessment. I believe we need a more public and open debate about the values underlining the fact that as a small country we have a national airline, that this does mean a very substantial capital expenditure and it means also very substantial employment, as I understand it, of over 6,000 people. All these factors are important and related when it comes to looking at a specific request for an injection of capital, the first request of that sort for almost a decade. We cannot really do our job very well unless, in his opening speech, in an explanatory memorandum, or in some other way the Minister is much more open about the Government's attitude and provides the kind of information necessary for Senators to evaluate what is intended here and gives an indication, not just in a sentence that it is likely that, for example, for capital re-equipment a sum of something like £250 million will be necessary, but what the general pattern looks like for the next ten years; how it is envisaged that Aer Lingus will both expand its service, improve flights in and out of this country and re-equip with expensive new aeroplanes.

These are the kinds of facts and figures, the kind of basic information which will allow us to make sense of what is otherwise a very narrow and technical Bill which, on the face of it, does not enlighten Members of the House very much. Senator Cooney referred to the Joint Committee on State-sponsored Bodies and it is appreciated that if the committee get adequate full-time staff and avail of personal expertise, then they may be able to do a much more substantial monitoring job and may acquire an expertise among the members which will allow them to make a much fuller evaluation of the various matters I have raised that were a long way from that.

This committee is going to take a very substantial time to work its way through the various State-sponsored bodies that are within its terms of reference. In the meantime, certainly for the next couple of years, it will be necessary on the floor of the House to try to examine and assess both the performance of a State-sponsored body like Aer Lingus and the allied air companies and also our own evaluation of what we want to see provided, where we want to see the priorities of whether or not this is the appropriate way to invest the capital expenditure and whether or not we want to see the kind of diversification that we have seen already and what has happened in relation to the ancillary activities and, in particular, the Government's attitude towards the basic human complex of people with the air companies, the fair rate for the lines which carry the heaviest load of our own population and the potential for expanding tourism and drawing people into this country by viewing the provision of air travel to this country as less a purely economic and competitive activity and more an important social service both for our own citizens and to attract others to come to this country and to generate the kind of economic support and activity which are so necessary. The responsibility is really on the Minister to provide us with this information and to allow us to evaluate in a more intelligible way the single proposal in this Bill looking for a further capital stake of £15 million in Aer Lingus.

Lady Goulding

As usual I shall be brief. I do not want to go into all the figures, which I must admit I do not understand fully, but I want to tell the Minister that as a pilot—maybe there are other Senators who are pilots also—I very much welcome the injection of £15 million into Aer Lingus. I would have welcomed also other Senators speaking and thinking a little more about the air crews and cabin crews as well as those who administer the money. One thing that is very necessary for a pilot is confidence as well as skill. In my days of flying skill was not really necessary but nowadays skill is of the utmost importance and anything that in any way lowers the confidence of pilots and air crews does great harm to our airline. The very idea that Senator Cooney and Senator Crowley could both say "Let us do away with London-Cork", will probably get headlines in the papers and the pilots will be reading these papers and they will be thinking: "Good gracious, we are going to lose out on this. They will not need so many pilots." Aer Lingus has a great tradition of good pilots. I do not think I have ever been frightened, and I have been frequently frightened when piloting myself, in an Aer Lingus plane and I have flown since 1939 on Aer Lingus planes. I beg others who will speak to think of what they are saying and what will appear in the papers. The pilots need confidence. They have confidence now and they have confidence in the way Aer Lingus is being administered and run.

One must bear in mind when one is talking about shuttle services that it is very easy to operate a shuttle service when you have a very large airline like British Airways with a great number of pilots to deal with the situation. We must remember we are a smallish, although excellent, airline and a shuttle service would put a great strain on the pilots and the rest of the crews, cabin and air crews, I do not think just gaily saying: "Let us have a shuttle service" is going to answer the question entirely unless, as Senator Robinson said, you are going to subsidise heavily, even more than we are subsidising now. In that way you could have a shuttle service but it would involve a very heavy subsidy indeed.

I think it was Senator Robinson who talked about not spending so much money on new aircraft. Say that to any pilot. We must keep up with the times. We must have the same kind of aircraft that other airlines have. You cannot expect pilots of today to rattle around in the old DC 3 when people are buzzing by in 747s. That is just today's analogies—Senator Robinson is probably talking about ten years hence. When all other airlines will be having Concordes does she not want us to have Concordes? I wish we had a Concorde now.

I repeat: Think of your crews before you make statements that are going to appear in the press which will affect their confidence. We have a great airline and I am certain that it will be one of the best in the years to come.

Dr. West

It is nice to follow Senator Goulding. I cannot take her point of view because I have piloted a plane only very briefly. I think she has made a point that is worth making and I do not think that out of this sort of debate should come headlines which will cause our excellent air crews in Aer Lingus to lose any confidence. I have been a Member of this House for eight years and there have been frequent Bills of this type asking for injections of extra capital for semi-State bodies and never in all those eight years has one of those Bills been turned down. I have never even known anybody to vote against a Bill of this nature.

In a sense we are in a cleft stick position because we are unable as individuals, without a great deal of expert information which is not at our disposal, without a great deal of expertise which again is unlikely to be at our disposal, to make the sort of judgments which are needed to say whether this sort of expenditure is essential or whether it is not. We are essentially relying on the Minister and his advisers. This is not a very happy situation to be in.

