The next item on the agenda is a discussion with representatives of the Dublin Airport Authority regarding the operation of Dublin Airport. I welcome Mr. Gary McGann, chairman of the authority; Mr. Declan Collier, chief executive, and Mr. Oliver Cussen, company secretary. I draw their attention to the fact that members of the committee have absolute privilege but that this same privilege does not apply to witnesses appearing before the committee. Members are reminded of the parliamentary practice that they should not comment on, criticise or make charges against a person outside the Houses or an official by name or in such a way as to make him or her identifiable. I propose that we hear a short presentation from Mr. McGann which will be followed by a question and answer session with members of the committee.
Dublin Airport Authority: Presentation.
Mr. Gary McGann
I thank the Chairman for giving us this opportunity to address the committee. I intend to inform it as concisely as possible about a range of important developments concerning the Dublin Airport Authority and its various business units. I will begin by updating the committee on the continued very strong growth in aviation services and passenger numbers at Dublin, Shannon and Cork airports. In the case of Dublin Airport, the year-on-year increase of over 15% is more than twice the current average for major international airports. Shannon Airport's passenger numbers are 24% higher than last year's record performance, while at Cork Airport numbers are up 20% on the unprecedented volumes achieved last year.
As the airports move into the peak summer travel season, current projections indicate that Dublin Airport's passenger numbers could surpass 21 million this year, 2.6 million higher than last year's outturn. Current estimates for Shannon Airport indicate an increase to 3.4 million passengers this year, while passenger numbers at Cork Airport are forecast to rise to 3 million. There are many reasons for this surge in traffic growth. The continued strong performance of the economy, the increased size of some of the aircraft fleets serving our airports, the launch of new routes and services by Irish and overseas carriers at all three airports and the targeted marketing campaigns by our own colleagues and the various tourism agencies to attract new services and passengers represent some of the principal underlying factors. We welcome this growth as beneficial to the overall economy, the regional economies in which our airports are based and our own business and its many stakeholders. However, prolonged growth on this scale presents particular challenges at Dublin Airport which, as every user of the airport is aware, must catch up and requires significant investment to manage current traffic volumes and the projected volume of more than 30 million passengers per annum within the next ten years.
One of the Dublin Airport Authority's two principal strategic policy objectives is to deliver the infrastructure that Dublin Airport needs as rapidly and cost-effectively as possible. That work is well under way. Following the Government's decision of May 2005 that a second passenger terminal should be built at the airport and that the Dublin Airport Authority should build it, we moved swiftly to engage the major airlines at the airport to ascertain their principal business requirements. This consultation process was managed on our behalf by a reputable international airport planning and design firm, Pascall & Watson, to ensure objectivity. Following completion of significant consultation, Pascall & Watson delivered its recommendations for the optimum development of the airport for the approval of the DAA board last September. This was subsequently published as a ten year development framework plan for the airport at a cost of approximately €1.2 billion at 2005 prices. This will be one of the largest and most complex building programmes in the history of the State.
The development plan will deliver a second passenger terminal in excess of 75,000 sq. m. before the end of 2009. It will deliver close to 50 new boarding gates in two new piers, where long and short-haul aircraft will be able to board and disembark passengers directly to and from the airport buildings without the need for bussing. It will deliver extensive new parking facilities, internal road networks and set-down kerbside areas required for between 30 and 35 million passengers per annum. It will deliver a new runway, parallel to the existing main runway and thousands of square metres of concrete aprons, on which aircraft can taxi and park. Central to the work carried out so far has been an extensive consultation process with the airlines and other major stakeholders at the airport, as well as close liaison with both the Commission for Aviation Regulation and the independent firm which the Government has appointed to verify the costs associated with Terminal 2.
I am pleased to inform the committee that construction work has commenced on Pier D which will deliver 14 new boarding gates by October next year. The consultation process with the airlines on Terminal 2 is well advanced and we will submit a planning application to Fingal County Council before the end of the summer. Subject to an expected seven-month planning process, construction of the new terminal will begin next May and it will be operational 30 months later in October 2009. We have also received planning permission for a new runway which is now winding its way through the planning appeals process.
I cannot over-emphasise how critical it is to anyone who uses Dublin Airport and to the wider economy that its development programme proceeds without unnecessary obstacles along its already challenging timeline. The swiftest possible delivery of this new capacity is critical to the comfort, convenience and well-being of the estimated 250 million passengers who will use the airport in the next ten years. It is also critical to the airport's development as a convenient transfer airport for long-haul aircraft and passengers travelling between North America, the Middle East and Asia. In the past six months we have seen the launch of the first two services between Dublin and the Middle East and there is significant potential to expand both point-to-point and long-haul transfer business in and out of Dublin Airport when the new terminal comes on stream.
The development programme is also critical to the delivery of the type of major international gateway this country needs and deserves as a progressive, prosperous, 21st century European state. In this context, one of the principal challenges to Dublin Airport's development is funding. To deliver the plan in full and to the required timescale, as previously stated, the Dublin Airport Authority requires an average airport charge per passenger of at least €7.50. The authority, as a fully commercial organisation, has no sources of revenue other than its commercial income and airport charges. Last October the Commission for Aviation Regulation determined that the airport should have a maximum charge of just €6.14 per passenger, in real terms, in each of the next four years. At these levels, according to figures supplied recently to the European Commission, Dublin Airport has the fourth lowest charges of any major airport in the world. Its charges are approximately 50% of the average for large European international airports. At these levels, the company will be seriously challenged in its ability to complete the investment at Dublin Airport on time and also to separate Shannon and Cork airports as autonomous businesses.
