JOINT COMMITTEE ON TRANSPORT debate - Wednesday, 13 Apr 2005

Chairman

I welcome Mr. Gary McGann, chairman, Mr. Declan Collier, chief executive, and Mr. Oliver Cussen, director of corporate affairs and company secretary at the Dublin Airport Authority, Mr. Patrick Shanahan, chairman, and Mr. Martin Moroney, director of Shannon Airport Authority, Mr. Joe Gantly, chairman, and Mr. Joe O'Connor, director of Cork Airport Authority.

I draw the witnesses' attention to the fact that members of the committee have absolute privilege but the same privilege does not apply to witnesses who appear before the committee. Members are reminded of the long-standing parliamentary practice to the effect that members should not comment on, criticise or make charges against a person outside the House or an official by name or in such a way as to make him or her identifiable.

Witnesses should note that the joint committee has directed that in responding to questions posed by members witnesses should ensure their replies are brief and to the point. The committee met in private session prior to commencement of this meeting and is aware, given the enormous changes proposed at Dublin Airport, that a business plan for the airport must be prepared and submitted by 1 May. Is that the correct date?

It also has been agreed that members will ask three direct questions and that they will be responded to directly in order to speed up the process. Were everyone to give a dissertation on what could happen we would be here until tomorrow. I ask that everyone be as precise as possible.

While we have received submissions, some members have expressed concern that they were not delivered to us until today. Submissions are required to be delivered to the committee the day before a meeting in order to provide members with an opportunity to review them. We would appreciate if that system could be adhered to in future though we accept it is not always possible. The committee has been told the delay was caused by staff shortages.

We will commence with a presentation from the representatives of Dublin Airport Authority followed by presentations from the representatives of Shannon and Cork Airports.

Deputy O’Flynn

Is the document we have a draft presentation?

Chairman

It is a draft presentation.

Deputy O’Flynn

Will another presentation follow?

Chairman

The committee will also hear presentations from the representatives of Shannon and Cork Airports.

Deputy O’Flynn

I presume this document is a final presentation and that we will not receive another one tomorrow.

Chairman

It is a final draft.

Mr. McGann

I thank the committee for the opportunity to discuss our business and the various challenges and opportunities which lie ahead for the Dublin Airport Authority. With the committee's agreement I propose to outline the context in which the Dublin Airport Authority came into being and its evolving relationship with Shannon and Cork Airport Authorities under the State Airports Act 2004. I will also present some details on current operations and business issues at Dublin Airport. Mr. Pat Shanahan and Mr. Joe Gantly, chairmen of Shannon and Cork Airport Authorities, respectively, will speak about their operations and business issues.

I wish to begin by stating something that to some degree may be self evident but which is still worth emphasising. Dublin, Shannon and Cork Airports are vital strategic assets for an island nation whose economic well-being depends on the broadest possible range of cost effective transport links with people and markets worldwide. In this context, 2004 may have proved to be an historic year in the strategic development of these airports and in national aviation policy in general.

The State Airports Act launched a new era in which the three airports may be able to assume a maximum possible level of responsibility for their growth and development. This should enable them to service their specific regional economies and customer bases more effectively and, by requiring each to develop its own self-sustaining business model, stimulate a higher level of business activity and operational efficiency. The Act provides for the creation of new airport authorities and new boards at the three airports to replace the existing Aer Rianta group structure and board. Under the Act, all Aer Rianta's assets, liabilities and contractual arrangements remain initially with the Dublin Airport Authority but the Act also mandates each of the new boards to do everything necessary to give effect to the restructuring of Aer Rianta and to submit business plans to the Ministers for Transport and Finance that may serve as the financial blueprints for full separation of the three airports.

Progress has been made in implementing the principal requirements of the State Airports Act. The three new boards took office last autumn under the chairmanship of Mr. Pat Shanahan in Shannon, Mr. Joe Gantly in Cork and Mr. Garry McGann in Dublin. The new boards have been co-operating closely since then to tackle the many operational, legal and financial complexities involved in restructuring a long established fully operational airports group sharing a common corporate structure. The Shannon and Cork Airport Authorities still have no assets or liabilities vested in them, but subject to budgetary parameters agreed with the Dublin Airport Authority have begun to assume much greater responsibility for their airports under delegated authority. Each authority is actively engaged in the formulation of strategic business plans. These must establish the platform necessary to secure the viability of the airports as stand-alone commercial entities and to generate the capital required to support investment in infrastructure and profitable business activity. While these plans are now close to completion, they have not yet been finalised nor approved by the relevant boards. On that basis, as it is the responsibility of the Dublin Airport Authority to present approved business plans to the Ministers for Transport and Finance, it would be inappropriate to address any specific details of the emerging draft plans at this stage. By their nature, these plans will involve many challenges for all. They will also require positive engagement by the shareholder and many stakeholders, including employees and their trade union representatives, if they are to deliver the objectives of the State Airports Act. I am hopeful the Dublin Airport Authority will get positive engagement and that it can rely on appropriate support from members of the Oireachtas when the time comes to implement its plans, subject to ministerial approval.

The Dublin Airport Authority and Dublin Airport are the principal responsibilities of my board looking forward. At one level, Dublin Airport has been a tremendous success story in recent years, particularly in terms of its operational growth. Passenger numbers for instance have been rising by more than one million per annum in recent years. This reflects principally the vibrancy of the Irish economy in the past decade, but also the dynamic business models operated by Dublin Airport's two principal airline customers, Aer Lingus and Ryanair. With current airport charges at less than half the average European airport charge rate, it is fair to say that good value on offer for its various services has also helped. Close to 17.2 million passengers used Dublin Airport last year, an increase of 8% on the previous year. This year we expect these numbers to move closer to 18.5 million passengers. The airport opened 35 new routes and services and welcomed ten new airline customers last year, bringing to 150 the number of scheduled and charter destinations served from Dublin at the end of the year and to 88 the number of airlines operating from it. Passenger numbers rose on services to all the airport's major geographical markets, though growth at 13% was particularly strong on continental European routes.

A feature of Dublin Airport's traffic patterns last year was the continued expansion of the wider low cost aviation sector. New European airlines such as Transavia, Hapag Lloyd Express and Germanwings all launched services during 2004, while Aer Lingus and Ryanair continued to grow their market shares. The airport experienced an increase of one third in VIP traffic last year and received very positive feedback on the way the air travel requirements of those involved in Ireland's Presidency of the European Union were managed during the first six months.

The capital expenditure focus has been to spend only what the existing approved airport charges will support. On that basis capital expenditure amounted to €10 million at Dublin Airport and was tightly constrained during 2004 and focused exclusively on maintaining existing infrastructure. Dublin Airport Authority has an obligation to plan effectively and efficiently for the future strategic development of a key national asset. In this context further significant planning work was carried out to prepare for the airport's future needs. A planning application was lodged with Fingal County Council in December 2004 for a new parallel runway, based on current traffic forecasts and it is believed this could be needed in full operational mode by 2012. The authority has assured the airlines that it will not begin to build it until it has derived maximum efficiencies in all respects from the existing runway network. In this context it is essential that Dublin Airport moves from its current voluntary status, where the airlines can effectively decide themselves at what times of the day they will operate their schedules to the type of fully co-ordinated status that is the norm at other major European airports and where flight times are allotted to them in the best interests of the overall operation of the airport. Only through an early change in the status can Dublin Airport extract the maximum use from its existing runways. Preparations have been also set in motion to revisit plans for a new pier to provide additional context stands for aircraft and to cater for growing passenger traffic. Strong passenger and traffic growth is very welcome but clearly presents challenges to all users of the airport.

