John Minihan (Progressive Democrats)
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I appreciate the Cathaoirleach's acceptance of this matter on the Adjournment and the attendance of the Minister of State, Deputy Killeen, on behalf of the Minister for Transport, Deputy Cullen, hopefully to clarify the issue. The question tabled is clear as regards whether the Minister intends to honour the previous commitment to leave the Cork Airport Authority debt free, or whether he has decided on an alternative structure. The people of Cork deserve a straight answer on the issue of Cork Airport, as a recent media report on the issue put it.

The fear is equally clear, that despite a commitment given by the then Minister for Transport, Deputy Brennan, Cork Airport will have to bear the cost of the new terminal building. That is the over-arching concern. However, in the interests of clarity I would encourage the Minister to address some further issues, and first, I will look briefly at the context.

The view of the Progressive Democrats is that competition can transform the aviation sector generally in the same way as it has the airline business, ultimately to the benefit of consumers. Competition between airlines has worked. It will work, between terminals, and between the service providers within them, and it should work for airports. Ireland's airports must be able to compete with each other. Cork Airport must be independent and free. It must be independent so that it may compete. It must also be debt free, so as to be able to do so fairly.

The Minister's predecessor correctly stated that when Aer Rianta was to be broken up, Dublin, not Cork, would bear the cost of the new terminal, which it is believed will be €160 million. What is needed now is either confirmation that this remains the case or an admission that something has changed. If it has changed, then the House should hear of it.

Has the Minister for Transport instructed the board of the Cork Airport Authority to accept an amount of debt for the terminal? If he has, how much? If the Dublin Airport Authority has been informed that it now does not have to carry the full debt in respect of Cork Airport, the people of Cork would like to know. Is Dublin now only to pay a percentage of the total cost?

This issue is taking place in a general climate of uncertainty. While I seek answers on allocation of the burden of cost for the new Cork terminal, I wonder whether the Minister knows what its final cost will be. If not, this begs the question as to how he can expect the board of the Cork Airport Authority to engage in discussions with the board of the Dublin authority on repayment. It will be negotiating on an amount that is, as yet, not known.

As I stated earlier, the objective is to see Cork Airport independent and debt free, to compete to the benefit of consumers. As an independent authority, the Cork Airport Authority is based on a commercial mandate and its board has a fiscal duty to only absorb costs which in its opinion are reasonable and sensible. I trust the Minister agrees with this view. This prompts the question, however, as to what action the Minister proposes to take if the Cork and Dublin airport authorities cannot agree on a repayments scenario. To place any burden of cost on the Cork Airport Authority defeats somewhat the purpose of the break-up. Does the Minister accept that the charges in Cork are already the highest of the three airports? To increase charges to repay debt on the terminal will merely result in Cork becoming more uncompetitive in comparison with Shannon.

I urge the Minister to address these points for the benefit of Cork Airport, its board, workers, the people of Cork and Irish consumers generally.

Tony Killeen (Clare, Fianna Fail)
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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.

John Minihan (Progressive Democrats)
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I thank the Minister of State for his response. I know that he has a particular interest in Shannon Airport, but Cork Airport has suffered for many years whereas the State has invested in Shannon Airport and supported it with stopovers and so on. The reality is that if investment in Cork Airport had taken place before the break-up of the airports, Cork Airport would not have the problem that it now faces.

The Minister of State's answer is, I must say, most disappointing. It appears clear that the Minister for Transport has no intention of honouring the commitment that the Cork Airport Authority will be debt free and we are now in some type of bartering situation. Given that my Adjournment matter raises a number of questions that were not answered in the Minister of State's reply, I ask Deputy Killeen to bring those points to the attention of the Minister for Transport. I hope the Minister for Transport will be in a position to return to the House in the near future to address those points, either in the course of an overall debate on the Aer Lingus and Aer Rianta break-ups or in response to a similar Adjournment matter so that we can flush out the points that I have raised.

I thank the Minister of State for his time, but I must say on behalf of the people in Cork whom I represent, his response gives us little hope that what was originally intended and what everybody understood would happen will now take place.

Tony Killeen (Clare, Fianna Fail)
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Many people have protested that Shannon Airport has probably paid for the construction at both Dublin and Cork airports.

John Minihan (Progressive Democrats)
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Passenger numbers at Cork Airport are up without any troops landing there.