Seanad Éireann debate -
Wednesday, 27 Apr 2005

Vol. 180 No. 5

International Interests in Mobile Equipment (Cape Town Convention) Bill 2005: Second Stage.

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

Minister for Transport (Mr. Cullen)

The purpose of the Cape Town Convention is simple; it is to make it easier to finance the purchase of aircraft. Senators will be aware from reading the Bill that the Schedules contain the text of the convention and protocol relating to aircraft objects. For convenience, when I mention the convention, I will be referring to the two documents together.

As everyone in this House will be aware, aircraft are expensive items, even when bought second-hand. It is a rare occasion when an airline can afford to acquire additional aircraft without borrowing. However, because aircraft move between countries, it is not as easy to borrow for an aircraft as it is for a piece of industrial or commercial property. In the case of buildings and land the lending institutions will always know where the property is situated and what law applies in connection with a lease or mortgage on the property.

The purpose of the Cape Town Convention is to create a uniform international legal framework for loans and leases for aircraft so that the aircraft itself can be the asset securing the loan. This framework will provide lending institutions with stability and certainty about their ability to repossess aircraft that are subject to loans or leases if the borrower fails to make the contractual payments. If at the time of the default on the loan payments the aircraft concerned is in any of the countries that have ratified the convention, the courts of that country will apply the rules of the convention to determine who may take possession of the aircraft. By reducing the risk for the lending institutions, the convention will enable lending rates to be reduced. This will have benefits for airlines and, ultimately, passengers. For example, the United States Government's export-import bank has offered reduced interest rates in respect of loans to airlines in countries that have ratified the convention.

An important part of the convention is the creation of what is known as the international registry. The purpose of this registry is to record the existence of loans and leases which are covered by the convention and to establish priority between them on a first come first served basis. The registry will operate over the Internet on a 24-hour, seven day a week basis. In order to gain the protection of the convention a loan or lease must be recorded in the registry. If there are two or more loans for the same aircraft, which is quite common, the loan registered first will have priority over later registrations. Members of the public, as well as those in the aviation and financing industries will be able to search the registry to discover if there are loans recorded for any particular aircraft. However, only appropriately authorised users will be able to add or change information in the registry.

A substantial number of the world's aircraft leasing and financing companies are located in Ireland. In addition to the direct employment in those firms, their location in Ireland has resulted in a considerable volume of high-profile work for Irish legal and accounting firms.

With this in mind my Department participated extensively in the preparatory work leading up to the diplomatic conference in Cape Town in November 2001 where the convention was adopted. We made it clear at an early stage that we were anxious to have the registry located in Ireland to underscore our long-standing commitment to international aviation and to support the aircraft financing activity in Ireland. The Department, with the valuable assistance of senior Land Registry officials, contributed to the work of the international registry task force established to define the role and operation of the registry. One of the meetings of the task force was held in Dublin Castle in January 2000.

It was decided at an early stage that a competition would be held to select the operator of the registry in order to ensure an efficient operation. That competition was held by the ICAO in the first half of 2004 and I was delighted when the Irish company Aviareto was unanimously selected as the winner at an international conference in Montreal in May last year. The other bids came from Canada, Singapore and Spain.

Aviareto is a small PPP project between my Department and SITA. SITA is a major international company owned by over 700 aviation companies worldwide. It is the world's leading provider of global information and telecommunications solutions to the air transport and related industries. It has offices in Letterkenny and Dublin employing 60 people in Ireland. The company has recently announced the expansion of its activities in Letterkenny which will involve the employment of a further 123 staff. Aviareto will be a small employer with probably fewer than ten staff and will be based at SITA's Dún Laoghaire offices.

The convention will come into force when it has been ratified or acceded to by eight countries. So far there have been six ratifications and accessions, namely, Panama, Ethiopia, Nigeria, the United States, Pakistan and Oman. Due to Ireland's long-standing support for this project and, in particular, because Aviareto was selected to operate the registry, it is my ambition for Ireland to be one of the first eight ratifying countries. I am sure this House will support me in this objective.

I would like to make it clear that the registry will not take over the role of the Irish Aviation Authority with regard to registering the nationality of Irish aircraft or regulating aviation safety. The registry will only be concerned with recording the existence of leases and loans for aircraft. It will do so for aircraft throughout the world, not just for Irish aircraft.

When considering the Bill it is also important to note that there is no obligation to use the registry, or take advantage of the convention. Due to the fact that aircraft financing involves large sums of money, all of the parties to a loan or lease will have professional legal and financial advisors. Consequently we can be satisfied that all users of the registry and the convention will do so on the basis of carefully considered decision. The convention will not affect the status of financial interests where the parties choose not to register them or where the financial interest was created before the convention comes into force in the relevant country, even if the interest is subsequently included in the registry.

I would like to give a brief overview of the content of the Bill. It is a short Bill and most of the text is in the Schedules which contain the convention and protocol.

Sections 1 to 3 contain standard provisions in legislation, namely, the Short Title, purpose of the Bill and interpretations. Section 4 provides that the convention and protocol will have the force of law in Ireland. As I said earlier, the convention and protocol will only apply where people have chosen to take advantage of it.

Section 5 empowers the Government to make various declarations that are permitted under the convention and protocol. These allow a certain amount of tailoring to take account of national circumstances. Section 6 contains standard provisions in connection with making orders, such as the inclusion of consequential provisions and specification of when an order takes effect.

Section 7 specifies that the High Court is the appropriate court for disputes. Under the convention, disputes involving the registry must be heard in the Irish courts because the registry is based here. Section 8 requires courts to take notice of the convention and protocol.

Section 9 requires that proceedings for damages must take account of compliance with the relevant articles of the convention. Due to the fact that the registry will be a computer-based system, it is important for users to comply with its requirements if they wish to have its protection. It was never intended that the registry would have responsibility for checking the quality or accuracy of the information placed in the database. That is the responsibility of the users. The registry will be responsible to ensure that no errors are introduced while the data is stored in the database.

Section 10 empowers the Minister to subscribe for shares in the registry company to an amount not exceeding €40,000. The Minister's shareholding will be an important indication of Irish support for the convention and protocol and the registry company.

