Aer Rianta: Follow the Asset Trail

A proposal for what is behind the Aer Rianta Privatisation

Aer Rianta is in the news - but what is the motivation for the break up of the company? Maybe its not ideology - this report passed to Indymedia by a senior trade unionist proposes it is the old story - a rip off of the states assets.

FOLLOW THE ASSET TRAIL

IN THE PUBLIC INTEREST

INTRODUCTION

This is a peculiar story about disparate characters who fortuitously or deliberately have successfully combined to devalue the wealth of the nation and are now poised to loot the lot under the noses of the gullible owners.

An article written in The Irish Times, October 18th, 2003 by Fintan O'Toole gave an interesting account of the trials and tribulations of a private company, which owns a significant share of the national assets. The Government, with the support of the current Minister for Transport, transferred the assets from State ownership to this private company (albeit State owned) a mere five years ago.

The article described how the same Minister is now publicly sandbagging to death the same company.

Fintan O'Toole's column ended with the following advice, "Never mind the national interest, just follow the man in the rugby shirt".

The man in the rugby shirt is one of the key characters in this curious story but he is by no means the only one or the most powerful.

The following account is not about the man in the rugby shirt or the private company, which was given the national wealth five years ago. It is primarily about the perilous situation that is planned by the Minister for critical and valuable State assets.

This account will follow: the trail of the national assets, the independent experts, the mandarins, the profiteers and the spurious monopoly.

The objective of this account is to focus attention on a Minister's actions regarding the ownership of highly valuable State assets. The assets in question were finally removed from the Government's direct ownership five years ago. We are now informed that the Minister has settled on the method of capital distribution and; "He is now expected to resolve his difficulties by introducing legislation which will by-pass present company law as he organizes a phased capital distribution of the Aer Rianta assets." (Martin Fitzpatrick - Reports).

The account also reveals the appalling vulnerability of the national assets and material possessions when commercial and media interests coalesce to denigrate or lionize politicians and when civil servants are motivated by blind economic orthodoxy.

We take the liberty here of quoting Jim O'Leary, lecturer in economics at NUI-Maynooth to define what is meant by national wealth as opposed to national income.

"Income is the flow of revenue that accrues over a period of time. Wealth is the stock of assets and material possessions owned at a point in time."

"Just as is the case with individuals, so it is with economies: it takes many years of high income to amass substantial wealth. Specifically, in the case of economies, it takes decades of high GDP (gross domestic product) per capita to generate the resources necessary to build an adequate stock of high quality infrastructure."

THE ASSET TRAIL

An examination of the Aer Rianta Annual Reports from 1985 to 2002 indicates what could be termed questionable movements of important and valuable State assets.

The following information on the ownership of the assets is provided by the Auditors, Stokes Kennedy Crowley in Aer Rianta's Annual Report 1998.

"Background to the Basics of Preparation of Financial Statements

The financial statements are prepared on the basis that Aer Rianta cpt managed, developed and operated Dublin, Shannon and Cork Airports as an agent appointed by the Minister of Public Enterprise until 31 December 1998.

At 31 December 1985 all fixed assets in use by the company were owned directly by the Minister and were not included in the balance sheet of Aer Rianta cpt.

In 1986 the Minister, as part of a review of this agency arrangement, decided that long term fixed assets would be financed directly by the company (see explanatory note below).

(Note: The 'long term fixed assets' referred to were thus included on Aer Rianta's 1986 Balance Sheet and other assets continued to be owned by the Minister. Up to this point Aer Rianta surrendered the annual financial surplus to the Minister and finance for capital expenditure was supplied by the Department to Aer Rianta).

In 1988 as a further development of this process (the review of the agency arrangements), the Minister decided that all new assets would be financed by the company from its own reserves, borrowings or grants.

(Note: All new assets were thus included in Aer Rianta's Balance Sheet and assets acquired before 1986 continued to be "owned by the Minister).

(Note: This arrangement continued until 31 December 1998. It was an effective arrangement for transferring assets from the direct ownership of the State to an agency, with minimum public exposure).

Consequently there are two categories of fixed assets in use at 31 December 1998:

(i) Fixed assets financed directly from Exchequer funds at 31 December 1987.
(ii) Fixed assets financed directly by the company.

On vesting day, 1 January 1999, the ownership of Dublin, Shannon and Cork Airports was formally transferred to Aer Rianta cpt and the arrangement whereby Aer Rianta acted as agent of the Minister ceased."
(Source: Aer Rianta Annual Report, 1998).

