JOINT COMMITTEE ON TRANSPORT debate -
Wednesday, 22 Oct 2008

Regional Airports: Discussion with Industry Representatives.

Chairman

I draw attention to the fact that while members of the committee have absolute privilege, the same privilege does not apply to witnesses. Members are reminded of the parliamentary practice that they should not comment on, criticise or make charges against any person outside the Houses or an official, either by name or in such a way as to make him or her identifiable.

The next item on our agenda is a discussion with representatives of Galway and Sligo airports and Ireland West Airport Knock. I welcome from Ireland West Airport Knock, Mr. Robert Grealis, chief executive officer and Mr. Liam Scollan, managing director; from Galway Airport, Mr. Michael Coyle, chief executive of Galway Chamber of Commerce, which owns the airport, Mr. Michael Corless, chairman and Mr. Joe Walsh, managing director; and from Sligo Airport, Mr. Joe Corcoran, managing director.

We will stick with size and will hear first from the representatives of Ireland West Airport Knock. All the witnesses are invited to make a short presentation. Some comments were made before the joint committee by Michael O'Leary, with which members do not agree. However, we wish to put them before the witnesses to elicit their response and thereafter we will have questions.

Mr. Liam Scollan

We thank the Chairman and members of the committee for inviting us to this meeting and for giving us this opportunity to present Ireland West Airport Knock and its issues today.

We thank the Government for the capital investment it bequeathed to us in the past year or two. The good news is that we have made excellent progress in implementing three major schemes, which will be completed by the end of this year, and a fourth scheme, the category II landing systems, which will be completed by February 2009. The investment will make a considerable difference to the airport's efficiency and effectiveness. We are getting on with these projects speedily.

In return, we are contributing €75 million in terms of tourist spend in the region. The airport was built in a recession and, in the recent hard times, it is fair to say that we have been contributing to the region. During peak season, this amounts to 150 jobs on site and 950 jobs in the wider region. We hope to grow our capacity next year to 450,000 seats annually or 9,000 inbound seats per week, a sizable capacity that will provide significant opportunities for growth in the region.

Despite our growth, the west and north-west regions remain grossly underserved. International air access capacity per capita in those regions is one sixth of what it is in the east, the south west and the mid-west. This is a stark example of regional imbalance. Capacity in the west and north west is approximately half of one seat per capita, compared to almost three seats per capita in the south west and mid-west. We must do much to catch up.

I welcome this opportunity to correct assumptions. Recent and older media reports have portrayed the airport as loss-making and highly dependent on Dublin services and public finances, but nothing could be further from the truth. IWA Knock is a low-cost, profitable and independent airport that receives no operational subsidy. Some 28 international destinations account for 97% of our traffic. We have only one domestic destination, namely, Dublin. My colleague, Mr. Robert Grealis, will expand on a number of points in his presentation. For example, some policies at national level act against us competitively. We will elaborate on this point also.

A slide shows the region that we serve. Some 880,000 people live within a 90-minute drive of us. We are the only airport in the region with a runway capable of taking large jets. We are vital to the west and north-west regions. If members look at the green section of the map, which displays the south west and the east of the Republic of Ireland, they will see from where 95% of traffic through Dublin, Cork and Shannon airports and that region's other airports come. Less than 5% of overall traffic is generated by the region covered by IWA Knock. This is a stark example of the considerable regional imbalance in air access levels. We are proud of the work done by the airports in the south and east, particularly in Shannon, Cork and Kerry, and their contributions to the regions. However, much more needs to be done in our region to grow aviation capacity.

Some of the legislative anomalies that have arisen in recent years have further disadvantaged some of the work being done by IWA Knock. I will hand over to my colleague, Mr. Grealis, the airport's chief executive, to take the committee through some of the issues.

Mr. Robert Grealis

I join in thanking my colleague, Mr. Scollan, for receiving us today and listening to our comments. The vital policing role of the Commission for Aviation Regulation is done in the public interest and should, therefore, be paid out of the public purse, as is the case with comparable roles in aviation security regulation, which is handled by the Department of Transport, and in economic regulation, the realm of the Competition Authority.

In 2008, a new levy was implemented by the commission to recover the legal costs it incurs in carrying out its functions. The levy on IWA Knock amounted to €62,000. From a legislative point of view, we have no recourse but to pay. It is inequitable and unacceptable that regional airports should be levied with costs that are directly attributable to the commission's role as the regulator of the Dublin Airport Authority. Legislation is inadequate and forces the airport to pay for costs from which it and its users do not benefit. Given that there is no indication of what the future costs will be, we cannot plan for their implications for the airport. Forcing our airport to pay the commission's costs of litigation relating to a competing airport is unjust and erodes our competitive position. It is unrealistic to expect that we can recover these costs by passing them to our airline partners.

Regarding the promotion of sustainable airports and regional development, regional airports and IWA Knock provide a range of public services at their own cost, in particular air traffic control, security, fire and other services that are provided by the public sector in other transport sectors. Airports must absorb those costs unless they are in receipt of subventions under the core airport expenditure scheme. This provides subventions where airports make losses, but no direct subvention is made regarding the public service cost incurred by the airports. The current application of the scheme is unjust and must be reviewed.

State airports benefit from long-standing advantages over IWA Knock and other non-State airports. We are concerned that the provision of some public services at State airports are provided by the State itself or a State agency and that the full cost of the services may not always be recovered.

In 2007, IWA Knock showed a clear demand for transatlantic services. The services provided by the airport took 3% of market capacity that year. Critical to our ability to redevelop those services is ensuring that we can offer the same range of services and facilities to airlines as operated at other airports. In particular, immigration pre-clearance and the potential full customs and border pre-clearance facilities must be developed at all airports with the ability to accommodate and sustain transatlantic services. Clearly, facilities opened at one airport confer a competitive advantage over another that does not have the same services. IWA Knock must be included in discussions, developments and supports so that we can provide a similar level of service to customers and bring additional economic benefits to the west and north west.

I draw the committee's attention to the proposed new air travel tax. This measure's introduction in the recent budget is an inequitable and retrograde step with serious consequences for the tourism industry, businesses and the travel industry as a whole. It further marginalises regions and runs contrary to the Government's stated policy on balanced regional development. It places significant competitive disadvantages on IWA Knock in sustaining and winning routes in what is now a global marketplace, particularly for the short and medium-haul low-cost routes on which the west and north-west regions are so dependent.

It is inequitable that a tax provides a competitive advantage to Dublin Airport over IWA Knock in particular, given the inequitable application of the €10 tax for specific short-haul routes to the UK. I will use the example of a route from Dublin to Manchester, Liverpool or a similar airport. This will only attract a €2 tax, but the same route from IWA Knock, Galway or any other regional airport will attract a €10 tax. It is anti-competitive and may be in breach of EU competition law. It is certainly not the positive discrimination set out in the Government's policy on balanced regional development. It is promoting congestion in the east, in Dublin in particular.

Regarding the air travel tax, the United Kingdom is our single largest tourism and travel market, particularly for the western regions. It is also our single largest business market. A €10 tax will have a serious detrimental impact on our business and tourism industries. Based on current passenger numbers at Ireland West, a 4% reduction in the number of visitors would wipe out the tax gain to the State by the implementation of the tax. Having examined the model that applies in the Netherlands and the United Kingdom, 4% is probably an underestimate of the effect on the tourism industry in 2009 onwards. The Dutch ministry of finance estimated that the introduction of the equivalent tax in the Netherlands would result in a 13% reduction at regional airports. KLM, the largest carrier, estimated that between 500,000 and 1 million passengers would be lost per annum. Cornwall County Council suggested the effect of the introduction of a similar tax in the United Kingdom could result in a 30% reduction in the number of visitors into that part of the country.

