I am pleased to welcome to the committee Mr. Peter Dunne, a worker-director of Aer Rianta; Mr. Barry Nevin, President of SIPTU's aviation branch, and Mr. Kevin O'Loughlin, also from SIPTU. I draw the attention of our visitors to the fact that members of this committee have absolute privilege but this same privilege does not apply to witnesses appearing before the committee. I also wish to remind members of the long-standing parliamentary practice that members should not comment on, criticise or make charges against a person outside the House or an official by name in such a way as to make him or her identifiable. I ask Mr. O'Loughlin to commence the presentation.
Aer Rianta Proposals: Presentation.
Mr. Kevin O’Loughlin
On behalf of the workers at Dublin Airport, we appreciate the opportunity to put our case to this important committee of the Oireachtas. I will give some background to our argument.
On 27 March, the Department of Transport advised that the Minister intended to examine proposals for a new independent terminal and progress them if the evidence suggested that such a terminal would deliver significant benefits. We want to explain to the committee who we are and what we do because with the passage of time there appears to be a misunderstanding on the part of the public, and the Oireachtas, about what we do.
There are approximately 1,400 workers at Dublin Airport alone. We provide operational, cleaning, maintenance, car park, retail, management, safety and security airport services, to name but some. What we want to home in on is what we do not do. We do not provide check-in, baggage handling, flight catering, fuel or ground catering services at Dublin Airport, and we do not fly planes. We have extensive experience of dealing with low cost carriers and we are the people who provide the facilities that allow aircraft to turn around in 25 minutes. We believe it is important that we emphasise this point because time and again, when delays occur at Dublin Airport, the workers in Aer Rianta are an easy target to blame.
We also want to stress that we have never been a burden on the taxpayer and, as the committee members are probably aware, we have contributed nearly €300 million to the Exchequer over the past 20 years. We have co-operated with change, which has been quite significant in the past two or three years. In 1999 alone, the staff-passenger ratio was 1:9,516 and the staff-passenger ratio is now 1:11,062, a 16.25% increase in the past three years alone.
I would like to give some facts about Aer Rianta. As members are probably aware, Aer Rianta owns and operates Dublin, Shannon and Cork airports. It has significant shareholdings in Birmingham, Dusseldorf and Hamburg airports. It also has interests in 15 worldwide locations, including Russia, Canada, the Middle East, the Ukraine and Cyprus, and it owns and operates the Great Southern hotels.
In 2002, and increasingly more in 2003, the latest figures indicate that more than 80 airlines fly in and out of the three airports to 130 destinations in the United Kingdom, Europe and the United States. We have had no increase in charges since 1987, and the charges have been capped at €5.36 per passenger at Dublin Airport. The reality is that aeronautical revenue is less than 25% of total revenue. Even more interesting is the fact that passenger numbers have grown from 10.6 million in 1995 to 19.3 million in 2002. The breakdown of the latest figures is as follows: Dublin Airport, which has doubled in size in seven years - 15.1 million; Shannon Airport, which grew by one million over seven years - 2.4 million; and Cork Airport, which doubled in size in seven years - 1.8 million.
The key reason we are here today is to consider what the experts say. Warburg Dillon Read, AIB Capital Markets and SH&E, who were commissioned by the Minister for Public Enterprise and the Minister for Finance in December 1999, stated:
International precedence of competing terminals within airport complexes are not favourable as they have been shown to create operational difficulties. Our analysis suggests that a competing private terminal at Dublin Airport would have to levy relatively high aeronautical charges in order to generate an adequate commercial return for its owners.
I wish to move on to the report of Professor Regas Doganis, which was commissioned by the Taoiseach, Deputy Ahern, in January 2002. Professor Regas Doganis is probably the most eminent expert on airport economics. He said that the current trend among European airports is to try to unify airport management under one unique airport company. He said also that airports such as Zurich and Brussels, which had split managements, have now combined them back into one.
The Panel Report, which was commissioned by the Minister for Transport in February of this year, stated that if this concept is to be progressed to the next stage of the tender process, it will require detailed consideration, in the first instance, of all the issues discussed in this report. It is important that we examine what the experts said about the actual airport charges. Warburg Dillon Read said they were low when compared to peer European airports. The Hague consultants said they were the lowest of 30 European airports surveyed. The Commission for Aviation Regulation said they were the lowest among peers. Professor Doganis said that, historically, they were very low compared to other major European airports. According to the Minister's own report, the Panel Report, the charges were unrealistically low. The common thread is that Dublin Airport is a natural monopoly and it has been shown by four independently commissioned reports to be behaving not like a monopoly. It does not abuse its dominant position.
