Joint Committee on Transport and Communications debate -
Wednesday, 5 Dec 2012

Ireland West Airport Knock: Discussion

Chairman

This morning's meeting is being held at the request of Deputy John O'Mahony. The purpose is to meet with Mr. Liam Scollan, chairman, Ireland West Airport Knock, and Mr. Joe Gilmore, managing director, Ireland West Airport Knock, to discuss the expansion of the airport in recent years and the strategic role it now plays nationally.

On behalf of the joint committee, I wish to welcome Mr. Scollan and Mr. Gilmore. I would draw their attention to the fact that, by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to this committee. However, if they are directed by the committee to cease giving evidence on a particular matter and continue to do so, they are entitled thereafter only to qualified privilege in respect of their evidence. Witnesses are directed that only evidence connected with the subject matter of these proceedings is to be given. They are asked to respect the parliamentary practice to the effect that where possible they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable. I also wish to advise witnesses that the opening statement they have submitted to the committee will be published on the committee's website after this meeting.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such as way as to make him or her identifiable.

I will now invite Mr. Scollan to make his opening statement.

Mr. Liam Scollan

I thank the Chairman and other members of the joint committee for the opportunity to appear here today. I also wish to thank Deputy John O'Mahony for facilitating this meeting. I am the chairman of Ireland West Airport Knock and will now pass over to Mr. Joe Gilmore, the managing director, who will start off the presentation. He will then hand back to me to finish the presentation.

Mr. Joe Gilmore

Good morning Chairman and other members of joint committee. I am pleased to be here this morning to present a short presentation on Ireland West Airport Knock. The first slide shows our location and catchment area. We service a population of between 800,000 and 1 million people. Our customer base is primarily the Connacht and western region. We also have a broader catchment into counties Donegal and Fermanagh, up into the midlands and down into Clare. We have quite an extensive population and geographical land mass.

We currently service 28 international destinations. Our primary market is the UK to which we have ten scheduled services, including to three airports in London - Stanstead, Gatwick and Luton - as well as Bristol, Birmingham, East Midlands, Manchester, Liverpool, Leeds, and up into Scotland. We have quite a number of southern European routes into Portugal and Spain, including the Canary Islands. Most recently, we have developed an important European access to Paris, Frankfurt, Dusseldorf and Milan, which has been positive from an inbound tourism perspective, particularly in summer 2012.

Our main carriers are Lufthansa, which is the largest airline in Europe - Knock is one of only two airports it flies to in the Republic of Ireland - FlyBe, which is Europe's largest regional airline carrier, Aer Lingus, Aer Lingus regional and Ryanair.

We also have several airlines that use the airport and provide charter services to various destinations. As I have outlined, we serve 28 international routes and our passenger growth for a small airport has been very impressive. Passenger numbers have grown by 350% in the past ten years. The rate of growth in 2011 was 11% and this year will be 5%. This is in an environment in which most other airports in the Republic are suffering significant declines. We currently account for 45% of the seat capacity to the United Kingdom from the western seaboard. This means we serve 750,000 airline seats between the United Kingdom and Ireland across ten destinations. The airport provides significant capacity and air access from the west to the important UK market.

There has been confusion at different times about who owns the airport. It is owned by a statutory trust that was signed over by the then Minister for Transport, the late Mr. Séamus Brennan, in 1991. It was effectively handed back to the people of the region to be run by it and signed over to what was effectively a community trust. The trust delegates responsibility for the running of the airport to a private limited company, Connaught Airport Development Company, CADCO, of which we are directors, with the aims of operating the airport, stimulating access, development and enterprise for the western region. We currently handle 65 weekly flights, with passenger numbers this year set to reach 700,000. Our runway is 2,300 m long, 45 m wide and the third largest in the Republic. Accordingly, the airport can cater for all types of jet aircraft. Previously, we handled services to the US east coast. We have full capability, with a category 2 instrument landing system, ILS. Prior to 2008, there were rumours that the airport had issues with fog and low cloud. Since the new landing system was put in place, this is a thing of the past. We operate independently from the State airports on a fully commercial remit. Any dividend or profit made is fully invested back into the airport operations. The trustees are voluntary and receive no dividends. The sole owner of the airport is the Horan International Trust.

We view it as a progressive modern airport, as well as a lean, low cost facility with a lean management team. The Minister for Transport, Tourism and Sport acknowledged this on a recent visit to the airport. It was also acknowledged in a departmental value for money review. The percentage of flights without delay is over 99%. The airport staff multitask, while over 66% are cross-trained in most disciplines. The operational subvention under the core operational support scheme was 87 cent per passenger. In other State-owned regional airports the figure is in the region of €6 to €8 per passenger. The airport's turnover in 2011 was €12.5 million and there was a net loss of €390,000. We fund 94% of our operating costs which include air traffic control which is not funded by the Irish Aviation Authority, IAA. We fund our own air traffic control, security, fire service, ground services and ground handling services. The airport employs 101 full-time workers, as well an additional 50 to 60 seasonal workers. This summer we provided 40 additional jobs for seven months owing to increased traffic and new flights. A recent Ernst & Young economic scoping report indicates the airport supports 900 jobs in the region, with a tourism spend in excess of €100 million and an annual GVA, gross value added, contribution of €17 million.

Mr. Liam Scollan

One can see the scale and size of Knock Airport and the contribution it makes to the region. This is an airport that is offering a different service and it is a lean and commercially successful operation. In the economic times we are in, that is a hell of a lot to offer.

In the past 18 months we have engaged with the Government to inform it of this new model of airport management. We have approached it with eight proposals. In 2010 we commissioned a study from Shannon Development which showed the airport could create an additional 500 jobs in the region. We have also proposed that we can double our contribution to tourism and the region overall. Recently, the Government announced an enormous package of incentives for Shannon Airport. One of the unfortunate effects is that it might appear that Knock Airport is against Shannon Airport and the mid-west region. This is not the case. We have always been fully supportive of the development of Shannon Airport and regional development. When I was chief executive officer of the Western Development Commission, I proposed to Shannon Development that we have an all-west strategic approach to development. When I was managing director of Knock Airport, I sat on the board of the Shannon task force to bring more tourists into the region. As recently as 2010, the airport met Dr. Vincent Cunnane of Shannon Development to work together. From this, the Government decided to have a scoping study undertaken by Shannon Development. The reason I am emphasising this is there is a history of co-operation between the airport and the region and Shannon Airport and the Shannon region.

