Paddy Burke (Fine Gael)
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I welcome the Minister for Transport, Tourism and Sport, Deputy Varadkar, to the House.

Denis O'Donovan (Fianna Fail)
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I welcome the Minister and thank him for taking this debate. In or around 1 July, I was contacted by a distraught mother who had paid approximately ¤85,000 to have her son trained as an airline pilot. She borrowed some of that money and remortgaged a property, a story that is typical of many of the students caught in this situation. How much money has been lost by the students in total? The figure I have been given is between ¤5 million and ¤10 million. Why did the Pilot Training College, PTC, in Waterford accept money from unsuspecting students when there apparently were concerns about the company's viability as long ago as the end of 2011? That an organisation accredited by the Irish Aviation Authority, IAA, took substantial sums of money in such a situation is a serious issue.

What investigation has the Department carried out to date, if any? What investigation has the IAA conducted? Is the Minister in a position to ensure the trainee pilots, some of whom have only received part of their training, will have their training completed by another accredited college? Is the Director of Corporate Enforcement inquiring into this debacle? If not, why not? Did an auditor for the IAA or the PTC raise questions about the company's viability more than 12 months ago?

A further issue has come to my attention. I will not be disparaging towards the directors or others involved, but some students e-mailed me. Has another company set up shop in recent days in the premises owned and operated by the PTC since that company's liquidation? If so, are any of the old company's directors involved with the new one? They may not be.

During my probing of the issue, I learned that the training institute in Florida was owed approximately ¤1.4 million by the PTC. What became of that money? The PTC extracted substantial sums from many young people, primarily boys but also some girls, so that they might be trained as pilots. Something is rotten. I felt for the mother who approached me at a wedding. I knew her to see her. She explained her extreme plight. That was early in the situation when the trainees were still in Florida. The Minister assisted in getting them home, but a cost of $500 or $600 per student to bring them back from America is small change compared with the substantial sums they have lost.

I am deeply concerned by a number of the issues that have arisen. I do not know whether the situation is as serious as I have been led to believe by some of the students and their families, who are scattered throughout Ireland. Would it be appropriate to notify the Garda of what the company was doing? The issue has come to light again. In the past week to ten days, the High Court appointed a liquidator to PTC. During the summer, there was some hope for a plan to save the company and complete the trainees' training.

These people have been wronged and the State owes them a duty. I hope the Minister will be able to answer some of these questions or give some good news about the Department guaranteeing the completion of the training for these pilots.

Leo Varadkar (Dublin West, Fine Gael)
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I thank the Senator for raising this important issue. The position which has arisen is most regrettable and came about from the failure of the Pilot Training College, PTC, a privately-owned and operated flight training school, to meet its contractual obligations to its students in the completion of their training in Florida. I fully understand the frustration felt by the students involved and their families and I expressed my sympathy when I met some of their representatives on 20 July last. Unfortunately in the current economic climate, many businesses have failed, leaving their suppliers, etc., out of pocket, including businesses where a State body has a regulatory role.

It is important that the role of the Irish Aviation Authority, IAA, with regard to flight training organisations is properly understood. The IAA has responsibility for approving and overseeing flight training organisations in Ireland and the primary functions in this regard are the oversight of the safety, quality and standard of the training being delivered, the conduct of examinations and flight tests. It considers whether the company has sufficient resources to safely provide the training required to the internationally-determined standards but has no involvement in, or responsibility for, the contractual arrangements between PTC and its students. The IAA's role in the approval and oversight of flight training organisations is based on European rules and, unfortunately, PTC is not an isolated example, as there have been other similar failures in other countries in the recent past, with students suffering losses also.

As part of its regulatory role, the IAA completed audits on PTC in May 2011 and April 2012 and on PTC Florida in April 2011 and in October 2011. The IAA also made site visits in the first quarter of 2012 and in June 2012. During these various inspections it was clear that PTC complied with all EU and international requirements as a flight training organisation and there was no indication of any deficiencies. PTC's accounts were signed off by professional auditors and were not qualified in any way.

EU and international requirements state clearly that the financial evaluation carried out as part of the approval and oversight process is not intended to be a consumer protection provision. However, the IAA has tried to offer assistance to affected students where possible. On 26 June, when the IAA was notified that PTC were ceasing all training activities, it immediately despatched a representative to Florida to secure the records of all students, and all training carried out to date was credited towards the students' final qualifications where possible. The IAA has also worked with other flight schools to explore how students might complete their training elsewhere at as reasonable a cost as possible.

I am advised by the IAA that some 79 students have opted to continue their training with other approved Irish flight training organisations, 20 of whom are self-funded students. There are a further 19 self-funded students who have remained in Florida to pursue their training under the US system, with another 24 who have not decided on their future career. As a gesture of goodwill and without prejudice, the IAA funded the costs of students who wished to return to Ireland and 65 students availed of this offer.