It is essential that the Commission for Aviation Regulation moves quickly to implement the recent recommendations of the statutory appeals panel and follows through on its commitment to urgently review Dublin Airport's capital investment requirements, as it indicated it was predisposed to do last year. All the major business and tourism organisations have supported our call for a reasonable airport charge to fund our investment programme which would still leave us well below the European average, as have those passengers we have surveyed who say they would be willing to pay more for a significant enhancement of the airport's facilities. We request the support of all Members of the Oireachtas in our endeavours to fulfil our mandate.
Before moving from Dublin Airport, I would like to remind the committee of the range of measures we are implementing to optimise the passenger experience, while we are waiting for significant new infrastructure to be delivered. On the airfield, eight new temporary boarding gates have been provided to facilitate the rapid turnaround of our low cost airline customers and their passengers. We have provided additional circulation space for passengers on the departures floor of the terminal by relocating non-operational facilities. We have hired up to 200 additional passenger security screening staff and increased the number of passenger security screening channels by 50% in the past year to expedite this critical function as effectively as possible. New airside catering facilities have been provided beyond the security channels for extra passenger convenience and choice. We have also put in place over 150 customer care staff throughout the terminal and in our car parks to facilitate passengers on their visit to the airport. Some 2,000 new long-term car parking spaces have just come on stream. We will deliver a new customised check-in area, below the arrivals floor of the terminal by next December, capable of handling up to 3 million passengers per year.
I am conscious that some members of the committee have expressed concerns recently about congestion at the airport at peak periods. I have outlined the reasons congestion is a challenge for us, the measures we are introducing and the encouragement we are giving other service providers to introduce appropriate measures of their own to manage passenger throughflow as effectively as possible. I would also like to reaffirm that the safety and security of customers and employees rank foremost amongst the priorities of the DAA board and management and that we will continue to take all appropriate actions in this regard.
I would now like to turn to the other key policy objective of the Dublin Airport Authority, namely, to achieve full separation of Dublin, Cork and Shannon airports, as directed by the State Airports Act 2004. As the committee is aware, progress on this issue has been slow. The time elapsed reflects the challenge involved in surmounting key hurdles before full separation can be achieved. The State Airports Act 2004 stipulates that the authority must submit detailed plans to the Minister for Finance and the Minister for Transport that demonstrate the operational and commercial viability of the three stand-alone airports. These strategic business plans are not yet complete, although significant effort has been expended in developing them by the respective boards of management, their staff and advisers.
The principal outstanding issue at Shannon Airport is the securing of agreement with staff and their trade union representatives for a comprehensive restructuring programme to bring the airport's cost base into line with its business realities and those of other competing airports and to have appropriate conditions in place to sustain that position. Working under delegated authority from the Dublin Airport Authority, the board, management and staff at Shannon Airport have worked impressively to stimulate additional low-cost traffic to the United Kingdom and continental Europe and sustain transatlantic traffic. However, the airport's cost base is significantly out of line with its rapidly changing business requirements, including the prospect of an open skies environment. Significant underlying losses are masked only by the temporary impact of military transit traffic.
Notwithstanding the many claims on its scarce capital resources, the Dublin Airport Authority has been prepared to support a restructuring programme at Shannon Airport with a generous voluntary severance package. It is now almost a year since the Dublin Airport Authority and the Shannon Airport Authority made efforts to bring about an appropriate cost base at Shannon Airport through negotiation with the trade unions. Progress has been poor and while we welcome the Labour Court's recent involvement in the process, we are seriously concerned about the urgent need for a breakthrough in order that the airport can continue to act as a key economic gateway for the west and that a detailed strategic business plan can be completed as part of the process.
Completion of the Cork Airport Authority's strategic business plan focuses on a resolution of how the significant investment in the redevelopment of Cork Airport is remunerated. To help expedite matters, the Dublin Airport Authority has commissioned consultants to carry out a detailed independent analysis of Cork Airport's growth potential, its cash generation potential and likely capital investment requirements. This analysis which we are informed will be completed in a number of weeks should support the boards and management teams of the Dublin Airport Authority and Cork Airport Authority, respectively, in advancing this issue.
The most high profile element of Cork Airport's redevelopment, its new terminal building, is about to become operational. This has been a highly complex project inherited by the board of the Dublin Airport Authority and its progress has not always been as smooth as planned. I am pleased to inform the committee that the building contractors, Rohcon, transferred control of the building on 9 June and that a certificate of completion is being prepared by the project architects, Jacobs International.
We anticipate that the Cork Airport Authority and management at Cork Airport will obtain full access to the building within the next week, leaving it in a position to complete any remaining on-site training, systems commissioning and final safety and security procedures before determining the date on which it becomes operational. At this stage, Cork management is planning to have the new terminal operational in July. We thank the people of Cork and all the stakeholders of Cork Airport for their support and patience as we completed this landmark new facility and trust they will derive full benefit not only from the country's only current 21st century terminal building, but also a completely revamped airport from the roundabout on the Kinsale Road to the edge of the airfield.
The second hurdle in the path to full separation of Shannon and Cork airports is the level of the Dublin Airport Authority's distributable reserves. This may sound like a technical accounting issue, but under company law, unless the Dublin Airport Authority has distributable reserves — effectively accumulated profits — at least equivalent to the value of assets it wishes to separate, such a separation cannot be effected. The Dublin Airport Authority does not currently have distributable reserves equal in value to the key assets in question, namely, Shannon and Cork airports, and there are a number of outstanding variables that must be resolved before adequate reserves will exist.
I wish to deal briefly with the question of the Dublin Airport Authority's loss-making businesses. At our last presentation to this committee, we emphasised that as a fully commercial organisation, the Dublin Airport Authority could not continue to support loss-making entities within its organisation or those that offered no prospect of returning to profitability. In this context last February, the board of the Great Southern Hotel Group decided to sell its hotels on a going concern basis, a decision which was subsequently approved by the board of the Dublin Airport Authority. The hotel company's staff was briefed fully on the decision and, in May, a full marketing campaign was launched in the domestic and overseas markets. The hotels are being sold by competitive tender and the deadline for completion of the tender process is 7 July. To date we are satisfied with the quantity and quality of the expressions of interest in the business and we plan to have the sale completed before the end of the year.