I refer to the impact of the tax on airlines' decision-making process to retain existing services and consider new services into the west. Given our reliance on low cost carriers and the elasticity of demand in terms of fare prices for air travel, it brings us into a difficult position. This applies to the regions in order to develop our tourism economy and support, sustain and grow existing businesses. The lack of a policy is a concern, as there appears to be no policy reference to the introduction of the air travel tax. There is concern that the introduction of a further carbon tax measure may result in the air travel industry supporting double taxation measures in the coming year.

Mr. Liam Scollan

I shall summarise with three points. There is a need to abolish anomalies that distort the market between airports in Ireland, to which our chief executive referred. I ask that the air tax provision be amended because it amounts to a tax on the west in respect of some of the routes to the United Kingdom. That is a retrograde step. As an airport that is a trust, we have no ambition other than to serve the people of the region. If these actions are taken, we will be in a better position to continue to grow and serve the needs of the people of the region.

Chairman

Before I ask the delegation from Galway Airport to make a presentation, I want to mention that representatives from Shannon Airport were invited but were unable to attend. They will come at a later stage. On behalf of Galway Airport I invite Mr. Walsh to speak.

Mr. Joe Walsh

As a regional airport, we share the concerns of Mr. Scollan and Mr. Grealis. I do not intend to refer to them again other than to say we support Ireland West, Knock in respect of those matters.

Galway Airport handled 310,000 passengers in 2007, accounting for 21% of passenger traffic in Irish regional airports. The airport is one of the fastest growing in Ireland, growing by 27% from 2006 to 2007. Passenger traffic is dominated by Galway city and county residents, to the level of 64%. Business travellers account for 40% of that figure on our key routes; those visiting friends and relatives make up the remaining 60%. There were 16 scheduled services to destinations in 2007, 13 of which were international and three of which were domestic. The leading scheduled destinations are a mixture of Irish cities, UK cities and tourist destinations such as Lorient, Bordeaux, Faro and Malaga. Galway Airport is forecast to grow in the years to 2030 and it is anticipated that passenger throughput could be at least 800,000 by that year, with the appropriate level of funding. The airport authority has defined an investment strategy to realise the growth potential of the airport. A key part of the strategy is the development of routes to key hub airports serviced by regional airports. As an island nation, access to and from the country is critical. Galway Airport provides for such access through regional airlines to major hub destinations.

The population of the city and county is 231,000, as of the 2006 census. It grew 15% on each occasion in the past two censuses and there is no doubt it will continue to grow.

Regarding supporting economic policy and strategy, the national spatial strategy states Galway, with its population, quality of life attractions, transport connections and capacity to innovate with the support of its third level institutions, will continue to play a critical role that has been essential in activating the potential of the region. The national spatial strategy identified nine gateways to drive that development and the development of the wider regions to achieve the overall objective of more balanced regional development. Galway is one of these gateways and has the potential to support the aspirations of increasing productivity and competitiveness through providing connectivity to the local business base and its ability to combat problems associated with ease of access to international gateways. Galway is a key part of the foreign direct investment toolkit and assists in the creation of the right transport conditions to enable businesses to thrive and local people to compete for jobs on offer in a highly competitive global market.

It is essential in the establishment of a national aviation policy that the role of regional airports is recognised as an important connectivity asset. The development and success of a Galway to Amsterdam route is a clear indicator of this role. The service commenced in May, has proved to be a success and continues to grow.

A recent survey of the Galway to Dublin route in June gives a flavour of the nature of our travellers. Some 41% of trips are business related, 19% are onward connections, which is fundamental to Dublin being a hub, while 53% use the service on occasions for onward connection. In supporting wider benefits, the airport provides links to a number of world cities, including Dublin, London, Manchester, Amsterdam and Edinburgh. While these are significant leisure markets, they are also important business destinations. Consequently, they offer an alternative option to business people travelling to these destinations rather than via other airports. The link to Amsterdam operated by Aer Arann provides access to one of Europe's main hubs and offers significant opportunities for onward connection. Through these and new connections, Galway Airport can offer useful, convenient connections to major European cities.

The perception of international connectivity is key for potential inward investors. As they examine regions in which to locate, Galway Airport ensures this requirement can be fulfilled and that the western region is not immediately removed from consideration. The development of interlining and code-sharing agreements between airlines is key to opening seamless access to major destinations from regional airports with regional carriers. The Aer Arann interline agreement with Etihad Airlines is a key development in this regard.

Galway city and county are recognised for the level of multinational corporations in operation. With a total full-time workforce of 9,500, or 12,500 inclusive of the part-time element, connectivity or connecting these companies with parent companies and markets is essential. Galway Airport continues to recognise the importance of these links and seeks to develop and improve air access for all business in the region.

The growing knowledge sector in the region is a key driver of foreign direct investment. The continued investment in research and development in both NUIG and GMIT will attract the next generation of multinational corporations to the region, as evidenced by the development of the new IDA bio-pharma site at Oranmore. Air access for the continued investment in the region is critical.

Tourism is a major sector in the west, Galway city and county in particular. The total number of tourist visits to the west amounted to 2.819 million in 2007, with total tourist revenue of €817 million. The total number of overseas tourists was 1.25 million, with revenue of €387 million. The role the airport plays in respect of this market is important. Those visiting friends and relatives amount to 60% in respect of key UK routes. The Volvo ocean race in 2009 will further enhance the potential for overseas visitors access to the Galway gateway via Galway Airport. There are 240 full-time employees at the site.

I will now turn to the specific questions that were raised in the letter inviting us to this meeting, beginning with our position on aviation policy. Galway Airport actively supports the development of an aviation policy where the development of regional airports is undertaken to provide air travel for the regions to major European cities and hub airports like Dublin Airport, for onward connections to the world. In doing so, the policy would support the provision of suitable, convenient and frequent services to passengers and businesses in the regions. The objectives as outlined in the Department of Transport's statement of strategy for 2008 to 2010 do not go far enough in this regard.

In 2007 Galway Airport initiated a technical assessment of the infrastructural requirements for future growth and development. This study was supported by Galway city and county councils. The assessment concluded that the existing airport has expansion potential on the present site, with the development of new terminal facilities to the south, with access from the new M6 motorway. The runway would remain at its current length, with minor adjustments to improve operational performance. However, the future extension of the runway is feasible, if required, to drive growth at a later date.

The future growth and development strategy is founded on a consolidation approach to key existing routes and the expansion of routes to key European cities and key hub airports, similar to the recent development of a connection between Galway and Amsterdam, to which I referred earlier. The airport has discussed the marketing of the western region with Fáilte Ireland West and has accepted an invitation to join a sub-committee of the board of Fáilte Ireland West to focus efforts on increasing inbound tourism to the west via air transport through our regional airport.

A question was also raised about proposals to address the imbalance between regional airports and Dublin Airport. Galway Airport is focused on key routes for both business and visitor traffic and on ensuring that both flight frequency and appropriate time-tabling can provide real alternatives to passengers in our catchment area, in particular for those on inward travel to the city and county for business. In the current business environment, where time is a key factor, ease of access to the regional airport, the frequency of key services and a no-hassle approach to using airport facilities are fundamental to our passengers' decisions to travel.

Galway Airport provides its own fuelling facilities and is the licensed operator of same. The provision of fuel at a regional airport is a key requirement for based aircraft operations and for courting new airlines to operate to and from the airport. The recent crisis in the fuel market, with the escalation of fuel costs, has put pressure on the fuelling operation and has had a negative impact on our business. The fuel distributed to Galway Airport is approximately 20% more expensive than fuel distributed in Dublin. Furthermore, sales volumes have declined due to price increases, which has meant that suppliers are unable to give us the same discounts as previously applied. Overall, the imbalance that exists in fuel pricing for Jet A1 and AvGas puts regional airports at a competitive disadvantage when attracting new business.