Section 11 prohibits a court from making an order that would prevent the registry from providing the services prescribed by the convention and protocol. This will be important to ensure a dispute with one party cannot affect the operation of the registry for the benefit of others. Sections 12 to 14, inclusive, are standard provisions relating to orders, including the laying of orders before the Oireachtas and the usual opportunity for either House to pass a resolution to annul an order. Section 15 is a standard provision relating to the Minister's expenses under the Act.

Section 16 inserts, into the Act that implements the Montreal Convention, standard provisions relating to the making of orders under that Act. These include the laying of orders relating to the Montreal Convention before the Oireachtas and providing for annulment by either House. It was not possible to include these amendments in the legislation before it was enacted because of a deadline to enact it before the expansion of the European Union on 1 May 2004.

The convention represents an important and welcome step forward in the legal framework connected with aviation finance and the location of the international registry in Ireland is a great achievement. I commend the Bill to the House.

Mr. P. Burke

I welcome the Minister to the House. I also welcome the legislation, the passage of which I will not delay.

The convention arises from the need to acquire and use mobile equipment of high value or economic significance and to facilitate the financing of the acquisition and use of such equipment in an efficient manner. It recognises the advantages of asset-based financing and leasing for this purpose and will facilitate such transactions by establishing clear rules to govern them. The convention is born of the need to ensure interests in such equipment are recognised and protected internationally. It is desirable to provide broad and mutual economic benefits for all interested parties and this is also recognised by the convention. Such rules must reflect the principles underlying asset-based financing and leasing and encourage the autonomy of the parties necessary in such aviation transactions.

The convention seeks to establish a legal framework for international interests in such equipment and attempts to create an international registration system for their protection. It provides for the constitution and effects of an international interest in certain categories of mobile equipment and associated rights in the aviation sector, which is a progressive and much desirable advance in international aviation measures, and I welcome its enactment.

The convention adopts the asset-based financing practices widely used in the United States and weaves them into an international agreement. Specifically, the convention establishes an "international interest", which is a secured credit or leasing interest with defined rights in a piece of equipment. These rights consist primarily of the ability to repossess, sell or lease the equipment in case of default and the holding of a transparent finance priority in the equipment.

Priority will be established when a creditor files, on a first-in-time basis, a notice of its security interest, in a new high-technology international registry. Once an international interest has been filed by a creditor and becomes searchable at the international registry, that creditor's interest will have priority over all subsequent registered interests and all unregistered interests, with a few exceptions. The international registry will be searchable on a 24 hour, seven day a week basis. Fees will be charged for filing a security interest in the international registry and for other services connected to use of the registry.

The rights and enforceable remedies created by the convention and aircraft protocol are designed to reduce the risk assumed by creditors in financing transactions in many parts of the world. In many countries, the risk factor is significant because local laws do not protect lenders in the event of default or bankruptcy or are highly unpredictable. This uncertainty is compounded because aircraft can and do move readily between countries and this drives up the cost of aircraft financing in many countries, which is reflected in the interest rate the financier charges. Measures that reduce the interest rate will reduce the cost of aircraft and, ultimately, the cost of travel, which will be welcome.

The convention seeks to reduce this risk in a number of ways. For example, it provides financiers with a number of key rights with respect to an aircraft financed to an airline of a country that has ratified this convention and protocol. These include the right, upon default of a debtor, to deregister the aircraft and procure its export; to take possession or control of the aircraft, or sell or grant a lease in the aircraft; and to collect or receive income or profits arising from the management or use of the aircraft.

The extent of these rights and the speed with which they can be exercised will be a function of the declarations a country files at the time it deposits its instrument of ratification. These declarations set out which remedies that state will allow and the means by which the remedies can be implemented. It can be expected that the greater the remedies a state chooses to recognize in its declarations, the greater will be its benefits.

These benefits will take the form of lower financing charges and fresh sources of capital for aircraft financing. This will particularly benefit developing countries whose carriers have had to pay high interest rates or who have been unable to access the commercial credit markets at all because of their credit risk. The ability of countries, which have historically financed aircraft acquisitions through sovereign guarantees, to make use of asset-based financing will allow them to use such guarantees for other domestic purposes.

The International Civil Aviation Organisation will supervise the international registry, which will be based at Shannon. I welcome the decision by ICAO to select the Irish company Aviareto to operate the international registry of financial interests in aircraft under the convention. A number of years ago we lobbied for the location of the Irish Aviation Authority at Shannon but we were not successful. The Government decided it should be located in Dublin. I am pleased this body will be located at Shannon.

Aviareto fought off stiff competition from Canada, Singapore and Spain to win this contract. It is good news for the aviation industry. Ireland has a high profile and good reputation in aviation with major maintenance, repair and overhaul and aircraft leasing companies based here, particularly in Shannon. The location of the international registry will add to that reputation and it will allow Ireland to play a more central part in the international aircraft financing business. It is also good news for Shannon, which, unfortunately, could face its own concerns over the future viability of its aviation sector, particularly with the advent of the open skies policy in the near future.

This convention, as an international agreement, could result in significant economic benefits to Ireland and other countries and could help facilitate the modernisation of airline fleets around the world. The convention is likely to help aircraft manufacturers to increase exports. For countries that manufacture aircraft there will likely be increased exports as the number of aircraft orders increases. Increased exports also could mean more jobs for exporter countries such as the Ireland. It also could help developing countries to upgrade their fleets at reduced financing costs. The treaty and airline protocol provide financiers with several key rights concerning an aircraft purchased by a country that has ratified the convention, including the right to seize the aircraft or sell a lease in it. Those guarantees are likely to lead to lower financing charges and the opening of fresh capital sources.

I welcome this convention and I am glad that it will pass swiftly. It will do much to improve the international aviation sector. I hope there will be speedy decisions on the construction of a new terminal at Dublin Airport and on the Aer Lingus question because these issues have been ongoing for too long. The Government is not giving a high enough priority to both those issues. I urge the Minister to make speedy decisions.