To do something about this the previous Government established a Joint Committee to oversee the operations of certain commercial semi-State bodies and this Government have continued that committee in operation. I would argue that neither Government have realised the importance of such a committee. The committee at the moment are only being used to do a white-wash job but they could be doing a very important job and they could be filling a very important role because, in the case of bodies such as CIE and Aer Lingus, which need vast sums of public money to keep them going, it will be more appropriate that the sort of discussion we are having now about the actual operations, the balance of the social role versus the commercial role of companies such as Aer Lingus and CIE, should be discussed in detail in committee by this Joint Committee. It is hard for Members to make anything other than general comments and one does not know if these comments have any effect. In fact, one could expect after some experience they would have no effect at all. They make no difference to the situation. The only thing that makes any difference is whether or not at the end of the day we vote the £15 million and, because we do not have the information as to whether we should or whether we should not, we rely on the Minister and we end up voting the appropriate sum and the semi-State bodies go on their way regardless of what is said here. Maybe they are right because, as I said, most of us are not in a position to make any proper judgments on the actual technical operation or how the capital sum we are voting fits into the operation of the company.

We are confined to making observations on the operations of Aer Lingus as it affects us. Senator Goulding takes the view of the pilots and the air crew, which is, I think, a good thing to do. It is useful to have someone here to give us that point of view. I can only give the consumers' view and that has been given already. I do not think in the present situation we can ask the Minister to go around licensing private companies to cream off the top of the market on the high density routes whether they be Dublin-London or Cork-London—I use both of them quite a bit. This could be more effectively done if it were done by a Joint Committee who had more detail at their disposal and who were in a position to question the senior executives of the company in private session and get the relevant information. Any body like Aer Lingus, which is in a monopolistic situation or a semi-monopolistic situation, is in danger of getting its head in the clouds, if that is not too unfortunate a metaphor, and can lose sight of the problem of the consumer. I cannot accept Senator Goulding's argument that it would be difficult or impossible for Aer Lingus to run a shuttle service to London.

I know that the Aer Lingus scale of operation is different from that of British Airways but the scale of operation on the Dublin-London route is already considerable and I do not see that it would require extra air crews or extra aircraft to provide a shuttle service. I believe that British Airways are prepared to provide this service but Aer Lingus is resisting them. It is important to maintain profitability but profitability could still be maintained if a shuttle service were introduced. The fare on the particular route could be reduced because a shuttle service cuts down some of the ancillary costs. I do not see that such a service is impossible and I would like to have a detailed argument from the Minister as to why it is not being introduced.

I doubt if the traffic density on the Cork-London route is sufficient to justify a shuttle service. While I would certainly like to see fares reduced I cannot agree with Senator Crowley if his point was that a licence should be issued for another company to operate on that route. On both of these routes there has been a joint scale of operation by Aer Lingus and British Airways. It is a semi-monopoly because these two firms come together and they strike the rates. There is a danger that they lose sight of the consumers' view. Again, the perspective would be helped by a more serious and searching exploration of the operations of Aer Lingus by the Joint Committee. My own feeling is that the Joint Committee will not be an effective committee unless by some stroke of good luck a vigorous chairman gets a hold of it, takes it by the scruff of the neck, and then goes after the various Government Departments with which he has to deal. That would be quite a job. It would be a big operation for anyone to undertake but, if it were to happen, then perhaps we would be able to get some feedback. At the moment the information on which we can make critical judgments is not at our disposal.

This agreement between Aer Lingus and British Airways can be a bit too cosy and it can lead to a ridiculous situation, such as the one concerning the sale of APEX fares by British Airways. If one goes into the British Airways office in Dublin and asks for a CA APEX fare from London to New York they say they cannot sell this because they have an agreement with Aer Lingus. If one goes to Belfast or London one can, of course, buy it. That sort of nonsense should be stopped. The Minister should put a stop to it straight away. Why British Airways cannot sell you an APEX fare from their Dublin office when you can write to their London office and get it by return of post I just do not know. That is the sort of position that the semi-monopoly gets itself into. By cutting down the ancillary services in running a shuttle, particularly on the Dublin-London route, fares could be reduced and profitability could be maintained. If fares were reduced somewhat the overall traffic would go up. After all the cross-channel boat services have over the years been gradually reduced and the emphasis now is not on the ordinary passenger but on the car with passenger or on the driver and his pantechnicon. This is an important part of our commercial life and I am not criticising it but I am saying that cross-channel boat services are not nearly as attractive as they were ten years ago for the passenger travelling on foot. Many of the boat services now do not connect with the trains——

An Leas-Chathaoirleach

I am afraid that boats do not arise on this.

Dr. West

No, but disappearing boat services put the airlines in an even stronger position when it comes to the development of traffic. This trend looks like continuing and it makes the case for more efficient air services more compelling. The introduction of a shuttle between Dublin and London should be looked at carefully.

When it comes to the problem of training personnel, particularly in the sales department, it probably induces a certain flatness and leads to inefficiency if all the training is carried out in an area in which there is a monopoly or a semi-monopoly situation. I should like to see senior people in the sales department of Aer Lingus going for training to the US where there is a highly competitive situation vis-a-vis selling air travel. One of the pleasant things about travel internally in the US is that an air ticket is virtually equivalent to currency. One can go in with an air ticket for a certain number of dollars and, without difficulty, make a transfer to another route without any problems. The airline sales people recognise this as part of their commercial operation but, if one tries to do this on Aer Lingus routes, one runs into severe difficulty.

