Alan Kelly (Tipperary North, Labour) | Oireachtas source

When the Minister, Deputy Varadkar, and I were appointed to the portfolio of transport, tourism and sport in March 2011, we made the aviation sector one of our key priorities. One of the issues that needed to be addressed was the unusual relationship between the three State airports since the enactment of the State Airports Act 2004. This Act provided for the establishment of two new public limited companies - Shannon Airport Authority and Cork Airport Authority - for the purposes of owning, managing, operating and developing these two airports, but in reality these functions were never transferred from the Dublin Airport Authority, DAA. Both companies were established in 2004 and have their own boards, but they have very limited autonomy from the DAA, which remains responsible for all significant commercial decisions with regard to both airports.

The onset of the economic crisis in 2008 created severe turbulence in the aviation sector. This is because of the close correlation between trends in the national economy and trends in the aviation sector, which means that the key indicators of both sectors mirror each other with a short time lag.

As the economic situation worsened, there emerged a particular concern for the future viability of Shannon Airport given the quite dramatic fall in its passenger numbers in recent years.

Last week, my colleagues, the Ministers for Public Expenditure and Reform and Finance, delivered the budget for next year and announced expenditure cuts and revenue raising measures amounting to ¤3.5 billion designed to reduce the general Government deficit to 7.5% next year, down from a projected 8.2% in the current year. The target is to reduce the deficit further in stages, to 2.9% in 2015. We will continue to face up to the challenges which this involves in a sensitive and as fair a way as possible.

What is the relevance of this to our State airports and to Shannon Airport in particular? While we have mapped a clear road to the recovery of our economic sovereignty and to the economic recovery of this country, the scale of our current difficulties requires that every part of the State's business, whether in the commercial sector or not, contributes to this goal. We are, for example, undertaking the most comprehensive reform ever of the public service with the aim of reducing public expenditure and staff numbers while at the same time endeavouring to maintain key services and social supports. This is far from easy but we have to do it and we must succeed. We simply have no choice.

Our efforts cannot be confined just to the Exchequer finances, however. The commercial State sector must also play its part to the full. In current circumstances, this is a moral as well as an economic and financial imperative. Our three State airports operate in the commercial sphere and can play a vital role in our economic recovery. I say "can" because, unless they are actually contributing, they could instead hold back economic development and hinder recovery.

Shannon Airport is currently in this unenviable position. It is loss-making and its passenger traffic has fallen dramatically since 2007. It is being supported by the DAA and it is not delivering to its potential for the mid-west region. Regardless of where ownership of Shannon Airport lies, this cannot continue.

The stark facts are that passenger traffic at Shannon more than halved from 3.6 million to 1.6 million in the period from 2007 to 2011 and is expected to fall further to fewer than 1.5 million in the current year. It was clear to the Minister and me that these trends could not be allowed to continue without putting the very future of Shannon Airport at stake. There was need for some intervention to put the airport on a more viable footing. This in turn required a thorough examination of all the options. Having discussed the matter with the three airports, the Minister commissioned Booz and Company, a leading firm of aviation consultants, to identify and analyse all likely options regarding the ownership and operation of Cork and Shannon airports and to make recommendations as to the optimal ownership and operational structures for those airports.

After consulting widely, Booz found Cork Airport to be performing well under DAA ownership and management and, as such, it concluded that the benefits of any fundamental change in its ownership status in terms of increased traffic and revenue for Cork would be marginal. Accordingly, the Government decided that the existing ownership of Cork Airport by the DAA would be maintained for the present and that our energies needed to be focussed on halting and reversing the serious decline of Shannon Airport.

The basic conclusion of the Booz report regarding Shannon Airport was that its decline and financial situation as a loss-making entity would continue unless there was a fundamental change in strategic direction for the airport. Having carefully considered the matter, the Government agreed in principle last May to a new strategy designed to reverse the decline in Shannon and to put the airport on a new strategic footing. This new strategy, which takes account of the Booz recommendations, involves the separation of Shannon Airport from the Dublin Airport Authority, DAA, the merging of a restructured Shannon Development with Shannon Airport to form a new entity with a commercial mandate in public ownership and the development of a suite of aviation-related industries located in the lands contiguous to the airport.

The Government also decided to rationalise the tourism and enterprise support agencies in the region. Shannon Development's tourism functions are being transferred to Fáilte Ireland and its enterprise support functions will be transferred to the IDA and Enterprise Ireland. These initiatives will serve to eliminate the historical duplication of resources and to deliver a better service to the region.

A high level steering group was established by the Ministers for Jobs, Enterprise and Innovation and Transport, Tourism and Sport to develop proposals for the implementation of the Government decision and to assess the feasibility of creating an international aviation services centre, IASC, of excellence centred on Shannon Airport. The steering group was assisted by two task forces.

The aviation business development task force was tasked with seeking out and evaluating aviation-linked business opportunities that could be associated with the merged Shannon entity and to bring forward proposals to address issues relevant to the merger for consideration by the steering group. The change management task force was formed to develop transitional arrangements for Shannon Airport and Shannon Development prior to the merger including matters relating to IT, HR, finance and accommodation. The task force also considered issues around the transfer of Shannon Development functions to the IDA, Enterprise Ireland and Fáilte Ireland and the development plans of these agencies for the region. Both task forces concluded their work last month and their reports have been published on my Department's website. The report of the aviation business development task force strongly supports the potential for the establishment of a broadly-based aviation industry cluster in and around the airport with potential to achieve global recognition while also providing a strong employment stimulus in the Shannon region. Aspects of the aviation sector that will be targeted for this purpose include aircraft maintenance, repair and overhaul, flight crew and other aviation-related training and the development of aviation logistics and cargo facilities, among others.

