Paul Coghlan (Fine Gael)

I thank the Minister for Transport for his overview of the legislation although I disagree with much of what he said. The State Airports Bill 2004 allows the aviation regulator to set passenger charges for Dublin Airport but removes Shannon and Cork Airports from regulation due to their weaker financial positions. This provision appears to conflict with the Aviation Regulation Act 2001 which obliges the regulator to oversee all airports handling more than 1 million passengers a year. Shannon and Cork Airports each handle more than 2 million passengers a year.

Confidential documents leaked to the media have highlighted concerns about the impact of the break-up of Aer Rianta and the company's €484 million debt. Last week, Independent Senator Joe O'Toole, who I understand will contribute to the debate later, asked that the Attorney General examine the implications of the break-up on the debt provision of the company. If Aer Rianta is split, its banks and bond holders are likely to demand higher repayments. The Minister dealt with that aspect in his contribution but a question arises in regard to the legal and actual terms in that it will be a different company.

On 30 June, the Aer Rianta chief executive, Margaret Sweeney, wrote to the Assistant Secretary in the Minister's Department to highlight those concerns. She quoted advice to the company from Arthur Cox, solicitors, and IBI, which stated that agreement would be needed from some lenders to avoid defaults arising from the restructure. That is because some of the company's loan deals contain restrictions on Aer Rianta ceasing to retain ownership of Cork and Shannon Airports and restrictions on the distribution of the company's assets. She said that if the group failed to secure waivers removing these restrictions, and the debt had to be repaid, "refinancing would be required" and "is likely to be costly". She further stated: "A situation could arise whereby refinancing may not be available and in such circumstances, the company would be likely to find itself in an insolvent position".

Despite reassurances on numerous occasions that the Minister would prove the business case for the break-up of Aer Rianta, we have not seen anything in regard to that rationale to date. As I understand it, we are being asked to wait until April 2005. At that stage legislation will be passed and will be virtually impossible to reverse.

This legislation will allow the three nominated boards at Dublin, Cork and Shannon, which are already appointed — I am not sure if they are established — to draw up business plans but they could have done that without the legislation. Perhaps, when responding, the Minister might outline when operational control will commence, although I recall he talked about an appointed day from which everything will flow.

The Minister does not appear to have a clear policy for the Irish aviation sector and this legislation does not provide any overall guidance. In effect, this legislation merely replaces the board of Aer Rianta with the board of the Dublin Airport Authority. It is shifting board name and little else. A slight difference aside from the name change is that the Dublin Airport Authority will now effectively have authority over Shannon and Cork Airports until such time as they become separate entities. The board of the Dublin Airport Authority will make decisions for the other two airports, despite the fact that, in effect, they will be competitive rivals after the break-up.

The decision to break up Aer Rianta has been long-fingered and a wait and see approach based on the judgment of the Minister for Finance, Deputy McCreevy, has been put in place until April 2005. In his contribution the Minister referred to "subject to the consent of the Minister for Finance". It appears, therefore, that the Minister for Finance has the power of veto.

The Minister for Finance has been sceptical of the business argument in favour of breaking up Aer Rianta. In many respects, this is a slight by the Cabinet on the ability of the Minister for Transport to carry through this process. It would appear that the ultimate decision has effectively been taken away from him, an aspect he might comment on when responding. In a sense this legislation is little more than a holding exercise delaying the break-up of Aer Rianta until April 2005.

Essentially, this legislation is a face-saving exercise. The Minister is now in a position to state that despite two years of sitting on this issue, something is at last being achieved. That is clearly not the case. The legislation is not driven by any coherent policy decision. It merely replaces one board with another. The Minister still has not presented any solid evidence that the three airports can stand alone as viable entities. This legislation is not based on a solid business argument for which my party has consistently called. It should not be for appearance sake but should be based on solid and reasoned business arguments.

Time has been wasted in negotiating this legislation. The Minister could have instructed the boards he appointed to draw up the necessary plans. The availability of these plans would have ensured a position where the merit of this legislation would have been evident to all. If the three respective boards had put forward the business rationale for the break-up of Aer Rianta, my party could have supported such legislation.

We are again being kept in the dark and expected to approve legislation which contains no overriding policy or business argument. We need to know the full facts before we can support the division of our airport structure. It is far from reassuring to the public to know that even the Minister for Finance has serious doubts about the success of this project.

Fine Gael has called on the Minister to publish a White Paper on future policy in the aviation sector. That is necessary, particularly in dealing with issues such as a new terminal at Dublin Airport, the future of Shannon, especially if the stopover ends or is significantly reduced, a second airport for the Dublin region and the sale of our national airline, Aer Lingus.

