Wednesday, 14 July 2004
Seanad Eireann Debate
This first amendment is, in essence, the most important in that it seeks to defer the implementation of the Act until such time as business plans have been prepared and submitted. This has been the core of the discussion in this House yesterday and previously in the other House. It seems to be a chicken and egg argument.
Yesterday, and on Committee Stage in the other House, the Minister made much of the fact that a number of different plans exist. He sought to have us believe these constitute a business plan for the purpose of the break-up of Aer Rianta and the setting up of three independent companies. It is important that we tease that out. We on this side of the House contend that there is no business plan for what is proposed. Nobody, be they consultants or the existing board, was asked to produce a business plan for each of three independent companies, particularly not for the two new companies at Cork and Shannon.
It is all very well to point to the overall fiduciary responsibilities of State-owned plcs to look after the corporate interests of the company or that every State company looks ahead at all times and produces a ten-year or 20-year plan or a plan for the new millennium or whatever. That is not what this is about. What this is about is whether there exists, or whether there should exist before the break-up, a plan that identifies the risks and down sides and the opportunities and challenges which will immediately impact on the new companies in the two, three or five years immediately following their establishment on the break-up of the existing company. That is the critical question.
It is acknowledged that there are specific issues relating to financial viability, which we will discuss in the context of later amendments, which affect some of the new companies. Examples are the lease of the Cork Airport from Aer Rianta or from the Dublin Airport authority, the SFADCo owned property in Shannon, and so on. Obviously it is right that they be taken into account. They are critical to the financial viability of the new companies. I am not aware, other than from the PwC report which I will come to in a moment, that these issues have been taken into account, definitively decided, and now form part of a business plan.
As I said yesterday on Second Stage, none of us doubt that it is possible to put together a business plan. It is possible, through all manner of wishful thinking, to say that various opportunities may arise and that there are possible downsides. What we are concerned about is the critical nature of that. We are concerned about what would happen if, having examined this seriously, the consultants or the boards conclude that the business end does not stack up and that there are far greater risks of non-viability than there are opportunities. To put it in more concise terms, what will happen if the consultants or the board decide that Shannon Airport will not be viable in three or five years’ time and requires some measure of cross-subsidy or, alternatively, requires to remain part of the group so as to ensure its continuing financial viability? There is no mechanism in this Bill at the moment that allows for a reversal. This amendment would in effect allow for an out by postponing the taking of the essential measures until such time as the business plans have been put in place.
Mr. Morrissey: Yesterday I stated that this decision was initially taken as a public policy decision, not strictly as a business decision. I would not expect the existing board, which has run a monopoly and has left Shannon and Cork with 10% of the business, to come forward with a business plan under which both Cork and Shannon could operate independently. If it did, it would negate its position to date. However, there has been investment of €60 million and €70 million in Cork and Shannon in the past five to seven years and they are going into the future debt-free and with autonomous local management. If, in those circumstance, local management cannot now bring forward a successful business plan to ensure their success, I would agree that a case could be made against them. Those airports should not be there if they require a subsidy. I am very much against this amendment.
Mr. Browne: I support the amendment. It might be better to speak in terms of a blueprint or terms of reference for drawing up a plan rather than in terms of a business plan. When this Government took office it drew up a five-year plan. While the Minister made some valid points last night about our not getting too bogged down about business plans, the boards must have some idea of where they are going. People in business know what they are at every day. This House agrees its Order of Business every day when Senators are informed of the items due for discussion and the timeframes allowed for each debate. Fine Gael will be supporting the Labour Party amendment.
Mr. Dardis: The considerable emphasis on the business plan is a red herring. There is a great difference between a business plan and a risk evaluation. They are not the same. The Minister was correct when he said yesterday and again on radio this morning that it is up to the boards to produce business plans. Nobody can impose business plans on boards about to come into operation. The legislation provides for publicly owned autonomous companies, guaranteed by Government, to compete aggressively and secure business for their regions and to thrive and prosper. I am sure the boards will fulfil that task diligently.
The continuing inference that we are somehow stumbling in the dark into the future must be rejected. That is not the case. As the Minister outlined yesterday, Aer Rianta already operates to a business plan. The template for this already exists. It is definitely a matter for the boards to decide their future. We cannot impose business plans on them. They will do the job effectively.
Mr. Quinn: I was approached in 1979 and asked if I would become chairman of an interim board for An Post. Some ten people were asked to become members of the board. I do not believe we would have accepted a place on an interim board which already had in place a business plan in terms of what was to be done and how it was to be done. If this plan is to work, in particular for Shannon and Cork, ownership must rest with the boards. I do not understand the logic of suggesting we provide a business plan which we then hand over to a board to put into operation.
It is the responsibility of boards to draw up business plans. I support the Minister’s suggestion that the business plan be owned by the boards to be established. However, I disagree with the Minister about the structure being used. I want Cork and Shannon Airports to have separate boards but I believe they would benefit from operating under the umbrella of Dublin Airport. However, that is a separate issue. The boards must have ownership of their accounts and plans. I do not believe such boards would accept responsibility for merely putting in place what Aer Rianta or the Minister has already decided.
The Minister has got it right in this case. The business plan is, as Senator Dardis stated, not the same as a risk evaluation. If Shannon and Cork Airports are to work, then ownership must lie with the individual boards. I would have difficulty supporting this amendment as I believe the Minister is correct on this one.
Minister for Transport (Mr. S. Brennan): Amendment No. 1 seeks to delay commencement of the Bill and the establishment of the boards for the three airports. I would have a difficulty accepting the amendment as it would affect policy. Amendments Nos. 2, 3 and 4 would have the effect——
An Cathaoirleach: There is a correction to the groupings as circulated. I have been informed that amendment No. 1 is to be taken on its own and amendments Nos. 2 to 5, inclusive, will be taken together. We are dealing with amendment No. 1 only at this point.
Mr. S. Brennan: I would have difficulty accepting the amendment as this provision is a fundamental part of the legislation. Senator Quinn put the case well. Responsibility for preparation of the business plans must rest with those required to carry out the job.
Mr. McDowell: We need to hear a great deal more than that from the Minister. The Labour Party is not concerned about whether the plans are called business plans, strategic directions or risk evaluations. We are concerned about whether the Minister knows what it is he is asking Cork and Shannon Airports to do. I would like an idea of what it is the Minister believes will be the brief given to, for example, Shannon Airport authority. Will it be told to operate the airport as a low cost hub or to maintain current business and shed jobs to reduce the cost base? Will it be told to work on the assumption that the transatlantic stopover will cease? I assume the Minister has or will give some sort of strategic direction to the board. If we knew that, we might be a little less concerned about the business plan.
What we want, and what this House is entitled to from the Minister, is a sense that he knows what he is doing in terms of giving to the boards of Shannon and Cork a clear instruction regarding the drawing up of the business plans. I assume that is what will happen because we will not amend the Bill. The boards must know what is expected when drawing up the business plans. I want to feel confident that the business plans will look credible in a year’s time and I am not confident about that at the moment. Looking dispassionately at Shannon Airport, as the consultants have, it is easy to make the case that the company could be insolvent in two or three years time. That is from where most of the concern expressed by the workforce and Members of the Oireachtas comes. We are looking at the status quo. If the Minister is saying, as he stated vigorously in his response yesterday, that he will give the boards their own wings to compete in the marketplace then we must have a sense that he has in mind a strategy which he may have already transmitted to the boards designate.
Mr. Dooley: Senator Quinn summed up how this matter will be dealt with. It is important the boards designate take control of Shannon and Cork on the appointed day. However, in the intervening period they are the ones who have to take ownership of the development of the airports going forward. I believe they are uniquely qualified to do so.
It is important to recognise that we must move from Government management of airports. The amendment states that matters relating to the airports should be brought before the Houses of the Oireachtas for approval. That would be wholly unnecessary. I am unable to think of any other State agency that would require such a decision. The legislation provides safeguards in terms of requiring further clarification from the Minister for Finance in conjunction with the Minister for Transport to ensure whatever plans are drawn up are sustainable and viable. The Minister spoke about that issue at length yesterday.
I am on record as saying I do not agree with the mechanism being put in place. However, I do not support the amendment. Senator Quinn has more than adequately dealt with the matter. The legislation provides safeguards to ensure the business plans have the capacity to deliver two viable airports at Shannon and Cork. The calibre of those appointed by the Minister to the boards should be sufficient to provide for the continued growth of the airports.
Mr. Browne: The difficulty which the Opposition has is that it is working in the dark. There have been reports of leaks and references to the PricewaterhouseCoopers report, yet we have not seen it in full. The Minister has not released to us any available documentation. The question I would pose — I am sure it is a question which would keep Senator Dooley awake at night — concerns what happens if Dublin Airport authority decides Aer Rianta International, currently based in Shannon, should be based in Dublin. How will Senator Dooley feel if the Dublin Airport authority business plan recommends that that facility be located in Dublin? I am sure he would like an input into the plan then. They are the type of issues likely to arise.
As far as I am aware, no terms of reference have been drawn up for the boards. While each board will draw up its own business plan there is a danger they will overlap and try to take assets from each other. What will happen in that scenario?