There are many other issues I could present to the committee, but perhaps at this stage it might be best to hand back to the Chairman. My colleagues and I will be more than happy to respond to any questions committee members may wish to address to us.
I thank Mr. McGann. We appreciate his comprehensive submission. Before calling Deputy Olivia Mitchell I wish to ask one question on the distributable reserves. I understand the issue in regard to company law requirements, but at what level are the distributable reserves for Dublin Airport Authority as of today?
Mr. McGann
Approximately €140 million.
That is going back over what period of accumulated profits?
Mr. McGann
Forever, effectively.
I thank Mr. McGann.
I assume the reference to complaints by some members of the public about congestion refers to myself. I realise I have been very critical. I realise also that the Dublin Airport Authority is playing catch-up after years of inaction on behalf of the Government and the previous board at Dublin Airport. Nevertheless, there are major congestion problems at Dublin Airport and they are not improving, despite all the efforts that have been made. All the reports I receive show there is chaos at Dublin Airport. I understand that buses going to the car parks do not turn up and people miss flights as a result. However, I do not wish to speak about that issue today, rather a matter that has raised its head and, undoubtedly, will become contentious in the run-up to the general election, that is, the additional runway at Dublin Airport.
To an island nation, aviation is essential from business, trade and tourism points of view. An efficient major international airport is crucial. Mr. McGann said it is important for all of us to ensure there are no obstacles to achieving what one needs to do at Dublin Airport, but the authority has to play a role as well.
I wish to go through the sequence of events that led to the decision to build another runway. Was it aviation policy on behalf of the Government that an additional runway was needed and that it would be provided at Dublin Airport? Did an evaluation take place of other alternatives, for example, as part of the national spatial strategy or any other strategy the Government may have considered, or was it up to Dublin Airport to say it needed another runway and the decision was made by Dublin Airport?
In the Government's statement of aviation strategy last May, it announced that the runway would be built at Dublin Airport. At that time, or prior to that time, did the Dublin Airport Authority produce a cost benefit analysis and present it to Government? Was the Dublin Airport Authority required to produce such an analysis? I realise this is not a publicly funded project but, as the major shareholder, the buck stops with the Government should anything go wrong. Objectors to the runway have demanded that an independent cost benefit analysis be carried out. Would Dublin Airport Authority have a problem with that and would it be willing to pay for it?
From the point of view of clearing up outstanding questions, the groups who oppose the second runway maintain there is no need for it. Mr. McGann said passenger numbers at Dublin Airport are growing at approximately 15% per year. I presume the number of flights is not growing at that level. Nevertheless, I understand there are almost 250,000 flights per year in and out of the airport. What is the existing runway capacity at the airport and when will it run out? At what point does the lack of capacity become a genuine constraint on the expansion of the aviation industry? I understand there is a need for the longer runway for the long haul planes but the argument has been made that, perhaps, the existing runway could be extended. Has a case been made for a second runway in terms of capacity and, if so, can that information be made public?
My other question is on planning generally at Dublin Airport. I do not want to refer to things that happened in the past but the impression is given that Dublin Airport is on the hind foot all the time in the area of planning and forward planning. Fingal County Council is very critical of the authority's planning application for the terminal and the runway. It is hugely critical of Pier D and its general ad hoc planning. I am not sure if that will be a permanent feature at the airport or if it will come down eventually. Fingal County Council was critical of the fact that no broader picture was taken of the traffic implications. No matter where the expansion takes place, there will be traffic implications, but there is a requirement to deal with those implications if one is to overcome the obstacles mentioned.
A huge number of concerns have been expressed by all the commercial users of Dublin Airport as opposed to the travellers, that is, by those who provide services at Dublin Airport, about changes of mind in regard to the terminal. We were told the size of the terminal would be 50,000 sq. ft. and, later, almost overnight, that it was to be 50% greater following consultations with the airlines. It is good that the Dublin Airport Authority did consult and that we know that up front. Is it the intention to provide that amount of space and does it change the decision on where that terminal will be built? It was a very constrained site to begin with, right up against the existing runway. Users of the airport and those working at the airport have expressed their concerns about the ability to operate a larger terminal at that location and still have apron space to move planes around. That does not even begin to deal with the expected problems in managing the airport during the construction phase.
Can Mr. McGann indicate to the committee how these fears can be allayed in terms of planning? We have heard that a tent will be necessary for the summer season and then, suddenly, the tent cannot be provided in the summer season. There is a need for the authority to get its act together too, as well as telling us that we should co-operate. Does Mr. McGann accept that is the reason it is receiving criticism?
Mr. McGann
I am not sure if the Deputy was making a statement or asking questions. I will assume there are questions and I will try to deal with them.
Nobody is going to make the case that Dublin Airport is not congested, behind in its development or struggling to cope with massive growth. No other airport of which we are aware is experiencing growth at these levels, starting five to ten years behind the No. 8 ball. If anybody thinks there is magic and a miracle to be worked on this, unfortunately, nobody will be able to deliver.
We are not aware of the criticism in the context of planning applications to Fingal County Council. It is the contrary. One of the problems with the process is that there is a need for massive consultations. This is natural as we are dealing with a public facility. Changes will take place during the consultation process. It was mandated that we consult and we are still running to the prescribed timeline.
I will deal with the broad concepts and ask Mr. Collier to speak about the specifics. The Dublin Airport Authority's mandate covers Dublin, Shannon and Cork Airports, nowhere else. Its responsibility is to develop and run the airports commercially and that is what we are seeking to do. In that context, there is a need for a holistic plan for Dublin Airport and all the facilities it needs to handle passenger numbers at the levels being projected. However, forecasts must be modified from time to time.
