Seanad Éireann debate -
Thursday, 19 Jun 1986

Vol. 113 No. 9

British & Irish Steam Packet Company Limited (Acquisition) (Amendment) Bill, 1986: Second and Subsequent Stages.

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

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

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.

Mr. Killilea

While we are not opposing the Bill there are a few comments I should like to make. First, there is no doubt that a monopoly situation is being created on the Irish Sea between Sealink and B & I. This is a very serious matter and the Minister should keep a very close eye on it. As soon as the monopoly situation came into being we had an immediate price hike. My fear would be that Irish people wishing to travel to the Continent would first have to cross the Irish Sea, drive through England and perhaps use the other connections from Dover and other places in the south east of England. That would not make life easy. I would appreciate it if the Minister would reassure the House that very tight surveillance from the point of view of cost and type of service would be maintained.

There is a matter which I do not understand and I have often wondered why nothing was done about it. We seem to be totally orientated towards going to France. It is probably a shorter route but in these days when Spain seems to be a very popular resort, for winter holidays in particular, why is it that none of those companies has made any effort to run a ferry service from the west coast — perhaps Limerick — to Spain? Spain is now a member of the EC. It would serve many purposes, not only for the tourism trade but also with a view to the carriage of goods, heavy vehicles et cetera. I cannot comprehend why those shipping companies would not provide a one or two-day a week service for this trade. We import citrus fruit and other items from Spain. I cannot see why this has not been investigated as a viable route.

Two trips a week would be considered to be very viable. Has the Minister any comments to make on that probability? We do not want to see the service operating from the east coast of Ireland making things even more miserable for those travelling by sea. The direct route could be from Foynes in Limerick or some other area on the west coast. A feasibility study could be done on this quite quickly. If there is potential, the service could be developed, taking into account the extension of membership of the Community to include Spain and Portugal. I would like to hear the Minister comment on this.

Perhaps we could get assurances that the cost element would be taken on board by the Minister. Perhaps all price increases should be through the process of application to the Minister for Communications, so that those applications would be on hand. If there is a reasonable argument in favour of the applications the Department could grant them but they should not come in a haphazard sort of way, that if business is big and peak performance is high, the price should be increased for the sake of profitability. There is more to it than profitability. I would appreciate it if the Minister would consider that.

There seems to be a new technique in dealing with superannuation and staff relations in section 2 of the Bill. It is new to me to see it written into a Bill that everything is now in the tight fist of the Minister. Have all external negotiations within the company fallen by the wayside or is it simply because of the attitudes and problems which have evolved in B & I that the Minister has taken all control for payment of pensions et cetera out of the hands of the company and placed them in the hands of the Department? That is a new diversion and I would like the Minister to explain it better.

There have been complaints that the south west service to the Continent seems to have gone by the wayside. There is probably some logical explanation for it. Perhaps the amalgamation of Sealink and B & I is responsible for it or the cost of the ferries is outside the demand. From a tourist point of view, particularly during the peak summer months, something should be done. I do not think the service should continue throughout the winter but certainly at peak period of the summer something should be done to try to keep that connection. I used the ferry in September 1984 and on that occasion it was full with passengers. When I came back in October it was still loaded with passengers and heavy truck traffic. I do not see why we could not have a summer service. I do not know what the service would be like during the winter but a six months service should be considered.

I would like to have the points in relation to the Spanish connection clarified, perhaps the south east connection could be moved more towards the south of France or, alternatively, there could be a continuing service to the south of France, and Spain on a three point stoppage. There is a certain amount of business meat to be eaten on that route. I would like to hear the Minister's comments on that. It would be a reasonable request — taking into account the monopoly situation which has been created — that certain instructions be given to semi-State organisations.

Semi-State organisations have a happy knack of not paying any heed to what the Houses of the Oireachtas tell them. Indeed sometimes they pay very little heed to what the Departments tell them. The only time we ever see them is when they are looking for money and when they get it they simply vanish until they run into trouble again. It is all high powered press relationship jobs — get the cash and goodbye. When one makes a reasonable request to some semi-State organisations they almost frown despite the fact that perhaps a few weeks previously one had voted them millions of pounds.