Mr. S. Brennan: In reply to Senator McDowell, there will be a memo and articles of association. This will lay out the purpose, objectives and aims of the plc, which will be Shannon, Cork and Dublin. This is the normal aims and objectives aspect of any company.
On the business strategy, the board will have to devise this itself. They are aware in Shannon that the EU-USA open skies policy talks are a backdrop. They are aware there must be some agreement with Aer Lingus so that it will continue to service Shannon Airport, which is my wish. They are aware that section 8 of the Bill requires them to negotiate with Dublin and Cork on other issues in the interim. The people who have agreed to serve on the Shannon board are acutely aware of these business issues. These issues exist regardless of the policy; they will not go away. If I were never standing here with this policy, these issues would exist. The question has always been who is best equipped to tackle them. I have made it clear that I believe this approach is the best way to tackle the issues.
I am not denying there are serious issues in regard to all airports, particularly Shannon, but these can be tackled. We can work out something on the US-EU stopover aspect. I am determined to get a good deal which will give Shannon some comfort, while allowing Aer Lingus to expand to new routes and new destinations. I am confident that, in discussing the future of Aer Lingus, we can build into it an understanding that whatever direction the ownership of Aer Lingus takes in future, Shannon will be taken into account in any arrangement arrived at. It would be a good time to make such an arrangement. We can build these aspects into whatever final settlements are made on a whole range of issues.
I will ask the board to address each of these issues, particularly the issue of growing passenger numbers. The chairman reckons he can reach 4 million from the current 2 million, and the board will have to work out a strategy to attract these extra passengers to the airport. The board must also address how to negotiate and work with Government on the USA-EU talks and Aer Lingus’s involvement in Shannon Airport.
Senator Browne asked what would happen with Aer Rianta International and so on. I have no doubt the three boards will be very practical. They will have to talk to each other about adhering to company law, which they are required to abide by and which delays the distribution of assets because of the insufficiency of reserves at the moment. Shannon Airport built ARI. I said on many occasions it is my wish that, consistent with company law, trying to deal with dividend issues and the restrictions involved, ARI is a Shannon product and should remain as such. The boards can work out between themselves whatever is possible within that statement.
Mr. Browne: If, for example, the individual airport boards have an area of conflict, which is quite possible, will the final arbiter be the Government or the Minister? Who will adjudicate in this instance?
Mr. S. Brennan: Section 8 makes it clear that the boards shall discuss between them what Shannon and Cork shall do on behalf of Dublin in the interim period, pending the 30 April deadline. I do not envisage a serious issue arising which would cause the kind of difficulty to which the Senator referred. The legislation makes clear who owns what until 30 April, when another trigger may arise.
Mr. Dooley: I welcome the continued utterances from the Minister in regard to the element of the company known as ARI, to which Senator Browne referred. It is a Shannon venture. It began and was developed in Shannon by people who have long since departed from Shannon. It was their idealism, ingenuity and entrepreneurship which developed this company. It would be great to see it in Shannon, notwithstanding company law issues.
It is clear in the legislation that where there is a disagreement between the boards, there is a capacity for the Minister to get involved and ensure the restructuring takes place in line with Government policy. If there is an issue in respect of ARI, I hope the Minister will be prepared to ensure his wishes are carried out.
Mr. McDowell: I made a note of Senator Dooley’s penultimate contribution when he said he would be opposed to Government management of the company. He appears to have changed his mind and is now saying that if Aer Rianta were inclined to give ARI to anyone other than Shannon, the Minister would intervene immediately to ensure it would not happen.
Mr. McDowell: I will resist the temptation to score a point on that and want to make the point to illustrate a dilemma. Who makes the decisions, or are the decisions, in effect, already made? Senator Browne asked under what company ARI would come. There are other decisions regarding SFADCo properties in Shannon.
I do not intend to take an aggressive approach because I appreciate the Bill will be passed. I am seeking to give the Minister an opportunity to put out information and to give us a sense of his strategic concept of how the policy will progress. I appreciate we will not get the Bill amended and there is no point in codding ourselves that anything other than that is the case.
Mr. McDowell: Would that it were. I want to get a sense of a few of these strategic issues which are, in effect, decisions of the Minister — he may have already made them. The first relates to ARI. He was being disingenuous when he said it was a matter for the boards. Ultimately, it is a matter for him. The Bill gives clear power to the Minister to make decisions of that kind and to give a direction to the board. Is he indicating that he sees ARI as being within the Shannon company?
Second, I would like clarity on the issue of SFADCo, and the property owned by SFADCo in Shannon. Is it the Minister’s view that it will be transferred to the Shannon company, because the rental income that would derive from it is crucial in terms of the viability of the Shannon company in the future? Third, what is his view on the lease of Cork Airport? Does he envisage at this stage that the lease of Cork Airport will be a lease from the Dublin Airport authority to the Cork Airport authority?
Mr. S. Brennan: I cannot say much more on the ARI issue. My preference has always been to acknowledge that the ARI headquarters should be in Shannon, which was the driving force behind the ARI success. I have expressed time and time again my wish that this is where it should remain. As a result of company law regulations, which are copperfastened by EU regulations — the Senator will be aware of this aspect having spent a long time as finance spokesperson in the Dáil — sharing out assets as dividends is forbidden unless there is a certain level of reserves to cover them. Aer Rianta International must remain in the ownership of the Dublin Airport authority because it is an asset that cannot be shared out as dividends until the reserves are at a sufficient level. The issue is complicated by that fact. I will be asking the boards to consider this urgently and to take into account my view that Shannon is where it should naturally fit. However, the law is the law and the boards must see how they can work that out. There are also other assets — the Great Southern Hotel Group and other subsidiaries hold assets internationally as well as nationally.
The retail aspect of Aer Rianta International is also important, as well as its international ownership of airports and so on. It has been pointed out many times, although it has nothing to do with this legislation, that the borrowing level of Aer Rianta is extraordinarily high. It is quite likely that any board will need to consider reducing borrowing. I am sure the current board has considered this. It will also need to secure funds for future development. I would be surprised if the board did not consider realising some assets to try to cut the debt. I emphasise that the company will need to do that whether it is one company or three.
Ownership of assets abroad has grown quite dramatically, representing hundreds of millions of euro in terms of capital gains. The issue for the board to consider now is whether it would make any sense to take the capital gains and re-invest them in our own airports. However, these are business decisions and I do not plan to lay any political decision-making on top of that.
Regarding SFADCo, I stated yesterday that the Tánaiste, Deputy Harney, is still in discussion with SFADCo and other interests in the region about how to proceed. Senators are aware that Enterprise Ireland is moving to Shannon. I am also aware of SFADCo’s great work in the region. There may be a number of options the Tánaiste and SFADCo can consider. Again, matters are complicated by the fact that large parts of the land on which the properties involved are built are in the ownership of the Department of Transport, in the form of the airport authority. There is an issue about the ownership of the land and any rental income therefrom. SFADCo has done a good job for the country and I hope discussions with the Tánaiste come to a successful conclusion.
Mr. S. Brennan: The viability of the airport depends first on airport activity. It needs to attract airlines and passengers and raise the numbers from 2 million to 4 million. That is ultimately how the airport will remain viable. These other issues are business issues that support the balance sheet. I would not like to say that any one element is vital because the core requirement is to expand the business of being an airport. I am sure the board of Shannon would welcome the income, as would any board.
The matter of the lease in Cork is a direct result of the company law situation. The board of Aer Rianta decided to invest in a new terminal in Cork Airport, which was much needed. I supported that decision, which was the right decision to make. It is a major investment — more than €140 million — but the terminal will be of service for many years to come. The chairman designate of the Cork Airport authority has been in discussions with Aer Rianta and it is proposed that an affordable lease arrangement will be worked out. It will not be a lease in the ordinary commercial market sense, in terms of what one would usually lease a €140 million building for, but a contribution by way of lease of what the airport can afford to pay towards the Dublin authority which, in effect, provided the terminal building. Due to the revenue reserve situation, Aer Rianta could not give away €120 million worth of assets to Cork just like that. It would not be permitted under company law. This is a compromise which allows the Cork authority effective day-to-day control of the airport and provides some income for Dublin by way of lease payments. It is a fair compromise.
Mr. Daly: This will have a bearing on the preparation of the plans. As the Minister is aware, Aer Rianta currently pays substantial amounts of money through the county council for all the rates on Shannon Airport properties. In view of the fact that Shannon will now be a State airport and that most of the lands are in the ownership of the Department, will it now be exempt from rates, as it was before the new arrangements were introduced? What effect will that have on the preparation of plans? Can the new board of Shannon Airport say that it will not have to pay a couple of million euro in property rates to Clare County Council because it will be a State airport? I wish to clarify this because there is a substantial amount of money involved which represents a major source of revenue for the county council. There is some concern in Shannon that the airport will be faced with a considerable bill unless it reverts to its original position. The Minister may not be in a position to deal with this now but perhaps he will explain the position at some stage.
Mr. S. Brennan: The 1998 Act brought in rates for Aer Rianta, which has paid rates on all three State airports since that time. There is nothing in the Bill that changes that in any way. The question of rates on State properties is something in which the Minister for Finance takes a keen interest. It is a Government issue. It is a matter of rates policies generally and covers much more than just airports. This provision has been in place since 1998 so unless there is a change in that policy, the individual authorities will presumably be required to pay rates to their local authorities, as they have done since 1998.
