I am pleased to introduce the Aviation Regulation Bill, 2000, to this House. This Bill provides the basis for independent regulation of State airports, a sector which continues to play a critical part in the economy and supports growth in so many areas. The purpose of the Bill is to establish a regulatory body to be known as the Commission for Aviation Regulation.
In total, the new commission will have responsibility for five different areas of policy. I am glad that we have a chance to discuss it here because people may think the regulator is concerned only with airport charges but he has wider responsibilities. The five areas are the approval of airport and air traffic control charges, the regulation of the ground handling market at airports, the granting of operating licences to air carriers established in Ireland, the administration of the rules governing the allocation of take-off and landing slots at airports and the licensing and bonding of travel agents and tour operators. Before the Senators interject to say that I am being sexist, the interviews for the post of regulator have been held and the person has been appointed. He is acting in an interim temporary capacity and will become the established regulator once the Bill is enacted.
Before speaking in detail, I would like to outline briefly the rationale for embarking on a new regulatory regime for the area. For some time, there has been a considerable focus on the issue of airport charges. Airlines, as one would expect, seek to have charges as low as possible to assist them to drive growth in their business and increase their traffic flows. Airports are also commercial operations and need a reasonable level of charges to meet their operating costs, pay staff, maintain facilities and fund new developments.
From Aer Rianta's perspective, while a small number of relatively minor changes in specific charges have been approved, there has been no increase in the landing and passenger tariffs which were approved by my predecessor, John Wilson, in 1987. Since that time, Aer Rianta has offered a range of discounts to the standard level of charges which have helped to add new routes and new business in and out of Ireland, thereby contributing to the growth in our overall passenger numbers. Discounts are also available in relation to seasonal variations on traffic as well as aircraft parking.
Given that it was signalled in 1992 by the Council of European Finance Ministers that duty free facilities would end in mid-1999, Aer Rianta always intended that the discount schemes would end when duty free sales ended. Airlines were aware of this fact. Aer Rianta took the necessary commercial decision to end the discount scheme last year when faced with substantial revenue losses which resulted from the abolition of EU duty free sales. Yesterday I brought to Cabinet Aer Rianta's results for the year ending 1999 and it will launch its report next week at its AGM.
In addition, Aer Rianta decided it was time it carried out a total reappraisal of the structure and basis for its airport charges. The business has changed substantially since 1987 with the liberalisation of air travel in Europe and the advent of low cost airlines. It used to be a huge expense to travel but it proves the old adage that competition benefits the consumer. Once competition was introduced on the airlines prices dropped. Travel to London now costs much less than one-quarter of what it used to.
I recognised the difficulties to which the absence of an up-to-date critical analysis of the charges issue had given rise and I saw the need for a fresh independent examination of the issue. In looking at the situation, it was clear to me that the central issue was the potential for conflict between the shareholder role, whoever was the Minister of the day, and the regulatory role and that this would have to be addressed if real and enduring solutions were to be found to the charges issue. The difficulties of having the roles of shareholder and regulator vested in one Department have been debated for a considerable time. There have been many arguments for and against the separation of those two roles. I took the decision that the best way to resolve the issue was to separate them, as most European countries have done. The UK has had a regulator for approximately ten years, as have most other countries.
I therefore put to Government my proposals for the independent economic regulation of Irish airports and for airport charges to be one of the areas of policy addressed by the regulator. This is a necessary measure for the reasons I have just mentioned and is without prejudice to the future Government decision on the strategic future of Aer Rianta. No matter what the future of Aer Rianta, the need for a regulator is very clear and stands alone as an issue of merit.
The remaining area on the charges front, which has been added to the regulator's brief, is the determination of a cap for certain air traffic control charges, specifically those imposed by the Irish Aviation Authority for services rendered to aircraft at the approach and take off stages. These charges are levied at the airport stage, as it were, and are part of the normal airline costs. It was, therefore, a logical progression to include the regulation of these charges, together with the Aer Rianta charges, in the regulator's remit. Although the en route charges are also part of the normal cost base of the airlines, the principles upon which these charges are based are determined by the relevant international aviation bodies and are imposed for the use of Irish airspace as opposed to the use of Irish airports.
There were also a number of other areas where the Department carried out a regulatory function, either a licensing or market access function. This led us to add to the portfolio of the regulator the areas of air carrier licensing, regulation of the ground handling market, allocation of take-off and landing slots and the licensing and bonding of the travel trade sector.
This brings me back to the beginning when I said there were five main areas of policy and decision-making which would be included in the regulatory commission's brief. In summary, we have assigned to the regulator all the relevant aspects from an economic perspective of the chain of events in which the carriers are involved, stretching from the licensing stage through to the allocation of departure and arrival slots and up to the regulation of ground handling and the determination of charges.
The objective of the legislation in respect of the Irish airports is to ensure that regulation of charges is carried out in a manner which will facilitate the development of cost-effective and efficient services which will meet the needs of the users. Regulation is to a large extent a balancing act, one which seeks to address the interests of the parties being regulated and the rights and requirements of the users of the services supplied by those parties. The central issue in relation to regulation is how to achieve that balance. I suppose it is not possible to achieve a proper balance for all sides.