Runways are a key part, as are airspace and terminal buildings, etc. It is to the credit of those working in what was known as Aer Rianta that the planning of the site provided for a second runway. It allows sufficient space for two runways, as distinct from what happens at many airports where runways are interdependent and cannot be used in parallel.
It is also true that there is probably no other airport in the world which offers such a low density, aside from the fact that the issue presents a problem for people living in the area. There is low density housing and a low population within the airport's span.
I do not mean to be rude but I know all that. I am trying to establish what assessments were made. I understand the arguments made by Mr. McGann but what led to the decision that the runway would be provided at Dublin Airport? I know how the authority reached its decision but was a Government policy handed down to expand?
Mr. McGann
No.
To Mr. McGann's knowledge, was there ever an assessment made of other options? When the authority decided on its option, was a cost-benefit analysis carried out? As part of its application to the regulator for an increase in charges, was there a need to undertake a cost-benefit analysis?
Mr. McGann
Absolutely. The applications to the regulator need to provide all the information flows necessary to judge the appropriate remuneration. The planning applications relating to the runway and the facilities required at the airport are an integrated proposition in the context of the €1.2 billion programme which has been subject to a cost-benefit analysis. It should be remembered that, unlike many businesses, we are regulated, which is understandable in certain circumstances. The cost-benefit analysis will eventually come to the revenue needed to fund the project. At the €7.50 figure, we would still be materially below the figure for most comparable airports in Europe, if not the world.
I understand the authority is limited with regard to a cost-benefit analysis and what can be included in the revenue flow. However, it does have some control over costs. A normal cost-benefit analysis may consider, for example, opportunities forgone. There is a land bank near the airport. Were these factors included in the cost-benefit analysis?
Mr. McGann
To what is the Deputy referring?
I am referring to opportunities forgone for the land. That would be a normal part of any cost-benefit analysis.
Mr. McGann
Not in any business I have ever run. If I am mandated to run an airport as a business, the use of land would be confined to airports.
Yes, but should the land be necessarily used to provide a runway? I am trying to establish the case for including the land in the cost.
It would be included.
Mr. McGann
Absolutely. Based on current projections, without the runway by 2011 or 2012, we will not be able to handle aircraft. A full cost-benefit analysis was made and submitted as part of the planning application and to the Commission for Aviation Regulation.
Is it available publicly?
Mr. McGann
What is with the regulator is probably available.
Mr. Declan Collier
A cost-benefit analysis was carried out as part of the planning application submitted to Fingal County Council as the relevant planning authority. It is available through that channel.
On the capacity issue, we currently have an aircraft landing and taking off at Dublin Airport every 90 seconds. We project that runway capacity at Dublin will run out, with existing runways, in the period 2010-12 but that is a movable feast. As demand rises from our customers, the date will be nearer or further away.
That is without referring business elsewhere.
Mr. Collier
After that, we will be standing at the end of the runway with a "full" sign.
On the terminal, the planning process we have gone through has been very rigorous. The framework development plan for Dublin Airport announced last September informed people that we would progressively deliver capacity at the airport in the next ten years. Some of the key milestones were the delivery of Pier D by 2007 and the second terminal by 2009. We are fully on track to deliver them. The engagement with the planning authorities has been of a very high standard.
With regard to the size and location of the terminal, we indicated initially, as part of the framework development plan, that we would need to build a terminal in the region of 50,000 sq. m based on the information we had received from airlines. At the end of the ten-year period, or at some time in the second five-year period, we would extend the terminal.
The consultation process in which we have engaged since last December with the airlines has clearly indicated that their business plans require a larger terminal. The application for the second terminal which we will lodge in the summer will be for a terminal in the region of 75,000 sq. m to 80,000 sq. m. There is no change, except that we are increasing its size, based purely on the engagement we have had with airline users.
Is the space available?
Mr. Collier
There is plenty of space. The location of the terminal will not change. The design process is robust. We have plenty of room to accommodate the terminal. We have planned the building of the terminal in such a way as to minimise disruption in the operation of the airport because we are well aware of existing issues. I am confident we will be able to deliver the facilities on time, within budget and with the minimum of disruption.
I welcome the delegation and congratulate its members and staff for the work being done at the three airports. There has been enormous improvement since the new management team was put in place. Dublin Airport comes in for much criticism but outside the busy peak periods it works very well most of the time. Most of my contact with the airport has been positive.
When the presentation was being made, I thought it a pity I did not have time to take out some of the comments made in 2003 by the former Minister for Transport, Deputy Brennan, when he spoke about the break-up of Aer Rianta. The media will recall how Aer Rianta International was to be given to Shannon Airport and the hotel chain to Cork Airport and that the entire process was to lead to everybody starting free from debt. It was to be a wonderful world for everyone. If there is to be accountability, that man should be brought in here and made listen to what is happening. The current Minister is very conscious of the folly engaged in. Perhaps it was thought that one could play with the company in a game of Monopoly.
I note that Mr. McGann stated delicately that "outstanding variables must be resolved." We were promised business plans for the three airports which were to be presented to the Minister for Finance in April 2005 but there is still no sign of them. While I fully appreciate the difficulties, some of us pointed out to the Minister that assets could not be shifted around in a company at will and for political reasons. There is a great deal of concern in Cork because people in the area were promised a debt-free airport, and likewise in Shannon, but this clearly will not happen now. If the Minister had taken advice in respect of what is allowed under company law, he would have realised that this was not the simple task he made it out to be in 2003.
I would like Mr. McGann to refer briefly to those outstanding variables, namely, the key issues that need to be resolved before the business plans can be completed. Specifically, what is the intention in respect of the future of Aer Rianta International? I presume Mr. McGann is still thinking in terms of the three airports rather than, specifically, Dublin Airport, given the way in which business is spread between the three airports. When the State Airports Act was being discussed, we were told how Shannon could compete with Cork and Dublin. That is not altogether clear because people living in the greater Dublin area are not going to travel to Shannon Airport to get a flight to Brussels for €5 less.