Mr. McDowell: Yes. Over the past few days I have read the Farrell Grant Sparks and Mazars report, which reviews the PwC report with which the Minister is more than familiar. It is damning in that it points out clearly that there is no existing business plan and states that it is highly unusual for a restructuring decision to be contemplated or finalised without outline business cases being made. Perhaps the word “outline” is critical. I am not sure we have heard anything from the Minister this morning which indicates that he has a firm notion about the outline. In that context I will be pressing the amendment.
|Bradford, Paul.||Browne, Fergal.|
|Burke, Ulick.||Coghlan, Paul.|
|Coonan, Noel.||Cummins, Maurice.|
|Finucane, Michael.||Hayes, Brian.|
|McCarthy, Michael.||McDowell, Derek.|
|McHugh, Joe.||Norris, David.|
|O’Meara, Kathleen.||Phelan, John.|
|Bohan, Eddie.||Brennan, Michael.|
|Cox, Margaret.||Daly, Brendan.|
|Dardis, John.||Dooley, Timmy.|
|Fitzgerald, Liam.||Hanafin, John.|
|Kenneally, Brendan.||Kett, Tony.|
|Kitt, Michael P.||Leyden, Terry.|
|Lydon, Donal J.||Mansergh, Martin.|
|Minihan, John.||Mooney, Paschal C.|
|Morrissey, Tom.||Moylan, Pat.|
|O’Brien, Francis.||Ó Murchú, Labhrás.|
|O’Rourke, Mary.||Ormonde, Ann.|
|Phelan, Kieran.||Quinn, Feargal.|
|Ross, Shane.||Scanlon, Eamon.|
|Walsh, Jim.||White, Mary M.|
Mr. McDowell: Section 3 provides for the Minister for Transport to bear the expenses incurred in the administration of the Act with the consent of the Minister for Finance. What is the distinction between the costs of the restructuring, which is dealt with by a separate section, and the expenses incurred in the administration of the Act?
Mr. S. Brennan: Section 3 is intended to cover administrative funds and not large restructuring funds. It enables the Minister for Transport to have expenses incurred in the administration of the Act paid out of public funds subject to the consent of the Minister for Finance. These may be incurred in establishing the boards, administrative expenses like fees for establishing companies and so forth. It also covers administrative expenses in putting the Act in place, such as hiring legal experts or accountants. It is to enable the companies to get going rather than covering the actual business of the companies. It is not intended to cover large restructuring sums as discussed earlier.
These amendments relate to the appointed days for the airport authorities and propose to make the establishment of the Dublin appointed day subject to the consent mechanism of the two Ministers that already applies to the Cork and Shannon appointed days. These amendments would also have implications in the way business is done. It is implicit from the amendments that the Dublin appointed day will be later than I expect the Minister intends it will be. The Labour Party would like the strategic direction of the companies to be clear before any of the companies are established and to reduce the length of the interim when Dublin is acting as big brother to the other two companies.
In anticipation of the Minister rejecting the amendments, will he set out in some detail when he anticipates making the order for the Dublin appointed day? How long does he anticipate the interim will be?
Mr. S. Brennan: Amendments Nos. 2, 4 and 5 would have the effect of requiring that the Dublin appointed day order would come under section 5(1). It would also require that both Ministers would have to be satisfied as to the operational and financial readiness of all three airports before making the Dublin order as well as the Cork and Shannon orders. These amendments are contrary to the policy objective of establishing the Dublin Airport authority and the Cork and Shannon authorities as soon as possible. It is intended that the Cork and Shannon authorities will be formally established so that they can undertake the business planning for their airports in advance of the appointed days when the airport assets will be transferred to them.
Amendment No. 3 would provide in section 5(1) that the order setting the appointed day for Cork and Shannon authorities would require the approval of both Houses of the Oireachtas. This is unnecessary since section 17(3) provides for the laying of the appointed day draft orders for Cork and Shannon before each House of the Oireachtas. Such orders will not be made unless they are approved by resolutions passed by both Houses.
Assuming the House passes the Bill, when it is signed by the President a number of procedures will be put in place by the Department and legal and financial advice will be sought before the commencement of the three airports’ boards. I envisage doing that as soon as possible but it will take some weeks before the detailed work of establishing the boards will be completed.
Mr. McDowell: Will the memorandum and articles of association for the Cork and Shannon companies be submitted to the Companies Registration Office and the companies established before any of the appointed day orders are made?
Mr. S. Brennan: As the Bill is drafted, the three plcs will be established immediately after the Bill is enacted. However, it may take a number of weeks to get through a number of procedures. As soon as is possible, the three plcs will be established and the memorandum and articles of association drawn up and agreed. On the establishment of the plcs I will sign the necessary orders for the boards to take office.
This is a straightforward amendment. Amendment No. 7 seeks in the same subsection after “airports” to insert “and subject to the companies being able to meet the requirements of section 9(4)”. Section 9(4) clearly spells out the role of the new airport authorities.
Mr. McDowell: I would like to use these amendments to tease out some of the viability issues on which we touched earlier, in particular the capital reserves to which the Minister referred at some length. What is the situation? My understanding is that it is not possible to distribute any of the assets from Aer Rianta, as it is constituted, to Cork and Shannon because the reserves do not exist to permit that under EU law. If that is to change and the capital reserves are to be increased it will require drastic liquidation of assets on the part of the company.
To be blunt, it will require, as the Minister said, disposal or realisation of assets. Does it in effect require the sale of the Great Southern Hotels or does the Minister envisage that it will be confined to the foreign assets of Aer Rianta International, as he said in our earlier discussion? These matters impinge on viability. It is critically important that before this process advances too far the boards and the Minister are satisfied about viability. That is why we have provided that the word be included in the Act when passed. Will the Minister comment on the situation regarding capital reserves?
Mr. S. Brennan: Amendments Nos. 6 and 7 relate to section 5(3) and seek to provide that both Ministers must be satisfied as to sustainable viability and the viability of the three airports, as well as operational and financial readiness prior to the making of orders for Shannon and Cork appointed days. It is a matter for the new airport boards to draw up business plans and marketing strategies for their airports which will ensure their sustainability, viability and growth in the future. The directors of each of the new authorities have a fiduciary duty to ensure the viable operation of their companies. The Ministers for Transport and Finance, as provided for in section 5(3), must be satisfied as to the general state of operational and financial readiness for vesting of assets in the new Shannon and Cork airport authorities, and those orders must go before the Dáil before any assets transfer.
In response to Senator McDowell’s query about the current situation, the financial advice available to the Department makes it clear that the level of reserves in Aer Rianta would not permit the dividing out of Shannon or Cork Airports tomorrow morning. The reserves are not large enough for that. I am reluctant to put figures on it but have seen broad figures of €70 million or €80 million for Shannon and maybe €120 million or €150 million for Cork but they are ball-park figures and could be very wide of the mark. Therefore, the reserves would not be large enough to make it possible to distribute the airports as dividends under company legislation.
The board of the Dublin authority has several options. It can seek to make extra profits by sweating the assets, getting more business, building up the revenue reserves in that way, which will take some time, or it can move more quickly and decide to make some capital gains which would also build up the reserves. It could do that by disposing of some international assets or receiving a fairly long overdue dividend from Aer Rianta International to Aer Rianta or the Dublin Airport authority. That due dividend could help to build up the reserves which would allow us to trigger the Shannon and Cork dividing out days earlier.
According to available estimates, and regardless of the arrangement we made with the trade union movement about 30 April, it would take six to eight months before the reserves were sufficient for Shannon’s assets to be divided out. In the case of Cork because of the terminal it could take up to twice that time. That is the best description I can give of the mechanism in place. The trade unions asked for the April date and I was happy to agree to it but it is also our best estimate of how soon we could transfer assets. One is not allowed to transfer assets from a plc unless one has reserves to cover them. That provides the time and space in which to work out many of the issues, even if we never had the other negotiations about trigger dates and agreements of Ministers and business plans and the other important elements. Current company law constrains us within this time period. I examined whether that company law could be amended but it was clear that EU directives do not permit that. That is the best explanation I can give of how it works and the numbers involved.
Mr. McDowell: I disagree with the Minister’s last point that this gives us time and space in which to work out the change. It does nothing of the sort. It seems to do the exact opposite by putting a gun to the head of the boards to realise assets quickly and give effect to what will then be the Act. The Minister points out that it would be possible to grow revenue over time on which to build up the capital reserves but that will not happen within the timescale the Minister mentions, of eight months, or even twice that time. That would take at least some years.
Are we by proxy effectively making a decision which will oblige Aer Rianta to sell the hotels or realise some of its foreign assets? Few of us would be put out if some of the foreign assets were disposed of although that might in turn impinge on the viability of Aer Rianta International but I doubt there are any strategic issues about which people will be very bothered. There are colleagues in parts of the country where the Great Southern Hotels are located who have a very strong view as to whether the hotels should remain within the State sector. Although generally I support the State sector my ideological commitment to it does not extend to hotels but some of my colleagues hold the view that this hotel chain should remain within the State sector. Does this decision effectively oblige Aer Rianta to sell the hotels?