Galway Airport sees the development of interlining and code sharing agreements between regional airlines and major long haul carriers as being the real opportunity to extend access to long haul travel to the regions. This approach involves the use of key hub airports like Dublin, Manchester and Amsterdam. The development of the interlining agreement between Aer Arann and Etihad offers real alternatives for long haul travel from Galway, via Dublin or Manchester, on to Abu Dhabi and onwards to the Far East and Australasia. The recent developments on interlining between Aer Arann and Aer Lingus on the Cork, Dublin route offers opportunities for long haul travel to the United States of America, although it is our understanding that this service will not be available to passengers on the Galway to Dublin route. We have written to Aer Lingus formally requesting status on this service through Dublin, which in turn supports the hub development of Dublin Airport and further supports the provision of PSO routes from Galway to Dublin for onward travel.

Chairman

I now call Mr. Joe Corcoran, who is here on behalf of Sligo Airport. I ask that witnesses furnish the committee with copies of their normal flight schedules, if available. If not, I ask them to forward them at their earliest convenience.

Mr. Joe Corcoran

I thank the Chairman for the opportunity to address the committee today. Regional airports in Ireland form an extremely important element of the country's infrastructure and should be viewed in terms of the strategic development of our country. The recent economic downturn has resulted in a delay to the national development plan programme but this should be kept under constant review to ensure that regional airports are not forgotten or become victims of the larger projects that are currently being revisited.

Like all businesses, we face many challenges in the current economic climate but I am glad to report that Sligo Airport is on a sound economic footing and is well placed to meet those challenges. Unlike some of the larger airports, we must fund items such as air traffic control, security and licensing costs directly, which is a huge drain on resources. When one takes the raft of new rules and regulations together with ongoing training, it is apparent that a more level playing field is required in order for us to compete. We would like to see the Department of Transport's core expenditure scheme rewarding the airports that are being careful with their expenditure. This would give confidence to the airport operators that they could depend on some contribution towards costs that do not have a corresponding income. Sligo Airport's income from the core expenditure scheme last year was just €9,000. Our financial standing has been positive for the last number of years.

The proposal by Government to introduce a new travel tax is ill-conceived. If our aim is to have more regional balance in air travel, how can this proposal stand when a flight from Sligo to Manchester is liable to the €10.00 tax, while a flight from Dublin to Manchester is not? The other anomaly is that the airport companies are being asked to collect the tax and unless there is a significant change in the proposal we cannot see how it can be operated. At a time when all airlines are under severe pressure the timing of this proposal is wrong.

Sligo Airport very much appreciates the PSO service and believes the scheme is vital for the survival of the smaller airports. However, we would like to see the red-eye service stipulation introduced to provide better timing for our daily air services. We have a twice daily schedule to Dublin. However, with a departure time of 8.50 a.m from Sligo and a corresponding departure time from Dublin of 5.05 p.m., the window for business is Dublin is too short. We have been lobbying for some time to change those times but they must be stipulated for the PSO in order for that to happen.

Chairman

The flight leaves Dublin at 5.30 p.m. Is that correct?

Mr. Joe Corcoran

No, it leaves Dublin at 5.05 p.m, with a departure time from Sligo in the morning of 8.50 a.m. Our ability to develop that business would be greatly enhanced should we get back to an earlier departure from Sligo in the morning and a later departure from Dublin in the evening.

Under the current capital expenditure programme Sligo Airport has been approved for very important work. The runway end safety areas at Sligo are part of the projects approved and although we are currently caught up in some planning issues, we hope that a solution will be forthcoming in the near future. Part of the project incorporates the installation of an instrument landing system which is vital for continued operation in the future. The instrument landing system also forms an integral part of improved safety works which we hope will be prioritised in the national development plan.

In addition to the capital expenditure scheme, we are planning to provide new hangars. At present, we have extensive hangar facilities but due to demand, thankfully, we have commenced an ongoing programme to develop them further from our own resources.

Chairman

What is the total proposed investment?

Mr. Joe Corcoran

The total capital expenditure scheme comprises just under €10 million. Many of the points I intended to raise were addressed by the other representatives but I have submitted an extensive document for members' perusal and I am happy to address any questions they may have.

Chairman

Both Ryanair and Aer Arann are critical to the two international airports and the two regional airports along the west coast. I will rehearse the comments made to the committee by the chief executive of Ryanair, Mr. Michael O'Leary, although I must emphasise that we did not agree with him. We are anxious to receive a straightforward response because the airlines provide business for the airports and, should anything happen to them, we will all be in severe trouble.

Mr. O'Leary's exchange with the committee went as follows:

Deputy Paul Connaughton

How does Mr. O'Leary see the future for regional airports over the next five years?

Mr. Michael O’Leary

Does the Deputy want the politically correct answer or an honest one?

Deputy Paul Connaughton

I want a Michael O'Leary answer.

Chairman

I do not believe Mr. O'Leary can be politically correct at this stage, whatever else he does.

Mr. Michael O’Leary

We are in the Houses of the Oireachtas. There is no future for Donegal, Galway or Waterford, and Knock, despite the fact that we fly there, is flaky as well. One cannot get away from the fundamental economics of this country. While Bristol has 10 million people and only one airport, we have 4 million people and 11 airports, seven of which would not survive without massive subsidies. We subsidise everybody on the Knock-Dublin route to the tune of €120 each. At a time when schools and hospitals are crying out for funding, we are subsidising the rich to fly between Knock and Dublin. It is insane. Ireland has more than a sufficient number of airports with Dublin, Cork and Shannon. Kerry, because of the road infrastructure, can probably survive with some services. However, the services are not to Dublin. The future for Kerry, Cork, Knock and Shannon lies in developing services directly into the UK and Europe, whereby visitors may be stimulated into coming here.....

Chairman

Why did Ryanair put EasyJet off Knock, Shannon and Cork airports?

Mr. Michael O’Leary

We did not put it off Knock, Shannon and Cork airports. It arrived in Ireland, as Go had before it, because Ireland was the mother lode of high fares and profitability for Ryanair. We were already operating on the Cork-London route; we operated on the Cork-Gatwick route and remained on Cork-Gatwick route after EasyJet went. When it operated on the Gatwick-Knock route, we were already operating on the Stansted-Knock route. We added to our Knock Airport services by adding a Gatwick and Luton service. We operated the Gatwick service from Knock Airport when EasyJet went. We have not taken away flights. When EasyJet left, we replaced the flights. We have sustained traffic, the level of which has not fallen but has increased since EasyJet left.

Chairman

When it operated to Knock Airport, Ryanair put a boot into the airport. As soon as it had left, Ryanair pulled out. According to my schedule, Ryanair has reduced the number of flights it operates to Gatwick Airport from the other two airports.

Mr. Michael O’Leary

No. Before EasyJet operated into Knock Airport, we were flying on the Knock-Stansted route twice daily. Today, we fly on that route twice daily and the Knock-Luton route once daily. We took the Gatwick aircraft and opened up two new routes from Knock Airport into the UK regions — I understand to Leeds-Bradford and Liverpool. We have since increased our frequencies, partly at the request of Knock Airport which did not want us to operate just four flights a day into London. We now operate three flights a day into London and two into the UK midlands to try to broaden the traffic at Knock Airport, which is what we are doing at Shannon and Kerry airports.