What is the position in regard to the second terminal for Dublin Airport? That is an important question. How will the assets be distributed? If the break-up occurs, what will happen to Aer Rianta International and the Great Southern Hotels group? Will the board members of Cork and Shannon Airports have any say in the actions taken by the Dublin Airport Authority? If not, what will be different from the current position in which all three airports operate as one body? Why should the board of Dublin solely take decisions for Shannon and Cork Airports over the next year? Why does this legislation allow for airport charges to be regulated by the aviation regulator at Dublin only and not at the other two airports? If airport charges rise at Cork and Shannon, will that affect the development of those two airports into low cost carrier airports?

The company suffered from poor profitability in its hotel subsidiaries last year, a subject to which I will return later. There appears to be a number of inconsistencies in regard to comments made in the past and perhaps the Minister will address those when responding.

The Taoiseach has consistently stated that he believes Aer Rianta must remain State owned, and he is opposed to privatisation. He has also stated that he views the maintenance of all jobs at Aer Rianta as essential. That does not appear to apply to the hotels company, which is wholly owned. If it does, perhaps the Minister would comment on it when responding.

The Minister was quoted in The Irish Times on 31 May as stating:

Because it is a plc there are revenue reserve issues, there are distribution of assets issues, there are ownership issues of assets. There are a fair few complicated financial transaction issues which the Department of Finance and I are battling out between us but Government policy is to give full autonomy to the airports.

The PricewaterhouseCoopers report, which the Minister commissioned, points out that the business plan for each airport is a matter for each new designated board. Fine Gael believes we must have business plans on the table which unquestionably show the viability of all three State airports once restructuring has taken place. That has not happened to date. The PricewaterhouseCoopers report also accepts that additional capital expenditure will have to be covered by increasing landing charges. No documentation has yet entered the public domain which constitutes a clear and coherent business plan. There does not appear to have been any appraisal undertaken on the future viability of each independent, stand alone airport.

There is a massive public deficit of information as regards the following: strategies and plans for entities; capital expenditure and investment plans; management team and operational plans; the nature of ongoing relationships with existing Aer Rianta operations; financial projects, cash and debt management; pricing policies; and interface with the regulator.

We further believe restructuring proposals for Aer Rianta must address the following: the "non-transparent" subsidies between the three airports; the differing priorities of the airports; the serious constraints on the availability of capital; and the inefficient allocation of capital between the airports. Because it is a plc, there are revenue reserve issues, distribution of assets questions and issues of asset ownership.

Passenger charges at Dublin Airport may have to rise to up to €9.50 after the break-up. There is a current ceiling on landing charges at Dublin Airport of €5.29. This increase is justified in terms of the need to deliver sustainable financial ratios. It also takes account of the fact the Minister for Transport intends to shift the debts of Shannon and Cork onto Dublin Airport's balance sheet. That is something we need to hear more about.

The IBI report says the PricewaterhouseCoopers study does not take account of a potential shortfall in the Aer Rianta pension fund. There is a need to review all the implications arising from restructuring in that regard. With regard to a second terminal for Dublin Airport, current facilities there can cater for 20 million passengers annually. However, from 2005 forecasted demand for the airport suggests that additional capacity will be needed. Aer Rianta has signalled that its pier D terminal facility will shortly be abandoned because of a failure by the Government to give a formal go-ahead. The terminal was to be a quick turnaround facility, especially suited to low-cost airlines. The company indicated that over €7 million of investment might be written off as a result. The construction of this new pier was first ordered by the Government, which then changed its mind and rendered it redundant. There are serious questions to be answered on this.

There is a major imbalance between the growth of passenger numbers at Dublin in comparison to what is being experienced at Cork and Shannon. Shannon's cost base is also significantly higher than may be justified. There has been only limited success in attracting the low-cost airlines, aviation's fastest growing sector. Aer Rianta's 2003 annual report says that 20.5 million passengers travelled through Irish airports last year, up 5.8% on the previous year. Some 80% of these passengers travelled through Dublin Airport. The principal challenge facing the three airports is to develop and facilitate growth in passenger traffic.

I was disappointed that the Great Southern Hotels were not mentioned in the Minister's speech. I am aware of the difficulties they have had, but there has been massive investment in some of them. These are well located properties, as the Minister knows. Aer Rianta would regard them as not being core. As the Minister or the chairman of the company, Mr. O'Hanlon said at one stage, Aer Rianta is not in the bed and breakfast business. Imagine the great concern in Killarney, Parknasilla, Galway — both Eyre Square and the Corrib — Derry, Rosslare, Dublin, Cork and Shannon. Surely it is inconceivable that each of the three authorities would not wish to have the hotels located on or adjacent to its own property. Major concern has been expressed in each of the localities, naturally among staffs, in all of the tourist centres and among taxpayers generally. I ask the Minister, when he responds, to tell the Seanad, in a straightforward way if he can, what the Government's position is as regards the hotels. Will they be sold as a group or individually? I understand a new chief executive has been appointed. What is his brief from Aer Rianta? Will he be instructed to prepare for a sale or will he first be required to sell off land attached to the various properties which is regarded as surplus to requirements? I look forward to hearing the Minister's replies to all of those questions.