Sean Barrett (Independent) | Oireachtas source

I move amendment No. 3:

In page 9, line 19, after "Minister" where it firstly occurs to insert "and the Commission for Aviation Regulation in respect of airport charges".

I welcome the Minister in an important week for the issue of airports. I understand that the Commission for Aviation Regulation will publish on Thursday the report on cost overruns in terminal 2 in Dublin Airport and the implication for pricing. In addition, the airports regulator's term of office ends on Friday. There are contemporaneous issues and they are important for us to consider.
The Bill states that the Shannon Group shall, on formation day, prepare and submit to the Minister, for approval by the Minister with or without amendment, a strategic plan for the next period of five years from that anniversary, and I seek in my amendment to involve the Commissioner for Aviation Regulation in that decision. The history of airport regulation in Ireland indicates that we need an independent regulator. Indeed, that is the problem the Minister is addressing. I refer to an airport, as the Minister stated on the last occasion, which lost 61% of its passengers in a short period of time.

I refer to an airport which, when the commissioner did regulate it, was found to be an inefficient user of capital and an extremely low-productivity user of labour. The problem of the history of airport regulation in Ireland is that Shannon and Cork airports were taken out of the regulation in 2004 but the productivity problem in Shannon was not addressed. The Minister now seeks to do this and has my support in that regard. Cork Airport, which had good labour and capital productivity, acquired an unnecessary terminal about which the airlines warned at the time and Dublin went on a spending spree that will be reported upon this Thursday. This was done with Shannon and Cork airports being removed from the remit of the Commission for Aviation Regulation. Effectively, this is also what happened in Dublin because the then Minister, Noel Dempsey, issued a directive to the Commission for Aviation Regulation to proceed with terminal 2 regardless of the economic advice. Charges increased by 40% at Dublin Airport, by more in Shannon and there was a huge decline in traffic.

Consequently, independent regulation is needed lest one has a repeat whereby it is left to the discretion of the Minister. Moreover, that order by the then Minister, Noel Dempsey, was never published by the Department. The commission published it on its website and people like Paul Gorecki from the ESRI, who deal in competition matters, have pointed out that this was an example of the capture of the Department of Transport, Tourism and Sport, in this case by Aer Rianta. I overheard the Minister state on RTE last week that his Department used to be called the "downtown office" of Aer Lingus but in this case it certainly became the downtown office of Aer Rianta.

The record of carelessness in capital investment and low productivity - the numbers are available for all three Aer Rianta airports - shows the need to have the regulator involved. Shannon had extremely low labour productivity and there was an unnecessary level of construction there. It must start to sweat the assets and this information must be published. When the Commission for Aviation Regulation was first set up, within months it had been sued by the body it was attempting to regulate in the public interest. The court cases ran on for years and a large part of the expenses of the Commission for Aviation Regulation pertained to the legal fees it incurred defending itself against the body it was founded to regulate in the public interest.

In these amendments, I am proposing that transparency be reintroduced into this area and that we opt for openness and independence. This relates to some of the voting decisions people made last Friday, in that these areas must be openly evaluated. When the directive went ahead in respect of Dublin, one was told the protection was that there would be consultation with the users. I have attended some of those meetings at the request of airlines and the people at the top table dictate, they do not consult.

As for independent verification of the final specifications and costings for terminal 2, that never happened and the independent regulation of airport charges did not happen either. This is part of the kind of construction industry that got Ireland into so much trouble and it needs independent appraisal. This is necessary to ensure that empire building within the airport sector does not take hold again because it has done serious damage to the sector and to the public finances. The realisation must be that since we now have fiercely and furiously competing airlines, the same kind of assessment of efficiency must apply to airports. Perhaps in the past it did not matter because the airlines did not compete and the airports knew they did not compete and consequently could pass on whatever charges they wished.

The theme music was something like "I Dreamt I Dwelt In Marble Halls" but there was an edifice complex, and it must be controlled because I would be afraid it would happen again. In particular, I am waiting to see what the regulator makes of the cost overrun. One estimate is that the cost overrun for terminal 2 was fivefold - that the cost of it, which came in at €1.2 billion, should have been €200 million. There is a largely empty terminal in Cork as well and Shannon is similarly burdened.

We need to impose efficiency on this sector. I regret that a former Minister, Noel Dempsey, was apparently captured, perhaps due to pressure from people such as the chambers of commerce and IBEC, as I recall, to build a terminal. There are airports the size of Cork and Shannon throughout the UK and two in Northern Ireland, one of which is about the same size and the other is a little bigger, and they operate as businesses doing business with airlines. We have not had that tradition. We have had wasteful capital expenditure and a seriously low productivity problem in Shannon in particular. One of the estimates for Shannon is that ratio of passengers to staff members is nine passengers per each staff member per day - 3,500 passengers per year. That number is unacceptably low. We must make sure, through independent regulation, that such low productivity and inefficient use of capital can be ground out of the system.

That is reason I want the proposals in amendments Nos. 3 and 4 to be independently assessed as well as submitted to the Minister. The Bill provides that the "Shannon Group may, in consideration of the performance of its functions, make such charges as it considers appropriate, to its subsidiaries or any other person, other than the Minister, for services rendered by it and the carrying out by it of activities." It is interesting that the Minister is exempt from that and that the charges the Shannon Group wishes to impose are what it considers appropriate, not what the airlines consider appropriate and not what would be in the wider public interest. Given what has happened, including what this Bill seeks to address, to make Shannon an efficient airport, an asset to the region it serves, there is a role for independent regulation. That is the reason I put forward amendments Nos. 3 and 4.

It was A mistake in 2004 to remove the regulator with regard to Cork and Shannon Airports and it was also a mistake when terminal 2 was permitted to do so by the ministerial directive, ordering the independent regulator for the sector to finance, through a 40% increase in airport charges, the construction of a terminal which the independent advice said was not necessary. It does not give me any great satisfaction to show that the critics were in fact right. I believe that is what will be vindicated when the commissioner's report on the cost overrun on terminal 2 comes out on Thursday.

Airport operation and construction may be too important, and certainly too expensive, to be left to airport operators. The trend in Europe is towards independent and commercial operation of airports. We do not have that here yet but we need to bring the efficiency of Irish airports far closer to the international average. That is what the independent research showed us. Ours is not at the international average. The costs are borne by wider society.

My amendments propose that there should be a role for the Commission for Aviation Regulation. The role of the commission should not have been bypassed by a former Minister, Noel Dempsey, in 2007 when the decision was made not to have competing terminals because other people wanted to build competing terminals at Dublin Airport. In 2004 its role was removed from Shannon and Cork and its role could have been of value in that Cork might not have an unnecessary terminal at this stage and Shannon could have tackled its labour productivity problem, to which the commissioner drew attention in his earlier reports.