Address by Minister for Transport, Tourism and Sport, Shane Ross T.D. at the National Civil Aviation Development Forum

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Introduction

I am delighted this morning to open the first ever conference of the National Civil Aviation Development Forum and to welcome you all to Dublin Castle. I welcome the participation of the speakers and panellists here today from within Irish aviation, from the wider business community, and from the EU and international perspectives. 

We Irish have a proud history in aviation.  The video we’ve just seen captures it well. We can look to examples of the spirit of innovation that always has been at the heart of the sector in Ireland – the pioneering transatlantic aviators, the world’s first duty-free opened here in Ireland, our singular role in the development of the aircraft leasing industry and the emergence of low-cost airlines which has revolutionised and democratised air transport.

NCADF

I’m delighted that today’s generation of Irish aviation pioneers are assembled here today at this conference, in the framework of the National Civil Aviation Development Forum which was established just over a year ago.  The Forum has brought together aviation and aerospace stakeholders, in a unique manner, to develop shared understandings of regulatory and policy issues impacting on the industry.  I recognise the support given by industry at the highest level as well as by senior decision-makers in our State regulatory and enterprise development agencies and in the Department of Foreign Affairs and Trade.   Working collaboratively in the Forum over the past year, the Forum has recommended a number of measures designed to improve competitiveness in the sector.

Report of the Forum

With my Government colleagues, I recently received and considered the Forum’s Report and, recognising the progress made to date, the Government endorsed the continuation of the collaborative approach taken by the Forum in support of the sector.  Further work is now required across the machinery of government to explore the various actions that have been proposed. Some proposals do create difficulties, not least those relating to taxation measures.  However, my department will now work with other Departments, with a view to progressing recommendations where possible. 

Policy makers from across government and from the Enterprise Development agencies are present here today and this is another opportunity for the industry to reach a wider government audience.  I hope that everyone here will avail of the opportunity to engage actively in today’s discussions and, in particular, to set out views in a forthright and frank way on how we can continue to develop aviation for maximum economic advantage.

Role of Aviation

The Irish aviation industry plays a pivotal role in Ireland’s economy, providing the essential links for business, trade and tourism.  As an island, our dependence on air transport cannot be overstated.  The sector currently contributes over €4 billion to the economy.  It supports over 40,000 Irish jobs, directly and indirectly, and underpins 180,000 more jobs in the tourism industry.  Air transport broadens our horizons for travel, leisure and culture, while it also contributes to balanced regional development and social inclusion through tourism. Continued growth in this sector has a unique potential to drive our overall, sustainable economic recovery and development. 

Policy Framework

For those reasons, I recognise the importance of having a clear policy framework in place that will create the right conditions for continued growth.    The National Aviation Policy published in August 2015 is an ambitious plan for growth of the Irish aviation sector, across the so-called aviation “value-chain” and across several regions of the country.  

But an ambitious policy such as our National Aviation Policy does not exist in isolation.  It must be supported by other government policies and actions – such as our framework policies for training and skills, enterprise development, job creation and regional development  -  if its full potential is to be realised.   The second panel discussion this morning will highlight the capacity of the industry to build on its strengths to develop clusters and opportunities to exploit new technologies and new markets.  

Leveraging success of Leasing/Finance sector

One such obvious strength is Ireland’s success in becoming a global hub for aviation finance and leasing.  This is an example of how our physical isolation is not a reason for constrained ambition.  9 of the world’s top 10 largest leasing companies are now headquartered in this country.  Ireland now has a 63% share of the global leasing market. That is phenomenal. We are, after all, only one of almost 200 countries and we account for less than 1% of the world’s population.

In 2015, approximately 4,300 leased aircraft were managed from Ireland with a total estimated value in the region of US$125 billion.  There are opportunities to leverage this extraordinary success through further development of complementary activities located in Ireland - both in professional services and aviation support services, notably Maintenance, Repair and Overhaul (MRO), which is enjoying a period of stability and growth following a number of difficult years. This sector plays a key role in supporting airline and airport activity, and it is in the interest of the whole aviation sector to build on the many synergies that already exist within the aviation community. 

Threats to the industry

Notwithstanding the success of our aviation finance and leasing sector, there is no place for complacency. Ireland’s position as the global leader has come under threat in recent years from new lessors in Asia Pacific.  Jurisdictions such as Singapore and China are actively targeting opportunities to gain competitive advantage.   In order to maintain and grow Ireland’s position in the market, the Irish Government will continue to assist in keeping Ireland competitive and an attractive location for aviation financial services.

Strengths of Policy Framework Conditions

The Irish corporate tax regime continues to be supportive of the sector, both in terms of a stable 12.5% corporation tax rate and also through Ireland’s suite of bilateral taxation treaties with other countries. Ireland was one of the first countries to ratify the Cape Town Convention, providing the appropriate international legal framework for the sector to flourish.  Very soon, my Department will finalise arrangements to adopt the Cape Town “Alternative A” insolvency measures, completing the jigsaw for that international framework.

