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Government Approves Drafting of Bill to Establish Shannon Group plc

Government Approves Drafting of Bill to Establish Shannon Group plc

The Government has approved the drafting of the Shannon Aviation Services and Miscellaneous Provisions Bill 2013, paving the way for the creation of the new Shannon Group entity. 

Minister Leo Varadkar said: “I have reconstituted the board of the Shannon Airport Authority and Minister Bruton has also appointed three members of the SAA board to the board of Shannon Development in order to augment the relationship between the two companies at the earliest possible stage.”

Minister Richard Bruton said: “By merging a strong independent Shannon Airport with the extensive property holdings, experience and expertise of Shannon Development we will create a strong new State company which will work with the IDA and Enterprise Ireland on developing an International Aviation Services Centre in the region.”

In the seven months since Shannon Airport was separated from the Dublin Airport Authority, significant progress has been made, including:

  • In June passenger numbers grew at Shannon for the first time in five years – up 8% compared to June 2012
  • Shannon Development’s enterprise, investment and tourism functions and the associated staff are in the final stages of transfer to the IDA, Enterprise Ireland and Fáilte Ireland and other State agencies
  • The appointment of Neil Pakey as Chief Executive of Shannon Airport Authority, bringing considerable experience in aviation. He will also become Chief Executive of Shannon Group
  • The board of the Shannon Airport Authority has been reconstituted with some members also now sitting on Shannon Development’s board to enhance co-operation
  • The inclusion in this year’s Finance Act of provisions that provide for accelerated capital allowances for the construction and refurbishment of certain buildings and structures for use in the maintenance, repair and overhaul of aircraft at all Irish airports
  • The approval by Cabinet of the Heads of the Shannon Aviation Services and Miscellaneous Provisions Bill 2013 paving the way for the creation of the new Shannon Group entity

Under the Bill a new State company, Shannon Group plc, will be established and the existing shareholdings held by the Government in Shannon Development (SFADCo) and Shannon Airport Authority will be transferred to the new company.

Shannon Airport was separated from the Dublin Airport Authority last December and now operates on an independent commercial basis. This will continue to be the case under the merged corporate structure that will be provided for in the new Bill.

Shannon Development has undergone major restructuring during the first half of this year and when completed, it will retain its significant property assets including the strategic lands and property in the Shannon Free Zone adjacent to the airport. To emphasise this more focused commercial remit, Shannon Development will be renamed Shannon Commercial Enterprises Ltd.

Under the proposed new regime, both of these companies will operate under the aegis of Shannon Group and the latter will promote and drive interaction and common purpose between them at local level. This will include the promotion and development of an international aviation services centre on the Shannon campus, centred on the airport.

Minister Varadkar added: “The new Bill will also provide the necessary legal mechanism to allow Ireland to adopt a new insolvency regime in relation to aircraft and aircraft engines, equivalent to the regime known as Alternative A under the Cape Town Convention. Ireland has a long and successful history in aircraft finance and aviation leasing. This measure will provide greater certainty to investors in the event of default and it is hoped that the change will also facilitate the issuance of Enhanced Trust Equipment Certificates, a form of security used in aircraft finance, in Ireland to bolster Ireland’s position as a user friendly and leading jurisdiction for aircraft finance and leasing.”

Passenger Numbers and Employment

The wider land and property assets of Shannon Development will be used as a development and promotional tool and, within Shannon Group, there can now be a greater focus on maximising the efficiency and effectiveness of the property management function. Shannon Group will seek to maximise the use of all of Shannon Development’s portfolio of land, industrial and building infrastructure and the network of business parks.

The report last November by the Shannon Aviation Business Development Task Force pointed to the real opportunities in Shannon to develop and grow a specialist employment hub for aviation related services, building on the existing cluster in the areas of aircraft and engine maintenance, aircraft leasing and other aviation services that already employ around 1,600 people. Over a five-year period, the Task Force estimated that an expanded aviation services centre at Shannon could create over 3,000 new jobs.

This objective will be assisted by incentives for the aviation sector that were included in this year’s Finance Act by the Minister for Finance. These provide for accelerated capital allowances for the construction and refurbishment of certain buildings and structures for use in the maintenance, repair and overhaul of aircraft at all Irish airports.

The restructuring of Shannon Development, ahead of its merger with SAA within Shannon Group, is nearing completion. Approximately 25 staff will remain in the company, which will be re-named Shannon Commercial Enterprises Ltd, to manage its property portfolio.

The enterprise and tourism functions of Shannon Development, together with the associated staff, are in the process of transferring to the relevant national agencies, the IDA, Enterprise Ireland and Fáilte Ireland. In addition, 25 staff in Shannon Development availed of a voluntary redundancy scheme in May of this year and almost 30 others have been redeployed to other State agencies in the Limerick and Shannon area, and further placements and redeployments will be effected over the coming weeks.

A major consideration for the Government in its decision on Shannon of last November was the serious decline of passenger traffic at the airport over recent years. Passenger traffic fell by two-thirds from 3.62 million in 2007 to 1.39 million last year. It was recognised that it would be challenging to reverse a consistent decline on this scale and that it would not happen overnight.

Passenger numbers continued to decline in the first five months of this year and the immediate priority for the re-constituted board and new chief executive of SAA is to halt this decline and then reverse it. In this regard the figures for June were very encouraging with the first monthly growth in passengers at Shannon in over five years – an 8% increase compared to June 2012. This is a major achievement and augers well for the newly independent Shannon Airport.

The Bill will also provide for the re-naming of Dublin Airport Authority as DAA, an acronym that is already in wide use across the company’s infrastructure, systems and assets. Aside from avoiding the cost of undertaking a more fundamental re-branding, the company believes that this change will also facilitate Dublin Airport, Cork Airport and ARI, as the company’s most important sub-brands, to develop greater prominence in their own right.

Drafting of the new Bill will be undertaken over the coming months. Minister Varadkar will now refer the Heads of the Bill to the Joint Committee on Transport for their consideration. It is hoped to publish the Bill during the autumn session of the Oireachtas so that it can be enacted by year-end.

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NEIL STEEDMAN has been a trade journalist, copywriter, editor and proofreader for 50 years, and News & Features Editor for ‘Irish Travel Trade News’ for the past 40 years.

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