I welcome the Minister for Transport, Tourism and Sport, Deputy Leo Varadkar.
State Airports (Shannon Group) Bill 2014: Committee Stage
Section 1 agreed to.
SECTION 2
Government amendment No. 1:
In page 6, between lines 5 and 6, to insert the following:
This is a technical amendment. It merely makes clear that the terms "airport" and "authorised officer" mean the same as they do in the 1998 Act.
Amendment agreed to.
Amendment No. 2 is a Government amendment. Amendments Nos. 2 and 10 to 14, inclusive, are related and may be discussed together.
Government amendment No. 2:
In page 6, to delete line 25 and substitute the following:
" "Shannon Airport Authority" means—
(a) before the day of its re-registration under the Companies Acts as a private company limited by shares, Shannon Airport Authority, public limited company, and
(b) on and from that day, Shannon Airport Authority Limited;".
This group of amendments relates to the change in the status and the names of Shannon Airport Authority and DAA. Amendments Nos. 2, 10 and 11 relate to re-registering Shannon Airport as a limited company rather than a plc. Essentially, the Shannon Group itself will be a plc but its subsidiaries will be limited companies. That is standard for other semi-State companies, such as Bord Gáis and Irish Water. It is designed to reduce the administrative and accounting burden on those companies.
Amendment No. 2 is a technical amendment to the definition of the Shannon Airport Authority in the definitions section of the Bill. It allows for the application of either the name, "Shannon Airport Authority, public limited company", or the name, "Shannon Airport Authority Limited", depending on whether the re-registration of Shannon Airport Authority to a private limited company has taken place.
The purpose of amendment No. 10, the substantive amendment, is to put an appropriate and symmetrical administrative and reporting structure in place to match the new ownership arrangements. The Shannon Group, as the holding company, will be the main reporting body for the group. It will be the nexus of decision-making and direction for the group and will produce a full annual report, etc., and report in detail to the Minister as set out in the legislation. It is normal that the subsidiaries of Shannon Group, as the holding company, be registered as private limited companies. As I mentioned, other State bodies, such as ESB, Bord Gáis and Bord na Móna, use the same approach. Shannon Development is already a private limited company and no change is required to its status.
Amendment No. 11 is a technical consequential amendment to reflect the name change of the Shannon Airport Authority and amendments Nos. 12 to 14, inclusive, are mainly corrections of references to the name DAA plc in earlier legislation.
Amendment agreed to.
Section 2, as amended, agreed to.
Sections 3 to 9, inclusive, agreed to.
SECTION 10
Amendment No. 3 is in the name of Senator Sean D. Barrett. Amendments Nos. 3 and 4 are cognate. Amendments Nos. 3 to 6, inclusive, and amendment No. 22 are related and may be discussed together.
I move amendment No. 3:
In page 9, line 19, after "Minister" where it firstly occurs to insert "and the Commission for Aviation Regulation in respect of airport charges".
I welcome the Minister in an important week for the issue of airports. I understand that the Commission for Aviation Regulation will publish on Thursday the report on cost overruns in terminal 2 in Dublin Airport and the implication for pricing. In addition, the airports regulator's term of office ends on Friday. There are contemporaneous issues and they are important for us to consider.
The Bill states that the Shannon Group shall, on formation day, prepare and submit to the Minister, for approval by the Minister with or without amendment, a strategic plan for the next period of five years from that anniversary, and I seek in my amendment to involve the Commissioner for Aviation Regulation in that decision. The history of airport regulation in Ireland indicates that we need an independent regulator. Indeed, that is the problem the Minister is addressing. I refer to an airport, as the Minister stated on the last occasion, which lost 61% of its passengers in a short period of time.
I refer to an airport which, when the commissioner did regulate it, was found to be an inefficient user of capital and an extremely low-productivity user of labour. The problem of the history of airport regulation in Ireland is that Shannon and Cork Airports were taken out of the regulation in 2004 but the productivity problem in Shannon was not addressed. The Minister now seeks to do this and has my support in that regard. Cork Airport, which had good labour and capital productivity, acquired an unnecessary terminal about which the airlines warned at the time and Dublin went on a spending spree that will be reported upon this Thursday. This was done with Shannon and Cork airports being removed from the remit of the Commission for Aviation Regulation. Effectively, this is also what happened in Dublin because the then Minister, Mr. Noel Dempsey, issued a directive to the Commission for Aviation Regulation to proceed with terminal 2 regardless of the economic advice. Charges increased by 40% at Dublin Airport, by more in Shannon and there was a huge decline in traffic.
Consequently, independent regulation is needed lest one has a repeat whereby it is left to the discretion of the Minister. Moreover, that order by the then Minister, Mr. Noel Dempsey, was never published by the Department. The commission published it on its website and people like Paul Gorecki from the ESRI, who deal in competition matters, have pointed out that this was an example of the capture of the Department of Transport, Tourism and Sport, in this case by Aer Rianta. I overheard the Minister state on RTE last week that his Department used to be called the "downtown office" of Aer Lingus but in this case it certainly became the downtown office of Aer Rianta.