On competition among Dublin, Cork and Shannon airports, it is nonsense to think of the three airports competing with each other. Each airport is a monopoly in its own geographical region. Dublin enjoys a larger special monopoly defined by the hinterland with a 90 minute journey for international traffic. Dublin would dominate in all counties except those closest to Cork and Shannon. Dublin Airport employs thousands of workers. At the last count we believe it was around 14,140, both directly and indirectly. It is of vital economic and social importance to Ireland. It is far more than a mere transportation hub. It is one of Ireland's most important public assets. It is too important to become an ideological experiment for privatisation but we must ask ourselves some serious questions which none of the reports even touched on. Who will take responsibility for the safety and security of a new private terminal, and the overall airport? Who will investigate any accidents? Who will screen the air-side workers who will work at the airports? More important, who will pay for all these services?
As far as we are concerned, that is a risk too great. The break-up of Aer Rianta is far too great a risk. It will result in significant job losses for airport workers, higher charges for passengers, reduced safety standards for both and potentially a huge additional cost on the taxpayer. It will undermine the commercial viability of Aer Rianta and should be rejected. In summary, we believe Pier D is urgently required to provide the much needed additional aircraft stands, which would further enhance the operational effectiveness of competing airlines, which is where real competition exists.
Current evidence does not support in the necessary comprehensive fashion the building of a private independent terminal. Breaking up the company into three separate entities flies in the face of logic. Surely the health board scenario is proof of that. Aer Rianta workers are among the most productive and experienced airport workers in the world. Aer Rianta has one of the most successfully positive industrial relations environment in Ireland's private or public sector workplaces. Unless concrete and comprehensive evidence is produced to the contrary, Aer Rianta should be allowed to manage all State airport facilities, which would enhance and expand the value and efficiency of Ireland's premier asset.
You set a great precedent by taking just over nine minutes to make your presentation, for which we thank you.
I welcome the group. This is a great opportunity to debate the issue in relation to the Minister's proposals on aviation policy. Multiple terminals are the norm in the US, Canada, Australia and in many other parts of the world. Taking account of Mr. O'Loughlin's point about safety and security, which would need to be resolved before an independent terminal could be developed, we need clarity from the Minister in relation to that. If such a facility works in other parts of the world, why could it not work here?
Professor Doganis was critical of the costings by Aer Rianta on Pier D. The regulator was of the same opinion and his view has been supported by the courts, and this matter is being taken further at this stage. Why is the company going against the request by the Minister, who is the representative of the taxpayer and the Irish shareholder? The Minister has requested that the company hold back on the development of Pier D until a decision is made on an independent terminal. Does Mr. O'Loughlin not think that it seems logical that work on the development of Pier D should be held off until the Minister makes a final decision on an independent terminal?
Some 13 expressions of interest have been received in relation to an independent terminal. Those who expressed an interest believe one is viable. Competition in the airline sector has been good for the consumer. Does Mr. O'Loughlin not believe that the structured competition that has taken place to date in the economy has been good for the country? Why would the position be different in relation to terminals? Ryanair has made the claim that it could bring an additional three to four million passengers into the country if there was an independent terminal at Dublin Airport. Our tourism sector is on its knees and we need additional tourists. Mr. O'Loughlin might deal with those queries.
I thank the delegation for this presentation. It has been worthwhile for Mr. O'Loughlin to clarify the role of Aer Rianta. When there are difficulties at Dublin Airport, in particular with check-in or baggage handling, most people assume such problems are Aer Rianta's fault and that it is responsible for those tasks. It has been worthwhile to have the position clarified.
I would like to ask Mr. O'Loughlin three questions. The first is in relation to charges. Mr. O'Loughlin said that the charges have been capped at €5.36 per passenger. I take it that it is the regulator who capped those charges. What is the mechanism for a review of those charges? Is there any scope for Aer Rianta offering any special deals to low cost airlines or must it rigidly stick to those charges set?
On the proposal for a second terminal, does Mr. O'Loughlin accept that there is a case for a second terminal? If so, surely it makes sense to hold off on the building of Pier D until those decisions are taken, irrespective of who will operate that terminal. The building of Pier D has major implications for the scope of what would be available in a second terminal and the location of one. In that regard, does Mr. O'Loughlin believe there is any case for a second airport in the Dublin area? I note the chairman of Aer Rianta suggested recently that there was a strong case for one. What is Mr. O'Loughlin's view on that?
In respect of the proposed break up of Aer Rianta into three independent companies, will Mr. O'Loughlin deal with the question of the potential for competition between three independent companies? He talked about separate catchments, however, for example, people in the south east should have the option to travel Cork, Shannon or Dublin, whichever would be the more attractive option for them. In terms of routes and reduced fares, is there potential to interchange between the different airports?
