Mr. Kieran O'Donoghue:

I thank the Chairman and Members for the invitation to address the committee. They will be familiar with the role of IDA Ireland. We are the Government agency responsible for promoting Ireland as a location for foreign direct investment, FDI. We report directly to the Department of Jobs, Enterprise and Innovation in this capacity.

We currently manage an investor portfolio comprising approximately 1,100 international companies. These companies employ more than 174,000 staff directly and spent approximately €22.4 billion in the Irish economy in 2014. Our client companies operate across a diverse range of sectors, including international financial services, life sciences, medical technologies, pharmaceuticals, IT, engineering, and online and professional services. Companies in these sectors undertake both manufacturing and service activities and include firms such as Intel, IBM, Microsoft, Citigroup, State Street, Google, Facebook, Pfizer, GSK and many more.

As a general rule, the principal markets and customers for these companies are located outside Ireland. As a result, Ireland is a base or platform from which these companies export their products and services to the UK, continental Europe and other international markets. In 2013, the year for which the latest data are available, exports by IDA client companies were valued at €125 billion, equivalent to 67% of total exports from Ireland.

As Ireland is an island nation with no direct land bridge to Europe and other markets, these companies are critically dependent on air, sea and telecommunications linkages from Ireland to their home countries, suppliers and customers. In this context, Ireland’s ability to win and retain foreign direct investment, FDI, is critically dependant on international air connectivity - for passengers but also, increasingly, for air cargo. This dependence is increasing over time.

There are several reasons why air connectivity matters for FDI, on which I wish to dwell briefly for a moment. It provides the principal means by which international companies and their key decision makers visit Ireland and assess the country, the jurisdiction, as a location for investment. Air access enables executives from existing companies to engage in person with their overseas headquarters and with affiliates around the world. The functions or activities performed from Ireland are increasingly what we describe as “high-touch”. Sales and marketing departments, EU headquarters and so forth require intensive face-to-face interaction between Irish-based executives and overseas colleagues and customers. An increasing number of multinational companies are in the services sector rather than the goods-producing sector, which is generating increased demand for passenger services into and out of Ireland. Services are expanding as a share of total exports from Ireland and now account for 53% of total Irish exports. Manufacturing firms are producing more high-value, low-volume products that are increasingly being transported by air. Air cargo currently accounts for 16% of total merchandise trade from Ireland by volume, but 38% in value terms. As the markets served from Ireland increase in number and become more geographically distant, the importance of global reach and time-to-market considerations is expanding the importance of high-quality air connections into and out of Ireland.

As a result of these trends and developments, Ireland needs frequent, direct and competitively priced flights to multiple destinations in the UK, the United States and Europe. We in the IDA would also like to see the commencement of direct connections to destinations in the Asia Pacific region as our business in this region, particularly in China and India, grows. As the committee knows, the largest segment of our business is made up of US companies locating activities in Ireland to service European, EMEA or international markets. In a company’s site selection process, the ability to fly executives from key cities in the US, convenient to their HQ location, directly to Ireland is an important consideration. For example, several client companies have made representations to us seeking ongoing development of Ireland’s air links with the west coast of the United States and other geographies. Direct connectivity to the UK and Europe is also critical to winning investment projects from companies whose headquarters are in Europe.

Significantly, there are destinations, particularly in the Asia Pacific region and close to second-tier European cities, that have no direct flights to Ireland. In this case, it is important to have access to the large number of destinations served from key hubs, especially Heathrow. This is achieved by high-frequency connecting flights from Dublin and other Irish airports. While Dublin Airport is our primary gateway for inward investment, our increasing focus on trying to ensure a more balanced geographical distribution of inward investment within the country means that we need to preserve and, if possible, increase international air connectivity from airports such as Shannon and Cork. At present, we have a total of 363 client companies, employing 64,000 staff, operating in the regions served by Cork and Shannon. Such connectivity is a key part of a region’s overall attractiveness that can influence the site selection and investment decisions of inward investors.

Ireland continues to have a strong manufacturing sector through the focus on and growth in high-value, low-volume products, typically in the life sciences and ICT sectors. These are frequently shipped by air rather than sea due to the need for rapid delivery. As a result, hold cargo as well as more dedicated air freighter options need to be available.

Air connectivity is critical to winning and retaining inward investment projects. We need long-term direct and indirect air connectivity to our major markets that caters for both passengers and freight. We also need competition between carriers to ensure long-term cost competitiveness.

With respect to any offer for Aer Lingus now or in the future, the IDA is not in a position to assess the impact of the sale of the company without a clear statement from potential buyers on their future development plans for the airline, its route network and services. When such a statement is available, we would expect the relevant authorities here in Ireland to undertake a thorough due diligence of any proposal from a national interest perspective.

In conclusion, therefore, I thank the Chairman for his patience and wish to make the following final points on behalf of IDA. Ireland is a small, open economy that is highly dependent on trade and investment. In this context and in terms of promoting Ireland as a location for inward investment, for tourism and enterprise development more broadly, it is vital that we maintain and enhance air access into and out of the country. The IDA’s principal concern is to ensure and develop air connectivity between Ireland and the sources of inward investment and the markets into which our client companies export goods and services both now and in the future. Requests for information, especially from new investors or those contemplating expansion within Ireland, routinely ask for data on air connectivity, namely, on airlines, destinations served, frequency, etc. This underscores, from the IDA's perspective, the fundamental importance of air access for Ireland’s ability to attract and support investment by international companies. I thank members for their attention.