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Future of Aer Rianta.

Dáil Éireann Debate, Thursday - 27 May 2004

Thursday, 27 May 2004

Questions (1, 2, 3)

Pat Breen

Question:

1 Mr. P. Breen asked the Minister for Transport the position regarding the break-up of Aer Rianta and Shannon Development and the ending of Shannon Airport’s dual gateway status. [16011/04]

View answer

Róisín Shortall

Question:

2 Ms Shortall asked the Minister for Transport if he will reconsider his plans for Aer Rianta in view of all of the expert advice available which suggests the airport charges will rise, that the future viability of Shannon and Cork will be jeopardised, and that Dublin Airport will be lumbered with significant debt which will prevent it from expanding its facilities as planned; and if he will make a statement on the matter. [16099/04]

View answer

Denis Naughten

Question:

167 Mr. Naughten asked the Minister for Transport if his Department has resolved the legal difficulties surrounding the break-up of Aer Rianta; if he has satisfied himself that the three airports are commercially viable as stand alone entities; and if he will make a statement on the matter. [16014/04]

View answer

Oral answers (39 contributions)

I propose to take Questions Nos. 1, 2 and 167 together.

The work which has been done by my Department's advisers in co-operation with Aer Rianta management and its advisers has underscored the fact that there are some major challenges facing the State airports. These challenges need to be addressed.

In the context of the proposed amending legislation to give effect to the restructuring of Aer Rianta, I have had numerous Government discussions informing my Cabinet colleagues on the background issues as well as outlining the broad financial projections for each of the airports, compiled by PricewaterhouseCoopers. Some issues of both a legal and financial nature remain to be finalised and I will be returning to the Government shortly when these issues are clarified. It remains my intention that the amending legislation can be enacted before the summer recess.

The new arrangements are designed to strengthen and expand each of the three airports and to give Shannon and Cork a fresh start. Through more focused commercial operation, all three airports can perform better and each can play a greater role in stimulating and supporting regional and national economic activity to the benefit of their customers, both airlines and passengers, and of Irish tourism, trade and industry. I announced the boards-designate for Dublin and Shannon Airports which bring together people of the highest calibre and combine considerable international and national aviation expertise with proven financial and business acumen. I will announce the full membership of the new Cork Airport board-designate shortly.

It is general policy that the three State airports should be in a position to provide cost competitive and appropriate infrastructure and to operate on a sustainable commercial basis in meeting the current and prospective needs of users. In the case of Dublin Airport, passenger traffic is forecast to grow to 30 million passengers per annum by around 2020. The Dublin Airport Authority must ensure the provision of adequate and cost-effective infrastructure capacity to cater for this growth and to make the appropriate case to the independent aviation regulator for the financing of this investment in the context of the next determination of airport charges.

I have made clear on numerous occasions that with a fresh start both Shannon and Cork Airports will be a commercial success and each will maximise sustainable employment within the airport companies and in their catchment areas. It is envisaged that the new airport authorities for Shannon and Cork will commence business free of legacy debt and this will have a major positive impact on the commercial viability of these two airports. It is proposed that those debts will remain with Dublin Airport which is effectively carrying the debts for the three airports. I have given repeated assurances to the ICTU and the Aer Rianta unions that there will be no diminution in the terms and conditions of employment of workers in the company on transfer to the new airport authorities. I have also made available key financial information on the three airports to the unions' financial advisers in the context of the current engagement process which is being facilitated by the Labour Relations Commission.

Responsibility for Shannon Development rests with my colleague, the Tánaiste and Minister for Enterprise, Trade and Employment, who is in contact with the board of that agency regarding its role in light of the forthcoming decentralisation of Enterprise Ireland to Shannon, and the advent of the new autonomous Shannon Airport authority. With regard to the dual gateway status at Shannon, my officials, at a meeting earlier this month in Washington with US officials, emphasised the importance of Shannon Airport for the economy of the west of Ireland, in particular in the context of Ireland's national spatial strategy which aims to counterbalance the growth of Dublin by focusing economic activity on a number of other locations. My officials also outlined the Irish Government's decision to separate Dublin, Shannon and Cork airports into autonomous airport authorities to enable them to maximise their potentials. In that context, they indicated that Shannon needs some years in which to transform its business plans and marketing strategies.