I refer to helicopters, which we can all see is very much a growing industry. That their number is on the increase is causing problems regarding landing and planning permission, and I ask the Minister to set policy in that regard. There are two types of helicopter, those owned by private individuals and those run by people who provide a hiring or leasing service to companies and individuals. The issue of where they may land and take off is causing concern in some communities. It is certainly worrying those who own such helicopters. I would like the Minister to arrange a debate on this issue at some stage or draw up guidelines regarding how the area proceeds in future. I welcome the Bill and wish it a speedy passage.

Mr. Dooley

I join my colleague, Senator Paddy Burke, in welcoming the Minister for Transport, Deputy Cullen, to the House for what appears to be a relatively straightforward Bill allowing Ireland to ratify the Convention on International Interests in Mobile Equipment, known as the Cape Town Convention, together with its protocol, and to adopt them into Irish law.

This creates an international legal framework to facilitate the asset-based financing of aircraft, their engines and helicopters. The convention and legislation are very welcome since, while they appear rather obscure, their positive effect will be to continue to reduce costs in the aviation sector, in particular the cost of aircraft, something one hopes will result in lower air fares. The dropping of charges across the aviation sector generally has led to lower fares. I suppose it comes at a very welcome time, since oil prices are increasing. I know some airlines have been hedging in that regard. However, they are now reaching the point where they will have to purchase oil on the open market, and one hopes this legislation will have the knock-on effect of ensuring air fares remain at their present relatively low level. We must obviously be mindful of that, since oil prices have the capacity to increase fares.

The lending institutions have signalled their welcome for the convention and stated their willingness to reduce lending rates when it is adopted. I understand it will enter into force when eight countries have signed up, and six have already done so. It is to be hoped that Ireland will be the seventh. Anything we in this House can do to speed the Bill's passage is good. It will afford protection to lending institutions regarding asset recovery in the event of airlines or owners of aircraft defaulting.

In the fares war that has developed between airlines, it is delightful to see that they have taken a different approach to reducing costs rather than focusing, as they have recently, on airports. Unfortunately, heretofore, the entire focus of reducing or eliminating costs for airlines has been on airports. It is now common practice that landing charges are reduced to unsatisfactorily low levels and in some cases to nothing. There seems to have been an effort on the part of certain low-cost carriers to create a race to the bottom in service delivery and payments for airport services. That must be examined.

Forcing down landing and ground handling charges is creating severe difficulties for the airports' capacity to deliver services in line with customer demands. Low-cost carriers do not want to pay for services, but they jump up and down when they are not delivered to their expectations. That must be addressed. There is now an expectation among some low-cost carriers that the taxpayer should carry the cost of airport infrastructure, and that is totally unacceptable. It is a little like the little piggy who stayed at home paying for the little piggy that went on holiday. We would not want to see that situation evolve.

This is having a serious impact on individual airports, particularly in the light of recent, very welcome change following the State Airports Act 2004, which separated the three airports and allowed them to manage their own business effectively and efficiently. At the same time, it is still creating some level of difficulty for them, since they must now recover the costs associated with the airlines through charging higher prices for car parking, cups of tea, coffee and whatever else is sold in the airport. That price transfer issue is causing difficulties for the airports' operation, a case in point being Shannon Airport, with which I am fairly familiar from a home perspective. The new chair, board and management are finding things difficult in the new environment of low-cost carriers.

There must be balance, particularly where airports must stand firm while offering good value. There can be no return to the old days of their having a very high cost base and expecting the airlines to pay for it. That day is gone, something accepted across the board. However, there is also a need for balance to ensure there is no downward spiral of cutting costs to such a level that the airport cannot provide the service without stretching matters in some other peripheral area. Ultimately, that must have a negative effect. One can only charge so much for parking or a cup of coffee before one reaches the point where people will refuse to purchase anything at the airport and find another means of getting there. Then one is back to the question of who pays to provide the service to the airline. There must be balance in the discussion.

In the case of Shannon, there is a proposal to outsource the entire catering section. For some time, this has been a very profitable division in the airport. It has loyal staff and a very dedicated team that has worked hard over the years in an efficient, open and frank way to get the work done. The nature of their work is such that, particularly in providing services to some of the military aircraft that go through late at night or early in the morning, they have adopted specific work practices. It is now unfortunate that their work has not been enough and that the outsourcing of their service is required to cater for the greed of those airlines that are creating an impossible situation. Morale among the workers is low as a result, something that must be addressed.

The management seems to have been forced into a situation where it is offering no alternative to outsourcing. Through the Minister for Transport, Deputy Cullen, I call on the chairman of the management team at Shannon to engage in meaningful dialogue with the staff, particularly those in the sections to be outsourced. It is important to recognise that the State Airports Act 2004, through the Department of Transport and the actions of the Minister's predecessor, Deputy Brennan, provided full protection to employees regarding pay and conditions, something the present Minister has also supported. It also stipulates that there may be no compulsory redundancies. That must be taken into account in any relevant discussions.

Dialogue and an openminded approach to the debate are needed, as is a recognition that workers who have very much been part of the airport's success must have their concerns taken into consideration. All concerned, including workers not only in Shannon but in the three main airports and their regional counterparts, recognise change is needed. There has been a great deal of change right across the international aviation sector. At the same time, while the airports have obviously been unbundled, a process the importance of which we all accepted, there is still a need for them to stick together against the aggression of the profiteers in some of the low-cost carriers to ensure that there be no diminution of service to the point that one is faced with an overcrowded cattle shed. That would not be welcome from anyone's perspective, certainly not with regard to any of the proposals for new terminals, whether in Dublin or Cork.

There have been references to some airports being "gold-plated". That term has been used too liberally and does not reflect the approach taken by those designing the terminals. Some of the low-cost carriers would desire to have facilities at such a minuscule level that their costs would cease to exist. At the same time, one expects airports to provide an efficient service to consumers. If that continues, the airlines will get great credit for offering low fares and the airports, which are struggling to offer a service to facilitate airlines, will be seen as nasty for having to charge exorbitant rates for car parking, teas and coffees. The queues at many airports are very long because airports do not have the resources they need to handle increased passenger numbers. There is a need for control and balance in this debate. I ask the Minister to ensure that low-cost travel does not lead to the travelling public receiving a poorer service on the ground.