(Thus, on 1 January 1999 the pre-1986 assets were added to the assets which had been quietly transferred to the agency between 1986 and 1998, giving the private company all of the State's assets).

From its formation in 1969 Aer Rianta had sought a change in its status from asset-less agency to semi-state organisation. Joint Oireachtas Committees and Civil Service Inter-departmental Review Groups denied requests for the change of status for over twenty years. In the early eighties the Joint Oireachtas Committee published the following advice regarding Aer Rianta's role." The major task facing the Company is that of managing significant national resources and developing an essential national service. ".........Aer Rianta should continue to work closely with the Department of Tourism and Transport and the question of autonomy should be deferred". However, despite the refusal of the change of status requests, the majority of the assets were nevertheless quietly transferred to Aer Rianta's Balance Sheet by the Minister's decisions in the 1980's.

In his first year as Chairman of Aer Rianta (1990), Dermot Desmond reported that the Minister for Tourism, Transport and Communications, Seamus Brennan was reviewing the transfer of assets from the Minister to Aer Rianta cpt.
(Source: Annual Report and Accounts, 1990)

In 1991, the Oireachtas Joint Committee on Semi-State Bodies and the Internal Departmental Review Group finally agreed to recommend a change of status for Aer Rianta.

In October 1991, Mr Desmond resigned prematurely from the Board of Aer Rianta. Mr Brennan was replaced in early 1992 by Mrs Marie Geoghegan-Quinn, TD.

The 1991 recommendations of the Oireachtas Committee and the Departmental Review Group were not acted upon until 1999, eight years later. In January 1999 ownership of Dublin, Shannon and Cork Airports was transferred from the Minister for Public Enterprise, Mary O'Rourke, TD to Aer Rianta.

In 2002, Mr Brennan replaced Ms O'Rourke. Mr Brennan had words of praise for Aer Rianta in 1990 and had worked in collaboration with Mr Desmond to have all of the State's assets transferred to Aer Rianta's ownership.

On his return, in 2002, to his former ministerial duties in aviation he proceeded to denigrate Aer Rianta and arrange its liquidation including the distribution of the national assets between three new companies.

The Minister has not explained his reasons for making a 180 degree turn. He has expressed his personal dissatisfaction and accuses Aer Rianta of monopolistic practices. But he has authority over Aer Rianta and appoints the directors to implement the government's policies. There are many ways to deal with the Minister's complaints about his own company without putting the taxpayers' assets in jeopardy.

The State assets, currently owned by the company, have been moved twice by ministerial decisions (1986 and 1988) and a third time by vesting legislation (1999). Minister Brennan now plans to move them, against professional advice, to three unsubstantial and vulnerable companies.

The State's assets are in jeopardy and require protection from the misguided opinion and damaging actions of the Minister.

THE INDEPENDENT EXPERTS TRAIL

In December 1999, a number of reputable consultants were appointed to advise the Government regarding a strategy for Aer Rianta.

The brief given to the consultants did not include a valuation of the "assets in use" or the separation of the assets and Aer Rianta.

In 1999, at the request of the Minister, Mary O'Rourke, Aer Rianta, assisted by Arthur Anderson Consultants, presented their proposals for the company's future strategy. The proposals included an Initial Public Offering of a minority shareholding in Aer Rianta. The minority shareholding was to raise capital funding for airport development.

Warburg Dillon Read, AIB Capital Markets and SH&E were engaged by the Ministers of Finance and Public Enterprise to evaluate the Aer Rianta report (Future Strategic Direction) and to advise the Ministers on strategic options.

Standard and Poors engaged consultants to analyse the financial standing of Aer Rianta in the context of a Eurobond issue and loan facilities.

The Minister for Public Enterprise commissioned the Price Waterhouse Coopers Report.

The Minister for Public Enterprise commissioned The Doganis Report. Professor Doganis submitted his findings and opinion mainly on the question of the construction of a private terminal and scale of airport charges.

Warburg Dillon Reid, AIB Capital Markets and SH&E : Report

In December 1999 three consultancy companies formed an advisory team to make a report to the Minister for Public Enterprise and the Minister of Finance. The title of the report is, 'Review of the Strategic Options for the Future of Aer Rianta'. The consultants involved in preparing the report were: Warburg Dillon Read, AIB Capital Markets and SH&E. The consultants noted in their introduction that the valuation of Aer Rianta or any of its constituent parts did not come within their terms of reference.

