Before the debate was adjourned I referred to the sudden changes in Government policy brought about by crises which beset Aer Lingus. There is always the danger that something similar will happen in the future and I am glad the Minister has enunciated the Government's clear aviation policy.
The major restructuring programme undertaken by Aer Lingus following the Cahill plan resulted in a substantial measure of success. While the figures for profits are encouraging, as the Minister correctly stated, they must be viewed against the backdrop of cost effectiveness, which has proven to be notoriously difficult to achieve in the past.
We should not ignore the last financial crisis in the airline which was entirely due to an appalling management system. This matter was never properly addressed in terms of how it came about and the introduction of measures to ensure a similar crisis did not arise in the future. I am not saying that those responsible should be held to account, which is the political fashion nowadays, but appalling mistakes were made. For example, it was decided to buy a 767 fleet for a route which was not available. These planes which were effectively unused were eventually sold for 12 per cent of their initial cost, leading to a huge loss for the airline.
The airline operated a peculiar accounting system at that time. I am not suggesting there was anything underhand in it but the way the figures, projections and write-offs were presented could have meant the then Government was misled in terms of the exact position of the airline's finances. This has been substantially corrected and the position set out by the Minister reflects the true position in the company.
I welcome the partnership approach advocated by the Minister as it is probably the only way of achieving the level of cost effectiveness Aer Lingus needs to achieve if it is to continue to meet demands and secure a partner in a strategic alliance. People accept that this is the way forward for the airline. I am glad well known companies are interested in the airline and would be concerned if no one was interested in it, as was the case five years ago. This interest reflects the commercial progress made by Aer Lingus. The airline will need to devise further commercial strategies if it is to withstand the increasing competitive pressures in the aviation sector.
Aer Lingus has a habit of attempting to psych out competition on new routes. While this may be good commercial practice, it is greatly resented in various sectors. There has been the high profile saga relating to competition on the Dublin route. During the term of office of the previous Government Aeroflot could have been thrown a lifeline and been retained on transatlantic routes to a much more meaningful extent. However, Aer Lingus dictated Government policy and ensured that Shannon-New York rights were not granted to Aeroflot. While Shannon-Newark rights were eventually grudgingly given to Aeroflot, they were not given early enough and were not attractive enough to enable it to develop the type of service it wished to develop. I am glad the Minister put on the record the outcome of her meeting with Aeroflot, which, given the business it is in, is driven by commercial concerns.
Aer Lingus had no interest in the Newark route until Aeroflot became interested in it. The Minister helped Shannon marketing to entice Continental to use this route, which it will begin servicing later in the year. However, in a pre-emptive strike Aer Lingus has decided to move its air bus fleet to the Newark line so that it will be able to compete with Continental. This will make Continental's entry to the market very difficult. As it does not have the necessary aircraft Aer Lingus has hired second-hand aircraft and American people to service the traditional Shannon-New York route, the mainstay of the transatlantic operations at Shannon Airport. These planes which are crewed by non-Irish staff use 65,000 tonnes of fuel at a cost of between £1,000-£1,200 per tonne. This diminishes productivity and profit on the route. This will enable those people in Shannon who are suspicious of Aer Lingus to say at some stage in the future that the Shannon-New York route is not profitable.
These aeroplanes carry less freight and fewer passengers and have a particularly poor configuration, thereby making the service second class. No Minister would spot these developments unless he was told what was happening. This gives Aer Lingus huge power in terms of influencing aviation policy which has been used against Shannon Airport on occasion, against Dublin Airport on other occasions and strongly used against the national interest.
Aer Lingus will correctly say that it is a commercial airline which is in the business of making a profit. They ought to be in a position to provide on the Newark and New York lines a new airbus with proper configuration, which would need less fuel, enabling them to compete and develop both services.
An interesting effect of the change made in 1993 is that the level of backtracking to Ireland, via London and Manchester in particular, has increased by huge proportions. One of the strongest arguments used for changing the Shannon stopover was that the number of people coming directly from the US to Ireland would increase in proportion to the number backtracking, but for some reason, which is not immediately apparent, the opposite was the case. The number of Americans coming to Dublin via London, Manchester and other UK destinations is much higher than it was in 1993.