I join my colleagues in welcoming the group. I thank Mr. O'Loughlin for his presentation and congratulate him on its concise nature. I hope to be equally concise in my questioning. A number of points are worthy of elaboration. I have discussed these points with the group privately in the past, but given that we are in public session, they are worthy of elaboration. Mr. O'Loughlin touched on the services Aer Rianta workers provide. From Mr. O'Loughlin's point of view, it is worthwhile getting across the message of what services Aer Rianta provides and, more importantly, what services it does not provide.
On airport charges, there are few, if any, businesses here who have not had an increase in charges since 1987. There are many theories as to why this is the case. I would be interested in Mr. O'Loughlin's view as to why there has been no increase in charges since 1987.
To develop on Deputy Shortall's point, we know there has been a major increase in passenger numbers and it is projected that the trend will continue into the foreseeable future. How does Mr. O'Loughlin envisage airport facilities in the Dublin area developing? What does he consider to be the most beneficial means of facilitating the obvious development that will take place, particularly in the context of the proposed second runway at Collinstown, an issue that will be topical for this committee in the coming months?
Mr. O’Loughlin
If I may, I will deal with the last set of questions first and my colleagues will deal with the more factual questions on the detail of charges. In regard to Deputy Glennon's question about a second runway, we all accept that for growth to occur, the current runway system is heading towards its peak of 22 million. It is logical that extra runway space is required, but we have not given consideration to the position of such runways. The logistics of the civil aviation business are such that for us to grow we first need extra runway space and, as night follows day, we will then need terminal capacity. We have not given any serious thought as to the positioning of those runways. We believe there are a number of alternatives, some more contentious than others. My young daughter, who was going away on a school trip recently, rang me up to curse me for making such a robust defence of our position at Dublin Airport because she was an hour and a half queuing to check in. We do not carry out check-in duties.
The reason there has not been an increase in charges is that they have been kept low to attract visitors to our shores. Deputy Shortall is correct to point out that the regulator has capped them in that way. A recent report suggested that the capping of the charges was based on incorrect scientific analysis but we will not delve too far into that.
With regard to Deputy Shortall's query about the three airports, I can outline the economics with a layman's expertise. Let us take Cork Airport as an example. The airport needs a terminal to grow and that terminal will eventually cost approximately €150 million. The current price is €140 million. If we mosey down Grafton Street to Smurfit Paribas, we will get a rate of 5% interest. The figures we have for the airport show a loss of €2.5 million last year. Throw in €7.5 million interest and that is a total of €10 million. Cork Airport cannot survive as a separate commercial entity without the support of the bigger companies. The same is true of Shannon. Cork and Shannon are engines for growth. They are not simply airports per se. They provide amenities for other industries, Dell being one of them. The attraction will not be there. Professor Doganis reckons that airport charges in Cork and Shannon will have to increase to twice or three times those of Dublin, which will make Dublin a more competitive airport. All things considered, we cannot see the logic of proceeding with the break up of the three airports.
There has been a common thread in the questions relating to a new terminal. We are open to and understanding of change. Another significant terminal in some shape or form is needed. Growth figures suggest that there will be more than one million extra passengers per year so obviously there will be passenger constraints. Looking to the long-term, we must consider another terminal at another airport.
Another terminal or another airport?
Mr. O’Loughlin
Another terminal. There have been various private expressions of interest but Aer Rianta is about to conclude its own plan. Before anything goes further, all the plans need to be assessed. Pier D is required now. The low cost carrier in Ireland and the State airline accepted that it was required. It is required for aircraft stand capacity, not passenger capacity. There will be a net increase of eight stands and they will facilitate the additional tourism which is required.
Unfortunately, the Minister has apparently asked that it be held up. However, if there is more congestion and loss of business, the Aer Rianta workers will be blamed. It was agreed previously by the airlines and they had no fundamental difficulty with it. With regard to the costs, we are told they are €50 million for construction of Pier D and €20 million for infrastructural facilities in and around it. We have studied the issue and concluded that there is no achievable alternative. There is an urgency to provide extra aircraft stand capacity. Given that, and in the absence of any other facility being available, this appears to be the best option.
With regard to the 13 expressions of interest that came up previously, the panel report, under chairman Paddy Mullarkey, shows that they have not gone into the specific and necessary detail to support making a Cabinet decision.
Mr. Barry Nevin
I have worked with the airport police fire service for Aer Rianta for the past 13 years. I will address the questions raised by Deputy Naughten, particularly with regard to our concerns about safety and security and the American experience that was mentioned this morning. The American experience is that there are private terminals which compete with each other. That was the American way, the lowest cost in everything. It was also the lowest cost in security. Whoever made the lowest tender or bid got the security contract. The outcome of that was 9/11. Since then, the Americans have re-nationalised all security. The American Government has taken responsibility and all security agents who carry out searches on passengers are federal agents.