It is a freelance situation. Every Government should take on board the methodology we use to hand out cash in pound shares, making up millions and millions of pounds each year. We witnessed it over the years. The semi-State bodies should either stand on their own two feet or they should not be there. It is as simple as that. I have witnessed the attitude they adopt the minute they receive their cash and I have commented on this on several occasions. I take offence by that attitude, as do many Senators and many Members of the other House. Once they get their money they seem to be gone and we do not have any powers or control over them.

I am wary that in this particular instance we are creating a monopoly. It is deadly dangerous and we should have legislation to protect ourselves in that situation. Whether or not we want to say in broad English terms that we are creating a monopoly the fact of the matter is that we are. We have a link up here between two major ferry services which control for the most part most European routes. I am not saying there is anything wrong with this but we need to keep a very tight administrative eye on it. I would like the Minister to comment on my suggestion to put in a safety valve so that any price hikes sought by those two companies on any of the crossings should be restricted to the normal process of application to the Department of Communications. That should be followed by the basic facts proving the necessity for it. I only ask that on the basis that it is a monopoly situation and it has to be watched.

We on this side of the House are not opposing the Bill. I hope the Minister will respond to those important questions.

Mr. A. FitzGerald

I, like Senator Killilea, welcome this Bill.

Mr. Killilea

I did not say I welcomed it; I said I would not be opposing it.

Mr. A. FitzGerald

It would appear from Senator Killilea's contribution that while he is not opposing it, he is interested in having the service developed with connections from the west of Ireland to Spain and so on. This is a laudable aim and I am sure both Senator Killilea and myself will be interested to hear the Minister's response at a later stage.

There has been considerable fear about the future of the B & I Company over the last two or three years, with the appointment by the Minister of the new chairman and managing director, to take the steps necessary to maintain an Irish participation on the cross-Channel routes, and the importance to this country on the industrial and commercial front and, of course, in the interest of tourism, to have a presence with a shipping fleet of this kind.

The package eventually presented to Government by the new chairman: to protect the shipping service between Ireland and the United Kingdom; to look after the much reduced but considerable staff of 1,400 who operate the service; to see to it that we are in a position over the next two years while this agreement lasts to come up with a restructuring of the company financially; and hopefully then to have it in a viable state is an important development. This package should lead — certainly on the basis of what the Minister has said — to a healthy and more successful operation across the Irish Sea.

My welcome for the Bill and the financial package it contains is, of course, greatly increased when I look at the figures. Not alone are we talking of an investment of £20 million in 1986 into the B & I Company but contained within that figure is the £7 million which is part of the package required to look after the whole question of capital investment in the shipping fleet.

The emphasis given in the Minister's speech towards enlarged duty free facilities, shops, restaurants, bars and cinema and various other attractions, to make travelling across the Irish Sea a more enjoyable experience is something we could do much for. I have the distinct impression that the operations by sea across the Irish Sea have become far less attractive in recent times in comparison with alternative means of travel to Britain. A great deal needs to be done to make a positive impact on the facilities that are on offer on board, even if they lead — and the Minister made it clear that they will — to increases in fares. There had been an enormously careless attitude by the staff operating these vessels up until the new programme was put into force. The availability of Irish products on these vessels left much to be desired.

Speaking of the Sealink jumbo vessel which it is to operate from Rosslare, I travelled on that boat on a couple of occasions last summer. The absence of Irish products and Irish drinks was something that upset, not just the few people whom I was travelling with, but a much wider selection of people who were on other trips across the Irish Sea in the course of last summer. It is very important to ensure that these vessels are seen as a flag ship for travellers coming into Ireland. It is more important, of course to ensure they give the same kind of treatment to visitors as is given by Aer Lingus by the availability of a good range of Irish products and a good range of facilities on board.

These are the kinds of things which would make this package successful. I feel certain that with the investment of £7 million in refurbishment we are going in the right direction. Although the new package from the chairman contained a reduction in staff numbers the fact that they have responded in a positive fashion seems to indicate that it is going to work. They are going to support it and this will ensure that it is a very successful operation.

I would like every possible reassurance from the Minister — in the areas of customer relations, customer developments and, in particular, the provision of Irish products on these vessels — that the Department of Communications will go to all ends to ensure that a very different type of approach is taken in the future than has been taken in the recent past.

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

Senator Killilea's contribution was very pertinent to the main issues concerned in this short Bill. It was a very valuable contribution. I am sure also when he takes on his leading role tomorrow in another sphere he will make an equally valuable contribution. I wish him well.

