Seanad Éireann debate -
Wednesday, 5 Mar 1986

Vol. 111 No. 11

Air Transport Bill, 1984: Second Stage.

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

Minister of State at the Department of Communications (Mr. Nealon)

When introducing this Bill in the Dáil, it was indicated that its essential purpose was to close off a potentially serious loophole that had come to light in the Air Navigation and Transport Act, 1965. That Act deals, inter alia, with the Minister's power to regulate air fares and it was to that area that the new legislation was addressed.

I should say at the outset that a requirement for airlines to secure Government approval for international air fares is the accepted norm applied by aviation regulatory authorities world wide. Because of the sovereignty which states exercise over their air space, traffic rights for scheduled air services are generally only available where a bilateral agreement or international treaty has been concluded providing for an exchange of such rights. These agreements generally include a provision relating to the approval of tariffs, and it was against that background and in recognition of Ireland's international obligations towards that end that the 1965 Act embodied in Irish law provisions giving the Minister statutory powers to control air fares.

Over the years airlines have accepted without question that scheduled service fares require Governmental approval and carriers serving Ireland have traditionally submitted their fares for approval as a matter of course. For practical reasons, control of air fares has been applied at the level of fares actually sold to the public. This is the norm and airlines have consistently submitted their proposals on this basis. It follows logically from this that if the fares approval process is to have any worthwhile meaning then the fares sold in the market must conform with the approved levels and conditions. This too has been accepted as a general principle by the airline industry.

A challenge to those accepted norms manifested itself in the Irish market during the summer of 1983, but steps taken by my Department at the time resolved the then prevailing difficulties. Unfortunately, more serious difficulties emerged early in 1984 when a major Dublin travel agent widely advertised Shannon-New York services at fares which did not stand approved by me. Efforts to resolve the difficulties through consultations between my Department, the airline and the travel agent concerned failed and, since the stance taken by the other parties constituted an effective challenge to the generally accepted interpretation of the 1965 Act and since continuation of the malpractice could have seriously jeopardised the already precarious state of North Atlantic operations, the Minister sought and obtained a temporary High Court injunction restraining the airline concerned from selling either directly or indirectly via travel agents fares which did not have my approval.

The injunction was to have effect until the substantive hearing of the case, but on appeal to the Supreme Court the injunction was lifted, the court taking the view that, given the terms of the 1965 Act, the airline concerned had an arguable case and that what the court termed "the balance of convenience" rested in not continuing the injunction. I should add that both the High Court and the Supreme Court refused to grant an injunction directly against the travel agent, the view being taken that the scope of the 1965 Act did not extend beyond airlines.

While the court decisions to which I have referred did not reflect a definitive judgment on the legal issues involved — that would have had to await the substantive hearing of the case — the Minister took the view, after consultation with his legal advisers and after weighing up carefully all of the implications, that the best course of action was to clarify the situation by way of our amending the 1965 legislation. That was the origin for the present Bill.

Publication of the legislation gave rise to a wide-ranging public debate and a prolonged examination of the measure in the Dáil. I very much welcomed that debate, since I believe that it can only be healthy that our policies in any area are subjected to detailed scrutiny, both by the public at large and by the Houses of the Oireachtas. In that regard, I am sure that the Seanad will wish to avail of this opportunity to give me the benefit of its current thoughts on Irish aviation policy in general and specifically in the area of air fares.

In that context, I would like to offer a few comments, first on my general policy stance; second, on my general philosophy towards air fares; and, third, to relate those to the measure now before the House. In the process I would also hope to lay to rest once and for all some of the erroneous constructions that have been put on the legislation and to convince Senators of the merits of the measure.

The Green Paper on Transport Policy which was published last November deals extensively with the aviation scene and I do not propose to go over all of that ground here. However, as an island nation heavily reliant on good access transport links for business and tourism needs, continuity and reliability of services must be a first priority. While low air fares and sea ferry charges are highly desirable, calls in that direction can be very academic if there are no services on which to offer the fares. A balance has to be struck between what the airlines require to sustain services and what constitutes reasonable value for money for the several segments of the travel market.

One can take the view that these matters should be left entirely to the free play of market forces. That was the view taken within the United States when it embarked on its deregulation policy. How successful that policy was I am not going to judge. Deregulation certainly led to lower fares and greater carrier efficiency on many routes — generally the heavily trafficked trunk routes — within the United States. However, deregulation also brought about substantial increases in fares on other routes, while many communities lost their services altogether. Therefore, it was not an unmixed blessing. These aspects have not received the same high profile publicity as have the lower air fares developments, but in my view, and bearing in mind the characteristics of the Irish market, including its size, seasonality and mix of traffic as between business and tourism travellers, I suggest that there are lessons there which one should not lose sight of.

Those who doubt my views might care to read the Professor John Bristow report of 1985 on "Aspects of the Regulation of Air Fares in Ireland" or the articles by Mr. Melvin Brenner, an acknowledged expert on US deregulation, which appeared in The Irish Times on 31 December 1984. Furthermore, anyone contemplating out and out deregulation might ponder on the pay-rate implications for workers in the industry and not forget either that the cut-throat competition has brought its share of collapses, stranded passengers and so on.

If Senators are by now getting a view that I am totally against change, then they are wrong. The Minister accepts without question that the present regulatory arrangements within Europe are too rigid and do not operate either to the best advantage of a carrier like Aer Lingus or to the maximum benefit of consumers. The Minister on several occasions has indicated that he would be quite happy to support an "open skies" regime in Europe, or in other words a regime in which carriers like Aer Lingus would have an opportunity to compete on equal terms for traffic between any two points in Europe. Such liberalisation could, of course, only become a reality if European countries generally were prepared to move together in this way and in the absence of movement in that direction the Minister wants to make it clear that he has no intention of exposing Irish interests unilaterally to regulatory regimes that would not serve our national interest.

In the matter of air fares, the Minister has consistently operated a policy of trying to keep fare levels as low as possible. He has on numerous occasions since coming into office rejected or modified fare increase applications put to him — often, I might add, in situations where the regulatory authority at the other end of the route, including the UK Civil Aviation Authority, saw fit to approve the increases in full. He will continue to take a tough line on fares increases. In order to do so, he must, of course, have the necessary statutory powers, and that brings me back to the current piece of legislation.

Opponents of the legislation have classified it as a recipe for high fares. Comments have also been made to the effect that the measure is running against the trend of liberalisation. I want to refute both charges. On the first count, the Bill is in fact a neutral measure, which is not biased in favour of either high fares or low fares. Accordingly, it is inaccurate to describe the Bill as an anti-consumer measure, with only one purpose in mind — to increase air fares. The prerogative to submit fares proposals at whatever levels they wish will continue to reside with the airlines and the Minister will examine all proposals on their merits. All he is seeking to do in the Bill is to ensure that, once an airline has received approval for its air fares proposals, it will stick to selling at those levels both directly and through intermediaries such as travel agents. That, I suggest, is a perfectly reasonable approach.

As to the allegations that we are running against the tide of regulatory change, may I say that it is standard practice for aviation authorities throughout Europe to have available to them powers to control air fares. As I indicated in my opening remarks, the provisions of the several international treaties on which the whole operation of scheduled services depends require that such powers be available. Furthermore, the various proposals brought forward by the European Commission in its Memorandum No. 2 are based on a premise that the bilateral system of regulation shall remain in existence and the commission's proposals in the air fares area provide specifically for the control of tarrifs by member states. Accordingly, the Minister is quite satisfied that the powers which he is seeking in the present Bill are compatible with the powers currently available to other regulatory authorities in Europe and are not inconsistent with moves which are under way either in the European Community or elsewhere.

I will turn now to the specific sections of the Bill and offer some comments. Section 1 of the Bill contains a number of definitions, including a detailed definition of what shall be regarded as an "airline tariff". The 1965 Act was deficient in this respect.