Mr. S. Brennan: The Senator quite rightly said it could do this by building up revenue reserves but I made the point earlier that if we never made these changes the current board, or its successor if there was no restructuring, must look at some cash realisation programme. The likely targets are some of the international airports it owns because they offer substantial possible gains. There are also substantial dividends in Aer Rianta International which have not been paid.
Mr. S. Brennan: Between Aer Rianta International and Aer Rianta, there is some €30 million to €40 million in unpaid dividends. They have the reserves to pay that amount if that course of action is taken.
This is a public limited company, and I confess the proposed legislation is complicated. However, the issues are being resolved and the best advice is being obtained. The Aer Rianta International option concerns built-up dividends which are due in any event. That is one course of action under consideration. The option of international assets is another. However, none of this has to do with our business here today. Cash realisation is a live issue and any board, or boards, would have to deal with it.
Mr. McDowell: We have received as much information from the Minister as we are going to get. We are making a decision by proxy to dispose of some of Aer Rianta’s assets. It is a pity we are doing so without adequate debate because the board will not have much choice when push comes to shove. Will it be necessary for Aer Rianta International, as a subsidiary of Aer Rianta plc, to borrow to pay its parent company the due dividend? Do I understand the Minister’s response to indicate it would? If this is the case, we are moving debt around. I appreciate the Minister must do so in order to stay within the rules, but it does seem a strange paper exercise in which to engage.
Mr. S. Brennan: I want to be helpful to the Senator. I appreciate he wishes this to be an opportunity to provide information. Aer Rianta International is able to pay the dividend. I am not clear how it will fund the repayment.
Mr. S. Brennan: The dividend is there and Aer Rianta International can afford to pay it. I am not clear whether the money is in the bank, in a drawer, in the reserves or elsewhere. I can check that information. It is in a position to pay the dividend, and that is part of the financial architecture of this scheme.
Mr. S. Brennan: I am referring to international assets. Companies often make decisions about whether to sell assets, such as aeroplanes, and buy more buses, or to use €100 million to buy rolling stock, aircraft, jetties or terminals instead of locking the money in a site. These are sensible decisions. That is why investments are made. I favour maximum flexibility. Ancillary incomes are there for when State companies require funds, not for building empires. We debated this in regard to CIE for years. As to whether €50 million should be used for bus services or left because the money may be needed at some stage for a garage, I am not getting into that debate now. However, these are important discussions.
Mr. McDowell: They are important. Clontarf bus garage is a valuable site. It causes much hassle for people who live nearby. I do not think they would be overly upset if Dublin Bus were to divest itself of that.
Mr. McDowell: This is different. I agree with the general philosophy outlined by the Minister that if a company acquires assets it must also dispose of them, particularly when they were acquired as a business proposition. However, this is a different matter. It involves a company divesting itself of some assets so that it can divest itself of more because of company law. That is a peculiar situation. It risks leaving the company in a worse position by allowing for business decisions driven by an overall structure on which the company may not be keen.
This amendment refers to the name change. As it stands, the name change will occur immediately. We suggest Aer Rianta should remain the name of the holding company until the Cork and Shannon companies are up and running so as to avoid an anomalous situation whereby the Dublin company owns the Cork and Shannon companies for the interim period of nine months or a year.
Mr. S. Brennan: Amendment No. 8 seeks to delay the renaming of Aer Rianta until after the Cork and Shannon appointed day. This issue has been brought to my attention by Senator Dooley among others. I am sympathetic to this matter. However, it would be confusing if I were to allow the delay. It is better that we start as we mean to go on. The notion that Cork and Shannon authorities will be subservient to a Dublin authority for nine months will be a feeling rather than a reality. There is no point delaying the renaming. The sooner we do so, the better.
In the memorandum of associations and my opening requirements of the boards, I will ensure the Irish title automatically follows the English title. Therefore, the title of the Dublin Airport authority, when established, will be Údarás Aerfort Átha Cliath, and so on for Cork and Shannon. In all instances where the title is used in a legal or promotional sense, I will ensure the Irish title is included. That is important.
Mr. Browne: I will speak on amendment No. 8. The Minister must admit there is confusion, particularly surrounding the next nine months until the new boards are fully established. In the meantime, people will think that Dublin Airport authority is only responsible for Dublin. However, the authority will have a say in the business of Cork and Shannon authorities. With hindsight, it may make more sense to leave it as the Irish Aviation Authority in the interim period until Cork and Shannon are fully autonomous. The name is misleading and will cause confusion.
Mr. Dooley: I have spoken to the Minister about this section and I recognise there are difficulties. I do not have a problem with the name. I would have preferred some capacity for representation from the regions on the Dublin board in the intervening period of nine months or however long it lasts based on company law. There are technical difficulties. I thank the Minister and his officials who have been helpful to both myself and Senator Daly during discussions on the matter with him in the past fortnight. I would welcome any comfort the Minister can provide on the issue. Worker-director participation allows for this in some regard. If possible, I would like to see the directors, chief executive officers or chairmen from Cork and Shannon having some involvement with the board of the Dublin Airport authority. There should be some structure, if not right of access, to allow them to get together in the intervening nine months or longer, depending on some of the company law issues which have been referred to.
Mr. McDowell: Ba mhaith liom cúpla focal a rá mar gheall ar an leagan Gaeilge den ainm atá ar an aerfort. In Alt 6, deir sé in the English language, Dublin Airport Authority or in the Irish language, Údarás Aerfort Bhaile Átha Cliath. Mar atá ráite ag an Aire anois, ceapaim go mba cheart go dtabharfaí“Aerfort Átha Cliath” ar Aerfort Bhaile Átha Cliath. Ní aerfort na cathrach é ach aerfort atá suite i gContae Átha Cliath — nó i gContae Fhine Gall, mar ba cheart dom a rá. Tá sé mar sheirbhís do chuile dhuine sa chontae agus níos fuide ná sin.
Senator Dooley has spoken to me many times about representation on the Dublin board from Shannon and Cork. He has pressed the case very hard with me and I understand why he feels so strongly about it. I can try to meet his requirement as best I can by reminding everyone of section 8 which requires the three authorities to work out arrangements between them so that whatever functions can be undertaken by Shannon and Cork in the interim can be agreed and carried out by the two airport authorities. That will ensure almost daily contact at very senior level between the three authorities which should meet the requirement of keeping very close touch during the transition period.
This is an important amendment in that it deals essentially with the ownership of the company in the future. The Minister, in proposing the Bill to both Houses, has been explicit in saying he has come to the view that Aer Rianta and the three successor companies will remain in public ownership into the future. It is no secret that not everybody is persuaded by his protestations on the issue. It is a great pity that, not just in regard to Aer Rianta but also Aer Lingus, we have had such a long but also inadequate debate in recent years when Government policy appears to have vacillated. When Ministers have changed their view there was a corresponding change of view within Government depending on which Minister was in power at a given time. We are left with a distinct lack of clarity in terms of the Minister’s or the Government’s future intentions.
The proposed new subsection seeks to copper-fasten State ownership into the future. I strongly believe that the three State airports are an essential part of national infrastructure and that they should be owned by the State. I also believe — and I hope we will get an opportunity to discuss it later — that any new terminal in Dublin should also be owned by the State. It is not possible to have constructive competition on the one site. We should take the opportunity to copper-fasten State ownership of the three airports.
Mr. Dooley: I object to the amendment because, based on the discussion we had earlier, I would like to see Aer Rianta International retained in the Shannon region and not transferred to Dublin, as the amendment would appear to suggest. I understand the Senator’s aim is to protect public ownership of the subsidiaries and the authorities. However, that is clearly set out in the legislation. I welcome the fact that the airports will remain in State ownership. I do not want to see Aer Rianta International transferred to Dublin, if that is what the reserves issue would allow for. I want to see it remain in Shannon.
Mr. Browne: His fingerprints are all over this amendment. It would be foolish to tie ourselves down; we should leave it to the boards to decide. We should not say Aer Rianta International or the Great Southern Hotels Group should automatically go to the Dublin Airport authority. It makes sense for people to have options. Aer Rianta International should remain in Shannon as it is based there and would be a major asset to the authority. If it is taken away from Shannon, it could lead to a collapse. I have difficulty with this and do not support the amendment.
Mr. S. Brennan: I agree with Senator Browne’s analysis. The purpose of the proposed subsection (3) is to statutorily underpin two companies as permanent State companies. However, Government needs flexibility in dealing with such issues and I do not consider it wise to put it into legislation. It is preferable to retain the flexibility that currently exists. Important business issues surround both of these companies and their locations.
I accept what Senator McDowell is aiming to do in his proposed subsection (2). I do not have a problem with the concept but it is not necessary because the legislation makes it clear that the three airports will remain in State ownership. Effectively, we are doing what is required by the Senator in subsection (2). Subsection (3) would cause me difficulties for the reasons outlined; namely that it does not give any flexibility to Government in this area.