Ours is the only airline that does not cut and run. When Aer Lingus left Shannon Airport, we increased the number of flights and saved the traffic; when EasyJet left Cork Airport, we increased the number of flights on the Cork-London route; when it left Knock Airport, we increased the number of flights by adding new destinations — Leeds-Bradford and Liverpool, although I may have them wrong. In every Irish airport at which we operate, we have increased traffic in the past five to ten years, as some of the other flakes have come and gone.

This brings us back again to the whole Aer Lingus discussion. Who does one ultimately want to own Aer Lingus? Is it some of the continental flakes which will come and go, or someone in Ireland who has a commitment to at least developing routes and frequencies, not just to Dublin but the regions also?

Members of the committee expressed their concern in response to Mr. O'Leary's claim that his operations out of Shannon were making losses and that if the situation did not change, he would pull out of the airport. We must ensure that we maintain access to the western regions.

As a regular user of Galway airport, I fail to understand the continued absence of a passenger transfer mechanism through Dublin. Why have the regional airports not insisted that passengers should not have to pass through customs in Dublin before checking in again, which can often take 30 minutes? If the representatives are serious about regional airports and connectivity, that should have been one of their first priorities. Two international airports and two regional airports will be within two hours' drive of each another when the western Atlantic corridor is complete. I put it to the representatives that some of their airports will not survive.

The recent decision by Aer Arann to reduce its routes and cut its staffing by 100 is a warning from the airline that significant challenges lie ahead. If anything was to happen to that airline, God forbid, it would destroy the west of Ireland. Where would Sligo, Knock, Galway and Shannon be left in such a scenario?

In regard to Sligo airport, Mr. Corcoran outlined an investment proposal comprising €10 million. I would like to learn the other airports' detailed investment proposals.

How far is Sligo airport from Knock and is it viable for Sligo to retain an airport given its proximity to the latter? Mr. Corcoran told us that the airport has only one flight per day to Dublin, which departs at 8.50 a.m. and returns at 5.05 p.m. The representatives of Knock airport might outline the services they operate to Dublin. Given that the subsidy for Knock flights is €120 per passenger, perhaps Mr. Corcoran can tell us the subsidy for Sligo. Should we not be realistic and acknowledge that Sligo will find it difficult to continue? If Aer Arann was to pull out or if anything was to happen to the public service obligation, that would leave the airport facing significant losses.

I am aware that Galway airport has expansion plans and, coming from the area, I am supportive of them. However, these plans must take into account the two international airports located an hour away in either direction. I do not see evidence of the synergy that will be needed among the three airports. If we are to have low cost services at regular frequencies into the west, destinations and schedules will have to be co-ordinated. Mr. Walsh spoke about the good service between Galway and Amsterdam. It would be crazy if Shannon or Knock created competition by operating services to the same city. Co-ordination as well as competition is clearly needed.

It is ridiculous that Knock wants transatlantic services at a time when Shannon is struggling to survive. The Knock representatives talked about the need, for example, for the ability to have the airline clearance, obviously to compete with Shannon Airport, although they did not say that. This is ridiculous given that Shannon Airport is going several steps further. It is not realistic for two international airports within two hours of each other on the west coast to try to provide international flights. The synergy should be that Knock Airport continues what it is very good at, such as the charter market and the very good British connections. For access into the west of Ireland it is critically important we support much greater Ryanair access into the west. Perhaps that would involve people being able to fly into Shannon and out of Knock and so on.

We want to see viable access into the west and many more passengers not having to go through Dublin. However I have a serious concern about four airports operating close to each other, all with major plans. I do not know if the management of the four airports have ever sat down together. If they have not, they should.

Deputy Fergus O’Dowd

May we ask some questions?

Chairman

I will allow replies to my comments and then ask committee members to speak. We will begin with Knock Airport.

Mr. Liam Scollan

Thank you, Chairman. We took the Ryanair comments very seriously, but only the comments about our being "flaky". On the day of the announcement we decided to give a Flake bar to every Ryanair staff member at the airport in recognition of his comments. When Ireland West Airport was first established we were told we had no chance, so Mr. O'Leary's statement was an improvement on the comments 20 years ago. At least we have been elevated to the level of "flaky". Hopefully in 20 years' time the geniuses in this country will decide we are moderately successful.

Our future lies in being low-cost, effective and efficient. That is how we are and will be, and that is the future of regional airports. Regional airports that are not cost effective will not have a future. In Mr. O'Leary's comment on the €120 subsidy there was an implication that we receive that subsidy, but it is an airline subsidy. I will tie that in with the dependence on Aer Arann the Chairman mentioned. Only 3% of our traffic flies with Aer Arann, namely the Dublin traffic. We are not dependent on Aer Arann or the PSO to that degree. I mentioned in my presentation that we fly to only one sixth of the level of seats per head of population in the mid-west and south west, so there is ample room to grow capacity at Ireland West Airport Knock. I will not get into some of the detailed comments but that is the broad overview.

We operate only a single PSO service which comes down from Dublin every night and goes back in the morning, rather than a proper returning service. Regarding the interlining point the Chairman mentioned, in every proposal we made before the PSO services at Knock we have made one very strong recommendation each time to the Department, and that is that the PSO be structured with the airline such as to incentivise it to fill the aircraft. Ever since I joined the airport that recommendation has been there and every time the PSO has come out it has not included that incentive. If that incentive were there, airlines operating the PSO would be incentivised to fill those seats and, thereby, interline. We have made the interlining point, but unless the incentive driven by Government forces airlines to fill aircrafts, it will not happen. The airport is pretty powerless to make that effective.

Co-operation works both ways, and this applies to other airports. Our airport serves on the Shannon tourism group where I actively promote the transatlantic routes. Our research tells us there is every bit as much demand in our region up to Donegal, over to Fermanagh, Cavan and Longford for transatlantic services through Knock. We still hold that view and believe the people of the region have every right to demand that service and every reason for us, on their behalf, to strive to achieve it.

Chairman

Knock has been unable to get an airline to fly. While we support the airport's initiative, which did not go well, is it possible to get flights, even with open skies policies, to the US, when Shannon is clearly coming under pressure?

Mr. Liam Scollan

I will ask our chief executive, Mr. Grealis, to respond to that.

Mr. Robert Grealis

We obtained 3% of the market share in a very short space of time last year. We managed to demonstrate that our market research was accurate, that the demand exists. This is particularly true in the US where the tour operators and travel agents welcome the fact that they can now have a direct service into the west of Ireland. The Irish diaspora, particularly in New York and Boston, is predominantly from Galway up to Donegal. I estimate that 70% to 80% of the diaspora in those two cities come from that region and they demand direct air access. Many people from Donegal say they do not want the five hour drive, but want direct routes. The tour operators are saying this is a new product — not the product in the south west and mid-west — and can attract new and additional visitors to the country. It is about providing service to the region and complementing and increasing the number of US visitors to Ireland and therefore increasing the revenue and benefiting the regional economy.

Mr. Joe Walsh

Thank you, Chairman. Mr. O'Leary's analogy with Bristol, citing that 10 million people live there, is nonsense. There are not 10 million people living in Bristol. From the perspective of a regional airport, Mr. O'Leary should have mentioned not just Bristol but Cardiff, Exeter, the M5 and the fact that the airports both north and south of it are working and providing services to regions such as the south west of England. A more useful analogy would have been to take the airports in the North of this island. If he had taken Belfast City and Belfast International Airports, which have passenger numbers in excess of 1 million, it would have more relevance. Belfast International Airport has upwards of 4 million or 5 million and Belfast City Airport has 1.8 million or 1.9 million with a population in Northern Ireland of just over 1 million. We are talking about regional airports and access to the regions. Ryanair does not give us that access. It is not giving us that access in the Galway city or county region. I will ask Mr. Coyle if he wants to make any further comment on the Ryanair piece, although I have other comments on the questions.