In terms of Aer Rianta, the State airport authority, we have sought to provide that regulation takes into account the various aspects of its role and function. Before framing a prices cap, the commission will have regard to the necessary levels of investment in airport infrastructure, reasonable rates of return on capital employed and the level of Aer Rianta's operating costs, including their employees and so on. From the airlines' per spective, we have sought to ensure that the reasonable interests of users of airport services are catered for. In particular, the level and quality of Aer Rianta's services as well as its effective use of resources will be an important part of the analysis conducted by the commission prior to making a decision on charges. The views of the airlines will be an essential element of the commission's work. Before making a determination on charges, the commission will be obliged under the legislation to engage in a consultation process with all interested parties and is further obligated to outline in a published report the basis on which a determination is made.
In relation to the commission's role in air traffic control charges, we have introduced measures in the Bill which will balance the competing interests of the service provider and the service user. Among those issues are the levels of investment in services by the Irish Aviation Authority and the quality of the service from the user's perspective. I will leave aside the charges issue to outline the key elements of overall thinking in framing this initiative. I have endeavoured to strike a middle ground but it remains to be seen if on Committee Stage here and in the Dáil other ideas will be put forward which I can certainly consider.
The route I have chosen draws in the required combination of measures to allow for regulation to take place in that middle ground area. The Bill contains specific references to issues to which the commission will have due regard such as policy concepts in the Department's strategy statement and so on. All the interested parties and relevant Government Departments were consulted. The Bill is framed to provide the commission with the appropriate level of flexibility and discretion in approaching the task of setting a charges cap. However, this flexible approach is predicated on the regulator operating in an open and transparent manner so that the certainty and clarity required by the regulated entities and the sector in general is an inherent part of the process.
Clearly there must be accountability. This is one of my hobby horses on which I dwelt when dealing with telecommunications legislation in this House. The 1996 Act, which set up the present telecommunications regulator, who is very highly motivated and able, does not include any accountability measures. The regulator was right in saying that she could not be compelled by law to come before an Oireachtas committee. Nevertheless, she did choose to come and has been a very good contributor to it. This Bill provides for accountability because it would be madness to lop off a huge segment of Irish life, in this case, telecommunications, and say the Minister is no longer accountable, and nor is anybody else, when the decisions being taken are intrinsic to everyday life. Similarly, when we dealt with electricity last year we provided in legislation for accountability. Now we are including such provision in this Bill. Not alone must regulators appear before Oireachtas committees whenever they are called, their reports must be transparent and their policy objectives clear.
This is an issue that has already arisen in other European countries and it will arise increasingly here. Where we have open markets and liberalisation there has to be regulation, but regulators must be accountable. It would make no sense to abrogate democratic responsibility, to give it to somebody else and say that we need never talk about it again. That would be all wrong. I issued a paper setting out a comprehensive set of policy proposals on governance and accountability, on which we received 28 submissions, some of which have been printed. Now we will move to legislate. That is about regulation in general.
This is the first legislation establishing an independent regulatory office. When we were dealing with electricity last year we did not have the policy proposals. This Bill includes the recommendations from the proposal process which include in particular the issues of transparency, independence and accountability. Independence and accountability are two sides of the same coin. It is important for the development of the market that there is confidence in the whole regulatory process. This is achieved by ensuring that a regulator has the necessary independence to do the job in the manner in which it should be done. That is not the same as saying that a regulator's office is free to behave as it sees fit in all respects. It would not be acceptable in a democratic environment to give to a regulator quite considerable powers and not make him or her accountable for the performance of their functions. I am confident that we have struck the middle ground in these proposals. Again I await with great interest what people have to say.
Let me turn to the main provisions of the Bill. Sections 1 to 4 contain the standard provisions. Sections 5 to 7 provide for the establishment of the commission and for its independence. Sections 8 and 9 assign the other four functions. Section 10 provides for ministerial authority to issue policy directions of a general nature. Section 11 provides for the appointment of the members of the commission. It provides that a commissioner may be removed by the Minister, who shall inform the House of the reasons for removal. Additionally, the established policy of prohibiting employment in the regulated industry for 12 months after leaving office has been continued.
Sections 12 and 13 provide for the recruitment of staff by the commission and the appointment of a deputy commissioner. Section 14 empowers the commission to engage consultants if it wishes. Section 15 addresses the issue of ethical behaviour and controls on staff interests. I drew attention to the importance of these measures in the policy proposals document. The commission is obliged to publish a code of conduct in respect of staff members which will provide guidelines for staff behaviour in respect of business.
Section 16 outlines the usual prohibition in respect of election at local, national or European level. Sections 17 and 18 place a requirement on both members of the commission and staff or consultants to make an initial declaration as to their interests and to make ongoing declarations of interests as appropriate. There is a potential for conflict, or a perceived conflict, between the work of regulatory authorities and the other interests of persons who become members or employees of such bodies. That came up a short time ago in relation to telecommunications.
