Oireachtas Joint and Select Committees
Wednesday, 16 October 2013
Joint Oireachtas Committee on Transport and Communications
Shannon Aviation Services and Miscellaneous Provisions Bill 2013: Discussion
The purpose of this morning's meeting is to engage with representatives of the Shannon Airport Authority, the Shannon and District Chamber of Commerce, Clare County Council and SIPTU regarding the general scheme of the Shannon aviation services and miscellaneous provisions Bill 2013. On behalf of the committee, I welcome Mr. Neil Pakey, who is the chief executive officer of the Shannon Airport Authority; Mr. Kevin Thompstone, who is the president of the Shannon and District Chamber of Commerce; Ms Helen Downes, who is the chief executive of the chamber of commerce; Mr. Owen Reidy and Ms Jane Boushell of SIPTU; and Mr. Tom Coughlan, who is the Clare county manager.
I wish to draw the attention of witnesses to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, they are protected by absolute privilege in respect of their evidence to this committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to do so, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given. They are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable. I also wish to advise the witnesses that any submission or opening statements they have submitted to the committee will be published on the committee's website after this meeting. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses, or an official either by name or in such a way as to make him or her identifiable.
I propose that a representative of each of the delegations will make a presentation, to be followed by a question and answer session. As the groups' submissions have already been circulated and may already have been read by the members of the joint committee, perhaps their presentations should be kept as short as possible so that we can devote more time to questions and answers. I hope that is okay. I ask Mr. Neil Pakey of the Shannon Airport Authority to make some opening remarks.
Mr. Neil Pakey:
I thank the Chairman and the members of the joint committee for inviting us to address today's meeting. I welcome the committee's input into this proposed legislation. After I have introduced myself, I will update the committee on the progress that has been made since the chairman of the Shannon Airport Authority, Ms Rose Hynes, last addressed the committee on this subject on 23 January last. I will also share some of our considerations regarding the detail of the proposed Bill. I will welcome any questions after that.
As the committee has a great deal of information on the authority, perhaps Mr. Pakey might proceed directly to the part of his presentation that deals primarily with the Bill. I thank him for the other detail he has made available. We have a tight schedule, as a vote may be called in the Dáil shortly.
Mr. Neil Pakey:
Okay. I will comment briefly on the great deal of progress that has been made to date. While it is clear that the legislation will not be passed until some future date, obviously we do not want to get caught cold. It is worth underlining that a great deal of preparatory work is being done on various fronts at present. Shannon Development, for example, is working on the transition.
The amendments to the Bill that we are suggesting are set out on page 6 of our submission. They are quite brief. Head 5 relates to the establishment of the Shannon group company.
We acknowledge the statement that "The Minister shall by order appoint a day to be the establishment day for the purposes of this Act as soon as practicable following the commencement of this Act". We are mindful of the major logistical exercise in achieving the date. Clearly we would like clarity on the appointed day. Given the amount of work involved, it is always helpful to understand the end date. If there is to be any delay, it would be helpful to know that as soon as possible. We urge that such a delay be no more than one quarter as otherwise costs etc. become unmanageable.
Head 9(b) deals with the functions and general duties of the group. While we agree with the principal functions as stated, they could be expanded somewhat to include promoting the development of airport traffic. We also suggest adding, "to utilise any other strategy, deemed appropriate in support of developing the Group's business interests profitably". This would ensure we are not as restricted as we are with the existing text.
Head 12(5) deals with borrowing by the group. We recommend that the borrowing facility limit for the group be set at a €100 million to allow Shannon group to deliver on the recommendations of the task force and to ensure we can be as competitive as our European peer group airport companies. As any such borrowings would be subject to business cases and ministerial consent, we should not have a more restrictive limit than our competitors, be they private or public operators. Earlier I mentioned some of the operators for which I worked in the past. They are clearly in the business of borrowing and investing in their airports and we seek the same flexibility to do that.
Head 22(2) and (3) deal with the chairman and members of the board of subsidiaries. In line with best practice we recommend that the chairman and board of the group appoint the directors of any subsidiary of the group and would also appoint the chairman of the board of any subsidiaries of the group. We believe the chairman should recommend members to the board, but the board as a whole should be the ones to appoint members.
