Séamus Brennan (Dublin South, Fianna Fail)

My contribution will be on the record. Lending to State companies is an attractive proposition for banks. I deplore the leaking of financial information which seems consistently designed to undermine the determination of this Government and these Houses in doing their duty.

I turn now to another issue which seems to be causing some confusion among media commentators. I emphasise that the three new airport authorities will continue to be State-owned as the Government believes that the State is the most appropriate shareholder for such a vital part of our infrastructure. This is an important issue and worth reflecting upon as other approaches have been suggested in recent years.

The House will be aware that, just five years ago, the board of Aer Rianta recommended, in its strategic review for the former Department of Public Enterprise, that the company should be authorised to prepare for an IPO within three years. This approach was endorsed by the subsequent report by Warburg Dillon Read commissioned jointly by the then Departments of Public Enterprise and Finance and a part privatisation was favoured by the Department of Public Enterprise.

More recently, in November 2002, not long after taking office, I received a letter from Aer Rianta proposing the sale of approximately one third of the company to a large international bank and I was reminded again of this proposal in July 2003. The Government said no to that proposal because it would inevitably lead, in time, to majority private ownership and the eventual replacement of a State monopoly with a private monopoly controlling our three most important strategic airports.

Dublin Airport is a European-scale airport and makes a vital contribution to our national economy because of the importance to us of international access for tourism and industrial development. It already deals with traffic of almost 16 million passengers and this is expected to reach 30 million by 2020. As our major airport it needs constant leadership so that it can continue to develop and grow in a way which engenders confidence in its customers and responds to the needs of its stakeholders. Those stakeholders include the State as shareholder, the airlines and other aviation companies, the aviation regulator, the public at large and the business and tourism interests which rely on Dublin Airport for their essential links to a wide range of locations in European and North American markets and elsewhere. Needless to say I believe that a successful Dublin Airport will also be good for the airport's management and employees who are of course key to steering the airport through the many challenges that lie ahead.

Cork Airport serves our largest provincial city and in Irish terms there is a significant and growing catchment area for its services. It is close to some of our most attractive tourist locations and under the national spatial strategy it will be a strong growth centre, which will counterbalance Dublin's scale and size. Its traffic has been significantly expanding from 1.5 million passengers in 1999 to 2.2 million passengers in 2003. The airport is also benefiting from a major new terminal investment which will enable it to cater for even greater growth in the years ahead. I expect a new airport authority board to build on this potential and work with airport management and staff on capitalising on the region's capacity for industrial and tourism growth.

Shannon Airport is unique in its location and the importance of its links with North American markets. However, I believe it will diversify in the future and will not be unduly dependent on North America, the market that played such a large part in its aviation history. I know from my contacts with the board designate that it has much confidence that it can broaden its traffic mix and that in particular much can be done to attract low cost services to the airport from European locations. I share that confidence.

It is no secret, however, that Shannon must make much progress in tackling the problems of its cost base if it is to achieve the commercial success that is within its grasp. The new board will draw up a comprehensive business plan to show how best to exploit its market opportunities and to realise the efficiencies which will ensure it can reap those opportunities.

As the House will be aware, the setting up of a new autonomous airport authority at Shannon Airport will have implications for Shannon Development, the State agency charged with regional and economic development in the mid-west region. My colleague, the Tánaiste and Minister for Enterprise, Trade and Employment, has been in discussions with the chairman and board members of Shannon Development to explore how best the two bodies can contribute to furthering the interests of the mid-west region. The board shares the Tánaiste's view that a viable and sustainable Shannon Airport is a critical requirement for continuing and future regional competitiveness of that region. One of the options under consideration is the transfer of the assets of the Shannon Free zone to the new airport authority. I understand other options have emerged in the course of the Tánaiste's discussions with the board and that these are also being considered. In reaching a decision on this issue, it is the intention to put in place the most sensible and efficient structures and to manage the region's most valuable and strategic assets so as to optimise their benefits to the entire region.

Before dealing with some of the detail of this legislation, I wish to rebut any suggestion that this legislation was formulated without consultation with Aer Rianta. While the drafting of the legislation was the responsibility of the Parliamentary Counsel assisted by our team of advisers, the broad framework for this legislation emerged following extensive interaction with Aer Rianta and its advisers.

Following the Government decision to restructure Aer Rianta in July 2003, the Department and its advisers and Aer Rianta and its advisers have been in contact about key aspects of the restructuring. From the earliest stages of those contacts it was apparent that the technical issues relating to restructuring were intricate and that close consultations would be necessary throughout the process. In particular, the availability of distributable reserves was recognised as critical to the distribution of the assets of Aer Rianta because of Irish and EU company law capital maintenance obligations. As a result of the current insufficiency in Aer Rianta's distributable reserves, the constraints involved had a major impact on the phasing of the distribution of Cork and Shannon airport assets which currently exceed those reserves.