One has to get one's ticket refunded, then apply for a refund, which may take some time to come through. Then one has to purchase another ticket. The situation in the more competitive areas is something that could only do our staff good from the point of view of experience. I would urge Aer Lingus to send more of their staff away for training into situations in which the monopoly that exists at the moment in travel between Ireland and Great Britain does not exist and where there is a more competitive air market.

I hope the Minister will make some comments particularly on the problem of shuttle, but my main point is that really we are not in a position to speak in any informed way. Everyone believes that Aer Lingus is a good company and every Member believes the decision to start our own airline prior to the last war was the right one. But all we can do now is make vague supportive noises. If the Government took the Joint Committee on Semi-State Bodies more seriously, then perhaps by way of feedback from that committee the Members here would be able to make more perceptive comments and a great deal of the work we are trying to do in a debate such as this would be done by such a committee.

Mr. Jago

First, from the evidence that is before us we can say that Aer Lingus is an asset to Ireland. It provides a service and, by providing that service, it creates employment and because it is an Irish company, it is creating employment in and for Ireland. It has been one of the few companies which have published their plans for next year, plans which adumbrate considerably increased employment.

Secondly, Aer Lingus provides us with badly needed foreign currency. Thirdly, Aer Lingus has created a good image of Ireland abroad. We have always known the safety record of Aer Lingus and we must also know the management record of Aer Lingus because services are now demanded in other developing countries to assist their management and develop their areas. We should congratulate the management on the diversification into allied industry because some of that has not alone helped in the economy of the country but it has directed trade to the airline. The question has been raised: Can we really discuss this subject? We can safely say in a period of inflation and when aircraft are becoming more expensive year by year, it is quite obvious that Aer Lingus cannot develop its own capital. Therefore we must accept that it is only correct that we should put more of our shareholding into Aer Lingus equity to reduce the loan capital. The question is whether £50 million is the correct amount. I accept the Minister's view in this, because we have no right to amend the amount irrespective of what information we may have.

Senator Crowley mentioned Cork. I would like to say a few words on Cork. A feeling has developed in Cork over the years due to various actions of Aer Lingus that they prefer to concentrate on Shannon and Dublin as they feel that some of the Cork activities cannot affect their profits. That is a feeling that has developed in Cork. This year there was concern in Cork because Aer Lingus announced they were cutting down services. There was quite an amount of publicity on this. At one stage Aer Lingus stated that one of the reasons was because the runway in Cork was not long enough. Aer Rianta countered by saying that nobody had ever questioned a longer runway. Since then Aer Lingus has published an increased schedule for next year. There is a certain amount of confidence in Cork in what they are doing. But there are still reservations. Cork Airport is the entry to one of the great tourist areas that helps our tourist economy greatly—the west Cork-Kerry area—and it is felt that if the services through Cork are curtailed that will curtail the tourist traffic. It is also felt that if you start services you cannot expect to build them up in one year, scrap them the next year, and come back. There should be a period of build-up when we should be prepared to accept a loss on our airways for the sake of our tourist traffic. Certain services which Aer Lingus have dropped have been taken up by foreign airways. If they pay the foreign airways why is it they do not pay Aer Lingus? This is the feeling in Cork at the moment.

I welcome the Bill and I think everybody has great confidence in Aer Lingus and when the Oireachtas committee on semi-State bodies meet they should refer to all the comments that have been made here today.

Mr. Markey

In discussing this Bill I have some mixed feelings. First of all, the good points: nobody would cavil at either the quality of service provided by Aer Lingus or the provision of scheduled flights that are given by Aer Lingus. Recently I was astounded by the number of daily flights to continental cities which I did not think would have warranted daily flights, but apparently they do on a commercial basis. That is what counts in the long term. I have mixed feelings and, having said good things about the quality of service provided, maybe the service provided is not as good as it was ten or 15 years ago—but then neither is the service that one meets in shops and many public services.

What gives me great concern about this measure is: where are we heading with the levels of public expenditure we are speaking of here? The Minister said that Aer Lingus is faced with a capital investment of £250 million over the next decade. That is very big money in present day terms. The last injection was made in 1969. It amounted then to £15 million. The injection under this Bill is a similar £15 million. Faced with the prospect of Aer Lingus having to raise £250 million over the next decade, I wonder if this £15 million is sufficient. Perhaps the Minister in his reply could give an indication of what this £15 is detailed for precisely.

I am worried about the profit margin shown by Aer Lingus and I would like the Minister to indicate whether a 3 per cent profit margin in the air transport field is a typical profit margin. How do we compare with other countries in this regard? Can we expect a much higher profit margin in the years to come, given enough boost in tourism earnings and all else that goes with the air transport business? I am uneasy about the aspect that, because Aer Lingus is providing a social service, therefore the injection of capital is merited. We have been through this argument in regard to CIE. It is an argument that ends in a vicious circle. It gets us nowhere in the finish—we just find ourselves pumping more and more money into a service. We eventually conclude that, once it is providing a social service, that is the end of it. That is a wrong base from which to look at Aer Lingus. It is a young industry, as the Minister has pointed out, and if at this early stage of its development we start talking about it as providing a social service and that is the end of it, it is not good enough.

