I thank the Chairman and committee members. This is the third time we have been asked to meet the committee. As on previous occasions, we were very pleased to receive the invitation to do so. We have been asked to make a short opening presentation on the organisational efficiency of the commission. I will try to provide this by outlining our output — the work we have carried out since we last met the committee in May 2009 - and by relating this to the costs incurred by the office to do that work.
The commission is funded primarily by a levy on the aviation industry, but also by licence fees from people applying for licences. We carry out seven functions in four areas. We set two price caps, one on the charges at Dublin Airport and a second on certain air traffic control charges levied by the Irish Aviation Authority, IAA. We license firms, such as Irish registered airlines, travel agents and tour operators operating in Ireland and ground handlers at the three main airports. We have the role of enforcing certain consumer rights for air passengers in general and for passengers with reduced mobility in particular. We also have a role in deciding on the runway regime at Dublin Airport.
The primary role of the commission is the setting of maximum charges at Dublin Airport and air traffic control charges levied by the IAA, generally on a five-year cycle. We issued our most recent Dublin Airport price cap decision last December and it is available from our website. We are now in the preparatory stages of preparing our next air traffic control decision, which is due next year and will take effect from 2012 onwards. Last December's decision at Dublin Airport provided for an annual increase in the price cap per passenger of €2.33, to cover the building and operating costs of the second terminal in a full operating year. For the first time, the pricing decision includes a link to service quality at the airport, such that if certain standards are not met, the charge the airport operator may levy is reduced by a certain percentage. We have now begun to publish periodic reports on the service standard measurements at the airport. In preparing for that price cap decision, the team of economists at the commission undertook directly on this occasion much of the consultancy work we previously outsourced, including the financial modelling and the estimation of some of the technical calculations, such as the cost of capital. The team has now begun work, as mentioned, on the air traffic control pricing decision.
Starting last autumn, we began to move our licensing and consumer protection functions onto the Internet, both to make it easy for the public to deal with us and to reduce the administrative requirement on ourselves. This has allowed us, against what is a much weaker economic climate, to scrutinise licence applications more intensively, without requiring an increase in staff. In the travel trade area, 304 firms were granted a licence by the commission in 2009. As members will recall, last year saw an exceptional level of travel company closures - 19 in total - giving rise to 4,500 claims to our office concerning reimbursement of failed travel plans in respect of approximately 13,000 passengers at an overall cost of approximately €3.5 million. In order to process those claims over a reasonable period of time, we recruited, at most,seven temporary agency staff who worked under the direction of our employees to process the claims. Generally speaking, the bonds that licence holders are required to hold were sufficient to make good those claims, but in some instances, recourse had to be had to a back-up fund, the travellers' protection fund. As a consequence, the size of this fund has declined from €7.5 million at the end of 2007 to approximately €5.5 million today. We believe a continuation of the licensing scheme in its current form will require the fund to be built up again.
Two other areas of our operations are also moving to Internet-based work. The air passenger rights enforcement team has been developing an on-line passenger complaints system which will be ready to go ahead later this year. In the meantime, the team has been dealing with thousands of queries from the public which have resulted in the identification of approximately 300 complaints under the European Union air passenger rights rules. Half of these require to be forwarded to enforcement bodies in other jurisdictions, but half were investigated by my colleagues and by the end of 2009, two thirds of those complaints had been resolved while the remainder were being investigated. Our airline licensing and ground handling manager will also be ready to introduce an on-line licence application scheme later this year. In the meantime, she is overseeing 18 airlines and 53 ground handling firms which have licences or approvals from the commission. Given the weakened state of the economy, we have been scrutinising the state of these firms more closely.
In terms of our operational efficiency - the subject of this discussion - we have advised the Department of Transport that it would be possible to reorganise or remodel our role in the area of ground handling to reduce duplication of a similar role carried out by the DAA. This would allow us to redirect our energies and resources into the more critical airline licensing area. As ever, in 2009 our legal team was engaged in advising the other functions within the office and in assisting in the defence of any court actions. The committee will recall there has been a long history of court actions since the office was set up in 2001. As it happens, in June 2010, the High Court for the first time refused leave to proceed with a legal challenge and consequently, the office is not facing a legal challenge in the High Court at present.
The office is carrying three vacancies out of a total complement of 21 staff. This is a substantial reduction, given our small size and the activities we are seeking to carry out, as I have outlined. I am sincerely obliged to my colleagues in the office for their dedication and goodwill which means that even though short-staffed, we have been able to continue to do our work.
Since we last came before the committee, we have produced a price cap at Dublin Airport and defended it before the High Court and an appeal panel. We have started the move to Internet-based licensing and consumer protection. We have issued a little more than 300 travel industry licences, monitored compliance with 70 holders of airline licences or ground handling approvals and investigated some 300 passenger complaints. In addition, the financial claims on the office have been handled by the agency team.
Over the five calendar years from 2005 to 2009, our accounts show that our overall budget has been very stable in the range €3.75 million to €4 million in nominal terms. This partly reflects the fact that as reported to the committee on previous occasions, we have taken a series of measures to minimise our costs. We are also involved in other initiatives, along with other public bodies, in looking for further efficiencies. The Internet-based licensing and consumer protection system will in its own right, at our initiative, keep the costs of the office under control in the future.
The committee will be aware that a year ago, the Government in its statement on economic regulation, announced that the office of the Commission for Aviation Regulation was to be merged with the National Transport Authority.
I thank the committee for its invitation. I have given a broad outline of the work of the commission and some information about our costs to assist the committee's judgment as to our operational efficiency. We will be pleased to respond to any questions.