The record of carelessness in capital investment and low productivity - the numbers are available for all three Aer Rianta airports - shows the need to have the regulator involved. Shannon had extremely low labour productivity and there was an unnecessary level of construction there. It must start to sweat the assets and this information must be published. When the Commission for Aviation Regulation was first set up, within months it had been sued by the body it was attempting to regulate in the public interest. The court cases ran on for years and a large part of the expenses of the Commission for Aviation Regulation pertained to the legal fees it incurred defending itself against the body it was founded to regulate in the public interest.
In these amendments, I am proposing that transparency be reintroduced into this area and that we opt for openness and independence. This relates to some of the voting decisions people made last Friday, in that these areas must be openly evaluated. When the directive went ahead in respect of Dublin, one was told the protection was that there would be consultation with the users. I have attended some of those meetings at the request of airlines and the people at the top table dictate, they do not consult.
As for independent verification of the final specifications and costings for terminal 2, that never happened and the independent regulation of airport charges did not happen either. This is part of the kind of construction industry that got Ireland into so much trouble and it needs independent appraisal. This is necessary to ensure that empire building within the airport sector does not take hold again because it has done serious damage to the sector and to the public finances. The realisation must be that since we now have fiercely and furiously competing airlines, the same kind of assessment of efficiency must apply to airports. Perhaps in the past it did not matter because the airlines did not compete and the airports knew they did not compete and consequently could pass on whatever charges they wished.
The theme music was something like "I Dreamt I Dwelt In Marble Halls" but there was an edifice complex, and it must be controlled because I would be afraid it would happen again. In particular, I am waiting to see what the regulator makes of the cost overrun. One estimate is that the cost overrun for terminal 2 was fivefold - that the cost of it, which came in at €1.2 billion, should have been €200 million. There is a largely empty terminal in Cork as well and Shannon is similarly burdened.
We need to impose efficiency on this sector. I regret that a former Minister, Mr. Noel Dempsey, was apparently captured, perhaps due to pressure from people such as the chambers of commerce and IBEC, as I recall, to build a terminal. There are airports the size of Cork and Shannon throughout the United Kingdom and two in Northern Ireland, one of which is about the same size and the other is a little bigger, and they operate as businesses doing business with airlines. We have not had that tradition. We have had wasteful capital expenditure and a seriously low productivity problem in Shannon, in particular. One of the estimates for Shannon is that the ratio of passengers to staff members is nine passengers per staff member per day - 3,500 passengers per year. That number is unacceptably low. We must make sure, through independent regulation, that such low productivity and inefficient use of capital can be ground out of the system.
That is reason I want the proposals in amendments Nos. 3 and 4 to be independently assessed as well as submitted to the Minister. The Bill provides that the "Shannon Group may, in consideration of the performance of its functions, make such charges as it considers appropriate, to its subsidiaries or any other person, other than the Minister, for services rendered by it and the carrying out by it of activities." It is interesting that the Minister is exempt from that and that the charges the Shannon Group wishes to impose are what it considers appropriate, not what the airlines consider appropriate and not what would be in the wider public interest. Given what has happened, including what this Bill seeks to address, to make Shannon an efficient airport, an asset to the region it serves, there is a role for independent regulation. That is the reason I put forward amendments Nos. 3 and 4.
It was a mistake in 2004 to remove the regulator with regard to Cork and Shannon Airports and it was also a mistake when terminal 2 was permitted to do so by the ministerial directive ordering the independent regulator for the sector to finance, through a 40% increase in airport charges, the construction of a terminal which the independent advice said was not necessary. It does not give me any great satisfaction to show that the critics were in fact right. That is what will be vindicated when the commissioner's report on the cost overrun on terminal 2 comes out on Thursday.
Airport operation and construction may be too important, and certainly too expensive, to be left to airport operators. The trend in Europe is towards independent and commercial operation of airports. We do not have that here yet but we need to bring the efficiency of Irish airports far closer to the international average. That is what the independent research showed us. Ours is not at the international average. The costs are borne by wider society.
My amendments propose that there should be a role for the Commission for Aviation Regulation. The role of the commission should not have been bypassed by a former Minister, Mr. Noel Dempsey, in 2007 when the decision was made not to have competing terminals because other people wanted to build competing terminals at Dublin Airport. In 2004 its role was removed from Shannon and Cork Airports and its role could have been of value in that Cork might not have an unnecessary terminal at this stage and Shannon could have tackled its labour productivity problem, to which the commissioner drew attention in his earlier reports.
I thank the Senator for his amendments and for adding to the discussion on this section of the Bill. I have not seen the report that is being issued on Thursday. I think it is a draft determination on the charges for the next quinquennium. I am not sure that it deals with cost overruns in terminal 2 but if it does I will be interested in studying its findings because obviously I have an interest in the matter. The Senator's comments in regard to the former Minister, Mr. Dempsey, are correct. It is not a letter that I would have signed and in the three years I have been in office I have made no such directions to the regulator because I favour independent regulation. In the fullness of time people will see terminal 2 as a good investment but perhaps it might have been built much more cheaply or operated differently. However, I think it was the right decision to build a second terminal. The high cost of the terminal in Cork has certainly made matters difficult for that airport because its operating costs are extremely high. In many ways, this is why Cork cannot now be separated.