With a new board and new chief executive in place at Dublin Airport Authority it is essential we renew our focus on the key actions required to manage, operate and develop Dublin Airport in the best interests of all of our existing and prospective customers. Our primary objective in this context is to anticipate and to meet the reasonable expectations and requirements of our various customers. For our passengers this means at a minimum we must ensure they have a safe, friendly and comfortable passage through our facilities. We must ensure for our part that we address more rigorously and creatively the challenges posed for us by increasingly stringent international security procedures and the physical limitations of our existing terminal facilities. In light of recent findings, we will fundamentally review our processes and procedures and training in the security area. We must also work constructively with the airlines and other service providers to offer as seamless a travel experience as possible to the travelling public. Airports and airlines share a responsibility for the well being of their passengers and for providing them with cost effective transport facilities but the other business goals do not always dovetail neatly. Airports have the specific responsibility to plan for longer business horizons and to anticipate up to ten years or more in advance the likely timing of demand by airlines and passengers for additional infrastructure or the upgrading of existing facilities. In the interests of all our customers and in the national interest we must now strive to create an environment where our sometimes differing perspectives can be debated openly and objectively and where meaningful consultation processes result in acceptable solutions and plans of action. Dublin Airport is fully committed to such an approach and to the maximum utilisation of our existing assets before bringing new resources into play in a timely manner.

I am hopeful that in partnership with our airline customers we can map out an acceptable cost effective approach to the major infrastructural challenges faced by Dublin Airport as it continues to grow. One such requirement is for significant additional terminal facilities at the airport. The need is clear. Current forecasts predict that more than 22 million passengers could be using Dublin Airport every year before any new terminal facilities become fully operational. Dublin Airport Authority is committed to implementing fully whatever decision its shareholder, the Government, takes regarding this critical national resource. The decision is for the Government. Dublin Airport urgently needs additional capacity to meet the reasonable expectations of its growing number of passengers. Given the long lead time for planning, building and commissioning, it is vital these decisions are taken as quickly as possible. If Dublin Airport Authority is asked to build and operate a new terminal, it will only progress this if it can do so at least as cost effectively as any other potential developer and operator and if it is remunerated appropriately for its investment. Funding by Dublin Airport Authority of a terminal and other capital projects will require a combination of interrelated measures which include achieving optimal levels of operational efficiency and flexibility, maximising the contribution it makes from commercial activities and stopping the haemorrhage from loss-making activities whether in the airports or subsidiary and associated businesses. It has been and will continue to co-operate fully with the regulator, the Commission for Aviation Regulation, to persuade him to allow it the required level of airport charges necessary to sustain productive investment and to operate the airport effectively and efficiently to meet the needs of its customers.

Dublin Airport is a fully commercial entity and receives no direct subvention from taxpayers. If it is not in a position to complement its commercial revenues with an appropriate level of airport charges and cost efficiencies it will not be in a position to build the facilities needed at the airport during the next ten years. It is as simple as that. The authority is currently engaging with customers and other stakeholders in assisting the regulator to decide his determination on airport charges for the new regulatory period and beyond. This determination will be made in the next few months and will have very significant implications for the strategic development of the vital national resource that is Dublin Airport. Failure to adequately remunerate Dublin Airport will directly impact on its capacity to meet its customers' needs and the requirements of the State itself at Dublin Airport.

I will now focus briefly on Dublin Airport Authority's two principal subsidiary companies, Aer Rianta International and Great Southern Hotels Group, both of which are also completing strategic business plans. ARI manages airport retail operations in North America, the former CIS and the Middle East. It also holds minority shareholding in Birmingham International Airport in the UK and in Dusseldorf and Hamburg Airports in Germany. The emerging business plan at ARI will focus principally on how the company can continue to leverage cost-effectively off its strong retail brand and reputation overseas, while optimising potential synergies with the retail operations at the three Irish airports. The plan will also assess how best to maximise the value of the overseas airport shareholding.

GSH continues to experience very difficult trading conditions and has now suffered four consecutive years of trading losses. The combination of flat occupancy rates, a decline in higher margin beverage sales in line with industry trends, continuously rising costs from an already excessively high cost base and an increasingly competitive hotels sector leave the financial and operational position faced by GSH very bleak. Payroll costs at GSH, which currently represent more than 45% of overall turnover, are significantly out of line with peer hotel operations where the average payroll to turnover ratio is approximately 35%. The business plan currently being finalised at GSH will demonstrate clearly that the status quo is not an option. A swift resolution of this issue is critical for GSH as well as for the Dublin Airport Authority.

Progress has been made in implementing the principal objectives of the State Airports Act. Business plans are close to completion at the three airports and other subsidiary companies, which will outline the decisions and actions required to ensure full commercial viability throughout Dublin Airport Authority's existing asset base. Aviation and passenger traffic continues to grow strongly at Dublin Airport and we are working closely with the airlines and other service providers to prioritise customer service standards in sometimes difficult conditions.

Major decisions require to be taken urgently regarding critical infrastructure at Dublin Airport and how it is provided and funded. Dublin Airport Authority is committed to implementing whatever decision the Government takes on this matter but needs the support of the regulatory authorities and other stakeholders to ensure adequate funding is available going forward.

I thank the committee for its time and attention. I will be happy to respond to questions on Dublin Airport Authority and to pass them on to my colleagues if necessary.

Chairman

I thank Mr. McGann. When we move on to deal with Cork and Shannon Airports, I would appreciate if the presenters would keep their presentations to five minutes, given that we outlined we wanted short presentations. I felt, however, that since Mr. McGann is the overall head he was entitled to extra time.

On the second question, Chairman, some instances of serious concern to the authority and to the travelling public have arisen in the past 24 hours which are regrettable, to put it mildly. Dublin Airport Authority operates to international security and safety standards and has consistently been the subject of audits over a number of years. This instance is a first. The rigour of the audits has increased significantly. The incidents reported were addressed immediately to ensure the situation is stabilised. The leaking of information regarding the incidents is somewhat unfortunate given that security does not benefit by public discussion. We have immediately addressed the specific issues. We will receive the full audit report in due course. In the meantime we will review all of the security aspects of the airport and ramp up whatever we need to ramp up. Subsequent to the receipt of the final report further increases in security will be put in place and we will have our processes validated by an internationally recognised organisation to further assure us.

Chairman

The travelling public will very much appreciate that being dealt with.

Deputy O. Mitchell

How does Mr. McGann marry those issues? What is happening as regards the second runway? In light of the fact that it will take a number of years for that runway to come to fruition, is consideration being given to the extension of the existing runway to allow for the development of long haul routes as per Government policy and Aer Lingus's objective?

My final question, which is somewhat delicate, relates to the break-up of Aer Rianta and the submission of the business plans. Mr. McGann stated that completion of the Dublin Airport Authority's business plan is dependant on the Minister's decision. However, that business also depends to some extent on the business plans of the other airports. At present, the other airports are incurring liabilities for which the Dublin Airport Authority will become responsible. Is that also impeding the development of a realistic business plan for Dublin Airport? I refer here to overruns at Cork Airport and so on.

Mr. McGann

On the first question relating to capacity, people will broadly accept that any business which has assets on its balance sheet should, in the first instance, maximise the use of those assets. The Dublin Airport Authority inherited from the former Aer Rianta a significant amount of forward thinking in terms of land acquisition and the planning of potential future developments. It is incumbent, in our view as an authority, that developments — particularly those of an infrastructural nature — should first and foremost consider the options and alternatives within the context of the assets currently owned. We believe, based on the information and reports we have received, that whatever capacity is needed for the foreseeable future — including the potential to expand that capacity further — will depend on the aggressive growth which the Deputy stated should be the objective of the airport authority. The alternative reports have in mind factors other than optimising the return on the assets of the Dublin Airport Authority.

Optimal planning is clearly a function of Government and it must take account of all factors, including roads, rail and airports. We provided the Government with information on what we could do in the context of optimising our assets and we believe we can deliver an acceptable solution in this area. Whether that solution is the one best suited to the Government's future plans in terms of potential for Dublin Airport remains to be seen. We are confident that, with an aggressive growth plan for the Dublin Airport Authority, we will be able to deliver the propositions under consideration.

Deputy O. Mitchell

Is Mr. McGann stating that optimising the assets of the Dublin Airport Authority might not necessarily be synonymous with the optimal solution relating to the national interest?

Mr. McGann

Mr. McGann

Long-haul jets are operating into Terminal 1, the terminal that will be developed for major jets unless everybody will have switched. That is not beyond the bounds of possibility.