Sections 2 and 3 should be read together. Between them, they contain the provisions which will govern the scope of application of the Bill. Only airline tariffs in respect of which a notice under section 3 is issued will fall within the scope of the legislation and in framing the measure in that way the Minister can at any time decide on the extent to which fares control should be exercised. At the present time, for example, he exercises no control on charter fares and it would not be his intention to issue section 3 notices in respect of charter operations. In fact, the section 3 provision has been framed in such a way that its use can be modified according as the regulatory environment changes. That, I believe, is the best way to legislate for a situation which is clearly going to change on an evolutionary basis over the next several years at a fairly fast pace. I should add that during the course of passage of the Bill through the Dáil section 3 was amended by the Minister to include detailed criteria which the Minister must have regard to in considering air tariff proposals. These are set out in section 3 (3).

The Bill allows airlines to continue what is standard practice in the industry, namely to begin selling fares on a "subject to Government approval" basis. This facility is necesary so that one carrier may not be placed at a competitive disadvantage vis-a-vis another. Section 4 does, however, provide the Minister with machinery to intervene. This he might wish to do where for example a carrier introduced what might be termed a totally disruptive fare. Given the nature of the airline industry, I believe that it is important that the Minister should have this kind of power.

Section 5 is a section which did not exist in the Bill as initiated. The section which the Minister introduced on Committee stage in the Dáil and which he further amplified on Report Stage makes provision for the establishment of a register in which details will be kept of applications for fares changes and for scheduled service route rights. The public and other interested parties will have access to the register and can thus make representations on any particular submission as they see fit. Details of decisions taken will also be filed on the register.

Section 6 sets out what will constitute an offence under the Bill, while section 8 stipulates the maximum penalties that can be applied. On the subject of penalties, I would like to remind the House that the penalties proposed for tariff offences have been scaled back considerably from those included in the original Bill. The maximum fine has been halved from £100,000 to £50,000 while the jailing provision has been removed.

With one exception, the provisions of section 9 merely reflect amendments that are necessary to the 1965 Act to bring its provisions into line with the present Bill. The exception relates to paragraph (g) and there I should explain that I am availing of the opportunity of the legislation to increase the penalties for other breaches of the 1965 Act from their present levels of £100 — summary conviction — and £1,000 — conviction on indictment — to £1,000 and £100,000 respectively. Since offences under the 1965 Act can cover matters such as flying an aircraft without authorisation from the Minister, I believe that the penalties for such offences should be steeper than those for what I would term tariff offences.

In explaining the penalty provision, I should also advert to the fact that in the course of the Dáil debate, the Minister agreed to the removal of a provision which established a clear linkage between the Bill and the licensing regime for the travel trade contained in the Transport (Tour Operators and Travel Agents) Act, 1982. The basis on which the Minister made that amendment is set out in the Dáil Official Report for 12 February —(volumn 363, columns 2303-2305

The sections of the Bill to which I have not made specific reference cover routine technical matters.

Overall, I would suggest to the House that the Bill should not be seen as a draconian measure or as an instrument to encase in concrete the existing regulatory arrangements governing air fares. Since coming into office, the Minister has endeavoured, both through his actions in dealing with fares proposals made to him and in the policies which he has pursued internationally and specifically within the European Communities, to bring about changes that will make airlines more cost and efficiency conscious and hopefully result in a better deal for consumers. As I have said already, continuity of air services must be the overriding objective when one considers our national interest. The availability of year round reliable air services to the possible range of destinations, offering consumers the widest practicable range of services at the lowest possible prices, must be our objective; and I believe that the Bill now before the House will contribute towards that end. I commend the Bill to the House.

Mr. Lynch

I support the Bill because we must remember that we have an obligation to protect our national airline and maintain it as a viable entity. At the same time we must work in the best interests of the consumer and we must ensure that our national airline operate in a manner which ensures that if we become more competitive it will give added boost to our tourism trade. My main concern regarding this Bill lies in section 3, to which the Minister referred. Section 3 sets out the interests the Minister shall have regard to other than those of the airline carrier when considering whether to approve an airline tariff. Among the interests to be considered is that of tourism. Section 3 (3) (b) obliges him to have regard to

the contribution capable of being made to the economy by the tourist industry by reason of the provision (subject to the need to maintain an air transport industry) of airline tariffs which are competitive in the fares, rates, or other charges and in the terms and conditions applicable.

As vice-chairman of the Oireacthas Joint Committee on Small Businesses I, along with other members of that committee and the chairman, spent many hours during the early months of last year working on that committee's Report on Tourism, Catering and Leisure, which was debated in this House just before Christmas. In my contribution to that debate I emphasised the importance of access transport for the development of our tourist industry. In stressing access transport I was very much reflecting the thrust of the report. The report stated an obvious fact, one which we do not consider as often as we should. I will quote briefly from pages 7 and 8 of that report, which I am sure the Minister must be au fait with:

Ireland is an island and therefore tourist access is, by definition, restricted to transport by air and sea. We are consequently at a comparative disadvantage with most European countries where overland transport by road and rail plays a major role in tourism access. Thus, in the tourism context, Ireland is principally perceived as a secondary destination. Given this natural disadvantage, it is critical that all tourist interests in Ireland co-operate fully in making access as easy, as economical and as comfortable as possible.

In fairness to this Bill, section 3 (3) acknowledges the legitimate tourism interest in air access transport to Ireland. This section also keeps faith with the Government's own White Paper on Tourism Policy which was published on 27 September 1985 and debated in this House in conjunction with the Report of the Committee on Small Businesses. Chapter 16 (1) of the White Paper states:

The Government recognise the vital importance of access transport to tourism. This country's location makes it imperative that reasonably priced access transport services, of sufficient capacity and acceptable standards, be provided from all our main markets.

I accept that this Bill, while dealing with various aspects of commercial air transport, recognises the tourism interests in the letter and spirit of the White Paper. However, I would be slightly concerned that recent Government changes, which have resulted in responsibility being detached from the Department of Industry and Commerce and joined with Forestry and Fisheries affect one of the long held views of tourism interests, that traditionally tourism does not have a central place in the determination of Government policy. I am not saying that such a reflection is valid in this instance, but we should bear in mind the firmly held views of small firms who depend on tourism, firms that are convinced that the needs of tourism take second place to those of State-owned carriers. Many of these firms will look anxiously to see that their fears are groundless when it comes to the implementation of the provisions of this Bill.

Section 5, to which the Minister referred, provides for a register which would be available for public inspection. This register will contain information with regard to decisions made by the Minister on airline tariffs notified to him under the other provisions of the Bill. I welcome this section of the Bill. It is a reasonable response to some of the tourism fears I have outlined. I recommend that all trade associations with tourism connections maintain a watchful eye on this register. In this way they can ensure that their interests are taken into account when questions of air tariffs are under consideration by the Minister.

I would like to refer briefly to the Aer Lingus interest. While the medium to longer term trend at EC level will lead to deregulation of tariffs and will limit the privileges of national airlines within their own countries we must accept that there will be considerable resistance to these steps in several EC countries. In those circumstances it is not unreasonable that we should take steps, but consistent with tourism requirements, to ensure a fair crack of the whip for our national airline and for the small but growing number of private airlines based at our regional airports.

It is easy to forget that Aer Lingus developed most of the European business at Manchester Airport only to lose it to British Airways. This loss was not in the face of commercial competition but resulted from the removal by the British Government of Aer Lingus pick-up rights. While all this happened some years ago, it illustrates what other Governments can do in the name of looking after their own. When we have an EC policy on air transport that allows Aer Lingus full commercial freedom to operate in other EC member states many of the provisions of this Bill will become redundant. In the meantime, as the second smallest EC member state, we are not in a position to unilaterally declare the open skies policy to which the Minister referred. All EC states, and particularly our larger neighbours, must move together in this area. This can be done through extensive consultations when that day arrives.

Perhaps the Minister would re-assure consumers, in view of the rumours and media reports about cracks in a number of jumbos in other airlines, that all the necessary additional checks have been carried out on the Aer Lingus fleet. We have a national airline with a tremendous record for safety and courtesy and we want that record maintained.

I would also be thankful if the Minister would make some comment in regard to the apparent discrepancy in fares. I had some figures of comparisons between a journey to England by boat and by plane. The cost is minimal by boat compared to flying. With regard to the air fares from Dublin to London, when these are compared with the cost of a flight from London to New York or Boston, there appear to be discrepancies, particularly when the biggest part of the cost of a flight is getting off the ground and coming down.