It is a prerequisite for airport separation that the Minister and the Minister for Public Expenditure and Reform be satisfied as to the state of operational and financial readiness, including business planning, of the three State airports. Detailed business plans for the proposed new Shannon entity, which of course includes Shannon Airport, and for the DAA, post Shannon separation, were prepared and these were subject to independent expert evaluation by KPMG on behalf of the steering group and my Department.

I am here today seeking the approval of the House for this motion because the Government is confident that Shannon is not only ready to stand on its own but will perform far better on its own, free of constraint and control by the DAA.

Of course there is a degree of risk associated with this decision but the risks for Shannon associated with retaining the status quo are, without doubt, far greater. In this regard, I have seen mention of the passenger projections for Shannon and that these seem fanciful. While the business plan is confidential, I can say that over the next five years the Shannon plan projects passenger numbers to grow from about 1.5 million this year to 2.3 million in 2017 and to 2.5 million in 2021. Shannon traffic peaked at 3.6 million five years ago. Yes, the business plan is based on that assumption. It will be a challenge I do not deny, but it is achievable. Moreover, the alternative is worse. The alternative is to accept that passenger numbers at Shannon cannot be improved. That would spell the continuation of decline at the airport and we would soon be seeking to downgrade or even wind down the structures at Shannon. That is not the future I want to see for the Shannon area, as someone who comes from there.

As the Minister announced last week, the Government has now confirmed its decision on Shannon and we are now working on the implementation of that decision. I am delighted with the news that commitments for the creation of 850 jobs have been secured by the task force from two companies as part of plans for an international aviation services centre to be located in Shannon. The longer term potential of this centre is projected to create and maintain up to 3,500 new direct jobs within five years, not including construction jobs.

While on this most important subject of jobs, I understand the concern that may be felt by the staff in both Shannon Airport and Shannon Development at this time of significant change. I acknowledge that, as with any new initiative, there are challenges ahead for the airport and for the new Shannon entity, which we will call NewCo for the time being, to be formed from the merger of the airport and the restructured Shannon Development, but I believe it also provides us with a great opportunity for Shannon and the region.

The terms and conditions of the DAA employees working in Shannon Airport will not be diminished in any way when they become staff of the Shannon Airport Authority. This was agreed following intense negotiations with ICTU in 2004 when the State Airports Act was being enacted and these protections are enshrined in that legislation. The terms of the Croke Park agreement apply to the staff in Shannon Development and, in due course, when the State owned NewCo is established, they will transfer to that company with their current terms and conditions. The workers in both Shannon Airport and Shannon Development are vital to the success of the airport and the vision for NewCo. Together with management, I am absolutely convinced that they can and will work together to ensure, not just the survival, but the renewed growth and success of the airport and the region.

I know that some in the unions are unhappy with how these policy initiatives have been progressed to date and felt excluded from that process, notwithstanding the arrangements for consultation that were in place. However, the Minister and I have invited ICTU to nominate a representative to join a steering group of key Departments which he is re-establishing to oversee the implementation of the Government decisions in relation to NewCo. He also wants to ensure that the workforce in the Shannon Airport Authority can have representation at board level as soon as separation is effected on 31 December and in this regard he has also invited ICTU to nominate an employee representative for appointment to the board of the SAA on a temporary basis pending agreement on arrangements for NewCo. This Government decision represents a historic new beginning for the Shannon region, with Shannon Airport playing a central role in a drive to develop a world-class aviation industry. In addition the decisions grant Shannon Airport the long-awaited freedom to determine its own future in the best interests of the airport itself and of the Shannon region. The decision will give the board, management and staff of Shannon Airport, the scope to bring a fresh approach to the future development of the airport. Its merger with a restructured Shannon Development provides the opportunity to open up access to the extensive landbank at Shannon that will facilitate the development of the international aviation centre of excellence.

Some in the Shannon region continue to maintain that Aer Rianta International, ARI, should be transferred to Shannon Airport from the DAA. From the time that separation of the State airports was mooted in 2004, it has been the intention of successive Governments that while the debts associated with the business of Shannon Airport would remain with the DAA, ARI would also remain with DAA. ARI is an integral part of the DAA group and the DAA's balance sheet, funding and credit rating are reflective of the group's business, including ARI. Even if it was desirable to transfer ARI out of DAA, it would damage the latter's viability to do so as part of the Shannon separation process. In short, if the DAA's financial viability was compromised as a result of separating Shannon Airport, separation could not happen.

Both the Minister and I are particularly struck by the degree of support for an independent Shannon airport across a wide spectrum of interested parties including business interests, chambers of commerce, and local authorities. Airport users, service providers, and prospective new airport customers including airlines and aviation companies have expressed an overwhelming desire to deal directly with Shannon airport on an independent basis.

The State Airports Act 2004 provides the legal mechanism for the separation of Shannon Airport from the DAA. In particular, section 5(1)(b) of the Act provides for the making of an order to specify the Shannon appointed day, that is, the day on which the assets and business of Shannon Airport will be transferred from the DAA to the Shannon Airport Authority. The draft order for approval by this House is a straightforward one which simply sets 31 December 2012 as the appointed day for separation of Shannon Airport from the DAA. Once this order has been approved by each House of the Oireachtas, it provides the legal basis to progress with the plan that will secure the future of Shannon Airport. My hope is that co-operating with all interests in the mid-west region and working together we can provide exciting and innovative opportunities that will benefit business, tourism and particularly job creation in the region. The task now is to make these plans a reality.

I thank Senators for their attention and I look forward to what they have to say in reply.