Outside the greater Dublin area in general, there must be potential for developing business in Cork and Shannon if the right transport links are provided to those airports. Currently, it is much easier for a person to get from Waterford to Dublin Airport for a flight whereas, by right, if the transport links were better, he or she would go to Cork Airport. Similarly, people in Galway should see Shannon as their local airport, but people are being bussed up on the Aircoach from Galway to Dublin.
Have studies been carried out on the origin and destination of passengers at the three airports? Given the congestion in Dublin and the need for additional business to be generated in both Shannon and Cork airports, has any investigation been carried out on ways to encourage the use of those airports by people who use Dublin Airport, principally by improving the transport links to Shannon Airport and Cork Airport?
Following on from Deputy Olivia Mitchell's question about the second runway, we are all familiar with the ERM report on airport safety zones which recommended an embargo on housing developments or any public buildings with a capacity for more than 50 people under the proposed runways. If one accepts that logic, one must also accept that where those conurbations exist, it is not altogether safe to provide a new flight path over those areas. The inverse must also hold true. What has happened following the production of the consultant's report?
In recent weeks I tabled a parliamentary question, the reply to which informed me the Department of the Environment, Heritage and Local Government is drawing up guidelines in respect of planning applications associated with airport developments. Has Mr. McGann been in contact with that Department in respect of those planning guidelines, and does he expect they will have any implications for either the second terminal or the new runway?
I appreciate that part of the remit of the Dublin Airport Authority, DAA, is to develop business at Dublin, Cork and Shannon airports. In terms of the overall good of the greater Dublin area, there is genuine concern about the intensity of the growth taking place at Dublin Airport, especially the effect it will have on the local road network and on traffic levels from Balbriggan into the city centre. While it may not specifically be the job of the DAA, it should be the job of either the Minister for Transport or the Minister for the Environment, Heritage and Local Government to examine the impact of this rapid and intensive growth on the north side of Dublin. As a north side Deputy, I am conscious of the high level of traffic that impacts negatively on many areas.
To what extent is it envisaged that the proposed metro will reduce surface traffic, both in terms of passengers and staff accessing the airport? It may not be the responsibility of the DAA but the Government should examine the feasibility of providing a second airport to serve the greater Leinster area. Belfast has two airports and London, which I accept is much bigger, has several airports. Given the layout of the city, the increase in population and the serious traffic congestion problems, it would make sense at least to examine the possibility of a second airport and whether benefits would be gained from developing elsewhere as opposed to continuing the intensive development at Dublin Airport.
Mr. McGann
I will deal with the questions that do not relate to Dublin and Mr. Collier will deal with the questions relating to Dublin. That will give him time to think.
On the business plans, the mandate we had was for not before April 2005, but that is neither here nor there. When dates were set for the business plans, it was done in the context of a desire to get them as soon as possible, obviously having regard to the fundamental need to come up with viable plans for all three airports. Sometimes a key airport is forgotten, namely, Dublin Airport, given its mandate to develop a second terminal by 2009. The business plans for Shannon, Cork and Dublin airports are well advanced in one sense. I will take them one by one.
The critical issue in Shannon is that the business plan demonstrates that it will not be viable with its current cost base. It is as simple as that. The strategy based on the delegated authority that the Shannon Airport Authority has from Dublin, having reviewed all the options, has been to grow the top-line and ancillary revenues. Progress is being made and positive benefits are being delivered but the cost base is seriously out of line, and unless this is addressed, the concept of a viable airport at Shannon, especially without military transit traffic which accounts for up to €9 million a year, is unsustainable.
There is a more significant issue in that regard, namely, that Dublin Airport does not get remunerated — one can argue that is correct — by the regulator for losses in Shannon or Cork airports. These two airports need to be looked after because they are not regulated.
The viability of Shannon Airport depends predominantly on addressing the cost base and that has been a very difficult and tortuous process over the past year. The case is before the Labour Court which is trying to bring the two sides together. It requires significant cost take-out. We have put in place and made available a fairly substantial voluntary severance programme to try to move that forward, especially for people who may want to retire early.
Another issue arises in the context of Cork, namely, the expenditure on the terminal which is basically in the region of €180 million and which must be paid. Irrespective of who pays for it, the concept of investing it and not having anybody pay for it as a commercial proposition does not make sense. Based on Dublin Airport's general financial situation and having regard to the financial forecast of what is required to develop the airport, it cannot afford to give away assets of that level on pure cash and expansion terms, even if the reserves exist. That issue must be resolved. I hope we are progressing towards a resolution in that regard in the relatively near future. We await a final view that will emerge from work being carried out on behalf of the Dublin Airport Authority in consultation with the Cork Airport Authority.
Once we have agreed solutions for Cork and Shannon, we will assess the viability of the development plan for Dublin Airport. The determination by the regulator of an annual airport charge of €6.14 per passenger for the next four years is materially short of what is required and is likely to leave a shortfall of more than €3 million in the funding to develop the expansion plan for Dublin Airport. Issues in regard to Cork and Shannon must be resolved before we can finalise the plan for Dublin. We will then be in a position to submit the three viability plans, which are interconnected. We are working towards this end but I understand it is frustrating for everybody that we are not there yet.
Aer Rianta International, which operates out of Shannon Airport, was originally a part of Aer Rianta. Its international success and progress is very much a function of the skills and expertise of its staff who are prepared to travel and work internationally. It enjoys significant influence in the tendering process because it belongs to an organisation that has a decent balance sheet and good prospects. Given that there is no danger of its collapse, it is seen as having little risk attached to it when competing with major players in the international arena for contracts to operate duty-free shops and so on.