Deputy Shortall

On the proposed second terminal and the debate on its optimal location, irrespective of ownership, does Mr. McGann accept that the debate should be held in public and that all information on the different locations should be available? The joint committee would like to pursue the issue in some detail. Will Mr. McGann make the Skidmore Owens Merrill report available in order that members can look at the issues involved at the different locations? Will he also make the W. S. Atkins report commissioned by the Dublin Airport Authority available to the committee in order that we can have an informed debate on the best location for a second terminal?

The public safety zones report, recently endorsed by the Government, recommends public safety zones in the flight corridor of any runway and restricting development in these areas. Does Mr. McGann accept the findings of the report and the corollary that a new flight path should not be developed over an area already developed? Does he have a ballpark figure for the development of a second terminal and new runway? Has he discussed this with the aviation regulator? What are the implications of both developments for airport charges?

Mr. McGann

The board of the Dublin Airport Authority is mandated under the Act to do certain things — to run the airport and implement Government policy. Clearly, as the people who run it, management at the airport is more informed on what the options may be in that regard. We believe our responsibility is to inform the Department of Transport, acting for the shareholder, and for it to discuss in the public interest whatever it believes is appropriate to discuss. We are but one player.

As the Deputy rightly pointed out, a number of options have been put forward. I do not think, as a commercial organisation with a mandate to behave commercially and make commercial returns as well as to develop the airport, that it is commercially sensible to wash all our detailed planning and information in public. If the shareholder, as the owner of the companies, believes that to be appropriate, fine. We answer to the shareholder and I give the Deputy an undertaking that we will discuss the issue with him.

With respect, ours is one of a number of propositions being looked at by the shareholder. The options vary in cost and location and would have varying consequences for infrastructure and ancillary development. One is talking about comparing apples and oranges and pears. Again, it would not be commercially sensible for Dublin Airport Authority to put out the information at this time.

Deputy Glennon

I welcome the three delegations. In particular, I welcome Mr. Collier at this early stage of his term of office and wish him the very best for the future.

I understand the Dublin Airport Authority has made a proposal to the Government in respect of what is known as the northern apron site for the development of a second terminal. I presume all relevant factors will be taken into account. Will the delegation elaborate particularly on SR Technics and the anticipated disruption to existing facilities during the course of construction, if the Dublin Airport Authority proposal is successful?

Does the Dublin Airport Authority envisage at any stage in the future having to develop a terminal on the west side of the existing campus? In other words, what is the anticipated capacity of the proposed terminal, when does Mr. McGann expect that capacity to be reached on current passenger projections and at what stage will further terminal construction be necessary? Since at some stage it will be necessary to build on the west side, why not do it now?

Who owns the lands where it is proposed the Dublin Airport Authority's new terminal will be constructed? Is there more than one landowner involved? If so, who are they?

Mr. McGann

The Dublin Airport Authority has communicated with the Department in respect of a couple of options, one of which refers to the north apron site. We have reviewed the matter in significant detail at management level and the authority has examined, to some extent, the manner in which that development would take place. It would clearly be untrue to say that any development on an existing airport site would not give rise to disruption implications but we are of the view, based on the manner in which this can be approached, that minimal disruption will take place. If the sequencing is done properly, the development can take place, without causing serious disruption to an already congested airport, in a fairly calm and relaxed fashion.

I am reluctant to discuss third party companies, for reasons the Deputy would obviously understand, other than to state that we have had discussions with anyone who will be impacted upon by the possible options at which we are looking. People are aware of these options but we would need to manage them in the context in which we received approval to do whatever is proposed.

Deputy Glennon

Are those involved happy with the outcome of the discussions?

Mr. McGann

We are certainly not proceeding with a proposal for the terminal development against the vehement objections of any people on whom it will have an impact. I am not sure whether "happy" is too strong a word but they are certainly comfortable with the concept.

Deputy Glennon

Is Mr. McGann saying that if SR Technics objects, the development will not proceed?

Mr. McGann

This airport authority is not in a position, to use a euphemism, to steamroll a decision through anybody. The process involved here, like any with the Dublin Airport Authority, is one of negotiation and consultation, and sensible development and delivery.

We believe the terminal, in terms of the options at which we are looking, will have the capacity to reasonably accommodate airport demand during the next ten years. The Deputy is right to ask about the western side. If air transport into Ireland continued to increase at the type of rates witnessed during the past ten or 12 years, it is not beyond the bounds of possibility that a western site might need development. However, I return to the fundamental principle that no company would ignore assets which sit on its balance sheet, and are available for development, and basically engage in accruing further costs or sharing future revenues with a third party. That is the logic behind the thinking.

Deputy Glennon

I thank Mr. McGann for his reply. I have one supplementary question. He stated that it would deliver a further ten years' capacity. What is the envisaged timeframe in terms of the new terminal's construction? When would Mr. McGann expect it to be fully commissioned? We have read reports stating that it could take up to six years and, therefore, the terminal would only be in operation for a mere four years before its capacity was reached.

Mr. McGann

In the interests of clarification, the figure for the cost of building the terminal — €300 million — is the top end in terms of depending on the level of capacity built and all ancillary costs.

Deputy P. Power

I will be brief because I will concentrate more closely on Shannon Airport. Arising out of the answer to the previous question on costings, has the Dublin Airport Authority compiled projected costings for Pier D. If so, precisely what are they? How do they relate to the overall figure of €300 million to which Mr. McGann referred?

There has been much media comment on and comparisons with low cost terminals in Asia, particularly the two at Changi Airport. Has Mr. McGann carried out cost comparisons in respect of both of those terminals?

My second question follows those posed by Deputy Glennon. I understand that the church on the lands is a listed building. Will that have an adverse impact on the authority's plans? Everyone is aware of the implications of such matters.

If the Dublin Airport Authority must deal with businesses on the airport lands, does Mr. McGann have any indicative figures on disturbance and compensation costs? Have these been factored into the authority's thinking on the viability of going down that road? These are effectively supplemental to the other questions.

Mr. McGann

The Pier D development, as it has become known, was stopped. There is a number of variations on Pier D. What is clear to us is that it is possible — because the planning is in place — to develop pier capacity much quicker than terminal capacity and there is clearly a congestion issue at Dublin Airport which needs to be addressed. A number of variations on the pier are being reviewed. There are cost implications which are significantly greater than the Asian examples to which the Deputy referred. It is important to remember that we are comparing apples with apples. In recent days we will have discovered the type of labour costs, for example, which may prevail in certain places as opposed to other places. It is, therefore, difficult to compare them.

The critical issue the Dublin Airport Authority faces in any development, whether it is a reflection of lessons from the past or the needs of the future, is that it and the new management under Mr. Collier are committed to ensure that the specification meets the needs of the customers, and not some development that is reflective of an architect's desires or something else, and that they are quoted for and developed by the most cost-effective builders and project managed accordingly.

Deputy P. Power

Mr. McGann gave an overall figure of €300 million but my question was related to indicative figures for Pier D.

Mr. McGann

The pier would cost in the order of €60 million to €70 million. However, one cannot build a pier on its own. One needs to consider connections and walking distances and so on.

I was not aware the church was a listed building. That is news to me. Listed buildings have implications.

Mr. Declan Collier

Let me clarify the situation on the church. None of the options we are considering for the development of the airport would impact on the church.

Deputy P. Power

My third question was related to disturbance costs and compensation payments.

Mr. McGann

Clearly, we will not go ahead with the proposal until we have considered all the implications, including the cost of site clearance, moving plant, those for third parties and so forth.

Senator Morrissey

In regard to Dublin Airport Authority accepting liability for the potential debt of Cork and Shannon Airports as well as for the restructuring proposals, will it consider selling off some of the loss-making businesses and concentrating on its core business? Does it have a good track record in building airport terminals, when one considers that it spent €160 million at Cork Airport which handles a paltry number of a few million passengers?

Chairman

That remark was uncalled for. The people of Cork, like the people of Dublin, are entitled to have an airport.