We have a small point on head 38 on the renaming of SFADCo. The Shannon Development staff and management and those involved in the airport prefer the term "Shannon Enterprises" as the future name. That can easily be a trading name just as Shannon Heritage is the trading name of Shannon Castle Banquets and Heritage Limited. Alternatively it could be resolved in legislation to change it to "Shannon Enterprises". That is not to say that the commercial ethos of the business changes - the commercial ethos of the business is still very prevalent.
On the transferring of the grant obligations and duties of Shannon Development, with effect from the enactment of the Bill, all of the rights duties and obligations of Shannon Development regarding any grant agreement, grant letter of offer or grant approval entered into or approved by Shannon Development prior to that date shall in the case of an FDI company, transfer to IDA Ireland. We seek clarity on that point.
There is also a small point about the transfer of the Shannon College of Hotel Management to NUI Galway. That concludes my submission.
I thank Mr. Pakey for his presentation, in which he has set out his vision and we wish him well in his endeavours. I believe the Bill makes no reference to Shannon Heritage, which would have been an integral part of Shannon Development or SFADCo. Does Mr. Pakey know what is due to happen to that entity?
Mr. Neil Pakey:
I mentioned the progress to date on the preparatory work. We are engaging with the airport and Shannon Heritage in particular in terms of joint marketing, several international events, etc., and in terms of looking at the heritage product at the airport. We have already started working jointly in preparation for implementation of the legislation.
I agree with Mr. Pakey's recommendation on the €100 million limit for group borrowing and we will make a similar submission to the Department on that. Is it Mr. Pakey's understanding that the board members of the subsidiaries will be appointed from the general membership of the group company or could people other than those who sit on the board or who are on the staff of the company at the moment be appointed by the chairperson to the boards of these subsidiaries?
My reading of this is that the chairperson of that group gets to appoint the members of the boards of the subsidiary companies. Will they be drawn from the pool of board directors? Mr. Pakey may not have the answer to this in which case he could come back to us.
It may not even be a question for Mr. Pakey and is probably better directed at the Minister. I just sought Mr. Pakey's view. My reading suggests that the chairperson of the board of the group will have the power to appoint the board members of the subsidiaries. Will the chairperson be restricted to appointing people who already sit on the board of the parent company or could they appoint people from-----
I welcome the witnesses. I have lived in the town of Shannon for the past 34 years. I wish everyone the best of luck with the new project which has my full support. I have no doubt the end will justify the means. I thank everybody for their effort so far.
Mr. Kevin Thompstone:
I thank the Chairman for inviting Shannon Chamber to present to the committee today. Ms Downes and I appreciate the opportunity to provide our observations and recommendations on the Bill. While we are here in our roles as chairman and CEO, respectively, of Shannon Chamber, we have the support of the Galway, Ennis and Limerick chambers, comprising a membership base of approximately 1,400 businesses and 45,000 employees. The chambers in that corridor are essentially saying that Shannon Airport is our business airport, so we are here on their behalf.
As the committee has already received our submission, I will go straight into our observations and recommendations on the heads of the Bill. Those observations are structured in three headings: the focus of the group; governance issues; and operations. On the focus of the group, our first comments relate to head 9. Head 9(a) refers to the Shannon group overseeing the functioning of the airport and Shannon Development. Head 9(b) refers to promoting the development of aviation-related and other businesses. We believe there should be explicit reference to airport traffic. While the airport must function, it must also grow in terms of airport traffic, something that is not covered in the existing wording. Our first recommendation is that the words "airport traffic and" be inserted before the word "aviation" in head 9(b).
Second, in respect of the group's functions or focus, there is reference to aviation-related and other business activities in the vicinity of Shannon Airport. We would make two recommendations in this regard. First, Shannon is much more than aviation, as there is a strong multisectoral base of business in engineering, information and communications technology, international services, finance, logistics and so on. We believe it is very important that the national agencies, namely, IDA and Enterprise Ireland, together with the airport authority, would also have a focus on growing those sectors. Our third overall recommendation is that the same would apply in respect of tourism. As the diagram included as figure 1 in my submission illustrates, Shannon feeds tourist traffic up and down the western seaboard regions. From that perspective, it is important that the national agencies, namely, Tourism Ireland and Fáilte Ireland continue to provide back up behind the airport authority's work on that front.
