Brian Lenihan Jnr (Dublin West, Fianna Fail)

I thank Deputies Pat Breen and O'Sullivan for raising this matter on the Adjournment.

The Government is committed to the liberalisation of air transport services between Ireland and the US and it is my firm belief that the introduction of an EU-US open skies regime will be good for Irish tourism, good for the country's business links and good for the economy generally. A number of reports, such as the Brattle report for the European Commission, the report of the tourism policy review group and the Air Transport Users Council, ATUC, of the Chambers of Commerce of Ireland, all support moving to open skies with the US as soon as possible.

As experience at European level shows, liberalisation leads to strong growth and decreased prices in the aviation market. Freedom of access leads to many more destinations being served. A liberalised EU-US open skies environment could lead to similar growth across the Atlantic and will also mean more business opportunities for Irish airlines, particularly Aer Lingus. The Government's main objective in selling a majority of its shareholding in Aer Lingus last year was to provide the company with access to new equity to enable it to compete effectively and to grow its business on short-haul and long-haul routes. As a result of the proceeds generated by the IPO, Aer Lingus will, under the proposed open skies regime, have a unique opportunity to fulfil its potential and to contribute in a positive way to the country's economic development through the expansion of its transatlantic operations. It is noted that the head of the Irish Hotels Federation recently commented that open skies with the US could double the number of US visitors to 2 million within seven years, generating an extra €1 billion for the Irish economy.

In November 2005, EU and US negotiators concluded work on the text of a first phase EU-US open skies agreement that included a transitional arrangement for Ireland, relating to the phasing out of the Shannon stop. During the transition period, the ratio of Dublin to Shannon flights would move from 1:1 to 3:1, so that for every one flight to or from Shannon, a carrier could provide three flights to or from Dublin. The draft agreement was unanimously endorsed at the December 2005 Transport Council subject to sufficient progress by the US side on opening up ownership and control of US airlines to EU investors.

In December 2006, following opposition from Congress, the US authorities withdrew the rule-making proposal concerning control and ownership of US airlines. The rule-making provision has been a key demand for a number of member states and its withdrawal by the US side is a significant barrier to concluding the EU-US open skies agreement. Negotiations at EU-US level resumed in January 2007, with both sides reaffirming their commitment to the goal of concluding an EU-US agreement that would open access to markets and maximise benefits on both sides of the Atlantic.

Following intensive negotiations over recent weeks a draft open skies agreement between the EU and US was finalised last week and the text will be presented to Transport Ministers for decision at the next Council meeting on 22 March 2007. As the transitional arrangements were incorporated in the proposed EU-US aviation agreement, their implementation was conditional on the conclusion of that agreement. It has been agreed with the US and the EU that these transitional arrangements will stand and will enter into effect immediately following approval of the draft agreement by the Council of Ministers. It is not true to say that a reduced transition period has been negotiated. The original transitional provisions, as negotiated in November 2005, still stand.

The Minister is confident that the liberalisation of air transport services will deliver major benefits for Ireland's economy. The additional access to the US, as well as the increased numbers of US tourists into Ireland, will greatly benefit Irish tourism, aviation and business links generally in all parts of the country, including Shannon and the wider mid-west region. With a view to assisting Shannon Airport and the wider region to adapt to the proposed new arrangements under an open skies regime, the Department of Transport is currently finalising an economic and tourism development plan for Shannon. This plan was initiated in the context of the ongoing EU-US negotiations on open skies when negotiators concluded work on the text of a first phase EU-US agreement in November 2005, which included a transitional arrangement for Ireland relating to the phasing out of the Shannon stop.

In preparing the plan, the Department of Transport has consulted with the Department of Arts, Sport and Tourism, the Department of Enterprise Trade and Employment and the Department of Finance. A liaison group, established by the Mid-West Regional Authority, has separately prepared a report on the future development of the Shannon region as an input to the plan. The Minister intends to bring the economic and tourism development plan to fruition in the context of the formal agreement of the EU-US open skies proposals.

The aviation industry has experienced dramatic change in recent years and the future development and growth of all international and regional airports in the State will depend largely on how each airport responds to the new challenges and the extent to which emerging opportunities, such as open skies, can be exploited. If Shannon Airport is to develop as a successful and sustainable business it is clear that one of the issues that must be addressed in its business plan is the airport's uncompetitive cost base. When that obstacle is overcome the airport has a real opportunity to develop new markets and to attract the airline customers that it needs for its commercial future, the area's tourism and other industry.

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