Wednesday, 19 September 2018

Questions (4)

Michael Harty

Question:

4. Deputy Michael Harty asked the Minister for Transport, Tourism and Sport the reason Shannon Airport continues to be under the regulation of the Commission for Aviation Regulation for the purposes of airport charges in view of the fact that Shannon Airport is an independent airport and has passenger numbers at the threshold for participation in the regional airports programme. [37888/18]

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Oral answers (6 contributions) (Question to Transport)

I ask the Minister to explain why Shannon Airport continues to be under the regulation of the Commission for Aviation Regulation for the purposes of airport charges, given that it is an independent airport with passenger numbers at the threshold for participation in the regional airports programme.

I thank Deputy Harty for his question. Shannon Airport is subject to very limited regulation by the Commission for Aviation Regulation, which sets charges for access to certain terminal facilities in compliance with an EU directive on ground-handling services. Unlike Dublin Airport, it is not subject to economic regulation. In the case of Dublin Airport, the regulator sets the maximum passenger charge that can be levied on airlines for the use of airport facilities and services due to its dominance in the market. Ireland's regional airports programme is intended to support necessary safety and security investments and activities by the smaller regional airports at Donegal, Knock, Kerry and Waterford to enable them to continue to contribute to enhanced regional connectivity. Under this programme, Exchequer funding is allocated through a number of schemes to cover capital and operational expenditure at those airports. Passenger numbers at these small airports are less than 1 million per annum. The support that is provided helps them to comply with international safety and security regulatory obligations. There are no plans to extend this programme to other airports.

Shannon Airport is a business within Shannon Group, which was established in 2014 following a Government decision to combine the airport with a restructured Shannon Development. The purpose of the group is to promote and facilitate air transport and aviation services in and around Shannon Airport and to optimise the return on its land and property and on its shareholdings in subsidiary companies. Shannon Group and its board, management and staff are to be commended for its achievements since then. For example, it increased its passenger numbers by approximately 25% to 1.75 million in 2017. It has increased its services and routes, successfully delivered the first phase of an investment programme in new and upgraded property solutions and increased its aviation cluster from approximately 40 companies with approximately 1,400 employees to approximately 60 companies with approximately 2,600 employees. It has restructured its Shannon Heritage business, invested in its various sites, improved its product for tourists and won contracts for the management of other sites, including the GPO visitor centre and Newbridge House. As Shannon Airport is a State-owned enterprise with a fully commercial mandate, it is not considered appropriate or necessary to bring it within the framework of the regional airports programme. It is a matter for Shannon Airport to ensure it operates within its mandate as efficiently and effectively as possible so it can cover its capital investments and operational expenditure.

I thank the Minister. It is good to be discussing matters relating to the future of Shannon Airport on the floor of the Dáil. The future of the airport is inextricably linked with the need for balanced regional development in the mid-west region and along the Atlantic economic corridor. Shannon Airport is a key economic driver in the region. Foreign direct investment companies see Shannon Airport as a critical piece of infrastructure that is central to the economic success of the region. EU rules allow capital expenditure supports to be provided to airports that are used by fewer than 3 million passengers per annum. The Government gives no financial support to Shannon Airport, which is used by 1.7 million passengers per annum, but it provides support to smaller privately-owned regional airports for capital investment and operational matters, such as security requirements. A policy change is needed to treat all airports outside Dublin on an equal basis. If the Minister is sincere about the Project Ireland 2040 ambition to drive effective balanced regional development, he needs to make the case for policy change to ensure Shannon Airport receives equitable support. In that regard, in 2017 the EU amended the general block exemption regulation, which allows airports of fewer than 3 million passengers to receive aid to be used for investment in safety and security. I ask the Minister to consider looking at that regulation and implementing policy change.

The Deputy is right when he says that this aid is restricted to safety and security. My understanding - the Deputy can correct me if I am wrong - is that the real problem at Shannon Airport is that concerns have been identified about capital expenditure which is required for the mandatory upgrading of equipment to comply with the revised hold baggage screening standards. This expenditure, which has not been accounted for in Shannon Group's financial forecasts, is likely to be approximately €10 million and will present significant difficulties for the group. The new hold baggage screening requirements are mandatory for all airports. Shannon Airport will have to overcome the difficulty it is facing in this regard. My officials are engaging with the Shannon Group to get a better understanding of all the elements relating to this issue. Even if Shannon Airport were to be included in the regional airports funding programme, I am not sure whether funding for safety and security would really fulfil the current needs of the airport. Shannon Airport is a different creature from the regional airports. It has competitors but it does not have an economic regulator.

The ability of Shannon Airport to increase its passenger numbers and be a successful airport is a related issue. There needs to be a policy change to support the connectivity and the traffic numbers coming through Shannon Airport. In the last five years, 95% of all passenger growth has been in Dublin Airport. Project Ireland 2040 sets out a vision for attracting jobs to the regions and ensuring economic growth is distributed fairly. IDA Ireland has regional targets for foreign direct investment. I think Tourism Ireland should also have regional targets to ensure there is a fair distribution of visitors to Ireland through airports other than Dublin Airport, including Shannon Airport. In 2016, some €12.6 million was invested in marketing Ireland. Approximately 95% of growth has occurred in the Dublin region, which gets 87% of the incoming traffic. It would appear that the vast majority of the money is being spent in the Dublin region and not in the other regions. I think there should be an examination of how the money being invested in marketing is dispersed across the other airports. In my view, Shannon Airport is not getting a fair proportion of that funding. I have two questions for the Minister. How much money has been spent on marketing airports outside Dublin? Will the Minister implement policies to attract more traffic to our regional airports in order to reverse the total dominance of Dublin Airport?

The problem here is that Shannon Airport is a different creature from Dublin Airport, which has a monopoly. The latter must have a regulator for that reason. The Commission for Aviation Regulation regulates all elements of the activities at Dublin Airport very strictly. The regulation in Shannon Airport is much restricted, as I said in my opening remarks, to terminals and other groups. The difficulty here is that the airport is a business within the Shannon Group, which was established in 2014, and a State-owned enterprise with a fully commercial mandate. It is not considered appropriate or necessary to bring Shannon Airport within the framework of the regional airports programme. The regional airports are nakedly and openly subsidised but Shannon Airport is not considered suitable for a clear subsidy because it has a commercial mandate and competitors. It is not regulated by the CAR except in very limited circumstances.