Senator Morrissey

Senator Morrissey

I stated that Mr. McGann had said the Dublin Airport Authority would build if "we are remunerated appropriately for our investment". I asked if this depended on the level of investment.

Mr. McGann

Deputy Connaughton

I will limit myself to three questions but I have many more, particularly in regard to Shannon Airport.

Reading between the lines, the goose is cooked for the Great Southern Hotels Group. For whatever reason it was not being run as efficiently as other hotel groups. However, before that decision is taken, there is a regional development element that must be taken into account before there is a mad rush of blood to close down everything in the country. That is my observation.

Mr. McGann

What is the question?

Deputy Connaughton

Will the Dublin Airport Authority close the Great Southern Hotels? The question could hardly be more straightforward.

Mr. McGann

The Great Southern Hotels Group comprises a large number of individual hotels. While it is called a group, most of the hotels are stand-alone hotels with an economic reality of their own. They include year-round hotels, airport hotels and hotels associated with leisure activities. As a result of many factors which I indicated, the hotel group is struggling. With the exception of a couple, all the hotels are struggling and something needs to be done. The cost base is hugely in excess of the norms in a competitive market. The hotel group is competing in probably one of the most competitive industries in the world and it is becoming even more competitive in Ireland because of the success of the country. All of the international groups are opening and developing in competition with them.

Deputy Sargent

Cuirim fáilte roimh na daoine ó na trí aerfort anseo. I have three brief questions, the first two of which relate to the proposal for a new runway. As Mr. McGann stated, the airlines were united in rejecting the plan. The article from 2003 refers to a figure of €100 million.

Chairman

The Deputy must ask a question.

Deputy Sargent

Will Mr. McGann clarify if that figure is correct as I have heard elsewhere that it is €150 million? Is it now accepted by the Dublin Airport Authority, in accordance with EU Directive 97/11/EC on environmental impact assessment projects, that a project of this magnitude should be the subject of an objective human health assessment? Mr. McGann referred to airlines and customers but I am referring to residents, some of whom work for the airlines and may be customers. As I am sure Mr. McGann is aware of international studies in this area, I will not speak about them now.

Chairman

The Deputy must ask a direct question. He is not a member of the joint committee and is being given the courtesy of being allowed to ask a question.

Deputy Sargent

I regret I am not a member. Will the Dublin Airport Authority, taking into account the Chicago Midway study, the Netherlands commission finding in 1999 and the requirements of the EIS, fund an independent human health assessment? I understand there was tentative agreement on such a project but that it has not been included in the application.

I am aware the Dublin Airport Authority has had discussions with residents.

Chairman

The Deputy should ask a direct question.

Deputy Sargent

I am asking a question.

Chairman

The Deputy should put the question rather than get involved in a discussion on the matter.

Deputy Sargent

I am not going to do so. Am I correct in saying there have been discussions with residents and that the Dublin Airport Authority does not have a formal objective to an independent economic evaluation? Does Mr. McGann agree such an evaluation is needed in the interests of the country? The national spatial strategy should take account of the interests of Cork and Shannon Airports and other regions. Would Mr. McGann object to an evaluation being carried out prior to proceeding further with the runway plan?

What is the Dublin Airport Authority prepared to do to assist in the provision of a rail link between the south and west of Dublin and the airport and from the north through Donabate or Swords? I am not speaking about utilising mainline rail but about providing access to the airport by rail which, as Mr. McGann stated, is quite normal in other capital cities. What assistance is the authority prepared to provide in that regard, given the overall benefit to the airport and the regions?

Mr. McGann

Chairman

Will Mr. Shanahan synopsise his presentation?

Mr. Shanahan

Shannon has played a linchpin role in the economy of the west in the past 50 years. As the Government aspires to balanced regional development through the national spatial strategy, Shannon Airport can be a catalyst for building a world-class economic corridor between Galway and Limerick. This region, north of Galway and south of Limerick, has enough critical mass to begin to counterbalance the economic activity in Dublin and on the east coast that is raising all boats.

I will now outline the current position at Shannon. For each of the past three years, Shannon Airport has incurred operating losses. Shannon passenger numbers have remained static since 2001 in comparison with its peer airports, Dublin and Cork. As the Dublin Airport Authority chairman said, Dublin Airport's traffic has grown by a million passengers per annum during the past four years, while Cork Airport has grown by 26% over the same period.

Chairman

With all due respect to Mr. Shanahan, I asked him to make an outline. He has been going through his presentation virtually line by line. I asked him to synopsise his presentation for the benefit of members. I take it that he is well enough briefed to know what it contains.

Mr. Shanahan

Yes. Our vision is for Shannon Airport to be a major business and leisure gateway for the west. Three significant challenges face Shannon at present. The first is to address the traffic issues and the difficulty of increasing passenger numbers. The second major issue that needs to be addressed is the cost base, which is substantially higher than that of Shannon's peer airports in Europe, particularly Cork and Dublin. The third major issue is the likely removal of the dual gateway status for transatlantic passengers. I would like to address each of these in turn.

The number of passengers using Shannon could be increased by lowering the overall aeronautical charges in order to stimulate growth. Such an approach has been attractive to a number of airlines. We have launched a new route and growth incentive scheme to which a number of airlines, including Ryanair, have committed. Those incentives have resulted in a record number of new services being announced this year. At present, we have 24 scheduled routes out of Shannon, with another ten planned for May. That will move passenger numbers at Shannon from 2.4 million to over three million this year and to 3.5 million the following year. We anticipate Shannon doubling its passenger throughput during the next five years, attaining in excess of four million passengers. That will need aggressive marketing, not just by the Shannon Airport Authority and management but also by the tourism organisations and the travel trade in the west in order to demonstrate that the region is a direct point of access into the country.

The second major issue for Shannon to resolve is its cost base, which, as I said earlier, is higher than that of Dublin or Cork. There is an urgent need to reduce payroll and non-payroll costs in the immediate future. Irrespective of the break-up of the airports through the State Airports Act, Shannon is still making losses. The issue of the cost base needs to be addressed quickly.

The final challenge is open skies. There is a view in Shannon that we need an appropriate transition period to prepare for a full open skies environment. A sudden change or short transition period would irrecoverably lose us a number of services that provide valuable traffic for the airport. A longer transition period is required. In addition to aggressive marketing, the airport needs to address a number of key factors to offset the impact of the open skies policy. One is the establishment of a viable, independent Shannon Airport Authority. The second is the securing of multi-year deals with key airlines, particularly Aer Lingus, on the north Atlantic route. Those routes should offer commercially attractive deals to the airlines as well as to the airport. We need to establish a dedicated, well resourced marketing and development fund to promote the west, particularly in North America and, specifically, on the east coast of the United States.

Increasing the catchment area around Shannon is critical to driving traffic through the airport. There are two critical projects that need to be completed in the short term. First, there is the provision of a high-quality dual carriageway or motorway linking Shannon to Galway, ensuring that the journey time is approximately 50 minutes. The second key project is the fourth river crossing in Limerick, which would open up Limerick, south Limerick and Kerry. Tipperary and Offaly commuters would also get to Shannon much more easily. In addition to these two critical projects, it is important for Shannon that the western road corridor be completed and that the western rail corridor be given priority, with a spur link into Shannon International Airport.

Traffic growth is of utmost importance to Shannon Airport and for all employees working in and around it. That growth will deliver sustained industry and tourism development in the west, enabling the airport to fulfil its regional role. A busy, successful and financially viable Shannon Airport will support the Government's policy, as set out in the national spatial strategy, on regional development. I am confident that the foundations are being put in place to underpin Shannon's status as a major access point to the west. However, we must soon resolve some key business challenges if Shannon Airport is to be transformed into a self-sustaining, profitable business, providing high-quality employment for generations to come.

Chairman

Mr. Shanahan said that operational costs are much higher at Shannon than they are in Dublin or Cork. How much higher are they per passenger carried? Mr. Shanahan said that he fears open skies. Does he not accept that if we are going to attract tourists into this country, there will have to be an open skies policy? In such a policy there would be further competition from Knock International Airport, an organisation not represented before the joint committee today, but which was here a couple of weeks ago eagerly requesting an open skies policy within which it feels it can compete.