Mr. Killilea

I am sure I will.

Mr. Nealon

He spoke about the monopoly situation. I can assure him, as he requested, the dangers that could arise from a monopoly situation would be very closely monitored by the Minister and the Department. It is right to point out that we have an open ports policy. The Minister would actively encourage any viable organisation coming on the scene to take part in any of the routes and introduce competition in that way. There is no prohibition as far as that is concerned. There is always the question of viability for the company involved. There is always the temptation for the people who enjoy what amounts to a monopoly situation, de facto if not in theory, to be a little lax and to rely on increases in fares to bring them into viability rather than on the keen kind of competition that might exist if there were other competitors on the route. However, we found in the past that with the fierce competition which existed, the only element available was competition in fares. The reduction in fares led to a loss-making situation and endangered all of the companies operating in this way. That is the difficulty. What is the perfect answer? We hope this Bill will produce it. I can assure the Senator very much that there will be careful monitoring of what is taking place there. The Minister, of course, would welcome at all times the arrival of competition if companies felt it would be a viable proposition for them.

As regards car ferries to Spain, this is something I have always been interested in. I often thought, with the volume of people who travel between the countries, there might be a viable proposition there for a shipping company. There is also the added factor, mentioned by Senator Killilea, that Spain have now joined us in the EC. With the obvious increase in trading that will take place between the two countries, we hope it will mean traffic in each direction, not particularly in imports but also as far as exports are concerned.

The setting up of such a service would be primarily a matter for the shipping companies themselves. The Minister would welcome any viable commercial service that might come about in this area. I understand that length of voyage has much to do with the viability or otherwise of such routes, especially because of the high capital costs of the vessels involved. There is the added factor also that in the case of people going to Spain for holidays the demand is not as great in the car ferries area as it is in the air charters area. That is for the type of holiday we have at present. That does not mean there will not be a demand for a new type of holiday. With the changes which are taking place people are to a certain extent bored of this——

Mr. Killilea

Sun drenched holiday.

Mr. Nealon

Exactly. They may like to move around. It is the same for Spanish people coming in this direction. There may be possibilities in that area. There would be no inhibition on it if it takes place. Any viable proposition would be welcomed. We have an open ports policy in this respect.

As far as the Cork-Wales situation is concerned there is regrettably an absence of a Cork-Wales ferry service at present. The Minister has always recognised the desirability of having a commercially viable cross-channel service operating from Cork. As Senators are aware, repeated efforts in recent years to provide such a service have unfortunately been unsuccessful, despite State financial assistance being available. In 1984-85 there was a subsidy of up to £500,000 from the Exchequer. In 1986 a starting-up grant of £300,000 was made available despite the low service. The Minister's view of the Cork-Wales service is that it remains a matter for local interests to pursue if they so wish. This incentive is available but unfortunately a service has not yet been developed. We have a service with Irish Continental Line and with Brittany Ferries in the summer as far as the connection with France is concerned.

Senator FitzGerald referred to the need for giving the best possible type of service in the crossing of the Irish Sea. This has been achieved. The upgrading has been very successful and we have a far more luxurious crossing. If a luxurious crossing was too expensive, it may not be used by every person crossing the sea. Therefore, we need a good balance between the luxury available and the comfort available for visitors coming into the country. The attractiveness of the cross-channel route across the Irish Sea is very important as far as attracting visitors is concerned but we also must keep in mind that it has to be at a reasonable price. I guarantee the Senator we will keep a very close eye on what is happening. As far as the B & I fares are concerned, they have to be referred to the Minister and he will monitor the situation very closely.

Another point raised during the course of the debate dealt with the approval of the Minister for Communications being sought for alterations to the superannuation scheme currently in operation by B & I or the introduction of any new scheme. It is the only scheme as far as the Department of Communications are concerned, which does not have this provision. It is a provision that is in general operation at present. The purpose of it, of course, is two-fold: to ensure that adequate provision is being made as far as the superannuation schemes are concerned and also that companies would not be endangering their own future through the various provisions in this area. Taking into account the people who will be recipients of the benefits of the superannuation scheme and the future of the company, it is a very wise provision. We have had some experience with this in the past.

I thank the House for their reception of the Bill.

Question put and agreed to.

Agreed to take remaining Stages today.

Bill put through Committee, reported without amendment, received for final consideration and passed.