Tourism must not be victim of petty rivalries

The Taoiseach would have been replaced by now for mismanagement of Aer Lingus, Aer Rianta and the vital tourism market, if the…

The Taoiseach would have been replaced by now for mismanagement of Aer Lingus, Aer Rianta and the vital tourism market, if the government were a public company with bad results and angry shareholders.

Mrs Mary O'Rourke, Minister for Public Enterprise, would be reshuffled by an incoming Taoiseach for messing up both companies, if commercial principles prevailed in the management of national airlines and airports.

She cannot be blamed for tourism, which is not part of her portfolio. In both cases the Taoiseach cannot escape overall responsibility.

Which is the more important business: tourism, or airlines and airports?

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Clearly, tourism is many times more important than Aer Lingus and Aer Rianta combined, in jobs, incomes, spin-offs and tax revenues.

A commercially-savvy Taoiseach wouldn't dream of forming a "Department of Public Enterprise" containing warring baronies like Aer Lingus and Aer Rianta, which his Minister attempts to run like a zero-sum game.

It is not a zero-sum game. By protecting and expanding the tourism market, additional revenues and profits can be achieved. But neither Aer Lingus nor Aer Rianta can make money by expanding at the reduced prices that the tourism industry needs, so they cannot serve.

They have costed themselves out of it. Something new is needed.

The figures are clear but the Government finds it easier to ignore them than to take painful management action to release hidden millions into our economy. An extra tourist brings something like £100 profit into the economy. If it took us £5 or £10 special extra expenditure to attract her or him to visit us, we'd be £90-£95 better-off, wouldn't we? Multiply that by millions of tourists.

But Aer Lingus is cutting services, and Ryanair says it wants 10 years of airport charges far below what Aer Rianta wants to charge, if it is to open up new services. I vote for Ryanair, Buzz, EasyJet and Go in this situation. By voting for the new, low-cost operators I am actually voting to help Aer Lingus as well, and the hotels and tourism industry and their employees.

Who votes against us? Well, the Taoiseach, Mrs O'Rourke, five or six top civil servants, Aer Rianta managers, and Aer Lingus trades union leaders do - i.e., they vote for economic decline.

I fancy that if Aer Lingus union members and their families were honestly informed of the upside potential of going for tourist growth, they too would back it.

Here is how tourist growth can be achieved while aiding Aer Lingus:

1. Let the Government pay Aer Rianta the total value of airport charges that it otherwise would levy on all airlines and passengers. According to the Aviation Regulator's recent report, that should be about £98 million next year.

2. Let the Government promise all airlines that it will pay these airport charges direct to Aer Rianta for the next decade.

That is slightly more generous than what Ryanair says it needs to commence 10 or more direct services from continental Europe to Ireland, bringing in millions of new tourists. It will also attract Ryanair's competitors and contribute something like £25 million annual saving towards Aer Lingus's rescue. None of this will breach European or Irish competition rules, as all airlines are treated equally and competition between airports does not arise.

3. To recoup some of the subsidy, reintroduce the travel tax that existed until 1999. Charge £5 per departing air passenger in 2002, dropping by £1 a year to 2007. This would be simple, quick and cheap to do via the airline booking systems.

The tax would fall on travellers and would produce about £50 million next year, leaving the Government with only £48 million subsidy to find from general taxation for Aer Rianta, or about £5 per departing passenger. Don't hide the tax, by the way. Identify it honestly, and ban airlines from adding mere airport charges to ticket prices, as if they were a tax rather than an unavoidable cost of transport.

4. Move Aer Rianta from Mrs O'Rourke's Department and put it under Mr Charlie McCreevy's Department of Finance, to end the semi-State sibling rivalry in the Department of Public Enterprise.

Finance could then sweat Aer Rianta down from the subsidy of £90 million in 2002 to a maximum of £40 million in 2007, matching the annual reduction in the travel tax. (Abolishing the remaining amount of subsidy may never make tourism sense.)

5. This would diminish Aer Rianta's long-term growth potential and its possible price upon stock market flotation.

So what? Flotation was yesterday's fashion and the world has changed. Now we need structures to unlock the tourist economy's hidden millions.

Andrew Whittaker is the editor of Competition journal.