Government lost a Golden Opportunity to Call Michael O’Leary’s Bluff – BREEN.

April 1st, 2010 - Pat Breen

Fine Gael’s Deputy Spokesperson on Foreign Affairs and Clare T.D. Pat Breen has described the Governments response to Fine Gael’s Private Members Motion which sought to axe the €10 Air Travel tax as “short-sighted”. Deputy Breen said that while the new Minister for Tourism, Culture and Sport Mary Hanafin in her contribution acknowledged the importance that Tourism plays in employment creation, her colleague the Minister for Finance Brian Lenihan poured cold water on any chances that this tax could be abolished when he said that “this tax is a fair tax” and he has “no immediate plans to abolish it.” Deputy Breen claims that the Government have lost a Golden Opportunity to call Michael O’Leary’s Bluff with Shannon Airport on the verge of losing a significant segment of its Ryanair business from the end of this week.

 

“I am very disappointed at the Governments’ response to our Private Members Motion last week, which sought to have this €10 Air Travel Tax abolished, and in spite of the Finance Ministers assertion that “this tax is fair”, I would argue that this tax is a disaster especially for Shannon Airport where the Airport is on the verge this week of losing a significant segment of its Ryanair Traffic.”

“In my view, this Government have lost a Golden Opportunity to call Michael O’Leary’s bluff. He is on the record as saying that if this Travel Tax was abolished he would reinstate services at Shannon Airport. This Government has already lost the PR battle for Hangar 6 with Ryanair and now they are about to lose another one to the Ryanair CEO this week.”

“The arrival of Ryanair at Shannon Airport transformed its passenger traffic numbers and they delivered significant growth, from 300,000 passengers in 2004 to 1.9 m passengers last year prior to the introduction of the travel tax in April.”

“In the current economic circumstances, it will be a huge challenge for the Airport Authority to secure alternative airlines to service these routes. That is why, the abolition of the €10 Air Travel tax was so critical to give Shannon Airport the breathing space to ride out this recession.”

“When Air Services are axed or capacity is reduced it hurts and it is really hurting this Region. The Airlines, the Airport itself at Shannon, the Car Hire Companies, Taxi Drivers, Bed and Breakfasts, Hotels, Visitor Centres, everybody is feeling the pain.”

“It is ridiculous for the Government to be persisting with this tax, the Finance Minister claims that around €125m will be generated in a full year from this tax, yet millions more is being lost to the coffers of this Country, in tourism related revenues as a result of declining passenger traffic.”

“Rather than admit they got this one wrong and axe the Travel Tax, they are prepared to let Shannon Airport lose a significant amount of its Ryanair business this week.”

See Underneath Deputy Breen’s contribution to Air Travel Tax Fine Gael’s Private Members Motion last week, together with comments from the new Minister Hanafin and Minister Lenihan.

I congratulate my colleague Deputy Olivia Mitchell for putting forward this Motion here in the House and it is a very timely debate with the Aviation and Tourism Industries in the Country in turmoil.

I am currently compiling a report for the Council of Europe on the global, financial and economic crisis confronting the European Civil Aviation Industry. As part on my ongoing work on this Report, On Friday last in Paris, I met with the CEO of Air France/KLM, Pierre-Henri Gourgeon. He described Ireland’s decision to introduce this €10 Air Travel Tax in the middle of a recession as a “disaster for the Country, an island Nation, which is so dependant on Air Access.” He pointed out that Dutch Government moved quickly to axe a similar tax which they introduced in Holland, having witnessed the dramatic affect that it had on their passenger figures, where they lost over 1 million passengers at Schipol Airport on its introduction.

The decline in the Shannon Region has been dramatic. Overseas tourist numbers to the Shannon Region dipped by 27 percent for the first nine months of last year, compared to a 6 percent decrease at Dublin Airport.

When Air Services are axed or capacity reduced it hurts and it is really hurting in my Region. The Airlines, The Airport itself at Shannon, the Car Hire Companies, Taxi Drivers, one of whom told me recently that he was sitting outside the Terminal Building from 7.00 a.m. in the morning until 3.00p.m. in the day before he got his first run. Our Bed and Breakfasts, Hotels, Publicans, everybody is feeling the pinch.

Airlines across the globe are axing jobs, Air Lingus is no different. Many of their workers at Shannon Airport are very fearful for their future, having already made huge sacrifices in their efforts to try and secure the viability of the Airline and there is also uncertainty about the future of their Shannon operations including their maintenance base.

 

We are now on the verge of losing a significant amount of our Ryanair Business at Shannon Airport. The arrival of Ryanair at Shannon Airport transformed the Airport, and they delivered passenger growth increasing their passenger numbers from 300,000 in 2004 to 1.9m passengers last year, prior to the introduction in April last of this €10 Air Travel Tax.

 

Several of these routes are very popular holiday destinations and they have been well supported by people in the Region.

On top of this, the entire Western Seaboard from Donegal to Cork will have no connectivity to the main administrative centre of the European Union in Brussels; and this will be a disaster for companies in the Region.

This week a report published in the Irish Times, suggests

that the Dublin Airport Authority is considering introducing a passenger levy for Shannon Departing passengers. We do not know if this levy is an additional tax, whether it is a proposal to transfer taxes paid by passengers directly to Airlines or if it is simply, another income stream for the Dublin Airport Authority to fund the very costly T2. Whatever, the case, and a lot of these issues need to be clarified, it is quite clear to me that before any further discussions take place on Airport Charges or on the introduction of any additional levies, this €10 Air Travel Tax must be abolished.