I will move on to the next item on function, which relates to head 38. While Mr. Neil Pakey has already referred to this issue, I also wish to build on it. The proposed new name for Shannon Development in the future is Shannon Commercial Enterprises Limited and I speak on this subject from my experience as chief executive officer, CEO, of a semi-State company. As CEO of Shannon Development, I had the experience of giving part of the company a brief for commercial activity. One difficulty into which we then ran was we had generated confusion regarding what were the assets there for in the first place. My strong view is the assets are there to generate economic activity and both Ministers referred to this when publishing the legislation last July. Be it the airport itself or the property assets, they primarily are there to generate economic activity. This is not to state they cannot be managed in a commercial way but the primary objective must be economic. For example, if one is driven mainly by commercial considerations, why would one not develop shopping centres or car sales activities in the free zone? One would generate a lot of commercial return but would contribute little in terms of economic impact. While this may seem like a minor point, it is a major strategic issue and for that reason, our fourth recommendation is to drop the word "commercial" from the proposed name in head 38. In addition, while I can understand the reason that in a new organisation, people might wish to break the link with the past, there is quite a level of brand definition in the term "Shannon Development". However, that really is a matter for the shareholder, the board and the Government. We consider the main item to be the dropping of the word "commercial" from the proposed name.
I will now move on to governance and in respect of Part 5 of the Bill, there already has been some discussion on the main item in the last few minutes. Our main recommendation in this regard, our fifth, is that in the appointment of members to the board and its subsidiaries, the process should be clear and transparent and that the primary objective always should be to ensure the board has the skills necessary to deal with whatever the upcoming challenges may be. In some instances, that involves appointing people from outside the organisation, which would not be unusual in semi-State companies. In that context, our sixth recommendation highlights the fact that among the membership of the aforementioned four chambers of commerce, namely, Shannon, Ennis, Limerick and Galway, there is a depth of expertise. We think the committee could give consideration, in its potential amendments to the Bill, to the possibility of the chambers of commerce nominating or at least providing a panel of people who could provide the requisite skills for the board.
Finally, in respect of the day-to-day operation of the company, it is important that once the legislation has passed, the board and executive are empowered to get on with delivering the job that has been set down for them in legislation. Mr. Neil Pakey already has referred to the borrowing limit of €100 million and our seventh recommendation deals with this. We believe it is very important that the threshold is kept at that high level and note there is a footnote in the draft legislation stating this is subject to confirmation with the Department of Public Expenditure and Reform. While I acknowledge everyone must control costs in this difficult environment, if that threshold is too low it will have an impact on the day-to-day operations. To take a particular example, if there is a need to provide a building for an existing or incoming mobile investment client, Mr. Pakey and his team must be able to react quickly and a threshold is required. One can have a high threshold and still have the company operating under the normal public sector guidelines. Consequently, we recommend strongly that the threshold remains at €100 million. These are our key recommendations and observations and I again thank the Chairman for giving us the opportunity to appear before the joint committee and make our observations.
I thank Mr. Thompstone and appreciate all his work in this regard. The reason it is important for someone like Mr. Thompstone to appear before the joint committee is he is uniquely qualified, in that he has an interest in the region and previously acted as the chief executive officer of Shannon Development. Consequently, members would be wise to take his counsel on the issues he has raised. One recommendation, which I support strongly, is that in future, the appointment of the board might have an ex officio position set aside for the chambers of commerce in general or that at least they might be in a position to nominate a panel from which the Government or Minister of the day might select someone. This would be of huge importance and the strength of retaining the airport in its hinterland and environment in a co-operative way will be the key to the success towards which Mr. Pakey is striving. I note there are considerable parallels between the comments of Mr. Thompstone and Mr. Pakey, which is helpful and useful.