On the loss of transatlantic traffic, I do not know the precise number in the report prepared by Mr. Frederik Sørensen and Mr. Alan Dukes but our estimation is that Shannon Airport would lose 35% of its transatlantic traffic in a pure open skies policy. That represents approximately 300,000 passengers.

Deputy Connaughton

The figure is 300,000? I thought it was 200,000.

Mr. Shanahan

We anticipate that there would be a loss of traffic through Shannon Airport. However, we believe that if marketing groups, with Shannon Airport and the other airports, work together on a coherent comprehensive campaign to market the west of Ireland, particularly in the United States, we can begin to recover that market. In an open skies situation, the theory, and hopefully the practice, is that the whole market into Ireland will increase and will double over a five year period. At present, approximately 40% of transatlantic passengers pass through Shannon Airport. In a doubling of the market, if Shannon Airport maintains a 20% market share, which is half of what it currently achieves, it would recover up to the numbers it currently carries, approximately 700,000 or 800,000 passengers. We believe the open skies policy must be faced and Shannon Airport must aggressively address the market. Shannon Airport is well-positioned to attract direct services from the United States and has a long history of doing so. We believe that if we target that market we can capitalise on it.

Regarding the business plan for Shannon Airport, when the new board was appointed we sought business input from both the tourism and industrial community in the mid-west to establish what their main issues were. We used that as a factor and we continue to use it to develop our business plan. We have also set up fora with industry, chambers of commerce and tourism bodies, including Ireland West and the Shannon region. The aim is to identify the elements these fora want for Shannon. Clearly they want the development and growth of traffic. We are factoring their input into the business plan. It is a Government decision whether it takes three years or five years. We cannot influence that.

Deputy Connaughton

What is the view of Shannon Airport Authority?

Mr. Shanahan

Our view is that we have to manage the transition of the business to an open sky policy. Shannon will be viable after that period of time.

Mr. McGann answered the question about the €77 million write-off.

Could Mr. Shanahan discuss the timing of the cessation provisions in the State Airports Act 2004 and the triggering of the cessation provisions? When should this be done? If Shannon Airport Authority were to become a separate company tomorrow morning, incorporated as a public limited company or as a company under company legislation, there would be obligations on the directors concerning maintenance of capital and liquidity. Could Mr. Shanahan say with any degree of confidence that these requirements could be complied with if there was cessation in the short term? If he cannot, does he envisage a much longer lead-in time before the umbilical cord between Dublin Airport Authority and a newly incorporated Shannon Airport Authority is cut? This relates to the restructuring charge mentioned in reply to earlier questions. I would like Mr. Shanahan to elaborate on this.

There was no mention in the presentation of developing Shannon as a freight hub. I acknowledge the ultra-competitive environment in which Mr. Moroney has been operating recently. Was there an in-depth study into developing the freight side of the business as distinct from the passenger side? The passenger side is an incredibly competitive aspect of the business. I have asked three questions concerning restructuring, the need for further study and the freight hub.

Mr. Shanahan

There may be a requirement for further study if the region is concerned about the impact of the open skies policy. We have carried out studies to assess the impact on the airport and we would be happy to feed that information into a regional study. We have done our analyses and we have spoken to the other airlines. That is an issue I forgot to pick up on in the context of the previous question. We have spoken to all of our transatlantic airline partners, particularly Aer Lingus. We examined the possibility of trying to engineer commercially viable economic routes between Shannon and the United States, and I believe there is great potential in that regard. Aer Lingus, in particular, will not walk away from a market that it built up during the past 40 years.

Other airlines are doing quite well at Shannon Airport. We are looking, commercially and aggressively, at ways of making sure they remain in Shannon. If there is a decision to carry out a regional economic impact study, we will be happy to contribute.

Deputy P. Power

Is this an academic study, given that an open aviation agreement is an inevitability? Is it a matter for negotiation?

Mr. Shanahan

I have identified five or six key issues that need to be addressed throughout the transition to open skies. There may be other issues. They are not apparent to us. It is largely academic, although others may have a different view.

An exercise has been carried out in respect of an agile logistics hub for Shannon. It seems that is an aspiration but not of an immediate nature. Our focus is more on growing our freight business. We intend to grow our freight business significantly in the timeframe of this plan and will target long haul freighters to come into Shannon to take a fair chunk of the Irish market.

Senator Dooley

I join colleagues in welcoming the delegation from Shannon Airport. I congratulate Mr. Shanahan and Mr. Moroney on the work they have done in recent months in preparing the business plan while progressing the work that is required following the introduction of the State Airports Act.

Mr. Shanahan mentioned that there would be a five-year lead-in to the open skies arrangement. The recent letter to the Taoiseach supporting the open skies agreement, to which I understand Mr. Shanahan is a co-signatory, also mentions such a lead-in period. Why is it that a two-year timeframe for the rolling out of the open skies agreement is included in the draft business plan? Perhaps Mr. Shanahan would comment on that.

Regarding the Sorensen and Dukes predictions versus those of the board, which I am not questioning, could Mr. Shanahan provide further insight into how the board arrived at its position? Is he in any way concerned that a new terminal will be competing with the existing terminal at Dublin Airport? What impact might this have on Shannon Airport in terms of its projected growth and the potential to retain the deal that has already been secured with Ryanair? Is there concern that this increased capacity at Dublin Airport will impact in the medium term on the board's projections?

Mr. Shanahan

The business planning process is not complete. The Senator referred to leaks of a preliminary document in the business plan. A business plan must be produced very prudently. One must look at the worst case scenario or fairly stark scenarios because not all positive scenarios are ultimately realised. We have, therefore, modelled a number of different scenarios in terms of open skies. The worst case model would be a two-year transition from where we are now to an open skies situation. It is our hope and our wish that the transition will be much longer and that the airport will have more time to put in place the necessary initiatives.

Senator Dooley

Is the board lobbying for a period greater than two years? Is there a strong commitment to lobbying for five years?

Mr. Shanahan

Absolutely. The authority is a signatory to the letter that was mentioned. A number of organisations in the region have come together to examine precisely what is required in this transition. We are lobbying hard for that timeframe. However, we must plan in a more prudent manner.

Mr. Martin Moroney will deal with the Sorensen and Dukes projections.

Mr. Moroney

On the question of how we predict the level of traffic, the main difference compared to when the Shannon stopover was abolished and we moved to a dual gateway status approximately ten years go is that, under a dual gateway status, there is a regulation for protecting Shannon in that traffic must be delivered to the airport by airlines if they are to operate into Dublin. The reason we need a transition is not to see how this develops. It is to remove, as far as possible, the uncertainties that would occur if there was a sudden change and airlines made immediate decisions which would more than likely favour Dublin as the major centre. If we have a transition period, particularly if it is five years, we can work closely with the current airlines and new airlines in a context where the stopover stigma will be removed and where Shannon Airport will be in a real marketing situation.

The Shannon market is quite different to Dublin. At Shannon, 42% of visitors from the United States are on repeat visits whereas in Dublin the figure is approximately 18%. At Shannon 90% of visitors originating in the US come for a full holiday; they hire cars and spend their time travelling throughout the west. Dublin gets more business travellers, more connecting traffic to the UK and more short-stay visitors.

Senator Dooley

I have a supplementary question for Mr. Moroney. I am aware that a number of airlines have indicated that they will use only one particular gateway if and when the current status is changed. Has there been any feedback in terms of whether some of the other airlines would want to consolidate?

Mr. Moroney

In an open skies situation we are confident of a substantial level of traffic, given a proper transition to give us time to work with the airlines. It is impossible to say what particular airlines will do because they have their own strategies and, as indicated earlier by the chairman of Dublin Airport Authority, they have short-term horizons. Next week we will again meet the airlines individually. No airline will say what it would do in an open skies situation. Airlines will tell us what they might do. We must persuade them in terms of what they should do to make money for Shannon Airport. We are confident but the transition period would help us greatly.