I appreciate the motives behind the Senator's amendments are strong but I do not propose to accept them. I see exactly where the Senator is coming from in theory but I do not want add to the bureaucratic burden of this new airport when there is no need to do so. As he pointed out, regulation of airport charges at Shannon and Cork by the Commission for Aviation Regulation ended with the State Airports Act 2004. That was probably the correct approach because these airports are very small, with only 1 million of the 24 million or 25 million passengers travelling through the State's airports going through Shannon, fewer than 3 million going through Cork and fewer than 1 million going through Knock. These are small airports and I would rather see them compete freely and independently than fetter them by regulation. Regulation makes sense in regard to Dublin Airport, which dominates with its more than 20 million passengers.
As part of the draft aviation policy document published recently, an independent review of economic regulation will be carried out. I will give consideration to the Senator's ideas in that context. Subject to what may emerge from the review, my view is that Shannon Airport should not be subject to such regulation or oversight and should be allowed to compete freely.
The draft aviation policy also makes reference to making key aviation statistics available in one repository. The indicators that the Senator suggested will be considered in that context. The Senator's amendment No. 22 is a good amendment. These kinds of statistics need to be made readily available to us and a Government body should have the power to collect them. We are doing something similar on land transport. For the first time, we are collecting statistics on passenger numbers from private operators. Several months ago I signed a statutory instrument giving the National Transport Authority the power to collect that information. I would like to see something similar in aviation but I am not sure that the CAR is the correct body. Perhaps the CSO, the IAA or my Department should carry out this work. While I accept amendment No. 22 in principle, I would like to return to it on Report Stage when I have determined which is the right body to collect these statistics. I agree, however, that they should be collected and published by a Government body.
Shannon Airport wants to stand on its own two feet. It has never sought Exchequer support. It wants to demonstrate that if it is free from DAA control, it will be able to turn Shannon into a successful business. This is where the financial discipline the Senator has in mind should arise. This discipline will come in part from the fact that it will have to compete with other airports and, therefore, need to control its cost base in order to compete. Shannon has made a good start on that road and, at this stage, we should leave it at it to see how it proceeds. If anything, the indications are that since it became independent it has been able to reach deals with airlines to reduce airport charges in return for growth.
They have been able to do that without having to deal with a regulator. The solution in this case is competition, not regulation. Prices need to be regulated if there is no competition but this is less necessary where there is competition and, in particular, when the competitor is a very small body, it makes more sense to allow that competitor to compete freely but to put in place price caps on the dominant body, which in this case is Dublin Airport.
The Senator made a good point about how airline competition rather than regulation of air fares has brought down air fares. There is a free market resulting in a range of choices for passengers. In many ways we are hoping to achieve this by allowing competition among the airports. For those reasons I do not propose to accept the amendments, but I welcome amendment No. 22 and would welcome the opportunity to consider it further and perhaps bring it to Report Stage.
I thank the Minister for his response and consideration. I wish Shannon Airport every success under this regime. It is essential that it thrives and comes back to where we all want it to be. I would value the role of the commission. Like the Minister, I look forward to what the commission will say on Thursday. I will not press amendments Nos. 3 and 4. I thank the Minister for his comments about output measures for airports which will be dealt with in a later amendment No. 22 proposing a new section 50.
As we get to this stage there needs to be much better protection for the customers and the airports. We went through a decade of low productivity and rampant investment which may, in time, as the Minister said, be worthwhile, but in the meantime the debt runs up. One of the problems in the public finances is that we need new criteria for the assessment of all investment across every Department. Spending Departments become agents for projects which very often seem to outnumber those of the Department of Public Expenditure and Reform or the Department of Finance. Investment for short-term stimulus on all sorts of projects without long-term benefits results in an increase in the debt mountain. This is a problem we face with a debt-to-GDP ratio of well over 100%. Therefore, stricter controls are required on investment.
Themeasures proposed in my amendment and to which the Minister referred, are to show whether we have efficient use of existing assets such as terminals and runways. There is significant evidence to show that we have not been good in that regard, that our passenger numbers per square metre of terminal, air traffic movements per runway and passengers per terminal are well below international standards. That gives a feel-good factor in the short term when the terminal is opened and a plaque is unveiled but it piles up debts. We will need lean and hungry airports. Some of the information published shows that passenger numbers per departure gate at Dublin Airport are two thirds of the best performing airports and passengers per square metre of terminal are one third of the best performer, and air traffic movements per runway are one quarter of the best performer. As the Minister said, if we have the lowest cost airlines in Europe, we need to have the lowest cost airports, otherwise airport charges as a percentage of the airline ticket will keep on going up.
I thank the Minister for his consideration.
Amendment, by leave, withdrawn.
Amendment No. 4 not moved.
Section 10 agreed to.
Amendment No. 5 not moved.
Section 11 agreed to.
Section 12 agreed to.
Amendment No. 6 not moved.
Section 13 agreed to.
Sections 14 and 15 agreed to.
SECTION 16
Government amendment No. 7:
In page 12, to delete lines 5 and 6 and substitute the following:
"(a) is adjudicated bankrupt in the State or another jurisdiction, and if so adjudicated, has not obtained a certificate of discharge from the bankruptcy in that jurisdiction,".
