Check Against Delivery
Introduction
I would like to thank you for the opportunity to address the House today on the aviation sector.
While there are a number of structures through which my Department engages with industry stakeholders on a collective basis, I am acutely conscious that these unprecedented challenges require that all options are considered and we are open to novel approaches. For that reason, I am proposing to establish a Task Force for Aviation Recovery, which will be challenged with developing and advising on the framework for restarting aviation. I will appoint key stakeholders from the industry to this taskforce within the next week and will ask them to report back to me within 4 weeks with a plan, ready to relaunch the aviation industry in Ireland. As an island nation, we must ensure that we staunchly fight for and protect our connectivity.
The COVID 19 crisis has brought new challenges in varying degrees across practically all sectors of our society and economy. We are all living and in many cases working in a manner that a mere three months ago would have been unimaginable. The crisis continues to have profound impacts on our society and devastating financial implications on the world economy, the Irish economy and the aviation and tourism industries at home and abroad.
The aviation industry is one of the most affected by the global pandemic. In Europe air traffic movements fell to as low as 10% of the levels from comparable period last year - mainly buoyed up by cargo flights. Passenger traffic has fallen to a trickle – around 1% of what might be expected. The various businesses right through the aviation value chain, with the sole exception of dedicated cargo operators, have seen severe depletion of revenue and are facing various degrees of financial challenge.
In an industry that has always been cyclical in nature and highly susceptible to external shock, the scale of setback now being experiences is unprecedented. Aircraft have never before been grounded in the way that we are now seeing.
The future remains highly uncertain and because of the inevitable employment impact, the human cost will be high.
Ireland has historically had a huge dependence on aviation. As an island economy built largely on international trade and foreign direct investment, aviation is the lifeline that connects us to the global economy. We do not have the advantage of international road and rail connections that that predominate for other countries to support the international movement of people beit for business, tourism or social purposes. The process of economic recovery as we emerge from this crisis will depend on the recovery of the aviation sector.
Government and industry response
Through the industry the collapse in revenue streams has with very limited exceptions necessitated a swift and painful response. The main airlines serving Ireland and the airports have applied major pay cuts and laid off staff. While some companies at the outset of the crisis were in a very strong financial position in comparison with industry peers none are immune from the need to reduce costs and restructure their business. We have all seen the public announcements about reduced employment. There is a broad consensus that the recovery of the industry will take time. While there were hopes at earlier stages in the crisis that next year might see a return to business as usual there is an increasing consensus that a recovery will be slow with some predicting that 2019 levels of traffic will not be achieved again until 2023.
The Government has already announced a suite of measures to help mitigate the effects of the crisis on our citizens and businesses. These include the Temporary Wage Subsidy Scheme, the Pandemic Unemployment Benefit, three month commercial rates waiver, the Pandemic Stabilisation and Recovery Fund for medium and large enterprises, a Credit Guarantee Scheme to support lending to SMEs, and warehousing of tax liabilities for a defined period.
Airports and airlines have been able to avail of those measures. To help constrain escalating losses, some have taken difficult decisions to lay-off staff on a temporary basis. These staff can, and are, availing of the COVID-19 unemployment payment. Most are also availing of support under the Government’s COVID-19 Temporary Wage Subsidy Scheme.
State airports are continuing to facilitate airline services for cargo and for limited numbers of passengers. Regional airports, such as Donegal and Kerry, are also remaining open to facilitate the Government funded PSO air service between those airports and Dublin. These services allow Donegal and Kerry to maintain a basic level of operations and to safeguard connectivity. As well as supporting essential travel, they also provide support to air medical and rescue services. Knock Airport, unfortunately has had to close down operations entirely on a temporary basis.
In line with recent announcements by other aviation business in relation to cost reduction measures, DAA announced last week that in the context of expected significantly reduced passenger traffic for several years, the Company has no choice but to right-size the business to match the number of passengers that are likely to use Cork and Dublin airports in the medium term. To achieve this, a number of options are being considered, including a Voluntary Severance Scheme (VSS).