The following extracts from the report paint a very different picture to the one Minister Brennan is painting for public consumption.

"1.2 Aeronautical charges: Aeronautical charges at Dublin Airport are low when compared with its European peers."

"1.3 Financial Outlook: As a result of Aer Rianta's major capital expenditure requirements, the loss of intra-EU duty free, comparatively low aeronautical charges and maturing traffic growth, we believe that Aer Rianta's financial outlook is severely strained."

"1.4 Financing alternatives for Aer Rianta as a State Company: We have concluded that the alternatives open to Aer Rianta to utilise debt financing and asset disposals are unattractive or inadequate. None of these financing alternatives provide access to the long-term capital necessary to upgrade and develop Aer Rianta's domestic airports in the future to meet passenger growth. We recommend that an opening of the equity capital of Aer Rianta to outside investors be considered as a source of future financing."

"Section 3: On a profitability measure Aer Rianta has the lowest margin of its peer group. On balance our analysis shows that the current low profitability is a result of suppressed aeronautical revenues rather than an excessive cost structure. This is supported by analysis showing that Aer Rianta has one of the lowest charges per passenger of its peer group."

"1.7 Having considered the relevant advantages and disadvantages of the various options, our recommendation is that an IPO is the funding option which best meets the commercial needs of Aer Rianta."
(Extracts from: Report to the Minister for Public Enterprise and the Minister for Finance; Review of Strategic Options for the Future of Aer Rianta, December 1999, Consultants, Warburg Dillon Read, AIB Capital Markets and SH&E (together, the "Advisers").

The following is an extract from the Aer Rianta Annual Report for the year 2000. It indicates clearly that the Minister rejected the Consultant's advice and forced the company to take a course of action the Consultants rejected as being unattractive or inadequate and also unable to provide the long-term capital required:

Extracts from Annual Report 2000 (Chairman's report)

"Aer Rianta does not expect an initial public offering to be approved" (by the Government) "in the short term, although the Board still considers this to be the best option in the long term."

"Given the Government's interim position, Aer Rianta has had to look to other sources of funding for its capital investment programme."

"The company raised €250 million through a ten year Eurobond issue, (oversubscribed by more than two-and-a-half times), and long term loan facilities of €125 million from the European Investment Bank."

Standard & Poors Note to Bond Holders

In early November the Sunday Tribune published the following report:

"Aer Rianta currently has a €250 million bond and the Standard and Poors note, which was issued last Wednesday before the PWC (Price Waterhouse Coopers) Report was known, was designed to inform the bond holders of the future financial performance of the airport operator.

It is noted that Aer Rianta had a "deteriorating financial profile and an unbalanced revenue mix" with the company too dependent on ancillary income from areas such as retailing and car parking.
(Sunday Tribune 09/11/2003; Standard and Poors Note to Bond Holders)

Note: Aer Rianta's financial position looks set to be further eroded in the short term as the Commission for Aviation Regulation announced that it intended to reduce charges at Dublin Airport by about 10%.

Price Waterhouse Coopers Report

The following information was published in the Irish Times on November 8th, 2003:
"The Price Waterhouse Coopers (PWC) Report says Shannon could be loss-making up until 2006, even with all debt wiped off its balance sheet. It also states that debt levels at Aer Rianta generally could rise to €400 million.
The report says Dublin Airport's profitability could be seriously eroded by large interest payments on debt transferred from Shannon or Cork".
The Doganis Report (Source: The Irish Times, January 26th, 2002)

"The Report, a copy of which has been seen by The Irish Times says Aer Rianta has very low charges at Dublin compared to other major European airports....".

Note: There may be other consultants' reports, which the writer is not aware of, as indicated by the following statement from the Chairman of Aer Rianta. The Sunday Tribune published his statement on June 22, 2003:

"When I became Chairman, two different sets of consultants had been appointed and the building of Pier C was held up for three and a half years."
"One group of consultants came in and said that we should sweat the assets."

The terms of reference given to Warburg Dillon Read, AIB and SH&E by the Ministers of Finance and Public Enterprise excluded "the valuation of Aer Rianta or any of its constituent parts".