Growth Opportunities

The global aviation industry continues to expand and we must not lose sight of the opportunities for Ireland in virtually all aspects of the business.    Forecasts are that the demand for air travel will double over the next 20 years.  With that growth, there should be opportunities for airlines, new routes and services, and also in MRO, in travel-related services such as Mobile Travel Services and Reservations systems, as well as in Aviation Recruitment and software development for the industry. 

Training and Skills Development

Furthermore, in the digitally connected age, there is no reason why Ireland cannot also be a world leader in the provision of remote services to support the aviation industry across the globe, building on our long and extensive expertise as well as our high-skill, tech-savvy, English-speaking, young workforce.  Above all, we must ensure that the sector has access to the necessary supply of competent aviation professionals, whether they be pilots, crew, engineers, finance and legal specialists, for both the Irish and international markets.  By the way, I’m heartened that today’s audience includes a number of students representing the next generation of aviation professionals and, undoubtedly, our aviation pioneers for the future.

Air Transport Liberalisation

I turn now to the theme of the first panel discussion today:  Completing the International Air Transport Liberalisation Process – What Needs to Happen Next?   In policy terms I think you will all agree that this process is what might be called a ‘slow burner’.

The process has been underway since the 1970s. Huge progress has been made since then and the benefits of liberalisation are there for all to see.  It has provided the industry’s consumers with new routes, new and better services and lower fares, whilst also facilitating general economic growth.

However, there is still a long way to go in the liberalisation process. As the global debate continues on the further liberalisation of international aviation, it is apparent that there are interests that would like to reverse the process. The Norwegian Air International experience in entering the transatlantic market is a case in point.

Brexit

However, by far the most significant recent development, with likely negative effects on the liberalisation process, is Brexit.  Again, it is an area where the Forum has provided useful input and I hope the Forum will continue to be a useful platform for the key industry stakeholders to discuss the issue as the negotiations progress.  It is clear that the only solution for Ireland is that the market should remain fully liberalised and deregulated, and that existing traffic rights should be preserved. 

Brexit is in fact the foremost strategic risk for my Department.  My officials and I are engaged in consultations with all transport stakeholders in order to plan for and mitigate the risks associated with Brexit and to identify opportunities arising.  On the 23rd of January, I hosted an All-Island dialogue on Brexit and implications for Transport and Tourism, with the objective of getting viewpoints from various stakeholders on how the UK decision will affect them and what can be done by both industry and by Government to mitigate these adverse effects.  

The Taoiseach hosted the second Plenary Civic Dialogue on Brexit in this very room last Friday, and the outputs of the transport sectoral dialogue were relayed to a wider public audience at that event.  After the UK triggers Article 50 and we enter into the negotiation phase, I will consider if it might be worthwhile holding another transport dialogue meeting at that point.

It is worth recalling that the UK is by far the most important origin and destination for international passengers to and from Ireland. The current extent of air traffic between the UK and Ireland is approximately 11 million passengers and in excess of 100,000 aircraft movements each year.  Most of you here today will know that aviation services between the UK and Ireland and within the EU operate under the traffic rights afforded under the Single European Aviation Area.  The British Prime Minister's recent announcements on the UK's negotiating position made it clear that a 'hard Brexit' is likely.  It will be necessary therefore to negotiate a new aviation transport agreement between the EU and the UK.

In the absence of a replacement arrangement, the existing traffic rights of Irish licensed airlines to fly between the UK and Ireland, the UK and the rest of the EU, within the UK, and between the UK and a range of other third countries, could be negatively impacted.   I am very concerned about the potential impacts, not just on Irish aviation but also about the implications for tourism and for the wider economy.  

These concerns have been conveyed to the European Commission's chief negotiator, Michel Barnier, and his team.  The Department of the Taoiseach remains in constant contact with the Barnier team and will continue to engage with them on these and other Irish concerns.  I expect that we can make the specific transport case directly to the European Commission’s negotiating team very shortly. For my part, I can assure you that I will be seeking to ensure that aviation features among the top priorities for Ireland throughout the negotiations.

Need for Consumer Focus

Returning to the general theme of liberalisation, I want to emphasise the importance I have always attached, throughout my political career, to the consumer. The consumer should always be at the heart of aviation policy making; whether it be their safety, security, service or economic needs. Those consumers are not as organised and vociferous as some of the other stakeholders in the industry, such as shareholders, management and labour interests. It is very easy for the consumers’ needs to get lost in the complex policy-making process at both national and international level.

At a global level I believe that an open and competitive aviation sector is the best mechanism for meeting consumer’s needs. I am glad to say that Ireland was an early convert to the air transport liberalisation process and successive Governments have pursued such a policy since the 1980s.