Following a prolonged period of dialogue with Aer Rianta and its advisers the Department presented to Aer Rianta in February last its proposed framework for the restructuring of Aer Rianta. I can confidently state that the essential features of that framework are reflected in the State Airports Bill, subject to the inevitable refinements that emerged following further detailed work by the Department and its advisers.

In the period since February our advisers, PWC, compiled an analysis of the financial implications of stand alone Shannon, Dublin and Cork airports and projections for the State airports in the years ahead. The capacity of the Aer Rianta Group to distribute the assets of Cork and Shannon and the necessary phasing of the transactions were also addressed. This analysis provided me with broad financial perspectives on the businesses of the three airports over the period ahead that were essential to determining the overall approach to restructuring and this legislation. The PWC working papers were also shared with the trade unions' financial advisers.

I have always been clear, and said so on numerous occasions, that these broad financial perspectives were not, and could not be, comprehensive business plans for the three State airports since I have consistently maintained that only the three new airport authorities, which will be responsible for the development of the three airports, are in the proper position, once this Bill is enacted, to develop comprehensive business or action plans. There is no question of putting the cart before the horse in this regard. The horse is the new airport authority in each case. The enacting of this legislation and the putting in place of the new airport authorities is the correct sequence for developing comprehensive business plans.

The PWC working papers confirm that there are pre-existing challenges relating to the State airports regardless of the decision to restructure them. Dublin Airport requires dynamic effort by the new authority so that the airport can invest to realise its growth potential and also to maximise operational efficiencies. Shannon Airport must also confront its particular commercial challenges in any event. PWC has given its view that the establishment of three independent entities will allow the major issues identified to be addressed in a focused way with fresh ideas, a clearly defined capital pool allocated to each airport and an autonomous approach pertinent to the business priorities of each airport.

It remains the Government's policy position that independence provides the best chance for each of the airports to be viable entities, responding effectively and efficiently to the business opportunities in their regions. On that basis Government reaffirmed the decision to proceed with restructuring and agreed to publish the State Airports Bill.

I have already mentioned the financial information shared with the trade unions' financial advisers as part of the engagement with the trade unions on the decision to proceed with the restructuring of Aer Rianta. Prior to the sharing of this financial information discussions had taken place on the general issue of the restructuring proposals and on various other issues, including the terms and conditions of Aer Rianta staff post-restructuring. The restructuring proposals will not result in any downgrading of the terms and conditions of Aer Rianta employees on transfer to the new independent airport authorities. In line with commitments given to the ICTU, appropriate provisions have been included in section 12 of the legislation to this effect. I can also reaffirm that the trade unions will be fully consulted on all issues of concern including the preparation of business plans for each airport with a view to maximising agreement prior to the transfer of assets and staff to Cork and Shannon Airports. I also point out that the legislation provides at section 12(11) that there will be discussions with recognised trade unions or staff associations for a period of up to six months from the date this Bill is enacted on the form of any new collective agreements and the bargaining structures through which they are arrived at and developed following the appointed days.

Turning to the content of the State Airports Bill, it has been carefully designed to deploy the necessary mechanisms under company law to provide maximum flexibility to effect the restructuring in conformity with the capital maintenance provisions of the Companies Acts. It provides a framework to allow for an orderly approach to the distribution of assets and facilitates the phasing which will be necessary in respect of the distribution of Cork and Shannon because of the current insufficiency in Aer Rianta's reserves.

The Bill proposes an enabling framework for the restructuring which is in line with the existing provisions of company law. Aer Rianta will effectively transfer the assets relating to the airport businesses at Cork and Shannon to the new airport authorities established under the Bill in return for the issue of shares by the new companies to the Minister for Finance. For company law and accounting purposes the transfers will be regarded as distributions made by Aer Rianta cpt to its shareholder the Minister for Finance. Consequently Aer Rianta cpt will only be able to make the transfers when it has available distributable reserves equal to the net value of the assets transferred. As the distributable reserves currently available to Aer Rianta cpt are insufficient for this purpose, a phased approach is provided for in the Bill which will allow for one of the new airport authorities to be vested in the relatively short term after enactment, that is, Shannon Airport, while the second will be vested once sufficient further distributable reserves have been built up within Aer Rianta cpt, that is, Cork Airport. A portion of the Cork Airport assets will remain in Aer Rianta cpt and be subject to a finance lease between Aer Rianta cpt and the Cork Airport Authority.