Despite the instructions to the consultants to exclude a valuation of Aer Rianta, the Chairman of Aer Rianta gave an indicative value to the Sunday Tribune:

"Prior to 11 September 2001 Aer Rianta was approached by an Australian bank, reported to be McQuarrie Bank, expressing an interest in purchasing a 20% stake in the Irish company. The deal would have valued the company at €3.6 billion".

Conclusions:

(1) The value of Aer Rianta presumably includes Aer Rianta's international companies and hotel chain.
(2) Aer Rianta is asset rich and capital poor.
(3) The "advisory team" of consultants has warned the Minister that "Aer Rianta's financial outlook is severely strained".
(4) They have also told him that "the current low profitability is a result of suppressed aeronautical revenues rather than an excessive cost structure".
(5) The value of the taxpayers assets are falling because of the Ministers' actions ie blocking timely physical developments, reducing the value of revenues from aeronautical activities and forcing the company to raise capital through debt.

The Independent Experts Trail crystallises some fundamental facts:

(A) Expert advice is to be deliberately ignored when it conflicts with the Minister's personal intentions.
(B) The company currently in possession of the assets is being systematically destroyed;
(C) The assets are being systematically devalued by the Minister's actions.
(D) The assets are in jeopardy if retained by the company and in triple jeopardy if transferred to the proposed new companies.
(E) Standard & Poors' note to bond holders is demonstrable proof of the devaluation of the assets.

We referred above to Martin Fitzpatrick's article "Bid to take Aer Rianta directors off the hook". The article reports the Minister as saying that he was relying on legal advice and he was confident that the outline legislation would be available before long.

Fitzpatrick ends the article as follows; "So as well as capital distribution, the Minister is believed to be preparing legislation which will enable the plans for Aer Rianta to by-pass existing law".

The Sunday Business Post, April 18th 2004 carries an article by Niamh Connolly naming the three companies currently assisting the Minister. One of the companies named is the solicitors Matheson Ormsby Prentice. This company advised Sir Anthony O'Reilly in relation to Valentia's bid for Eircom - value of the transaction €3 billion. Sir Anthony O'Reilly is Chairman of Matheson Ormsby Prentice.

THE MANDARINS TRAIL

The questionable handling of the State assets described in the 'Asset Trail' raises questions of procedures and responsibilities. Who is representing the interests of the taxpayers/shareholders regarding the transfer of the airports to Aer Rianta and the latest proposition to transfer them to other companies.

1. The Editorial in the Irish Times, July 15th, 2003 describes the Minister's responsibility to at least tell the taxpayers what he is doing with their investments and what benefits will accrue.

"The taxpayers who funded and own the State monopoly are entitled to know what specific benefits will flow from restructuring. And the Minister, who is the shareholder on their behalf, has a responsibility to tell them."
(Irish Times, Editorial; July 15th, 2003)

2. The Department of Transport, Energy and Communications described responsibilities for State enterprises in the 1997 "Statement of Strategy":

"The Minister and, where appropriate, the Minister of State with delegated powers, is responsible to Government and the Oireachtas for policy and performance of these companies. The Department working directly to the Minister is, in effect, the proxy shareholder for these State enterprises."

3. The Board of Aer Rianta indicates its understanding of responsibilities in the Annual Report 2000:

"The Board fully recognises and accepts the right of the Minister and Government to make policy decisions that affect the organisation."

Public Servants

On the 19th October 2003 the Sunday Tribune published a "Review of the Mullarkey Report regarding the Senior "Mandarins":

"Dubbed the real or permanent Government, the 16 heads of departments or 'secretaries general' make up one of the most powerful groups in the State".
"There is concern in the report that the increasing powers of the Comptroller and Auditor General and the Public Accounts Committee are forcing mandarins into the gaze of an inquisitive public."

On the 11th April 2004 the Sunday Tribune published an article "The outrageous fortunes of those who jumped to the private sector". The article refers to a senior tax official a high-ranking official in the Department of Finance and a high-ranking official in the Department of the Taoiseach who joined private companies and became millionaires. Apparently a draft code of standards and behaviour for civil servants addresses this issue but the code has been on the table for the last four years.

Department of Transport, Energy & Communications - Statement of Strategy, 1997

The Mandarin with responsibility for the Department of Transport, Energy and Communications revealed views of Aer Rianta and its future in a document titled "Statement of Strategy" in 1997.

The following extracts are taken from the 1997 document.

