Air Services.

Dáil Éireann Debate, Thursday - 29 January 2004

Thursday, 29 January 2004

Questions (2)

Róisín Shortall

Question:

Ms Shortall asked the Minister for Transport the action he proposes to take arising from the collapse of the airline Jetmagic; the steps which will be taken to assist up to 400 passengers who may be unable to complete return journeys as a result of the collapse; the steps being taken to ensure the continuation of the routes; if he has plans to review conditions of the licensing of airlines in view of this collapse; and if he will make a statement on the matter.

Oral answers (19 contributions)

Minister of State at the Department of Agriculture and Food (Mr. Treacy)

I wish to express my own regret and that of the Minister for Transport, Deputy Brennan, at the difficulties that Jetmagic is experiencing, and our concern both for the passengers and the staff of the airline.

Jetmagic is a Cork Airport based regional airline, which began operations in April 2003. The airline has been operating from Cork to a wide range of destinations in the UK and Europe and has 100 staff all based in Cork.

The airline announced earlier today that it is suspending operations on the recommendation of its board of directors. An extraordinary general meeting of shareholders will take place within the next week or so, to decide whether the company should be wound up. The airline has not actually closed as of yet, and if further financial backing can be found, it may be able to get back on its feet. The company has cited a lower than expected passenger demand, especially in business travel, as being the main reason for its cessation of operations. Competition from other carriers on some of its routes is also cited as impacting on the company's business forecast for 2004.

The airline has said that it has approximately 400 passengers who cannot now return to Ireland on Jetmagic flights. The airline has put a helpline in place, and any stranded passengers who call the number will be given details of alternative flights that they can arrange to get them home, although the airline is not in a position to fund those flights. Jetmagic is contacting airlines at airports it serves and is asking those airlines to help in getting people home.

Passengers who have already booked and paid for flights will not be able to travel outwards. The airline is recommending that any passengers who have paid for tickets with credit cards should contact their credit card company for a refund and that any passengers with travel insurance should contact their insurance company. For any passengers who have not paid by credit card and who do not have insurance, Jetmagic has provided an address to which claims for refunds should be sent.

Aer Lingus has offered that any Jetmagic passengers stranded abroad at any airport served by Aer Lingus, will be brought home by them for €50 per passenger, plus taxes. Passengers who are not at an airport served by Aer Lingus, but are able to make their way to such an airport, can avail of the same offer.

European airlines operate under a package of European law, known as the "third air package", dating from 1992. Under this legislation, airlines are free to commence operations as long as they meet economic and safety criteria and to compete on any routes they wish without recourse to any authorities for approval. Governments are not permitted to subsidise or assist any airline company.

In Ireland, economic regulation of the airline is carried out by the Commission for Aviation Regulation and safety regulation by the Irish Aviation Authority. Jetmagic commenced operations in April 2003, having obtained approval from both the Commission for Aviation Regulation and the Irish Aviation Authority. The Commission for Aviation Regulation became aware towards the end of last year that Jetmagic was facing financial difficulties. The Commission for Aviation Regulation contacted the company regarding concerns it had about the financial situation and asked the company to improve its balance sheet position. Jetmagic recently confirmed to the Commission for Aviation Regulation that it had received additional investment from some of its shareholders. It is now clear that these additional funds were not sufficient for the ongoing viability of the company.

The Deputy also raises the question of a review of the licensing of airlines. As it happens, the European Commission is currently carrying out a review of the third aviation package to see if the 1992 legislation requires updating. However, I am satisfied that the unfortunate collapse of Jetmagic is not due to any deficiency in the present licensing arrangements.

Ms Shortall

I thank the Minister of State for coming to the House to provide that reply. The priority today is the plight of the 400 passengers abandoned at various airports. In his reply the Minister of State seems to wash his hands of any responsibility for those people. It is important that all possible steps are taken today to ensure those people can return home as quickly as possible. I note the reasonably generous offer made by Aer Lingus. Has the Department of Transport taken any steps to contact other airlines, to establish where the passengers are and the quickest and cheapest way to get them back home? Given the exceptional circumstances, I hope the Department will play a role in this.

Mr. Treacy

There is no such thing as washing our hands. We are bound by certain national and international legalities on this issue. The Department takes this matter seriously and has been in contact with the company since the latter part of last year.

Ms Shortall

I am talking about today.

Mr. Treacy

The Deputy should let me answer, as I did not interrupt her. The Commission for Aviation Regulation has also been in touch with the company. There has been constant communication between the Commission for Aviation Regulation and the Department of Transport. Every effort is being made through all the possible avenues including the communication with the national carrier, Aer Lingus, whose generosity I acknowledge, to ensure that services and options are available as far as physically possible to return passengers to Ireland as quickly as possible.

With passengers in various locations it is not possible to make arrangements to return them all together. However, all organs of the State, including the Department of Transport, are and will be available to assist Irish citizens stranded anywhere.