Mr. Owen Reidy:
I thank the Chairman for the opportunity to appear before the joint committee today. As I appreciate that members have read the submission, I will not go through that. However, I wish to make two key fundamental points on behalf of SIPTU and our union represents workers and members in both Shannon Development and the airport. While not wishing to put a dampener on things, we have serious reservations and concerns about this prospect actually flying and working because we believe that ultimately, the success of this project is based primarily on planned growth on the airport site and on passenger numbers. In this context, the Irish Congress of Trade Unions conducted an independent appraisal of the business plan of the new entity and we are particularly concerned, given the current economic climate in which we operate, that the projected or planned growth from 1.39 million passengers in November 2012 to 2.5 million passengers by 2021 is based on assumptions that do not stand up to scrutiny. We are concerned that if this does not work, the overall project may suffer and fail, notwithstanding the fact that we wish it well. Should that arise, we would be concerned about any implications for the workers concerned in both entities.
The second fundamental point relates to the heads of the Bill and I will confine my comments to the areas concerning the protection of employees because obviously that is our fundamental objective. In common with Deputy Dooley, the first question or concern we had pertained to the Bill's complete lack of reference to or mention of Shannon Heritage. Obviously we have an interest in those workers and in the product Shannon Heritage has and we wish to ensure we get some assurances on its future viability and regarding the employees concerned. In respect of heads 18 and 22 regarding the issue of directors and worker directors, obviously we come from a perspective in which we support fully industrial democracy. We think that worker directors have made a fundamental contribution in a range of commercial semi-State companies and other entities and they play an important role. They are not senior shop stewards at the board but they do bring the workers' voice to the board and they bring something to the overall strategic guidance and leadership of any entity.
We have some questions, under heads 18 and 22, on what is intended for worker directors. Will they come from the group? Will they be involved in the subsidiary? Obviously we support as much worker participation as possible at board level, be it on the group or subsidiary companies.
Head 25 refers to superannuation schemes, which are another area of interest and serious concern to us. It is important to remember that the project attempts to merge together two organisations with different cultures, histories and practices. It is also important to remember that the workers at Shannon Airport are commercial semi-State employees and part of a pension scheme called the Irish Aviation Superannuation Scheme, IASS. I am sure the politicians from the region are familiar with the scheme. We are involved, with our colleague unions, in major comprehensive negotiations with the employers on that scheme, one of which is Shannon Airport. We are trying to ensure the scheme's inherent problematic issues are fixed and that proper pension provision is available to all of the employees in the scheme currently and in the future. It is critical and essential that the current pension conditions of Shannon Airport staff are followed through in legislation and that whatever results from the discussions is applied to the employees who wish to transfer. Likewise, the staff of Shannon Development are public servants and part of the general public service pension scheme arrangements and criteria. It is critical that the arrangements they enjoy are maintained.
Both the public servants in Shannon Development and the workers in Shannon Airport have borne the brunt of major restructuring, pay cuts and all that goes with it, including the Croke Park and Haddington Road agreements. Also, the Shannon Airport side had a cost recovery programme that was negotiated with the Dublin Airport Authority that affected workers in Shannon, Cork and Dublin airports. We believe the link is critical. There is some comfort from the suggestion, in general terms, that those things will be looked after in the Bill, but it is important to cite them here today. It is also important to ask, if this does not work, what happens next. We are left with a product and workers from both entities who must have a future. We want to ensure a sustainable and viable future for them and the interests they serve in the mid-west.
Ms Jane Boushell:
I shall make one small comment as my colleague, Mr. Reidy, has covered virtually everything. As he said, our focus is very much on viability for the future of our members as well as the organisation. We have concerns about the proposed necessary capital expenditure up to 2017 which we understand to be around €37.5 million. It appears that no cushion has been built in for any unexpected capital expenditure. We are also very anxious about the borrowing cap and want it to adequately provide a cushion for any unexpected occurrences. I shall leave it at that. Thank you, Chairman.
I thank everyone for their presentations. I have read them but I must examine the Bill and take on board some of the suggestions that have been made.