Sometimes difficulties arise in terms of the location of airports, a number of them being in the least populated areas. That leads inevitably to political competition, competition for a limited number of passengers and for scarce resources. It will be difficult to address that matter in terms of reducing the amount of finance to particular airports because it will not be feasible or practical. Those airports will be a huge drain on aviation resources in terms of improving infrastructure and marketing.
One of the inevitable effects of the huge increase in passenger numbers through Dublin airport will be increased pressure for a second airport, for which there is a case to be made. I strongly oppose the opening of a second airport in Dublin on the basis of my experience and interest in aviation matters. Aviation policy should be decided before pressure is brought to bear from commercial forces. The Government should take into account the best interests of the capital city, the country, tourism, trade and industry in deciding whether a second airport should be built. From the experience in Belfast and elsewhere, there are good reasons for not proceeding with such a proposal. There are also positive reasons that should be taken into account in deciding this matter.
When changes were made in Shannon the Fianna Fáil-Labour Government of the day set up the Shannon task force, which reported to Government. That task force made a number of recommendations, but the Government had already made a decision which militated against Shannon in some respects. The report was the antidote to the change, one aspect of which was the setting up of a marketing fund. In the first year the money was provided by the State. There was then a change of Government and, in its first year, that Administration provided funding by the back door through Aer Rianta. In 1997, however, no marketing funds were made available.
The arrival of continental airlines here, which was a huge success for the Minister, Deputy O'Rourke, would not have come about if those funds had not been available. Unless the fund is restored there will be long-term effects for Shannon. I base those comments on various matters, including the excellent task force report. It is short-sighted of the Government to continue with policies which encourage Dublin airport to burst at the seams. The result will be that money will be needed to provide extra capacity at Dublin airport, even though there is an enormous amount of spare capacity in seven or eight airports, including two owned by the commercial State company. Government aviation policy should be designed to pick up the slack in Cork and Shannon and in the regional airports. It will be difficult for Government to resist the ongoing pressure, created by an increasing number of passengers through Dublin airport, to provide infrastructure to cater for that development.
The 1994-99 national plan estimated that seven million passengers would pass through Dublin airport in 1999, but by 1996 the figure had reached nine million. When one makes the case I have been making, one is open to the charge of being anti-Dublin, but we must consider this matter from a national perspective. In that context there are disadvantages for various areas. The change made in 1993 had a minimal impact on Dublin airport in terms of passenger numbers and services. By comparison, it had an enormous effect on Shannon and particularly on tourism in the west.
Aviation policy must be considered in the context of our membership of the EU. There has been an ongoing debate in recent years, particularly between the Commission and the Council of Ministers, about who has rights to negotiate bilateral agreements with outside countries, particularly the United States, which is the most attractive commercially. The Commission took the view that it has authority in that regard and made it very clear that member states are not entitled to conclude such agreements. It went so far as to threaten legal proceedings against three or four countries, not including Ireland. Eventually the Council of Ministers, faced with pressure from the Commission, made minor concessions in terms of the powers of the Commission and allowed it a mandate to open negotiations with the US, but only as regards the regulatory framework and certain ancillary matters. Access and traffic rights were to be the subject of a second stage plan for which the Commission is pushing and for which the Council has not given a mandate and continues to resist. In exchange for the concession made by the Council, the Commission withdrew its legal threat. The Commission undertook its first negotiations with the US at the end of October 1996, but the outcome was not very satisfactory.
The Council proposal will provide for derogations by various states. There are elements within the EU who see their role as superseding the role of the Irish Government. In that context we should consider aviation policy in the context of competing forces such as Ryanair. That company has been very successful in reducing charges and fares, particularly in and out of Dublin airport. It has, however, created an airport economy, which in the long-term is not conducive to a better standard of service for the passenger. It will ultimately lead to passengers paying for higher standards, which will be difficult to achieve if they are allowed fall.
As regards Shannon airport, I would prefer to see workers properly paid than for independent airlines to dictate terms along the lines which Ryanair management is trying to do at Dublin airport. That company does not operate out of Shannon airport. It tends to operate for three years at a time when there are reductions in airport charges and as soon as charges increase Ryanair disappears. It has done that on two occasions. In its absence, A. B. Shannon, a very small airline, which was given little hope of success, has built up an excellent business without impinging on the rights of workers to be properly paid and without demanding that they hang around for three or four hours before they get an hour's work. Aviation policy should not dictate that airport workers must do their business under those conditions.