Mr. McDowell: In response to colleagues who made the point about Aer Rianta International, the purpose of subsection (3) of the amendment is not specifically to give ownership to Dublin as opposed to Shannon or Cork; it was intended to ensure State ownership would continue. Reference is made to the Dublin Airport authority as the successor company to Aer Rianta plc. I accept it is a case of belt and braces but, nonetheless, I consider it important that we would do so in view of the circumstances in which we find ourselves where workers in Aer Rianta and the three successor companies are very unsure as to what will happen in future.
As the Minister is aware, the amendment was also tabled in the Dáil in an attempt to get assurances that the company would be retained in public ownership. I acknowledge that he gave that assurance in the House yesterday and today and I presume we will not get any further with it.
Before the company would seek to divest itself of either Aer Rianta International as a whole or any of its significant assets, or for that matter any of the hotels, it should have recourse to the House which was the purpose of subsection (3) of the amendment. It would be a great pity, and I do not suppose Fianna Fáil backbenchers would allow it, for the Minister to get rid of the hotels without a proper public debate as to the benefits that accrue to Aer Rianta from having ownership of the hotels, in terms of the training and so on that goes on there. I would not like to see it happening without a full and proper public debate and it was in order to ensure we had such that we tabled this amendment. However, we will not take it any further.
Acting Chairman (Ms O’Meara): As amendment No. 13 is consequential on amendment No. 12, the amendments may be discussed together, by agreement.
Mr. McDowell: I move amendment No. 12:
This legislation, when enacted, will mandate the company to do certain things, to transfer certain assets and to set up the companies in the way that has been set out in the restructuring programme. Having given the mandate to the company, it seems inappropriate that it will be shared in some way. In a sense, the mandate will be shared by the Minister and the company. There seems to be an implication that the Minister is not satisfied that the company will behave exactly as he wishes. In essence, I propose to remove the Minister’s power to mandate the transfer of assets and the various other issues which are set out in section 7(1), such as liabilities and contracts.
Mr. S. Brennan: Amendment No. 12 relates to section 7(1), which provides that the transfer of assets can be effected by the Minister, as well as the Dublin Airport authority. It would remove an added element of the flexibility to effect what will be a complex restructuring process. Amendment No. 13, which relates to sections 7(2) and 7(3), proposes to remove the power of the Minister, with the consent of the Minister for Finance, to make orders to give effect to the restructuring. The Bill is enabling legislation. The provisions which this amendment seeks to delete are part of a range of powers designed to provide maximum flexibility for giving effect to the restructuring. Senator McDowell has expressed his concern about not trusting the companies. One should consider the will of the Oireachtas, assuming the Seanad passes the Bill this afternoon. It is important that the Minister of the day should have a role in assuring that the will of the Oireachtas is carried through. I do not suggest that the companies will fail to do so, but it is important that we should have an extra assurance.
Amendment, by leave, withdrawn.
Amendment No. 13 not moved.
Mr. Browne: I move amendment No. 14:
This amendment proposes to remove any vagueness about the Minister’s power to give direction to Aer Rianta, or another company, about any matter relating to the restructuring. I seek the removal of the phrase “or in anticipation of” because I am concerned that the provision could be abused by future Ministers.
Mr. McDowell: I take a similar view to that of Senator Browne. This section, as drafted, gives the Minister more than extra comfort, in essence. He will be given absolute power, in effect, to dictate the way in which the restructuring is due to happen. We need to strike a balance between giving the interim boards a certain measure of discretion in deciding how to set the thing up and allowing the Minister to micro-manage, to use Senator Dooley’s phrase. This section of the Bill gives the Minister an extraordinary level of power not only to do things related to the restructuring, but to do anything that might be “in anticipation of” the restructuring. That seems to broaden it out even further, but the amendment before the House seeks to narrow it slightly to issues which are directly related to the restructuring, at least. The section as it is currently drafted will, in effect, allow the Minister to micro-manage everything that happens at the three companies between now and next April and probably beyond that date.
Mr. S. Brennan: I have no wish to micro-manage this or any other issue. I assure the Senator that the sooner I can get it done and dusted the better, so the boards can get on with their jobs. The amendment before the House proposes to remove the Minister’s power to give a direction “in anticipation of” the restructuring. Section 7(6) is important because it adds some flexibility to a complex restructuring process. The Minister will have the power to give directions to ensure that the restructuring is completed, in line with the wishes of the Houses. My legal advisers have suggested to me that we should have the power to give directions in anticipation of the restructuring. The restructuring is not a one-off event that will take place at noon on a certain date — it is an ongoing thing. There is a great deal of legal argument about when restructuring starts and finishes, or when one is in the middle of restructuring. The legal advice given to me is that if I can give directions not only about restructuring, but in anticipation of restructuring, I will have the flexibility required. I did not dream it up myself — it was suggested to me in particular legal advice and I accepted it.
Mr. McDowell: There is concern about issues which might not be directly related to restructuring. I refer to issues relating to the second terminal, for example. The Minister may choose to give directions in respect of the second terminal or pier D. He may well tell me that he already has the power to do that. I am not sure that he has such a power, but he might clarify the matter. The Minister might say that issues which are not directly related to the restructuring issue will be the subject of ministerial orders in the near future. As of now, he has them almost in his back pocket and he may intend to throw them on the table when this Bill is in his back pocket. Perhaps the Minister might use this opportunity to confirm that he does not have the power to make directions about issues of obvious strategic importance, such as pier D and the second terminal. Does he intend to make orders in the near future in respect of such matters?
Mr. S. Brennan: That is not the intention. If the Houses approve legislation that provides for a restructuring process that establishes independent State airports, that is the will of the Dáil and Seanad. It will receive the presidential signature and it will become an Act. It is important, to ensure that the Act is seen through and not frustrated, that the Minister of the day, whoever that might be, is given reserved powers to see through the restructuring. The Minister cannot ramble through and do that willy-nilly because triggers are built into the legislation. I refer to the 30 April deadline, the requirement for business plans to be approved and the consent of the Ministers for Finance and Transport. Such triggers are important. Any directions on restructuring will be subservient to the safeguards built into the legislation. The provisions in question are in place to ensure that the process does not stall, which could happen if a board fails to do something it should do to give effect to the legislation. I do not envisage that that will happen. It is a normal provision in most legislation, such as the existing Aer Rianta Act, which provides that the Minister of the day can give directions on a range of issues. It is a fairly normal part of ministerial powers in respect of State companies.
Mr. McDowell: I would like briefly to tease out an issue. The only discretion the board of the Dublin Airport authority will have will be linked to the capital reserves issue, which we discussed earlier. As the Minister rightly pointed out, the board of the authority will not legally be permitted to transfer some of its assets until the capital reserves issue has been sorted out. A board which is not eager to transfer the assets will have the option of not dealing with the capital reserves issue by liquidating some of the other assets. It might be possible, therefore, for such a board not to advance on the issues we debated earlier, including the possible sale of hotels, the realisation of foreign assets, etc. Am I right to say that if the board were to fail to make a decision on realising assets, the sanctions we are debating would give the Minister the power to direct the disposal of the foreign assets? Is it reasonable to assume the Minister will seek to use his power to do that if he is still in office?
Mr. S. Brennan: The answer to the Senator’s question is probably “Yes”. The Minister could give such a direction if a board were to fail to do that. Section 8 states that restructuring will take place and the Dublin Airport authority will enter into discussions with the other airports about delegated powers and matters of that type.
Senator McDowell’s question is fair. If the Dublin Airport authority should decide that it is unconcerned with the spirit of the legislation and does not propose to divvy out any airports, it would then be incumbent on the Minister to exercise the power provided in the Bill to ensure the intent of the legislation was implemented.
Mr. McDowell: It is unlikely the airport authority would go so far as to refuse to divvy out the airports but it is possible that it might not take the other consequential moves necessary to make the airports viable. This is where the difficulty arises and it is in such a situation that the Minister might find himself tempted to intervene to direct a sale of assets.
Mr. S. Brennan: Senator McDowell is quite correct and his explanation makes me twice as pleased that the legislation is as it is. If the Dublin Airport authority were to behave somewhat neglectfully towards Cork or Shannon Airports or have them lose out in certain carve-ups and so on, the Minister should intervene and reiterate that although Dublin is the big player, Cork and Shannon must be treated fairly as they set sail. This reinforces my conviction that the Minister must have the necessary clout to execute this intervention. I come from the west but represent Dublin and I know in my heart that Dublin has issues to deal with. The economic future of Dublin Airport is not in doubt and it will be brilliant. One can talk about bonds and so on but it is only necessary to consider the enormous traffic flow from Dublin, which will ensure it is an extremely profitable and successful airport. Shannon and Cork Airports must therefore be dealt with fairly by the Minister and Government and supported in every way possible. Senator McDowell has made a better case for the legislation than I could have done on the matter of the power of the Minister.
Mr. McDowell: I do not have a problem with making the Minister’s case in that I am happy to have it put explicitly on the record that the Minister has the power to direct the sale of assets and would not hesitate to use it. That is the provision I wished to include and we are agreed that it is covered under the legislation.
Amendment, by leave, withdrawn.
Mr. McDowell: I move amendment No. 15:
This amendment deals with the costs of the restructuring operation. Section 7(8) stipulates that “Costs arising from the restructuring may be paid by the Minister, to such extent as may be sanctioned by the Minister for Finance.” The Bill represents a political decision by the Minister and the costs of restructuring, which may be considerable, should be paid by the Exchequer rather than saddling the company with those costs.