Mr. Michael Coyle

Clearly Ryanair is not a business airline. We have done the analysis. There are 2,000 business journeys into and out of Galway Airport every week. That service is greatly valued particularly by our multinational community but also by our wider business community and the members of Galway Chamber of Commerce.

Mr. Joe Walsh

I will also call on our chairman to comment on the survival of Aer Arann and airports in the west of Ireland.

Mr. Michael Corless

The Chairman mentioned that not all the airports on the west coast will survive. Given the economic climate, perhaps he is correct. Given the level of Government support for each of the regional airports on the west coast, whether any or all of those airports survive depends on Government policy on regional airports. The perceived difficulties of Aer Arann are a reflection of the economic climate. I recall when I first came to Galway in the 1970s we did not have an airfield. It took a German industrialist and inventor, Steiner, to set up a factory and build an airfield. He did so because he had his own business in Germany and wanted to commute.

Lemass set up industrialisation in the west in the 1960s and it was recognised by the chamber of commerce 15 years after the set-up of the Steiner airfield that with the success of industrialisation in the west, the region needed global access. Accordingly, it wanted to take over the airport and bought it from Steiner. It invested in the airport with Government support over a period of time to enable those companies we now talk about to expand their product and have access to European and worldwide markets, thus enabling the success of Galway Airport.

In terms of its development and investment, Galway Airport has only invested on a business case basis. In other words, if the demand was there from those who wish to visit friends and relatives in the UK and those businesses currently in Galway who wish to access wider markets, or if the demand was there for additional services required to access those markets in a more convenient way, we as an airport would invest. Accordingly, there are 310 reasons Galway Airport needs to survive. We will do whatever we need to do to survive, as those 310 reasons include thousands of those passengers who came in and out of Galway throughout 2007.

Our strategy is to develop Galway Airport over the next 20 years. Our vision statement has been clearly defined and is supported by Galway City Council and Galway County Council to enable us over the 20-year period to develop the business to more than double what we need. We are not looking to the short term. We all went through difficult times in the 1980s and we know what it is like. We believe we will come out of that but we want to be well positioned in order to create industry in Galway and protect the jobs of all those employed in that industry. The commercial and residential interests involved include a major tax take by the Government from the Galway region. We want to enhance and grow the business into the future.

We are delighted Aer Arann is with us and we built a hangar for the airline at our own cost because we wanted to secure direct access by at least one airline to European destinations and onwards. One can see from the development of the business throughout the past 30 years that there has been progressive and continual growth. We expect to maintain that with the support, not just of the people and those who use the airport, but also the Government. We acknowledge and welcome the support we have been given. Our total investment in Galway to date has been €15 million, of which somewhere in the order of €6 million to €7 million has been Government support.

Mr. Joe Walsh

The Chairman raised the matter of transfers through Dublin and was correct in his comment. In terms of the regulation on the industry, our security screening at Galway comes under the same regulatory requirement as Dublin. It is no different and we are audited in the same way. With regard to transit through Dublin, we should not have to put our passengers through the same screening process in Dublin when they have gone through the same specification equipment and search protocols in Galway.

This is not a Galway Airport matter, it is an aviation policy matter. I referenced aviation policy at the start of my piece. It should be driving out Dublin Airport in terms of its ability to perform as a hub. Transit facilities are required for a hub airport and that should be aviation policy; that is just as important as any of the other developments listed in Dublin Airport currently.

I also mentioned the role of regional carriers, airports and feeders into hub airports like Dublin, Amsterdam and Manchester. If we take Amsterdam as the example, it has been developed as a hub airport for regional carriers to feed the major long-haul carriers. We should have that in Dublin.

We have a PSO obligation at Galway supporting three services a day, although we have a fourth service provided by Aer Arann to Dublin. We should have the ability to connect with onward travel with the likes of airlines like Aer Lingus. That is where interlining and code-sharing comes into play, and this is happening in the industry now. There is consolidation and with the rethinking, regional airlines have a role to play. Ryanair cannot provide that now as it will not get a person to the United States. Aer Arann, through the link with Etihad, can do so. It can get a person to Sydney from Galway, although one may stop in Dublin, Manchester or Abu Dhabi. If a person is in Sydney and wants to come to Galway, the option is there.

That is what we need and what we are presenting to our businesses and the multinationals based in Galway. They use the knowledge base in the region and are founding industries for that reason. Aviation policy needs to change.

Mr. Joe Corcoran

The Chairman opened the session by referring to size and with regard to Sligo, size matters. The airport's survival will be assured by the many people we have working with us. Through the programme of capital expenditure, we have a plan for survival.

The proximity of Ireland West Airport to Sligo Airport was mentioned earlier. We are in business over 26 years and have survived. Many services are provided through both airports and it is important to have a spread of airports. As Mr. Walsh mentioned, one is able to access a region. Speaking of regional imbalance, there must be a network like that of the UK and Scotland.

We are on the periphery of Europe. Do we want to hold our airports or not? Sligo will be fighting very hard to hold on to our airport.

Chairman

The point is we all want to hold onto our airports. If the PSO was stopped for Sligo or Aer Arann decided to stop serving the airport, where would it be?

Mr. Joe Corcoran

Less than 40% of our income comes from non-scheduled operations. We have two return flights daily to Dublin and we have a four times a week service on our Manchester route for the summer period.

Chairman

How far is the airport from Ireland West Airport?

Mr. Joe Corcoran

Approximately an hour. It is pretty equidistant between Sligo, Ireland West and Galway. It is about the same distance.

Mr. Liam Scollan

Mr. Corcoran is a rally driver so I would say he could do it in half the time if he wanted.

Mr. Joe Corcoran

We can fly Mr. Scollan.

Chairman

Who provides the Manchester service?

Mr. Joe Corcoran

Aer Arann also provides the Manchester service.

Chairman

Is there a service from Knock to Manchester?

Mr. Liam Scollan

Eight times a week.

Chairman

I see. I am probably talking against myself, but if anything happens to the PSO or Aer Arann — we hope it does not, but we must be realistic in the times we are in — we will have some difficulties.

Mr. Joe Corcoran

A similar analysis could be made for many airports in the United Kingdom and throughout Europe. We could concentrate on the "if" scenarios. Ultimately, the airports are vital for the infrastructure of the country. We are an island nation and in the west we are on the periphery of it. We have many private and business flights through the airport, aside from scheduled services. The Irish Coast Guard helicopter is also based with us in a strategic position to cover the area from Galway up the coast to just past Derry.

Deputy Fergus O’Dowd

This is a committee. The Chairman represented his point of view, but I have an entirely different one which I would like to express. Having visited Knock Airport with my colleagues in Fine Gael last year, I am extremely impressed by the professionalism and dynamic driving the region forward. We very much support the work of Mr. Grealis and Mr. Scollan. I see the same energy and commitment in Mr. Walsh and Mr. Corcoran. There are 30 full-time jobs at Sligo Airport which is great for the area and provides a tremendous service. We want to try to help with the policy changes the representatives need, listen to what they are saying and help them to improve their businesses in any way we can.

I am concerned about the Government cuts to funding for regional airports. The proposal in the budget was for a cut from €41.3 million to €27.9 million, which represents a decrease of €13.4 million, or over 32%. I would like to hear the views of the representatives because it is a significant cut in Government support. I do not know what programmes will be affected or how the cuts will affect the individual airports. Have they been contacted about the matter? We in the Opposition have not yet had an opportunity to examine it, although we have tabled parliamentary questions to the Minister. It is important that when the economy is in crisis, we do not consider imposing cuts on dynamic regions such as those represented by the delegates. We must have a commitment to the west and south, not just Dublin. I am not a rally driver, but I do use the M1 to get to the airport, which is 20 minutes from my home in County Louth and that is staying under the speed limit. I understand and appreciate fully the benefits regional airports bring to their communities.

