When introducing this Bill in the Dáil, it was indicated that its essential purpose was to close off a potentially serious loophole that had come to light in the Air Navigation and Transport Act, 1965. That Act deals, inter alia, with the Minister's power to regulate air fares and it was to that area that the new legislation was addressed.
I should say at the outset that a requirement for airlines to secure Government approval for international air fares is the accepted norm applied by aviation regulatory authorities world wide. Because of the sovereignty which states exercise over their air space, traffic rights for scheduled air services are generally only available where a bilateral agreement or international treaty has been concluded providing for an exchange of such rights. These agreements generally include a provision relating to the approval of tariffs, and it was against that background and in recognition of Ireland's international obligations towards that end that the 1965 Act embodied in Irish law provisions giving the Minister statutory powers to control air fares.
Over the years airlines have accepted without question that scheduled service fares require Governmental approval and carriers serving Ireland have traditionally submitted their fares for approval as a matter of course. For practical reasons, control of air fares has been applied at the level of fares actually sold to the public. This is the norm and airlines have consistently submitted their proposals on this basis. It follows logically from this that if the fares approval process is to have any worthwhile meaning then the fares sold in the market must conform with the approved levels and conditions. This too has been accepted as a general principle by the airline industry.
A challenge to those accepted norms manifested itself in the Irish market during the summer of 1983, but steps taken by my Department at the time resolved the then prevailing difficulties. Unfortunately, more serious difficulties emerged early in 1984 when a major Dublin travel agent widely advertised Shannon-New York services at fares which did not stand approved by me. Efforts to resolve the difficulties through consultations between my Department, the airline and the travel agent concerned failed and, since the stance taken by the other parties constituted an effective challenge to the generally accepted interpretation of the 1965 Act and since continuation of the malpractice could have seriously jeopardised the already precarious state of North Atlantic operations, the Minister sought and obtained a temporary High Court injunction restraining the airline concerned from selling either directly or indirectly via travel agents fares which did not have my approval.
The injunction was to have effect until the substantive hearing of the case, but on appeal to the Supreme Court the injunction was lifted, the court taking the view that, given the terms of the 1965 Act, the airline concerned had an arguable case and that what the court termed "the balance of convenience" rested in not continuing the injunction. I should add that both the High Court and the Supreme Court refused to grant an injunction directly against the travel agent, the view being taken that the scope of the 1965 Act did not extend beyond airlines.
While the court decisions to which I have referred did not reflect a definitive judgment on the legal issues involved — that would have had to await the substantive hearing of the case — the Minister took the view, after consultation with his legal advisers and after weighing up carefully all of the implications, that the best course of action was to clarify the situation by way of our amending the 1965 legislation. That was the origin for the present Bill.
Publication of the legislation gave rise to a wide-ranging public debate and a prolonged examination of the measure in the Dáil. I very much welcomed that debate, since I believe that it can only be healthy that our policies in any area are subjected to detailed scrutiny, both by the public at large and by the Houses of the Oireachtas. In that regard, I am sure that the Seanad will wish to avail of this opportunity to give me the benefit of its current thoughts on Irish aviation policy in general and specifically in the area of air fares.
In that context, I would like to offer a few comments, first on my general policy stance; second, on my general philosophy towards air fares; and, third, to relate those to the measure now before the House. In the process I would also hope to lay to rest once and for all some of the erroneous constructions that have been put on the legislation and to convince Senators of the merits of the measure.
The Green Paper on Transport Policy which was published last November deals extensively with the aviation scene and I do not propose to go over all of that ground here. However, as an island nation heavily reliant on good access transport links for business and tourism needs, continuity and reliability of services must be a first priority. While low air fares and sea ferry charges are highly desirable, calls in that direction can be very academic if there are no services on which to offer the fares. A balance has to be struck between what the airlines require to sustain services and what constitutes reasonable value for money for the several segments of the travel market.
One can take the view that these matters should be left entirely to the free play of market forces. That was the view taken within the United States when it embarked on its deregulation policy. How successful that policy was I am not going to judge. Deregulation certainly led to lower fares and greater carrier efficiency on many routes — generally the heavily trafficked trunk routes — within the United States. However, deregulation also brought about substantial increases in fares on other routes, while many communities lost their services altogether. Therefore, it was not an unmixed blessing. These aspects have not received the same high profile publicity as have the lower air fares developments, but in my view, and bearing in mind the characteristics of the Irish market, including its size, seasonality and mix of traffic as between business and tourism travellers, I suggest that there are lessons there which one should not lose sight of.
Those who doubt my views might care to read the Professor John Bristow report of 1985 on "Aspects of the Regulation of Air Fares in Ireland" or the articles by Mr. Melvin Brenner, an acknowledged expert on US deregulation, which appeared in The Irish Times on 31 December 1984. Furthermore, anyone contemplating out and out deregulation might ponder on the pay-rate implications for workers in the industry and not forget either that the cut-throat competition has brought its share of collapses, stranded passengers and so on.
If Senators are by now getting a view that I am totally against change, then they are wrong. The Minister accepts without question that the present regulatory arrangements within Europe are too rigid and do not operate either to the best advantage of a carrier like Aer Lingus or to the maximum benefit of consumers. The Minister on several occasions has indicated that he would be quite happy to support an "open skies" regime in Europe, or in other words a regime in which carriers like Aer Lingus would have an opportunity to compete on equal terms for traffic between any two points in Europe. Such liberalisation could, of course, only become a reality if European countries generally were prepared to move together in this way and in the absence of movement in that direction the Minister wants to make it clear that he has no intention of exposing Irish interests unilaterally to regulatory regimes that would not serve our national interest.