I accept this Bill as reasonable. I also accept that it takes full account of tourism interests. In common with others concerned to maximise our tourism potential, I look forward to being reassured by the manner in which the provisions of the Bill are implemented.

Mr. FitzGerald

I welcome this Bill. It is to a large extent very much in the national interest. During the period of its enactment through the other House, that House seemed to be confused about the objectives of the Minister and of the Department of Communications in producing this Bill. I have been greatly reassured by the last paragraph of the Minister of State's contribution to the House when he said that the availability of a year round reliable air service was the overriding objective in this country with a possible range of destinations offering consumers the widest practical range of services at the lowest possible price and that he believes the Bill will contribute to that end. The Bill is intended to give power to the Minister, which he or she may not use but is there in the public interest, to control, in the interest of keeping prices of a range of air services as low as possible, the cost of tariffs and fares.

I would like to say how much the general public are confused by the variety of the air fares today in taking a trip almost anywhere. The average price of going on a journey by air can be as low as 10 or 20 per cent of that charged to others travelling on the aircraft on a particular flight. The extent to which there is a variety of fares for almost everybody on any flight is something that requires streamlining. I hope that the power given in this Bill for the regulation of tariffs and fares will be useful. I do not accept that having that power is in any way to be confused with the liberalisation of tariffs and fares and of our airline's working arrangements. In the most liberalised countries — I speak of the Netherlands and the United Kingdom, countries which are very close to us — where low fares are subject to much international discussion they have the same form of controls and regulations as are contained in the proposals before this House today. I believe the proposals contained in this Bill to introduce what has been traditionally there by way of practice by the airlines but which needs to be put into some order following the Supreme Court action which was taken in 1984 relating to the earlier Bill in this area. The Air Navigation and Transport Act, 1965, is really only a question of getting involved in tariffs and fares and, in particular, dealing with the anomaly that can often exist between an approved fare to the airline and that then being sold by the travel agent, whether acting as agent for the airline or in a separate and independent capacity.

I am quite happy that during the period the Minister for Communications has been responsible for air transport a number of important improvements in liberalising our air transport laws have been made. The Minister, for example, has consistently approved proposals from US carriers for fare levels that were lower than those offered by Aer Lingus. He has on several occasions rejected fares to the United Kingdom and continental Europe because they were considered to be too high. He has also been the first to break the Aer Lingus monopoly on cross-Channel routes by granting authorisations for air services to Avair and Aer Arann, notwithstanding objections by the board and managment of Aer Lingus supported by the Irish Congress of Trade Unions. There have of course, been unfortunate happenings in relation to Avair since that particular decision. He has, with only one exception, approved all approaches from foreign Governments to inaugurate scheduled air services to and from the State and tried unsuccessfully in 1983 to persuade his EC colleagues to include more liberal provision in the EC directive on inter-regional scheduled air services which came into effect on 1 October 1984.

I was interested to note the contribution of the Minister for Communications to the Bill in the other House on 1 May 1985, when he said in response to one of very many exchanges with Deputy Desmond O'Malley:

Aviation is regulated by means of various multinational and bilateral treaties. A regime along the lines proposed by Deputy O'Malley would breach Ireland's treaty obligations with other countries and could not be intoduced unilaterally. Deputy O'Malley obviously ignored this point in tabling this and other amendments. He quoted me as saying at a press conference which I gave some months ago that I was in favour of an Anglo-Irish free trade area. What I proposed and put to the British Secretary of State for Transport is the concept of a free air zone incorporating the two islands. I mentioned that to Mr. Ridley on a couple of occasions and we intend pursuing that concept with the British.

We are speaking here of an attempt, obviously, to get over the problems that Senator Lynch referred to a moment ago relating to the difficulties in Manchester some years ago relating to Aer Lingus picking up passengers in Manchester. Perhaps there could be an agreement with the British, although they would be as careful to protect their national interests as we will be ours. I know the Minister is very keen that this be pursued.

In the course of the Bill's passage through the other House, important provisions were included to protect — this is an important area — the interests of the consumer, particularly under section 5. The consumer can under section 5 inspect a register as frequently as necessary to be assured of the levels of approval in tariffs and fares that the Minister has been able to deal with.

Under section 8 I welcome the reduction in the penalties that the Minister of State has drawn our attention to today. The maximum fine hs been halved from £100,000 to £50,000 and the jailing provision has ben removed. The ludicrous situation that has existed up to now for those selling the tickets at travel agent level who were able to operate quite differently in relation to the price of tickets from those submitting the price to the Minister for approval has been brought into line in a manner that will be generally understood and accepted.

Broadly speaking in welcoming this Bill, I feel it is very much in the interests of the consumer. It is no less liberal a move than the present situation and controls that exist in the United Kingdom and the Netherlands. I hope that, in the passage of time and in the interests of the travelling public and of as much movement as possible in the direction of liberalisation and competition in our airline system, the provisions of this Bill will be required to be used very infrequently.

Mr. B. Ryan

This must have been the most extraordinarily controversial minor Bill that ever came through the Dáil in recent years. It started off as something that was intended to pass through quite quickly as a technical Bill to give the Minister certain powers. Then it became extraordinarily controversial. I am inclined to accept by and large the contention of the Minister of State, and indeed of the Minister, that there is nothing particularly extraordinary about this Bill. I am also somewhat mystified at the depth, and indeed the ferocity of the opposition that was manifested to it both inside the Oireachtas and outside it. It says as much about the ideological state of a large section of Irish opinion as it does about the capacity to debate the issues involved with any degree of rationality.

I am glad the Minister mentioned the fact that this glorious deregulation that has been manifested in the United States has resulted in the loss of air services to those areas where there was not a highly profitable route available and a concentration on the routes. It is also a fact that there has been in recent times a considerable number of reports of increasing levels of stress among airline crews because of the fact that deregulation has imposed increasing burdens of competitiveness and of price on companies and these have been paid for by extremely heavy working loads on the employees involved.

On the other hand, it tends to be, although it should not be, the function of people like myself on the left in Irish politics to somehow become the apologists for high price policies in the interests of what some people would regard as the artificial sustaining of inherently unprofitable enterprises. There is a role of State involvement in all areas of the economy. My view is that there is a role for an increasing involvement, but that is not as some sort of regulatory protection of artificial markets but as a dynamism for growth and development.

I want to put on record my experience of air fares as an occasional traveller by air from Cork to Dublin. When I began travelling the air fare from Cork to Dublin was approximately 75 per cent higher than the corresponding rail fare. That relationship was maintained until a private company became involved which has since become bankrupt. All of a sudden we had a most extraordinary upsurge in air fares from Cork to Dublin to the extent that it is now almost three and a half times more expensive to travel by air. The price of the air fare from Cork to Dublin has increased quite dramatically over four years, far more rapidly than the corresponding rail fare. It was the involvement of the private sector company which produced this explosion in fares — and then, incidentally, produced the collapse of the company involved, leaving only Aer Lingus. In the process the fares have taken an extraordinary leap upwards. I do not understand why.

There is a need to examine the cartel which operates between British Airways and Aer Lingus on the Dublin-London route. It is extraordinary that shuttle services are available between London and Glasgow and between London and Belfast which are considerably cheaper than the standard air fare between those cities. Aer Lingus and British Airways are equally culpable. There will not be any remarkable change if British Airways are privatised. They have established a fairly cosy relationship between London and Dublin in which one company are not prepared to under-cut the other. The elaborate procedures involved in flying from London to Dublin or vice versa are hardly any less than those involved in flying from Dublin to New York or anywhere else. It is a routine matter to travel from Dublin to London. It is extraordinary that you have to go through all the procedures — the paper work and documentation that one would associate with an around the world trip. There is a good case for simplifying the procedures and in the process producing a cheaper fare structure.

It needs to be said that, were it not for the State's involvement, we would not have a commerical airline service. There never was and never will be an inclination for the private sector to take the risks and to advance the large sums of money involved in setting up, developing and expanding a commercial airline. There are those who suggest that there is now a need for the flotation of part of the shares of Aer Lingus on the stockmarket. Now that the State, through Aer Lingus have taken the risks, they say we can now offer part of the shares in the areas where Aer Lingus have demonstrated that there is a potential for profit.