Logic therefore dictates that regardless of what developments take place in regard to Aer Rianta International, its business should not be threatened. There is a general view that it might struggle to survive under the ownership of a separate Shannon Airport Authority which will not enjoy the same resources as its Dublin counterpart. This discussion is ongoing and has not been finalised because it is part of the final separation discussions. The indications are that Aer Rianta International will move towards Dublin rather than Shannon.
I am conscious that only 15 minutes remain for this part of the meeting. I ask members and delegates to be as brief as possible in their questions and responses.
Mr. Collier
I will respond to the points about the runway and the safety zones. I assure members it is perfectly safe to use the runway systems in Dublin and for the aircraft to fly over the zones in which they are permitted to do so. This applies also in the case of the proposed second runway. One must refer to the work that has been done in the last 40 years in agreeing the position of this new runway in the context of the development plan for Dublin Airport and, on a broader scale, the city itself.
The ERM report is being examined by the Department of the Environment, Heritage and Local Government and we are waiting for it to introduce the new safety zones. The proposed runway and terminal and all other development at Dublin Airport are consistent with the recommendations contained in that report. There will be no inconsistency between the development of Dublin Airport and the implementation of these new zones.
With regard to the road network around Dublin Airport, we have had extensive and ongoing discussions with all those parties having a responsibility for the delivery of surface access to Dublin Airport and the city of Dublin itself, including Fingal County Council, the National Roads Authority and the Rail Procurement Agency. This ongoing collaboration represents not merely an intellectual engagement. We estimate Dublin Airport will contribute €40 million to €50 million to the development of the roads network around the airport in the next four or five years. The reports detailing the pressures on the roads clearly indicate that Dublin Airport is only one contributory factor. We are playing our part in addressing the problem. We welcome the plan to deliver a metro to Dublin Airport by 2012, if not sooner. Programmes are already in place to encourage our staff to travel to the airport by means other than private vehicles.
I asked about transport links to the other airports to encourage business there.
Mr. McGann
Each of the airports has a marketing programme and is working hard to attract traffic. The same issue arose when I was running Aer Lingus. It is a question of which airport international customers want to use. Without a major population centre as a base, it is very difficult to provide a full schedule of flights elsewhere in the State of the scale provided in Dublin. All the relevant studies have indicated this. Airlines are encouraged, however, by the airport authorities in Dublin, Shannon and Cork to see whether the load can be better distributed.
What about a second airport?
Mr. McGann
That is not a matter for us.
I wholeheartedly endorse Deputy Shortall's comments on her personal experience of Dublin Airport. It has endured much unwarranted bad press. On some occasions when congestion at the airport was in the headlines nationally, I went out there to see for myself and wondered what all the fuss was about. It is important to acknowledge the extent to which some of this bad press is unfair.
I will be brief with my questions to facilitate as comprehensive a response as possible. Does the capital expenditure plan for Dublin of €1.2 billion for the next ten years include any contingency for Cork or Shannon airports or any contingency for the shortfall in the workers' pension scheme?
With population growth rates at their current levels, is it not the case that even if the second terminal is built and fully commissioned by 2010, we will still be playing catch-up? My conservative calculations indicate there could be 30 million passengers by 2009 or 2010. If our experience in recent years is to be exploited, we should now look to the prospect of building a third terminal. What is the delegates' view on this?
I have been specifically asked to raise my final question. The team of international consultants available to the authority was described to me as akin to Roman Abramovich's team of international football stars. Even with these consultants, however, in addition to the undoubted in-house expertise, how was it that nobody knew planning permission was needed for the tent that is to be erected?
Mr. McGann
I will deal with the last question first. The decision on the tent was taken relatively recently and discussions are ongoing with Fingal County Council. We are reasonably satisfied the issue will be resolved by July, as originally planned. On the question of whether tents require planning permission, there are people more informed than I. It seems they are required in some instances and not in others — the issue is not as black and white as the Deputy suggests. The professionals we have engaged are experts in slightly more advanced fields than tent technology.
The €1.2 billion capital programme relates only to Dublin Airport and does not include any contingency plans for Shannon or Cork airports. Neither does it make any assumptions about pensions or pension deficits. Current pension arrangements are being honoured and commitments to employees in this regard are being met. The business plan for Dublin Airport will, however, have regard to the outcome of these issues. Mr. Collier will answer Deputy Glennon's other question.
Mr. Collier
The projected capacity in the demand profile for Dublin Airport envisages passenger numbers in the region of 30 million to 35 million in the next ten years. We will be playing catch-up until 2009 when we deliver the second terminal. The current growth rates we are experiencing in the airport are something of a blip. We are quite happy that the demand profile we have envisaged, of 30 million to 35 million, will mean the facilities we deliver in 2009 will be more than enough to cater for the demand.
However, as part of the Government decision last May on the delivery of increased capacity at Dublin Airport, we were asked to examine the further development of the airport following the delivery of the second terminal. That work will begin in 2008 and will examine other areas where we might build capacity to cater for continued growth because Dublin undoubtedly has a very bright future ahead of it.
Mr. Collier is saying that the 15% increase this year can be viewed as something of a blip and growth rates of 10% can be anticipated in future.
Mr. Collier
We had been looking at growth rates of between 8% and 9% on average over the years. The increase this year was very large because Aer Lingus and Ryanair increased their business significantly, but the figures will fall back again. The increase represents approximately 3 million passengers this year, but that will fall back to 1 million or 1.5 million over the coming years.
I welcome members of the delegation and ask them to outline the current position regarding the debt of Shannon Airport. If the debt were to be paid off right now, what would that cost?
Mr. McGann
The debt at Shannon is €100 million.
I thought it would be a figure that would be to the forefront of Mr. McGann's mind and that he would not have to spend too much time thinking about it.