One of our concerns is if a private operator goes into a terminal. Are we looking at a situation where some security company can start in the morning, recruit 150 people, give them basic training and put them to work? They might not like the job and leave after a couple of months. Not only will they leave and create a high throughput of people in the security area but they will leave with information about what is being detected and sought. There is no career path for people in that type of security business and we would have huge concern about that.
Since 9/11, Europe has become involved and we are now operating under EU regulation 2320. The Irish Government is bound to observe this regulation. Regular audits are carried out and one of the features of this is that every five years a security vetting and checking of all staff, regardless of whether they are new members of staff or have been there for ten years, must be carried out. Europe carries out the audit but who will vet staff in a private terminal? Will there be dual interests? At present, the airport police vet all staff, contractors and everybody coming onto the site. That will be a serious concern.
With regard to the terminals, Mr. Dunne will deal with the JFK experience.
Mr. Peter Dunne
Deputy Naughten asked if multiple terminals are the norm. That is the case in the US, but they are all state run and responsibility for them rests with the state. The JFK experience is probably the best example of how not to run an airport. The airport has nine terminals. One of them, terminal 5, is idle at present because the airport does not know to whom it should be given. There has been no growth for the past 11 years despite all the terminals. In 1990, there were 29 million passengers and in 2001 there were 29.4 million passengers. The figures did fluctuate and the events of 9/11 had an impact but in 11 years there has been no growth, despite all the competing terminals. They are still all managed by——
What was the growth up to 9/11?
Mr. Dunne
In 1990, it was 29 million; in 2000, it 32 million and it is back to 29 million now. In 1999, it was 31 million and in 2001 it was 29 million.
That need not interest us.
Mr. Dunne
I am replying to the question of whether JFK airport is the norm. This is an example of how not to run an airport. People say competing terminals will create massive growth but it did not happen. They are all managed by the state, anyway, and they all pay the airport charges. I got a printout yesterday of the charges at JFK. The taxes and charges are €58 per head.
Deputy Naughten asked why an independent terminal would not work in Ireland. The international inquiries by the Government to countries where private terminals operate with the state one, indicated that such operations failed. A prime example of this is Pierson International Airport in Canada which almost brought down the government. That report is available for all to see. That is a good example of comparing like with like. One is not comparing like with like when you compare Dublin Airport and JFK. When something similar was tried at Pierson Airport it almost brought down the government and it had to be re-nationalised.
Deputy Shortall made mention of the charges being capped at €5.26. Aer Rianta's charges are the lowest in Europe in comparable airports where there is no state subsidy. Those whose charges are lower than ours are all state-subsidised. We get no subsidy from the State whatsoever. The reason we have not seen charge increases since 1987 is that Aer Rianta was not allowed increase them. Furthermore, Aer Rianta was instructed to give discounts to various airlines, and that is acceptable. We managed and still manage, despite the loss of duty free and other factors. For instance, if we could increase our charges by €1, it would bring in €20 million, which brings us to the issue of the second terminal and being able to pay, through borrowings and profits, for a new terminal.
Earlier Barry Nevin mentioned the plans. The master plans are finished and they are about to be launched on the public, but we have not seen them yet. Why is there all this talk about a new terminal before we see what Aer Rianta plans? It is illogical. I have seen the plans for the future of Aer Rianta and it makes great sense. Some of the staff have seen them. The plans make absolute sense, and there will be no recourse to the Exchequer whatsoever, Aer Rianta will pay for it all.
Have you seen the plans for the new terminal?
Mr. Dunne
Yes. I am on the board of Aer Rianta and we are considering them.
Why have the plans not been made public?
Mr. Dunne
They are almost finished and about to be launched; that is my point.
Do those plans include a second terminal?
That is a second terminal, is it not?
Mr. Dunne
People mentioned a second terminal. The second terminal terminology came up when somebody was talking to me about a private terminal. We have Pier A, Pier B, and Pier C and now we are proposing Pier D. To refer to Pier D for fear it is lost in the discussion, we were told some years ago by the Government to have Pier D ready by 2004. Acting on that instruction from the Department of Transport we rushed to do that. When the present Minister took office we were told suddenly to stop and delay it. That is the kind of regime we have to operate under. We were making progress. When we speak of a new runway, a new terminal or plans, it should be remembered that we have to prepare them ten years in advance. We have to seek planning permission and arrange borrowing requirement and so on. The forward planning must be done ten years in advance. For us, that is where the confusion lies. We were working towards having Pier D completed in 2004, as per instructions, and suddenly we were stopped. We were then criticised by all sides for congestion and so forth. This pier should have been finished.