We strongly disagree with the Government's approach to this issue of Shannon. From the start, we stated that the Government, in proposing what it did for Shannon, should first have obeyed the recommendations in the Booz & Company report. Let me explain that, before the Shannon package, the Government commissioned Booz & Company to look at the prospects for Cork and Shannon and the State airports and the Government ignored the advice. The Booz & Company report stated that the Government should not proceed with a support package for Shannon without clear consideration of the competitive implications for other airports. That is an extremely important statement. It is stated clearly in the Booz & Company report that no such package should be undertaken without understanding the competitive impact on Knock and the other airports. What has the Government done? It has gone ahead with the package, and that is extremely unfortunate. It is unfair. It is wasteful of public resources because it does not look at competitive airports, such as Knock, to come up with solutions. It is also a parochial approach. What we would have preferred is an approach that looked at all airports in Ireland, including Knock, and not just one. That is very divisive.

I spoke of the co-operative approach. Unfortunately, we must look at where this comes from. There have been unfortunate statements from the Minister for Transport, Tourism and Sport, Deputy Varadkar. Most recently, in The Irish Times on 31 March, he stated that if there is not a change in Government policy, Knock will catch up on Shannon. It is not helpful to national aviation, not to mention aviation and development in the west. The article states that the Minister warned that if nothing was done for Shannon the airport stood in danger of being passed out by Knock airport in passenger numbers, despite a current gap of over 900,000 passengers. He said:

I think if the trends continue as they are it will happen because Shannon's numbers are already down 20 per cent this year and Knock is still growing. It is only a matter of time without a change in policy.

The only difference between then and now is that, whereas he mentioned a gap of 900,000 passengers in March, the gap is now lower. That is the good news. The gap is only 600,000. We are catching up but this not a Shannon versus Knock issue.

These are our concerns. We want the Government to consider the competitive implications of its package for Shannon. We want the Government to have a duty of care to assess and select for survival those airports with a proven track record in the market in terms of delivering capacity and efficiency. The grant aid supports the Government has given to Shannon effectively favour one airport over another and that does not make sense in Ireland and in the competitive context of Europe.

In another statement to the chamber of commerce in Clare, reported in the Clare Champion, the Minister said:

Shannon has less passengers now than it had back in 1997.......In that same period, Knock has increased its passenger numbers by 350%. Even though both airports operate in the same economy in the same country, the trend in Shannon is down and the trend in Knock is up.

This is not the language we wanted in the west. We did not want a divisive language that pitted one airport against another, but a co-operative language because it is out of co-operation that Knock airport grew. Mr. Gilmore referred to the trust, which was a co-operation between the people of the west and the then Minister.

The Government's actions in aviation fly in the face of anything to do with market competition. It is unfair, anti-competitive and potentially illegal. It rewards airports which, even with 1.6 million to 2.2 million passengers, are losing €8 million to €10 million annually and punishes an airport like Knock that is almost breaking even on half those passenger numbers. It is well recognised that airports in the European market with over 1.5 million or perhaps 2 million passengers should really be making a profit or breaking even, and airports with less than 1.5 million passengers simply cannot make a profit. The Government is following a DAA-centred approach here. We would urge the Government to stop doing that and to pursue an approach involving the DAA plus Knock plus all airports and regions. To back up that, there were statements from the chairman of the DAA in Shannon in 2011 in which there was this constant reference to the gap between Knock and Shannon and that Knock was taking between 250,000 and 500,000 passengers from Shannon. That is probably true, but it should not dictate how Government policy operates.

We believe there is a parochial approach. I already referred to that. There is a panic reaction to the massive losses being made by the State airports but if this action continues, it will only drive the decline of Knock airport, which would not be good for Irish aviation or for the region.

For 18 months, we have met the Government and presented it with plans to create thousands of jobs in tourism and other sectors. All of these plans were rejected on the basis that Ireland West Airport Knock is a private company. That is not true; we are a community trust. Our vision for the future is one of 1 million passengers per annum and the creation of 500 jobs without a grant or subvention mentality. We asked Government for a long-term commercial investment approach with the airport to help us build a modest infrastructure and secure our long-term future.

We are simply asking for fair treatment. That is all. We have a large catchment area of 800,000 people. We deserve to be recognised as a strategic airport. The Department has refused to accept and use the word "strategic". Instead, it prefers to call us "important". We are not important; we are strategic because "strategic" means investment, not only in the airport but in the infrastructure around the region, from the N26 from Ballina to the N5 and to the N17.

What we are asking for is engagement, for example, from the Department of Jobs, Enterprise and Innovation on infrastructure and enterprise investment to create the jobs that the trust promised and worked with Government on in 1991. We are asking for route development and international marketing support because we have shown, as Mr. Gilmore has shown, that we have the ability to attract the largest airlines in Europe, such as Lufthansa and Ryanair, which have been the backbone of our development and which recognised the potential of Knock airport dating back to its foundations. We want Government to develop a strategic policy position with Knock airport in the same way as it has already done with Shannon. We ask Government to suspend the inequitable focus of one airport to the exclusion of another or else to engage in a parallel process with Knock airport.

Ireland West Airport Knock is built and has given hope to thousands of people in the region because it grew out of people co-operating and working together. This country is facing challenging times. Every citizen is facing challenging times in this country. Ireland West Airport Knock is an example of where such co-operation grew into an international successful business. We want the Government to co-operate with us more strategically and give, not only Knock but the people of the region and of this country, a signal that it will invest in that type of co-operation and hope. I thank the committee.