That is the lowest form of cheapskate private enterprise I have ever heard. The State took all the risks and produced all the capital. The fact that Aer Lingus are a substantially and consistently profitable enterprise which has shown considerable initiative in developing business outside the airline operation deserves to be commended. If we need legislation to protect Aer Lingus from cheapskate competition, from opportunistic operators who will maximise returns in the areas where there is a high demand, then we should have it. But, to ensure that, do we need penalties on the scale being proposed? There are many other areas of public life — for instance, in the area of planning regulations — where penalties on the scale suggested here do not exist and where considerable and profound damage to the fabric of our society is done by people who operate, if not outside the law, then very close to the fringes of the law and where the enforcement of the law is a detailed and tedious process. The tragedy is that the law takes so long to operate that much of the damage is done before the law can be brought to bear. The Minister may produce some evidence to suggest that these penalties are consistent with other areas of activity.

Most of us have received comprehensive and quite impressive briefing documents from Aer Lingus about the air fare structure in Europe and the fact that, over a period of years when free competition was supposed to be increasing, most European countries were taking further steps to reduce the degree of competition between their own and other airlines and that Aer Lingus have been the victim of increasing regulation all over Europe. They are one of the strongest supporters of an open skies policy and are on record as this over a number of years.

One would hope, therefore, that the Minister's powers are reserved for the protection of Aer Lingus from unfair competition. Indeed, one would hope that Aer Lingus, who have demonstrated themselves as more than capable of competing where free and fair competition exist, will not need such powers and that the Minister involved will ensure that the European Community will achieve a common policy on air travel which will reduce and demolish the various overt protections for individual interests which now exist within the European Community. One would hope that within such a development the suspicious looking cartel which exists between Aer Lingus and British Airways on the Dublin-London route will be brought to an end.

We need to protect our national airline. It has had to carry, in the national interest, heavy losses on the Atlantic. Those who have ignored Ireland when bad conditions existed cannot be allowed to step in and undermine our national airline at a time when potential profitable opportunities exist. Therefore, it is necessary to protect our national airline by the means suggested in the Bill. I support the Bill.

Mr. Howard

I do not expect I will be sharing as warmly the welcome given to the Bill by other Senators. I welcome the Minister's speech more than the Bill, because of two points. He gave a commitment to an open skies policy where European air traffic is concerned and also a commitment to ensure that the lowest possible air fares will be available. However, the contradiction is in the last paragraph of the Minister's speech, which states:

As I have said already, continuity of air services must be the overriding objective when one considers our national interest. The availability of year-round reliable air services to the greatest possible range of destinations, offering consumers the widest practicable range of services at the lowest possible price must be our objective.

I believe that the Bill now before the House will contribute to that end. That, to me, is the contradiction in the argument because the availability of the lowest possible fares is subject to and conditional on the other two conditions, that is, the continuity of air services being the overriding objective and the availability of all round services. Therefore, the Minister and Government are saying to us that you must get these two factors right first and that the availability of the lowest possible prices is subject to the availability of these two factors.

Even though it has not been said in the Minister's speech, it is very clear to me — and, indeed, to the Senators who have already spoken — that one of the major objectives of the measure, if not the main objective of it, is to support and preserve the special monopoly position of Aer Lingus. There is little doubt in the mind of the Senators who have spoken so far. Indeed, the Senator who spoke just before me, Senator Brendan Ryan, put it quite clearly. He said the purpose of the Bill is to protect Aer Lingus from unfair competition.

Last night I was reading the debate on this measure in the other House and I became aware — I had been aware before, but it came back to my mind again — that this Bill was first introduced in June 1984. The Second Stage was taken in the other House by the Minister who is here with us and urgency of a very high degree was expressed on that occasion. Twenty months have passed since. I do not think that we have had any disaster, even though the powers now being sought were not exercisable, as far as I know, in that period of 20 months. We did, however, have rather pleasant briefing sessions in an establishment not too far from this building. No doubt they were useful. Equally, I have no doubt in my mind that these powers have to be balanced in relation to other aspects of the matter.

I should like to state quite clearly that I will not be objecting to the Bill but I have certain views in relation to it, in relation to our national airline and in relation to air traffic, because air traffic affects particularly my own part of the country. I should like to say quite clearly that I recognise the need and the right of the Minister to exercise control in relation to air fares. The Bill gives authority to the Minister to do so. It is an authority, as he told us, that he thought he had under the 1965 Act, but the courts found otherwise.

Since the Bill was introduced in June 1984, considerable changes have been made by the Minister to the Bill, and I welcome these changes. I would say that without the changes the Minister introduced the legislation would, indeed, to me and to many others be quite unsatisfactory. The reason we have this Bill, which originated, as I say, from a court case which held that the Minister did not have the power that he and his predecessors thought they had under the 1965 Act, was because of an offer of low cost air fares by a travel agent in this city on the Shannon-New York run. The Minister or the Department sought to prevent the availability of that low cost air fare from Shannon to New York. They found in court that they did not have the power, and hence we have this Bill. Therefore, in the public mind, and while I do not fully share the concept that certain members of the public do, I am concerned that the air should be clarified in relation to it. Because of the sequence of events that I have referred to, the circumstances in which this legislation was conceived and saw the light of day are to the public mind twofold. First — and this is quite serious — to prevent the availability of low cost travel and, secondly, to preserve the monopoly position of Aer Lingus and its high cost travel both to and from Ireland. That belief in relation to these two points is pretty widespread when considering what has given rise to this legislation. It may be valid in part. The Minister, Deputy Mitchell, and, indeed, the Minister of State we have here with us this afternoon, are doing their best to get the record straight. I believe it is absolutely important, where the public are concerned, to have adequate clarification in relation to the purposes and objectives of this legislation.

Aer Lingus have been mentioned here and, indeed, have been praised, and they deserve the praise they have received. Indeed, I too, have been on record as praising the contribution that Aer Lingus have made to this country. They have served Ireland well and deserve credit for doing so. Having extended that praise and that credit to our national airline, I do not feel I should be inhibited from drawing attention to certain aspects of the airline's work that I find unsatisfactory.

I believe that the airline has served Ireland well. The question is: has it served Ireland as well as it could or should? To me the job that it does best of all, the job it does 100 per cent, is the job of its public relations. It goes hard on the message that it is the flag carrier. Indeed, we are all proud — those of us who from time to time are at foreign airports and see the tail with the shamrock and the Tricolour on it. In going so hard for that image of being absolutely vital as a national flag carrier, it is appealing very blatantly to the patriotic emotion that is in all of us.

Mr. Fitzsimons

There is nothing wrong with that.

Mr. Howard

It is a pretty blatant and brutal use of this emotion. That is my concept and that is what I am expressing. The second great point — indeed, it has been made here by every contributor to the debate so far — is that it provides an all year round service. Of course, it does. But has the possibility ever been examined that any other airline, given the same advantages and given the same monopoly position as Aer Lingus enjoy, would not do precisely the same? Has the position ever been examined that people can say with such certainty that only Aer Lingus in the circumstances could do this particular job? They represent their interests as being completely on a par with the national interest in every respect — absolutely 100 per cent. They claim their national interest is Ireland's national interest.

I should like to make the point that in my part of the country we have Ireland's only international transatlantic airport and that two-thirds of the people who come to this country and who leave this country — I talk about North America and Ireland — either embark or disembark at Shannon. Is it not in the national interest that Shannon Airport should be successful and that it should grow in success? Yet the history of Aer Lingus in regard to Shannon over the years has been a withdrawal to Dublin of personnel, staff and services, and a willingness to overfly Shannon and land at Dublin on days on which other airlines — Trans-America and Northwest Orient — are prepared to land at Shannon.

I do not wish to labour the point because I might be straying too far. The successful expansion and promotion of Shannon is crucial to the national interest. One measure which will considerably help its progress is the matter of pre-emigration and pre-customs clearance to the States. It is a matter which has been debated and delayed for quite some years. It is known that Aer Lingus opposition has been part of that delay. Aer Lingus, perhaps rightly, will fiercely defend its monopoly position and it will fiercely oppose competition from any quarter — legitimate, perhaps, nonetheless this is the position. Under the legislation proposed here the Minister will have power to accept, to reject, to suspend or to modify any fare or any proposed fare. I am satisfied that commonsense and objectivity will be applied by the Minister to any application received by him.