The eventual effect of an EU-US open-skies deal, should such a deal emerge, would be to leave the choice of airports with the airlines. In the absence of special bilateral arrangements between Ireland and the United States in such a case, there is a risk that the open-skies arrangement could mean a sudden end to the current Shannon stop requirement, which could have immediate negative impacts for Shannon. I met the US Secretary for Transportation, Norman Mineta, at a meeting of European Transport Ministers yesterday and I re-emphasised to him that an acceptable arrangement for Shannon must be reached before I will be in a position to agree to any EU-US aviation agreement that might be put to the Transport Council on 10 and 11 June next.

A Cheann Comhairle, how much time is allocated to these three questions?

There is just 12 minutes. Two of them are oral questions, one is written.

I thank the Minister for his reply. He said that he has given assurances to the unions and he knows what is going on. Is he aware that over the past week while negotiations continue with Aer Lingus personnel over staff cuts in Shannon, Aer Lingus has removed ground-handling equipment from Shannon Airport? Is it not a disgrace that this is happening while these negotiations continue? Is there a five-year plan for the airport or has the Minister instructed Aer Lingus to submit a plan for it?

Is the Minister aware that Aer Lingus management has refused to handle Lufthansa Cargo's equipment although it flies into Shannon once a week, 52 weeks a year, in off-peak hours? Aer Lingus management has told Lufthansa to go to Servisair because it does not want to handle the equipment. What is going on? I believe that the Minister does not know what is happening there. This is the real picture. He said in his reply: "Shannon needs some years in which to transform its business plans and marketing strategies."

That is not appropriate, the Deputy should confine himself to questions.

All right, I was just quoting what the Minister said. Is the Minister aware that Heathrow Airport authorities have asked for a derogation until 2015 for the open-skies agreement? How many years has the Minister asked for so that the bilateral agreement can stay in place? These are the important questions. Is it not irresponsible of the Minister to allow this to go on? Has he commissioned an impact study on the effect this would have on Shannon? The PricewaterhouseCoopers report shows that Shannon could lose up to €125 million by 2008. Does he have a management plan or impact study in place? In what direction does he feel the airport will go? What analysis has he done? With regard to the decentralisation of Enterprise Ireland to Shannon is it not a fact that only two staff have applied for transfer to Shannon? Will Enterprise Ireland consume Shannon Development's briefing although it has done good work in the region?

I met the central representative council for all the trade unions in Aer Lingus which expressed concerns similar to those which the Deputy expressed today. I conveyed my view to the council, which I also conveyed to the board of Aer Lingus, that in the context of the future of Shannon Airport, Aer Lingus must do more and be more specific about precisely what it will do in an open-skies connection. It is a commercial organisation and I have no alternative but to let it make commercial decisions, which I have done consistently since I took this post, but I said that as we move to open skies and Shannon prepares for the future it needs to know clearly and crisply the best Aer Lingus can do in the couple of years from now in terms of numbers of transatlantic flights available, to which destinations and their frequency.

In other words Aer Lingus needs to spell out its commitment to Shannon. I will encourage it to do that and I have asked it to let me and my Department know what its plans are as I negotiate the bilateral agreement, which we are negotiating, and as we negotiate the open-skies agreement, which as EU President we are involved in negotiating with the United States. As soon as I have definite information from Aer Lingus I will give it to the Deputy.

Eight minutes of our time has now gone. Will the Ceann Comhairle tell me whether I have six minutes to speak on my priority question?

I thought I was entitled to six minutes.

There is 12 minutes allocated for the two questions.

It is the Ceann Comhairle's responsibility to ensure that is shared fairly.

