The enactment of this short Bill will enable the Minister for Finance to provide up to £38 million to the B & I Company by way of additional equity capital. The Bill also gives the Minister for Communications certain controls in relation to the superannuation of the staff of the company, which he may exercise with the consent of the Minister for the Public Service.
As the House will be aware, the provision of additional equity is required to enable the company to implement the restructuring proposals from the B & I board which the Government decided to support with Exchequer funds. All but £100,000 of the existing authorised share capital has already been taken up by the Minister for Finance.
During the period 1980 to 1984 the B & I incurred losses of more than £43 million which necessitated equity advances of more than £30 million to enable the company's continued operation. In these circumstances the Minister found it necessary to take action to ensure that this state of affairs would not continue. In May, 1985 he appointed a new chairman and managing director to the company with the mandate:
to take whatever steps are necessary, with the agreement of the Board of the B & I Company and subject to the approval of the Minister and taking account of the need to maintain Irish participation in cross-channel passenger and freight services, to restore the company to profitable operation by 31 December 1986.
In December last, the board submitted to the Minister its proposals to restore the company to viability. The board's proposals included:
Development of the existing co-operation arrangements with Sealink through a new two-year agreement; the B & I Rosslare-Pembroke service would cease and a new joint car ferry service would operate between Rosslare and Fishguard under a new brand name using a Sealink jumbo vessel.
Upgrading of on-board services through a combination of capital investment in redesign of the sales areas, introducing new skills in catering, retailing and passenger care facilities, either by way of contracting arrangements or direct recruitment.
Financial restructuring of the B & I involving shareholder investment of £43 million.
Substantial cost efficiencies to be achieved through reduced manning levels and changes in work practices in all areas of the company's business.
The Government considered the board's proposals and decided that, subject to the enactment of the enabling legislation, it would allocate a total of £38 million in equity capital to the company over the period 1986 to 1989. While this is somewhat less than what the board requested, it nonetheless in present financial circumstances represents a very substantial level of investment.
The reduction of £5 million on the amount requested by the board took account, inter alia, of the exclusion of certain proposed capital expenditures and the expectation that the number of redundancies achieved would be less than originally estimated. Twenty million of the equity will be advanced to the company during 1986. This significant investment of Exchequer funds is contingent on a matching contribution by the board, management and workforce of the B & I towards restoring the company to viability.
Senators will agree that as an island nation our access transport services, particularly between Ireland and Britain, are vital to trade, commerce and tourism and to our national economy generally. The Government's decision to provide continuing support for the B & I is an indication of its commitment to a strong Irish presence in shipping services to this country. This was the main reason why the State acquired the company in 1965. This major investment by the Government will ensure that a significant share of cross-channel traffic will stay in Irish hands. This underlines the Government's view that, while it welcomes external involvement in services to and from Ireland, a significant level of Irish participation operating under equitable conditions is an essential ingredient in ensuring the quality and efficiency of cross-channel services.
As I previously stated, £20 million of the £38 million will be advanced this year and the balance of £18 million will be phased over the three subsequent years 1987, 1988 and 1989. The amount and timing of the further equity injections will be closely related to the overall performance of the company against very challenging profit targets which the Minister has set for it. These are as follows: 1987 — £0.5 million; 1988 — £1 million; 1989 — £2 million.
These targets may appear small at first sight but I would remind Senators that they must be judged against the B & I's losses which between 1980 and 1984 amounted to more than £43 million. Furthermore, in the absence of Government support and other remedial measures, the B & I would have been likely to incur losses of the order of £10 million per annum. Against that background, the profit targets are difficult but achievable. Throughout the period, the Department of Communications will monitor in detail the company's performance.
The current year will be a year of transition for the company as the various elements of the restructuring plan are implemented and the company will continue to be loss-making.
The future of the B & I can only be assured if there is sustained commitment on the part of the company's workforce to work with management towards the common goal of creating an efficient and commercially viable enterprise. The workforce of the company must be commended for their realistic acceptance of the fact that change was necessary for the company's survival. The package of proposals now approved will safeguard the 1,400 jobs which the B & I will continue to provide. The board and management of the company also deserve recognition for their resolute approach to very difficult problems.
Of the £20 million being provided this year, £7 million is being spent by the B & I on capital investment. The remaining £13 million is being used to begin the process of restructuring the company's balance sheet by reducing the company's borrowings. The equity injections to be provided in the years 1987 to 1989 will also be used to reduce the company's burden of debt to an acceptable level.