Section 19 provides for the standard penalties for the unauthorised disclosure of information. Sections 20 and 21 allow for the creation of superannuation schemes. Sections 22 to 25 provide for the resources and revenues of the commission. In line with arrangements for existing regulators, my Department will provide for the start-up costs in terms of staff, premises and equipment. These costs will be recouped when the commission is up and running.
It is intended to assign staff from the Department to carry out the functions being transferred. These officers will remain staff of the Department. That is how the staff wish it to be. I had several meetings with staff members in the telecommunications offices and this has been worked out. This arrangement ensures the continuity of staff experience, something which is very important.
The main provision in relation to funding is the commission's power to impose a levy on the regulated entities, subject to the obligation to set the levy at an amount which just covers the operational costs and expenses of the office. The commission may borrow money but the Department of Finance has a say in what it may borrow.
Financial reporting is an important mechanism for ensuring propriety, transparency and accountability. Section 26 deals with the reporting measures in terms of financial accounts. The format of these is to be agreed with my Department and the Department of Finance. They will be subject to the scrutiny of the Comptroller and Auditor General.
Section 27 places a requirement on the commission to report to the Minister whenever requested to do so. Section 28 empowers the commission to require the separation of accounts in respect of any activities regulated by the commission. Section 29 gives scope to the commission to deal directly with its requirements for office premises. Section 30 provides that the commission shall have a seal which shall be used to authenticate documents. I hope it will do so by encryption.
Part III deals with the primary purpose of the legislation, the regulation of airport and air traffic control charges. Section 31 outlines the scope of the regulation. It will apply to airports having more than one million passengers annually. This threshold may be varied by ministerial order.
Section 32 outlines the nature and scope of the regulator's role. The framework in which a deter mination is made is laid out. Section 33 outlines the regulatory objectives which will be addressed by the commission prior to making a determination on airport charges. Section 34 amends the Air Navigation and Transport (Amendment) Act, 1998, by substituting the commission for the Minister. Section 35 deals with the regulation of aviation terminal services charges. Section 36 sets out the broad policy framework. Section 37 amends the Irish Aviation Authority Act, 1993. Section 38 addresses the issue of the review of decisions by the commission. It is provided that the only avenue of challenge is by way of judicial review. I do not know about that. It is something that will be examined on Committee Stage both here and in the Dáil. Most determinations have an appeal mechanism.
Section 39 is an enforcement procedure whereby the commission may apply for a High Court order to ensure compliance with its decisions and requests. Section 40 is a standard procedure outlining methods by which a notice may be served on interested parties. Section 41 governs the role and powers of authorised officers. Section 42 empowers them to procure a search warrant if necessary. Section 43 provides the standard indemnification in relation to the bona fide performance of his or her duties by a member of staff. Section 44 provides that, in line with company law requirements, any offence committed by a body corporate with the knowledge and consent of a director or officer of that body shall be regarded as an offence committed by that person as well as the body corporate. Section 45 provides that in line with usual practice, summary offences are prosecutable by the commission.
Section 46 amends the IAA Act and section 47 provides that the commission will be subject to the freedom of information legislation. Section 48 amends a typographical error in the Air Navigation and Transport (Amendment) Act, 1998. Section 49 amends the Air Navigation and Transport Act, 1973, by inserting a provision in relation to the power of arrest for air rage offences.
In conclusion, I will summarise where we are in the overall aviation picture. All plans are made up of a number of different steps and stages, and the aviation picture is no different. I spoke earlier about Aer Rianta and we are considering all its proposals. It is fitting that I pay tribute to the very important role airports play in our economy and to the hard work and dedication of the people at all levels in State and other airports who have helped to make them a success story. As an island nation we are critically dependent on efficient, reliable, cost effective airports which can meet the demands that our growing economy continues to make across all sectors. The measures in the Bill recognise the role which our airports have to play in response to those demands.
In relation to the Irish Aviation Authority, we are all aware that Ireland has rightfully enjoyed a good reputation as a provider of quality, safe and efficient air traffic services. Those attributes will continue to be important under the regulatory regime. I am always afraid to say our airlines or railways are safe for fear of anticipating an unfortunate incident.
On the Aer Lingus front, the Government decided, against the backdrop of a liberalised aviation industry, the requirements of a single European market and the commercial requirements of a modern airline, that the best way forward was to put in place arrangements for an initial public offering of the company. Preparatory work is going on to facilitate this process. I hope developments will take place towards the end of this year or the beginning of next year. This will depend on the state of the markets. A flotation will not take place if the time is not appropriate.
The regulatory measures which the Bill is putting in place are a key element in the aviation picture and one which will help to bring about, in tandem with other initiatives, the attainment of our objectives for the sector overall.
Across party lines, there is a great belief in our airports. Apart from the smaller regional airports, all of which are doing well, the State airports have a very good record of providing an excellent service. There has been a wonderful mingling of ideas and initiatives among board members, State employees and successive board chairmen. Ministers hold responsibility for a short time but the permanent government remains. I commend the civil servants who have dealt with airport regulation for many years.
I commend the Bill to the House and I thank the House for the courtesy extended to me.
On a point of information, Sir, how much time has been allowed for the debate?