The Chair's responsibility is to make sure the question does not go beyond 12 minutes and I suggest that the Deputy submit questions to the Minister and not use up her time on this.

I will take it up with the Ceann Comhairle later because I do not want to waste any more time.

When the Minister announced his intention to break up Aer Rianta last summer, I forecast that there was no way he could meet the timetable he had set, and I am still of that view. In recent weeks we have seen further consultants' reports which confirm earlier reports that there is no business case for proceeding with the break-up of Aer Rianta. Arising out of those findings, will the Minister confirm that if he goes ahead with the break-up of Aer Rianta it will entail a substantial capital reduction to pay the dividend to the Minister for Finance and that will essentially devastate the Aer Rianta company as we know it? Does the Minister intend that if he goes ahead with these proposals it will entail Dublin Airport retaining a significant shareholding in Shannon which cannot survive on its own?

Has it been confirmed, and does the Minister accept, that Cork Airport cannot stand alone and that Dublin must remain as the landlord for Cork Airport which will become a subsidiary of Dublin Airport? Does the Minister accept that if he proceeds with his plans they will result in mass redundancies in Shannon Airport, and wage cuts? Does he also accept that if he proceeds with these plans, they will result in significant airport charges at all three airports, especially in Dublin where a 50% increase is forecast?

The Government laid down a 12 month timetable for the completion of the process, from July 2003 to July 2004. It is May 2004 and I am still of the view that it can be completed within the 12 month schedule envisaged by the Government.

Regarding consultant‘s reports, the PricewaterhouseCoopers assessment is a series of working papers. I did not ask it to give me an assessment of whether restructuring was a good idea; I asked it to lay out on a factual basis the financial information available to it.

Does that mean there is no business case?

It has done that.

Will the Minister explain——

Allow the Minister to speak without interruption, please.

I want to make one issue clear. When the Government made this decision in July 2003, all the information that is now available was, in substance, available to it. There is nothing new in the reports of any of the consultants employed by the trade unions or in other financial analyses, either from the board, the new boards designate or from consultancy houses.

There is nothing about shedding assets.

I want to answer the Deputy's questions. There is nothing new in any of it. All the financial information was put before the Government in July 2003 when the decision was taken. It was put before the Government again in October 2003 when the Government took the decision for the second time. The information that appears to be emerging selectively was available to the Government. There was nothing new in the information. The board of a public limited company like Aer Rianta, with its directors coming from different walks of life, including the trade union movement, would have been aware of the full financial position.

Why then did the Minister employ two consultants?

The Minister should be aware that the time for this question has concluded.

Regarding the dividend to the Minister for Finance, the Deputy is not correct. The dividend to the Minister for Finance this year was about €7 million out of profits of €20 million. This is a technically difficult area. The Deputy may be referring to the financial mechanism that has been recommended by solicitors to allow the revenue reserves in the plc to be of such a scale as to dividend out Shannon and Cork. For that to happen, internal dividend movements would have to take place. We have engaged Matheson Ormsby Prentice, who for four months——

For capital reduction purposes.

No, it is not.

I ask the Minister to conclude. We cannot continue with interruptions. We have gone over seven minutes on this question.

It is not a capital reduction. Since the beginning of this process I have been determined that, in future, the people of the Cork and Shannon regions will have the facility of autonomous airports. My faith in the people of those areas to develop those airports remains stronger than ever. I visited both facilities and met people there on several occasions.

Will Dublin still be a shareholder in Shannon, and still the landlord of Cork? Is that not right?

Deputy Shortall, on a point of information——

The answer is "No".

There are four minutes for supplementary questions, not six.

What about the substantial number of redundancies at Shannon?

If the Deputy wants a straight answer, it is "No". It will have an interest in the transition period.

The Minister should read his consultants' report.

There are four minutes for supplementary questions, not six. Deputy Shortall appears to be under a misapprehension.

It is six minutes in total.

It is the responsibility of the Chair to keep time and I ask Deputy Shortall to allow other Deputies who submitted questions to receive an answer from the Minister.

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