'Ryanair takes the benefits of air investment, but won't pay for it'
Airport authority insists its facilities are efficiently run
Published 29/04/2010 | 05:00
For the Dublin Airport Authority, 2009 was a true annus horribilis. Unfortunately for its chief executive Declan Collier things haven't been a whole lot easier in 2010.
Ice, snow, a volcanic eruption -- all have made a bad situation even worse, as passenger numbers at the three airports under its control -- Dublin, Shannon and Cork -- face a continued decline amid economic despondency. At Dublin, which accounts for 65pc of all air passenger traffic into the island of Ireland and 75pc of traffic to the Republic, passenger numbers sank to 20.5 million last year from 23.5 million in 2008. This year, Collier expects the figure to shed a further 1.5 million, while in the first quarter of this year they're down 14pc. It's a long way from the heady days when congestion at the airport was a major bugbear and runaway growth driven by well-heeled consumers.
The aviation regulator's office -- more on that later -- doesn't think passenger figures at Dublin will recover to 2008 levels until 2014.
Releasing results on Tuesday for 2009, the semi-state Dublin Airport Authority (DAA) posted a staggering 51pc decline in its group profits, excluding exceptional items, to €38m.
Turnover tumbled 13pc to €547m while combined passenger numbers at the three airports fell 13pc to 26.1 million.
Factor in the exceptional €46.5m related to its 450 staff layoff plan and the DAA was €13m in the red for 2009 -- not a happy place to be for any CEO.
"There's no doubt that the economic situation in Ireland hit us very hard in 2009," he says. "Our industry is particularly vulnerable -- it's right on the edge of any substantial hit to the economy, so we tend to feel things faster than many other parts of the economy."
If things weren't bad enough without the economic situation, the closure of Irish airspace due to Iceland's volcanic eruption cost the DAA an estimated €7m to €8m, while a maelstrom of various issues from the soon-to-open Terminal 2 (T2), airport charges and political fury over the Ryanair-Aer Lingus-Hangar-6 issue have all served to make the past 18 months even more eventful.
Shannon, meanwhile has felt the full wrath of the downturn, with Collier conceding that it has a tough but, he says, achievable task of repositioning itself for growth.
Other smaller regional airports, he adds, will eventually have to consolidate, to allow "focused investment".
Collier, who is on the board of Allied Irish Banks as a government appointee, and who spent years working in the private sector with Esso, is quick to bat away any suggestion that the DAA has been failing to deliver, particularly on the infrastructural and operational side.
"There are three great myths about the DAA," he says, speaking over coffee at Dublin's Westbury Hotel where he will later deliver the company's results at a press conference.
"One is that we're very inefficient. The second is that we've high charges and the third is that we receive funds from the Government."
Collier maintains that on first count, independent studies have shown that the DAA, and particularly Dublin Airport, is efficiently run.
He also repeats the mantra that despite an up to 40pc hike in passenger charges approved before Christmas by the aviation regulator, Dublin Airport remains the lowest-charged airport of its peers in Europe.
The line that Collier has to walk is, admittedly, a somewhat unenviable one, especially in the current economic climate.
Still, there has been justifiable scrutiny of the capital expenditure undertaken by the DAA at Dublin, which will involve a total €1.2bn spend -- roughly half of it on the new terminal due to open in November. That has also spurred the DAA's gross debt to €1.25bn and net debt to €616m (that net debt will top €1.1bn over the next year). Earlier this year, ratings agency Standard & Poor's cut the rating on some DAA bonds and added that it expects the company's financial profile to "materially weaken" because of declines in passenger traffic.
Ryanair boss Michael O'Leary has consistently been the biggest critic of T2, which is designed to handle 15 million passengers a year. He has labelled it a "white elephant", arguing that a terminal could have been built for a fraction of the cost.
Collier remains unrepentant, and also dismisses the notion that a privately-built and operated terminal would be a viable alternative.
"It's an absolute fallacy to say that there was too much money spent on investment at Dublin Airport," he argues, saying T2 will serve for the next 50-plus years. "There was a huge consultation process. Every single airline with the exception of one -- Ryanair -- supported that. Ryanair has never supported any investment at Dublin Airport. Ryanair is quite happy to take the benefits of investment at the airport, but refuses to pay for it."
That the DAA will be able to charge passengers up to 40pc more for using Dublin Airport once T2 comes on stream is what irks the authority's biggest customers, not just Ryanair, but Aer Lingus and CityJet too.
Transport Minister Noel Dempsey effectively strong-armed the aviation regulator last year via a ministerial 'direction' to make sure the rise in charges it was about to grant for the five-year period to 2015 were of a magnitude to ensure the DAA could service its debt and cope with its operational costs.
Construction of a planned second runway -- vital, says Collier, if some Asian carriers are to be able to service Dublin, is on hold and unlikely to happen before 2012. That will involve significant further cost.
Collier says he has been asking the aviation regulator's office, which has been headed by Cathal Guiomard since 2006, "for quite a number of years" to phase in higher charges over a period of time.
"The regulator failed to do that. We now find ourselves in a position where rather than granting those increases when we first requested them five years ago and allowing the increases to be feathered-in over a period of economic plenty, we've been given the ability to increase prices at a time of economic scarcity. It's a difficult job we have now to introduce those airport charges."
Part of the increase in charges is dependent on the opening of T2 on time in November -- virtually a certainty. There had been some calls for the facility to be mothballed until passenger numbers rebounded, but testing and formal commissioning of the facility will commence shortly.
Collier remains unsurprisingly optimistic about the prospects for the terminal, which will only be the second location in Europe after Shannon with full United States customs and border pre-clearance facilities that effectively enable travellers to enter the US as domestic passengers and avoid lengthy queues when they arrive there.
The DAA remains in "advanced" talks with Air India, which is considering using it as a hub, while other airlines have also expressed an interest in it, says Collier.
The challenges for Collier and his team are significant, but he remains unfazed.
"I never wake up in the morning and think, God, here we go again," he says. "I'm enthused and energetic about what I do. It's frustrating from time to time.
"No one in business wants to have one of their largest customers continually complaining and carping. We accept the negatives with the positives. It's difficult at times."
It's going to be some time before it gets any easier.