Chairman

I thank Mr. Scollan and Mr. Gilmore for a fine presentation. The history of the airport was impressive.

I will go straight to members. I remind them that today is budget day and there are many under pressure around here. I want specific questions.

I do not want statements. I know members have a lot to say but the issues arising have been addressed in the presentation. I will be cutting members off after two minutes of questions. As non-members are present and I received a number of calls today and yesterday, I will call members first and when they have finished I will call non-members. We will take four questions at a time in a rota revolving between Opposition and Government members. I ask the witnesses to be as specific as possible with their answers because we are constrained by time. I will begin with the first question. In 1991 the airport was handed over as a private or community trust. At that stage was the airport in debt?

Senator Paschal Mooney

Cuirim fáilte roimh Mr. Scollan agus Mr. Gilmore and I thank them for their excellent presentation. As I am aware others wish to ask questions, I will focus on one or two issues. I ask for clarification on the request for fair treatment. I have been attempting to establish what the airport is seeking. It uses terms such as process in parallel, fair treatment and meaningful recognition as a strategic airport. What should the Government do in the current circumstances? We should bear in mind that the business report on the separation of Shannon Airport states that it is seeking to recover lost passenger numbers from Knock, which is a frightening prospect in that the business plan on which the Government has based its decision is not only about growing Shannon, but also about taking from the good work that has been done by Ireland West Airport over the past 20 years. The witnesses skirted around this issue by speaking about co-operation between Shannon and Knock but it seems to me that the gloves have come off. Shannon is being established as a separate entity with a clean sheet and it will start to aggressively market the airport. What are the implications of this development? They were referred to in the context of declining numbers but any objective observer would acknowledge that Knock has survived very successfully not only against competition, but also in the face of prevailing economic winds. From a neutral position, why should it be any different if Ireland West's model is seen to be successful irrespective of the competition?

Deputy John O'Mahony

I have seen at first hand the development of Ireland West Airport. Some of my family worked there in a voluntary capacity on the famous day in the 1985 when it opened. We are not just speaking about an airport in County Mayo which is located less than 20 minutes away from where some of us live, but also a region stretching from Donegal to Galway, Westmeath, Longford and Cavan that has been successfully served by the airport. Since I was first elected I have attempted to facilitate engagement between the airport and the Government. Part of that engagement was arranging for the witnesses to appear before this committee but I did not realise the timing of our meeting would be so topical.

The witnesses have stated that the announcement made on Monday will adversely affect Knock. What needs to be put in place at this stage? They have outlined measures that can provide the support they need to overcome the disadvantages they now face. Can they give an indication of the level of subsidy provided to Shannon over the past two to three years and the extent of its losses over the same period? What was the extent of the losses suffered by Knock over the past two to three years and what level of subsidy did it receive from the Government? It is phenomenal that the airport's business grew by 11% in 2011 and 5% in 2012 given the current context for the aviation industry. Can figures be provided for the other airports during the same period? Have the other airports lost numbers in those years?

Chairman

The Deputy asked some detailed questions.

Deputy John O'Mahony

I will have a few supplementary questions to ask later.

Deputy Dessie Ellis

I thank Mr. Scollan and Mr. Gilmore for their presentation. I do not wish to get into an argument about Shannon and Knock airports because both provide a great service to their respective areas. I was interested to learn that for an airport to be sustainable it needed to handle approximately 1.5 million passengers. Knock's passenger numbers are currently 700,000 and are moving towards the 1 million mark. How will it reach the 1.5 million threshold? Will it look to develop international routes, industry in the airport, cargo services or other ways of increasing business? Is it at a disadvantage due to the nature of the links in the north west? It is the only part of the country that has not been linked up with the motorway network, whereas Shannon has an advantage in terms of motorway access. The failure to complete the motorway network in the north west is a disaster not only for the region, but also the entire country.

I ask for clarification about how the community trust works. The witnesses indicated that Ireland West Airport is community owned but they also say it is a private airport. How does that system work? If the airport is a community trust, it would appear to belong to the people.

Knock receives a small subsidy from the State. I assume the Government intends to continue that subsidy. The witnesses have not indicated that the subsidy is under threat. We know what is planned for Shannon in terms of writing off its debts and allowing it to stand on its own. The competition between Shannon and Knock will be intense and I would not like to see bitter infighting break out between the two.

Deputy Patrick O'Donovan

The region from which I come is heavily dependent on Shannon Airport but it has been neglected by the Dublin Airport Authority for many years. Shannon has stagnated under the weight of the DAA because it has not been allowed the space to grow independently that Knock has enjoyed. For one reason or another, Shannon was hamstrung in its development. It is regrettable that the opportunity for Shannon to become independent is being criticised. At the end of the day there is room for both airports because they have different models to promote. What level of engagement does Knock anticipate now that Shannon will be set free of debt and allowed to aggressively pursue business? It is in the interest of both airports to work strategically together to develop the west of Ireland. The Minister for Transport, Tourism and Sport recently suggested that different forms of incentives may be made available for the development of airports. However, he was clear in stating that the incentives would not be restricted to one airport over another.

It is important to bear in mind that Cork Airport officials had good reason to give out this week but they have not done so because they have not managed to come out from under the DAA's control. I am from a region whose airport has been deprived of the independence to allow it to expand that other airports in the west have had over the past number of years and this has been a detrimental blow to the region which not only includes counties Clare and Limerick but extends to County Waterford, south Kilkenny and County Kerry. It is important that both airports be allowed to develop independently and market themselves. At the end of the day, Shannon Airport is State-owned and the State has an obligation to make sure it does not fail, which is what the Minister is ensuring this week. However, given the announcement last Monday, what plans has Knock Airport to capitalise on behalf of the entire west of Ireland?