The positive outcomes which will accrue to Ireland as a consequence of the Cape Town Convention do not just involve lower fares. The Minister mentioned that an Irish company has been awarded the contract to manage the international registry, which is a key aspect of the infrastructure being put in place to implement the convention. It is great that the Department of Transport has entered into a public private partnership to ensure that the registry is based here. As the Minister said, the importance of the contract does not relate to the ten or 12 jobs which will be located here, but to the international prestige that will accrue. It demonstrates that the capacities, skills and ICT expertise needed to manage a registry of this nature are available in Ireland. The value of the equipment and facilities which will be managed in Ireland indicates that this is a high-worth area. The Minister mentioned that accountancy companies and legal practitioners in this country will do the work associated with these companies. Although the direct employment will be relatively small, the overall impact of the registry being located here will benefit this country significantly.

I welcome the Bill. Given that the registry is to be located here, it is particularly important that Ireland will be one of the first countries to adopt the Cape Town Convention. It is important that this Bill is passed without delay. The significant increases in the price of oil in recent years, which are causing difficulties in the low-fares sector, might start to affect the cost of fares. Airlines have started to take a broader approach to the process of reducing costs. Rather than continuing to try to reduce airport costs, they should examine the financing of their aircraft and some of the other facilities and services they provide. They have not examined the possibility of trying to reduce the quality of aircraft, for example, although we would all be concerned if they did so. They seem to think they can reduce the quality of the service given to people in airports. That needs to be examined.

Mr. Ryan

I am tempted to speak about Cork Airport at the beginning of my contribution, rather than at the end, so that I can stay in tune with Senator Dooley. I will not resist the temptation to say some things about policy, however. This Parliament has a peculiar role in assessing this legislation because 43 of the Bill's 53 pages consist of an international convention that Members do not have the power to amend. I am not complaining, but simply stating that the power of Members to scrutinise the Bill is restricted. I will ask a few questions about the Bill in a moment.

No rational person could do anything other than welcome this Bill. All Irish people should compliment those involved in winning the contract to run the international registry. As I was reading the explanatory memorandum and as the Minister listed the countries which competed with Ireland to win the contract, I realised that it was not an accident that an Irish company won it. It happened as a consequence of the good decision, which was taken by a Government I did not support, to attract various forms of financial services to this country and to assemble people with a considerable range of skills in one location.

Those who advance development theories about clusters, etc., are heavily validated when one considers that jobs are being created in the aircraft leasing sector, which is far removed from banking. The aircraft leasing services in this country which did not succeed were useful in that they helped a large number of individuals and professions to develop skills in this area. People say that the tradition of making barrels in County Louth led to the development of the furniture industry in County Monaghan and one can draw a similar parallel in this regard. This country's achievement in this area is to be welcomed.

If one were to accept the opinions of some of our more pessimistic economists, one would think that this country's current level of economic achievement is a blip and that it is inevitable that we will revert to our past status at some future time. There is no such thing as an optimistic economist, as they seem to deal in degrees of pessimism. There is ample evidence on many levels to suggest that we have moved to a different level of economic performance in many areas. I am not trying to make life simple or be complacent. Some world competitiveness bodies have suggested that some areas of government and public service have not adjusted to the new realities of how this country does business. Some of them have complained about the Government's lack of speed, flexibility and responsiveness when confronted with new situations. This country's success in winning the contract for the international registry is to be welcomed in that context.

I have read the Cape Town Convention, but I would be exceeding my capacity for overstating things if I were to pretend that I understand all its contents. I challenge the Minister to state that he understands everything in it. I do not expect him to comment on the matter, at least not on the public record. I am sceptical about it. I understand the bones of the convention, however. The Bill's explanatory memorandum is quite clear, as these things go. The Minister's speech was also quite easy to follow. Any questions I have about the matter are being asked simply for the purposes of clarification.

I understand that participation in the registry by a leasing company, financing institution or purchasing body will be voluntary. Such organisations will not be compelled to participate in the registry. The registry's appeal is that it will lead to a decrease in the rate of interest to be paid by those who borrow money. We must assume that companies which purchase aircraft will believe that the reductions in interest rates will be worthwhile, given the increased likelihood that such assets will be seized or at least be accessible. In that context, we need to assume that most aircraft purchasers do not get involved in dodgy business, even though a great deal of dodgy business takes place in the world.

I look forward to learning of the degree to which the register is used by some of the thrusting and competitive low-cost airlines with which we are familiar. Perhaps they will choose to pay higher interest rates rather than using the register. They might not disclose some of the under-the-counter sweeteners being used. I refer to the imposition of low costs, rather than corruption. As a casual observer of the airline industry, I am aware that the official price that is cited for new aircraft often bears little relationship to the price offered to a major purchaser.

There is also the issue of explicit or implicit government subsidies. I believe European support for Airbus is unfairly criticised because there is no explicit similar support in the US. Much of the subsidy for innovation in that area comes from the US military budget. Although this support filters into civilian aircraft it is not classified as a subsidy. This leads to the ridiculous situation we currently have in the World Trade Organisation, WTO. There could be major implications for the European aerospace industry on the day the new Airbus is being tested. I think it has landed by now so I need not worry about the superstitious implications of welcoming it before it lands.

This is a huge achievement for Europe. The US had world dominance ten or 15 years ago in this area and the United Kingdom was a brief contributor before it pulled out. Boeing became an effective world monopoly when it amalgamated with McDonald Douglas. That Airbus became the dominant aircraft manufacturer in the world is a significant European achievement. This comes at a time when we tend to flagellate Europe for its lack of competitiveness.

One can make all the aircraft one wants but this counts for nothing unless they are sold. The scale of financing this is enormous. Even our most famous low-cost airline cannot finance the purchase of a new fleet from its own assets. Either it finances the deal from the manufacturer through delayed payments or it borrows the funds. The situation will be better for everyone, including the consumer, if the financial system is regulated. I agree with Senator Dooley that it would be best if airlines competed on the real cost of air travel rather than the companies' ability to extract subsidies from the taxpayer.

I was intrigued by the reference to aircraft, engines and helicopters. The protocol also mentions railways and space assets. The overlap between military and civil in space is less clearcut than in other areas. Where does the necessity for inclusion of space assets arise in this convention? I am intrigued by the introduction of space assets into what is a complex piece of international accounting, or a registry of deeds.

