I thank the committee for the invitation to address it on the company's recent annual results and its current trading position.
The global downturn had a marked impact on the DAA's financial performance last year. The Irish economy has been particularly affected by the downturn and as economic output declined both at home and in the UK, which is our largest trading partner and a key provider of air traffic into and out of Dublin, Cork and Shannon airports, this had a direct effect on our operation. Passenger numbers at our three Irish airports declined by just under 13% to 26.1 million in 2009. Retail sales are an excellent barometer of domestic economic activity, as they account for about half of all Irish consumer spending, and the fall in passenger numbers at our airports effectively mirrored the decline in Irish retail sales last year.
Despite the drop in traffic our airports played a pivotal role in the Irish economy last year, handling 96% of all international air traffic into the Republic of Ireland and 75% of all air traffic to this island. Turnover declined by 13% to €547 million while group profit, excluding exceptional items, decreased by 51% to €38 million. Taking into account a number of exceptional items, the group recorded an after tax loss of €13 million for the year.
Current trading continues to be difficult as economic conditions remain weak in Ireland and the UK. The company was also hit by the volcanic ash disruption which closed and restricted Irish airspace for 11 days in April and May. About 5,000 flights were cancelled and this affected the travel plans of more than half a million DAA customers.
We estimate that these disruptions have cost the company up to €9 million in lost revenue. As part of our customer service commitment we refunded aircraft parking charges to our airline customers for planes that were stranded at our airports due to the impact of volcanic ash. We also ensured that car park customers were not charged for any extra stay as a result of the disruption.
Passenger numbers have continued to decline this year, and those declines have been exacerbated by the volcanic ash disruption and the impact of severe weather across Europe in the early part of this year. The DAA responded quickly to the downturn by taking substantial measures to reduce its cost base and by introducing incentive schemes to stimulate growth. We agreed a landmark €38 million cost recovery programme with staff late last year. Under this programme, approximately 300 people left the company under a voluntary severance scheme, a further 150 temporary contract positions were not renewed and significant changes in work practices were agreed.
Staff at the company also voted to accept voluntary pay cuts ranging from 0% to 12% depending on their annual salary and a pay freeze until 2012. The average pay reduction was 5.5% while those earning less than the annual equivalent of €30,000 saw no reduction in their pay. A unique element of the agreement is the ability for pay levels to be restored if the company meets certain agreed profit targets in the future.
A total of 71% of the staff voted in favour of these cost-cutting measures and I again publicly praise my colleagues across our three airports for endorsing the company's cost-recovery plan in such significant numbers. Voting to accept a reduction in one's pay is never easy, as members of the committee know, and the company's staff deserve both recognition and praise for supporting this course of action. As a result of this action and prudent management of all operating costs, the DAA has reduced its costs to 2005 levels. All of these changes were managed without any disruption to the operation of the airports despite a very volatile industrial relations environment both within the sector — with the IAA and Aer Lingus — and on a national level.
Staying with the issue of costs, I would like to set the record straight on airport charges at Dublin Airport. In recognition of the difficult environment facing the aviation sector, the DAA froze its airport charges at Dublin Airport for the first four months of this year. Even with the recent increase in airport charges stipulated by the Commission for Aviation Regulation, Dublin Airport's charges for this year will be 25% cheaper than the €12.50 average charge levied in 2008 by comparable European airports such as London Stansted, Gatwick, Brussels, Lisbon, Copenhagen, Munich, Vienna and Oslo. There are very few other Irish service providers that will charge their customers 25% less this year than their European peers were charging two years ago.
It is also worth noting that airport charges, commercial revenue, and borrowings are the DAA's only sources of revenue as the company receives no Exchequer funding whatsoever and in fact is a net contributor to the State in the form of taxes and dividends. Last year a dividend of €19.4 million was paid to the State.
Despite being one of the most efficient airport operators in Europe, as independently verified by a number of studies, the DAA will continue to remain focussed on its cost base. As providers of vital elements of national infrastructure, the DAA must continue to take a long-term view of the requirements of the Irish economy and invest in improving and maintaining its facilities for the benefit of the tourism and business sectors. In this context, I am happy to report that the main construction phase of terminal 2 at Dublin Airport has been completed and we are now beginning to test and commission the new facility ahead of its opening this November. The Minister for Transport has confirmed that the DAA will operate terminal 2. The recruitment of 500 new staff to operate T2 has started today and members will see advertisements to that effect in tomorrow's media. The 500 new staff will be responsible for all passenger services and facilities management at T2, and will be involved in tasks such as security, cleaning, customer service and passenger processing.
The opening of T2 will transform the passenger experience for everyone who uses Dublin Airport and we look forward to welcoming the travelling public to the new terminal. Providing infrastructure is a long-term business and T2 will be used by passengers for decades to come. Dublin Airport's original terminal for example, which celebrates its 70th birthday this year, is still in use by passengers today. T2 is just one element of a €1.2 billion five-year investment programme that is radically improving the passenger experience at Dublin Airport. Our customers are also benefiting from an extension to the existing terminal, a new boarding gate facility, pier D, a major programme of improvements to the airfield, the provision of improved utilities and environmental management systems, and a new road network that is almost complete.
The improvements in facilities that we have been making to our airports, such as terminal 2 in Dublin, the new terminal at Cork Airport and the provision of a new US customs and border protection facility at Shannon Airport, provide the foundations for future growth. Overall the DAA has invested €1.6 billion in new and improved facilities at its three Irish airports over the past five years.
While current trading conditions are difficult, we are looking to renewed modest growth from next year. The long-term pattern for air traffic shows that after every major economic or geopolitical shock, there is a subsequent return to sustained growth and as infrastructure providers we must take the long-term view.
As an open, export-led economy, Ireland relies heavily on the aviation infrastructure that the DAA owns and operates to meet the needs of both the tourism and business sectors and ultimately drive economic growth. The recent volcanic ash events show how critical connectivity is for an island nation and we remain committed to providing quality cost-effective facilities for all our customers.
I thank the Vice Chairman and the other members of the committee for their time and attention. I am joined by the company's deputy chief executive, Oliver Cussen, and our chief financial officer, Ray Gray, and we are happy to take any questions members may have.