Deputy Noel Harrington

I welcome Mr. Scollan and Mr. Gilmore. Mr. Scollan referred to the sustainability of numbers to make the airport viable. There are 65 weekly flights with passenger numbers amounting to almost 700,000 but the airport needs 1.5 million passengers to make it viable. Following intense growth over the past number of years, has Mr. Scollan a strategy to more than double passenger numbers to make the airport sustainable? I presume the ability to increase passenger numbers depends on his ability to attract airlines to the airport and that is chiefly done through charges. How does Knock Airport compare in this regard? If charges are evenly marginally lower, how can he expect to more than double passenger numbers in a reasonable timeframe?

Mr. Liam Scollan

There were many questions and we will answer them between us. Senator Mooney asked what precisely we are looking for and what are the implications of the Shannon Airport decision for Knock airport while Deputy O'Mahony asked what needs to be put in place now and what is the level of subsidy to Shannon Airport. First, we are looking for strategic engagement between the Departments of Transport, Jobs, Enterprise and Innovation and Finance and the Cabinet in the same way as for Shannon Airport. Second, we had plans to create 500 jobs and we needed an infrastructure roll-out fund to do that. That involved approximately €23 million to be spread over several years. We said to Government, "Let us look at a creative way of attracting investment to lead to these kinds of jobs". Third, there was an infrastructure roll-out of the same amount in terms of the airport. The airport has been invested in very little over the years. Approximately €23 million has been invested compared with ten times that amount in Shannon Airport. We asked for a modest financial package. We also put forward innovative proposals to attract more tourists and routes. Mr. Gilmore will deal with the question on the implications for Knock Airport.

Mr. Joe Gilmore

I would like to clarify one issue. This is not a Knock airport versus Shannon Airport issue. We are not knocking Shannon Airport. In the short term, we are funded until 2014 under the core operational programme and we have a commitment from the Government to that effect. However, after that, the Department has advised us that there will be limited, and possibly no, funding for regional airports. Depending on the economy and so forth, we will potentially be in a treacherous position. We are carrying €10 million of debt on our balance sheet as a result of infrastructure projects undertaken with the Government over the past number of years. We are facing stormy waters.

Deputy O'Mahony asked about subsidies. We have received a total of €1 million in operational support funding in 2011 and 2012 to cover our operational losses. He asked how our numbers compare to Shannon Airport. We have been unable to access Shannon Airport numbers. The DAA accounts are consolidated. Separate accounts are not published for each DAA airport. We can only go on statements made in the media or by reputable sources. Our understanding is losses at Shannon Airport are in the region of €7 million to €8 million a year and cumulatively amount to €25 million over the past three years. I would like to highlight another issue in this regard. A statement was made to the media last Monday that Knock Airport had received €44 million in State aid since 1993. That figure is incorrect. We have received €21 million in State aid in total since 1993.

Chairman

I asked earlier whether the airport had debt when the trust was set up in 1991. What happened to that?

Mr. Joe Gilmore

I will have to defer to my chairman on that.

Mr. Liam Scollan

We do not know. There would not have been a large debt. It is our understanding that there probably was not a debt at that stage.

Mr. Joe Gilmore

We expect it was minimal. From memory, we understand the Government of the day put in IR£8.5 million and the airport fund raised through Monsignor Horan a further IR£4.5 million to complete work. I expect there was probably a small debt at that time.

The airport has received €21 million in direct subvention in total since 1993. It was put into the media that we had received €44 million. We have been trying to find where the gap was but we understand it was in PSO subventions to airlines that used the airport but the largest recipient of PSO subventions during that period was the DAA because all the PSOs originated out of Dublin Airport.

With regard to traffic growth, we are of the view that traffic numbers were in significant decline between 2009 and 2011 at the other State airports. We believe they are showing some growth this year but I do not have the exact numbers to hand.

Mr. Liam Scollan

Deputy O'Donovan asked about what we would do now to engage with Shannon Airport. Before the Deputy arrived, we pointed out over the years the level of our co-operation with Shannon Airport and Shannon Development and the extent of the study Shannon Development carried out with Knock airport officials to work on jobs. As Mr. Gilmore said, we have absolutely no issue with Shannon Airport but the issue is not us co-operating with the airport; it is the Government co-operating with Knock airport. We are asking for that co-operation today.

Deputy Harrington asked how we would achieve growth in passenger numbers. We are one of the few airports that has recorded consistent growth over the past ten years. It has been not dramatic one year after another but it has been consistent, steady and strategic and we have shown the ability to attract large airlines such as Lufthansa. We showed the ability to attract US airlines in the past and we had transatlantic services. Our growth would come from an expansion within Europe, which would bring more tourists to the region, an expansion into the US and further expansion in the UK. We were asked what were our other plans.

We also presented plans, which were contained in the report Shannon Development did with us, to expand jobs in aviation-related businesses, in aircraft breakdown, maintenance and repair, in businesses such as IT and electronics and even in education itself. We had a pile of innovative proposals but unfortunately those have not been taken on board.

Mr. Joe Gilmore

We were asked about viability based on 700,000 passengers. Mr. Scollan has dealt with how we can get to 1 million passengers initially and then 1.5 million. We charge users of the airport a fee of €10. This is effectively a development fee, which has been in place for the past 20 years. We are the only airport on the island that has such a charge. In this way we are self-funding the airport, and at 700,000, our passenger numbers continue to grow despite the penalisation, as one could argue, of people who use this airport compared to the State-funded airports. However, they continue to vote with their feet; 700,000 passengers will use the airport this year. That is a great endorsement of our business model. On that basis we are confident we could grow and sustain the airport. Reaching break-even depends on many factors, but if we could get close to 1 million passengers, we believe we could get there.

Mr. Liam Scollan

We were asked about the level of supports at Shannon. As Mr. Gilmore said previously, we do not know what those are. This is not an anti-Shannon issue; it is just that we would welcome total transparency on the supports given to all airports so that people can see whether there is genuine value for money. For instance, we know there has been approximately €150 million in capital investment, although we do not know these things for sure. We know, for instance, that there has been funding for immigration facilities at Shannon, which gives it a major competitive advantage over other airports. At that time we would have welcomed an invitation to tender aimed at, let us say, Cork, Shannon, Knock and the different airports in the west that are capable of landing transatlantic traffic. For instance, we know there are significant troop movements - 200,000 to 300,000 - through Shannon, which bring enormous levels of income.