Most of the £7 million capital investment is being spent on the refurbishment of the company's vessels and will result in substantial improvements in the overall standard of on-board facilities. The sales areas of the car ferries have been redesigned and now offer much greater comfort and a wide range of passenger facilities. These include a greatly enlarged duty free area, shops, restaurants, bars, a cinema and various other attractions to make crossing the Irish Sea far more enjoyable than was the case in the past. In addition to the physical improvements to the vessels, a comprehensive programme of staff training is being undertaken to ensure that passengers receive the highest possible level of service and attention.
The B & I's agreement with Sealink relates to 1986 and 1987 but can be renewed if considered desirable. The new agreement will result in a more efficient utilisation of vessels while providing a better overall service to passengers. In the past, intense competition on the Irish sea routes has led to both companies incurring losses which in the B & I's case had to be met by the Irish taxpayer. The battle for market share led to an undesirable lowering of standards and brought about a situation where fare reductions were the only means of attracting additional passengers, leading in turn to still greater losses. Clearly this situation could not continue indefinitely. Inevitably, fares had to increase to cover costs if the company was to be restored to viability.
There have been complaints about the level of fare increases being imposed by the B & I this year. Let us look at what this year's increases represent. The overall year-round fares increase is about 8 per cent; for 327 days of the year the increase is 10 per cent maximum. For the remaining 38 days, a 15 per cent increase has been applied to certain peak season sailings. For these higher fares, which as I have said are necessary if the company is to be restored to viability, users of B & I services can look forward to much improved standards of service and facilities on the company's car ferries. Moreover, fares on B & I car ferries are not out of line with the rates per mile charged on a number of the most popular routes on the English Channel.
We cannot impose double standards on the B & I in this area. One cannot on the one hand insist on the company operating to commercial standards and without reliance on the Exchequer beyond the support which the Government have already pledged and, on the other hand, expect the company not to raise its fares to a realistic level.
Fears have also been expressed about the danger of lack of competition on the Irish Sea. Let us not forget that Ireland has always operated an open ports policy and will continue to do so. Any shipping company is free to provide services to and from our ports. One should not overlook either the real competition which exists between the sea and air transport services for many types of passengers and commuters.
While the Minister for Communications would be concerned if B & I and Sealink should combine to abuse their position on the Irish Sea, I do not see this as likely. In any event the Minister will be monitoring the situation and he will have due regard to the interests of the users of the cross-channel services. The EC Commission are examining the implications of the agreement with Sealink but I do not expect that there will be any problem about the agreement.
On the southern corridor the B & I and Sealink are operating a joint service under a new brand name, "Southern Seaways". Pending the acquisition by Sealink of a suitable jumbo size ferry, the service will use the Sealink's "St. Brendan" year-round and will be supplemented by a B & I vessel during the May to September peak season. This year the "Innisfallen" will be deployed for this purpose. This will provide some short-term contract employment for many of the staff on the Rosslare route who are being made redundant.
One aspect of the B & I's restructuring plan about which some concern has been expressed is the use by the B & I of overseas contractors on their vessels and about possible discrimination against Irish goods. In fact, the catering concession on the company's car ferries is held by an Irish company, Campbell Catering of Swords, County Dublin. A British firm, Allders, operate the duty free shops. The B & I consider that specialist contractors can perform these tasks more economically and efficiently, thus providing an improved service to the customer. This is a common procedure in shipping companies and indeed a somewhat similar arrangement was made by Aer Rianta at Dublin Airport where the catering concession is held by SAS.
Furthermore, the B & I have assured the Minister that far from harming the sales of Irish goods on board B and I vessels, the new arrangements will, in fact, promote such sales to a much greater degree than formerly. There is no question of any discrimination against Irish goods. In fact, most goods on sale on board the B & I vessels are Irish goods and the greatest demand is for these goods. I understand that the B & I have had discussions with the main Irish manufacturers about the duty free shops concessions with a view to securing the optimum involvement of Irish manufacturers.
Before I conclude, I would like once again to stress the point that the company's future cannot be assured by Government support alone. It is equally dependent on full co-operation by all concerned in the provision of a continuous, reliable and efficient service. I feel sure that this co-operation will be forthcoming.
The Government's objective for the B & I is to see an efficient and commercially viable enterprise which will provide a vastly improved service for its customers, ensure secure employment for its staff and contribute to the development of tourism and trade and general economic growth.
I see no reason why this objective cannot be realised. This Bill heralds a new era for the B & I which will lead in a relatively short time to the emergence of a revitalised, self-sustaining enterprise worthy of comparison with the best carriers in this most competitive sector of transport. The enactment of this Bill will give the company the opportunity to ensure its own long-term future. I have every confidence that the company will grasp that opportunity.
I commend the Bill to the House.