Joe Carey (Clare, Fine Gael)
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I thank you, a Cheann Comhairle, for allowing me to raise this important issue.

The hospitality industry is in free-fall, with hotels closing and jobs being lost. The Government, however, has done nothing to stem the tide. In fact, the Minister for Finance's travel tax will make this horrendous situation even worse. If the travel tax goes ahead as planned, Ryanair has warned that it will reduce flights to and from Shannon from 30 March. Last year Ryanair accounted for 60% of all traffic through Shannon airport, carrying 1.9 million passengers to and from 30 different destinations. In recent weeks Ryanair has said it will have no choice but to reduce its Shannon-based aircraft from six to four this summer. It will also reduce from 30 to 25 its route network at Shannon. Ryanair's weekly Shannon service will be reduced from 136 flights to 116. These cuts will mean a reduction of 700,000 passengers using Shannon airport this year. The mid-west region, including County Clare, can ill afford this loss.

I spoke with Ryanair's chief executive, Michael O'Leary, two weeks ago and he informed me that his company would reverse its decision on these cuts if the Government scrapped the flat €10 travel tax. The average price of a Ryanair flight is €10 during the winter months and, in effect, the Minister is imposing a 100% travel tax on Ryanair passengers. There is no fairness or equity in this tax, which must be either scrapped or introduced as a scaled percentage on the price of the flight ticket. It is simply not right or fair to charge a passenger travelling to America the same tax as one travelling to London.

Earlier today the Minister for Finance announced that airports in this State which had less than 50,000 departing passengers in the previous calendar year will be exempt from the travel tax. This is positive news for airports in Donegal and Sligo. The Minister's statement, posted on his Department's website, states:

Concerns have been raised regarding the impact the air travel tax could have on small peripheral airports and their ability to develop new routes. The importance of such airports to the local area has also been stressed. I indicated that I would take the matter into account and reflect on it.

Shannon airport is the key economic driver of the mid-west region. We too have major concerns about the flat €10 travel tax, as it will have a devastating impact on our economy. The travel tax has placed in jeopardy Ryanair's €400 million investment in Shannon airport. Some 100 direct jobs and 700 indirect jobs will be lost at the end of March. The lost revenue from 700,000 fewer passengers will place further pressure on retailers in County Clare who are already reeling from the effects of the recession. The tourism industry is being thrown to the wolves by this tax. On a practical basis, it will mean fewer bed nights, fewer coaches, fewer taxi fares and fewer meals in restaurants.

I plead with the Minister to reflect on this damaging tax, as he has done for other airports. He should consider the immediate dire consequences the tax will have on the mid-west region, including Shannon airport. Let the Government put balanced regional development first. The Minister should either scrap this tax for Shannon airport or introduce a fair tax based on a percentage of the cost of flight tickets. The Minister should not lose sight of the fact that we are an island nation.

John Moloney (Laois-Offaly, Fianna Fail)
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I am pleased to take this opportunity to clarify matters relating to the introduction of an air travel tax that the Minister for Finance announced in budget 2009, which will come into force for passengers departing from Irish airports as and from 30 March 2009. The Finance (No. 2) Act 2008 confirms the introduction of an air travel tax from 30 March 2009. The general rate applying will be €10 per passenger, with a lower rate of €2 for short air journeys. The Minister, however, took account of concerns raised by the regional airports, particularly those on the western seaboard.

The lower rate of €2 will apply to departures from any Irish airport where the destination is 300 kms or less from Dublin airport. This means all Irish departures to locations such as Manchester, Liverpool and Glasgow will be subject to the €2 rate. The Minister has also decided that a relatively short air journey should reflect a lower charge. It is not unusual for the price of fares for longer journeys to be higher than those for shorter journeys and the tax reflects that position. The Minister was also conscious that the tax would apply to both the outward and return journeys in respect of domestic flights. In addition, the Minister was cognisant of the greater competition that exists from other forms of travel for that sector relative to longer flights.

Ireland is not unique in applying a tax on air travel. Many EU member states and other countries worldwide apply similar taxes. For example, our nearest neighbour, the UK, has applied a similar tax for several years. Currently, the UK applies an air passenger duty of £10, approximately €11, for a standard ticket for any destination in the UK or Europe. For all other destinations, the rate is £20, approximately €22. Both these rates double for tickets other than economy class.

Moreover, the UK Government announced in its 2008 pre-budget speech that it would be revising the duty with an introduction of four bands of 2,000 miles each together with an increase in rates of air passenger duty with effect from 1 November 2009. The new rates will comprise the following: band A, zero to 2,000 miles, £11; band B, 2,001 to 4,000 miles, £45; band C, 4,001 to 6,000 miles, £50; and band D, over 6,000 miles, £55 in the case of economy class. These rates double in the case of tickets other than economy class. The base band A rate will be further increased to £12 from 1 November 2010, with increases of 30% to over 50% being applied to the other three bands B, C and D.

A new Dutch aviation tax entered into force in July last year. The tax is charged at €11.50 for EU destinations and €45 for other destinations. In France, the civil aviation tax is charged at approximately €4 for EU destinations and €7 for other destinations. Australia and New Zealand, both dependent on air travel like Ireland, also apply departure taxes.

The proposed air travel tax rates, both for shorter and longer journeys, are not unreasonable when compared with rates in other countries. For example, a person travelling in the UK will be liable to pay the UK air passenger duty of £10, approximately €11, on each leg of the journey. A passenger departing from Manchester to London will be subject to the £10 tax and on the return journey departing from London to Manchester will also be subject to the £10 tax, giving a total tax liability of £20, approximately €22. In Ireland, a person travelling in the State will be liable to pay €2 in tax on each leg of the journey, giving a total tax liability of €4. Furthermore, both the UK and Dutch rates in respect of longer flights are over two and four times higher, respectively, than the Irish rate.

The Government also acknowledges that low cost travel has been good for Ireland. The pioneers in this area deserve to be commended. However, in analysing the new tax, we must not overplay its impact.

For example, a fare from Shannon to London Stansted that is initially presented as €15 with a similar €15 return fare will actually cost a passenger over €90 when all charges are included.

Joe Carey (Clare, Fine Gael)
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That is not correct.

John O'Donoghue (Kerry South, Ceann Comhairle)
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The Deputy cannot interrupt the Minster of State because this is the Adjournment.

John Moloney (Laois-Offaly, Fianna Fail)
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It is in this briefing, so I must assume it is correct. I do not make it up as I go along.

This assumes no luggage is checked in which would cost more. Included in the €90 is a €5 credit card handling fee per flight segment. This latter practice has been the subject of much criticism by consumer bodies. Assuming fares remained the same, the price of this trip would rise to €100 on foot of the new tax. In the case of trips to Manchester, Liverpool and Glasgow the price would rise by just €2.

John O'Donoghue (Kerry South, Ceann Comhairle)
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The Minister of State's time has expired.