If we were not providing air transport to fly Irish people from Dublin to London or Dublin to New York, there are many other air companies willing to do so. The Germans could come in and do the job for us and certainly some of the American air companies could do the job once the commercial loads were there. I look on providing a social service more in terms of internal services within the four corners of the State, such as what CIE and other semi-State bodies provide. When we go outside the boundaries of Ireland we must look at some criteria other than the provision of a social service.

The ancillary activities that were referred to by the Minister are desirable, but I wonder whether we are going to depend on these more and more in future as a prop towards the provision of the air service itself. It is a very desirable departure on the part of Aer Lingus to provide hotel and recreational activities and it will increase revenue. By and large the image of Aer Lingus in the public mind will be still one of air transport between here and other countries. This brings us back to the point of whether the profit margin of 3 per cent is a typical one in the air transport field or whether we can look forward to a greater margin in future.

If other countries deregulate their air transport it means that we probably will have some difficulty. I would like the Minister to tell us if anything is happening in this respect that would tighten up the field for us or would tighten the regulations and give us greater competitive ability in the field of air transport. If we are faced with the situation where other countries deregulate we will find ourselves being very small fish in a very large field and may well suffer as a result. I wonder if the Minister would tell us whether there is something being done at an international level to tighten up matters in this sphere.

In the case of flights between Ireland and the UK particularly, there is a special case for something to be done in regard to the very high fares, I know the Minister is inhibited in this regard. The figures are presented to him by the Aer Lingus authorities who probably present him with certain inhibiting factors saying: "Look, there is no case to be made for a reduction in fares or a better deal being offered to people travelling between Ireland and the UK and vice versa”. The public mind has concluded that there is something wrong with the level of fares that operate for what is a very short journey between this country and the UK. I would welcome anything that would provide for a reduction in fares. There is no question of a better service being provided—there are many daily flights. It is a question of the price of the flight and the public mind regards as necessary some reduction in that sphere. We do not for instance, hear that a special case is being made for CIE services operating between Cork city and Dublin city, although Senator Crowley earlier made great play about Cork in the air transport field. In regard to the air flights between Ireland and the UK there is a need for a reduction in fares.

I do not cavil with the service provided by Aer Lingus. I should like to know, however, where we are heading with the sort of capital investment that is going to be required in the next decade. The provision of new planes is a necessity. It is necessary not only from the viewpoint of image but also from the viewpoint of safety. Anybody who has taken short hops in other countries—it may be only 50 miles or 100 miles—know the sort of planes that one can end up in. I fear that any such situation would be detrimental and would be a horrible future for us to face. We are committed to this sort of advancement and it is necessary for us to keep a very close eye on expenditure and on the taxpayers' money that will be involved in keeping a very adequate and suitable air transport service in the future.

I welcome this Bill. The money that is being injected is necessary. We seem to be committed to that course and we must keep a much closer watch on this whole sphere in the future.

Mr. Mulcahy

Ba mhaith liom a rá ar dtús ar an mBille seo gur dócha gur mhinic a bhrath daoine san Seanad nuair a bhíodar ag taisteal thar lear dá mbeidís san Róimh nó i bPáras, Londain, Meiriceá, nó pé áit, nuair a thiocfadh eitleán Aer Lingus ar aghaidh agus tar éis dul isteach ann agus suí san chathaoir, do bhraithfeadh éinne go rabhadar abhaile ag an am sin tar éis dul isteach san eitleán. Is maith an rud é sin; sin é an saghas seirbhíse a thugann an Airlíne Náisiúnta atá againn dúinn.

There are many good things that can be said about Aer Lingus and quite a few of them have been said already. I would like to elaborate on one or two of them which may not normally be adverted to. Most of the comments seem to be on the more regular and normal aspects of the Aer Lingus service as an airline. Aer Lingus as an organisation has for many years given leadership in this country, particularly as a semi-State body, in the development of entrepreneurial behaviour. We all agree that we need entrepreneurs in Ireland. Very often, a State operation is not the place for the development of entrepreneurs. People like Dr. Dempsey and Dr. Dargan helped in an entrepreneurial style to develop the airline.

Senator West mentioned training abroad and how important this would be for the sales people in Aer Lingus. It was a very farsighted move of Michael Dargan's when he arranged that the present chief executive of Aer Lingus would be the president of Aer Lingus in North America for a period of time before eventually he came to the top of the organisation. This is the type of management development thinking that I would like to see in semi-State organisations. I just mention that as a particular facet of Aer Lingus which should get some attention. This comes out, of course, and it is coming out now as has been said already, in the related operations and the related diversifications that Aer Lingus have indulged in. These have helped in no small way to bolster up the profits of the organisation and make a contribution towards the airline itself.

Another example of that is in the area of computers. From the very beginning Aer Lingus employed people and provided development for people who specialise in that area. They were instrumental in evolving novel schemes for the type of computer booking that we all take for granted when we stand in front of the desk and ask: "Am I on the plane or am I not?" They just have to run a few keys and whether it is in New York, Rome, London, Dublin, Cork or wherever your position is known because of a very complex network of communication and a very advanced computer system. Aer Lingus have been able to sell that system to developing countries. This has made a great impact, not only as far as Aer Lingus is concerned on revenue, but also on the standing of the country.