Mr. S. Brennan: Amendment No. 15 relates to sections 7(8) and 8(17), which provide that the cost of the restructuring will be paid by Aer Rianta or the Dublin Airport authority unless otherwise paid by the Minister. The effect of this amendment would be to render all costs payable by the Exchequer. The Minister for Finance and I are in full agreement that the Exchequer will not pay substantial sums in connection with the restructuring. However, minor costs such as those associated with the establishment of the Cork and Shannon airport authorities prior to their appointed day could be paid by the Exchequer, which is a standard provision in the Bill. The Exchequer will not pay all costs as envisaged in the amendment as that would be inappropriate and unnecessary. The pressure to keep the costs down will come from the airport authorities and it is appropriate that they include those costs in their budgets.
Mr. McDowell: I am not sure that is reasonable. Perhaps the Minister could give us some indication of the level of costs involved and I presume the Department of Finance has performed some sort of risk analysis with regard to this. That the company is being broken up, assets and staff transferred, new systems established and some new staff employed to accommodate duplications in bureaucracy and administration will surely involve significant additional costs. These changes are a consequence of the Minister’s initiative by virtue of a political decision by the Government and it is therefore unreasonable to impose those costs on the company. I can understand that the Minister for Finance thinks the Exchequer should not bear the costs because that is his job but the Minister for Transport should take a more reasonable view by acknowledging that it is his idea and it should be funded by the Exchequer.
Mr. S. Brennan: It is not just my idea; it was a decision reached by the Government after a year of discussion. The minor costs which the Minister must pay include those relating to the issue share capital of a public limited company, for example. Those types of pre-incorporation costs must all be borne by the Minister. Once the airport authorities are fully incorporated and the boards legally in office, any costs that emerge must be dealt with by them. I do not envisage significant costs but I cannot anticipate all those that will arise. The boards must work them out and strive to keep them to a minimum because they must be paid without Government assistance. It would be quite silly to have three airport authorities legally in office as public limited companies while the Minister for Finance is paying bills based on decisions made by those authorities. The authorities could decide to engage experts, hire lawyers or sanction significant building work, for example, as part of the restructuring operation and send the bills to the Department of Finance. That would be daft. It is entirely sensible that the boards should decide on the restructuring costs themselves and the best way to keep the costs down is for the authorities to pay them.
Amendment, by leave, withdrawn.
Amendment No. 16 not moved.
Section 7 agreed to.
Acting Chairman: Amendments Nos. 17, 21 to 23, inclusive, 48 and 49 are related and may be taken together. Is that agreed? Agreed.
Mr. Browne: I move amendment No. 17:
This amendment arises from recent reports regarding the possibility of creditors recalling loans sooner than was originally agreed or revising the terms of loans because Aer Rianta will be changed from one company to three separate companies. The Minister addressed this issue in the House yesterday and said he had received no correspondence to support these claims. I asked that any information on this matter be made public and that was not done so I will press this amendment. There is much concern because we are dealing with debts of almost €500 million and although I accept the Minister’s word, I would be far happier if there was some supporting documentation. The Minister also dropped blatant hints that the leaked letter which alleged this problem came from within Aer Rianta itself and perhaps he might clarify this assertion today. It would be worrying if the information did indeed come from Aer Rianta, especially if that information is incorrect. It is unhelpful to all concerned. It has captured the public’s imagination and is receiving extensive press coverage and it is the responsibility of Members of this House to ensure there is no difficulty down the line when the three separate authorities are established.
Mr. McDowell: I take this opportunity to see if some clarity can be attained on the matter of the bonds and bilateral loans. Most of the facts were set out yesterday but I wish to recapitulate them briefly to ensure I am not missing anything. It has been established that there was correspondence between Deutsche Bank and Aer Rianta at the end of July 2003. In that correspondence Deutsche Bank, as the trustee for the bond holders, expressed concern about the lack of certainty in the Government proposals and the impact they would have on the companies into the future. It sought a reassurance from Aer Rianta that the bonds were sound and, in effect, that the company would be restructured in the context of solvency.
I want to ask the Minister a number of specific questions. First, will he reiterate what Aer Rianta said in that correspondence, namely, that it saw the restructuring as taking place in the context of solvency and therefore not being an event in default? Second, will he put on record whether he has had any intimation from Deutsche Bank, acting as trustee, or from the creditors generally, either in respect of the bonds or the bilateral loans, that they would regard any of the events contemplated by the Bill as events in default? Third, has the Minister any indication from Aer Rianta that it is concerned that the creditors might regard the events anticipated by the Bill as being events in default that would cause it to get into a spiral which might ultimately result in insolvency?
Mr. Morrissey: I see some merit in the amendment in regard to the discussions that have taken place over the past 12 months. Banks might rightly have been concerned before the legislation was published but in view of the fact that the legislation is published, the State remains the underwriter and that the Minister said yesterday that he has had no correspondence from any banks in the recent past, the fear being expressed is exaggerated.
Mr. S. Brennan: I am dealing with amendments Nos. 17, 21, 22, 23, 48 and 49. Paragraphs (i) and (ii) of amendment No. 17 provides that the Minister shall lay a report before both Houses of the Oireachtas or appear before an Oireachtas committee. I am always available to appear before Oireachtas committees whenever I am required to do so to discuss any issue within my portfolio. We do not need to change an Act to require me to appear before a Dáil committee. I am happy to do that. I have always done that, as indeed every Minister must. In regard to laying a report before the House, that can be solved by way of parliamentary question or Adjournment debate at any time, or even more substantively.
Amendment No. 17 is not considered necessary. As is normal in such situations, communications have and will be maintained with funders so as to ensure they are briefed appropriately on the restructuring. These matters are being and have been handled at the outset by the company and its advisers, in consultation with the Departments of Transport and Finance, in a professional manner. There has been no adverse reaction from any funders to these communications nor suggestions of any intention to initiate actions under event of default type clauses of the various loan agreements. The company, the two Departments and their respective advisers are fully apprised of the relevant clauses and these have been the subject of professional scrutiny from the outset.
The Bill is enabling in nature and provides for the restructuring process to proceed in a measured and orderly way which will not lead to any destabilisation of the company’s funding arrangements. I made that clear yesterday. The Bill contains a number of conditions that must be met first before the restructuring of Aer Rianta can be given effect. In this context, it will be necessary for detailed business and financial plans to be prepared by the new boards of Dublin, Cork and Shannon Airports. It is a requirement of the Bill that these plans be approved by the Ministers for Transport and Finance with each House of the Oireachtas also being required to pass a positive resolution on appointed day orders for Cork and Shannon Airports before restructuring can be fully implemented. These financial plans will, of necessity, include obtaining any necessary consent from the funders in accordance with the terms of the relevant facilities. When putting draft appointed day orders before the Houses of the Oireachtas, the Minister will have to address all the issues emerging from the business planning process, including the concerns expressed today in regard to the funding aspects.
Amendments Nos. 21, 22 and 23, which relate to the business planning provisions in section 8(8) and (9), are similar. Unfortunately, I cannot accept these amendments as they seek to include the viability of the three airports as a criterion to be satisfied prior to the making of orders for the Cork and Shannon appointed days. As I said repeatedly, it is a matter for the new airport boards to draw up these plans and marketing strategies for their airports, which will ensure their sustainability, viability and growth in the future. Indeed, the directors of each of the new authorities have a fiduciary duty to ensure the viable operations of their companies. The Minister for Transport and the Minister for Finance, as provided for in section 5(3), will have to be satisfied as to the general state of operational and financial readiness for vesting of assets in the new Shannon and Cork Airports but the issue of viability is one for the boards of the airports.
In regard to amendment No. 48, this section as drafted provides that all orders made under Part 2 of the Bill must be laid before both Houses of the Oireachtas but that section 3(1) of the 1998 Act does not apply, that is, a resolution annulling an order cannot be made within 21 days. The section does provide that appointed day orders for Cork and Shannon Airports require a positive resolution by both Houses of the Oireachtas before being passed. This approach ensures that both Houses will have control over the key stages in the restructuring process, that is, the setting of the appointed days for Cork and Shannon Airports. As regards other orders to be made under this part of the Bill, the approach is geared towards providing maximum flexibility for carrying through what is, as I said earlier, a complex process as efficiently as possible, allowing for the fact that transactions will need to proceed within a clearly defined timetable.
On amendment No. 49, airport by-laws are of local and limited jurisdiction and, under the Bill, will be made by either the relevant airport authorities or, in the case of regional airports, the Minister. Accepting this amendment would mean the Statutory Instrument Act 1947 would apply, thereby requiring the by-laws to be published in the bound volume of statutory instruments. Statutory instruments are usually of general and national application, which would not be the case in regard to by-laws under the Bill.
In addition, the situation in regard to not laying by-laws affects the current position under the Air Navigation and Transport (Amendment) Act 1998 where there are no requirements to lay such by-laws. I ask Members not to ask me too much about the last statement.