On 26 July the High Court appointed an examiner to PTC Ireland. The IAA worked with the examiner to assess the options available but unfortunately two weeks ago the examiner advised the court that a potential investor had withdrawn and it ordered the liquidation of PTC. Whereas I and my Government colleagues sympathise with the plight of the students and their families who have suffered considerable financial losses through the collapse of this company, neither the Government nor the IAA accepts any liability in this regard. The Irish taxpayer cannot be liable for a company's debts just because it had an approval of some form from a State agency.

The Senator asks about reports that a new company has been established at the same address as PTC. I understand that a company, Clearsky Pilot Training College Limited, has been registered at that address. The IAA has not received any application for approval from the company involved. However, following these reports, last Thursday, 4 October, the IAA inspected the premises of the company in question and found that the company is providing refresher training for an international non-EU client. That training does not meet the standard required for an Irish or EU pilot's licence. Should this new entity wish to provide training meeting stringent EU standards, like any other company it will have to apply to the IAA for approval.

While the Companies Acts do not come within my remit, I am advised that a registered company is a legal entity separate from its owners, shareholders and directors. The owners of a limited liability company are liable only for the amount of money that they have invested in the company and are not liable for the entire debts of the company. PTC was such a limited liability company. Distressing as it may be for all creditors of PTC, whether students or firms, under the Companies Act, if a person is the owner or director of a company that is put into liquidation, the directors and owners are legally entitled to establish or continue to be involved with another company and the debts of the first company do not transfer with the owners or directors to the new company. Creditors of the failed private entity should pursue the recovery of their debts with the liquidator if possible. As I have said already, neither the Government nor the IAA accept any liability for a private company's debts. Nevertheless, I acknowledge the Senator's comments that the students and their families have been wronged. They have been wronged by the company involved and not the Irish taxpayer.

I cannot provide a figure on how much has been lost but it will amount to several million euro. It is important to bear in mind that this does not just affect the young guy down the road or his mother but other parties are also involved, such as foreign airlines, a business in Florida and many other creditors. It would not be possible for the Government to compensate some creditors because we have sympathy, but not compensate all creditors. That would run into many millions of euro, including payments to foreign colleges, students and airlines.

I cannot answer the question of why the company accepted money up to the point that it ceased trading but unfortunately it is not uncommon for a business to continue to operate until the day it ceases trading. I do not know if the Director of Corporate Enforcement or the Garda are involved in this case and I cannot speak for them. I hope they will take an interest in the case and if there is a case to be answered in terms of company law or any other matter.

Denis O'Donovan (Fianna Fail)
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I thank the Minister for being so frank. I am disappointed as I feel much concern for the students who have been wronged and there has been much light touch regulation from the IAA. Perhaps we could examine that in future. The IAA experienced a company getting into difficulty in the not too distant past, although it may have been before the current Minister took office. I am a solicitor by profession and it is my opinion that if a person or company takes in substantial sums of money up-front knowing that commitments cannot be fulfilled, it is bordering on criminal. The company sent these students to Florida knowing that fact, which is reckless trading. There should be some mechanism to punish such companies as we are talking about unsuspecting young people and their families. Some of these people put their life savings into the training scheme but the company was accepting this money up to the difficulties arising on 1 July. Somebody in the company knew damn well that within weeks it would be in a trading position where it would not be possible to survive.

The Minister should have another look at the matter because it will not go away. The liquidator will probably not even consider the people who have been wronged as priority debtors. These students should receive greater attention from the State as we sent them to be trained. The light touch regulation of the IAA must be tightened, and it is a bit like the banking regulation in the past, which had terrible consequences for the country. I respect the Minister in coming here to take this matter and I understand his plight.

Leo Varadkar (Dublin West, Fine Gael)
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I absolutely share the Senator's feelings in this regard. Some of my own constituents are in the same position as the people he describes. We have a shared experience of the feelings of the people who have been wronged. If there was reckless trading in the case, it is a matter for other authorities and the Senator makes a valid point in that regard.

There was a failure of another training college but that was more than 20 years ago. At a policy level we are considering the introduction of a bonding system where if this happens again, at least the customers and trainees would be protected. I do not accept that the IAA has been involved in light touch regulation and it is important to ponder the point. If the IAA had discovered that the company was in trouble financially, what could it have done?

All it could have done was close the company and told it that it could no longer trade and the people affected would be in exactly the same position they are in now except perhaps for the one or two who may have paid full fees in the past week or two. When it comes to bodies that are licensed, regulated or approved by a Government body, we should bear in mind that all the airlines are licensed or approved by government. Radio stations, all our public and private bus companies, hauliers, driving schools, private colleges and other institutions are all in some way regulated, licensed or approved by government. It would be very reckless of me as a Minister to put the Irish taxpayer on the hook for the failure of companies such as those.