Ms Shortall

It is regrettable that the Minister of State has not answered my question. I want to know whether his Department had taken any steps today to ensure people are brought home as quickly as possible. All his bluff, blunder and generalisation do not answer that question.

I wish to ask about the more serious issue of the licensing system for airlines and the precise role of the Commission for Aviation Regulation in this regard. We are all familiar with the position that obtains in respect of travel agencies and have learned through difficult experiences. In the past various companies ran into difficulties and their passengers were stranded in various places or were left high and dry. As a result, a system of bonding for travel agencies was introduced. If we have a system that applies to travel agencies in respect of safeguarding the moneys of passengers and clients, a similar system should be put in place for airlines.

With regard to the role played by the Commission for Aviation Regulation in granting licences to airlines, are conditions set down in respect of the financial situations of such airlines before they are licensed? Is there any requirement to lodge a bond to safeguard against situations of this nature and to protect the interests of passengers?

Mr. Treacy

The company in question only took this decision earlier today. We are in touch with the situation but we obviously cannot have duplication of effort because it would create confusion for the unfortunate passengers.

Ms Shortall

So there is no effort at all.

Mr. Treacy

As stated earlier, a special helpline has been made available by Jetmagic. Communication has been made by the company with individual passengers, in so far as that can be done. The company has contacted these people's home addresses and, in co-operation with the Department of Transport, which is in touch with the situation, has tried to reach them by telephone. The Department, the Government or the Minister have not heard of any particular cases of hardship thus far. Every effort is being made on a professional basis to ensure that people experience a minimum of disruption and that they are returned to Ireland as quickly as possible.

As regards bonding, I was Minister of State with responsibility for aviation when we introduced bonding for travel agents. There is no requirement in European law either for travel agents or airlines. Ireland is the only country with that system for travel agencies, which was introduced as a result of difficulties experienced in the past.

As regards the licensing system for airlines, detailed criteria are laid down by the Commission for Aviation Regulation and the Department of Transport vis-à-vis the finances, guarantees and research which must be available and the requirements that must be met before an airline can be established and commence trading. Those criteria are extremely strict. We could obviously consider the issue of bonding. If Ireland was the only country to go down that road, it would be expensive. However, if a global approach could be taken, with support from the International Air Transport Authority or a similar organisation, it would help to ensure that a new instrument of support would be available to protect airlines and their staff, passengers and operations in the future. I am sure this matter will be considered by the Minister.

Mr. Naughten

Has any contact been made with other airlines servicing this country and the foreign airports involved to see if an arrangement similar to that with Aer Lingus could be put in place as a matter of goodwill to fly the 400 stranded passengers home?

I met the management of Jetmagic a number of months ago. The company provided a high quality, regionally-based service and it is disappointing that it has encountered financial difficulties. One of the reasons for that was the cut-throat competition in the sector. In light of the comments made by the company and the previous example of the service provided by Go between Dublin and Edinburgh, does the Department intend to put measures in place to ensure that there will be fair and balanced competition?

The Minister of State indicated that any company operating in this country must meet economic and safety criteria. It is clearly evident that the passengers are not part of the current aviation package. The Minister of State said that there is not a deficiency in the licensing system at present. In light of the Government's holding of the Presidency of the European Union, will he give consideration to ensuring that a bond system be put in place, particularly in respect of some of the other low cost carriers? With new enterprises commencing operations, passengers could be left stranded as is the case with Jetmagic.

Mr. Treacy

As the Deputy is aware, from information recently available in the public arena, there have been certain difficulties whereby clubs and groups have come together to operate as travel companies or travel groups and have, to a degree, flouted the laws. I will ask the Minister for Transport to examine the situation to see if there is anything that can be done with regard to a bonding system on a European-wide level while we hold the Presidency. It is not a simple matter but we will do everything possible to ensure that protection is provided.

I agree that competition is critical. We would not have the massive tourism product or the reduced cost in air travel, either on the island of Ireland or out of Ireland, were it not for the huge competition that exists. Jetmagic admits that there was tough competition on the routes on which it provided services. This eroded the cash returns it expected to make on those routes.

As regards the Deputy's first question, the Department of Transport has been in contact with a number of airlines, including Aer Arann, the world's fastest growing regional airline, British Airways, CSA, a Czech airline, and Aer Lingus. All four have offered assistance to the stranded passengers. Every effort is being made by the staff of Jetmagic and officials of the Department of Transport to see what can be done to ensure that people experience the minimum amount of difficulty in returning to our country.

Mr. Eamon Ryan

It is a matter of regret for the staff of the company, its owners, who invested a great deal of money and have now lost it, and the people of Cork and Munster that Jetmagic has ceased operations. We would like the Government to do what it can to try to rescue some of the passengers affected by this situation and also to try to rescue some of the business that Munster will lose.