1. "One option would be to privatise the State companies and for both regulation and policy development to remain under the direct control of the Government."
2. "Aer Rianta's current legal status as an agent of the Minister is an anachronism. It needs to be established as a normal Commercial State company. This will involve transferring the three State airports from the Minister's ownership to that of Aer Rianta".
3. "An excessive concern for shareholder value of the existing State companies in dominant positions could lead to the loss of competitiveness in the economy as a whole".
4. "The Department will devise appropriate policies which will translate into price control mechanisms to be implemented by a regulatory authority".

It appears that the Mandarin has fulfilled the 1997 ambitions expressed in one and two above and he has definitely not shown "an excessive concern for shareholder (taxpayers) value" in Aer Rianta. Indeed, Standard and Poors' warning to bondholders and the Consultants' warning to the Minister, about the severely strained financial future, failed to create any concern at all. The price control mechanism (number four above) was also achieved with the establishment of the Commission for Aviation Regulation. The Commission to date has cut capital expenditure, repeating the policy that created the disastrous shortages of airport capacity in the nineties. It also intends to reduce landing charges despite overwhelming evidence and independent advice that these measures will seriously damage the viability of the company and threaten the security and value of the assets. The only piece missing from the Mandarin's 1997 "Statement of Strategy" is the liquidation of the company that accepted the gift of the State assets in 1999. An article published in March 1997 by "Industrial Relations News" also provides an insight into the Mandarin's thinking. The article is titled "The John Loughrey Interview". The following extracts are taken from the article: "It is now accepted that the privileged position of State companies is coming to an end". "The changes at Telecom Eireann will have to be managed over a dramatically short period. This is one reason why the share options have been made available so as to facilitate such a change." "The strategic alliance involving KPN-TELIA and Telecom Eireann is a classic model of its kind. This is an excellent formula as it facilitates the inevitable process of transformation."

Mr. Loughrey's views on State companies can hardly be regarded as objective and may be a general malaise in areas of the public service. Niamh Connolly reported David Begg's opinion on the subject as follows; "In my opinion, they believe passionately in privatization. They facilitated the process of starving the State companies of investment over the years." Although Mr Loughrey has retired from the civil service he is still facilitating the privatisation strategy. On December 21st, 2003 The Sunday Business Post published an article titled "Loughrey audited power plant contest". Simon Carswell, journalist, reported that a spokesman for the regulator confirmed that Loughrey had overseen the competition. He also reported that the Commission for Energy Regulation had postponed the signing up of the "two preferred bidders". A spokesman for the regulator refused to say why it was postponed. Simon Carswell also reports in the article that Mr Loughrey gave evidence to the Moriarty Tribunal during its investigation into the granting of a second mobile phone licence to Denis O'Brien's company Esat Digiphone in 1996. The article also reports that Loughrey told the Tribunal that he may have been aware in May 1996 that O'Brien did not have the money to pay for his part of the fee for the second mobile phone licence. People called to assist the Tribunal included ex Minister for Transport Michael Lowry, ex-Chairman of Aer Rianta Mr Dermot Desmond and ex-Aer Rianta Board member Noel Fox. Simon Carswell's report does not boost one's confidence in the strategic planning and the management of State assets.
The Sunday Business Post reported the following on May 6th, 2001:
"According to sources in Aer Rianta, the EU Commission had asked in May 1995 whether discounts at State airports were higher for Ryanair than for other airlines, but these concerns were allayed after a visit to Brussels by senior departmental official John Loughrey." The Sunday Independent, April 18th 2004 reports the outcome of a current ruling regarding discounted airport charges given to Ryanair at Charleroi. The EU ruled that the Ryanair discounts arrangements would be made available to other airlines. One wonders if there is an accessible record of Mr Loughrey's explanation to the EU Commission and the impact on Aer Rianta's income.