When I was in the United Kingdom in the last couple of days, I heard that Aer Arann had proposals to cut one quarter of its workforce. The press release spoke of moving away from some scheduled services and towards charter flights. This must have great significance for the regional airports. I do not know whether the representatives have been in discussions with Aer Arann. It seems international aviation is in crisis. Circumstances are increasingly difficult for many airlines. Whatever strategy we have, it must take into account that the PSOs are critical. Our view in Fine Gael is that growth must be maintained. The question of regional spatial strategies is also very important.

I listened carefully to the representatives' comments about Galway and the significance of the business plan. My colleagues on the committee are from the west and far more familiar with these issues than I am. The key to the whole western economy is not who leaves the airports but who comes in, where they are coming from and why they are coming in. Mr. Scollan mentioned in his presentation the number of new passengers coming in whose journeys originated outside the country — I think it was 6,000 — and said he was trying to increase that number and that he wanted people to come in and spend money. When the airline is leaving with Irish people on board, he wants others to come in who will spend their money by staying or working in the region. This is particularly important. What are the strategies in this regard? What should we be doing, as an Oireachtas committee, to direct the Minister into such areas? That is what will make the difference. Instead of having one-way flights, as we unfortunately will under the Government, with people heading to the USA or the United Kingdom and not coming back because of unemployment, we need to have a business plan — perhaps in collaboration with the airports — on how we can develop and maintain significant inward passenger growth from other countries.

Mr. Robert Grealis

With regard to the Department of Transport funding programme, we have sought clarity from the Department since the budget announcement on the impact on the budget programme for 2009 and potentially in 2010. Currently we have approximately €11 million worth of projects ongoing at the airport and we expect to start a large project — the apron, which will cost €6 million — towards the end of the year. The clarification we have sought is with regard to phase 2 of our development which is due to commence towards 2009 and for which we are still waiting. The cutting back of some of our projects would have a detrimental impact on our ability to increase business.

Deputy O'Dowd asked about our business strategy for growth. We provide more than 9,000 seats inbound every week and expect to see this number grow in 2009. The big challenge is to fill these seats. That is something we try to do in partnership with the airlines but obviously our resources are limited for marketing and promotion. One area of concern which we are trying to address with the tourism authorities is that we see very little region-to-region air access marketing. Therefore, when we are promoting the west — be it golf, fishing, Connemara or Westport — we are not promoting the means of getting there alongside this. If one is in the Manchester market, one might see a lovely image of a golf course in the west of Ireland but it does not tell one the means of getting there. That is something we are trying to push with the tourism agents. We need a greater focus on region-to-region specific air access marketing. We at Galway Airport will be working on this issue together with the tourism agencies under Fáilte Ireland.

Mr. Joe Walsh

With regard to the cuts in funding, Galway Airport received €6.3 million in the February 2007 announcement which was not as high as we had expected. However, it was a considerable sum of money and we set about investing it in improving the facilities. We are now facing a 56% minimum cut in that support. I do not agree with the rationale applied to it which was on the basis of contractual commitments. We are looking at a four-year programme, although it kicked off in February 2007. We would not have had contractual commitments in July 2008 for works planned for 2009. We are suffering as a consequence. However, we recognise the fact that funding cuts had to be made. We brought forward a programme, whereby we took the decision to defer in the interests of the economy, accepting that we were under major pressure to do so. There are elements of the programme that we have started, as mentioned by Mr. Grealis with regard to Knock Airport, but the funding to complete the works is not guaranteed. I am talking about schemes for improving the operational efficiency of the runway. It is not necessarily nice to have — we are not dressing the place — but is to improve operational efficiency. We are still awaiting an outcome, for which I will be pushing hard.

Deputy O'Dowd mentioned the cutting of staff by Aer Arann. Aer Arann, a key business for us and the western region, is going through its process. With regard to the change in model, it did refer to other types of business. My understanding is that if it is able to place aircraft in wet-leasing as part of its fleet and as another income stream which it has been doing, it is supplemental to its main business, which is to service regional airports such as Galway.

Deputy Fergus O’Dowd

It is very significant.

Mr. Joe Walsh

Absolutely. It is still going through the process and, obviously, we are not party to it. We are working very closely with Aer Arann, a key partner of ours. We pride ourselves on the relationship we have at the airport and the service we provide. We would be very optimistic——

Chairman

The key issue is that we have three airports with three PSOs and Aer Arann is under severe pressure. I agree completely with Deputy O'Dowd. We want to see the airports survive and thrive but there are immediate challenges. I believe that the airports must face up to those challenges with Aer Arann. Have the personnel of the four airports ever sat down to look at these issues with respect to the immediate challenges?

Deputy Fergus O’Dowd

My question also applies to Sligo, in terms of the cuts.

Mr. Joe Corcoran

Under the national development programme our plans to the end of next year come to just under €2 billion, which will be relatively unaffected. We have been told by the Department that the balance of the programme will be on a case-by-case basis but because all our expenditure from there is on safety related issues we expect to be prioritised.

Deputy Fergus O’Dowd

The key point is that the cuts are €13.4 million and we do not have figures. Mr. Corcoran does not seem to know by what amount Sligo will be cut. I am trying to be helpful rather than point the gun. The airports will lose significant amounts of money and some of the airlines that serve them are in crisis. It is a very serious issue. It appears that the delegates know as little as I do about what will happen to their airports.

Mr. Joe Walsh

In terms of the submissions we made identifying what is contractually committed to, my understanding is that it is on that basis.

Deputy Fergus O’Dowd

Is Mr. Walsh talking about cuts of €6 million for his airport?

Mr. Joe Walsh

I am talking about 56% of €6.3 million which will be in excess of €3 million.

Deputy Fergus O’Dowd

Is there another €10 million out there that will hit the airports?

Mr. Joe Walsh

I assume that will go across the other regional airports. Obviously, we are not party to the other submissions.

Deputy Fergus O’Dowd

What about the North?

Mr. Joe Corcoran

There are a number of other airports that are not at the session.

Deputy Frank Feighan

I welcome the delegates and their submissions have been very informative.

I see this issue as State airports against the rest and the rest seem to be effectively on the western seaboard, in Connacht. I know some of the delegates personally. These airports are not merely facilities for flying in and out of but are interwoven with everything that is positive in the west of Ireland. I see that Galway Chamber of Commerce is involved in Galway Airport. I met Mr. Liam Scollan from the Western Development Commission many years ago. Everything is interwoven with the committees and boards. I see that Mr. Corcoran is involved in Sligo Airport and is also involved with the world rally. This is about the people who come to run the airports and therefore it is a matter, effectively, of the people against the State. There are considerable challenges for all but State airports have received great support. That provides an unfair advantage.

The committee might sit here today and say that this and that should be done. Concerning the support and services that the State airports receive that other airports must provide for themselves, will the delegates elaborate on what exactly they provide?

I fly out of Knock Airport most of the time and in two weeks I will fly to the Roscommon Association in Manchester. I take great pleasure in flying from Knock and, like everybody else, I have paid a €10 departure tax for the past number of years. I am quite satisfied to do this as is everyone who flies from Knock Airport because it provides facilities that would not otherwise have been provided. I shall take a train to Birmingham and fly back from there to Knock Airport because I have a loyalty to it. It is near my home.