It is ironic that the Minister for Transport, who has been spending so much time dealing with aviation policy with the supposed intention of improving the fortunes of Cork Airport, has not paid attention to this matter. He has been busy formulating his business plans, which no one understands and which have not been explained——

Mr. Naughten

Including himself.

Mr. Eamon Ryan

——to split up the State airports. It is unfortunate that, rather than concentrating on that matter, which does not make much sense to people in the industry, he did not pay attention to what was happening at Cork Airport and stop throwing shapes about the structures of the three airports operated by Aer Rianta.

Will the Minister of State indicate whether he believes the company faced fair competition on some of its routes? Some commentators have stated that what may have happened is that routes the company selected, especially for business or commuter services, were targeted by certain competitors who introduced services of their own to ensure that Jetmagic did not get off the ground and experienced difficulty attracting customers. Is the Minister for Transport concerned that such competitive practices were pursued in this case? What means does he have of governing the issuing of routes and the management of competition in this sector to ensure that a new operator such as Jetmagic has an opportunity to establish itself and to ensure that large existing operators, especially State companies, some of which are about to be privatised, do not use their monopoly position to compete unfairly and bring about the demise of such a fledgling airline? What measures did the Department put in place to ensure that such anti-competitive practices were not pursued in this instance?

Mr. Treacy

Deputy Eamon Ryan's statement about the Minister, Deputy Brennan, is disingenuous. It is also inconsistent with the statement he made earlier in connection with the situation regarding the Irish Financial Services Regulatory Authority. The Minister must have business plans and be committed to ensuring that, before decisions are made on any issue, certain criteria are fulfilled. It is the same in this situation with the licensing arrangement laid down for airlines.

I am not an expert on airline travel so I cannot say whether the competition was unfair. That is a matter for the European Commission under European law. There have been no allegations of unfair competition. There have been statements from the company that there was strong competition on their routes. However, under European law, airlines are free to choose their routes and Governments in member states are precluded from investing in airlines. That is the reason there has been such change in the travel industry and why there are so many new companies in the business. It is also the reason that air travel has become much cheaper and mobility has increased, to the advantage of all economies.

Ms Shortall

Will the Minister address the jobs issue? Every effort should be made by the Department to contact FÁS and other agencies involved in recruitment and employment to ensure the 100 people left behind by the company will be enabled to find alternative employment, preferably in the aviation industry.

The other issue is the future of Cork Airport and what this collapse means for it. Other speakers have spoken about the absence of a business plan. The concern of Opposition Members is that the Minister, Deputy Brennan, is proceeding on the basis of a hunch with breaking up Aer Rianta without having thought it through and without a clear business plan. That is the reason we and the consultants who recently advised the Government are concerned. The break-up of the Aer Rianta company calls into question the future viability of Cork and Shannon airports.

In this case, a local company started at the airport with services on popular routes at competitive prices, yet it could not survive. What does that say for the Minister's claim that opening up the airports will facilitate the generation of extra business? After today's events one must ask if that business exists. One must also ask about competition and whether anti-competitive practices were followed by other airlines to squeeze out Jetmagic. Both elements had an impact but the latter was probably a stronger influence on what happened today.

Serious questions arise from the collapse of this company. Will the Minister of State relay to the Minister, Deputy Brennan, the concerns expressed by the Opposition? We do not seek answers today, within a few hours of the event, but expect the Minister, in light of his broader plans for Cork Airport, to examine closely the events leading to the collapse of Jetmagic. He should come to the House or to the Committee on Transport with a detailed report on what went wrong and why this fledgling company could not survive despite the goodwill that existed and the good deals Aer Rianta gave the company. Why could it not survive?

Mr. Treacy

The Government is most concerned about the loss of jobs but it is legally precluded from intervening in the situation until a special annual general meeting of the company takes place and the Department of Transport and other relevant State agencies are notified of the situation. Obviously, in the event of a negative conclusion at the annual general meeting, the Department of Transport will liaise with the Department of Enterprise, Trade and Employment and the other State agencies, including FÁS, to assist the victims of this problem.

I do not agree that there was an effort to squeeze out Jetmagic. Competition in the airline industry is tough. The objective of airline operators is to fill their planes to maximum capacity so they can achieve the maximum throughput and the best possible turnover. That leads to competition. There is no comparison between running an airline and running an airport. Aer Rianta is an airport management company; it is not an airline operator, an aviation authority——

Ms Shortall

The Minister, Deputy Brennan, seemed to suggest that they were queuing up to come to the airport.

Mr. Treacy

——or a tour operator. The management and development of an airport is different from running an airline or a tour operation. Making comparisons between what happened to Jetmagic and the positive attitude of the Minister, Deputy Brennan, to ensuring there is an equalisation of regional opportunity throughout Ireland is spurious.

Written answers follow Adjournment Debate.