This amendment arises from a query by Senator Barrett on Second Stage regarding the appropriateness of including as a grounds for disqualifying a director of Shannon Group the making of composition arrangements with creditors. Having reviewed the text and consulted with the Office of the Director of Corporate Enforcement, I am proposing that this provision be removed from the list of grounds for disqualifying directors in subsection 16(9). The term is considered to be obsolete and is being dispensed with in company law generally. I am also taking the opportunity to update subsection 16(9)(a), which deals with bankruptcy as grounds for disqualification. The amendment mirrors what is contained in the Companies Bill 2012, which was passed recently by the Dáil, and makes clear that disqualification will only apply for the duration of the bankruptcy process and cease to apply once the bankruptcy is discharged.
Amendment agreed to.
Section 16, as amended, agreed to.
Sections 17 to 26, inclusive, agreed to.
SECTION 27
I move amendment No. 8:
In page 19, line 31, after "direction." to insert "The direction shall be notified to the Oireachtas Joint Committee on Transport and Communications.".
This section deals with the giving of directions and issuing of guidelines by the Minister to Shannon Group. As we already discussed, the difficulty that arose in the past had to do with the directive that was given in writing regarding terminal 2 at Dublin Airport. I am dissatisfied with this form of provision in general, an issue which also came up during our debate on the legislation to establish Irish Water. The practice of Ministers giving directions seems to be an attempt to bypass the Oireachtas. I am proposing, therefore, that if the Minister wishes to give a direction, it should be notified to the appropriate Oireachtas committee. Facilitating this type of secret activity is not what we came into this House three years ago to do.
The Minister has acknowledged that he would not have written the letter his predecessor did in regard to terminal 2. In fact, he has never issued such a direction during his term of office, which I welcome. Many of the difficulties that have arisen in respect of the water issue could have been alleviated if the proposals we brought forward in this House had been incorporated into that legislation. Ministers should seek to bring the Oireachtas in such matters with them by communicating openly. Unfortunately, what happened with terminal 2 set a very bad precedent. This amendment seeks to address the issue by requiring the Minister to notify the relevant committee of any proposal to issue a direction.
I support Senator Sean D. Barrett's sensible proposal. The Minister has not given any such directions since coming to office, but that is not to say that any future Minister will take the same approach. In the interests of transparency, the Senator's proposal should be included in this important legislation. Members of these Houses should be clear on decisions and directions being made in these matters. The amendment refers to the Joint Committee on Transport and Communications and would apply to any future committee assuming its functions.
The committee should be notified should any direction be given from the relevant line Minister. It is a sensible suggestion and an amendment which will get our support.
For clarity, this relates to the Minister giving directions to Shannon Group, not to the regulator. The power of direction granted to a Minister in respect of State bodies for which he or she is responsible is a normal provision of any legislation establishing a State body. In this Bill, the power is constrained in two ways. The Minister can only make directions to Shannon Group in respect of the performance of its functions and directions can only require it to comply with the policies of Government. Obviously, the Minister could not direct Shannon Group to act in contravention of Government policy. It is the primary responsibility of the Minister to oversee and, as necessary, direct the operation of any State bodies under his or her control.
Before making a decision on this amendment, I have a few thoughts, or a few questions, on which the Senator might expand. When he said "notify" the Oireachtas joint committee, what would that mean? Would it just be a letter of notification telling the joint committee what is happening? Is he suggesting the joint committee would have to hold a hearing on it or have rescinding powers or approval powers? Would an alternative be that any direction should be laid before the Houses of the Oireachtas or just put in the Oireachtas Library as a potential alternative so that at least there is transparency in regard to the directions rather than going by letter to the Clerk? What would happen if it was a matter of urgency, for example, or, in particular in regard to an airport, it related to State security? There could potentially be issues about putting a direction before the House, publishing it or making it available to the public if it related to a security matter. I do not want to recall the Arms Trial, etc., but I think Senators will know what I am thinking about. I would be interested in the Senator's thoughts on how that might work in practice and what unintended consequences might arise.
I should have said but I am happy to do so now that when the Minister appoints directors, they go before the joint committee. That has been of immense use to all sides. It is one of the innovations introduced in recent times that has worked. I think there has been a very strong welcome for the people whom the Minister has sent before the joint committee and there has been useful dialogue between the members and the appointees. I missed the Minister's last nominee, as I was in Belfast with some constituents, but Michael Cawley, his tourism nominee, appeared before the joint committee recently.
As the Minister suggested, I would have to think about the other ramifications of notification. Notification would be sufficient, subject to thinking about it between now and Report Stage. The complaint previously was that there was never notification, except when the commission directed it on its website. As the Department did not put it on its website, the fact that the directive had been issued leaked out, for example, when people like Paul Gorecki of the ESRI were undertaking research. I will think about it between now and Report Stage. I thank Senator Darragh O'Brien for his support.
The amendment is in line with the Minister's general approach of openness, which is the spirit in which it was put forward. Government behind closed doors is not a good idea. It would take the secrecy out of it because members of the committee could tell people. It would no longer be a secret and would probably lose its value as the term "top secret" would not be on the document. The wisdom the joint committee would have would be able to respond to the directive.