I agree with Mr. Reidy's comment on workers having a role on the board because it is important they do so. I am also concerned about how pensions will be transferred and the repercussions. I am not sure what effect the change will have and hope someone can tell me more about the matter.
At this moment I have no doubt that there has been a great improvement in the number of passengers using Shannon Airport. I am not sure if that can be maintained on the basis outlined and over the period we are talking about because the airport faces great challenges from, for example, Knock Airport which is nearby and also caters for the west. That is my only fear. I am not sure about the projections but perhaps someone will tell me more about them.
I appreciate Mr. Reidy's input. He made some valid points on the overall situation, many of which I made at the time of separation. Unfortunately, that time has passed so we must do everything that we can to make the current situation a success.
He raised issues about heads 18 and 22 and Shannon Heritage, which I identified. We might want to see those issues fleshed out in legislation. A specific reference must be made to Shannon Heritage. As the delegation knows, the superannuation scheme is a particularly difficult matter.
When preparing legislation, it is helpful for us to know the witnesses' views in advance. We will try to incorporate their comments in the legislation, as best as we can. I thank the delegations for their participation.
I agree and have promoted the idea that the interests of employees should always be protected 100%. There was never a doubt about that. Let me give a little history of the estate and put on record the fact that 25,000 people used to work there but 3,500 jobs have been lost over the past ten years due to bad management.
Examining airport numbers is going in the wrong direction. Without question, we want to grow the number but we must also examine the industrial base which is a key component of the new model. I shall do all in my power to ensure the units are filled. There are a couple of projects on the go on which we are working very closely with Mr. Neil Pakey. The aim is not to take away from workers but to give them more to do. We must fill the base to ensure there are jobs in the future. That aim is what drives me. I have lived in Shannon for 34 years and ran a business there for 20 years or so. Two years ago I lost the business because one of the companies pulled out, but we have rebuilt the business and increased staff numbers from three part-time to six full-time employees. I have a passion for the town of Shannon, the industrial estate and the airport and I can assure the committee that local people share the same passion.
I have no issue with employee rights. They must be protected. Our job is to ensure employees have plenty of work in future and I can assure the delegations that is what we will do. There are a couple of projects on the go that will help the organisation of Mr. Neil Pakey, Ms Downes, Mr. Thompstone and Mr. Tom Coughlan. We must wait and see what pans out over the next year. One could not leave the estate the way that it was because it was not working.
Mr. Tom Coughlan:
I thank the Chairman for his invitation to appear before the committee today. As the presentation has been circulated to the members of the committee, I shall keep my comments brief and identify policy positions adopted by Clare County Council on the process. First, the council supports the view that the airport would be maintained in public ownership and separated from the Dublin Airport Authority to create an independent entity. Second, the council supports the drive to attract aviation related enterprises to the airport and its land bank. Third, the council wishes to be in a position to influence and participate in decisions made on the future of the airport. In that context the council very much welcomes the fact that I have been appointed director of the Shannon Airport Authority, as Mr. Pakey mentioned.
I wish to make four points on the Bill, but I shall be brief as some of them have been mentioned. First, having regard to the fact that the Shannon Group company must be innovative, proactive and dynamic, the proposed functions at head 9 are somewhat restrictive. I suggest that consideration be given to a wider range of competence for the group.
Head 12 deals with borrowing by the group. Even though the matter has been referred to, I reiterate what the previous speakers have said. For the group to carry out its functions as envisaged, and one hopes there will be wider functions than those envisaged at present, it must be in a position to finance itself and it must be empowered to raise the necessary capital and finance to achieve its objectives. A sum of €200 million is mentioned in the Bill, so I ask the committee to consider retaining that amount.
Head 18 refers to the board of the group and I raised a technical point on subsection (5) in my presentation. It may need clarification and review in the context of the appointment of the board.
Head 22 refers to the chairman and members of the board of subsidiaries. My point, to a certain extent, is similar to the corporate governance issue raised by Deputy Dooley regarding the appointment of members of the boards and chairs of subsidiaries. The chair of the group would have the power to appoint the chairs of the subsidiaries and members of the boards of the subsidiaries.