Deputies might remember that some six or seven years ago we were rightly lashed publicly in the media about delays and congestion at the airports, but that was because the Department of Transport had delayed us for three years. We had the approvals, the money and the wherewithal to go ahead with those plans but they were delayed for three years. In those three years, the volume had increased by one million passengers per year. The volume had increased by an extra three million by the time we got through the six-bay extension which is now in place. These were very unfair practices towards us, most unfair.
I want to ensure I respond to all the questions. Deputy Glennon mentioned the services provided. I think I answered his question on why we have not had an increase in charges since 1987. We were not allowed increase charges and, furthermore, we introduced discount schemes to encourage new carriers.
On my question about services provided, the witnesses are doing themselves an injustice in glossing over it in terms of the public perception. It is worthwhile, for the information of the committee and also due to the fact that we are in public session, that the group set out the services their members provide and those provided by the airlines and their sub-contractors.
Mr. Dunne
That is the point Dermot O'Loughlin made earlier. People complained to Aer Rianta that their baggage was delayed and did not come through, but Aer Rianta only supply the belt through which it comes. The system is in use constantly, 95% to 98% of the time and when baggage does not come through it is not the fault of the airport authority but of the airline handlers.
That is the point Dermot O'Loughlin made earlier.
Like my colleagues, I welcome the delegation to the committee. As a consumer I find Dublin Airport increasingly uncomfortable and awkward and it is suffering from what I call the Heathrow syndrome. In the old days - I can remember when I was five going out to see my father off in the late 1940s - the Michael Scott Collinstown Aerodrome, to which Deputy Glennon referred, was a lovely place. One could drive up and the passengers could get out, check in and get into the aeroplanes. It is not impossible to repeat that experience. They do it in America where the different airlines have different loading bays for passengers and so forth.
What has happened, it seems, is this. I can understand why the Department, as the delegation described, has intervened from time to time and stopped developments. One of the reasons is that Dublin Airport is completely unplanned, higgledy-piggledy and ad hoc. When there is a crisis they add on a bit here, and then they add on another bit and another, and the passengers are walking for miles. Due to the increasing Heathrow syndrome and the increase in passenger numbers, Dublin Airport has gone from being a passenger friendly airport to being an increasingly unpleasant experience.
Two of the three questions I am allowed relate to paragraphs 11 and 12 of the Warburg Dillon Read report and the Professor Regas Doganis report. One paragraph from each was quoted and I assume the witness cherry-picked the ones that were best for his argument. I have not read those reports. Can he tell us is this an accurate reflection? Does the general trend of the full report also support the case he was making and was he just clever in picking out the one bit which suited his case? What was the overall trend of the report?
Paragraph 13 of the presentation is about the Panel report and the quotation used states that if this concept is to be progressed, it will require serious consideration of specific issues. Has this started to happen? Are they actually in the process of considering these issues at present?
I welcome the delegation. Do they believe there should be competition at Dublin Airport?
Mr. Dunne mentioned that if Aer Rianta could increase its charges by €1, it would raise €20 million. What consumer service is he offering for that €1 increase? Can he be specific about the consumer service he would offer for that €1? What would such an increase be in percentage terms?
Like other members, I welcome the worker directors of Aer Rianta and thank them for the clarity of their statement. I particularly welcome the indications of the work areas for which Aer Rianta is and is not responsible. I also welcome the case made against privatisation, which is rarely heard nowadays. Indeed, we are bombarded by proposals for privatisation in all sorts of areas on the basis that privatisation is good in itself, which I do not accept.
On the presentation, I am seeking some expansion or clarification. It appears to me, from many of these reports, that the building of a private pier facility at Dublin Airport would actually increase charges at the airport. The representatives also referred to difficulties which the mix of, say, Aer Rianta and a private operator would create at airports, and indicated this had happened elsewhere. Will Mr. O'Loughlin elaborate on that? On Deputy Shortall's question, I am from the southeast and I seek clarification on the Cork, Shannon and Dublin three-company scenario.
Mr. O’Loughlin
Regarding Senator Norris's point, if only we were so clever as to be able to cherry-pick in that way. We feel quite passionate about this and I have never had so much late night reading that did not send me to sleep. I will get back to the uncomfortable nature of Dublin Airport later but regarding the reports, the key reason we are upset is that the Minister has clearly stated his intentions. We must be upfront. We were part of a consultative process which was to conclude with a series of meetings on 4, 8 and 11 April. On 4 April the Minister chose to go to The Irish Times and tell everyone he was tired of talking to us, he was forging ahead and never mind the begrudgers.
We wanted a calm, reasoned debate and over a full week and at a general meeting of Aer Rianta workers we embarked on what we felt was an intelligent campaign. We studied the report the Minister had. It stated, as did Warburg Dillon Read, that charges had to increase. Professor Doganis said prices had to increase. Lo and behold, Paddy Mullarkey said they have to go up. Everyone says charges have to go up. Spare me: I did a couple of years of economics in UCD and this loses me completely.