We are aware that the stage at which an application reaches the Minister — the airline interested in a particular route — before the time comes for its application and its level of fares to arrive on the Minister's desk it has to go through a certain process of preparation. We know that some airlines have done this and we know that they have been stymied by a refusal to share computer services and other airport services with them. I question whether that is the national interest. This is on the record and for as long as that type of stymie — I am not sure if that is the correct word — goes on, if the sharing of computer services and the sharing of airport services is refused then, of course, an application will never arrive on the Minister's desk. There is need to examine what happens at that preliminary stage. I would like an assurance from the Minister that he and his Department are conscious of what happened in the past in relation to this aspect and that steps will be taken to ensure that there is a fair and balanced sharing of the facilities at our airports.

I know the Minister is conscious — indeed, he mentioned it in a few passages of his speech — of the high cost of travel to and from Ireland. There can be no question that access by air to Ireland is expensive compared to other routes of similar distance and mileage. That is damaging to industrial development. It is damaging to commercial activity and it is damaging to the development of our tourism industry. Costly air access to this country is preventing commerical development, industrial development, tourism development from reaching their full potential.

Senator Lynch referred to the Third Report of the Joint Committee on Small Businesses. It is relevant to look at the opinion of another State body, Bord Fáilte Éireann, in relation to their efforts to encourage and develop tourism in this country and the difficulties they encountered in achieving that objective. It went on record before that committee as saying that access transport to this country, air transport from Britain and the Continent of Europe were non-competitive. To back that up, tourism interests, which also made submissions to that Joint Committee, as recorded on page 18 of the report, claimed, among other things the following in specific reference to Aer Lingus, that they were inhibiting the granting of licences for private air charter to Ireland; that they were uncompetitive on certain air routes; they frequently failed to announce their fares until quite late in the tourist business year; that they were more interested in transporting Irish holiday makers abroad through summer charters to 19 Mediterranean destinations, than in developing tours to Ireland; that they were hostile to scheduled competition from Europe into Ireland; that they gave no special incentive packages to encourage travel agents to offer special group holidays into Ireland and that, finally, Aer Lingus appeared to have a "special relationship" with the Department of Communications.

I do not want that to be regarded as a total and outright condemnation of Aer Lingus or their failure to discharge their responsibility, so vital to tourism industry. In fact, I praised the achievements of Aer Lingus but that should not prevent these criticisms being expressed for the purpose of ensuring that both the national airline and the Minister and his Department take note of the existence of these criticisms, valid in many cases, and that steps are taken by the interests to which I have referred to rectify this situation.

The final observation I want to make in relation to the cost of air travel and which is constantly echoed is that to many people the policy of Aer Lingus would appear to be their preference to fly a plane half empty at a given figure than to fly it full at half that cost. That opinion is widely shared. I have said that it is important for the commercial and industrial life of this country, that it is important for the tourist industry, that we have the lowest possible level of air fares into this country and that the high cost of air travel is one of the reasons why tourism is not reaching its potential and why more people are not coming here. The high cost of air travel is a reason why industrialists will often locate elsewhere.

It is important, therefore, that the Minister would, as he has done today, clearly spell out the objectives of this Bill; to restore the power he believed he had under the 1965 Act, and which the courts declared he did not have and to enable him to exercise control which was apparently being exercised from 1985 onwards. Many will continue to believe — indeed, with some measure of right — that the Bill is there to protect Aer Lingus. I would hope that the feeling that it is to deny low cost air travel to people traveling to and from this country, such as tourism and business people, will be dispelled. The responsibility to ensure that low cost travel is available is shared by the national airline and the Department.

Tourism, industrial and business activity cannot and will not reach their full potential for as long as air travel costs into and out of Ireland are, in the words of Bord Fáilte Éireann, uncompetitive.

Mr. Fallon

As a protectionist measure, this Bill endeavours to give commercial protection to Aer Lingus. I am not suggesting that there is anything wrong with that. I would support that fully. It is right that every possible protection should be extended to this industry or any industry under pressure and attacked by unfair trading practices. We have examples of those in many areas. Senator Howard asked if Aer Lingus has served Ireland well. I believe it has. It has brought pride and we are delighted that we have such a worthwhile national airline. Every help we can give to it should be given. In some areas the idea of giving protection to our industries is regarded as being an ugly word. I do not see it like that.

Worldwide Governments have no hesitation in protecting their own industries. In this instance, just as airline tickets have been dumped in the context of this Bill, we have to examine the position and protect the industry as best we can. It is essential for our national airline and for the preservation of jobs that ticket sales be controlled in an orderly and understandable manner and that regulation is seen to be done fairly and properly.

We should also make the point that if the Minister takes upon himself, rightly, the question of pricing, other factors come into play. He has to ensure that the level of service the airline provides is of a very high standard. The pattern, perhaps over the past decade or so does not indicate that this is so. While we have seen airline fares escalate dramatically in places the question of service has not been matched accordingly. Customers deserve the highest possible service. They are paying dear for their tickets and they deserve to be looked after. When the Minister examines this area he should look closely at the airlines and agree on proper pricing structures. The level of servicing provided should be looked at also to ensure that it is of a very high order to satisfy the requirements of people using the airlines.

Another area which is appropriate to this Bill is the practice of over-booking. This should be examined. There seems to be a standard practice in the airlines of selling an extra 5, 8 or 10 per cent of tickets above that which will fill the plane in the hope and expectation that the number will not show up. Sometimes that does not happen and, unfortunately, people who feel they have a guaranteed seat are left stranded. The practice of over-booking is standard procedure with airlines. In this kind of situation people are entitled to a seat and also a reasonable level of service.

We should look at this Bill as legislation which is protecting Aer Lingus. I am not suggesting that Aer Lingus are inefficient in any way. They have made great strides over the past number of years to render themselves more efficient. It is generally accepted that that is so. Aer Lingus's continuation and strength are essential for the sake of the organisation and in regard to communications with the outside world. It is important that there is co-operation between organisations such as Bord Fáilte and Aer Lingus in the national interest in getting people to come to Ireland for holidays. Aer Lingus should endeavour to fill their own planes but, at the same time, they should encourage people to come to this country at all cost if not by their planes. The role of the consumer is important in this. Every attempt should be made to keep fares as low as possible. The obligation is to have an efficient service.

If this Bill was not passed, we would have a free for-all-situation in which the various airlines such as Trans America, North West Orient and others would service this country and cream off for a period of the year the tourist business which is available without providing any additional business. We should continue on the North Atlantic route. It is a source of pride to every Irishman that we are flying this particular route. My regret is that we still do not fly into O'Hare Airport in Chicago. A decision was made by Aer Lingus some years ago to cease flying into O'Hare Airport. I know that many Irish people living in Chicago regret this and many people in this country feel Aer Lingus should re-examine the position of flying into and out of O'Hare Airport for the benefit of many Irish people living in Chicago and around Chicago and for the many people from Ireland who want to go to Chicago. Maybe a change of heart would prevail here now or in the future. I would welcome this development and wait to hear the Minister's comment on that.

The question of the viability of travel agents is relevant to the Bill. We have, unfortunately witnessed some closures of travel agents which will have problems for our consumers. If we go for an uncontrolled cut price situation, more of these travel agents will find themselves in financial trouble with consequent problems for the fare paying consumer. It is in the national interest that Aer Lingus should continue to be a successful airline. Aer Lingus and tourist interests are important national partners, and every effort must be made to make air travel fares as cheap as possible. The Minister and Aer Lingus must be very serious about reducing air travel costs. If careful consideration is given to doing whatever is required to be done, eliminating every possible wastage and working for greater efficiency, this could be achieved. It is important that this be done to enable us to compete with airlines in Europe and airlines of the rest of the world. Certainly, it would be my hope that Aer Lingus would continue to be an efficient national organisation, of which all of us can be rightly proud. I wish continued success to Aer Lingus, to all who fly the airline and to all the people who work in that great organisation.

Mr. Fitzsimons

My contribution will be a short one. I, too, like the other Members, regard this as a very important Bill. I also note that the Members of my party in the other House also regarded the Bill as very important and one that should not be rushed through the House. I am glad that it has taken considerable time for consideration, but nobody then visualised it would take such a long time.