Three Airlines, Ryanair, Aer Lingus and City Jet have called for this Tax to be abolished. Michael O’Leary has said he will reinstate routes at Shannon and Dublin Airport, if this Tax is abolished and bring in more people to this Country. The CEO of France told me on Friday last, it will be only be a matter of time, before this tax is abolished, as the loss off revenue for the Airlines, the Airports and Tourism Sectors far outweighs the amount of revenue which is collected from the Tax.

I would say to the Government and to you here tonight, Minister, have the courage to call Michael O’Leary’s Bluff, remember, he won the PR Battle on Hangar 6.

A Wiseman once said that “If you are willing to admit you are wrong! You are right” I would say to Minister Killeen and I congratulate him on his elevation to Cabinet, Have the Courage, Minister, Let Shannon’s Voice be heard at the Cabinet Table, Abolish this tax, it is counterproductive, and give Shannon Airport and the Mid West Region the breathing space it needs to ride out this recession.

Deputy Mary Hanafin: I thank the Deputies opposite for offering me their good wishes on my appointment. I am glad that Private Members’ time has been given over to a debate on a subject as important as tourism. This debate belies comment in the media to the effect that tourism, culture and sport are not important to this country’s people or its economy. Tourism is important as regards its potential to give rise to employment and investment and must be viewed in the context of the domestic and international markets. There is a resolve among people throughout all of the sectors to market the best of what is Ireland. Certainly, over the coming years I aim to prove that, as one of our indigenous industries, tourism, which already employs 200,000 people, is one area which we can expand and which will promote Ireland. I look forward to doing that and to working with the Opposition spokespersons on something which is genuinely in the best interests of the Irish people. Minister for Finance (Deputy Brian Lenihan): I am pleased to take this opportunity to address the House on the subject of the air travel tax and the wide range of issues raised in the motion. I understand that last night my colleague, the Minister of State, Deputy Seán Haughey, did not have the opportunity to address some of the issues raised in the motion and I hope to address these outstanding points.

Deputies are aware of the general economic position and the responsibility of the Government to bridge the gap between expenditure and income. The air travel tax is but one of the measures adopted for this purpose and so far it has raised €99 million and will raise €125 million in a full year. Any party coming into the House arguing for the abolition of a tax has a responsibility to specify an alternative way of raising that revenue. Is Fine Gael suggesting we raise it by increasing income tax, VAT or excise duty? It has been recognised by all commentators that our revenue base has been very weak in recent years. There is an onus on anyone advocating its further depletion to identify where that revenue base can be shored up. Our options are limited and given the significant drop in the tax take, we have to find ways to raise moneys which we need to pay in part for vital public services. It is not an option for Government to succumb to every eye-catching interest group that walks past these buildings. That may be a luxury in which Opposition Deputies can indulge from time to time – not always, I accept – but we cannot.

In shoring up the gap between what we as a State take in and what we spend, the Government has to take an overall view that ensures the burden is spread fairly across all sectors. I would be the first to acknowledge that low cost travel has been good for Ireland. The pioneers in this area deserve to be commended. Mr. O’Leary has spoken very eloquently on the subject of this tax and I have listened very carefully to what he has had to say about it. However, it is simply not credible to argue that the new tax is to blame for the fall in passenger numbers.

We need to bring a sense of balance to this aspect of the debate.

 

Deputy Paul Connaughton: It would hardly increase them.

 

Deputy Brian Lenihan: In the past few years, we saw exceptional growth in air travel both to and from Ireland. Irish residents in many cases made several trips abroad in a calendar year. The downturn in the economy and increased economic uncertainty has seen a change in behaviour in this regard. Consumers are not taking as many foreign trips as they did at the height of the boom. All Members of the House know that and it is a pretence to state it is caused by the air travel tax. That is the reason for the fall in passenger numbers. To suggest that people are not travelling because of a tax of €10 is tendentious. An air trip abroad generally involves expenditure of several hundred euro. Singling out the €10 tax charge as the major disincentive for the intending traveller is stretching credibility. How can it be argued that the tax is more of a disincentive, for example, than the non-discretionary on-line check-in fee of €5 per flight or €10 per return flight? That is to single out just one of the myriad charges imposed by the airlines.

The introduction of a modest air travel tax is an important revenue raising measure in the context of the financial challenges we now face. The Government regards this tax as a fair tax in the current circumstances and I have no immediate plans to abolish it. It will raise approximately €125 million in a full year in circumstances where those additional revenues are required to fund badly needed services.

Every sector can argue against taxation. Last night, my colleagues on this side of the House referred to the fact that having a debate on tourism which focuses on the €10 tax really misses the point. Ultimately, airlines respond to consumer demand. They will fly where people want to go. Everyone in the tourism sector, supported by Government, must ensure that our tourism experience is of a top standard and that the industry is flexible to meet the changing demands of holidaymakers. My colleague, the Minister of State, Deputy Haughey, last night outlined the significant Government investment in tourism. My colleague, the Minister for Tourism, Culture and Sport, Deputy Mary Hanafin, will make the extension of numbers and of the tourism industry a key priority in her Department in the years ahead. The sector faces challenges but we are committed to supporting this valuable industry with the resources available to us.

Deputy Upton made the point that we need to focus on emerging markets, particularly Asia, for growth in tourism numbers. However, she noted that the visa application process in some Asian countries can be slow and therefore hampers any such growth. That issue falls within the remit of the Department of Justice and Law Reform and I understand that it has stated it is open at all times to suggestions on how the visa service rules and requirements can be improved to meet the needs of all sectors affected by visa issues, including the tourism sector.