It affects not only Aer Lingus but the products that our businessmen bring in to these countries when they find that Aer Lingus has that kind of standing in a fundamental matter of this kind. I know that some difficulties have arisen in this area in another aspect of the Minister's responsibility in that the telephone strike caused problems there. I hope that these are gone now and that that particular development can expand.

Addressing myself to the monopoly aspect of Aer Lingus's activities—this might be slightly more negative than the positive things I have been saying so far—I would like to add my voice to what the Senator said about the London run. The London run is a money spinner. It is very important that people who use it will get the same treatment as somebody who is going off on a trip to New York or any other continental country. The frequency of the run and the more casual aspect of it should not be allowed to take from the very fine service Aer Lingus gives across the board. The London run is a money run and the frequent user of that run should get the same service. As an aside, I should say in that regard that the Minister should influence British Airways to carry Irish drink on their aircraft. It is a bit of a nuisance when one cannot get Irish whiskey and has to put up with another product.

On the other aspect of Aer Lingus monopoly, it has come to my attention that the air cargo freight rates will be going up shortly. I am not sure whether these have been approved yet. I gather that they probably will go up as part of the IATA Agreement. It is essential that where a company is in a dominant position it will not introduce increases of this kind at short notice. The shippers who are involved in this area should be given a chance to cope with them. It is possible to take alternative routes through London because British Airways offer somewhat reduced rates. We must help our businessmen to stay competitive. While we all know that the costs are going up, we have to be very careful about it. I just mention that matter to the Minister.

Another area, going to the positive side of it again, that I would mention is that Aer Lingus has specialised in methods of training for years. I would like to put it into the record of the House that some of the most advanced methods of management training, sales training and organisation development have been used by Aer Lingus. Some of the staff of Aer Lingus have been able to transfer this knowledge over for use in other businesses in Ireland. In fact, some of the people who left Aer Lingus and went into that type of a job—in other words, training—have made a tremendous contribution in that area. Aer Lingus are way ahead of most airlines in the world in that field.

One other positive point I would like to mention is the need to keep the confidence and morale of the pilots up, as mentioned by Senator Goulding. It is fantastic to think about the way the pilots and senior staff of Aer Lingus rallied around during the strike and managed to make such an impact on the public while the strike went on. The work they did at that time, getting close to the public, serving them their coffees and so on, made a great contribution to raising morale in the organisation. Certainly, I would not like anything that we might say today to detract from that, either at the level of the pilots and hostesses or at the level of the staff of the organisation right up to the top. It was a tremendous achievement and obviously a great boost to morale.

One negative point is the question of serving internally some of the needs of the country. It is interesting that it took an independent company like Aer Árann to provide the service that the people in the west needed. For many years there had been a demand for service to some of the islands. Maybe there is a need for a complementary activity of that kind internally which can be provided by a more independent body like Aer Árann. Maybe there is room for it to be supported and promoted.

I would mention, in terms of what the Bill is setting out to achieve—obviously I welcome it—the fact that it is £15 million now and that it was £15 million in 1969. This means, in effect, that it is a much smaller amount when we take the value of money into account over that period. Obviously, if Aer Lingus is going to go abroad and carry on the entrepreneurial activities that we have supported in this debate, it will need a balance-sheet which is healthier looking in terms of its financial gearing. Obviously, this type of money will not provide that. Even though we cannot go into all the details that would enable us to carry out an in-depth analysis in support of the Minister's view, it is very clear to anybody looking at the Aer Lingus balance sheet that it needs this type of injection, given the losses that it had to incur over a period of time.

I cannot help feeling, when I look at those currency losses and at the Irish monetary system, that maybe all the fine work that has been done in the last year might not go astray. Now that we have done that, maybe we could take a solid view about what happens in relation to being solemnly tied to the UK currency. A loss of £14 million was mentioned by the Minister. I do not think that £14 million refers entirely to currency losses. Possibly it refers also to extraordinary items. However there was a fair amount of currency loss involved and it is terrible to have to put up with that.

To sum up, my contribution is that there are a lot of good things to be said about Aer Lingus. There are one or two questions which inevitably arise when you are dealing with what is almost a monopoly. I welcome the Bill.

Mr. Kennedy

I am sorry I was not here for the Minister's opening statement. But, reading over it very quickly during the proceedings, I am surprised that he does not appear to have made any reference whatever to the holdings of our air companies in the hotel industry abroad, especially in the United Kingdom and the United States—although he does refer to the value of the tourist industry. Could we have some information about those holdings, the extent of them and their profitability or otherwise? It appears to me—I am speaking from the top of my head as it were because I do not know a great deal about the financial position of Aer Lingus—that although our air companies have these holdings in the hotel and allied industries in other countries they do not appear to be interested in acquiring hotels in this country. I am rather surprised at this because the hotel industry nowadays is a very profitable one. Furthermore, I am advised that it is almost impossible to get accommodation in hotels in Dublin, Cork, Limerick and some other areas.

I would welcome information about the extent of the holdings abroad, whether they are profitable or otherwise and why the air companies do not take an active interest in the hotel industry here. They could quite easily have bought over the old CIE hotels when they were releasing them some time ago. In asking for this information, I want to make it clear that I join with Senator Mulcahy and other Senators in congratulating Aer Lingus on its tremendous achievements over the years.