THE PROFITEERS TRAIL

The Minister is the taxpayers' representative and the owner of Aer Rianta. He does not appear to understand the economics and monopoly status of airports. He also appears to think profiteers are men from the St Vincent de Paul who will build terminals at no cost to the taxpayer. The Minister could usefully consult Professor Doganis' book 'The Airport Business' or listen to the independent advisors the Government employed. A Director of Goldman Sachs International Ltd defined the airport business as follows: "Airports are two businesses in one. The aviation side relates to the core function of an airport as a facilitator of air transportation. The other side of the airport business is the commercial, retail and real estate business. Many airports are natural monopolies that must be regulated if privately owned. As a result they are never likely to function in a total competitive market, free from government controls." Note: The elements which make for a 'natural monopoly' include geographical position, the airspace, the gateway status and the lands. Some of these elements usually remain in State ownership because of their strategic importance to the defense of the State, etc. Commercial airport activities are regularly contracted out to service providers. The value and importance of this policy was demonstrated in the past in regard to Miami Airport. The Airport lost two of its main customer airlines with the demise of Pan Am and Eastern. Despite this, the credit rating agency, Moodys Investor Service, maintained Miami's rating at 1A. The retention of 1A rating was maintained because of Miami's strategic geographical position. Profiteers would be very pleased to get a twenty-year lease on a developed airport site and share in its 'natural monopoly' status. The McEvaddy brothers know the value of the airport land and are quite 'up-front' about their ambition to cut themselves into the taxpayers' 'natural monopoly'. The brothers have purchased, according to The Irish Times, May 2nd 2003 a 140-acre land bank that adjoins Dublin Airport. ".... The land sits right beside the runway at Dublin Airport and, consequently, its full commercial potential can be unlocked only if a terminal is developed on site."

"With a price tag of €450 million, the terminal would be a massive project."

"Mr McEvaddy says he and his brother realise this and have no intention of managing their terminal."

"We are a property company in this context and that is how we are approaching this thing", he says.

"We would also plan to have a hotel, warehousing and a business park."

One wonders what the National Roads Authority would do if a farmer rejected compulsory purchase but offered to build a half mile of road and a privately owned toll station on his land on condition that the authority made his development a part of the M1.
The Sunday Business Post, December 21st, 2003 reports that Aer Lingus does not require its head office building and is planning a €500 million development on the airport site. The plans include a 100,000 square metre scheme of hotels, apart hotels, shops and offices. It would be very surprising if the 99-year lease does not forbid sub-letting or include change of use clauses. However, Aer Lingus seem to be optimistic about becoming a landlord rather than an airline on a site developed over decades by the State. All of the above and some asset strippers on the sidelines are happy that the Minister is representing their interests and showing no concern for the damage to the State's interests.
The State has bought land compulsorily for the development of the national airports. It is reasonable to assume that the purchase of land compulsorily is to be employed in the national interest and not in the short-term interests of individuals or private companies.
Perhaps the Minister should consult Mr. Dermot Desmond, ex-Chairman of Aer Rianta. He bought London City Airport eight years ago. London City Airport doubled in value last year following a revaluation of the land.
The financial cost of acceding to the demands of profiteers is the loss of revenue streams for the next thirty years. The potential effects on the development of the airport facilities and infrastructure would be a planner's nightmare. The value and the security of vital assets could go the Eircom route.
The Profiteers Trail leads one to the conclusion that the transfer plan for the assets will undermine their value and security. The taxpayer will loose again and airport development and planning will be in a legal and political morass.

THE SPURIOUS MONOPOLY: AER RIANTA

In 1999 the Government as the shareholders proxy decided to vest the national airport assets in Aer Rianta. The taxpayers may have regarded it as reasonable. After all Aer Rianta had done a reasonable job as the Minister's agent for the 30 previous years.

Now 5 years after transferring the assets to Aer Rianta Minister Brennan is telling the shareholders (taxpayers) that the company in which the Government invested their assets is a big, bad, inefficient monopoly. He claims he has to break it up and scatter the assets in three directions.

Minister Brennan pejoratively describes Aer Rianta as a monopoly. He surely remembers his own part in transforming an asset-less agent into a private company with considerable assets.

In the early 80's an Oireachtas Committee described Aer Rianta's position and the Minister's prerogative.

"Although Aer Rianta is consulted and makes recommendations on capital investments, the final decisions are not taken within the company because the Minister for Tourism and Transport holds the company's fixed assets....."

The above Committee did not recommend the transfer of the fixed assets. Oireachtas and Inter-Departmental Committees repeatedly affirmed this arrangement until 1996.

The current Minister was thanked by Aer Rianta's Chairman, Dermot Desmond, in the early 90's for his support of a proposal to transfer the assets to Aer Rianta.

The same Minister is now intent on the liquidation of Aer Rianta and the transfer of taxpayer's assets, three unsubstantial and vulnerable companies.

Is the Minister's main interest the future of Aer Rianta or the future of the valuable assets?