There is no explicit reference to the EU. Is there no single EU position or code of law on this? It seems extraordinary that every single country in the EU would deal with this in a different way. We might find ourselves in a situation where Ireland would be a signatory to this protocol and Germany, France and the UK would not. I am not sure of the implications of that, but at the international level of the WTO the EU negotiates on our behalf. The dispute between Boeing and Airbus is being carried out by the EU and the US rather than Britain, France, Germany and Spain and the US. I am surprised this convention is being dealt with in a different way.

I am also intrigued by the countries that have ratified this. They are a motley crew. I am glad the US, a major player in the world economy, is a signatory. It has not participated much in recent years but it does have a financial interest here. The other five — Panama, Ethiopia, Nigeria, Pakistan and Oman — are not from the dynamic part of the world economy, neither are these countries noted for their aircraft manufacturing. If some of these countries are involved in the funding of aircraft leasing I would like to know the source of the money. With the exception of the US it is a strange collection of countries. Diplomatic convention precludes the Minister from saying the kind of things I am allowed to say. Nevertheless perhaps he could make some comment on these countries using diplomatic language.

As I understand, the purchaser or leaser and the supplier will agree in which country's court they will settle the case. I would not like to depend on the court in Ethiopia to sort out the €250,000 I might have loaned to Ethiopian Airlines. Pakistan is a dictatorship and I would like further explanation on the significance of the countries that have ratified this convention. When will other countries ratify it? What about Britain, Germany, France, Canada, Australia, South Africa or other developed or developing countries?

The discussion on aircraft leasing invites some extraneous comments. Although I do not always agree with the Minister, I see him as someone who likes to make things work. I believe that the current emphasis on low fares is in danger of leaving us with one large international airport in Dublin and a number of less accessible airports. This large airport is overcrowded and under-resourced. There are fewer and fewer opportunities to link into the international air service from Cork Airport. The number of destinations one can fly to from Cork, without having to collect luggage at Dublin, has decreased dramatically. This has happened since Aer Lingus rediscovered itself.

An international businessman who is interested in investing in Cork will have to collect his baggage in Dublin, clear customs, and check in again. There is no way to send luggage via Aer Arann to Cork or Shannon. That may sound like a minor inconvenience but serious travel by international investors is incompatible with provincial airports where luggage cannot be transferred and tickets cannot be changed. Recently, I was in stuck in Amsterdam on political business and intended to return to Cork via an Aer Arann flight from Dublin. KLM went to enormous lengths to fly me to Dublin but could do nothing about the remainder of my journey because Aer Arann lay outside the loop. My inconvenience was minor but this situation could negatively influence perceptions of competitiveness and attractiveness.

The IDA informed me that street litter is as significant as costs in deterring potential investors. Investors may be discouraged if, upon exiting airports, they see that their surroundings have not been looked after properly. My experience of travelling from Amsterdam to Cork might also have a negative effect on investors' perceptions. Now that it has returned to an even keel the Minister should discuss with Aer Lingus the restoration of ease in international travel through Dublin to the two major regional airports. When the airline provided a regular service between Dublin and Cork there was efficiency of movement and ease for people in rearranging flights.

Mr. Wilson

I welcome the Minister to the House. He has had a long day here. When I saw this Bill on the Order of Business, I wondered whether this topic should be the responsibility of the Department of Communications, Marine and Natural Resources. However, after reading the Bill I am satisfied that it is being dealt with by the correct Department.

The Bill will allow Ireland to ratify the Convention on International Interests in Mobile Equipment and Protocol on Matters Specific to Aircraft Equipment which was opened for signature at Cape Town on 16 November 2001. Enactment will give the convention and protocol the force of law in Ireland. The purpose of the convention and its associated protocol is to create an international legal framework to facilitate asset based financing of aircraft, aircraft engines and helicopters. Asset based financing means leasing and loans where the principal asset securing the debt is the aircraft involved. As aircraft regularly move between countries and international legal frameworks, it is necessary to assure lenders that they may recover control of the aircraft if the borrower defaults on the lease or loan repayments while the aircraft is in another country. By reducing the risk to lenders, the convention will benefit airlines through costs and finance. It will also benefit consumers in the form of lower fares. I agree with the hope expressed by Senator Dooley that reductions in fares do not come at the expense of service or standards at airports.

The incorporation of the convention into Irish law will only impact on large scale financing contracts between debtors and creditors who choose to take advantage of the protection of the convention. Persons and firms involved in such large scale finance will be professionally advised on all aspects of their financing contracts. To gain the protection of the convention, financial interests in aircraft must be recorded in the international registry which is defined in the convention. The international registry will be entirely computerised, operating over the Internet 24 hours per day and seven days per week. It will be self-financing through user fees and will be regulated by the International Civil Aviation Organisation.

The Department of Transport participated in the preliminary work for the design of the international registry system, which included hosting a working group in Dublin. The registry is separate from the role of the Irish Aviation Authority in recording aircraft on the register under the 1944 Chicago Convention for the purpose of safety supervision. The international registry is solely concerned with recording financial interests in aircraft and has no role in aircraft safety. The ICAO held a competition in 2004 to select a company to operate the international registry for its first five years. The proposal submitted by an Irish company was unanimously selected, as has been noted by a number of speakers. I welcome that this company, which succeeded against companies from Canada, Singapore and Spain will be based in Shannon.

I support Senator Dooley's interest in the future of Shannon Airport. I also welcome the support for the airport from Fine Gael in this matter. Members of that party have often been unsupportive in the past. It has sponsored motions which could have jeopardised jobs in the region.

The convention and protocol will enter force after ratification by eight countries. In view of Ireland's support for the project and the location of the international registry company in Ireland, it is hoped that Ireland will one of these countries. To date, six countries have ratified the convention. I support this Bill and wish it a speedy passage through the house. The legislation will not incur a charge on the Exchequer beyond a sum of €40,000 for the purchase of shares in the company.

