Leo Varadkar (Dublin West, Fine Gael) | Oireachtas source

As the Senator will be aware, the Government decided in November to proceed with the separation of Shannon Airport from the Dublin Airport Authority, DAA, and to merge the airport with a restructured Shannon Development to form a new integrated Shannon entity in public ownership, "NewCo". This will grant Shannon Airport the freedom to determine its own future in the best interests of the airport itself and of the Shannon region. It will free the board and management of Shannon Airport, together with the employees, to bring a fresh approach to the future development of the airport.

In line with this Government decision, the assets and business of Shannon Airport were transferred from the DAA to the Shannon Airport Authority, SAA, on 31 December 2012, following the approval of the relevant order by both Houses of the Oireachtas. Shannon Development and Shannon Airport Authority are both owned by the State and the State, on behalf of its citizens and taxpayers, has been faced with these two ailing companies that have not been realising their potential to make a contribution to the economy of the wider region. The State is, therefore, restructuring its assets to make better use of them as a catalyst for the development of sectoral opportunities, and the creation of jobs, particularly within the aviation sector. This restructuring involves no more than a re-ordering of assets which are already in State ownership. It is the DAA, not Shannon Airport, that borrowed money over the years and it is for the DAA to pay that money back. The State is neither writing down nor writing off any debt as these borrowings will be paid back in full by the DAA. It will be for Shannon now to chart its own future as a separated State-owned company.

There appears to be some confusion in recent debate about the difference between a State airport and a regional airport. Please allow me to clarify that issue. There are two types of airport in the State, the State airports and the regional airports. The State airports, Dublin, Cork and Shannon, are owned by the State and the Government appoints their chairman and boards. They receive no Government grants or Exchequer subsidies. They are expected to fund their own capital development from their profits or borrowings against their own assets which are not guaranteed by the State. They should turn a profit, pay corporation profit tax and a dividend to the State and have done so in the past.

The regional airports - Ireland West Airport Knock, Kerry, Waterford and Donegal - are not owned by the State and we do not appoint their boards. They exist for reasons of regional and social policy to provide essential air access to relatively remote regions that do not have a major airport or State airport nearby. As a result, they can receive Government subsidies, subject to certain EU rules. Generally, these subsides are provided to allow them to break even and remain operational. They are not expected to pay a dividend and the Government does not guarantee their debts or financial obligations.

I have consistently said that all Irish airports should operate to a commercial mandate and have stressed on numerous occasions that regional airports, including Ireland West Airport Knock, must work towards achieving operational viability over the near term, particularly given the downward trajectory of Exchequer funding. In this regard, apart from the consideration of restructuring the State-owned airports, I have also endeavoured to rationalise the system of State support for the regional airports not owned or controlled by the State, including those in the ownership of private companies and private trusts, and the Government now has a settled policy in relation to those airports.

In line with the recommendations of the value for money review on the regional airports programme published in 2011, the Government has decided that funding under that programme for the period 2012-2014 is being consolidated on the four regional airports of Ireland West Airport Knock, Donegal, Kerry and Waterford since the start of 2012. Funding for Galway and Sligo airports ceased in 2012. Subject to funding availability, the other four airports, including Knock, will continue to be eligible for funding up to the end of 2014 when the current EU-approved scheme expires.

While it might be possible to put a scheme in place to fund the regional airports beyond 2014, any such scheme would, due to new EU guidelines, be subject to more stringent eligibility criteria and to prior approval by the European Commission. Of course this would also require the allocation of scarce Exchequer resources rather than to other competing demands such as public transport, road maintenance, hospitals and schools.

Since 1993, Ireland West Airport Knock has had the benefit of around ¤40 million in support under the regional airports programme. This includes funding for PSO air services, which although paid directly to the airlines, also benefits the airport through revenue paid by those airlines to the relevant airport. Approximately ¤1.3 million was provided in 2012 to the airport, ¤700,000 in capital expenditure funding for capital projects and ¤600,000 in operational subvention under the "opex" programme. In addition, in 2012 alone the tourism agencies, Tourism Ireland and Fáilte Ireland, provided a total of over ¤1 million for overseas marketing related to Ireland West Airport Knock and the surrounding region. Shannon, Cork and Dublin have not received such Exchequer support. While some may argue that Shannon and Cork have been cross-subsidised by Dublin, it could equally be argued that had these two airports, Cork and Shannon, the same status as Ireland West Airport Knock, a regional airport, they would have been eligible for the same Government grants for the past few decades.

I believe that the measures the Government has initiated in relation to Shannon will give rise to some degree of increased competition not only between the State airports but also between them and the regional airports, including Ireland West Airport Knock and Kerry, which is a good thing. These measures are focused on increasing the overall number of passengers to and from Ireland through increased efficiencies and attracting new aviation business that would otherwise not be based in Ireland which will have a beneficial national impact.

I am confident that there is a role for all remaining airports in providing scheduled air access for Ireland including Knock, Donegal, Kerry and Waterford. It is also obvious that visitors arriving at Shannon Airport are more likely to visit western regions than tourists arriving at Dublin Airport. I know the Senator will be aware of the importance of transatlantic connections and access to Heathrow through Shannon and that he will want to see the airport's decline halted.

I regret that some have attempted to suggest that the development of Shannon Airport must come at the expense of Knock. I believe that both airports can have a bright future, particularly as the economy recovers and tourism initiatives such as The Gathering help to bring more people into the country. It will be for the airport boards and managements to bring this about.

In the context of overall aviation policy, the Senator may wish to be aware that I launched a consultancy process on the development of an aviation policy for Ireland at a major conference in December and that this will be pursued through 2013, leading to the adoption of a new policy in 2014. In that context Ireland West Airport Knock has been invited to participate actively and this is an opportunity for them to set out its vision for the future of Knock and the regional airport sector.

I reiterate for the benefit of the House that the Department and its agencies stand ready to work with Ireland West Airport Knock but it must be within the existing budget envelopes, within state aid rules and must have regard to the fact that there are other regional airports at Kerry, Donegal and Waterford that also need to be taken into account.

In regard to the measures announced by the Minister for Finance, Deputy Michael Noonan, in the budget, these will appear in the Finance Bill which has yet to be published. Any measures will apply equally to all airports.