Wednesday 26 November 2014

Kevin Toland: DAA’s big cheese maps route for growth

Interview: Kevin Toland, Chief Executive, Dublin Airport Authority

Published 05/06/2014 | 02:30

Kevin Toland took a salary cut of around €700,000 to become DAA chief executive. Photo: Grant Pritchard.
Kevin Toland took a salary cut of around €700,000 to become DAA chief executive. Photo: Grant Pritchard.

Three Ryanair aircraft are parked on the tarmac just across from Kevin Toland's office window as he grabs a soft drink from the mini-fridge in the corner and sits down at the small conference table.

Eighteen months into the job as chief executive of the Dublin Airport Authority (DAA), the Navan native has managed to repair what was, at least publicly, an estranged relationship with the airline. They may have worked well on an operational level, but in the press, Ryanair and the DAA were usually at it like cats and dogs.

For years, Ryanair bashed the semi-state DAA for everything from the cost of the T2 terminal to the charges it levies on passengers and the costs for check-in desks. The DAA has frequently replied in kind.

The former head of dairy group Glanbia's North America business disappointingly says he won't be drawn on individual customers.

"I would prefer not to comment on the past at all," he says, following it with a reply that could be right out of the 'How to Respond to Media Questions Without Really Answering' handbook.

"I work very hard for all our customers to try and make sure we're doing a really good job for them. We've enjoyed good development over the past year."

Last year, Ryanair announced a significant expansion of its routes from Dublin, while Aer Lingus has launched services to San Francisco and Toronto and other carriers such as Etihad and Emirates have also increased capacity to and from Dublin.

Toland (48) is a likeable guy but is loathe to divulge much about of his personal life or interests. Coming from the private sector, he has a pragmatism and consumer focus that probably helps him to operate the DAA (which includes Dublin and Cork – Shannon is now an independent entity) as the "factory" which he likens it too.

Toland was living in Chicago and travelling away from home about 150 nights a year before he got tapped on the shoulder about the DAA job. He says it was the ideal time to decide whether he and his family (he has a wife and three kids) wanted to live in the US or Ireland.

But there was more than just that: taking the job meant giving up a near €1m-a-year salary at Glanbia for a basic €250,000 before pension contributions at the DAA (the Government-imposed salary cap at semi-states). Transport Minister Leo Varadkar tried to persuade Public Expenditure Minister Brendan Howlin to sanction a €400,000 annual salary for Mr Toland, but that was rebuffed.

Aside from the salary issue, there's the fact that the airports are a favourite political football. He must surely have thought long and hard about whether or not he should take up the post.

"Absolutely. Clearly, the Irish economy had had a really tough time, but it was an opportunity to come in and take on one of Ireland's important companies."

Toland had been working in the food and drink business for about 25 years, so running the airport is something "very different", he says.

He succeeded predecessor Declan Collier (who now runs London City Airport) as passenger traffic at Dublin had suffered a slump following the downturn. From a peak of over 23m passengers in 2007, the figure fell to 18.4m in 2010.

Its finances suffered too, as fewer passengers and reduced retail spend at both Dublin and Cork impacted the bottom line.

But while it could seem like a poisoned chalice job, Toland appears to have jumped in at the right time. The economy is improving and passenger numbers are rising, hitting 20.2m last year at Dublin.

He insists the first thing that struck him when he joined the DAA was the "absolute pride and passion" that its workers have.

"It's a team of people that have been through a lot in terms of trying to put in place infrastructure for growth and after that had to cope with a massive step back in the passenger numbers as the country went into deep recession," he says.

Staff took pay cuts, there were efficiency increases and "hard sacrifices" to ensure the business was able to deal with its financial and other obligations.

The DAA's finances were crimped alongside the decline in passenger numbers and even now the company points out that the operation is barely profitable. Last year, revenue fell 6pc to €501m, while the core business profit declined 7pc to €26m as its international unit – ARI – sold its interests in Russia and Ukraine.

Last week, ARI paid €54m for the 50pc stake in a retail operation at Larnaca and Paphos airports in Cyprus that it didn't already own.

"The big issue for me was what's the strategy to return to growth and success for the company," he explains. "It's how to build good growth momentum and to try and find and support ways to not just bob up and down with the GDP and the economy."

One of those key strategies includes trying to turn Dublin into a transfer hub for passengers crossing the Atlantic.

Dublin Airport is very uncongested compared to Heathrow and some other major airports, and has sufficiently expansive North American network connections to make it an attractive option for passengers from other European countries heading to the US.

Additionally, it has the only US Customs and Border Protection facility in Europe, meaning passengers arriving in America from Dublin land as domestic passengers rather than having to endure long immigration queues when they touch down.

But can Dublin really become a significant transfer hub?

Toland is certain it can, pointing to the 548,000 transit passengers that used the airport last year. He wants to boost that to 2m within the next three to four years.

"It's a tremendous opportunity," he says. "One in 10 passengers from North America to Ireland are using Dublin as a hub. We're the second-fastest growing airport in the EU and the seventh largest airport in Europe in terms of the number of flights to North America, with nearly 300 a week.

"We're not setting out to be either Amsterdam or Heathrow, but we are looking at places like Helsinki," he adds, pointing out that Dublin has the strong business base through the multinational presence here that's needed to support a hub business.

"Before I went to America I thought one in five Americans were of Irish extraction. I discovered when I lived there that it was 100pc," he jokes.

But with growth comes fresh headaches.

Last week, the Commission for Aviation Regulation (CAR), which regulates passenger charges at Dublin Airport, said that it expects the maximum charge per passenger to drop 22pc to €8.35 by 2019.

The DAA insists that the CAR's sums are based on the company having to cut nearly 700 jobs, or a third of its workforce. The CAR maintains that it's not suggesting the DAA cut jobs, arguing that how the DAA achieves efficiencies is up to it. Commissioner Cathal Guiomard warned that employment terms and conditions at Dublin Airport will have to change, however.

Toland claims the regulator's decision to seek a reduction in passenger charges is "totally flawed".

He says that airport charges have been kept flat in recent years and will remain so in the next five. A 22pc cut would leave the charge at "uneconomic and unsustainable levels", he argues.

Meanwhile, Toland has also been trying to steer the DAA through tortuous negotiations regarding a pension scheme with a near €800m deficit that serves thousands of former and current workers at the DAA and Aer Lingus.

It sucks up valuable management time.

"It's taken a lot longer than anyone would have imagined. It consumes management time and it's like a rock in everybody's shoe. We've got 1,500 people here who are part of a pension scheme that's no longer fit for purpose and we need to fix it. There's another 1,000 that can't join a pension scheme, so we need to get that resolved."

Nobody said being the big cheese would be easy.

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