Mr. Quinn: The Minister will be aware that I voted with the Government earlier in supporting the view that the business plan should not be in existence before the interim board is set up. However, if a business plan is presented, I find it strange that the Minister has not included the words “financial viability”. I refer to amendments Nos. 21, 22 and 23. The Minister appears to be saying that is taken for granted, so to speak, but I am not sure that is the case. I realise it will be presented to the Minister for Finance and on that basis it is unlikely to be taken unless there is financial viability. I would have thought the Bill would be strengthened by the inclusion of the words “financial viability” in all three cases and I urge the Minister to reconsider that.
Mr. Browne: On amendment No. 17, the Minister is very vulnerable. He has not done his homework and that has been shown quite clearly. He said he has not received any correspondence indicating there is a problem but neither has he received any correspondence indicating that there is no problem and that this issue has been carefully examined. The danger is that when the Bill is passed, a problem might arise subsequently. If I had documentation from the main banks involved or the people who are owed money stating that they are happy that the company is being broken into three separate companies and that it will not affect the term conditions, either in regard to repayments or the period of repayments, I would have no qualms about this aspect but we do not have that information. In fact, neither has the Minister if we listen to what he is saying. He is forcing all of us to take a leap into the dark and we all hope that nothing will happen. It is possible nothing will happen in that area but we do not know that for certain. I find it amazing that the Minister would not have contacted the main people involved to get a reassurance from them on this issue and that he is taking this approach. We will press the amendment for that reason.
Mr. S. Brennan: Will the Senator tell us how often he gets letters from constituents indicating they have no problem? I do not get too many of those. I get letters telling me they are experiencing problems but they do not write to tell me that everything is grand. I spelt out the position clearly yesterday. Everybody in the financial sector in this country must now know about this issue. It has been in the headlines for weeks. I conclude that the bond holders and lenders to a State company are quite happy and satisfied. I do not know whether the Senator has any knowledge of the markets, but it seems to me if one has a bond drawn on a State company today and is getting paid, one is likely to stay quiet because it might be difficult to match that arrangement elsewhere. I state clearly that no concern among bond holders or creditors has been communicated either to me or to the Department of Transport. One piece of correspondence came to the company when this was announced a year ago. It was properly responded to by Aer Rianta at the time, with the company reassuring the correspondent that it was solvent and there was not an issue. That was the end of the matter and I am quite satisfied there is no issue here to be concerned about. Any creditor of Aer Rianta, whether bond holder, trade creditor or whatever, can be assured that he or she is fully covered. I am reliably convinced that this is the view of the bond holders also. They have my phone number and I have not heard a word from them.
Mr. Browne: It is worth pointing out that international lenders are involved. I accept the point made by the Minister. The bottom line is that one company owes approximately €480 million. The Minister has admitted that all three of the new airport companies will face immense challenges. In some cases they will sell off assets, in others they will buy them. A great deal of restructuring is involved and I hope, if it goes right, there will be three viable strong independent airports. However, the danger is that matters can go wrong. That is when creditors get extremely nervous. We all know the case of a lady who had no difficulty in getting a €10,000 loan from a credit union. There was no problem in giving it to her, but then matters went wrong and she had difficulty paying it back. Now it has become an enormous problem for her. Banks are great when an individual’s affairs are going well. When they are going wrong they are quick to recall loans and change the lending conditions. I am, I hope, only erring on the side of caution in tabling this amendment.
Mr. McDowell: Is the Department or Aer Rianta in discussion with the bond holders and the bilateral lenders and creditors as regards consents or waivers? Assuming these are forthcoming, will they involve significant cost to the Exchequer or to the company?
Mr. S. Brennan: I understand that Aer Rianta is in touch with all of its lenders. It has supplied them with copies of the legislation and kept them briefed on its progress. It is a matter for Aer Rianta to deal with its lenders. It would be appropriate neither for the Department or me to get involved in trying to do that on behalf of a State company.
Mr. McDowell: There are also guarantees by the State.
Mr. S. Brennan: I am assured it is not a difficulty. I made that clear yesterday and I do so again today. I know Senators are trying to be helpful as are many media commentators. However, it is not helpful to continue to suggest, nationally, that there is any scintilla of doubt over the ability of a major State company with substantial lenders, such as Aer Rianta, to repay and live up to its commitments. Aer Rianta and the new companies are fully capable of living up to the letter of the bond holders’ requirements. That is my information. I do not believe I can go much further beyond wheeling the bankers into the Seanad this morning.
Mr. McDowell: I agree there is no risk to the creditors because the State ultimately guarantees the loans. Even if they were to trigger the default mechanism because the company could not pay, the State has to step in, in any event. This is not likely to happen and there is no risk, literally, to the creditors. However, there is a potential risk to the company if for whatever reason — the Minister says it would be perverse, and it would be — the creditors were to exercise their rights under the notes. It is quite clear from the information in the public domain that they would be entitled to treat the restructuring as an event of default.
Mr. S. Brennan: That can surely happen to any company in the country.
Mr. McDowell: This should have been sorted and the restructuring should have been squared with the creditors, particularly since they have the power to bring the process crashing down if they choose to exercise it. I accept the logic of the Minister’s position that they are not likely to choose to exercise that power, but they have it and this should have been sorted before this. The consents or the waivers should have been in place before the legislation was put before the Houses. Given that is not the position, we are looking for the maximum possible level of reassurance from the Minister that the consents will be obtained, and at a reasonable cost.
Mr. Browne: The real potential victim could be the taxpayer who will have to bear the financial burden if matters go wrong. There is no doubt the creditors can be provided for. The State can bail out the companies if matters go disastrously wrong. I hope they will not. However, we have to protect the taxpayer and that is why we are pushing this amendment.
Mr. S. Brennan: There is no risk of any sort to the taxpayer. The Aer Rianta organisation is solvent. It has enormous assets which cover its loans many times over. It is probably one of the most secure companies here to which a creditor could lend money. I do not know of any bank which would not queue up to lend funds to a State company of this sort. The taxpayer has no concerns about this matter.
Mr. Cummins: Did the chief executive of the company not sound a word of caution about this, and did the Aer Rianta chairman not use the word “draconian”? I appreciate what the Minister is saying in terms of how fully covered the company is and I am inclined to accept that in line with the available advice. However, for some reason everything does not appear to be beyond doubt.
Mr. S. Brennan: I have nothing further to add to what I have already said.
The Committee divided: Tá, 14; Níl, 29.
|Bradford, Paul.||Browne, Fergal.|
|Burke, Ulick.||Coghlan, Paul.|
|Coonan, Noel.||Cummins, Maurice.|
|Finucane, Michael.||Hayes, Brian.|
|McDowell, Derek.||McHugh, Joe.|
|Norris, David.||O’Meara, Kathleen.|
|Phelan, John.||Tuffy, Joanna.|
|Bohan, Eddie.||Brady, Cyprian.|
|Brennan, Michael.||Cox, Margaret.|
|Daly, Brendan.||Dardis, John.|
|Dooley, Timmy.||Fitzgerald, Liam.|
|Hanafin, John.||Kenneally, Brendan.|
|Kett, Tony.||Kitt, Michael P.|
|Leyden, Terry.||Lydon, Donal J.|
|Minihan, John.||Mooney, Paschal C.|
|Morrissey, Tom.||Moylan, Pat.|
|O’Brien, Francis.||O’Rourke, Mary.|
|Ó Murchú, Labhrás.||Ormonde, Ann.|
|Phelan, Kieran.||Quinn, Feargal.|
|Ross, Shane.||Scanlon, Eamon.|
|Walsh, Jim.||White, Mary M.|
Tellers: Tá, Senators U. Burke and McDowell; Níl, Senators Moylan and Minihan.
Amendment declared lost.
Acting Chairman (Mr. Mooney): Amendment No. 19 is an alternative to amendment No. 18 and amendment No. 20 is related. Amendments Nos. 18 to 20, inclusive, may be taken together by agreement.
Mr. McDowell: I move amendment No. 18:
These amendments seek to explore what will happen during the interim period and where in essence the power lies. There is a difficulty built into the mechanism set out by the Minister in that for the interim period of nine months, the Dublin Airport authority will have big brother-type responsibility for Cork and Shannon Airports.
Amendment No. 19 seeks clarification on what will happen in circumstances where it is the view of the Dublin Airport authority that a particular transfer of responsibility to Cork or Shannon Airports may be required under the Bill in terms of autonomy and so on, but is not in the corporate interests of Aer Rianta or the Dublin Airport authority as it will be known in the future. The Bill must clarify what will be the overriding responsibility of the Dublin Airport authority at that stage. Is its primary responsibility the normal fiduciary responsibility of a board to look after the corporate interests of the Dublin Airport authority or does it have an overriding responsibility, legal requirement or mandate to give effect to the restructuring and, in effect, do things which in normal circumstances the board would not choose to do? In other words, would it divest itself of assets or give to the new companies assets which are the primary responsibility of the board of the Dublin Airport authority in the meantime?
This dilemma for the board arises because of the structure used. It is important the board knows whether it is to act in the normal interests of the company or whether its primary responsibility is to deliver the Minister’s restructuring.
Mr. S. Brennan: Amendment No. 18 seeks to delete references to arrangements for the delegation of functions at section 8(1). I consider it important that the Cork and Shannon authorities have the option of agreeing such a delegation of functions between them. It would not be right to delete such references.