The new air travel tax will cost €10 whether one flies from Knock, Sligo or Galway to Manchester or one flies from Dublin to Manchester. That is divisive and must be addressed. I do not want to be political in this committee. There are people from the Government side here who want that matter addressed. The committee should formulate some form of wording to send to the Minister for Transport, Deputy Dempsey, about addressing this anomaly. I propose that it does so and will be looking for the right wording, across party lines. It must be stopped.

Chairman

We have already spoken to the Minister and expressed the view to him that there is an anomaly.

Deputy Frank Feighan

I propose a motion that this committee ask the Minister to address the anomaly which places an unfair burden on the regional airports. We may come to an agreement on that.

Deputy Áine Brady

Unfortunately I no longer have the Ireland West presentation because I gave it to Deputy Flynn, who wished to take it with her. The delegates are very welcome. I would like them to comment further on a remark made that the Government rewards failure rather than success by giving subsidies to those who are underachieving. Deputy Feighan referred to that. I am delighted that the Chairman already mentioned that we spoke to the Minister about the divisive nature of the new airport tax.

Chairman

Mr. Scollan must leave so we shall give him an opportunity to respond.

Mr. Liam Scollan

Regarding Deputy Feighan's comment, I have two specific examples of how State airports have an advantage over ours. One is air traffic control which is something that the regional airports, our colleagues in Sligo, Galway as well as ourselves in Knock, pay for entirely ourselves. At the State airports that service is provided by the Irish Aviation Authority and, as we understand it, it is not a cost to the individual airports. Those costs are very significant at regional airports.

The second advantage that accrues within air traffic control is that there is round the clock cover if required. That is very expensive and the regional airports do not have the luxury of being able to provide this. When there are those sorts of competitive disadvantages in tough times it really matters. In addition, when there is a tax, it effectively pays people to go to Dublin and fly from a congested airport to key airports in the United Kingdom. If one adds to that one has the situation where any regional airport in the west of Ireland is severely disadvantaged at present.

Deputy Frank Feighan

What would it cost the airports in Knock, Sligo or Galway to provide air traffic control? What does it cost Dublin or Shannon airports? We might tease this out because the committee would not be aware of such costs.

Mr. Robert Grealis

In Ireland West, the cost, in terms of salary and equipment which depreciates, would be €400,000 per annum. Regrettably, I cannot inform the committee what the cost is at any individual State airport. There is an associated cost to the regional airports in respect of air traffic control. Because of the State system of developing air traffic controllers, the regional airports find they must pay premiums for controllers. It has become a profession where demand outstrips supply. Unfortunately, that means the costs are more than they perhaps should be. We are not aware of the costs at individual State airports because that is under the auspices of the Irish Aviation Authority.

Mr. Joe Corcoran

Sligo Airport has three air traffic controllers at a cost of approximately €180,000 a year. In addition, there is the training element. Recently we needed to train a third controller at an approximate cost of €80,000 which was directly charged to us. The problem was that the State has the training facility at Shannon Airport and it could not be made available to us for training. With the co-operation of the other airports we got a group together and brought a trainer over from the United Kingdom. That is another element of the costs.

Mr. Joe Walsh

Regarding the provision of air traffic control services by Eurocontrol, there is a charge on the airline for every nautical mile flown that is associated with air traffic services. The Irish Aviation Authority, IAA, receives a significant share of that. From the perspective of Galway Airport, and it is no different for my colleagues on the other side, it is not recognised that we take control of aircraft at 20 nautical miles from the airport. We get no component of the charge levied on the airlines, but we carry the cost of the air traffic service which involves bringing the aircraft in from 20 miles away. While the IAA receives a significant component of that charge, the regional airports which provide these services from 20 nautical miles do not get any of it.

I concur with the remarks of Mr. Corcoran and Mr. Grealis on training. Last year we carried out the training of air traffic controllers, which is a very expensive business. We provide potential future controllers for the country. They are IAA certified but we carry the cost and it is important to recognise this. It is another role that regional airports play in aviation policy here.

Senator Fidelma Healy Eames

I thank the Chairman for the opportunity to attend the committee. I welcome the representatives from the three airports. As a former member of Galway Airport I am pleased to see them here. I fully support the regional development aims which the airports meet. We need them to survive. I have two or three questions to put.

I am conscious of the significant cuts the airports claim they face. I put my question to all three representatives, but I direct it in the first instance to Galway Airport. Mr. Walsh stated that Galway Airport faces significant cuts of €3 million. In his presentation, he stated that 330,000 people used Galway Airport last year. Regional airports face a penal air travel tax of €10 per head applicable to anyone wishing to leave any of the west of Ireland airports. If one multiplies €10 by 330,000, it amounts to €3.3 million, which is greater than the cuts the airports face. There is surely a case to be made to the Government for returning to the region from whence it came the tax that all the passengers using Galway Airport must pay. I seek the views of the delegation on this suggestion. Does it wish to see this tax ring-fenced for the regional airports from whence it comes? I support the proposal of my colleague, Deputy Frank Feighan, in that regard.

I understand the public service obligation, PSO, will be under review from 2011 onwards. We accept it is a vital support for regional airports, as the Chairman noted. Has the delegation considered lobbying for the retention of the PSO after 2011 to subsidise connectivity to major European destinations from the regional airports? If the retention of the PSO is under threat nationally, there is surely a case to be made in that regard.

I refer to aviation policy and the development of regional airports. Does the delegation believe current policy adequately supports the delivery of balanced regional development as part of the national development plan? If not, what would the delegation wish to see in its place? Everyone accepts we are in difficult economic times, but the delegations have a vision for the future. For example, Galway Airport has launched its vision for 2030. The issue is not only about surviving now, but to have a long-term strategy. I seek the views of the delegation on these matters.

Deputy John O’Mahony

I thank the delegations for their presentations. It is clear from all presentations that they have in the past faced many obstacles and still do so, but they are equally determined to overcome them. The airport I am most familiar with is Ireland West Airport, Knock. In our region it is more than just an airport providing accessibility to the area. In the past 25 years it has provided hope to an area that has been devastated.

I visited the airport with my colleagues some months ago and I recognise there are very well thought out co-ordinated plans in place. There is joined-up thinking for transport with rail, road and bus routes linking to the airport. There is a plan for an industrial zone around the airport. Does the delegation believe these plans will help with the survival prospects? Given its location, could the airport be seen as a magnet for industry because of the transport development in place and the potential for importing and exporting goods and services? The Ireland West Airport, Knock delegation, with other delegations, suggested it does not get a fair crack of the whip because of aviation policy. The payment of air traffic control was mentioned. In which other areas of aviation policy is the delegation not getting a fair crack of the whip? What difference would it make if the airport got a fair crack of the whip?

I support the suggestion of Deputy Feighan concerning air travel tax. What difference would it make if there is no change? The measure is obviously anti-west as well as anti-airport. What difference would it make to the figures provided and the potential of the airport? Perhaps the other delegations could answer the same questions.

Deputy Paul Connaughton

I apologise in advance for leaving the meeting early as the budget debate will start shortly. I welcome the delegations. I have spent a lifetime discussing western development. We will do everything we can at our level to ensure the appropriate infrastructure is in place to build a strong counterbalance to Dublin. That is what I have spent every day of my life working to achieve, and I believe the same applies to the delegation.

When Mr. Michael O'Leary was before the committee he shook the place he was so dogmatic about his capabilities. I will not cover ground already covered by others, but I have two or three basic questions to ask which apply to all delegations. Who is to say the aviation industry will not become even more cut-throat than at present? There are participants in the industry as strong as Ryanair. It is obvious the Ryanair story has been a good news story although the last thing we wish to see is closure of any regional airport. Mr. O'Leary, through the offices of Ryanair, made aviation possible for people that would not otherwise have had access to air travel. In addressing future concerns, does the delegation foresee an occasion where the influence of Ryanair, or an organisation in that category, will take an airport out of business anyway? It may well happen that regional airports as they are currently constituted may not be able to stand up to strong competition.