Like the other Members, I want to pay tribute to Aer Lingus. I have not had the pleasure of travelling by air to many foreign countries but on the few occasions I did I felt proud to see an Aer Lingus plane on the runway at the airport. Aer Lingus give us all cause to feel proud of their record of achievements, built up over a long time, something we should regard highly and not lightly allow to evaporate or be damaged.

Over a considerable time this Bill has engendered a certain amount of emotion. To some extent that is understandable. Nevertheless, I believe we must be logical, we must be very sincere and we must be very careful. When we are dealing with this Bill we have to think of two aspects — customers and the State company, Aer Lingus. It is not easy to find a middle way. No matter what is done, it will be subject to criticism. We must be very careful that the fares are not more expensive than they might be. Everybody is concerned with this. We must also be concerned about Aer Lingus, a State company, and to ensure that the charges are high enough to maintain the high standard that the company has established.

In recent weeks we have had publicity in the media with regard to a firm who want to transport passengers from Dublin to London at around £50. I suppose if it were possible to do so we would be glad of such a low charge. But, having regard to all the aspects — the safety that is essential, the great record of safety, an all-the-year-round service, which again is most important and not just taking the cream periods and the times in the year when the traffic is heavy — having regard to reliability and many more things that we should take into consideration, we should be concerned that nothing would be done which would undermine Aer Lingus and the wonderful service they have established.

The Minister has stated, as far as I understand it, that the prime purpose of the Bill is to close off a potentially serious loophole. I will not go into details of how serious that may have been. I note that travel agents have a commission of up to 15 per cent and it did seem not unreasonable that these travel agents might accept less commission and pass on the balance to the customers. But, obviously, there is a problem in this connection. It is an area with which I am not familiar and I am not going into it in depth. In passing, I just want to say, as somebody looking in from the outside, that there does not seem to be anything radically wrong with reducing the commission. It is something that is done quite generally. I also believe that we are dealing with scheduled services. We are not concerned with charter fare levels. It has been conceded that the charter services play a very important role in providing low-price holiday packages for the public. As I understand it, with regard to the Bill, there is no change here and I welcome that. I also note that the system has operated satisfactorily for over 20 years. A court action was initiated but not concluded, and apparently the Minister felt that there would be no acceptable conclusion within a reasonable time and that is the reason for the Bill.

The Bill does not restrict or confine to any one fare level the tariff to be sanctioned by the Minister. I understand that all these submissions will be examined on their merits by the Minister and a decision made. I have heard the criticisms about fares into and out of Ireland and indeed I have read them in the media. There seems to be some confusion in this area. I understand, on the one hand, that in general, fares to and out of Ireland compare favourably with those of other countries in Europe. On the other hand, I have read some very severe criticism of the difference in fares. Perhaps the Minister, in his reply, would refer to this aspect.

It is important to have our own airline and not to be dependent on other countries and other airlines. It is important that considerable profit would be made for replacement. What this would amount to I do not know, and I am not sure even the experts would be able to fix a specific figure on this. I wonder at the present time is any finance being put aside for replacements. Is any finance being put aside for the future? Is the level of fares high enough to put some finance aside or to make some investment in the future? This is a very important aspect.

Safety is something with which we are all concerned. Quite possibly it is the most important consideration when we are dealing with this Bill when we consider that last year was the worst year in the history of civil aviation. In the year 1,533 passengers died, which was a 24 per cent increase on the worst previous year, which was 1972. The popular Boeing 747 came under suspicion with fears about cracks.

The Minister has referred to the penalties in section 8 of the Bill and other Members have referred to them. I realise that they have been reduced. A figure of £50,000 has been reduced from £100,000 in the Bill initially presented. But, nevertheless, I think the penalties are very high, and I concede the points which the Minister has made that there are different areas in which the Bill may be transgressed. Our airline is very important for our tourism. We must consider carefully anything that would help in this regard.

There was an article in The Observer, on Sunday 23 February 1986, headed “Crisis in the Sky”. This referred to the increased competition among American airlines, which it said “brought cheaper fares but also plunged the industry into unprecedented turbulence. Faced with huge losses and growing labour problems, some airlines are now facing bankruptcy”. The article further stated:

America's airlines are in financial chaos. The age of deregulation and competition which brought cheaper fares for passengers has begun to rebound on the airlines themselves. Many are reporting huge losses, including People Express, which started the fares war. What was once called price cutting now looks more like throat-cutting.

In the first ten months of last year, 86 per cent of all air tickets sold in the U.S. went at a discount — and the average price of a ticket was 56 per cent of the full fare.

With discounts like that, the airlines are trying to cut costs in order to salvage their profit margins. Cost cutting in turn leads to problems with the workforce.

Two airlines, beleaguered Eastern and TWA face imminent strikes — the former by its pilots and the latter by its cabin staff. Their managements may choose bankruptcy as a means of breaking the unions. This was the route which the now reconstituted Continental, a subsidiary of Texas Air, took successfully. Eastern has already retained a Boston bankruptcy specialist.

The article lists quite a number of firms who face bankruptcy. We do not want anything like that to happen to Aer Lingus.

Senator Ryan spoke about Aer Lingus fares to Dublin some years ago and said that a private company entered into competition and he was smiling wryly at the explosion in fares this produced consequent on the private firm going out of business. I think very highly of what Senator Ryan contributes to debates, but it must have been unprofitable for that private firm to continue in business. It seems to me the moral of the situation was that higher fares were necessary to maintain that service.

Senator Howard in his very interesting contribution to the debate spoke about the monopoly position of Aer Lingus. This is inevitable. The important thing is to ensure that there is no abuse. The Bill has inbuilt in it in this regard a means of ensuring that no abuses will take place. The Senator also spoke about half-empty aeroplanes, and of reducing the price by half and doubling the number of passengers. In working out a price structure, I think a full complement would never be considered. Reducing the fare by one quarter would not in itself ensure that there would be a full complement of passengers. This is a problem which cannot be solved to everybody's satisfaction. I would not like to be regarded as a knocker. It is wrong to knock for the sake of knocking.

I would like to refer to Knock Airport. It is not improper of me in passing to say it seems that against the tide we have an international airport. Great credit is due to Monsignor Horan and his committee. A deal has been clinched to provide a twice-daily service between Knock Airport and London. A successful airport would be of great benefit. But the indecision has meant that there is no infrastructure, no hotel accommodation suitable for an international airport; the roads need attention and so on. I would ask the Minister to look again at the situation with regard to Knock Airport and treat it with sympathy.

I, too, congratulate Aer Lingus on a job well done. I was unable to attend the briefings referred to by Senator Howard. Nevertheless I realise that great work has been done by Aer Lingus. Having regard to all the factors I mentioned and many others spoken of by other Senators, I realise the importance of the Bill.

Mr. Ferris

I shall be very brief. I would like to say a few words of tribute to our national airline. It is vitally important that we would have a fleet like Aer Lingus to carry our flag throughout the world. Part of their brief, in addition to providing the transport required by us as a nation is also to use their offices throughout the world as sales outlets for Ireland. Aer Lingus have a dynamic role in the promotion of tourism. It would be remiss of us if we did not acknowledge their major role. Unfortunately, this legislation was misrepresented throughout the country as being in some way a means to give Aer Lingus a privileged position and to ensure that they could manipulate fares in their own interest. Any of us who have read the Bill realise that this is not the case. The Bill ensures that there is no legal doubt about the Minister's power to approve or disapprove various submissions made to him for fares in and out of the country. It is appropriate that our Minister should have the same powers as his counterparts in Europe. A free skies policy has not been adopted by any other country. I do not see why Ireland should allow itself to be different particularly in the area of transportation at this level.

Aer Lingus are a tremendously important employer in this country, employing as they do about 5,800 people directly. Indirectly, they employ many people in the tourist industry, something like 34,000 additional people. The value of their enterprise to the country can easily be measured in monetary terms. From the prestige point of view alone, it is vital that we as a nation should have a national carrier of the status of Aer Lingus. Those of us who have been fortunate to have been served by them know of the courtesy, kindness and efficiency with which they treat their customers, whether they are coming into Ireland or Irish people going out of the country. For my part, I have only the highest of praise for them.