Not only that, the terms of reference for the Mullarkey report are quite specific. The terms of reference are, to consider and provide the appropriate infrastructure at the lowest possible cost. It did not even hold to its own terms of reference. We must go back to the robust economics of these reports, which are the only ones we have and they do not support this.
We did not cherry pick. We can show the reports of SH & E, AIB Capital Markets, Warburg Dillon Read, Professor Doganis and the Panel Report. The Panel Report made 104 references to other works, 90 of which were to the Aer Rianta master plan. We were saying someone should come along and tell us why this is going ahead but the evidence does not exist at this time for a private terminal - we are not saying there should not be a terminal.
Deputy Naughten referred to the American experience. Heathrow consists of a collection of terminals run by BAA. There is no competition between the terminals. There are numerous terminals in Schiphol but they are all run by the Schiphol airport authority; Frankfurt is run by one authority also. There is no terminal competition so we will be brand new in that regard. Toronto Pierson was going to be a great private project but it had to be given back to the Toronto port authority. Sorry for getting a little impassioned but the evidence is not there.
Deputy Healy asked about privatisation. We are not all worker-directors, it is just me, Peter and Barry. We are here to give the workers point of view. We do not believe it is necessary to break the airport into three - it is illogical. I take the Deputy's point in relation to interest in thesoutheast but if we look at commodity and competition, Dublin Airport will be the big baddie, for want of another expression. Its charges will be naturally cheaper and it will have a 90 minute connection time from other towns into town and there will probably be more variety. Why would one want to go to Cork or Shannon? Quite simply, Dublin Airport will gobble up Cork and Shannon. It will be fodder to huge corporate interests to come in and sweep up. We all seem to be missing the point that the value of Aer Rianta will be annihilated.
My colleagues can come in on the experience of Dublin Airport.
That flies in the face of what Ryanair said here. I am not saying I agree with Ryanair but it wants competition. There is a main airport in Brussels and then Charleroi, for example, and Ryanair wants an equivalent situation in Dublin. If Mr. O'Loughlin is correct in saying Dublin Airport will gobble up Cork and Shannon, then the same thing should happen to the small airports Ryanair is flying into, but that is not happening.
Mr. O’Loughlin
We do not specifically mention our good friend in the low cost carrier——
Imagine if he was here, he would be hopping.
Mr. O’Loughlin
And we would love to see him hop at this particular time of year.
The chief executive of that carrier does not want competition, if truth were told. At present that company has moved from Shannon, where there were no charges, to Kerry, where there are. Peter will explain this further. His mindset coming up to his impending nuptials has probably gone off a little——
This is a serious issue. The fact is that Ryanair has put people on to airplanes who never flew before. It has brought competition and a huge increase in the numbers flying. That is the bottom line. I am not saying everything it has done is correct but that is what has happened. Ryanair has done that because it gets a small airport, does a deal and flies people in cheap. If its chief executive officer were here he would probably say he wants the same thing in Dublin.
When one flies Ryanair to Copenhagen one lands in Germany and has to take a bus to Copenhagen. It is not the same thing as having two terminals in the one airport area.
He would go for another airport——
In Mullingar, if he could.
——if he could find one.
I will give him a site.
Mr. Dunne
He is the second biggest customer and is very welcome. I will speak about Ryanair, not Michael O'Leary as he is not Ryanair. It existed before he came along. However, Ryanair would not be here today without the help of Aer Rianta. Since 1989 Aer Rianta has given Ryanair over €60 million in both discounts and promotional supports. When Ryanair almost went to the wall in the early 1990s, who saved it? Aer Rianta. It was also saved by what some would say were dubious dealings - routes were taken from Aer Lingus and given to Ryanair. That is what I am saying. Ryanair almost went to the wall and Aer Rianta bailed it out to the tune of more than €60 million. That is not generally known by the public.
Shannon was mentioned earlier. Ryanair had a three-year deal with Shannon and it had been agreed that at the end of that time it would pay charges. When the three years were up, he did not want to pay charges. He wanted another three or four years, €500,000 and so on. We said we could not give it to him because we would have to treat people equally. He then went off to Kerry airport and he is now paying €8, which is €3 more than we expected to pay. We would argue the point with him at any time.
An increase of €1 per passenger would amount to €20 million and €2 would amount to €40 million. If that increase was granted Aer Rianta would be in a position to build what we planned at no cost to taxpayers. If we do not get an increase soon we will have a problem in the future. We may not be able to pay to impliment these plans.
What would it cost taxpayers if the private sector were to build the terminal?
Mr. Dunne
When the Ryanair proposal was put forward €140 million was mentioned for the shell of a building of some sort. It was to be in the most prime area possible. Are we to give away the land for free?