At the State airports air traffic control is free. While we have no access to figures, the savings to those airports are in the region of €2.5 million to €3 million a year. Our air traffic control costs are approximately €500,000 and we pay for that from things such as the development fee. Historically there has been an uneven playing field. While I know there was one miracle at Knock, there has also been a second, which is the fact that we have managed to grow despite that level of subvention over the years indirectly through the DAA system. This is not an anti-Shannon issue but it is about the Government's strategic engagement with an airport in setting out a new model for the development of aviation in the country.

Mr. Joe Gilmore

One of the Deputies asked about infrastructure at the airport. This is another critical area that needs addressing. Considering the infrastructure, one could argue that north of Galway there is a serious deficit in road and rail infrastructure. We welcome the completion of the current N18 motorway up to Tuam. However, it again indicates that the focus is on creating access to the major DAA airports. The Dublin motorway has been completed from Galway and now a motorway will go from north Galway straight down into Shannon. Why is there not a motorway starting in Sligo and going down into Galway to give us better access? It took us approximately 22 years to get scheduled bus services into the airport. We only succeeded two years ago in getting the route 66 Derry to Galway service to stop at the airport. Up to then we had no scheduled bus services and we are trying to operate international airport access.

Mr. Liam Scollan

We do not wish this. Knock has a history of political battles among Fine Gael, Fianna Fáil and others. We are in danger of falling into that. I know Deputies Mulherin and O'Mahony have made statements in support of our stance on this. This is not an anti-Fine-Gael issue, nor is it anti any party. We do not want to become a political football; we just want a business approach from Government.

Chairman

I will first call Deputy Colreavy, who is a member of the committee, and then I will take the non-members. I will take all contributions together.

Deputy Michael Colreavy

I thank Mr. Scollan and Mr. Gilmore for their presentation. However, I believe we have the wrong witnesses before the committee today. We should have the Minister here. My question to the Minister would be what does he have against the people of the north west. At a previous committee meeting I drew out a rough sketch of the infrastructural map of Ireland. North of a line from Dublin to Galway there is nothing apart from the Dublin to Sligo line. The one little star was Knock airport. We have heard the history of passenger growth, 99% punctuality, and a subvention of 87 cent per passenger compared with 6 cent to 8 cent in the other airports. The airport is funding 94% of its operating costs and employs 100 people, with another 900 in indirect employment. It makes a significant contribution and serves a growing list of international destinations. My question is to the Minister. Why is he punishing a successful operation?

I have two questions for the witnesses. Do they envisage any prospect of engagement with the Minister or the Department to level the playing field? Without that engagement and without a successful outcome to that engagement, does Knock airport have a sustainable future after 2014?

Deputy Michelle Mulherin

I welcome Mr. Scollan and Mr. Gilmore. Deputy O'Donovan, who has now left, spoke about Shannon. The witnesses have explained all the engagement they have had with the Department. While I understand why something needs to be done for Shannon from the point of view of its importance for the mid-west region, there is no policy for airports nationally. The witnesses have been advised that now that Shannon is sorted, they should sort things out with Shannon themselves.

The Government is responsible for the control of aviation and aviation policy. Aviation is crucial given that we are in a global village. We feel it even more in a peripheral area such as the north west. We need recognition of the strategic importance of Knock. It is incredible that what is being proposed is the continued nursing of State-run airports that are losing money hand over fist. They should be benchmarked against an airport such as Knock for efficiencies and how to do business. There needs to be a reality check. Knock is of no greater or less importance to the west and mid-west region because it is a trust for the people rather than being owned by the State. Everything must flow from that. My beef is-----

Chairman

Does the Deputy have a question?

Deputy Michelle Mulherin

I will outline my beef first and then my question will make perfect sense. A decision has been made in respect of one airport but there have been no decisions in respect of other airports. A substantial financial decision has been made which, on the face of it, will skew competition for airports such as Knock and is not responsible.

Does the Department view the airport as being disadvantaged? It has pawned it off with the statement that it is a private airport but is it acknowledging that the airport will be disadvantaged arising from this? How does the Department propose to level the playing field and how would the delegation describe the engagement the airport has had with the Department? We have reached a crucial point when the chairman of the airport is appearing before a joint Oireachtas committee describing the airport's situation. Mr. Gilmore was cut off in the middle of his answer about Government support for the airport and the figure of €44 million given earlier in the week. Could there be some confusion in respect of the PSO contracts in that some of the money given to and received by airlines is being attributed as being received by the airport?

Chairman

He said that. We will move on to the next topic.

Deputy Dara Calleary

I thank Mr. Scollan, Mr. Gilmore and Deputy O'Mahony for facilitating the meeting. There has been much discussion this morning about the subsidy. How many people are working in the airport? What has the airport paid in employers' PRSI in the past number of years? It is building a substantial retail presence. What VAT has been gone through the airport? The airport is a substantial employer in the county, and these people are all paying taxes so let us put that return against the subsidy and we might have a real discussion.

Deputy Mulherin spoke about the lack of a national aviation strategy. If there was to be such a strategy, which one would have thought might have been designed before this decision was made, what specific niches would the delegation identify for the airport? What focus would the delegation like and what responsibility would it like to take on the shoulders of the airport as part of that strategy?

Everyone agrees that nobody wants to pit the airport against Shannon Airport but the reality is that a business plan has been approved by the Government for Shannon Airport which involves targeting Knock and Kerry for what it describes as lost passengers. The Government, the Minister and the Department are pitting the airports against each other. I would be interested in hearing the delegation's thoughts on that.