Dr. Mansergh

I welcome the Minister, his officials and this Bill, which was initiated in this House. The convention serves an important practical purpose because aircraft leasing is an integral element in the operation of air companies of every type and size. Ireland has a track record in this area through, for example, the operations of Guinness Peat Aviation during the 1980s. As has been mentioned, this area is a tailor made addition to the international financial services in which we have been successful over the last 16 years. The success of the Minister and his Department in attracting this operation to Ireland against international competition was a considerable coup. We should also credit the Minister's predecessors, the Minister for Social and Family Affairs, Deputy Brennan, and Senator O'Rourke, who is now the Leader of this House. Upon our ratification of the convention, only one more signature will be needed for it to enter force.

I wish to use this opportunity to discuss related areas of air transport policy with which the Government is currently grappling. Leasing is relevant to the issues of ownership and acquisition of aircraft. The Government faces the issue of financing and securing the expansion of Aer Lingus. This decision will require detailed study and expertise. I have faith in the Minister, his advisers and the Government to come to the right decision.

I would make two or three points that I have made previously in this House on interests that must be safeguarded in regard to Aer Lingus because there is no doubt that Aer Lingus is a very valuable national asset with much goodwill and a track record. It also has the wider transatlantic connections that are vital to this country from an economic, social, cultural and tourism point of view.

One danger to be guarded against is that Aer Lingus, if it were to be privatised, would be swallowed up by a much larger airline which would subsume its interests. That does not necessarily have to be the case. I recall, for example, that there was much concern about Irish Distillers, which was a private company. It was taken over by Pernod Ricard some years ago without any obvious ill-effects in terms of the products used. We live in close proximity to British Airways and I would not like to see Aer Lingus become a satellite of its larger neighbour, even if it will, for the time being, be under an expert chief executive, Mr. Willie Walsh.

The second interest to be safeguarded is our transatlantic connections, not only from Dublin but also from Shannon. If it is possible for Cork to run transatlantic services I have no objection to that but it is essential to keep what we have; it does not have to be precisely on the existing basis. That may not be tenable in the medium to long term but it is essential that there is a certain minimum transatlantic traffic. I am aware there is some ambiguity about the ownership of the slots at Heathrow but the third interest is to ensure that Aer Lingus keeps those slots and that it keeps its name and identity because that, in a sense, is a marketing tool for Ireland.

The other aspect which is perhaps even more controversial is the question of ownership, operation and competition in airports. I take the point Senator Dooley made earlier about a race to the bottom, which we do not want. If one thinks of Shannon, in particular, where tourism traffic is a very important element, there must be a proper welcome, as there is currently, rather than something terribly basic.

One of the decisions the Government took last year was to separate the airports in terms of management. That is a more credible form of competition than what is sometimes talked of in regard to Dublin Airport. When people talk about competition between two airport terminals at Dublin, I wonder do they mean the sort of competition that there is, say, between the Bank of Ireland and AIB. The reality is that the terminals, whether conjointly or separately owned, are confined to one location. I see no possibility of locating an airport somewhere else in Dublin simply because the objections would be too great.

Many airports around the world have two terminals including Zurich, Delhi, etc. One terminal usually deals with domestic traffic and the neighbouring country and the other deals with traffic much further afield. Alternatively, it is divided up by airlines. Some airlines use terminal 1 and others use terminal 2 for all their flights. I do not agree with the notion that an airline like Ryanair, for the sake of argument, will be able to suddenly switch to another terminal because it has a minor row with the owners or that the managers of terminal 1 will be able to switch to terminal 2. That could not happen because of the level of disruption that would be involved.

The debate on this issue has become far too ideological. One must be realistic about the degree of competition. Efficiency and service to the public are what matters, not some mantra of an ideal competition that will only work to a limited extent in regard to airports. To the extent that there is competition between airports it is far more likely to be between Shannon, Cork and Dublin than between two terminals side by side.

There is also on occasion an anti-union undertone to some of the discussion, which I do not like. We ought to remind ourselves that this country's current prosperity to a level few of us expected to see 20 years ago is based to a substantial extent on social partnership. I do not hold with the idea that we can simply kick that overboard although, to be fair, I do not believe anybody in Government believes that. Social partnership has been maintained without break by all Governments over the past 20 years but the Minister would do a service were he to continue his efforts to inject some common sense and reality into the debate about two terminals. I am sure he has been doing that for a long time but we must get away from the artificial contradiction between competition on the one hand, which is good, and a State run operation on the other, which is bad.

Labhrás Ó Murchú

Fáiltím roimh an Aire agus na hoifigigh freisin. I agree with much of what Senator Mansergh said. He moved away from the debate slightly but spoke a good deal of sense. I could identify with many of the sentiments he expressed, something to which I will return shortly.

This legislation is both important and relevant for Ireland. That is underlined by the near unanimity with which it has been greeted in the House today. For the past years the aviation industry has been experiencing severe challenges to the point where major airlines have gone to the wall and where we have seen the merger of other airlines and partnerships between airlines. Those of us who have had the opportunity to travel appreciate the major progress made by the aviation industry and the streamlining that can take place but we still have to contend with the old bugbear, namely, the cancellation of flights. In the past few weeks, friends of mine experienced problems with three different flights in the USA, one of which was cancelled while the others were delayed for several hours. It is an issue which must be confronted.

Among the great difficulties in Ireland are the restrictions on subventions with which we are now faced. It is a question of an airline being viable in its own right. Aer Lingus has proved it is possible to come back from the rails and be competitive. I have chosen to fly with Aer Lingus rather than with Ryanair or other low-cost carriers because I have a special respect and regard for the airline which has provided a quality service over the years. The service impacted in many ways on our image and economy. As the aviation industry is one of the tools of tourism, it is important that Irish airlines can access capital when it is required. As a small country, Ireland has a smaller chance of accessing capital than larger countries. Banks will provide one with a loan to purchase a house or some land as they know the house or land will remain in position, but an aircraft is a different matter. An aircraft can travel outside the jurisdiction which raises questions for banks on how they can be sure they will be able to recoup any loans.

While it is important to make the provisions outlined to reassure lenders, we should not ignore the advantages for the aviation industry itself as they are paramount in the current climate. A great deal of hype and codology is published in the media by people setting out stalls though not as transparently as they pretend. Most of the people in question are not in the position, given their current assets, to buy the type of fleet to which they refer. One wonders if we can return to reality.