On a more parochial level I refer to internal flights. I listened carefully to the remarks of the delegation earlier. It seems internal flights and the public service obligation is still very important for regional airports. With the new road and rail structure, it may become very difficult to compete in the next four or five years for internal travel. Is that another problem?

When the delegation talk about efficiencies, how are they monitored? Is it cost per seat to get people from A to B? Is that how it is done? Can we receive some indication of the numbers likely to be carried in the next four or five years? How solvent are the delegates' businesses, from a trading point of view? Is there any close to going under or are the balance sheets so strong they will be able to sustain a lot of competition before that day comes? I hope the answer is that they will be able to sustain it. We hope we have a very strong aviation industry in the west because we know in our hearts and souls that if we are ever to industrialise to the degree we want, we are unlikely to get there without their help.

Mr. Michael Corless

I would not like to the see the west divided between all of the airports and one falling because we are all fighting for our own piece of the cake. To answer the question on synergies, there is a case for working together. There are synergies within the airports through the west, including Shannon. We in Galway Airport would assist in that process as much as we could. This is not just an airport issue, it is also a business one. We do not want airports to be so expensive for business people that they will want to go to Dublin Airport due to the cost of leaving Galway Airport.

On the issue of solvency, as I stated, we are dependent on Government support. The extent to which we receive such support depends on Government policy on regional airports.

Mr. Robert Grealis

On the points raised by Deputy Connaughton on competition and market forces, market forces will always apply but competition is not necessarily coming from within Ireland but from eastern Europe and further afield. When we talk to low cost jet operators, we are competing for the use of their aircraft, a moveable asset. They can move to operate in Hungary, Poland or any other country. It is down to the airline to decide what benefit there is to be gained in flying a route in or out of the west of Ireland. They look at revenues on traffic. It is the airlines and the demand in and out of the regions that will determine what will happen in long term.

Regarding our future, we are profitable. We do not receive operational subsidies and our balance sheet is reasonably healthy. There will be challenges in 2009 and 2010. The implications of the air travel tax are unknown and times are uncertain. We believe passenger numbers will fall by at least 5% because of the air tax, which will outweigh the benefit to the State of the tax. In the United Kingdom a similar tax was applied but remote regions such as the Highlands and islands were excluded. On the point raised on balanced development under the NDP, positive discrimination is supposed to apply to the regions. If that is the case, why not apply it to the regions of Ireland and follow the principle applied to the Highlands and islands in the United Kingdom?

Mr. Joe Corcoran

With regard to PSOs, road and rail travel, there is certainly a challenge. The Chairman mentioned the interline agreements. In 1988 when Aer Lingus flew three times a day to Sligo, 90% of the traffic was interline. The development of such traffic was helped by Dublin Airport being more proactive in providing facilities. There were challenges in the security area and that is one of the reasons the service went. The low cost carriers went point to point. All they would do is check a bag. From that point on the interline agreements fell. However, they are developing again and we will do everything possible to enhance and encourage this.

The air travel tax is anti-regional development. I welcome Deputy Feighan's proposal. As our balance sheet showed net assets of €1.9 million, we will survive for a while.

Mr. Michael Coyle

The committee should consider what the role of regional airports is achieving in the Government's national spatial strategy objectives. The Taoiseach is in China on a trade mission. Presumably, he is out there looking for business. Ultimately, the business people with whom he will interface will make the decision. We know that on the checklist of the multinationals, be they US or otherwise, is access and accessibility. We believe Galway Airport, with the research taking place in NUI Galway in particular, which has two Science Foundation Ireland pieces of research, the Remedy Institute and the Derry Institute, has a key role to play. It is a unique selling point in the Government's toolkit for selling Ireland abroad for inward investment. Air access is a key element of Galway Airport's toolkit. The committee should carefully consider the role of regional airports in achieving the Government's national spatial strategy objectives.

Chairman

That is our key objective. My personal view is that our key objective is to have a very strong airport structure in the west. The problem which I believe will become more serious is that the delegates are depending on airlines to ensure their future. If the airlines are not available, it is not the airports that will be the problem. That is only point I want to make today. We have seen unbelievable changes, even since Mr. O'Leary was here, and we will see very significant changes in the coming months. If we are to sustain best access to the west, we must be very careful about how we move forward and in the planning we do. That is my only interest.

I will conclude by taking Deputy Feighan's proposal. We recognise the very good work done by Shannon, Knock, Sligo and Galway airports. There are two international and two regional airports. There has been good growth; my interest is in seeing a strong Galway Airport. It is also seeing best access to the west. We must be cognisant of changes taking place in motorway networks, hourly train times and so on. We must have joined-up thinking between the airports in the regions and everyone, as Deputy Connaughton said, realising we are in different times.

We have been told by several experts in the airline industry that a number of airlines will not be in business in the coming years. The key objective of the committee is to ensure we have strong regional airlines and that we change the balance. We have had a lot of discussions with the Dublin Airport Authority on changing the balance, whereby everyone who wants to come in and leave the country must travel to Dublin.

That has been the whole focus in our discussions with the DAA and the four airlines, Aer Lingus, Ryanair, CityJet and Aer Arann. Our whole focus is on a strong regional airport structure. However, there are challenges that did not exist 12 months ago and they must be addressed. If not, there will not be too many regional airports to worry about. That is my concern. I thank the delegations. I wanted to be provocative because I believe the issues I have raised are pertinent. I hope the delegations did not mind my doing so but I did so in the interests of everybody moving forward. I will take Deputy Feighan's proposal on the airport charge.

Deputy Frank Feighan

Given that the air travel tax places regions at a significant disadvantage in the national and global markets I ask the Minister to scrap it.

Chairman

The Deputy's earlier proposal was that there should be equity in the tax. There is an anomaly in the tax between the west of Ireland and the rest of the country. I can go along with that but not with a proposal to scrap the tax.

Deputy Frank Feighan

I will go along with the Chairman's proposal.

Chairman

The Deputy's proposal is that the anomaly which exists between the west of Ireland airports and Dublin Airport should be discontinued, where an air travel tax of €2 applies from Dublin to Manchester but the rate from the west is €10. That is an anomaly we want changed.

Deputy Frank Feighan

I will go along with that.

Deputy John O’Mahony

I presume it would not need to be €10 for every flight.

Chairman

We will leave that to the Minister.

Deputy John O’Mahony

That would be an important issue.

Senator Fidelma Healy Eames

What about the suggestion that the tax would be returned to the area?

Chairman

That is a budgetary issue on which we cannot make any impact.

Senator Fidelma Healy Eames

The Chairman is very interested in the west of Ireland and in Galway, as I am.

Chairman

I am also very realistic.

Senator Fidelma Healy Eames

Yes, but the Chairman said today that he wants to see these airports survive. I put it to him that he represents this committee——

Chairman

My main priority is to fight to get as much money as possible for those regional airports in the current difficult climate.

Deputy Frank Feighan

The Chairman has been fair to us all along.

Chairman

I thank the Deputy. Unless there are any other specific issues to be raised the committee will adjourn.

Mr. Michael Corless

Did the committee actually vote on that issue?

Chairman

No. It is agreed.

Mr. Michael Corless

My apologies, Chairman.

Chairman

That is fine. We agree on most things around here.

Deputy Frank Feighan

The Chairman knows he has the numbers.

Chairman

I thank the delegations for appearing before the joint committee. We appreciate their very good contributions and look forward to having them back at some future date.

The joint committee adjourned at 5.53 p.m. until 3.45 p.m. on Thursday, 5 November 2008.