Senator Trevor Ó Clochartaigh

We are looking at this purely from an economic perspective rather than a regional development one. We do not have a regional development policy at the moment. If we do have one, I have not heard of it. Knock needs to be seen as part of a regional development policy because an airport is not just a business. Obviously, it is an important hub for people to travel into and out of an area but it is also a catalyst for development throughout the region. One of the problems is that we are looking at the subsidy purely as a cost rather than as an investment. An subsidy for an airport such as Knock would be minimal and would be a very good investment because it is a catalyst for creating business in an entire region and keeping a region alive.

I agree with the points raised about connectivity. We need to get cross-party support in the Dáil and Seanad to support Knock and Shannon and to get the Ministers looking at the issues of connectivity and infrastructure.

We have seen the closure of airports by stealth - for example, that occasioned by the withdrawal of PSOs in Galway. I do not know whether we have a national strategy for airports but Galway was certainly closed by stealth and I hope that is not what is happening with Knock. With the closure of Galway Airport, does the delegation see any knock-on effect on Knock, if it will pardon the pun? How did the closure affect Knock's business? Did it pick up any numbers or did they go to Shannon Airport?

Deputy Denis Naughten

I apologise as I had to step out for a minute. I have a few brief questions. To return to the Booz report, why did the Department not carry out an evaluation of the impact of the proposals for Shannon on Knock, Cork and Kerry airports? The proposals will not just affect Knock but will have a regional dimension.

I am surprised by the Minister's comment that Shannon and Knock are competing for one pool of the population. Shannon has a far bigger catchment than just the area north of it, while Knock has a far bigger catchment than just the area south of it. The people in between have the benefit of both airports. Does the delegation believe it is because there is a perception within the Department that Knock is a regional airport while Shannon is an international airport? Is it the case that because Shannon is a State airport and Knock is a community airport there seems to be an attitude block in respect of the development of both airports in a partnership-type approach? How would the delegation envisage Shannon and Knock working together? The best objective would be to see a co-operative approach between both airports, with Shannon going for a particular type of business and Knock going for another type of business. It does not make sense to have two airports on the west coast competing head to head for the one type of business coming into the expanded region. A co-operative approach would be a far more effective tool to expand the throughput in both airports. I am surprised by the plan that has been produced, which is focused on taking business away from Knock rather than bringing a counterbalance to the Dublin Airport Authority, which has such a disproportionate number of passengers compared to the two other airports.

Could the delegation elaborate on the regional enterprise hub? I know the airport has some innovative plans to create more than 500 jobs along the lines of what has been done in Shannon in the past. One could build on the other.

Mr. Liam Scollan

We will deal with these questions as briefly and effectively as possible. The first question concerned the level of engagement with the Department and the Minister and whether Knock has a sustainable future in the context of the decisions about Shannon. We have had 50 meetings in the past 18 months with political and Civil Service representatives, particularly those from the Department of Transport, Tourism and Sport, so there has been a significant level of engagement. We met with the Minister for Transport, Tourism and Sport on 5 July 2012, at which time we presented the full plans from Knock. Prior to that, we presented our thoughts on the expansion of tourism to various Ministers, including the Minister of State with responsibility for tourism and sport, Deputy Ring. In the meeting with the Minister for Transport, Tourism and Sport, we pointed out the dangers of pursuing a one-track approach with Shannon and said that we supported the Shannon initiative but that it needed to be done in parallel or there would be potential legal and State aid implications. When those meetings went no further, we then felt it was important for us to take the matter to the Taoiseach and we look forward to meeting him and whoever else the Government will bring to the table to discuss what has been happening and how we can resolve this without legal recourse. Have we a sustainable future in the face of this? Any company facing this would say it did not. Knock will not say that. We have fought through difficulties for 27 years. We were built in a recession and we are in a recession now, but we will keep going. It will take a lot to stop us and a lot to stop us expanding. There is no point in being silly and thinking we can continue to do this in the face of this type of competition, but we are not going to give up.

Deputy Mulherin asked what the Department's view of Knock airport was. The Department has told us repeatedly that the Minister's clear view is that the Department is engaging with the State airports and it sees Knock as a private entity - the Department's words, not ours - and, therefore, there will be no funding for Knock after 2014 unless additional funds were made available from the Exchequer. A question was asked about funding after 2014. The default position is that no funding will be made available after 2014.

A question was asked about what our contribution to the region is and how many people we employ.

The answer is 100 people in winter and up to 150 in the summer with a contribution of €111 million to tourism with a gross value added of €17 million. We have expert reports from Ernst & Young on this.

Deputy Michelle Mulherin

Does the Minister or Department acknowledge that Knock Airport will be disadvantaged and has either suggested any way in which the playing field could be levelled?

Mr. Joe Gilmore

Our interaction with the Department of Transport, Tourism and Sport is very cordial, professional and regular with regard to tactical day to day and year to year operational issues. We have a very good relationship. However, at a strategic level there is no discussion. The Department does not get into strategic discussions with us. It will not acknowledge there is an issue. It takes direction from the Minister for Transport, Tourism and Sport and from this perspective-----

Chairman

Has it acknowledged it at any stage?

Mr. Joe Gilmore

It has not directly acknowledged it to us at any stage. In our view we are a strategic air access asset for the region, but the Department will not acknowledge this. As was pointed out by the chairman of the airport earlier, the Department will state we are important for the region but not that we are strategic. It is not within its role or remit as I interpret it to enter into strategic discussions with non-State airports.

Deputy Michelle Mulherin

My question was more for the chairman because he has had strategic meetings at a different level.

Chairman

I ask members not to interfere while witnesses are answering questions.

Mr. Liam Scollan

Mr. Gilmore put it very well. We have had very successful audits with the Department of Transport, Tourism and Sport and various aviation experts. With regard to the Department, the technical operation of the airport could not have been better over the years. Since May 2011 we have had successive strategic meetings. On eight occasions I have met an assistant secretary general at the Department and had eight other substantive conversations on this issue. This is at the core of the issue, because at one stage the Taoiseach felt it was important for high-level dialogue to take place involving the Department and we did this.