This issue must be examined from a regional spatial strategy point of view. I fully understand the importance of Dublin Airport. Reference was made to distributable reserves of €140 million. I am not an accountant but that appears to mean that the authority has €140 million that can be distributed if necessary. Is that correct?
Mr. McGann
Yes.
What size is the debt at Cork Airport?
Mr. McGann
It is in the order of €200 million.
Therefore, €300 million is owed but the authority only has reserves of €140 million. Is that correct?
Mr. McGann
Yes.
Can Mr. McGann see the difficulties that the two regional airports face? The main players in the industry are in action in Dublin, for obvious reasons, not least the fact that it is estimated that 30 million people will be using the complex shortly. The authority must accommodate those people but can Mr. McGann imagine what the people in the regions are thinking while this is going on? The authority does not have enough money to pay the debts of the two regional airports, although they were told by the former Minister for Transport, Deputy Brennan and others, that their debts would be cancelled at a given point in time.
Is it not reasonable to assume that there are dark clouds hanging over those two airports, given that there are so many problems at Dublin Airport and the authority has an investment programme for it which must be, by its very nature, expansive? We have been discussing the business plans for both Cork and Shannon but it is likely that rather than expand, those airports will be forced to retract from their current position. Is that what we want or should we have positive discrimination towards the regions with regard to road, rail and airports, to ensure a counterbalance to Dublin? That is the bottom line. We constantly advocate regional development but now it appears that if the authority does everything it should from the point of view of Dublin, there will not be much left for Cork and Shannon.
Mr. McGann
The mandate of the Dublin board, which is understood and accepted, is to seek to separate the three airports. The aim of that policy was to try to ensure that each airport would develop satisfactorily in its own region. It was based on the view that staff at Cork would develop Cork Airport better than staff in Dublin could, and the same applies to Shannon.
Since the authority took over, and especially in the past year, both Shannon and Cork airports have grown their activities quite significantly. The issue is more fundamental than Dublin's capacity to separate the airports. Shannon Airport is not viable. It is losing money. Positive discrimination is already happening. If it were not, Shannon would not be able to continue to survive as it has done in recent years. In the past year or two, it has been supplementing its income and getting into positive cash flow mode because of military traffic, which is not something it can depend on in the long term. That business is already declining.
The issue for Shannon and Cork in the first instance is to create a viable business plan so they can stand alone, survive and thrive under the new authority. Once that is done——
Is Mr. McGann saying that there is no reasonable prospect of that happening for a number of years?
Mr. McGann
Is the Acting Chairman asking about the prospect of us separating them or of them being viable?
My question relates to the prospect of them being viable as airports.
Mr. McGann
There is no prospect at all of Shannon being viable in the near term with its current cost base.
Therefore, there is no question of it being severed, in accordance with the terms of the Act.
Mr. McGann
In accordance with the mandate we have, which is that the airports must have viable business plans, the Acting Chairman is quite correct. There is no possibility of——
Delegated authority or no delegated authority, it will still be part of the Dublin Airport Authority.
Mr. McGann
Yes, and the consequences of that are problematic in their own right in that the DAA gets no compensation for losses in Shannon, and presumably rightly so. Furthermore, the DAA has not built into any of its financial plans an assumption that Shannon losses will continue to be funded by it. I do not mean to be trite, but we have a commercial mandate and it does not include positive discrimination.
All I will say to Mr. McGann is that if we were to adopt that maxim for the whole country, we would not have a railway, road or airport anywhere outside of Dublin. That is the problem with the principle to which Mr. McGann refers.
Mr. McGann
Absolutely, but the authority's mandate will have to be changed if it is to pursue the type of programme advocated by the Deputy.
We will come back to that at a later date.
Mr. McGann mentioned that the authority has a commercial mandate to operate three airports. Given what he has said to the committee so far, does he believe the authority has been successful in that regard? I suggest it has not been successful, especially if it is supposed to be operating to a commercial mandate.
Will the delegation explain the situation regarding the pension under-provision? A sum of between €170 million and €180 million was spent on Cork Airport. If the process of unbundling the airports had not commenced two years ago, who would have paid for developments at Cork? If the authority is to focus on its commercial mandate, who will pay for developments in Limerick?
Mr. McGann has said the authority will deliver its capital investment programme on time and on budget. However, it will be grossly underfunded to the tune of approximately €300 million because of the regulator's under-provision on the airport charge. Given that the airport charge is so low by international standards, why did the regulator only agree to an increase to €6.14 as opposed to €7.50?
The authority has received plaudits today regarding customer service, but how long can the kerb capacity at Dublin Airport survive with the way people are being ejected from their cars? A private business could not do what is being done at Dublin Airport. I am referring to how people must get out of their cars and access the airport. People are going up the ramp on three lanes, pulling in and out, and it is unregulated. One may say it is regulated because there are lines there but it is dangerous. Could a private operator do that? Plaudits have been given for the Dublin Airport Authority's service but it is a dastardly service when one arrives home and must wait for a taxi to be called. That is not a proper customer service.
To follow up on what Senator Morrissey said, I am astonished that any plaudits could be given to the Dublin Airport Authority for its customer service. Perhaps the DAA's chairman and chief executive could comment on the fact that the Chambers of Commerce of Ireland have consistently voted Dublin Airport as one of the worst airports in Europe that any of their members have had to use. How can that be reconciled with people saying the customer service is good? I think it is abominable. Some of us at this meeting are living on a different plant.
I will cite one or two matters to which I would like answers. Dublin Airport is supposed to be about giving service to customers, but it is the introduction to rip-off Ireland and lives up to its name. It is the gateway to rip-off Ireland and the DAA bears a heavy responsibility for that. I would like to hear the chairman's comments on these facts. When customers come in to the airport, at various times — I was there last Friday week — they find that the foreign exchange service is not open after 11 p.m. when many flights are still arriving. People have money to change but nowhere to change it. How can visitors operate on that basis when they get to Dublin? Why does the DAA tolerate that situation? The foreign exchange rates at Dublin Airport are the highest in Ireland. In recent years, they have occasionally been found guilty of gross overcharging beyond the mandate given to them by the DAA. That is a complete and utter rip-off.