Professor Conroy

I welcome the Bill, the purpose of which is very sensible and necessary, as is spelled out in the first paragraph of the comprehensive and informative memorandum presented by the Minister when he introduced the Bill.

Basically what is being requested is an injection of equity capital—in present day terms a relatively limited injection of capital but one which is very necessary so that the financial position of the company vis-a-vis equity and loan funding should be brought into an appropriate balance for financial purposes. I am delighted to see that this is being done in the manner which is proposed. It is very pleasant to hear the many tributes to Aer Lingus, because Aer Lingus is one of the great success stories of the country, a success story which has not always been without its difficulties. I am glad that it has overcome these difficulties and that is now fully accepted on every side of the House as a necessary and integral component of our national life. I join in the tributes which have been paid to the excellent standards of the air crews, cabin crew, management and all involved in Aer Lingus.

We should consider the purpose of Aer Lingus, which, briefly, is to provide us with an essential part of our infrastructure for our development and prosperity; a part which, had it not been present, would have greatly hindered us in the progress that we have made and which, if not present for the future, would be a severe limiting factor. It has been the custom in many countries to have a national airline. For many of these countries it has been perhaps solely a question of prestige. From the point of prestige we can be very proud of Aer Lingus, but that is not its only purpose. We are an island nation. Fast, effective communications are vital. Aer Lingus have done this in a most efficient and praiseworthy manner.

I, too, would like to see lower fares on the London and other routes. We must not fall into the trap of imagining that in some way or other Aer Lingus is a social service or should become one. It must have a sound economic basis. I do not doubt that if they can keep fares down they will. Let us not put undue pressure on Aer Lingus to reduce fares below an economic level, however much we wish or desire it. The success of Aer Lingus has been based on the sound business, financial and economic principles on which it has developed. Let us continue to keep it that way.

One major aspect of Aer Lingus which has not been really touched on is that it is probably our major export earner of foreign currency. The figure, for the last year for which figures were available, is approximately £60 million, an enormous earning of foreign currency and a very valuable aspect of Aer Lingus. We think of Aer Lingus in terms of tourist trade and that is very important. They also played a major role in development activity. They have made it very clear throughout the world that we have the technical ability to take part in any modern industry. This has been an important factor for many foreign businessmen and industrialists in considering setting up industries in this country. The very high technological reputation of Aer Lingus has been a key factor and one which we perhaps take for granted.

There is a return cycle in airline financing which relates to the provision of new generations of aircraft, and at a certain stage in each cycle it provides all airlines with an immense burden on their financial resources. Aer Lingus have done extremely well in that they have managed to balance the buying of their fleet and have bought aircraft which were proved to be extremely suitable to the routes Aer Lingus operate. I do not doubt that they will show the same financial and technical aeronautical expertise for the future, but the costs involved are staggering. At the moment the cost amounts to £65,000 per airline seat, and the figures which are given here would represent the cost of presentday replacement of the aircraft. Due to this cycle which I just mentioned the replacement will probably be taking place over the next few years rather than immediately. This may involve even larger sums than those mentioned here.

There have been one or two comments on the ancillary activities of Aer Lingus, in particular, the hotel activities. These are more or less a routine function nowadays of international airlines. They are very necessary for various business purposes related to the airline. They are a very valuable aspect. Certain other aspects of the ancillary activities of Aer Lingus are rather more important: the overseas contracts which they have been so successful in obtaining and which have performed to such an extremely high level of competence, the trainee activities of Aer Lingus and, a very valuable aspect, the maintenance, repair and general engineering work which it now seems possible Aer Lingus will be able to develop to a significant extent. This is a tribute to us and to those working for Aer Lingus at all levels. I mentioned air crew, management and cabin crew, but we should not forget the very rarely recognised mechanics, maintenance crew, engineers and technological people concerned with Aer Lingus. It is their exceptionally high quality work which has been a vital factor in the extremely reliable service provided by Aer Lingus. This has been recognised internationally by various other countries and airlines which wish to process either their work or training through Aer Lingus. These people deserve our tribute.

I know, a Leas-Chathaoirleach, you intervened when another speaker referred to boats but clearly there is some degree of a competitive element between the airlines and the shipping services and contrary to what one of the previous speakers said, I think Aer Lingus are, if anything, likely to face further competition there with the introduction of hydrofoil and other-up-to-date surface craft. This will be an additional reason for ensuring that the new aircraft which are bought are aircraft which can be operated at efficient, economic level. From a national point of view it is very beneficial that we should have increasingly efficient and speedy transportation available to us either by air or by sea, but it will certainly provide increased problems for Aer Lingus, not decreased.

There are a number of other points which could be made—some were made by other speakers already—and there are many others which one would like to develop. Basically in this very necessary and timely Bill we are discussing a change in the equity capital and therefore I would like to restrict myself just to these general comments.

Mr. Butler

I agree with many of the complimentary remarks which were made about Aer Lingus but one area that has not been referred to at all during the debate is the industrial relations position in Aer Lingus which is very important. It is probably more important there than in any other industrial section in the country because of the effect a breakdown in industrial relations there would have, not alone on trade but on the transport of tourists in or out of the country. I suggest that recognition be given to those people who are involved in the industrial section of Aer Lingus because of the few breakdowns we have had in industrial relations within Aer Lingus. We all know how difficult it is and how important it is to have good industrial relations. During the year there were breakdowns in other countries and because of the effect they had on tourism within this country and in the other countries it is important that we should take notice of the fact that we have had this type of industrial relations in Aer Lingus.