A number of questions have been raised by the Press regarding Ministerial interventions and the use of funds:

1) Liam Collins Sunday Independent
Aer Rianta gave Ryanair subsidies and discounts worth more than 60 million euros. This support was vital to the company when it was floated on the stock exchange. Government sources point out that the State gave Ryanair huge financial aid over the last 12 years.
The Sunday Business Post May 6, 2001
As Minister for Transport Energy and Communications from 1994 to 1996 Lowry intervened with Aer Rianta to obtain discounts on landing charges at Dublin Airport, which directly benefited Ryanair. According to sources in Aer Rianta, the EU commission had asked in May 1995 whether discounts at State airports were higher for Ryanair than for other airlines, but these concerns were allayed after a visit to Brussels by senior department official John Loughrey.
(What was Aer Rianta doing regarding rebates? Was it illegal? What undertakings did the mandarin promise to the EU Commission about the alleged preferential treatment given to one carrier? Did this event have a negative impact on aeronautical revenues? Was there a fine or a retrospective penalty imposed? Did this in turn provoke reputable consultants to warn the Minister that they believed Aer Rianta's financial outlook was "severely strained"?

2) Sunday Independent May 3, 1998
"Is this the Ryanair that owes us as much as 2.7 million punts? Aer Rianta spokesman asks yesterday".
(Note: Why did Aer Rianta fail to collect from Ryanair?)

3) Aer Rianta Annual Report 1990
In 1990 Aer Rianta chairman Dermot Desmond revealed that 10 million punts was to be invested in hotels over the following 2 years. At this time Aer Rianta also surrendered 14.8 million punts to the Minister for Tourism Transport and Communications, Seamus Brennan.
(Note: Can Aer Rianta explain why it was consistently under providing for the capital funds required to provide adequate airport facilities? Why did Aer Rianta divert funds to rescue the Great Southern Hotel Group? Why has Aer Rianta failed to maintain a coherent spatial development plan and why has it compromised Dublin Airport's potential for development by ad hoc and short term planning?).

Aer Rianta has failed to articulate a convincing response to the popular insults and allegations launched against them over the last decade. Perhaps the Minister gagged the company or the Board and executives lacked the will or the ability to do battle on behalf of the company. If the company had a sustainable case to make it failed to do so and the Board plus executives bear the blame.

The Irish Times, Friday 4th April 2003 - Quoting Mr Brennan.....He said "he could no longer stand over monopoly operations at Dublin Airport".

Is this the same Minister for Tourism who according to The Irish Times on 19 January 1990 unveiled a plaque at Dublin Airport?

"Transport and Tourism Minister Seamus Brennan, who unveiled a bronze commemorative plaque in front of the main terminal building, said Dublin Airport is one of the top airports in Europe and "the fastest growing in the EC"."

If Aer Rianta is a monopoly, it is the Minister's monopoly. The Minister has the last word on appointments to the board, the airport charges and capital finance.

Who controls Minister Brennan's monopoly?

"The Minister and, where appropriate, the Minister of State with delegated powers, is responsible to Government and the Oireachtas for policy and performance of these companies. The Department working directly to the Minister is, in effect, the proxy shareholder for these State enterprises."
(Statement of Strategy, Department of Transport, Energy and Communications, 1997)

"The Board fully recognises and accepts the right of the Minister and Government to make policy decisions that affect the organisation."
(Aer Rianta Annual Report, 2000)

It appears that the Department formulates policy, the Minister and Government make the policy decisions and the Board of Aer Rianta implement the decisions. Mr Brennan controls Aer Rianta and has the authority to restructure the company without putting the taxpayer's assets and the airports infrastructure at risk. There are a number of international examples of public bodies putting the management of State airports out to tender without transferring the assets from direct State ownership.

Big Hitters!