In the matter of air fares, the Minister has consistently operated a policy of trying to keep fare levels as low as possible. He has on numerous occasions since coming into office rejected or modified fare increase applications put to him — often, I might add, in situations where the regulatory authority at the other end of the route, including the UK Civil Aviation Authority, saw fit to approve the increases in full. He will continue to take a tough line on fares increases. In order to do so, he must, of course, have the necessary statutory powers, and that brings me back to the current piece of legislation.
Opponents of the legislation have classified it as a recipe for high fares. Comments have also been made to the effect that the measure is running against the trend of liberalisation. I want to refute both charges. On the first count, the Bill is in fact a neutral measure, which is not biased in favour of either high fares or low fares. Accordingly, it is inaccurate to describe the Bill as an anti-consumer measure, with only one purpose in mind — to increase air fares. The prerogative to submit fares proposals at whatever levels they wish will continue to reside with the airlines and the Minister will examine all proposals on their merits. All he is seeking to do in the Bill is to ensure that, once an airline has received approval for its air fares proposals, it will stick to selling at those levels both directly and through intermediaries such as travel agents. That, I suggest, is a perfectly reasonable approach.
As to the allegations that we are running against the tide of regulatory change, may I say that it is standard practice for aviation authorities throughout Europe to have available to them powers to control air fares. As I indicated in my opening remarks, the provisions of the several international treaties on which the whole operation of scheduled services depends require that such powers be available. Furthermore, the various proposals brought forward by the European Commission in its Memorandum No. 2 are based on a premise that the bilateral system of regulation shall remain in existence and the commission's proposals in the air fares area provide specifically for the control of tarrifs by member states. Accordingly, the Minister is quite satisfied that the powers which he is seeking in the present Bill are compatible with the powers currently available to other regulatory authorities in Europe and are not inconsistent with moves which are under way either in the European Community or elsewhere.
I will turn now to the specific sections of the Bill and offer some comments. Section 1 of the Bill contains a number of definitions, including a detailed definition of what shall be regarded as an "airline tariff". The 1965 Act was deficient in this respect.
Sections 2 and 3 should be read together. Between them, they contain the provisions which will govern the scope of application of the Bill. Only airline tariffs in respect of which a notice under section 3 is issued will fall within the scope of the legislation and in framing the measure in that way the Minister can at any time decide on the extent to which fares control should be exercised. At the present time, for example, he exercises no control on charter fares and it would not be his intention to issue section 3 notices in respect of charter operations. In fact, the section 3 provision has been framed in such a way that its use can be modified according as the regulatory environment changes. That, I believe, is the best way to legislate for a situation which is clearly going to change on an evolutionary basis over the next several years at a fairly fast pace. I should add that during the course of passage of the Bill through the Dáil section 3 was amended by the Minister to include detailed criteria which the Minister must have regard to in considering air tariff proposals. These are set out in section 3 (3).
The Bill allows airlines to continue what is standard practice in the industry, namely to begin selling fares on a "subject to Government approval" basis. This facility is necesary so that one carrier may not be placed at a competitive disadvantage vis-a-vis another. Section 4 does, however, provide the Minister with machinery to intervene. This he might wish to do where for example a carrier introduced what might be termed a totally disruptive fare. Given the nature of the airline industry, I believe that it is important that the Minister should have this kind of power.
Section 5 is a section which did not exist in the Bill as initiated. The section which the Minister introduced on Committee stage in the Dáil and which he further amplified on Report Stage makes provision for the establishment of a register in which details will be kept of applications for fares changes and for scheduled service route rights. The public and other interested parties will have access to the register and can thus make representations on any particular submission as they see fit. Details of decisions taken will also be filed on the register.
Section 6 sets out what will constitute an offence under the Bill, while section 8 stipulates the maximum penalties that can be applied. On the subject of penalties, I would like to remind the House that the penalties proposed for tariff offences have been scaled back considerably from those included in the original Bill. The maximum fine has been halved from £100,000 to £50,000 while the jailing provision has been removed.
With one exception, the provisions of section 9 merely reflect amendments that are necessary to the 1965 Act to bring its provisions into line with the present Bill. The exception relates to paragraph (g) and there I should explain that I am availing of the opportunity of the legislation to increase the penalties for other breaches of the 1965 Act from their present levels of £100 — summary conviction — and £1,000 — conviction on indictment — to £1,000 and £100,000 respectively. Since offences under the 1965 Act can cover matters such as flying an aircraft without authorisation from the Minister, I believe that the penalties for such offences should be steeper than those for what I would term tariff offences.
In explaining the penalty provision, I should also advert to the fact that in the course of the Dáil debate, the Minister agreed to the removal of a provision which established a clear linkage between the Bill and the licensing regime for the travel trade contained in the Transport (Tour Operators and Travel Agents) Act, 1982. The basis on which the Minister made that amendment is set out in the Dáil Official Report for 12 February —(volumn 363, columns 2303-2305
The sections of the Bill to which I have not made specific reference cover routine technical matters.
Overall, I would suggest to the House that the Bill should not be seen as a draconian measure or as an instrument to encase in concrete the existing regulatory arrangements governing air fares. Since coming into office, the Minister has endeavoured, both through his actions in dealing with fares proposals made to him and in the policies which he has pursued internationally and specifically within the European Communities, to bring about changes that will make airlines more cost and efficiency conscious and hopefully result in a better deal for consumers. As I have said already, continuity of air services must be the overriding objective when one considers our national interest. The availability of year round reliable air services to the possible range of destinations, offering consumers the widest practicable range of services at the lowest possible prices, must be our objective; and I believe that the Bill now before the House will contribute towards that end. I commend the Bill to the House.