One of the most important comments Mr. McGann made is that he is not prepared to be completely bent over backwards by airlines to the point where people will be obliged to operate out of haysheds. Even though there is competition between the airports, they will be obliged to come to some collective arrangement to ensure that the airlines do not ride roughshod over them.

Chairman

We will move on to Cork Airport and Mr. Gantly.

Mr. Joe Gantly

I appreciate the opportunity to discuss Cork Airport with the committee. According to the guideline set, I will try to be as brief as possible.

Cork Airport opened in 1961 and the existing terminal was constructed at that time. In the period from 2000 to 2004, passenger numbers increased by 34%. The airport catered for 2.25 million passengers in 2004. The plan for this year is to increase that number to 2.76 million passengers, an increase of 23% year on year.

By far the most significant development under way at the airport is the construction of a new airport terminal. In that regard, facilities are under construction. The road network, the fire station and a number of other ancillary actives are already complete. The terminal is on schedule for completion in November and the plan is to welcome passengers in early March 2006.

On what is a topical subject, the decision has been taken to install two airbridges at Cork Airport. The original design requirement was for three but having consulted the airlines, those which use and do not use the airport, the prudent course is to install two. In addition, for those passengers on aircraft who cannot use an airbridge to alight, a covered walkway will be constructed in the north-south terminal to ensure passengers will be able to exit aircraft safely and will stay dry if it is raining.

The new terminal will provide significant opportunities to enhance the catering and retail facilities. The tendering process is under way and the final selection will take place in the coming weeks. The plan is to continue to stimulate strong passenger growth by developing strong proactive relationships with a broad range of airlines and working closely with them to maximise inbound and outbound traffic to and from the southern region. We are working closely with the relevant stakeholders in the region, that is, the city and county councils, the tourism authorities, the chambers of commerce and all those who have an interest in and are contributing actively to the development of the business plan. In that regard, the authority welcomes the decision to put in place a flyover over the Kinsale Road roundabout and the sooner it is completed the better.

The contributions of individual stakeholders have been very detailed and meaningful and will be reflected in the business plan we will produce. The financial challenge for Cork Airport is to ensure it generates sufficient revenue and continues to meet its ongoing operational costs, as well as its capital and debt financing requirements. With regard to the operating costs, we have begun to carry out a rigorous cost analysis which is focused on the fact that the new terminal will be a more costly proposition to run on a day-to-day basis, taking account of the cost of energy and other ancillary service costs. Clearly, we want to start off on the best and most economic foot possible in the new airport. In addition, the ability of the airport to finance the debt associated with the new terminal is being examined rigorously as part of the business planning exercise.

In summary, the challenges facing Cork Airport are significant. The completion of a comprehensive business plan is critical to the definition and management of these challenges. The profitability and cost issues facing the airport are substantial, particularly when the debt associated with the airport redevelopment is factored in. However, one of the airport's key assets is the skilled, experienced and customer focused staff who have loyally served the airport during the years and contributed significantly to its success in the past and who I am confident will contribute to its success in the future.

Chairman

Does Mr. Gantly have projections for the expected passenger numbers in 2020? Does he expect the increasing number of passengers to come from the business or leisure sectors? Does he have a figure for the level of debt Cork Airport could sustain when it becomes an independent entity? The real problems for airports will arise if they do not have sufficient fat to be able to compete.

Mr. Gantly

I cannot answer the specific question raised by the Chairman because we have not made projections up to 2020. The business plan extends to 2014, a period of nine years. We are predicting passenger numbers of the order of 4.5 million to five million.

Chairman

That is a considerable increase from a base level of 2.76 million passengers at the end of this year.

Mr. Gantly

The level of debt and related issues are being worked through and the business plan is under way. Therefore, I am not in a position to state the level of debt we will be able to service. That will become clear when the business plan is completed.

Cork Airport has done an excellent job in managing costs as borne out by performance indices. Employee costs per passenger are approximately €5.50. The number of passengers processed per employee is approximately 9,500. Clearly, that is not where we want to stop. We want to become more productive and efficient. Obviously, there will be opportunities to do this as the airport grows. I cannot emphasise enough that the commercial revenue potential of the new airport is considerable and is a matter to which we will pay particular attention in the business plan.

Deputy O. Mitchell

I thank the delegates for the presentation. I commented on the overrun on the terminal and I am pleased Mr. Gantly is considering ways of financing it. I hope it will not be a Dublin based solution.

I support the idea of a quality terminal. I disagree with my colleague, Senator Morrissey's suggestion of a low cost terminal. The way to keep airport charges down and attract business is to generate income from non-aviation activities. A good terminal is a great way of earning money but to do this one must have the passenger numbers. Shannon Airport has been slow to come to the realisation that the open skies policy is coming. However, it is best placed to benefit from it because it has the expertise in running a service to America and also because its name is recognised as the place to land in Ireland. That is true whether one lives in Boston or Houston. What market will Cork Airport target to increase passenger numbers? I do not want an exact city but broadly is the airport targeting the business community or the holidaymaker?

Mr. Gantly

Clearly, there is a desire and significant interest locally in a transatlantic service out of Cork Airport. The reality is that the market will dictate the size and extent of that service and that it will be validated by whoever is the first entrant into the space. The local opinion, as yet unsubstantiated by fact and figures, is that it would be heavily supported but at the end of the day the market will dictate and the service will either thrive or fail on that basis. The Shannon Airport Authority chairman made the point, with which we agree, that we will be prudent in what we include in the business plan.

There have been interesting developments in Cork. I will provide a specific example which might assist the committee. We introduced a service to Prague which initially operated at weekends. It was targeted as a tourism initiative. In the intervening period, it has become a seven-day service used by both business people and tourists. Business people can now bypass Heathrow and use Prague as a hub to access the rest of Europe. There are dynamics coming into play of which regional airports can take advantage in addressing the difficulties involved in dealing with some of the larger terminals. The short answer to the question is, therefore, that we intend to target both sectors.

Chairman

For the information of members, Deputy Shortall has forgone her position as spokesperson on this and has nominated Deputy Lynch.

Deputy Lynch

I understand that there are to be two air bridges. I would have preferred three. Nevertheless, people who are disabled will be grateful. Being put on a plane when one is not completely mobile is most undignified. We are, therefore, grateful for the air bridges.

Following what Deputy Olivia Mitchell said regarding the transatlantic route, I am anxious to know when it will proceed. Will the runway be capable of accommodating the traffic?

Mr. Gantly is correct to state that the terminal is extremely important. Anyone who is familiar with Cork Airport knows that not a person goes on holidays without another ten people accompanying them and making a night of it at the airport. This is a huge market and it is important that people are prepared to stay and have an evening out at the airport.

Chairman

The Deputy should ask a question.

Deputy Lynch

Will the terminal be up to standard? Will the runway be capable of accommodating transatlantic traffic?

Cork Airport has not been well served by Aer Lingus. The withdrawal of the Cork-Dublin route was a disaster for Cork. Leaving it to just one air carrier was disastrous. In addition, I am constantly asked about the special offers that are available from Aer Lingus out of virtually every other airport but not out of Cork. Are there any plans to entice Aer Lingus back into Cork Airport? Are any other carriers going to come in to take up the business in which Aer Lingus is clearly not interested?

Mr. Gantly

I will first deal with the transatlantic issue. There is a myth that the runway at Cork Airport is not capable of dealing with transatlantic flights. That is untrue. The runway is quite capable of dealing with an aircraft capable of carrying 210 passengers.

On the second question, which relates to the market and when the transatlantic route is likely to be introduced, the airlines have responsibility for this matter and we are engaged in ongoing discussions with them in respect of it. The board of the airport authority is actively engaged in and completely supportive of the transatlantic concept. There is much work going on. The answer to the Deputy's specific question is that I do not yet know when it is likely to commence.

Is the terminal on budget and will it remain within budget? It is important to point out that the Government instructed the board of Aer Rianta to proceed with the terminal at Cork Airport. That was long before the Dublin Airport Authority was established.