I do not seek to patronise the Minister when I say he is a breath of fresh air in his focus and decisiveness. Whenever he says anything decisive and focused, however, somebody will want to take a swipe at him. The swipe which has been taken in this instance has nothing to do with the welfare of the aviation industry in Ireland. If an extra terminal is required in Dublin, it should be a question of providing what is best. I return to what Senator Mansergh said about competitiveness. We throw such terms around like confetti at a wedding, but nobody ever defines what they mean. Speaking in this way is often an excuse for a lack of action and in place of ideas and vision. The debate is put off the rails and we lose opportunities and focus. We would do a great service if we were focused on what was required and approached the matter practically.

I remember a famous debate on the "Late Late Show" in which Monsignor Horan spoke about establishing an airport at Knock. Many bright people in politics at the time who could not identify with rural or provincial Ireland spoke of a boggy, soggy piece of land and asked how an airport could be made to work there. I can still remember Monsignor Horan's response that his airport would cost no more than one DART carriage provided and maintained for Dublin. If one looks at the cost of putting infrastructure in place, one will see that he was quite right. Monsignor Horan's vision has worked not only to provide an airport but to regenerate an entire region. The people of Britain can fly from Luton to Ireland every weekend and be part of the nation. It has given them the opportunity to spend their money here and help the economy. It is exactly the spirit we require in approaching the larger picture of Dublin Airport and the Irish aviation industry. There is no difficulty in securing consensus in the House on legislation like the Bill before us because smaller, peripheral issues are not being allowed to distract us from our main focus. I wish we could adopt the same approach in discussions of the national interest.

I am not against private ownership and, indeed, would probably be a communist if I were. However, there are times when the national interest is best protected by public ownership. I will not spell out the principle in great detail, but it is one of the reasons Aer Lingus gave us the best service it could. While I am not against low-cost airlines, I hope we are not moving toward a scenario in which all carriers operate in that way. The nature of the services on board low-cost airlines in a climate of affluence will create problems. One is hardly on board some of the aircraft involved before one finds oneself buying a ticket, bottle of orange or soggy sandwich. Soon one will have to pay for oxygen if one must use it. While I accept the need for low-cost airlines, they should not lead to the elimination of quality services which people want and can afford. Without the Bill, competitors will not be able to approach the market to secure the money required to put a new fleet into the air and sustain their businesses.

Senator Ryan spoke to the reference in the protocol to space assets. It caught my attention also and I am sure the Minister will refer to it in his closing statement. I am a little paranoid at times about some of these issues, including the war in Iraq. When I looked at the Cape Town Convention first, I did so positively. I am happy it is good for Ireland and delighted it is being incorporated today. I seek always, however, to establish what the small print says. While I do not think the international registry will mean we are dominated, the reference to space assets worried me slightly. I would like it to be spelt out whether we are dulling the line between the commercial and the military. It would not be good for the aviation industry or smaller countries like Ireland if we were to do so.

I do not see any difficulty with the type and number of countries involved. If some of them are developing nations, I would like to be in partnership with them. I have seen that most countries which have moved beyond the initial problems of development are full of energy, enthusiasm and vision like Ireland was in the 1950s and 1960s. Developing countries are prepared to work hard to make their economies a success. Our standing and expertise, which is evident in the way we won the competition to secure the site for the international registry, can help those countries.

The Minister is on the right track and I wish him well. We are lucky to have him. We have had one debate in the House on the domestic aviation industry and I hope we can return to the matter as things develop.

Mr. Leyden

I welcome the Minister for Transport and his senior civil servants who are here to advise him on the Bill. I thank him for bringing this important legislation to the Seanad in the first instance. While the title, the International Interests in Mobile Equipment (Cape Town Convention) Bill, does not grab one as especially significant, a reading of its details reveal its great importance. The Bill has major implications for the aviation industry. The Department of Transport, in which I served as a Minister of State in 1982, is very progressive. It has many issues to deal with at present. It was deeply involved in securing the international registry for the State. Sixty people will be employed in Ireland. The company recently announced the expansion of its activities in Letterkenny which will involve the employment of a further 123 staff. Aviareto will be a small employer with fewer than ten staff based at SITA's office in Dublin. It is most encouraging that we could secure this deal through our diplomatic service and the work of the Department and that we were successful in beating off stiff competition from Canada, Singapore and Spain which are all most progressive countries. Singapore is not a large country but it is very advanced in aviation terms. It is a great success for the Department.

I am delighted the Land Registry was involved in the registering process. As the Minister is aware, it is due to relocate to Roscommon so there is a local link between the Bill and decentralisation to Roscommon. As far as I can see the Land Registry had an input into the preparation of this registry. I welcome the Bill.

This is an exciting time in aviation with the successful take-off and landing of the Airbus A380. I welcome its successful test flight. This aeroplane can cater for up to 800 people on one flight which has certain risks involved. It will be a major competitor for the jumbo jet. Will the Minister confirm if the landing aprons at Dublin Airport can cater for the Airbus A380? That is the direction in which the future of aviation is going.

We constantly hear about the difficult situation in Dublin Airport. Having used the airport in many different capacities over the years, I must say I did not find its management to be the greatest. It has neglected a great asset. I could never understand why one had to drive up to five miles to park one's car. It was disgraceful that one had to wait for a bus to turn up on coming back from a holiday at 3 a.m. or 4 a.m. in the morning. The management at Dublin Airport deserves to be replaced by an authority which will be far more progressive than it has been heretofore.

This is an important period in the development of Dublin Airport and the Minister, Deputy Cullen, is fortunate to be Minister for Transport on the eve of important decisions for Aer Lingus, the Dublin Airport Authority and the other airports. The Minister appears to have an open mind on these matters. The duty of the Government is to ensure the decision taken is in the best interests of Ireland Incorporated. That is the fundamental purpose of the Minister in this matter.

Ulick McEvaddy's presentation of his concept for the airport in last Sunday's newspaper article sounds very exciting, as does the proposal by Bernard McNamara. Neither of these people has approached me and I have no involvement in the matter, good, bad or indifferent. My only interest is from the point of view of the best possible decision being taken for Dublin Airport. Bernard McNamara has also acquired land adjoining Dublin Airport. He is a former county council colleague from Clare County Council and a former candidate for Dáil Éireann. He has also put forward very exciting plans for his concept. I am not sure if the Minister will have one, two or three new terminals in Dublin Airport. There are certainly great options available.