In the event of a breakdown I would be sorry for people who have either gone abroad and are left stranded, or people who have come into this country and are left stranded here. I do not know how we could get over that type of situation. I would like to know how many unions are involved in industrial relations in Aer Lingus. It is important that we have as few as possible. The fewer unions involved in that field the more likely it would be that we would be able to solve the problems that would arise there. I know the Irish Congress of Trade Unions are very interested in this area and they make every effort possible to ensure the continuation of the working of Aer Lingus.

I am bringing up these points because no one referred to them and they are important. I would like to congratulate Aer Lingus but I would like to say to those people who are involved that whenever there is danger of a breakdown, they should negotiate to the very end to ensure that there would be no breakdown.

Minister for Tourism and Transport (Mr. Faulkner)

Ba mhaith liom buíochas a ghabháil leis na Seanadóirí go léir. Is Bille fíor-thábhachtach an Bille seo. Tabharfaidh sé seans do Aer Lingus forbairt a dhéanamh sna blianta atá romhainn, agus tá sé sin íontach tábhachtach, ní amháin ó thaobh Aer Lingus féin ach ó thaobh eacnamaíocht na tíre go ginearálta. Tá áthas orm gur aontaigh na Seanadóirí go léir inniu leis an Bhille, go bhfeiceann siad an tábhacht atá ag baint leis agus tá súil againn uilig go gcuideoidh sé le Aer Lingus feabhas a chur ar an obair fíor-thábhachtach atá á dhéanamh acu i láthair na h-uaire.

I would like to express my thanks to the Senators who spoke on this Bill for their general acceptance of it. It is a Bill which is an important measure in that it is designed to put the air companies on a sound financial basis to enable them face the formidable challenges of the future and to continue their valuable contribution to national development.

Senator Cooney recognised that the bulk of the profitability of the companies comes from their ancillary activities. I think it will be accepted that considering, for example, the cost of aircraft acquisition to meet future growth we would all hope that the air companies' profitability would increase. Senator Cooney referred to the possibility of reassessing the situation in relation to Aer Lingus and I detected perhaps a slight hint that he would be inclined in relation to the north Atlantic service to reduce it because it is losing money. Of course, there is much more involved in the north Atlantic service than the fact that the service as such is losing money. It is a fact that if we had not got our own north Atlantic service the number of tourists visiting this country would decrease very considerably because, with the type of fares which are being offered from the US at present planes would tend to overfly this country and we would only get the number of tourists who felt like coming back from London or some other destination to Ireland. In our present circumstances, because we have Aer Lingus servicing the north Atlantic, we are assured of not only planes landing in Ireland but also we are helped very considerably by the exceptional work which is being done on tourist promotion by Aer Lingus.

Might I just point out here, in answer to a suggestion made by Senator West that Aer Lingus should send some of their people to be trained in America in promotional activities, that in fact quite a considerable number of the airline staff are working on promotional business in America and they are competing very effectively with promotional people from other countries. I doubt if they would have much to learn from being trained in America. I might also add that, were it to happen that we were to make any dramatic changes in our north Atlantic situation, it could mean the release of 1,300 airline staff, many of them home-based. It would mean also the disruption of our airline with large-scale economies and loss of morale and, of course, in national terms it would be harmful to industry and trade and it would be a very considerable blow to tourism. I hope that we never reach the point where we think that the north Atlantic service is not necessary. I am not suggesting that Senator Cooney was proposing such a decision but I am saying this simply because I thought he felt that we were just keeping the flag flying by continuing the service across the Atlantic. I hope I have demonstrated we have done much more than that.

We also had suggestions about the possibility of a shuttle service on the shorter routes like the London-Dublin route. The obvious advantage to passengers on a shuttle service is the availability of a seat at any time without prior reservation and this, of course, would be a particular advantage to the business traveller but I would like to underline the fact that a shuttle service would not in itself automatically mean a reduction in fares. The potential advantage to the airline is a traffic increase but there would be quite substantially increased costs involved, mainly the cost of providing a back-up service to cater for peaks of demand.

In so far as the London-Dublin traffic is concerned, about two-thirds of traffic on this route is comprised of non-business passengers. Many of whom use the existing special promotional fares and these would not fit in with a shuttle service. A number of studies have in fact been done and these have shown that the introduction of a shuttle service on this route would not be an economic proposition nor would it be justified having regard to the fact that only a limited number of passengers would stand to benefit from the extra expenditure involved. Nevertheless, I would like to say to the House that Aer Lingus and British Airways keep this matter under review.

A number of speakers referred to the fares between Ireland and the United Kingdom, particularly on the London-Dublin route. It is quite natural that all of us would like to have fares reduced. I, personally, would like to see them reduced. I have no doubt that Aer Lingus would also. But we must try to keep a balance in our minds in relation to the needs of Aer Lingus, not only now but in the future—the need it has for money, the need for a certain level of profitability and, on the other hand, the demands of passengers for lower fares. The fact of the matter is that, in so far as the short-haul services of Aer Lingus are concerned, they are only marginally profitable. It is true to say that were it not for the cross-subsidisation by profits from ancillary activities, the fares would in fact be higher than they are at present. As I said a moment ago, I have already indicated that there is need for quite substantial profits in the years ahead to meet the cost of new aircraft. In the circumstances, it should be recognised that there is not much scope for a reduction in fares.