Regarding staff morale, quite a number of staff have contacted me regarding the uncertainty about the future of the airport. Would Mr. Gantly advise us on staff morale? I thank all of the staff — including Mr. O'Connor, the director, and Mr. John Smith, for their ten years of leadership in the Cork Airport Authority — but I am advised that morale is at a very low ebb at Cork Airport and I would like to hear from the chairman on the matter.

We have already addressed the question of transatlantic flights. We know that the Qantas 757 can land at Cork Airport as it did in September. I welcome what the chairman has said on that.

I need to ask Mr. O'Connor a question. Is he director of the Cork Airport Authority or is he the CEO? What is his position? Will he be the new CEO or has his job changed? What is his job specification?

Mr. Gantly

I will deal first with the budget issue. In recent times there has been a rigorous process of managing costs associated with the new terminal. In that regard, the terminal continues to be on budget. On projects of this size, however, we are always open to claims from contractors or other parties involved in the construction. It would be wrong, therefore, to indicate that we will be on budget at the completion. However, that is clearly the target.

I must emphasise that what we are doing at present goes beyond the provision of air bridges. In addition to providing these, we are also providing covered walkways for aircraft that do not use air bridges.

Chairman

It is the best of both worlds.

Deputy O’Flynn

Mr. Gantly does not have to explain about the weather. I explained it to the committee in January when I asked whether we could invite representatives from the Cork Airport Authority, along with representatives of the other airport authorities, to come before the committee. For 41 years we have put up with bad weather.

Mr. Gantly

Chairman

It is not appropriate to ask that question. The matter does not arise, particularly as Mr. O'Connor is currently an employee of the Dublin Airport Authority. The advertisement was for the position of CEO and everybody, including the Deputy, has a right to apply for it.

Deputy Dennehy

I thank the committee, given that I am not a member, for affording me an opportunity to speak. However, as a member of the liaison committee for Cork Airport I am interested in this matter. I also welcome Mr. Joe Gantly and Mr. Joe O'Connor and wish them well.

I wish to refer back to the issue of air bridges. Aer Lingus originally demanded the air bridges but when the new regime — comprising the three people who have now left the company — took over it opted to run a cheap, low fares airline and refused to install them. I am astonished by Mr. Gantly's comments to the effect that Shannon received no funding while Cork Airport received €147 million. Dublin and Shannon had their opportunities and it is now Cork's turn. We did not argue about the funding that Dublin and Shannon received in the past.

Chairman

The Deputy must ask a question.

Deputy Dennehy

I am speaking about policy and funding for marketing. Cork Airport was built on the slogan "A little airport with a big heart". Will Mr. O'Connor indicate if that ethos can be achieved in the future in light of the doubling of throughput at the airport?

Mr. Gantly

I will reply to the Deputy's questions in reverse order. I accept his comment that there is a strong sense of purpose at Cork Airport which is reflected in the slogan used. It is also reflected in customer feedback. A task force has been set up to ensure that purpose will be enhanced when we move to the new terminal.

As regards debt and debt financing, until the business plans are completed, as indicated by the chairman of the Dublin Airport Authority, I am not in a position to comment on how, when or by what means we may be able to repay debt. That will become evident when the business plans have been completed.

Deputy Dennehy

Will the expenditure be recorded as a debt for Cork Airport?

Mr. Gantly

The Deputy is asking two different questions. We will have to resolve, through the business plan, how the debt will be financed going forward. On the expense of operating the terminal on a day-to-day basis, I made the point in my presentation that we must ensure that we do not put in place processes which are costly and which do not support the long-term viability of the airport. That is a clear objective of the business plan.

As indicated, a team of people are actively working on that issue to ensure we begin properly.

Deputy N. O’Keeffe

I thank the committee for permission to attend the meeting. I welcome the airport officials and, in particular, the representatives from the Cork Airport Authority. I welcome that Cork Airport is operating well and has a bright future if the economy continues in the right direction. When the economy changes, everything changes.

As Mr. Gantly and Mr. O'Connor will be aware, I have always had an interest in transatlantic flights connecting to Cork. Can Cork's runway accommodate a Boeing 747? I understand that an Airbus can land on a different length of runway than that required by a Boeing. There is strong competition between Boeing and Airbus and, as a result, there will be some major innovation in the aircraft industry in the coming years.

There has always been a debate in Cork over centre-line lighting and the fact that the airport had category 3 status. Which status does Cork Airport hold? Is there now centre-line lighting? The publicity around Cork Airport has not been satisfactory in recent days.

I was out of the country yesterday and I picked up an Irish newspaper in Paris. It carried publicity about planes having to be diverted from Cork at the weekend. Pilots were being blamed and there was discussion about fog, wind, a particular pilot's lack of experience and many other matters. I would like some clarification about that matter.

I welcome the news regarding the two air bridges. I would be happy with that. In my political capacity, I make as much use of the airport as any person. The covered passageway is a welcome compromise. All those things are good. There are no air bridges at many airports. Cork Airport is located on a hill and people boarding aeroplanes who do not have overcoats can get quite wet, particularly in the mornings.

The business plan is a nicety to me but it is an important document. If a business plan is just a projection and is not updated in the various ways required, major changes will be needed. Such changes will depend on how much the economy goes up or down and on the amount of business going through the airport. We have had growth in the economy, with 2 million employed today compared with 800,000 ten years ago. In the past the unemployment rate was 18%, whereas now it stands at 3.8%. This makes ours a buoyant, successful economy and that creates business. If business in this country expands further and Cork Airport continues to take off, from where will the capital to develop the additional facilities, particularly with regard to transatlantic flights, that will be necessary come? Is there a commitment from the Government under the State Airports Act to capitalise Cork Airport, or all the airports for that matter?

My final point relates to the Kinsale Road roundabout. I would like the witnesses to elaborate on that matter because I did not really know what they were saying. If the Kinsale Road roundabout is to get a flyover at huge cost, what will happen to the various bypasses in rural areas and, in particular, those in the Cork East constituency.

With the permission of the Chairman, I will ask a couple of simple questions on the Dublin Airport Authority later.

Mr. Gantly

I will address the Deputy's questions in reverse order. One of the key pieces of infrastructure for any airport is its surface access. It is evident to anybody who uses the airport frequently that the Kinsale Road roundabout is a bottleneck. Construction is due to start some time in May on the planned flyover at the roundabout. I was welcoming that development, as I believe that it is fundamentally needed.

Deputy N. O’Keeffe

I also welcome it but where will it originate?

Deputy Lynch

Just after the dump.

Deputy N. O’Keeffe

What?

Deputy Lynch

Just after the dump.

Chairman

I ask Deputy Ned O'Keeffe to refrain.

Mr. Gantly

There is no specific definition of Government capital in the State Airports Act along the lines to which the Deputy refers in his question. With regard to variations in economic activity, and as was also indicated by the chairman of the Shannon Airport Authority, the business plan must, at one end, cover scenarios painting the bleakest picture for economic growth or passenger growth. The model we put in place must be sufficiently flexible to adapt to both down sides and up sides in business. That will form part of the business plan.

I will answer the specific questions about Boeing 747s. It is possible for a Boeing 747 with the correct payload to take off from Cork Airport and that has actually happened. Boeing 747s have left Cork for Lourdes on many occasions, which debunks the myth that they cannot use the airport.

I will defer to Mr. O'Connor on category 3 status and centre-line lighting because he has the detail on that subject.

Mr. O’Connor

Chairman

I hope Mr. O'Connor sought the relevant apology.

Mr. O’Connor

I did. The article was mischievous.

Deputy Kelleher

I thank the Chairman for affording me this opportunity. Like some others who have spoken, I am not a member of this Committee. I am, however, anxious to contribute on this issue. I welcome the representatives of the various authorities. I am aware that it is late but I have a few brief questions.

There is a cost of €5.50 per passenger and there are 9,000 passengers per employee. Once it is staffed, the new terminal will probably require extra employees or at least the same number of employees who are currently manning the existing terminal. I assume there is a high probability that there will be no job losses with the new terminal. Is that the case?