At these meetings we made proposals and explained what we are explaining at today's meeting. We exhausted this process on 5 July. After the meeting with the Minister when he rejected the financial proposals referred to by Senator Mooney we asked whether we could do the same as Shannon Airport whereby the Government would hire international experts - such as Booz and Company which worked with Shannon Airport - to work with the airport to come up with a strategic international plan. After all, we run an airport and we are not international investors. The Minister stated he would convey this to the Secretary General of the Department. We had further meetings after 5 July with the assistant secretary general for aviation in the Department and his team. We found this other proposal was not forthcoming. It had not been adopted or accepted. We had two if not three meetings with the Department, and by September we realised we had exhausted every possible attempt to engage strategically with the Minister and the Department.

At this stage we reluctantly took the decision to go public. We only went public on this because we realised an announcement was going to be made and that the Government would go ahead with it. We do not usually do our lobbying in the public arena; for the past ten years we have worked with the Government in a business-like fashion. We have never made public statements against Government policy. We have been forced into this and we are very regretful because we prefer to co-operate with the Government and the Department and we have had an excellent relationship with the Department over the years. We would prefer if the Government set Knock and Shannon airports on a level playing field and then told us to co-operate. A member of the committee was a very good international runner in the 1,500 m. Knock and Shannon airports are being asked to compete with each other in a 1,500 m race where Shannon Airport has been given a 500 m start.

Chairman

Mr. Scollan questioned Michael O'Leary at the aviation meeting on Monday. He stated because of their structure Knock and Kerry Airports are in a better position than Shannon Airport. He stated that given Knock airport's structure and its success to date he has no worries about its future. Will Mr. Scollan respond in general to what he stated?

Mr. Liam Scollan

We are a commercial operation and we have an excellent professional relationship with Ryanair, Lufthansa and Flybe. They all work with us which is why we expand; they are our customers and we treat them as customers. We are delighted Michael O'Leary has such confidence in Knock airport. At the same time one cannot ignore the implications, perhaps not this year but next year and after, of the anti-competitive nature of the decisions made this week by the Government. Shannon Airport will be able to offer large financial incentives to airlines to undertake routes and Knock airport will not. This is the gist of it. The level of engagement between the Government and Shannon Airport with regard to route development is staggering. We are interested in talking to US airlines and Mr. Gilmore has done an excellent job in attracting new routes. Recently he was in discussions with a large US airline but the following week the Minister for Transport, Tourism and Sport had discussions in the US with the same airline during which he encouraged it to undertake routes to Shannon Airport. Despite comments such as those made by Michael O'Leary, when it comes to international traffic it is very difficult for a lean management team, a little less than half of which is sitting before the committee, to compete with the might of the State in route development.

Chairman

Mr. Scollan mentioned presentations he has made on tourism to the Minister for State, Deputy Michael Ring. I see much tourism development in the east coast of Ireland. The numbers in the city of Dublin increased this summer. I live in Tipperary and we do not have an airport so we have many issues. In co-operation with the Department of Transport, Tourism and Sport what effort is Knock airport making to encourage people to the west of Ireland? I do not think the beef is with Shannon Airport. There is much more at play than Shannon Airport when it comes to the entire west of Ireland down to Kerry. What potential is there for cargo business? Do the witnesses have figures on the potential for this? Is Knock airport going after this market?

Mr. Liam Scollan

I agree totally with the Chairman. This is about the west of Ireland from Kerry to Donegal. This is the challenge facing the country. It is a wonderful part of the country but it does not get the share of tourism it should.

We have engaged a great deal and have had an excellent relationship with Tourism Ireland for years. When I was with the Western Development Commission, we proposed an all west of Ireland regional marketing strategy. It has been taken up in part and is still running, but much more needs to be done.

We asked RED C to undertake detailed research into the effectiveness of tourism marketing abroad in terms of passenger and tourist numbers travelling through Knock airport. There was good and bad in the study. On the one hand, only 1% of tourists travelling through the airport stated that they were impacted upon by international marketing by, for example, Tourism Ireland. On the other hand and more positively for Tourism Ireland, more than one third of tourists were influenced by the marketing of airlines flying into the region. That work has been supported by Tourism Ireland.

We have pointed out to Tourism Ireland that the west needs a partnership between tourism businesses and Knock airport as well as a targeted approach to attracting tourists to the region. For example, we would set a target of a certain number of tourists for 2013. We wanted the Department of Transport, Tourism and Sport to set a target of 35,000 tourists to the west and north west from our German, Italian and French flights. If one does not set targets, one will not achieve targets. There was a reluctance to set targets. Consequently, 13,000 tourists visited via those routes. Many more passengers were carried because they were flying out. We ask that the Government consider a targeted approach to tourism for the south west, the mid-west and the north west.

The private sector needs to be engaged further. Although Tourism Ireland has a co-operative marketing programme, we would have liked the private sector, the airport and local authorities to be given the confidence to self-manage a marketing programme for the region. Those providing the services know best what the tourist wants, be he or she from Germany or anywhere else.

Mr. Gilmore will address the questions on aviation services.

Mr. Joe Gilmore

I will be brief. I will also address a few of the other questions asked by members. We estimate that we picked up approximately 25,000 additional passengers as a result of the termination of services at Galway Airport.

Deputy Naughten asked why the Government had not carried out a competition assessment of the impact of proceeding with the separation of Shannon Airport. We do not know. One would need to ask the Minister directly. We can only surmise that other pressures were being applied to progress the Shannon issue. While we understand why it was done, we disagree with it. The report commissioned by the Government advised against it, yet it is the result.

We were asked whether the airports could co-exist. The answer is "Yes", but we compete. As commercial entities, we compete across all areas. Our catchment areas overlap across one third of the region, particularly in County Galway. We compete for non-commercial airline business. The Chairman mentioned cargo, but other business includes the maintenance, repair and overhaul of aircraft. The airport started a number projects in this regard recently and we are starting to grow a small number of jobs, but we are competing with Shannon. All airports compete, and finding a way to work with Shannon in a "co-opetition", if I may call it that, would be difficult. However, we are open to discussion.