The car parks are utterly unsatisfactory. It is not just the extortionate amount charged per day but also the short-term car park which is a farcical experience for anyone to go through. Unfortunately, I have to travel through the airport regularly. I was there the other day waiting for a short-term car park bus for a long period for no apparent reason. A bus passed me by which had staff at the front but no passengers. This is typical of what one sees at Dublin Airport. The customers are treated with utter contempt. When I came out the time before to try to exchange my ticket for the short-term car park, three machines in a row were not working.
These are simple things. Let us forget about all these distributable reserves the chairman was talking about in a lofty manner. Let us talk about the customer, the person who has to go through the airport. It does not take very much to look after him or her in terms of machines, car parks and short-term car park buses, yet those things are mismanaged. That is indicative of the fact that the DAA, which was formerly Aer Rianta, is a monopoly. There is a monopolistic attitude that because they have customers by the throat, they can kick them around and there is nothing they can do because there is no competition.
A change of culture is required and I would like to hear the DAA's comments on this. The DAA has a new board. The last one was politically appointed in the worst possible way. The new board has been politically appointed again, but the last one was so identified with people attached to political parties that it was run like a Soviet-style organisation. It is not so much like that now but the cultural attitude is the same as it always was — the customer does not count and is ripped of. That is something the board must get to grips with long before it tackles the macro issues.
Senator Morrissey raised the issue of landing charges. The DAA did not get the €7.50 it wanted but got €6.14. The DAA said then that there was no plan B if it did not get what it wanted. Is there a plan B now for the deficit the DAA talked about as a result of that decision by the regulator?
How much money does the DAA pay to be a member of IBEC, of which Mr. McGann is also the chairman? Does the board think that membership is worthwhile and what does it get out of it?
Mr. McGann
I thank members of the committee for their questions which I will deal with in sequence. Senator Ross said he was astonished at the plaudits Dublin Airport was receiving from some members. I would be astonished if he was not astonished, quite frankly, based on his track record. It is very easy to speak against the motion in any situation.
The relative performance of Dublin Airport must be examined in the context of what the DAA and the management are dealing with — an airport that is seriously constrained, had suffered under-investment over a number of years and is trying to cope with the success of this country. I am quite sure many people are fed up with the negativity about this country. Most of the problems we are dealing with here are those of success. There is no question that there are challenges about customer services in a number of areas. It is impossible to respond to some of the points the Senator made because I do not know whether it is 0.01% of the time or whatever. I am sure in some instances it is and it may be more in others.
There is no question but that Dublin Airport is constrained. I probably travel through Dublin Airport a great deal more than the Senator, given that I travel five days in most weeks. On average, I travel through about 35 to 40 airports each year and the comparison with Dublin is not as odious as the Senator would suggest. The DAA is clearly trying to advance this situation in a manner that is inclusive, consultative and progressive. The doctrine of knocking will not achieve anything. The principle that the beatings will continue until morale improves is a flawed concept.
I will move to the specifics of the commercial aspect, which Senator Morrissey raised. We have a commercial mandate and are commercially successful. We have made profits every year since our inception. We must deal with some airport situations that are not performing to the standard commercial mandate. I went on a bit about Shannon, so I will not repeat myself. By any standards, there is a commercial mandate in operation. The key question is whether we are making sufficient funds to reinvest in a capital intensive industry that is growing beyond belief and is significantly greater than any airport authority in the world right now.
As regards the question of whether there is a plan B, the regulatory process is not over. It is worth noting that in the appeals process, the appeals commissioners effectively supported the Dublin Airport Authority's position on many of the issues it raised. It has sent recommendations back to the regulator, which we hope will help the regulator to move forward in terms of the airport charges he has agreed to give us. The process is not over and, obviously, like any organisation, when we finish that process, we will have to see what is the situation. It is quite simple. We will spend and build to the extent that we have the financial capability to do so. If that is not adequate to the current plans, we will probably have to modify them. However, we certainly cannot continue to support loss-making or under-performing businesses at the same time. If we have a commercial mandate then we need to act to such a mandate and that requires us to deal with some of these loss makers.
Does Mr. Collier want to take up the pension issue?
Mr. Collier
An under-provision in the pension scheme was mentioned. In terms of the valuations that have been carried out, our accounts do not see that there is an under-provision in the pension scheme. We are aware of the significant amount of media comment that has been made on the Aer Lingus initial public offering. As we are joint members of the scheme, we have been in touch with the Department of Finance, the Department of Transport and Aer Lingus, and we await the outcome. If necessary, we will respond accordingly when there is some clarity on that.
I asked about capacity and the manner in which people are expected — if the airport is growing at 3 million passengers per annum — to alight from their cars and get in.
Mr. Collier
With regard to the kerb capacity, that system at Dublin Airport has been fully vetted and passed by safety officers. It is not a dangerous system but one which has been passed. It is not an unusual system and it exists in airports throughout the world. It is not ideal, and it is something we would like to improve over time. However, given the constraints at present, it is the best we can do in the circumstances. We will work to improve it but we are very limited in what we can do.
How much does the DAA pay for membership of IBEC and what does it get out of it?
Mr. McGann
It pays approximately €120,000 per annum. It gets the same representation as any member of IBEC in the context of social partners and many other issues. I suspect that is probably the only direct answer the Senator will get to that question this week.
Mr. McGann may be right.
I thank Mr. McGann, Mr. Collier and Mr. Cussen for attending. We appreciate their time and the comprehensive nature in which they answered questions. We look forward to dealing with them again.