This is probably going over ground that has already been covered but I need further clarity on the issue and the broader public also need to be clear about the principles involved. When public representatives and Cork people lobbied Aer Rianta intensively in respect of the provision of a new terminal at Cork Airport, we met with huge resistance, which obviously came from high up within the company. Mr. Hanlon, its chairman, more or less indicated that a new terminal would not be built on his watch. We met obstacle after obstacle. I do not believe anybody who has travelled through Cork Airport could, in their right mind, deny the fact that a new terminal is required.

In the best way that he could, the previous Minister instructed that the new terminal should proceed. Plans were duly drawn up and the project commenced. More importantly, everybody was led to believe that the capital cost of the new terminal at Cork Airport would be financed through Dublin. Everybody to whom I spoke on the matter was under that impression. The previous chairman, the previous Minister and, I believe, most public representatives sitting at this table, were of that assumption.

Chairman

That has always been the consensus.

Deputy Kelleher

I cannot understand — I seek clarification on this — how we have moved from the previous understanding to the current position. Mr. Gantly's report states, "A significant financial challenge facing Cork Airport Authority is the management of the debt associated with the construction of the new terminal." Surely someone present can indicate when there was a policy change on that issue.

Deputy O’Flynn

The Minister, Deputy Martin Cullen, could do so.

Deputy O. Mitchell

That was not necessarily conclusive of a policy change.

Deputy Shortall

The former Minister, Deputy Brennan, could indicate when it occurred.

Deputy Kelleher

I know there were many objections previously with regard to an open skies policy and transatlantic flights but we are now led to believe that Cork Airport is exploring transatlantic fights. There were myths that the runways were too short and that planes were too heavy but now we discover there are no legal impediments to transatlantic air travel through Cork Airport. That is an important factor because if we are to be consistent about developing transatlantic flights within the entire country, Cork Airport should be allowed to have its fair share. Has the new board at Cork Airport any view on what it will do with the old terminal in terms of transatlantic flights in the future and other areas of travel? I compliment Mr. Joe O'Connor, the airport director — or manager, as he would refer to himself — and the staff and I wish the chairman and the board the best of luck.

Mr. Gantly

In the competitive environment within which we will operate, the indices of performance to which Deputy Kelleher referred must improve. Having said that, there are no plans for job losses in Cork but we must be at least as productive as we have been — or more so in the future — and in that regard I have the full support and commitment of the management team and the employees. The board is considering the old terminal but there is no definitive plan that I can present today. It is an asset and, in response to the comments made by the chairman of the Dublin Airport Authority, there is clearly a responsibility on the Cork Airport Authority to ensure that it uses every asset as effectively and efficiently as possible. The existing terminal will be examined in that light.

Would Cork have that freedom if Aer Rianta had not been disbanded?

Mr. Gantly

I cannot speculate on what would have happened if Aer Rianta had not been disbanded. The relationship between the Cork and Dublin airport authorities is clearly excellent at interpersonal and business levels. I have had nothing but support from the people of Dublin.

Deputy Dennehy

I asked a question earlier about funding. The question about air bridges has been dealt with. The question now is who will fund the development of Cork Airport. I was astonished by Mr. McGann's input. Aer Rianta funded all the good things that happened at Dublin Airport, regardless of cost. It also funded Shannon and Cork. If Cork Airport made profits, the money went into the pot and whichever airport needed funding received it. It is now suddenly imperative that a business plan, which will saddle Cork with a debt of €147 million — or, as it appears now, €160 million to €170 million — be introduced. That is a complete change. Someone alluded earlier to the change of Minister but that does not alter the decisions made. It was decided that Aer Rianta would provide €147 million for the development of Cork Airport. Is that still the case? There is no point stating that there is a business plan and that the matter can be considered.

The public returned six Fianna Fáil Deputies out of a possible ten in Cork and we lobbied the previous Minister. We will meet the Minister for Transport, Deputy Cullen, next. We understood a decision had been taken to the effect that the development of Cork Airport would be funded by Aer Rianta. This is the central issue. All the other sums of money are trivial. Is Cork Airport going to be saddled with €147 million of debt? Aer Rianta has funded Shannon and Dublin in the past. It is now Cork's turn. I do not see why Cork should be cut adrift.

Chairman

We would not do that.

Deputy Dennehy

Cork funded the building of Dublin and Shannon airports. We will meet the Minister to discuss the matter. When I asked the Secretary General of the Department a similar question he replied that the Dublin Airport Authority has the controlling interest.

Deputy N. O’Keeffe

I asked that question of the Progressive Democrats.

Senator Morrissey

The Progressive Democrats will intervene.

Chairman

Mr. McGann will have no political allegiance.

Mr. McGann

I can describe our remit.

Deputy Dennehy

From when does the remit date?

Mr. McGann

The remit dates from the formation of the Dublin Airport Authority. We have a mandate to run the authority on a commercially viable basis. This incorporates all three airports until they are separated. We have a mandate to facilitate development of viability plans for Shannon and Cork, such that they can exist in their own right. The plans are under way. Those viability plans may or may not make demands on Dublin Airport. We will examine the plans that Cork and Shannon produce. Dublin will take on board whatever is presented. Dublin will provide the shareholder with an opinion on what it is capable of doing.

Dublin has to deal with a regulator that caps its passenger charges because there is no competition with Dublin Airport. These caps take no cognisance of revenues from Shannon or Cork, nor do they take cognisance of losses in Great Southern Hotel or Shannon. They will give no recognition to the cost of the development of the terminal building in Cork. Cork Airport will not pay for it and the regulator will not allow Dublin to get the passengers to pay for it. Dublin passengers may hold the view that they should not pay for it.

Deputy Dennehy

The Cork authority must receive some instructions. It is running an airport. Is the figure of €147 million included in the business plan?

Chairman

I wish to inform the Deputy of something that was said before he joined the meeting.

Deputy Dennehy

I was listening to the proceedings remotely. With new technology, I was able to listen to it for three hours.

Deputy Kelleher

Who adjudicates on the business plans? Mr. McGann stated that he will adjudicate on the business plan. He will present an opinion to the shareholders.

Chairman

As explained earlier, the three viability plans will be put to the two Ministers. Problems of this nature arise when members are not present at meetings from the outset.

Deputy Kelleher

I accept that and I apologise.

Chairman

I am not blaming the Deputy for that either.

Deputy O'Keeffe stated that he wishes to ask a question relevant to Cork Airport only.

Mr. McGann

Chairman

I thank Mr. McGann, Mr. Shanahan and Mr. Gantly and their support teams for devoting four hours of their time to this meeting. We all have learned a great deal. They will understand from where the political impetus on the various airports is emanating.

The joint committee adjourned at 6.15 p.m. until 2.30 p.m. on Wednesday, 20 April 2005.

JOINT COMMITTEE ON TRANSPORT debate - Wednesday, 13 Apr 2005

Airport Authorities: Presentation.

Mr. Gary McGann

Mr. McGann

Mr. McGann

Mr. McGann

Mr. McGann

Mr. McGann

Mr. McGann

Mr. Oliver Cussen

Mr. McGann

Mr. McGann

Mr. McGann

Mr. McGann

Mr. Cussen

Mr. Cussen

Mr. Cussen

Mr. Cussen

Mr. Cussen

Mr. Cussen

Mr. McGann

Mr. McGann

Mr. McGann

Mr. McGann

Mr. McGann

Mr. McGann

Mr. Cussen

Mr. Cussen

Mr. McGann

Mr. McGann

Mr. McGann

Mr. McGann

Mr. McGann

Mr. McGann

Mr. McGann

Mr. McGann

Mr. McGann

Mr. McGann

Mr. McGann

Mr. McGann

Mr. McGann

Mr. McGann

Mr. McGann

Mr. Cussen

Mr. Cussen

Mr. Cussen

Mr. Cussen

Mr. Cussen

Mr. Cussen

Mr. Cussen

Mr. McGann

Mr. McGann

Mr. McGann

Mr. Declan Collier

Mr. McGann

Mr. McGann

Mr. McGann

Mr. McGann

Mr. McGann

Mr. McGann

Mr. McGann

Mr. McGann

JOINT COMMITTEE ON TRANSPORT debate -
Wednesday, 13 Apr 2005