Amendment No. 19 would provide that the entering into arrangements by Dublin Airport with Cork and Shannon Airports on delegated functions would be optional for Dublin. This is contrary to the policy objective that prior to their respective appointment dates, Dublin Airport shall make arrangements with the other two airports to delegate the performance by them of functions on its behalf to the extent agreed between the parties.
Amendment No. 20 seeks to remove text from section 8(5) which sets out the responsibility of Dublin Airport subject to any delegation of functions for Cork and Shannon Airports pending the Cork and Shannon appointment dates. The amendment is unacceptable because until their respective appointment dates, Dublin Airport will have ultimate responsibility for the management and operation of Cork and Shannon Airports. However, as provided for in sections 1 to 4, Cork and Shannon Airports, through devolved arrangements with Dublin Airport, can in the interim period undertake certain management and operational functions regarding their respective airports and can prepare to assume full responsibility for the ownership and development of the airports on their appointed days.
Mr. McDowell: I will try to come at this from a different angle. The legislation, when enacted, will allow for a transfer of a great deal of authority to the interim boards. Am I right in assuming that the Minister wishes the maximum possible level of authority to be transferred to the interim boards as soon as possible? Are we likely to find ourselves in the position within a matter of weeks or shortly after the appointed days where the interim board will deal with staff issues and so on and people will to all intents and purposes be working to the interim board? Is that the reality?
Completion of the deal has been postponed until 30 April 2005. Is the reality on the ground to be that the interim boards will in effect act de facto as the real boards within a matter of weeks of the legislation being passed? Is that what the Minister envisages? I raise the matter by way of amendment because there is a real dilemma in the context of the Dublin Airport authority having real responsibility for operations on the ground in Cork and Shannon Airports when it might not deem that to be in the overall interests of the company.
Mr. S. Brennan: The legislation is of necessity finely balanced in this regard. Section 8 states that the Dublin Airport authority “shall” pending the Cork appointed day enter into such arrangements with Cork Airport for the performance of functions on its behalf regarding Cork Airport as may be agreed between the parties. The clause for Shannon is exactly the same. The language used is clear.
The Dublin Airport authority is required to enter into arrangements with Shannon and Cork Airports for functions as can be agreed between them to be carried out on behalf of Dublin Airport in an agency-type fashion although that phrase is not used in the Bill. Legal responsibility remains with Dublin Airport in the interim period.
Mr. McDowell: Does the Minister envisage that staff issues will be transferred to the interim board fairly quickly?
Mr. S. Brennan: Again, the Bill is clear in that regard. That cannot happen until at least 30 April 2005. Staff cannot legally transfer until then.
Mr. McDowell: They cannot do so legally but it could be done on an agency basis by virtue of the delegation process in place. Does the Minister see that happening? Will the interim boards de facto do this work albeit on an agency basis legally? Decisions and operations on the ground will be taken by the local boards. Is that what the Minister foresees happening?
Mr. S. Brennan: There is a difference between the legal and operational situations.
Mr. McDowell: I appreciate that.
Mr. S. Brennan: The boards will be put in place and will be required to prepare business plans and to make an agreement with Dublin Airport as to what functions they can carry out on its behalf. I hope they can reach sensible arrangements in terms of what Cork and Shannon Airports can do while under the umbrella of Dublin Airport. Such arrangements must be of a day-to-day nature. I do not envisage any awkward situations arising in that regard.
The boards will draw up business plans and will be able to carry out functions as agreed by the Dublin Airport authority, the legal owner, and the operating board in place. It is worth pointing out that the worker-directors on the boards will also have to be consulted about the arrangements. We are committed to discussing the preparation of business plans with the trade union movement and other stakeholders as we go forward.
Mr. McDowell: What type of issues will be dealt with by the sub-delegation process?
Mr. S. Brennan: This matter is dealt with in the legislation and is not necessarily an issue to be dealt with by me. I hope they will try to create new business. As I outlined already, staff cannot be transferred. They can continue to work in the airports but cannot legally be transferred until April 2005.
They should first take urgent and vigorous steps to create new business. I am certain the three boards will be able to agree on what needs to be done. It is in their interests to do so. Dealing with that issue would be at the top of my list.
Amendment, by leave, withdrawn.
Amendments Nos. 19 to 23, inclusive, not moved.
Acting Chairman: Amendments Nos. 24 and 25 are related and will be discussed together.
Mr. McDowell: I move amendment No. 24:
Section 8 as it stands entitles each company to make the necessary arrangements to put in place the restructuring process with the consent of the Minister. As a number of the decisions that will have to be made inevitably impact on the residual company, Dublin Airport authority, or Aer Rianta as it currently stands, the amendments seek to provide that their consent and approval will be sought, as well as that of the Minister, so that the companies’ consent is a necessary part of the whole structure in the future.
Mr. S. Brennan: Amendment No. 24 would amend section 8(12), where Cork and Shannon are performing functions on behalf of Dublin before their respective appointed days under section 8(1). The performance by these authorities of such functions, to include provisions of services and facilities related to such functions, will already be subject to the terms of an agreement in place between Dublin Airport authority and the other relevant authorities under that subsection. The airports will come into the issue directly in that way.
Amendment No. 25 would amend section 8(13) where an airport authority wishes to establish a new airport or become the owner or manager of an existing airport. This should only require the Minister’s consent. No ministerial consent is required for the performance of delegated functions of Dublin Airport authority under subsection (1). This is a matter for agreement between Dublin Airport authority and Cork and Shannon authorities as the case may be.
Mr. McDowell: I want to address the issue of a new airport. I accept what the Minister said on amendment No. 24. When reading the Bill, I was struck that this subsection was included because it appears to be an afterthought. It appears it was suddenly decided when drafting a Bill seeking to restructure the existing airports to throw in two or three subsections which relate to the possibility of a new airport. Nonetheless, it gives us an opportunity to tease out one or two issues relating to the new terminal. It appears this is hugely important in the context of the overall restructuring. The Minister said this morning that Dublin is certain to be thriving and successful in the future, and perhaps that will be the case. If what is a State asset were to be undermined by a terminal or another airport in private ownership, it is possible to imagine circumstances where Dublin Airport authority will be left with a wasting asset in Collinstown. It is unlikely but it is not too difficult to imagine that will be the case.
I wanted to use the amendment as a vehicle to invite the Minister to set out his thinking in regard to the new terminal. He blocked spectacularly the development of pier D by Aer Rianta last year. He is on record as saying that he favours a new terminal. Perhaps he will let us know when he envisages a Government decision on the new terminal and giving a direction to the Dublin Airport authority in that regard in the near future.
Mr. S. Brennan: Section 8(13) provides that an airport authority can, with the approval of the Minister and after consulting the Minister for Finance, establish a new airport, become part owner of an airport and manage or operate an existing airport. Under subsection (10), an airport authority is given the power to manage, operate and develop any other airport established or owned by it under subsection (13). These provisions mirror provisions in subsection 16(i) and (iii) of the 1998 Act. We are seeking to carry through the provisions in the 1998 Act to permit the same statutory permission to the authorities to become involved in this area, with ministerial agreement. This will give some flexibility to the authorities. Originally it was probably aimed more at the international market than the national market. As it is worded in the 1998 Act and now, it can apply to both the international and national market.
The Government has been considering the issue of a second terminal at Dublin Airport. It will conclude its deliberations on the matter in the coming weeks. Extra capacity is needed at the airport and I hope to be able to say more about it in the not too distant future.
Mr. Daly: I presume there was a reason for including these subsections. Is it the intention to vest some of the smaller airports in either of the authorities, for example, Farranfore or Knock? Will the Minister clarify what will happen in Dusseldorf and other international airports where there is involvement already? Will Aer Rianta’s overseas airport involvement be vested in Dublin, Cork or Shannon?
Mr. S. Brennan: There is no new intention in the Bill other than to carry through what was in the 1998 legislation, which allowed Aer Rianta to invest in other airports and to get involved in their management. We are carrying that through to the new authorities, which is what is before us here. I have no plans to bring the regional airports into State ownership.
In regard to Dusseldorf and so on, I explained earlier that the shareholding in the companies is held by ARI or some special corporate vehicles attached to ARI. This is where they will remain until the relevant board decides whether to hold on to the investments, sell them or make further investments. I envisage the airports will have maximum freedom to invest in and seek to manage other airports, if it appears to be a good business strategy for the airport in question.
Mr. Quinn: When we debated the topic yesterday, the Minister was very clear that the whole purpose of the policy was to delegate responsibility to the individual airports. The Minister and I had a difference of opinion on how this would be structured. It appears the amendment would go against everything that is in mind, namely, to delegate responsibility and place on the shoulders of Cork and Shannon the responsibility for success. If they were to do so subject to the approval of the Dublin Airport authority, it would appear to go against what we are trying to achieve here. I do not understand the reason for the amendment. I understand those who tabled the amendments wish to see this delegation take place. I support the Minister in not accepting the amendment.
Mr. Ross: The Minister referred to the second terminal. Will he tell us what advice he received from the current board on the viability and benefits of a second terminal?
Progress reported; Committee to sit again.
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