Tony Killeen (Clare, Fianna Fail)

I thank Senator Minihan for raising this matter, in which I have a particular interest albeit perhaps more from a Shannon perspective.

The State Airports Act 2004 provides a framework for an orderly approach to the distribution of the assets of Shannon Airport and Cork Airport in conformity with the provisions of the Companies Acts 1963 to 2003. The boards of Cork Airport and Shannon Airport are now charged with making preparations to assume responsibility for the ownership and development of the airports. They are also empowered to undertake certain management and operational functions on an agreed basis with the Dublin Airport Authority during the interim period.

Under the State Airports Act, before any assets can transfer to either the Shannon Airport Authority or the Cork Airport Authority, the Minister for Transport and the Minister for Finance will need to be satisfied as to the financial and operational readiness of those airport authorities. Accordingly, each airport authority is required to prepare a comprehensive business plan and to obtain the Ministers' approval for these plans before any assets can be transferred.

At an early stage in the airport restructuring process, it was indicated that the intention was that both the independent Cork and Shannon airports would commence on a debt-free basis. However, that was always going to be subject to determining the optimum mechanisms for allocating airport assets among the three airports in compliance with the capital maintenance rules and other provisions of the Companies Acts.

There are technical company law and accounting requirements that would need to be satisfied in any transfer of assets from the Dublin Airport Authority to the Shannon Airport Authority and the Cork Airport Authority. For company law and accounting purposes, such transfers of assets would be regarded as distributions made by the Dublin Airport Authority to its shareholder, the Minister for Finance. Consequently, the Dublin Airport Authority will be able to make the transfers only when it has available sufficient distributable reserves to match the value of the assets being transferred. The level of debt associated with the assets of Shannon and Cork airports and the level of distributable reserves required to transfer those assets to the two authorities will emerge from the work currently under way on the development of business plans by the three airport authorities. These data will feed into the decision on determining the optimum mechanisms for allocating airport assets among the three airports.

The position on the transfer of assets to the Cork Airport Authority was set out in the course of the passing of the State Airports Act 2004. In view of the tightness of the DAA's distributable reserves, a phased approach to restructuring was provided for in the Act. At that time the option was mentioned of the negotiation of a finance lease covering a portion of Cork Airport's assets to facilitate the earlier establishment of Cork as a fully independent airport, with the remaining airport assets being transferred to the Cork Airport Authority.

Under this option, the Cork Airport Authority would have no bank debt at the time of separation but there would be a finance lease with the Dublin Airport Authority in respect of a portion of its assets. Cork Airport will benefit greatly from the major investment currently being made in the development of its facilities. The new terminal will deliver an annual passenger capacity of 3 million people, with the scope to expand that to 5 million when needed. In these circumstances, the advantage of the finance lease option is that it would provide the basis for the Cork Airport Authority to take over full responsibility for the management and operation of the airport at the earliest possible time and thereby drive future growth using the platform provided by the new facilities.

As I said, the business planning process will provide a basis for determining the most feasible options for carrying through the restructuring. The Senator can be assured that, as required under the State Airports Act, the ability of both Shannon and Cork airports to operate on a fully-commercial basis will be fully assessed as part of this process and will be factored into the decisions made.