As I said, I was hoping the era of secret direction of State companies by Ministers when security of the State is not a concern would end. There is nothing to be lost by involving people in the decision.
For today I will withdraw this amendment and consider an appropriate form to achieve what we want on Report Stage. This has been an interesting review of it.
As Senator Darragh O'Brien said, this Minister has a philosophy that we like but he may not be in his post forever. His successor may have other thoughts on the need to keep things secret, in which case we would like to constrain him with our amendment.
I have no intention of requiring this Minister, or any future Minister, to bring any direction before the Oireachtas Joint Committee on Transport and Communications. Laying the letter before the Houses in the Oireachtas Library would be sufficient. The amendment could be revised before Report Stage to exclude anything that relates to airport or national security. It would send a good message. It is not my intention that any Minister would have to come in with any direction given to Shannon Group and explain it to a committee, but it is important that it be published and that the structure and process for doing so is clear. Placing it in the Oireachtas Library would be sufficient.
An amendment could be tabled on Report Stage to exclude security, not just at Shannon but also national security. Some of our international friends have used Shannon Airport for the movement of military into Iraq and Afghanistan. That may happen again in the future. This affects international security too. Any future government might deem it necessary to allow Shannon to be used for that type of operation. I will be interested to hear the Minister’s remarks on this point.
We are in broad agreement about what we want to achieve and to avoid. It is best to deal with this again on Report Stage when either the Senators or departmental officials may come up with a revised amendment that allows for transparency without any unintended consequences. In my three years in office I have never issued a direction to a State airport. There is no secrecy in that regard.
Maybe someone else did.
It occurs to me now that other Ministers might wish to do so and, on balance, transparency is better than secrecy. The suggestion that we return to this on Report Stage is a good one.
Amendment, by leave, withdrawn.
I move amendment No. 9:
In page 19, after line 36, to insert the following:
"(4) The Minister shall establish, within 6 months of the passing of this Act, a committee including representatives of Iarnród Éireann, Shannon Group, the Department of Transport, Tourism and Sport and other such members as the Minister may decide, to examine the possibility of constructing a railway link from the Limerick/Galway rail line to Shannon International Airport. The committee shall report to the Minister within 12 months of the passing of this Act.".
We table this amendment in a positive way because the Bill affords an opportunity for the Minister to reflect on how best to improve linkages and transport connections to and from Shannon Airport which, despite its success and the fact that it is an international airport, is somewhat cut off and depends mainly on bus services and private taxis. The success of most of the main international airports around the world is predicated on being linked to a major rail network. In many cases the railway terminal is under the airport building. We suggest that the Minister consider establishing a group within the next six months to inquire into the feasibility of this proposal, involving members of the Department, Iarnród Éireann, Shannon Group and any other sectors that he believes could make a positive input to this.
I thank the Senator for raising this issue. I do not propose to accept the amendment for two reasons. It is not necessary to legislate to establish a committee. Were that desirable we could do that in any case.
Nonetheless, this has provided an opportunity to discuss the matter.
In 2006 and 2007, a committee was established representing the local authorities, local development interests and others. It examined the feasibility of a rail link from Shannon Airport to Limerick and the report concluded that for the link to provide a good quality rail service between Limerick, Shannon and Galway, the cost at 2006 prices would have been €633 million, with an annual operating subsidy of €6 million per annum. That would be required for approximately 20 years, even if 1 million passengers used the line. When the project was assessed, it had a negative net present value and a benefit-to-cost ratio from 0.138 to 0.179, even in high-growth scenarios. For a capital project to be considered, it must have a benefit-to-cost ratio of more than 1, and to be considered for European funding it would need a ratio of more than 1.
As a result of the poor outcome of that economic evaluation, a decision was made at the time not to pursue it. Since 2006, the public finances have worsened and we are now tied to particular spending ceilings, so I could not justify approximately €660 million in cuts and tax increases to fund the project when it has been assessed negatively with regard to the benefit-to-cost ratio and net present value. For those reasons, I ask the Senator to withdraw the amendment.
I thank the Minister for his reply. The figures are not optimistic but we have moved on since 2006. Although the coffers are not as full as they appeared at the time, there is a new reality in the construction sector and people are getting major projects over the line for sums that are much more realistic than the figures received by the Minister at that time because of certain financial attitudes. Perhaps it may be the time to have another look at the potential project. The old argument we have is about where cost and benefit comes in when we try to promote rural Ireland, or in this case the mid-west and the west. Tourists coming to Ireland through Shannon provide enormous benefit when they go to Galway or Limerick, as opposed to renting a car and heading straight for Dublin. In the west we seem to be coming out at the wrong end of all this, with matters gravitating towards the east coast. I will not press the amendment, but I may revisit it on Report Stage. Perhaps we might have a fresh look at these figures.
Amendment, by leave, withdrawn.
Section 27 agreed to.
Sections 28 and 29 agreed to.
NEW SECTION
Government amendment No. 10:
In page 20, after line 33, to insert the following:
“Shannon Airport Authority, limited
30. As soon as maybe after the Shannon Airport Authority transfer day, Shannon Airport Authority shall be re-registered under the Companies Act 1963 as a private company limited by shares and on or from the day of its re-registration as such shall be known as, in the English language, Shannon Airport Authority Limited, or in the Irish language, Údarás Aerfort na Sionainne Teoranta.".