Shannon Group has kept the Airport open to facilitate cargo operations, essential passenger travel, emergency flights, reparations and diversions. The management has taken difficult decisions to reduce costs including temporary layoffs, reduced working hours, the closure of all Shannon Heritage tourist attractions while opening hours for the Airport have been reduced.
The key airlines serving Ireland, Ryanair and Aer Lingus, have publicly announced some of the measures that they are taking to tackle costs. I am acutely aware that these airlines are particularly critical to the Irish economy.
Continuing uncertainties for the sector
The Government’s priority in response to the COVID crisis and rightly so has been to save lives. We all know well the measures taken and indeed it is only though our collective efforts that we have avoided far worse outcomes.
The measures adopted for this purpose though do place a huge constraint on aviation movements. At present the travel guidance issued by the Department of Foreign Affairs and Trade recommends that only essential international travel be undertaken. In addition, a self-isolation obligation is recommended, for persons arriving by air with limited exceptions.
In combination, these factors mean that both outbound and inbound travel for a business, social or tourism purpose is heavily restricted. This is of course reflected in the actual numbers travelling. The Roadmap for Reopening Society and Business does not set out any timeframe for the resumption of aviation nor is there any clear definition of the conditions that need to be achieved to allow such a resumption on an unrestricted basis.
As such, I am concerned that the industry has no certainty when business might regrow and this of itself is a significant destabilizing influence.
Recovery considerations
The recovery of aviation depends on a number of factors including the lifting of constraints on border movements and the establishment of new arrangements to protect the health of passengers in the course of the aviation journey. Fortunately there is European guidance around both of these issues and I will outline these in turn.
The European Commission issued a communication on 13 May setting out guidance and recommendations relating to the travel and tourism sectors, which envisages a gradual, phased, coordinated and proportionate easing of border controls and travel restrictions across the EU.
The guidance suggests the criteria that should be applied to the removal of restrictions on border movements. The criteria include: firstly, epidemiological conditions in the country or counties concerned; secondly the COVID containment measures; and thirdly the economic and social considerations.
We are beginning the process of considering how these criteria might be best applied in an Irish context. Of course public health considerations must predominate and we cannot take actions that potentially undermine the good work that we have done in bringing COVID 19 under control.
On 20 May, guidelines were adopted by the European Aviation Safety Agency in conjunction with the European Centre for Disease Control for the management of air passengers and air passengers and aviation personnel in relation to the COVID-19 pandemic. The guidelines seek to promote health and constrain the likelihood of virus transmission in the course of the aviation journey. They include measures such as increased sanitation in relation to both aircraft and airports; the implementation of physical distancing where possible and the wearing of medical grade face-coverings by both passengers and staff. Air passengers will have a responsibility to adapt to new behaviours and new practices. We have seen in the measures to respond to the crisis so far that people are very willing in this regard.
Next Steps – An Aviation Recovery Plan
I know that the aviation industry is anxious to have some visibility of how and when we will move forward to reopening for business and it is concerned that aviation does not feature in the Government’s Roadmap for Reopening Business and Society. I share that concern.
Therefore in addition to establishing a Taskforce for Aviation Recovery my Department is progressing the development of an Aviation Recovery Plan through a number of inter-related strands of work.
I will set these out sequentially.
· Firstly, we are looking to the experience of other countries in opening borders and monitor the effectiveness of measures to control any resumption of COVID 19 growth. We will consider how a phased approach to reopening might developed based on the criteria outlined by the European Commission as a basis for an aligned European approach. We will of course work closely with the Department of Health and other relevant Departments in this regard.
· Secondly, in consultation with the National Facilitation Committee, my Department and the Department of Health will agree the new protocols that should be applied to promote health and virus control in the aviation journey. I expect that a code of practice will be finalised and published in the coming weeks.
· Thirdly, we will continue a close bilateral engagement with both State-owned and non-State owned parts of the industry that are critical to future connectivity with regard to capability and readiness to resume operations.
· Fourthly, subject to close consultation with the Department of Public Expenditure and Reform, we will consider what support measures, if any, beyond the horizontal supports already adopted, may be necessary to facilitate the rapid return of a strong aviation industry that can, in turn, support the wider economy through the recovery phase.