I welcome the opportunity to present Ryanair's comments on the Commission's proposals. However, I would question the timing of this hearing given that the Council's work on this initiative is already very advanced. The Council has included a number of amendments that Ryanair would argue have actually made the Commission's proposal worse.
Before getting into specific comments on this proposal, I first express Ryanair's concern regarding the ongoing trend by the European Commission of re-regulating the airline industry. Following the initial success of liberalising air transport in Europe, which led to the birth of efficient low-cost airlines like Ryanair and EasyJet, the Commission, largely under pressure from flag carrier airlines and their national governments, have sought to re-regulate the industry to protect these inefficient airlines, which are unable to compete with the more efficient low-cost airlines. The current proposal on airport charges is a case in point.
Other damaging legislative initiatives include the widely criticised EU261 measure on passenger compensation, which applies only to airlines and not to competing forms of transport, such as ferries and trains. It forces airlines like Ryanair to pay ludicrous amounts of compensation, often up to ten times the level of the fare actually paid by the passenger. More worrying is the proposal to include aviation in the emissions trading scheme when aviation accounts for less than 2% of greenhouse gasses and has made huge efforts in recent years to reduce fuel burn and, therefore, emissions. The industry has estimated that the Commission's proposals will cost approximately €4 billion per annum in an industry where most airlines are already loss-making or marginally profitable. The true intent of green parliamentarians appears to be to prevent people from travelling by air at all, despite the minimal impact of aviation on the environment and the huge benefits it brings in terms of economic growth and regional development. Taken together, these damaging and unnecessary regulations are seriously undermining the competitiveness of the EU air transport industry, a hugely important industry which impacts on many other sectors and on the well-being of EU citizens.
The main problem with this directive is that it is largely unnecessary, and in the limited number of cases where legislation is necessary to prevent monopoly airports from abusing their dominance, it is completely ineffectual. During the initial phase of consultation with the industry, the low fares airlines, which use mostly regional and secondary airports, pointed out to the Commission that the airports market is very competitive, with airports actively seeking to grow their traffic by offering better, more efficient services and lower prices to airlines. There are certain large hub airports, where capacity is scarce and there is little or no competition from secondary airports like Charleroi, Hahn or Skavsta, which can and do impose above-market prices and offer substandard services. In these cases, there may be a need to intervene with some form of regulation but in many cases these airports are already subject to some form of national regulation.
It was also pointed out that in many of these cases national regulation had been unsuccessful in forcing monopoly airports to meet the reasonable requirements of users and that the Commission should instead encourage competition from secondary airports and competing terminals within airports, given that regulation had already been shown to have failed. A case in point is Dublin Airport, which has consistently failed to provide the kind of low-cost efficient facilities that Ryanair requires to continue to grow in Dublin. This is despite having been regulated for the past six years by CAR. Ryanair is now the biggest user of Dublin Airport yet the DAA has repeatedly failed to either build a low-cost second terminal or to allow Ryanair build and pay for such a facility. This is because the regulatory system in Ireland, which is the same as that now being investigated by the Competition Commission in the UK, actually incentivised the monopoly to waste money on facilities as it provides a guaranteed rate of return on any capital expenditure. Why would the DAA spend just €200 million on a low-cost terminal when it can get a guaranteed return from the regulator on more than €800 million which it intends to spend on T2?
Yet, despite the fact this system has been widely criticised in the UK, CAR continues to allow DAA to ignore the requirements of users and to build ridiculously expensive facilities, the costs of which are then passed on to airlines and their customers. Despite the fact CAR has found that the second terminal being built by DAA is at least 50% too large, CAR is nevertheless allowing DAA to recover the vast majority of these costs. This is clearly wrong and demonstrates the utter failure of regulation. Had the Government followed through on its promise to allow for a competing terminal at Dublin Airport, costs would be decreasing instead of about to double, as confirmed by our failed regulator.
The proposed airport charging directive will do nothing to address this. It is full of notions of transparency, objectivity and non-discrimination, although even these have been watered down in the Council version, but it does not address the fact that a monopoly will always seek to charge monopoly prices. If this means building unnecessarily expensive facilities to achieve this, it will do so. Dublin Airport is proof of this fact.
The only way to address this is either to have a competing airport that will force the main airport to improve services and lower its prices, which is happening in most cities that have secondary airports except those which are owned by the same company, such as, for example, BAA's common ownership of the London airports, or, alternatively, monopoly airports must be forced to allow competing terminals that will give airport users a choice. The Government had committed to the latter in its programme for Government but reneged on this promise and has allowed the Dublin Airport Authority monopoly to build the second terminal despite its history of providing inefficient, gold-plated facilities. One only needs to consider the mess in Cork, where the airport is left with a terminal for 3 million passengers per annum that cost €200 million, whereas similar facilities are being provided at other airports around Europe for a fraction of that price.
What does the proposed directive do for airlines and passengers? The answer is absolutely nothing. Originally it was to apply to all airports with traffic of more than 1 million passengers per annum, which would have meant that approximately 160 airports would have been subject to it, the vast majority of which do not require such regulation. Although this now has been increased to 5 million passengers per annum, most of these airports are highly competitive and do not require any regulation of their prices. Regional airports like Cork and Shannon will eventually be caught by this legislation and will be forced to adapt their commercial practices to this legislation. This will call into serious question the future development of these airports. There only are approximately 20 to 25 airports in Europe that actually require some form of regulation to prevent them from abusing their monopoly power.
Who has been pushing for the wider scope of this legislation? Interestingly it is the flag carrier airlines and the main airports. In the case of flag carriers, they see this as an opportunity to put manners on the very competitive low-cost airports to undermine the low-fares airlines using them. In the case of main airports, widening the scope of the legislation to include small airports has necessitated its watering down to the point where the legislation is almost irrelevant. Moreover, it also will undermine the competitiveness of secondary airports, thereby sparing the main airports from this growing competitive force.
In conclusion, this is another piece of unnecessary and damaging legislation to come out of the European Commission. It does not address the problem of anti-competitive behaviour at monopoly airports like Dublin and imposes an unnecessary legislative burden on a huge number of airports that clearly do not require regulation.
This is just one of the several legislative initiatives coming out of the Directorate General for Energy and Transport in Brussels that appear to be designed to undermine the competitiveness of air transport in order to protect the ineffectual high-fares flag carrier airlines. Such damaging legislation, together with the failure of national regulation of monopoly airports like Dublin Airport, are having a negative impact on the competitiveness of air transport and will lead to fewer passengers travelling, which means less tourism and fewer jobs. This is particularly serious for an island nation such as Ireland, which depends heavily on air transport for its tourism industry and economic growth.
I call on the joint committee to oppose strongly the continuous stream of legislative nonsense coming out of the Commission. The joint committee should be promoting liberalisation and competition instead of protectionist and damaging legislation. The airport charges directive is a prime example of this kind of bad legislation and the joint committee should oppose its passage, assuming it is not too late to so do.