Amendment agreed to.
SECTION 30
Question proposed: "That section 30 stand part of the Bill."
We are opposing this section on the grounds that it is unfair, in the main, to the future of Cork Airport. It does not in any way answer the major uncertainty hanging over the future of the Cork facility. As it is so vague, it has added to the anxieties that the business community and the people of the south west have about the future of their airport. It seems as if continuing to have the airport operating as it does, attached to the Dublin Airport Authority, puts it at a major disadvantage to Shannon, which is having its status changed. We welcome the promotion of Shannon and the investment there, as well as the clearing of the debt. Nevertheless, we must look to Cork also.
The Bill provides for the dissolution of the airport authority in Cork on a day to be appointed by order by the Minister.
Cork Airport appears to have been the loser overall in the reconfiguration of the State airports. We have seen the dramatic fall in passenger numbers, which are down by 28% or 2.35 million in the past five years. We must see how we can shore that up and protect and enhance the future of Cork Airport. It seems that Cork Airport is highly unlikely to meet its previously stated target of breaking even on a cash basis by the end of this year. Its owners remains focused on returning the airport to growth but the Bill does not give them any solid basis in terms of outlining the Minister's plans for the airport. The latest annual report and accounts from the Dublin Airport Authority, published at the start of May 2014, show that passenger traffic at Cork declined by 3.5% to 2.3 million in 2013. There were some major factors involved in the decline such as the general weakening in traffic on routes to Britain. Traffic was also considerably affected by the decision of the Hungarian carrier, Wizz Air, which had operated six routes from Cork to Poland and Lithuania, to cease operating from Cork Airport due to competitive pressures. Our view is that Cork Airport is suffering due to its position as the DAA's second airport, with Shannon Airport's new independent status making it more competitive in seeking new business. We propose that the section should be deleted and revisited.
Section 30 provides for the dissolution of Cork Airport Authority plc on a day to be appointed by order of the Minister. It also provides for the Minister to re-establish the Cork Airport Authority again in the future. In the interim, provision is made to protect the name – Cork Airport Authority – from being registered by anyone else. Certain consequential amendments to the State Airports Act 2004 are also contained in the section.
Two years ago, in connection with its earlier decisions on State airport restructuring, the Government decided that ownership of Cork Airport by the DAA would be maintained for the present but that the matter would be kept under review. The position has not changed and any proposal to separate Cork Airport from the DAA is not likely to arise in the short term. The airport would have to be much closer to breaking even in terms of its costs and revenues and there is also the very large debt attached to the terminal, which I do not see being resolved in the near term. If and when the airport is separated, we will need to have a Cork Airport Authority in situ to receive the business from the DAA and we will re-establish it again at that stage.
For the past ten years we have had a rather ludicrous situation, a company that is a fully fledged plc under the Companies Act, established for the purpose of owning, managing and operating the airport in Cork, which has no airport, staff or business. It was a little surreal to have CAA plc in place under those circumstances and it is not a good idea to continue that. What section 30 does is bring a degree of common sense to the situation and we intend to wind up the company until it is needed. The Bill makes provision to re-establish the company at a future date if it is needed.
In the meantime, rather than having a surreal, phantom company, I have tried to do something a bit more practical that might help the airport grow and develop. That is why I established the Cork Airport Development Council as a stakeholder body which is multi-sectoral and is designed to boost the development of the airport. The council had its first meeting in March and I hope to meet it in June. The council is chaired by the DAA chairman, Pádraig Ó Ríordáin, who is from Cork, and contains representatives from the business sectors, including nine external members. For example, there are representatives of Fáilte Ireland, Conor Healy from Cork Chamber of Commerce, the airport managing director, Mr. John Mullins from the Port of Cork, Mr. Michael Murphy from UCC, Mr. Eric Nolan from the DAA, Ms Anne-Marie O’Brien from Ballydoyle racing stables, Ms Emma O’Brien from Clonakilty Chamber of Commerce, Mr. Joe O’Flynn from SIPTU, Ms Ann-Marie O’Sullivan from the board of the DAA, Mr. Bob Savage from EMC, Mr. Kevin Toland, chief executive of the DAA, Mr. Jim Woulfe from Dairygold and Mr. Gerry Walsh from the DAA.
This is a much more practical way of doing what the Senator wants us to do, namely, grow and develop Cork as an airport and destination rather than having a phantom company run it. The proposal is to wind that down but allow us re-establish it in the future should it be possible to separate Cork.
I agree with Senator Ned O’Sullivan. Section 30 provides for the dissolution of Cork Airport Authority plc on a day to be appointed, by order, by the Minister. It also provides power for the Minister to re-establish Cork Airport Authority in the future. Cork would be in the top 20 airports in the United Kingdom and has been affected much less by the recession than Shannon. I support the Minister’s plans for Shannon. Therefore, why can Cork not have its independence?