That is not answering my question.
Mr. Dunne
It is answering the question.
The cost to taxpayers?
Mr. Dunne
When we priced what he proposed it was found to be more than €1 billion in cost. However, he was only interested in paying the €140 million for the shed he was proposing to build. He conveniently forgot to say that he was going to move five or six hangars which house FLS Aerospace. That was his plan - hotels, roads and so on. Did he mention these items? Did he mention 21,000 jobs and an extra 10 million passengers per year? In Dublin Airport, Aer Rianta currently handles 18 million passengers, with less than 3,000 staff. That does not make a very good ratio. I am delighted the Senator asked the question to which that is the answer. When he was told the price he said that he only wanted to pay €140 million. Who else would pay for it other than the taxpayers?
Would the Minister be wrong to choose his plan over the others?
Mr. O’Loughlin
If I may answer that question. The difficulty is that we do not want to be seen as some members of the flat earth society. The expressions of interest are mentioned in the Panel Report which states that it must give further detailed consideration to the matter. What has transpired is that there is no cause for displacement of the hangars. No one seems to be considering the loss of the value of the asset in the first instance.
Would the Minister be wrong to choose his plan?
Mr. O’Loughlin
He would because the issue has not been thought out properly.
I wish to ask Mr. O'Loughlin about the Shannon issue. I do not follow his logic in relation to the matter. Aer Rianta is not now in a position to deal with Ryanair. It had a three year concession after which Ryanair wanted further concessions. The reality now is that Aer Rianta/Shannon Airport no longer has Ryanair. There is no income coming into Shannon from Ryanair because it moved. As we know, not all the income coming into Aer Rianta and the airports comes through airport charges. Much of it is value-added and comes from commercial activity. The reality now is that my area, Limerick, is now sitting on an airport which has a capacity for eight million people and it has just a throughput of two million people per year. It has surplus capacity for six million passengers, which is why I wanted to put the question to Mr. O'Loughlin. What if Shannon Airport has its own management, autonomy and independence to say, "All right, Ryanair. We do not particularly like certain things you did in the past but we want to do business with you. We want to get you into our airport because there is value-added for everyone in this." Under the current arrangements it would seem to me that Aer Rianta cannot cut that deal with Ryanair, the net result of which is that Shannon Airport is losing out. I do not think the argument was carried to its logical conclusion. I would like to get an answer to that question.
What is the envisaged throughput for Dublin Airport in ten years' time and how long will your proposals take in relation to planning and its capacity? What subsidy is Dublin Airport receiving? You state that Shannon and Cork could not survive without their big sister in Dublin to look after them. How much subsidy from the Dublin operation is going into Shannon and Cork? It was stated that just 25% of revenue comes from the charge per passenger and that 75% of revenue is gained from other operations such as shops, franchising, parking and so on. In view of this, what will be the loss to Aer Rianta of Ryanair moving out of Shannon following the termination of its free landing? How many passengers were put through Shannon in the last year of the operations?
Mr. Dunne
To reply to Deputies Ellis and Power on the Shannon issue and Ryanair, as I said earlier, it had a deal with us for no charges for three years. It had agreed that from the end of the three year period it would start to pay charges. It broke that agreement by saying it did not want to pay charges.
There was no legal agreement.
(Interruptions).
Mr. Dunne
It also wanted all sorts of desks and cash. We offered it a deal of €3 or €4. It broke the agreement because it wanted to start off before the three or four years with no charges, plus all the best prime desks and cash from Aer Rianta. We would operate at a loss if we agreed to that deal.
Other airports are doing it?
Mr. Dunne
Because, as I said earlier, they are subsidised by government.
He said you are getting 25% of your income from the actual charge. Suppose it is €15, it means that for each passenger you are getting €15. If the number of passengers was over 70,000, therefore, the revenue to the airport would be 70,000 times €15. His claim is that Aer Rianta is not losing money.
Mr. O’Loughlin
If he constituted 70,000 out of a throughput of 2.4 million, he was not that significant in Shannon in the first instance.
Deputy Ellis asked about cross-subsidisation.
My numbers may be incorrect, but I think it was approximately 70,000.
Mr. O’Loughlin
Yes, 70,000 as a percentage of 2.4 million is not a huge figure. Aer Rianta offered three years free of charge in Dublin and four years free of charge in Shannon and Cork airports for fresh routes. If that model is to be extended, should everyone have a free service in Shannon?
Yes is the short answer because the capacity is there. The reason Aer Rianta is not able to cut it in the commercial atmosphere is because it does not have the independence to cut that deal and say, "come on in for nothing, we will pay you to come in." Aer Rianta is getting money in their shops, car parks and all its commercial activities. The reality is that the space exists but you are not willing to bring him in. People in my area feel very passionate about that.