Minister Brennan also talks about appointing "big hitters" to the three boards of his to-be-created airport companies. The following is a sample of 'big hitters' appointed to the Aer Rianta Board by the Government from 1990 to 2000:

Year	Minister	Chairman	Notable Board Members
1990	Seamus Brennan TD		Peter Hanly (deceased) Noel Fox
1991	Maire Geoghegan-Quinn TD	Dermot O’Leary (Acting)	Noel Fox Chris Kirwan
1992 & 1993	Brian Cowen	Dermot O’Leary (Acting)	Noel Fox Chris Kirwan
1994	Michael Lowry TD	Noel Hanlon	Dermot O’Leary Noel Fox Chris Kirwan
1995	Michael Lowry TD	Noel Hanlon	Dermot O’Leary Noel Fox
1996	Alan Dukes TD	Noel Hanlon	Dermot O’Leary Noel Fox Tony Smurfit
1997	Mary O’Rourke	Noel Hanlon	Noel Fox Dermot O’Leary Tony Smurfit Tadgh O’Donoghue
1998	Mary O’Rourke	Noel Hanlon	Noel Fox Dermot O’Leary Tony Smurfit Tadgh O’Donoghue
1999	Mary O’Rourke	Noel Hanlon	Noel Fox Dermot O’Leary Tony Smurfit Tadgh O’Donoghue
2000	Mary O’Rourke	Noel Hanlon	Dermot O’Leary Tadgh O’Donoghue

 

 

 

Conclusion

1. The scheme to remove national wealth from State ownership has been in the making over a number of years. It has involved some civil servants, some politicians and some elements of the media. Conspiracy, cock-ups and opportunism have all played a part. It appears that when certain elements in Government, media and profiteers combine there are no procedures in terms of transparency and mandatory auditing to prevent the pillaging of national wealth. (In Britain there is an advisory and monitoring body to deal with privatization and public/private partnership).

2. It is clear that the Minister had no business plan other than to break up the company that owns the state assets.

3. The professional advice the Minister received did not support his scheme and was therefore rejected.

4. The Minister claimed he was introducing competition. Giving the capital city airport the opportunity to compete with two small airports is actually anti-competitive.

5. The Minister's claim that his private state company acts like a monopoly is specious. (Oxford Dictionary," adj. Superficially plausible but actually wrong").

6. The Taoiseach and the Minister have indicated that downsizing or changes to pay and conditions will not be a part of the proposed break-up.

7. The one real and critical change that the Minister intends to execute is the change of ownership of the assets.

8. The reader may have recently noticed that the seaports are going through a similar scenario. It involves Government appointed consultants producing reports which the Minister rejects because they do not satisfy private interests. The reader may have read an invitation to tender for the purchase of two harbours in County Fingal. The invitation to tender was issued by the Dublin Port Company. Residents in Balbriggan and Skerries were amazed that a private company (albeit State owned) could sell the harbours to the highest bidder. The Harbour Act 1996 provides for the Minister for Finance and the Minister for the Marine to form private companies. It also authorizes directors of the private companies to sell the land vested in these companies. Minister D Ahern has confirmed that Dublin Port Company (a private company) does not require Ministerial approval to implement its decision to sell the two harbours. However, the Air Navigation and Transport (Amendment) Act 1998 does not authorize the directors of Aer Rianta to sell land vested in the company. Is this creating a problem for future asset stripping?

9. One should not underestimate the pressure, which Minister Brennan may be experiencing since he took up his office. He may be facing serious threats to his future political career.

10. The Irish Times, March 29th 2004 (Front Page) "The Progressive Democrats' continued participation in the government would be in question if it failed to liberalise bus routes and break-up Aer Rianta, the Tanaiste, Ms. Harney, has said." The Sunday Tribune, April 4th 2004, "...the Tanaiste's warning, in an interview after the conference on Sunday, that the party would not continue in government unless key reforms in transport were implemented, could not have come at a better time." Mister Brennan may also recall John Bruton's reference to the day of the 1997 general election when the Irish Independent carried a front page editorial urging people not to vote for the "Bruton government". Perhaps the present government has learned from Mister Bruton's experience. The following is an extract from the editorial in the Sunday Business Post on March 7th 2004; "As the paper revealed recently, a sweet heart tax deal, delivered by the last government under conditions of secrecy, facilitated the take-over of the telephony group by Tony O'Reilly's Valencia." At time of writing, legal problems regarding asset distribution and reserve funds are delaying the break-up. The Minister probably knows that he can avoid the legal problems if he separates the assets from the company. He could deal with the operating company without putting national assets jeopardy. He could also ensure that the critical and valuable infrastructure is secured, developed and financed in the national interest. However, Mister Brennan's current advisors regarding legal arrangements for the transfer of assets are the solicitors Matheson, Ormsby, Prentice. The Chairman of Matheson, Ormsby, Prentice is Sir Anthony O'Reilly who is well versed in making the best of state assets.

Charles Calvert 1