I am slightly biased by the fact that I was born in Cork. However, I think we are quite capable of running an airport about the same size as Belfast City Airport, Cardiff, Leeds-Bradford or East Midlands. There are many UK airports the same size as Cork which run themselves. It is almost like sending down colonial governors from the Dublin Airport Authority to give the benefit of their knowledge to the running of Cork. Cork Airport should be making its own decisions. I do not like the idea of the airport run as a colony of Dublin.
I accept there was an unnecessary terminal built costing €180 million. The receipts from the sale of the Great Southern Hotels, a sale for which I compliment the Department and others involved as they were sold at the top of the market and the taxpayer and society did well from them, came to €265 million. That money could have been used to write-off Cork’s debt and set it up as an independent entity. It is the second city in the State and the airports in many European cities are not run by their national airport authorities. My first forays into writing about this were to persuade the UK Government to abolish the British Airports Authority which it ultimately did. Having airports compete would be beneficial rather than having Cork in this dependency state with Dublin.
Who was responsible for the terminal at the airport? Some future economic historians will point out from the Cork point of view that free capital was distributed from Dublin and it seemed like a good idea at the time. We know when Cork and Dublin were connected by motorway, car and bus travel became more practical and attractive, meaning bookings for flights between the cities plummeted and now no flights are provided. There is still, however, a role for Cork to connect the southern province to the United Kingdom and mainland Europe. I would like to see the governance of the airport devolved to its own airport authority and the people of Cork. It is much more in line with how we think about these things than to have it as some kind of appendage to the Dublin Airport Authority. I am opposed to this section.
This is about the signal going out to the people Cork. I accept the Minister’s point that the situation at the airport is not correct and it is somewhat anomalous to have a company in place where there is no effective work for it to do. That is, however, what should be addressed rather than winding up the company. We should also equalise arrangements between Dublin, Shannon and Cork. Cork is the poor boy of the three and the people there do not accept that.
The Minister established the forum in question. Is it a statutory board or just a big quango talking shop? Does it have powers and responsibilities? It appears to be a large board to me.
We must move on. The Minister must outline the plans for Cork. We cannot put this off until another Bill comes before this House in another year or two but should address it under the Bill. For that reason we oppose this section, which we want deleted.
The Cork Airport Development Council is non-statutory. It has been set up to work with the interests in the area to help us develop the plan for Cork of which the Senator spoke. Much of what needs to be done there is to increase the number of people visiting Cork. People do not go to a city to visit its airport, but pass through the airport to reach a city or region. We need more people to visit Cork. Unfortunately, it is largely an outbound airport, as the Senator mentioned, with people flying Ryanair or Wizz Air to eastern Europe or going to the Canaries. We need more people to visit the southern region through Cork. As the money from the sale of the Great Southern Hotels is long gone, unfortunately, that solution is not available and the net debt of the DAA is still approximately €600 million.
It is possible for a future Government to take the decision to separate Cork Airport and make it independent and the legislation provides a mechanism by which it could be done. However, it can be done only when it is right for Cork and the DAA. It is not right for the DAA now because it carries a debt of €200 million as a result of the new terminal. If this debt stayed with Cork Airport it would crush Cork while if it stayed with the DAA it would severely damage its balance sheet at a time when it needs to deal with pension issues. Over time, passengers using Dublin Airport will have to pay down the debt for the terminal. Unlike Shannon Airport, Cork Airport's operating costs substantially exceed its revenues. Were it separated now it would immediately be loss-making. To operate on a commercial basis it would require significant redundancies and-or pay cuts, which nobody is proposing. While it is not the right time, unfortunately, for Cork Airport to become independent, it could be done when the time is right, and this legislation allows a mechanism for it.
While I understand the Minister's explanation, I agree wholeheartedly with Senator Ned O'Sullivan on the signal it sends about the future viability of the airport. I take the Minister at his word that it could be re-established in the future. The Minister mentioned that the Cork Airport Development Council committee met in March. Was that its first meeting? Is it mandated to have four meetings a year? How often does it meet? It is not on a statutory footing. What role has it been asked to carry out? How often has it been asked to meet and could it fizzle out? If we are serious about developing the airport as a hub for the south-west region, I would like the Minister to expand on it. Was the March meeting the first one? Is it due to meet again this year and what is the structure of it?
The board of the DAA established the Cork Airport Development Council at my request and it had its first meeting in March. Although I do not know when the next meeting is scheduled, the council is supposed to meet at least quarterly and I intend to meet it when I visit Cork next month. Its remit is to pull the interests of the region together, try to develop the airport and give people more reasons to visit the region and use the airport. There is no question about the airport's viability. It is the second biggest airport in the State in terms of passenger numbers.
Question put:
The Seanad divided: Tá, 22; Níl, 13.
Tá
- Bacik, Ivana.
- Brennan, Terry.
- Burke, Colm.
- Coghlan, Eamonn.
- Coghlan, Paul.
- Comiskey, Michael.
- Conway, Martin.
- Cummins, Maurice.
- D'Arcy, Jim.
- D'Arcy, Michael.
- Hayden, Aideen.
- Henry, Imelda.
- Keane, Cáit.
- Kelly, John.
- Landy, Denis.
- Moran, Mary.
- Mullins, Michael.
- Noone, Catherine.
- O'Donnell, Marie-Louise.