That could be a concentration of power in the hands of the chair at the expense of the board having a role in those decisions. It is in the context of corporate governance that I would have concerns about that.
The Bill seeks to legislate for the implementation of the new group. The Bill, when taken in conjunction with the existing corporate governance codes, will meet the requirements of the Shannon Group company.
With the Chairman's consent, I will raise one other issue which is related to aviation and to Shannon, but also to the more general aviation related business. It is the issue of a commercial rates incentive scheme recommended by the Shannon Aviation Business Development Task Force report of 2012. It comes back to what Senator Mulcahy referred to, namely, the need to drive enterprise and job creation. A rates incentive scheme was introduced for urban renewal some years ago and it was very successful. There is provision in the Finance Act 2013 for tax reliefs for certain aviation services facilities, and the suggestion is that a commercial rates incentive scheme could be considered for aviation related facilities. That could help to drive the aviation business, which would be of keen interest to Shannon and to the airport.
I thank the Chairman for the invitation to appear before the committee today. I hope my contribution can assist in some way in the members' deliberations.
I thank Mr. Coughlan. His presentation was very helpful and he concentrated on the areas he believes require some tweaking. The one aspect of his contribution I want to highlight and support strongly, although that does not mean I do not support the other statements he made, goes back to what I said about Shannon Chamber. It is important that the new Shannon Group is embedded in and connected to its hinterland and region. In that context, in terms of forward planning and the development of the land bank, it is important that the council retains the direct link currently provided through Mr. Coughlan by way of appointment. I would hope our submission to the Minister on this legislation would incorporate a requirement on whatever Minister is in place to give cognisance to that and that an ex officio position would be set aside for an officer of the council. It is preferable that the county manager, whoever that might be, would sit on the board and, if necessary, on some of the sub-committees, but that is the type of measure that would enhance the capacity of the overall governance of the new company and ensure it is appropriately connected in the region. I feel strongly about that.
Mr. Coughlan has identified the borrowing limit, which has arisen time and again. Issues arise also around the appointment of the boards of the subsidiary companies. I suggest to the Chairman, as a follow-on from our work today, that we invite officials from the Department of Finance, the Department of Public Expenditure and Reform or whoever is responsible for the creation of this document to attend this committee in order that we can tease through the points all the witnesses raised with a view to ensuring those elements are included in the next draft of this Bill.
I echo the point made by Deputy Dooley. It is critical, from the planning and development perspective, that Clare County Council has a strong role to play into the future. I worked closely with the manager for a number of years, and he can ease the passage of any developments that take place. It is critical that is locked in for the future because Clare County Council plays a huge role in the Shannon area and I have no doubt it will do so in future. We must involve all the players in the project. This is a huge project, not just for Shannon but for the entire mid-west, and that is from where we should be working.
I apologise for being late; I was detained in the Seanad Chamber. I echo what Deputy Dooley and Senator Mulcahy said regarding Clare County Council's continued and important involvement. It is Government policy that the local authority would take a more proactive role at national level in economic development with the enterprise board legislation and so on. However, the role Clare County Council has played at local level in the development of Shannon and with the airport and so on over the years must be acknowledged. I would like to see in the legislation some formalised structure to ensure the council and the county manager would be on the board and in terms of other areas of importance, and that such connectivity would be in the primary legislation.
I will make some observations. There is a great unity of purpose in ensuring this measure is successful. I note that some of the witnesses' suggestions for amendments to head 9 and so on are with a view to being competitive, but what would their reaction be to suggestions that they have been getting competitive advantages over some of their neighbouring airports? Knock was mentioned earlier, and also Cork Airport. For instance, the witnesses mentioned growth in passenger numbers, but do they see that happening at the expense of those other airports? Do they see the possibility of co-operation with some of those airports in areas that are of general interest that could be successfully followed together? Those are suggestions that would have come from some of the other airports. I would be interested to hear the witnesses' comments on that.