The total Government investment in Aer Lingus over the past 50 years is about £73.6 million which in today's value is something like £300 million. If we look at that investment I think it behoves all of us to ensure that that investment is protected. The fact that the people involved in the industry, whether they are tour operators, other airlines servicing this country, Aer Lingus themselves or any members of the industry directly involved in the promotion of tourism or transportation, have accepted the principles of this Bill and have welcomed it as something that is a pleasant surprise for us. Usually, in the area of legislation you get people with axes to grind and they always feel that legislation benefits one section or the other. Everybody involved in this area welcomed the whole thrust of the Bill and its terms. Unfortunately, it has been misrepresented as doing something else, but I think the Minister in his opening remarks refuted this because he does not intend to get involved in the control of charter fares and all the other fares that would concern us since they are part and parcel of packages that are available to people requiring a holiday. There should be no unnecessary legislative interference in the normal cut and thrust of the airline business and the sale of package holidays throughout the world. Aer Lingus play an important role within that segment of the market as well.

We have to depend on Aer Lingus as a national carrier not just for the peak times when people want to travel to the sun or otherwise but as an airline that will always be available to us as a nation not alone on economic routes which everybody knows about and in which a lot of other competitors are also involved also but on strategic routes, North American routes and routes which are of vital importance to us as a nation. We must depend on carriers like Aer Lingus to run services on those routes even at times in the knowledge that they are uneconomic but when from the country's point of view it is important, that that service would be continued. These are the same criteria that we lay down for CIE, our other national transport authority. We are looking for services where you could say they are uneconomic but where it is important that there will be services if the proper infrastructure of the country is to be developed. Their record last year of carrying 500,000 into the country is a record to be proud of. They generated an expenditure rate in the country of about £250 million. These are the kind of figures which can have a spinoff effect for our national economy and for the prestige of the country. I know that Americans who want to come here complain about the high price of flying from America to Ireland and back, that there are other people undercutting us in this process. The reverse of this situation must also be looked at. It is good to know that people like Aer Lingus, when they are selling their product in the States and in other countries, are acting as agents for us from a tourist point of view and by their efforts bring many people into the State. They have had some good years and they have had some bad years. They have had operating losses. In 1981 these were turned into operating profits running to about £26 million and in 1984-85 the operating profit was about £30 million. These are welcome operating profit figures.

We must now look to the future about the replacement cost of the fleet. It is a major responsibility for the Government and indeed for Aer Lingus to put together a package that will allow them to replace the fleet when that becomes necessary. It behoves all of us as legislators to ensure that the structures that will be there to assist that replacement of the fleet will be there at no risk to Aer Lingus or their operating future. For that reason I welcome the Bill. I welcome the fact that there is widespread support within the industry for it. It is important for us that our Minister would have proper legislative control over air fares which all of us would accept. I would also say that the national airlines should be conscious of how the public as users of the service perceive them. Everybody says — and I suppose if you look at the figures there is some truth in it — that the piece of sea separating Ireland from England is one of the most expensive pieces of water in the world to fly over. There are probably historic reasons for that. The piece of water that separates the North of Ireland from Britain is probably a little shorter in distance but it is cheaper to cross. Admittedly, it is a different type of airport and service: it is provided for a different purpose. For that reason, I suppose we have to contend with it. We would like the national carrier to be aware of the fact that people find it hard to accept the cost of flying from here to Britain and back and, by comparison it is very expensive. We would ask them, and indeed the Minister who has control over the fares, to keep that in mind. If you take their flights to any place else they are comparable to the great airlines of the world.

I am glad that Aer Lingus have fitted into that bracket of being an efficient and great airline. It has a tremendous safety record, second to none possibly, throughout the world. They are a flag bearer for us and for that reason alone we have a responsibility to ensure that they get every bit of support that we can give them by way of legislation to ensure that their future is secure.

Mr. Kiely

I would like to make a few comments on the Bill. In doing so I would like to stress that air transport is very necessary in this country. As Senator Ferris said, we are surrounded by water. I understand that the purpose of this Bill is to clarify the Minister's powers in regard to regulating air fares so as to close off a potentially serious loophole in the Air Navigation and Transport Act, 1965. Aer Lingus are doing a very good job and, as already mentioned, they are providing a great service which is very necessary for air transport in this country. They are also doing work in promoting tourism and attracting people here.

Some people might say that this Bill is protecting Aer Lingus, but I would also like to see provisions in the Bill that would protect the patrons of Aer Lingus or any other company involved in transporting passengers by air. I see an extract from the Minister's speech in which he said that, while low air fares are highly desirable, calls in that direction can be merely academic, if there are no services on which to offer the fares. We need the fares, and if we need something we have to pay for it. A balance has to be struck between what the airlines require to sustain services and what constitutes reasonable value for money for the several segments of the travel market.

We have private companies operating air services and I am sure they must obtain licences from the Department of Transport so that they can operate. Before these licences are approved or granted they have to satisfy the Department that they will provide satisfactory services. It has been brought to my notice that some of these services may not be satisfactory: a complaint was made to me recently about a passenger who came home during Christmas. He booked a flight through a travel agent in Luton, but the return flight was to take him to Manchester. He arranged to travel from Shannon and he got a print-out of his ticket at an Aer Lingus office in Limerick. He duly arrived at Shannon in time for the 8.15 flight to Dublin which would connect him with an Aer Lingus flight to Manchester. On arrival at Shannon he did not see anyone checking in at the private company's desk. On inquiry, he was told the flight had been cancelled because of insufficient passengers. He was left in the lurch and had to drive himself from Shannon to Dublin. During the drive he was involved in a car accident. He was put to great extra expense because of the way the private company operated, showing complete lack of care for their patrons.

I am not against private enterprise — I would do everything to promote it — but there must be a serivce. Aer Lingus would put on that flight whether the number of passengers was two of 20. Aer Lingus were commended for their safety, for which they have a great record, probably the best in the world. I commend all those involved, pilots, captains, air hostesses and all ground staffs who play a vital part in ensuring a very safe air transport service.

Because of recent air tragedies, and because of the recent discovery of faults in jumbo jets we must always be on the alert to ensure that the planes are safe for passengers. It should be the duty of companies, private or State, to ensure that their fleets are adequately maintained and that planes will be replaced when necessary. There should always be a proper check from the point of view of safety.

Our airports are well equipped, at Cork, Shannon and Dublin. We have the airport at Knock in Connacht, provided through voluntary local effort, something that should be commended. I hope the Government will eventually recognise that effort by giving some aid so that the Connacht Regional Airport at Knock will become an international airport to give a service west of the Shannon and a means of access for tourists and others.

Minister of State at the Department of Communications (Mr. Nealon)

I thank Senators for their valuable contributions which will be of great help to the Department. I am sure that the contributions will be read with interest by organisations outside. The purpose of the Bill is to close off a potentially serious loophole in the 1965 Air Navigation and Transport Act. It is the internationally accepted norm that there should be government approval for international air fares. Applications have to be made by carriers. This is applied worldwide and therefore there is nothing exceptional about the provisions of this Bill. Senator Ryan referred to it as a reserve power to protect our national interests.

As a tourist nation and an island we have a great interest in access transport. It must be consistent and reliable. A very important part of that mix is low fares, but of course if there is nobody coming in it is no use having low fares on paper. A balance must be struck between what the companies require to maintain services and what constitutes reasonable value for the consumer.

Most Senators referred to the level of air fares on the Dublin/London route. Fare comparison on a route-to-route basis can be used to support arguments that fares are too low or too high. To be valid, such comparisons must include many factors, like the length of the journey, the volume of traffic on it, the infrastructural costs such as landing fees and the traffic mix, etc.

In so far as Dublin-London fares are concerned, the lowest return fare will be £99 on offer from Aer Lingus, British Airways and Dan Air. In the past — I heard it last week when I had discussions with the British Minister for aviation — we heard about a £49 return fare, London to Amsterdam, but people find it difficult to avail of that fare because it is, surrounded by all kinds of conditions. I understand one cannot book in at the airport of origin — it must be done from a city centre office of the airline concerned. The return flight cannot be booked in advance — you have to repeat the performance in Amsterdam. What percentage of these tickets are reserved? What looks like a very attractive fare may not be so valuable in practice. I am not denigrating it; I am merely repeating the comments of people who tried to seek out this fare.