- O'Neill, Pat.
- Sheahan, Tom.
- van Turnhout, Jillian.
Níl
- Barrett, Sean D.
- Leyden, Terry.
- MacSharry, Marc.
- Mooney, Paschal.
- O'Brien, Darragh.
- O'Donovan, Denis.
- O'Sullivan, Ned.
- Ó Murchú, Labhrás.
- Power, Averil.
- Quinn, Feargal.
- Reilly, Kathryn.
- Wilson, Diarmuid.
- Zappone, Katherine.
Tellers: Tá, Senators Paul Coghlan and Aideen Hayden; Níl, Senators Ned O'Sullivan and Diarmuid Wilson.
Question declared carried.
SECTION 31
Question proposed: "That section 31 stand part of the Bill."
I have a couple of questions on the section, which the Fianna Fáil Party opposes. Senators will be familiar with the Dublin Airport Authority, or DAA, which is to be renamed "daa", using the lower case. What is the logic of this change? I do not have an issue with the use of "DAA" to describe the Dublin Airport Authority. Will the change to the lower case version be an expensive rebranding exercise that results in new signage, letterheads and so forth?
The lower case "daa" title is used on the terminal 2 building. It is legitimate to point out that while the change may appear reasonable, it may be costly and unnecessary if it is made in legislation. The Bill proposes to change all references to the Dublin Airport Authority to "daa". Will this result in all paraphernalia and literature, including brochures, headed paper, compliment slips and business cards, as well as e-mail domain names, websites and signage in the airport, on approach routes and in offices, being changed to reflect the new title? If so, has such a rebranding exercise been costed? What expenditure will be incurred to reflect this minor change in name?
I concur with Senator Darragh O'Brien. There are rebranding merchants at work who cost a fortune and I am not sure they provide value for money.
I am concerned about the following reference on lines 20 and 21 of page 23: " 'State Airport’ means an airport in the State, managed and controlled by a company;". There must be a word or words missing between the words "a" and "company" as under this definition all airports are declared to be State airports. Something appears to be missing from the definition of "State Airport".
I have been informed that "a company" is defined in the Bill as meaning Cork, Shannon or Dublin Airport.
I thank the Minister for clarifying the matter.
I agree with Senator Darragh O'Brien that rebranding merchants can cost significant sums of money. I do not know what they accomplish. They are concerned with images and logos, whereas the efficiency indicators to which the Minister referred relate to realities, which are much more important than images. I hope the change will not result in the airport incurring the expense of rebranding every sign or piece of paper in the airport, as the Senator pointed out. I tend to discount the argument that it will present a more modern image. The country must address real problems, rather than issues such as nomenclature, image and stationary.
I fully concur with Senators Darragh O'Brien and Sean D. Barrett. The Dublin Airport Authority, DAA, was a misnomer from the day the new body was established. It was given this name because it was intended at the time to separate Shannon Airport and Cork Airport almost immediately and sell off Aer Rianta International, ARI, the retail element which consists of shops, duty free operations and other activities in which ARI engages around the world. This is no longer the plan and the Dublin Airport Authority title has become a misnomer as it involves Cork Airport and businesses all over the world, especially retail outlets in airports, consulting and shareholdings in other airports. The Dublin Airport Authority is not solely involved in airports. Further, it is a company rather than an authority and the use of the word "Authority" in its title gives the impression that it is a State agency. The title was wrong from the beginning.
The original cost of changing the name from Aer Rianta to the Dublin Airport Authority was €4 million. The company investigated what it would cost to rebrand the authority and considered a number of new names as well as the option of reverting to Aer Rianta. My preferred option was to use the name, Rhiannon, as it recalls the original name of Shannon Airport, Rinneana, and Aer Rianta. However, the estimated cost of such a rebranding was €3 million, a large sum in the current circumstances.
The company also carried out consumer research with passengers and business customers. The response to a proposed name change was firmly negative and considered to be unnecessary, unwarranted, a waste of money and potentially damaging to the reputations of the Dublin Airport Authority and Government. It was decided, therefore, not to engage in an expensive rebranding exercise and to use instead the existing acronym, DAA, in lower case.
As Senator Darragh O'Brien noted, the word "daa" is already used on signage and so forth. The change will not give rise to any costs to the Exchequer, although it may result in a nominal cost to the company as and when letterheads and so forth are replaced. The point of this change is to avoid an expensive rebranding.
I thank the Minister for his clarification in which he outlined what appears to be a sensible approach. While the change will not give rise to any costs to taxpayers per se, as it does not involve the expensive rebranding that would have occurred if any of the other proposed name changes had proceeded, the Minister also referred to a nominal cost to the Dublin Airport Authority. Does the Department know precisely what the DAA must do to comply with this measure if the legislation is passed? If the only action required will be to change a few letterheads, I will not be unduly concerned. However, some companies view these types of changes as an opportunity to replace everything, across the board. In my view, this will not be necessary, although costs of €80,000 or €100,000 may be incurred. While I do not have an issue with a legislative change to clarify the position regarding the name of the Dublin Airport Authority, I require greater clarity about what costs, if any, will arise for the airport, even if none will arise for the taxpayer.
Progress reported; Committee to sit again.