Mr. Neil Pakey:
The interesting point from a Shannon perspective is that Shannon used to have an airport with 3.6 million passengers. An increase of 1.1 million passengers over a period of seven or eight years is achievable and deliverable in my view, especially when we consider the way the airport had been managed in respect of traffic development. Over the period of the previous Administration, it did not necessarily focus on the joined-up thinking we spoke about earlier, be that with Shannon Heritage, the chambers or the councils. Stakeholder engagement was not what it could be and that is one of the fundamentals to help drive traffic growth.
The Chairman mentioned Knock Airport. It has concerned me somewhat that there are no services to Germany from Shannon, yet the smaller airports in Ireland have services to Germany. I ask the question, as I have only been in the job three or four months, as to how that can be the case. I agree there seems to be some favouritism given in terms of support to some of these services at smaller airports, but I have to look at it in the round and think "live a little bit". The relationship with Knock Airport in particular can be very positive. Therefore, we have put forward an aviation policy submission with favourable references to other airports. We have not been overly concerned that we cannot get German services when some of the smaller ones seem to be able to do that. There are the territories around the west. It is not unusual to have more than one airport. It is not unusual to have some commercial tension, and it is not unusual for the two airports to work together. I have spoken to the Knock Airport chief executive officer about how we might join up a little more. In the United Kingdom model, for example, the airports work together on many of the policy and best practice issues, and we look forward to that as well.
Mr. Tom Coughlan:
I wish to comment on the issue the Chairman raised, particularly with respect to transatlantic traffic.
We have a choice. We can have transatlantic passengers flying to Dublin and visiting the west - Mayo, Clare, Galway - on a day trip basis or we can have them flying into Shannon, staying in the west and visiting Dublin on a day trip basis. Clearly we want to see a strong western region in terms of tourism and in terms of business and for that to happen we need a strong Shannon Airport because Shannon is the transatlantic airport for the west.
Senator MacSharry raised this issue in the Seanad with me and I made the clear point to him that Knock is not Shannon. There is an industrial base in Shannon, and I repeat that. We all talk about passenger numbers. I would like to see the industrial base redeveloped because we could get major growth in that area. That is not to take away from Knock but we must be very clear on that. There is 2,000 acres of development land on the back of Shannon Airport that is structured and ready to go. Some of the buildings are old and we will need to remodel some and knock down others but the target must be to fill up the industrial estate and if we get passenger numbers on the back of that it would be welcome. We will work with that and keep going.
In terms of previous aviation policy, I contend we have had too many airports in the west and other regions getting State support from Donegal, Mayo-Galway, Kerry, Waterford and so on. For an island of our size aviation policy in the past was thwarted and not very well focused. Mayo airport has proven itself above and beyond the other airports I mentioned and there is a significant role for it in that there should be an airport servicing that region but giving State support to all the airports that received it over the years was thwarted policy. At least now we have a focused policy to try to ensure that the three hub airports succeed, Shannon being the international airport on the west coast. While the Chairman's point is well made we need to learn from mistakes made in the past also.
My apologies for being late. I am not certain if this point was dealt with and it is related to head 9 on the promotion and the marketing of the airport. I am not certain if Mr. Pakey was asked how he envisages an integrated model, say, to grow passenger numbers using the economic model in terms of assets within the property subsidiary. It has always been a particular issue for me, that of Shannon being not only an airport but a huge driver of economic development in the region. Fundamentally, however, it is an airport. Mr. Pakey might give me an idea of his proposals and how he sees those fitting into the legislation. What is his overall approach?
Mr. Neil Pakey:
I will try to do that. In the past four months we have sustained passenger growth. How have we done that after a period of five years of continued decline? I think it was 17% on average for each year. Much of it is simply relationships with airlines and convincing airlines to do business. There are many reasons an airline would do business, some of which were raised in this room because people have put forward the different good reasons people should fly into the region, but more often than not it comes down to continuous engagement with the operators and the market.
Mr. Neil Pakey:
To take it from the airline perspective, if an airline has ordered another five airplanes it will put those five airplanes somewhere. It will be all those airports that are within range of those five aircraft. There is not a definitive answer. For an airport like Shannon, it is probably an airline in the smaller international gateway airports in Europe. To take the decision by United Airlines this week, it has expanded the season, which is great news.