As far as the Luton-Dublin route is concerned, Ryan Air intend to operate services at an unrestricted fare level of £99. This proposal has been approved by the Minister because of a consumer perception which has been reflected here today that Dublin-London levels are too high and the insufficient seats are being made available by the major carriers at the lowest fares. The Ryan Air service will address the extent to which a market gap exists on the Dublin-London route, not only for Irish originating traffic but for the United Kingdom traffic as well.

I am aware that there are community groups in Britain that have been seeking lower air fares. The recent fare developments on this route will encourage a large increase in traffic. This will be the acid test as to whether the lower fare will increse the level of traffic. The Ryan Air service of £99 is an innovative decision and is designed to increase competition on the Dublin-London route. I will watch with great interest developments in this regard.

In regard to the New York route, points were raised by Senator Lynch and others. The promotional fares to and from the US this year have been reduced significantly — decreases of up to 20 per cent are involved. This, in so far as Irish tourism is concerend, should offset the recent depreciation of the US dollar vis-a-vis the IR£

Senator Howard pointed out the dilemma between low fares and continuity of services. The Bill enables the Minister to balance the competing national economic objectives. Section 3 sets out the criteria against which each application must be judged. The circumstances will differ by market area. Where services operate on a marginal economic basis, the Minister will be likely to have a greater regard for air service viability than he would have on a more profitable route. It will be up to the Minister to determine his priorities in national air transport policy.

Senator Lynch raised the question of cracks manifested in recent examinations of jumbos. I am happy to assure the Senator that Aer Lingus have undertaken stringent checks on their B747 fleet and have not found anything wrong with them. They will continue to maintain the closest possible checks on their fleet to ensure operational safety. I am pleased to see in the statement issued by Aer Lingus after these checks that the new type of examinations that were required following the difficulties that emerged in the jumbos were being done by Aer Lingus on a routine and continuing basis. This is pleasing for all of us here who have expressed great pride in our national airline.

Senator Howard spoke of the possibility of customs pre-inspections being carried out at Shannon. Recent talks with the US authorities have enhanced the possibility of such a facility being established there. Further contacts in this regard are planned. It is, however, inaccurate to state that Aer Lingus have a veto over the establishment of this facility. While I acknowledge that they have their own interests to consider and have some reservations about the proposal, that in no way is hindering the efforts being made to see this facility established. The Government recognise the value which this would have in attracting extra transit traffic and other airline business through the airport. My officials are endeavouring to get agreement on its establishment on mutually acceptable terms with the United States authorities. Senator Howard has this matter well researched. We are hopeful in this situation and the talks are ongoing.

Many Senators expressed some concerns — and Senator Howard expressed them more stridently — about the monopoly position of Aer Lingus. Avair was an international carrier which regrettably is no longer with us. At the time of its demise it was providing a very satisfactory and highly regarded service between Dublin and my local airport in Sligo which I availed of on a number of occasions. I regret that there is not a service there now. I understand that negotiations are proceeding which may replace it with another service in the near future. Currently, we have two other international carriers in Aer Arann and Ryan Air.

Foreign carriers are competing heavily against Aer Lingus on much of their route network. I believe I am correct in quoting the Minister in recent times as saying that he has not refused any of the applications that have been made to him.

The Bill should not be presented as protecting Aer Lingus. That is not the case. The Bill is designed to promote the Government's national air transport objectives as well as more general economic ones. The Minister has to balance the various interests involved and the decision rests with him. The Bill can be used to protect Aer Lingus and any of the other Irish airlines.

A point that has come up in my negotiations with the UK Minister for Aviation is that one of our inhibiting factors is the lack of a large number of airlines with which to compete, and other countries who may be seeking rights here. While other countries may have ten or 12 or 14 carriers, we have a limited number and this inhibits our overall competitiveness as a nation. This is something which has to be taken into account in the ordinary course of events to protect our national interests in any liberalisation of air transport.

National economic objectives are broader than the interests of any one airline. Tourism needs attractive access costs to facilitate the growth of traffic and we are all aware of the importance of this. We knew it in a negative fashion when it decreased for a period and we know it in a positive fashion when it is coming back again. The Minister on a number of occasions since coming into office has intervened to reduce the levels put to him by Aer Lingus and other airlines. In October 1984 he intervened when price increases of between 8 per cent and 10 per cent from Ireland to the United Kingdom were sought, and they were reduced to between 6.5 per cent and 8 per cent. Again, in October 1985 there was an increase of 8 per cent to 9 per cent sought and it was reduced to between 4 per cent to 7 per cent, in both directions. As far as the Continent is concerned, in April 1985 the Minister also intervened, and tourist fare increases from Paris were reduced to 6 per cent for that period. The Minister has been implementing a strict policy of ensuring, as far a possible, that air fare levels are kept below the prevailing level of inflation. This policy has been pursued notwithstanding airline objections. The Minister has stated that the powers in the Bill will continue to be used in a fair and objective way, taking account not only of the airline interests but of consumer interest and the national interest generally.

Senator Fallon spoke about the service to Chicago. The termination of the scheduled service to there in the Seventies was of matter of regret for many people. Aer Lingus are keeping under constant review the prospect of inaugurating new service points in North America. To date the economics involved have not been sufficiently attractive for them to open up again. In so far as Chicago is concerned, the Minister has authorised each summer direct charter services to Shannon for foreign airlines to meet the needs of tourism, and indeed the need of the Irish ethnic community in the area. This he will continue to do in respect of routes on which no services are currently operating.

Senator Fitzsimons brought up the point about Aer Lingus fares and whether they are competitive. I believe they are, particularly on the North Atlantic route. There are other market areas where fares are not as consistently competitive as they are on the North Atlantic. As already mentioned, the Minister has taken a number of steps towards increasing airline competition — for instance, Ryan Air. In other areas where he believes insufficiently competitive fares abound, he has intervened to make available lower tourist fares.

I am sure the Acting Chairman and some other Senators will be particularly interested in the Connacht Regional Airport. The Minister has publicly pledged to make every effort, other than the provision of additional finance, of course, to see the airport operational as early as possible. So far every penny put in was put in by our Government. The facilities at the airport are not yet of a standard to permit the safe operation of air services, but it is hoped that whatever outstanding works remains to be done can be undertaken and completed at an early date. In so far as air services are concerned, some interest has been expressed by a number of air companies in operating services to and from Knock airport this summer. They are under consideration in my Department at present and I would hope that the examination of these applications can be sufficiently advanced to permit decisions to be taken within the next month or so.

Senator Kiely spoke of the Connacht Regional Airport and of a specific case of a cancelled flight at Shannon. This seems very disturbing and if the Senator cares to give me details of the case I would be glad to take it up with the airline involved.

The Minister on many occasions has indicated his interest in liberalisation of air transport and in an "open skies" regime in Europe. Last week I met the UK Minister for Aviation, Michael Spicer, in Dublin and the meeting marked the beginning of bilateral discussion on the possibility of further liberalising the arrangement governing the operation of scheduled air services between Ireland and the United Kingdom. I reiterated my support for a genuine liberalisation of the European market which Aer Lingus would gain greater access to routes in Europe. I also reiterated the commitment of the Minister for Communications for an "open skies" concept along these lines. We earlier heard Senator Lynch talk about what happened to the scheduled service developed by Aer Lingus between Manchester and the Continent — their rights were removed in those cases. We are genuinely interested in a regime where Aer Lingus could openly compete between all points in Europe. That is what the real concept of "open skies" means. The UK Minister and I expressed a desire to see more rapid headway made in the European Communities in this area and on a broader European front towards liberalistion of existing air transport arrangements in Europe. In our bilateral contacts we agreed that discussion at official level would commence within the next few weeks.

I wish to thank Senators very much for the manner in which this Stage of the Bill has been received. I believe that discussions on a Bill of this nature, especially a Bill that is not controversial in a party political sense, can enhance the legislation that is going through and result in better legislation overall.

Question put and agreed to.

Committee Stage ordered for Wednesday, 12 March 1986.

Sitting suspended at 5.30 p.m. and resumed at 6.30 p.m.