Mr. Nevin
I refer Deputy Power to the transcript of "Morning Ireland" of 16 June celebrating Continental's five years in Ireland. The Shannon issue was discussed and it was said that while there was a little business at Shannon in the summer they were not interested because their passengers preferred to fly to Dublin. The recent census stated there are two million people in the Leinster area. We support the use of regional airports and anything that can be done to help Shannon and Cork. Aer Rianta, out of its borrowings and profits, has developed Cork and Shannon without placing any burden on the taxpayer.
Does that not completely fly in the face of what is happening in the aviation industry in Europe at present where low cost carriers are flying everybody out of Dublin into smaller airports? Is it not true that that is what is happening?
Mr. Nevin
It is happening at airports that are not pier airports to Dublin Airport. We are getting caught up with discussing Ryanair. We are not apologists for Aer Rianta or management here to condone it, we are merely workers trying to give our point of view on this. We can see that this plan is flawed. It needs more work before it goes ahead.
We appreciate what you aresaying.
Mr. Nevin
When Ryanair pulled out of Shannon it left one flight there so that no competition could take the slot. This company, so in favour of competition, made the statement that it has an arsenal or war chest of a billion to drive off any incoming competition. Easijet are currently advertising for airports on the Internet. They outline the criteria required of an airport to get their business. I suggest that what is behind this is an attempt to keep Easijet out because Pier D will bring Easijet to Dublin. Certain other competitors do not want competition in the low cost sector. That information is available on the Internet.
Aer Rianta management told us that.
The issue of cross subsidisation is something of interest to us all in view of the fact that we are in the middle of a discussion with regard to Shannon and Cork. What is the amount of cross-subsidisation to the two of them?
Mr. O’Loughlin
The figures in Aer Rianta accounts are never specifically broken up. We are fortunate in that we did get the break-downs for last year. The breakdown in exceptional costs was that Shannon would make €600,000 and that Cork would have a loss of €2.5 million. That is the reality.
Is that without subsidisation?
Mr. O’Loughlin
Yes.
Could they bring in subsidisation?
Mr. O’Loughlin
No. The actual losses were €2.5 million, including all costs.
In Shannon and Cork?
Mr. O’Loughlin
Yes.
You said Shannon had a €600,000 surplus.
Mr. O’Loughlin
Yes, but Cork had a €2.5 million loss.
So, Cork lost €2.5 million but Shannon is profitable?
Mr. O’Loughlin
At €600,000. There were exceptional costs involved.
How much were they?
Mr. O’Loughlin
I have already taken out the exceptional costs.
You said there were other exceptional costs.
Mr. O’Loughlin
Sorry, I have included them.
What are the figures for the previous two years? I know I am asking something you may not know.
Mr. O’Loughlin
We do not know. Cork now has a very necessary terminal which will allow for growth but repayments in interest alone will be €7.5 million and yet it only caters for two million passengers which makes it very difficult for it to survive.
Do you believe in competition at Dublin Airport?
Mr. Dunne
Yes, I do.
Between who?
Mr. Dunne
There is a great deal of competition at Dublin Airport and we encourage it but somebody has to manage it otherwise there is chaos. That is why Aer Rianta was set up. I am glad the Deputy asked that question. I have worked with Aer Rianta for 32 years and my father worked with Aer Rianta for 20 years. That is 50 years of experience in the aviation industry in my family alone. Many people do not understand why Aer Rianta was established and what it does. It was set up to deal with the monopoly and to manage competition thereby allowing Ryanair and Easijet into the Irish market.
As the provider, do you believe in competition?
Mr. Dunne
There are 130 companies at Dublin Airport, some of them in competition. I am answering the question. Perhaps the Senator is not understanding what I am saying. There is competition at Dublin Airport. The operation of Aer Rianta only accounts for 10% of daily operations at the airport. It is wrong to brand Aer Rianta as a monopoly or as grossly inefficient - as has been done by some people in the media.
We are not branding Aer Rianta in that way.
Mr. Dunne
I know. It has been done by the media. Unfortunately, the Minister for Transport, Deputy Brennan, and his colleagues, Deputies Harney and McCreevy, although good at what they do, have let their flawed extreme capitalist ideology get in the way of logic and commonsense. We thank you for the invitation. The staff of Aer Rianta are grossly offended by the two page document we received from the Minister in regard to his proposals. We have received no explanations or answers to any of the questions we raised. All commissioned reports by Government state this is a foolish illogical idea. We have never received any answers from the Minister to this day. We are grossly offended at what is being done.
Thank you. The presentations were very enlightening. It is good to hear the other side of the story.
The joint committee adjourned at 10.50 a.m. until 2.30 p.m. on Tuesday, 3 July 2003.