Mr. Neil Pakey:
Its choices of what to do with that aircraft are numerous and we have to put the best pitch forward. When we think about the challenges commercially, we have our published fees and tariffs, and we stick with those. We try to work with them along the terms of the joint marketing plans and things like that to convince them that the market will fall but it is no different from any airport in which I have been involved. Full market investor principles apply. Nothing more is done other than getting commercial. The challenges ahead is a big issue, and we will work with our colleagues from SIPTU on some of those because some of the cost base of our airport is higher than I would wish in terms of trying to match the cost to the market. We have got these challenges ahead but at the moment they are not stopping us growing the business.
In summary, Mr. Pakey is saying the fundamentals in running an airport are the same whatever the location. Specifically with regard to where Shannon Airport is located, what does Mr. Pakey see as being the major challenges for the airport in the next three years?
Mr. Neil Pakey:
I thank the Deputy. The confidence and the loyalty are there so we are pushing at open doors. The market wants the airport to be successful and we need to tap into that loyalty, get people to fly from the airport rather than just say it is a big challenge but we are making great progress towards that. One of the challenges going forward probably is managing our cost base to make it more aligned to competitors in Europe, and how we get there is a huge ask going forward.
My apologies, Chairman, for not being here but I had to attend two other meetings. As a local Deputy for the area I have a keen interest in this issue. It is one on which I have focused since becoming a public representative. The main players are present this morning.
This Bill is very important for the future of Shannon Airport and I am delighted that this committee is discussing it. We hope the Bill will be brought forward some time early in the new year but much work has been done and many of the parts have been put into place. I will go through the transcript of the meeting when it is published. What has happened in the airport during the past two years, particularly the past 12 months, has been very important. We need to consider not only the airport but, as was discussed, the Shannon free zone and the greenfield site, and a good deal of work needs to be done in that area. It was designed in the 1960s and 1970s for manufacturing and the buildings are now outdated. Therefore, a good deal of work needs to be done there.
I am confident with the management and team in place, led by Mr. Neil Pakey, CEO of the Shannon Airport Authority, that we can attract aviation-related industries into the region. That is key to the development of Shannon Airport into the future. There are 20 or 30 companies there but much more could be done as we move forward and as the aviation industry changes. There is a new focus in the industry and with the airlines and in this context Shannon can be a hub for the east and the west as we move forward. I support what is happening. I work with the airport authority, as do all the local public representatives, and Shannon Chamber does its bit, as do the other players who were here this morning.
We are on their side. We will ensure Shannon Airport works in conjunction with the Chairman's local airport, Knock Airport, which was also mentioned. I am always of the impression that the airports on the western seaboard should be working together. That is particularly relevant now that €8 million is being pumped into the wild Atlantic trail to have signposting, etc., ready for next year. Airports like Shannon and Knock will be of strategic importance in the context of that route, which will be publicised all over the world. We can all take a piece out of that. While I am not suggesting that Shannon Airport owns the transatlantic business, there is no doubt that it is of great importance for the mid-west. According to a poll that was conducted by RED C last year, between 30% and 40% of tourists who access this country through Shannon Airport stay on the west coast. That is extremely important for Mayo, Donegal, Galway, Kerry and west Cork.
We cannot forget Limerick. It is very important, especially as it will be the city of culture next year. The Minister, Deputy Noonan, is pumping a great deal of money into the area. There is no doubt that Limerick, like my own county, has an important role to play.
I would like to conclude by mentioning a statistic pertaining to the Cliffs of Moher project. It is hoped that 950,000 people - just short of 1 million people - will visit the Cliffs of Moher this year. That will have a significant impact on tourism along the west coast of Ireland.
I thank Mr. Thompstone, Ms Downes, Mr. Pakey, Mr. Reidy, Ms Boushell and Mr. Coughlan for the contributions they have made to this morning's meeting. The answers they have given to our questions will be of great benefit to us when we prepare our response to the Minister. At next week's meeting, the committee will consider the general scheme of the proposed Bill in the context of the points that have been made, with a view to agreeing a position before responding to the Minister. Is that agreed? Agreed.