The positive results speak for themselves. There is now a diverse range of airlines based in Ireland; from legacy to low-cost and from long-haul to regional.  Irish air passengers certainly have the benefit of choice in terms of product, routes and services, and the level of our connectivity continues to grow. In addition, the wider Irish aviation cluster now comprises multiple home-grown and international aviation companies that have chosen Ireland as their base.

ICAO Liberalisation Agenda

There are a number of liberalisation policy initiatives underway that I would now like to address briefly.  At a global level the work of the International Civil Aviation Organisation is obviously key.

The most recent ICAO Assembly last September requested that work be completed on two vital aspects of air transport liberalisation; an international agreement by which States could liberalize market access, and an international agreement to liberalize air carrier ownership and control.  A concerted effort by the EU and its allies will be needed if this work is to achieve a meaningful outcome.

Ownership and Control Rules

In relation to Ownership and Control rules, the Forum has highlighted that Irish airlines are restricted in their ability to access different sources of investment and to create fully-integrated global airline groups. The Forum has recommended the gradual relaxation of the ownership and control rules.

I can certainly support that recommendation; however, little can be achieved on this by Ireland or even the EU alone; a coalition of like-minded countries across the globe is required. The US is of course key to this and there is little sign that its approach to this matter will change any time soon.

Single European Aviation Market

Turning from global matters to our own region of the world, I would like to emphasise that the EU remains a vital force in the air transport liberalisation process.  The Single Aviation Market is a model to the rest of the world of the benefits that can accrue from aviation market liberalisation. Ireland has played an important part in turning the possibilities of the single market into realities.

It has led to a huge growth in connectivity between and within Member States and an increase in choice for consumers in terms of airlines, routes, service levels and price. In this sense it has made a significant de facto contribution to the concept of free movement of people throughout the Union.

The success of the European Single Aviation Market has also facilitated the expansion of the single aviation market principles outside of the Union through the creation of European Common Aviation Area with the EU neighbouring countries. In addition the EU has negotiated open skies agreements with important aviation partners such as the US and Canada.

New EU Open Skies Agreements under Negotiation

The European Commission now has mandates to negotiate a number of other such agreements, and Ireland is fully supportive of these efforts. Irish airlines rely heavily on the correct application of these agreements to develop their businesses into the future.

Separate to EU air transport agreements, but closely related to them, is the proposed replacement of Regulation 868/2004 on protection against subsidisation and unfair pricing practices.  It is particularly important at present that this proposal is not perceived as the EU adopting protectionist policies in international aviation. Ireland will be emphasising the need for connectivity and consumer interests to be central to EU aviation policy. 

Airport Infrastructure

Before I end, I would like to refer to a small number of topical and strategic policy issues that are very relevant to today’s conversation about growing the Irish aviation sector.  First of all, I will turn to the question of our airport infrastructure.  It is obvious that the forecast growth in global air travel will require adequate capacity to meet the demand and to exploit opportunities for connectivity to emerging markets.  We must ensure we get this right in the context of the overall “capacity crunch” across the EU airport network and the need for environmental sustainability.  

I have welcomed daa’s decision to proceed with the development of a second parallel runway at Dublin airport. This project is expected to create thousands of jobs and will be invaluable in allowing the airport to grow, which in turn allows the Irish economy to grow, by supporting employment, trade, FDI and tourism.

In a significant initiative late last year I undertook that a review be arranged to examine the longer-term capacity needs of the three State airports. This review will begin in the coming weeks and its outcome will provide a solid basis for decades to come. The review will include an option for a third, independent terminal at Dublin airport. The question must be continually asked: Is a State monopoly at any Irish airport in the interest of the users, the tax-payer or the travelling public? I think I know the answer.”

Preclearance and US Executive Order

I also welcome the success of US Preclearance at both Dublin and Shannon airports, which has allowed the airports to position themselves competitively to grow their businesses and target new and emerging markets. While the recent US Presidential Executive Order has raised questions about preclearance the service has unequivocal benefits from an aviation perspective.

The Government has already conveyed its concerns on the Executive Order to the US authorities, and I have publically expressed my disagreement with the contents of the Order.  The report of the review on US Preclearance in Ireland, requested by An Taoiseach, is expected to be presented to him this week. As you know, the Executive Order is currently suspended pending the outcome of US court proceedings.  

Conclusion

To conclude, I’m glad to have had the opportunity to address you all this morning. I’m heartened by the level of participation here today. It’s to the credit of all in this room that our industry is held in such high esteem globally and it’s clear that we have a shared commitment to continue and growth aviation in the widest sense.

There is space this morning for all to contribute to this important conversation and I encourage you to have you say. I wish you all continued success. I hope you enjoy the conference.

Date of Speech: 
Monday, 20 February 2017