I have already mentioned that there are a number of different types of fares available on the Dublin-London route. There is the normal economy return, that is the £72 fare; there is the excursion fare of £60 and there is the APEX fare of £48. Of course, there are also the low promotional fares, that is, inclusive tour fares and fares for special events and for families. If you compare like with like, these fares are among the lowest in Europe on a cost per mile basis.

I know that those who are anxious to have fares lowered are not interested in cost per mile but an airline which is endeavouring to run on an economic basis must concern itself with this factor. The normal economy fares between Dublin and London and Shannon and London on a cost per mile basis are very considerably lower than the fares on the London-Paris, London-Brussels and London-Amsterdam routes and one could say that the comparison is similar in the case of other fare types on other similar routes.

Mention was made of the profits this year and, as I said, there were fairly substantial profits from the ancillary activities. The combined overall profit was approximately £4½ million in the year ended 31 March last and I do not have to remind Senators that this was on a gross revenue of £162 million. This approximated to a return of only 3 per cent and, as I said in my opening speech, if there were a downturn of 3 per cent in gross revenue the profit would be wiped out. This further demonstrates the need for higher profits and the need to recover increasing costs through air fares.

Senator Crowley referred to the situation in Cork as did Senator Jago. There was a furore recently when there were reports of a withdrawal by Aer Lingus of certain air services out of Cork. I would like to set the record straight in relation to this. The services withdrawn consisted of no more than a once weekly night charter to Spain and a few ad hoc Dublin-Lourdes night flights, formerly routed through Cork. The withdrawal, necessitated by schedule changes and fleet deployment problems, will however, as Senator Jago mentioned, be more than offset by the considerable improvement in the frequency of the companies' schedules services from Cork to the UK and continental Europe.

In addition the operation of a frequent and improved Cork-Dublin connecting feeder flight, with onward connections to a number of holiday destinations on the Continent will give a much better service to the Cork people than a once weekly charter to a single destination. Overall, it is true to say that the level of Aer Lingus operations out of Cork is being increased, and there will be a very limited reduction in the charter area.

Senator Crowley also referred to what he termed a ban on air services other than Aer Lingus but the fact of the matter is that we have no application for services out of Cork to other countries. It is open to other airlines to apply to me for permission to operate out of Cork, but we have no application for such a service.

I was rather surprised at Senator Robinson's criticisms of my opening speech in that she suggested that the information I made available was meagre. I felt that I had given a very reasonable resumé of the Aer Lingus position related to this particular Bill. She asked what was the purpose of the £15 million. The £15 million will restore the ratio between the equity capital and borrowing to about 1:1. This is a normal ratio. The equity injection of £15 million will assist the airlines in their objective of building up reserves towards future capital requirements. The companies will also be able to borrow on the basis of the improved capital structure.

Senator Robinson also referred to the ancillary activities. In common with quite a large number of other airlines, Aer Lingus in the early seventies decided to diversify into potentially profitable ancillary activities. They were mainly aviation-related. This was to endeavour to offset the cyclical swings to which the air transportation business is subject, to maintain employment and also to improve the overall rate of return on capital. Their activities come under two broad heads, aviation-related and others. To date, the companies have invested about £2 million in activities related to aviation and about £17 million in non-aviation-related activities. The aviation-related activities have not required heavy investment as they are generally integrated with the operation of the air services.

I must say, and I am sure that the Seanad would agree with me, that I fully support the diversification programme which has been very successful and has contributed substantial profits to the company. The aviation-related activities consist mainly of services to other airlines in the fields of maintenance and overhaul of aircraft, in crew training and in advisory services. Activities not directly related to aviation but with some affinity to it, include hotel investments which were referred to by Senator Kennedy and I would like to tell him that the investments in hotels that he has referred to are highly profitable. I would also say that Aer Lingus has also got a minority shareholding in some hotels here as well.

Senator Robinson in referring to these ancillary activities particularly referred to Teneriffe. The position there is that because of the downturn in the tourist activity on the islands, Aer Lingus has not so far developed the property in Teneriffe but the position is being kept under review. In fact, the ancillary industries in which Aer Lingus are involved are now highly profitable in most instances, but one might expect that some might not be as profitable as others—but taking the overall picture they are and they have been profitable.

Senator West suggested that Aer Lingus is in a monopoly position in providing transportation, but in actual practice of course it is in competition with surface transport and also with other airlines. The shipping services have improved enormously over the last few years.

I have dealt with most of the points raised. Again I appreciate the approach of the Senators to this Bill.

Question put and agreed to.

Agreed to take remaining Stages today.

Bill put through Committee, reported without recommendation, received for final consideration and ordered to be returned to the Dáil.

Seanad Éireann debate - Wednesday, 6 Dec 1978

Air Companies (Amendment) Bill, 1978: [Certified Money Bill]: Second and Subsequent Stages.

An Leas-Chathaoirleach

Seanad Éireann debate -
Wednesday, 6 Dec 1978