As the chairman of the airport pointed out, we engaged in a process three years ago. A team of six Shannon Development executives were at our airport for approximately eight months and went through all of our numbers and financials. The plan that was drafted was produced by one of the most professional development agencies in the State. It is an expert in developing aviation parks at airports. The plan outlines the blueprint for the 500 jobs and the incentives and structures required. Unfortunately, that plan has not gained any traction to date.

Deputy Calleary asked about the niches into which we will grow. Obviously, one is tourism. This year, we have embarked on an access from Europe project that has attracted approximately 16,000 visitors to the region. Of those, one in every two is a first-time visitor to the west. If these visitors spend between €500 and €1,000, we estimate an overall additional spend of €10 million to €12 million in the region. First-time visitors come to the region because of direct, low cost access. They stay within a one hour's trip of where they visit. Without access, they would not reach the west. They would fly to the east coast, do day bus trips to the Cliffs of Moher and spend no money on the west coast.

We have examined the issue of cargo, but Shannon and Dublin are major hubs in that regard and cater well for the country. Cargo also requires an intensive level of infrastructure to be built around the airport. It is not an area on which we would focus, given the issue of the industrial base. Tourism, leisure and aviation-related businesses are our focuses. We have a great deal of space, some 300 acres of development land, that is ripe for investment and can create hundreds of jobs.

Mr. Liam Scollan

I will give a further answer. Deputy Naughten asked whether there was an attitude block as regards regional versus international. It is evident to us. On Monday, there was a national aviation conference at which we listened to the various speakers carefully. It was primarily a Dublin Airport Authority-centred conference. There is a perception that only State airports are in the big game, not regional airports like Knock. This would have been true 20 years ago, but it is not true now. Given the size of its runway, Knock's scale has allowed it to access the international market. Current thinking must catch up with us. Knock is at the table and can bring a great deal to national aviation. It is due to the old belief that Knock airport is regarded as important rather than strategic.

Mr. Joe Gilmore

The Chairman referred to Mr. O'Leary's comments at the conference on Monday. While they were positive from our perspective, one cannot base a business plan on the comments of an individual airline's CEO.

Chairman

They were interesting, as was his assessment.

Mr. Joe Gilmore

They need to be put in the context of the forum at which they were made.

Chairman

Yes. I do not want to drag the meeting on too long, but Senator Mooney can ask a question.

Senator Paschal Mooney

What has emerged from this discussion is that there is a blueprint in the Government to grow Shannon at the expense of Knock. It is significant that, despite the best efforts of the Knock airport management to engage at a strategic level with the Department of Transport, Tourism and Sport, the former has failed to do so. Therefore, I will make a formal proposal in terms used in the airline business, namely, short haul and long haul. With respect, we should haul the Minister for Transport, Tourism and Sport before the committee. We need to establish the Government's exact role and its strategic plan for the airports. I formally propose that the Minister appear before us at the earliest opportunity.

Chairman

Our work programme takes us up to Christmas, but we should consider the Senator's proposal afterwards.

Senator Paschal Mooney

I am not asking that a timeline be set, only that it be as soon as possible. In light of what we have heard this morning, a meeting would be vital.

Deputy John O'Mahony

I support Senator Mooney's comments. The Minister was initially meant to attend at the same meeting, given the aviation discussion, but it did not come about for some reason. It is important that we get a response to some of the points that have arisen today.

I wish to make three points briefly. In light of this discussion, it seems that Knock airport's ownership is being used as a reason not to engage.

That would be ironic, from the point of view of what has been stated about membership of the trust and board being on a voluntary basis, given current discussion around membership of boards, fees, money wastage and so on. Reference has been made to the report outlining the potential for 500 jobs. As stated, that report was published in 2010. Obviously it is not only this Government that has not engaged or rolled out any potential in this regard. I would welcome a response from the witnesses on that issue.

I was interested in Mr. Gilmore's comment in regard to the width and length of the airstrip in Knock. I note that the G8 summit in June is to be held in Fermanagh, which is approximately 60 or 70 miles from Knock. Obviously, other airports will be involved. I heard by way of conversation last week that 5,000 journalists will be working on that summit and that one television station-----

Chairman

Are they coming in to Knock airport?

Deputy John O'Mahony

-----has block booked a hotel in Donegal. Is the Knock airport airstrip big enough for Air Force One?

Chairman

We must conclude questions at this point.

Senator Paschal Mooney

Money will also be needed for work on the N16 to ensure their speedy passage through Sligo to Enniskillen.

Mr. Liam Scollan

The answer to the Deputy's question is, "Yes, it is." As we stated earlier, we do not wish to become embroiled in a political battle on this issue. The focus for us is Knock airport and the Knock region. The Deputy is correct that the report was commissioned under the previous coalition, led by Fianna Fáil. In fairness, it was not activated under that Administration.

Deputy Dara Calleary

When was the final draft agreed and delivered?

Mr. Liam Scollan

In late 2010. I am stating facts. It is up to members to make excuses or clarify issues. I am just saying it was not activated.

Chairman

Is the airport being used for the G8 summit?

Mr. Joe Gilmore

There is full capability at the airport to land any aircraft. We would like to facilitate the summit. However, that is a matter for the two Governments.

Chairman

I thank witnesses and members for attending. This discussion has been useful. I have no doubt we will be returning to this issue again. As stated by the witnesses, it is important this does not become a Shannon versus Knock issue. I urge members to bear this in mind. We will endeavour to have the Minister appear before the committee at some stage in the future to discuss this issue.

I wish the witnesses well. I have no doubt they will be successful in terms of their negotiations on this issue. I admire what they are doing. Well done. I thank them for coming before us. This has been a useful exercise.

As there is no other business we will adjourn until 9.30 a.m. on Wednesday, 12 December 2012 when we will meet with representatives from RTE for another useful and interesting discussion.

The joint committee adjourned at 11.15 a.m. until 9.30 a.m. on Wednesday, 12 December 2012.