I very much resent the recent advertisement by Michael O'Leary. I cannot understand why he does it. The headline reads: "Habemus chaos at Dublin Airport." Depicting the Taoiseach as Pope Benedict XVI is a very serious matter. I cannot understand why an individual running a successful airline would do this. We should remember that he did not found the company. It was created a long time ago by the Ryan family whom I compliment. They do not appear to get much recognition for what was achieved in setting up Ryanair. Michael O'Leary might like it but I do not think the public is very impressed by that type of advertisement. The travelling public is paying for them.

I am more concerned about the cutbacks in Ryanair where staff in headquarters are not allowed to charge their telephones. That is rather petty. As Senator Ó Murchú said, we will probably be charged for the oxygen in aeroplanes if the opportunity arises in future. That said, I know nothing about Mr. O'Leary but he is probably delighted that he gets mentioned in the House and that he is recognised. I do not think any individual will browbeat the Taoiseach or the Minister, Deputy Cullen, as far as making the right decision is concerned.

The right decision will be made by the Government when it looks at all the options, their effects, the speed with which they can be implemented, who will manage this situation and if there will be competition within the airport. The Minister already said he wants competition with airports abroad not internally, which would result in chaos ensuing.

I heard an expert on the matter speaking recently on the radio. He explained that one overall management should be put in place to control the situation, but the internal details of who runs what was not relevant. The taking off and landing of aeroplanes must be controlled by one agency so as to avoid chaos. I endorse the work the Government has been doing for a considerable time in this regard. It is close to decision time. I wish the Government well in its decision. I have a completely open mind as far as the proposals are concerned but I am attracted by individuals who can put up a case to supply a terminal building to the State and lease it to the airport authority. That kind of initiative should be encouraged. I commend those individuals and hope they can all be taken on board in this exciting development.

From my experience of Baldonnel Aerodrome, which is out of the city, there is potential for its development for the use of small aircraft. The Minister has probably been briefed in this regard. The Air Corps is based there. Most European airports have a military aspect. It is worth looking at this matter. Senator Ó Murchú referred to Knock Airport which was a tremendous success for Monsignor Horan, the Fianna Fáil Administration and Charles Haughey. I was on the Front Bench when the invitation came in from Monsignor Horan to the Leader of the Opposition who at that time said he would yield to nobody but the Pope regarding the invitation. If the Pope was going to open it I think Charles Haughey would have stepped aside, which brings me back to the aforementioned newspaper advertisement. I was very proud to be there when Knock Airport was opened by Charles Haughey, then Leader of the Opposition.

It is a pity the registry was not in place when another Government spiked Irish Shipping. It was the greatest scandal in the history of the State that the plug was pulled on it. I will not refer to the Minister who was responsible because he is deceased but Garret FitzGerald's Government pulled the plug on that industry. I hope the Minister will be able to do something for those men and women who were badly treated because I think they have a case against the Department.

Minister for Transport (Mr. Cullen)

I thank the Senators for their contributions which were most positive. This is important legislation which provides a uniform international legal framework for aircraft financing. It will greatly assist the growth of air travel and continuing safety improvements through the use of newer aircraft with the most modern systems. I join with others in congratulating those who were successful in bringing the international registry here. It shows the depth and experience and the quality of the people available here that this was the right location. The use of helicopters was mentioned by Senator Paddy Burke. Where helicopters may land is a matter for the planning authorities and not my Department, and regulations on the safe operation of helicopters come under the remit of the Irish Aviation Authority.

Senator Paddy Burke and others referred to the fact that Aviareto will be based at Shannon. As there seems to be some confusion on the matter I wish to clarify that as I stated in my speech, Aviareto will be based in Dún Laoghaire at SITA's existing offices. The confusion may arise because there are proposals to base the Irish Aviation Authority at Shannon. The principles of what Senators stated regarding regional development and the relocation of company assets throughout the country to create economic activity are still valid.

Senator Ryan concentrated on the nations that have ratified the Cape Town Convention and Protocol. The list of those countries attempting to get on the international registry illustrates its worth as those are probably the countries that would have the greatest difficulty in making it attractive to finance aircraft. I would not read anything into the fact that other European countries have not as yet ratified the convention, as I presume they are, similar to us, in the process of moving it through the system. The competition faced by this country to base the registry here was significant, which also indicates its importance. The benefits of ratification for Irish airlines will be significant and immediate.

The point was raised that the convention also deals with space assets. This is intended to facilitate the commercial operation of communications satellites as opposed to any military operations and while that is in the protocol, it is not in this legislation as it has not yet been agreed at European level. It will follow on from the convention and we will deal with it when it does.

I do not have to hand the information required to answer the question on the Airbus A380 but I can assure Senator Leyden that the developments happening at our airports make it essential for them to be able to deal with aircraft of this size and capacity. These new aircraft will be more environmentally friendly than current models as they will be fuel efficient and, as they are able to carry a greater number of passengers, will reduce the number of aircraft flying. These aircraft will provide a range of economic, social and environmental benefits and we must be able to cater for them. Not to do so would exclude us from a significant part of the airline business.

Growth opportunities for airlines operating out of Ireland, particularly for Aer Lingus, in long-haul flights are tantalising close, and for that reason I welcome the many positive comments of Senators on issues other than those contained in the Bill. In particular I welcome the balanced and succinct comments of Senator Mansergh and I agree wholeheartedly with him.

I assure the House and my colleagues that what exercises my mind is finding the best outcomes for Irish aviation, the travelling public and Ireland, in order to ensure we have the best fixed asset and mobile facilities. I echo the call here today for good cost-efficient airlines. Cost-efficiency and quality are not mutually exclusive, and I bear that in mind when dealing with these issues. These measures represent significant opportunities for this country and I assure colleagues that the Government is determined to deal with them in Ireland's best interests. I thank Senators for their support for the Bill.

Question put and agreed to.

Committee Stage ordered for Wednesday, 4 May 2005.

Sitting suspended at 4.05 p.m. and resumed at 5 p.m.