Business Irish

Wednesday 19 December 2018

Aer Lingus agrees Dublin Airport expansion deal as profits rise 15pc

Aer Lingus CEO Stephen Kavanagh, pictured with cabin crew, said the airline is poised to lease another long-haul Airbus A330 and overall capacity will rise 9.7pc this year
Aer Lingus CEO Stephen Kavanagh, pictured with cabin crew, said the airline is poised to lease another long-haul Airbus A330 and overall capacity will rise 9.7pc this year
John Mulligan

John Mulligan

Aer Lingus has “reached an agreement” with the DAA regarding plans for infrastructural development at Dublin Airport to enable continued expansion by carriers, according to the airline’s chief executive, Stephen Kavanagh.

But Mr Kavanagh and IAG CEO Willie Walsh have both warned that capacity constraints at Dublin Airport continue to risk airlines’ growth plans there.

However, despite the concerns, Mr Kavanagh revealed that Aer Lingus is poised to lease another long-haul Airbus A330, which will bring its wide-body fleet to 14 jets during the summer.

It will also start taking delivery next year of an order of eight A321LR jets to expand its North America operations.

The executives were speaking as IAG, which also owns Iberia, Vueling, Level and British Airways, released full-year financial results. Aer Lingus recorded a €269m operating profit last year, up 15pc on 2016. Its revenue climbed 5.3pc to €1.85bn.

Capacity at Aer Lingus jumped 12.1pc last year as it added more routes and expanded existing services.

Its capacity will rise 9.7pc this year. It’s launching a service between Dublin and Seattle this year and in 2017 inaugurated a service to Miami.

Apart from progressing a €320m runway plan, the DAA is now planning to spend another €285m on a number of projects that will include the construction of new aircraft stands on the so-called south apron, as well as taxiways and additional immigration facilities in both existing terminals.

An already complete extension to the existing Pier 1 has also been included in the calculations. The bulk of the €285m of projects will be delivered between 2019 and 2021.

That’s all on top of the €100m a year that the DAA has been spending on Dublin Airport improvements.

The Commission for Aviation Regulation (CAR) has indicated that it intends to allow the DAA — whose CEO is Dalton Philips — to recoup €267.5m of the required funds for the latest 23 capital projects through potentially higher passenger charges.

“This is the difference between a commercial operation and one that relies on a regulatory guarantee of profit,” said Mr Walsh.

“Aer Lingus has been growing, spending money on new aircraft… which means they [the DAA] get more passengers, but the average prices [fares] would have fallen.

“We don’t put our prices up when we get new aircraft,” he said. “That’s the same argument we have with airports. “There’s nothing stopping them building new infrastructure, which then generates more business, gets more people coming though the airport – they should be seeing their average passenger charge reduce, not increase.

“It’s just a fundamental difference of opinion as to how your business operates. We take commercial risk. The airport should do the same.”

But in 2014 – the year before it was acquired by IAG – Aer Lingus told the CAR that no further infrastructure development was required by Dublin Airport. Meanwhile, passenger numbers have now surged to close to 30 million a year at Dublin, while Aer Lingus has itself significantly expanded.

An airport source also pointed out that the pace of passenger growth at Dublin Airport wasn’t envisaged by airlines, the CAR or the DAA.

And despite the criticism of the DAA’s infrastructure rollout, Mr Kavanagh said engagement so far with Mr Philips has been “excellent”.

 “There’s a recognition that, not just from an Aer Lingus perspective, but from an airport perspective, infrastructure is required,” said Mr Kavanagh.

“I think there’s now a joint agreement in terms of where and how the Aer Lingus ambition can be fulfilled in terms of the development of the south apron.”

He added: “The question then of course is how quickly it can be delivered. While we can see summer ’18 operating, beyond summer ’18 we’re seeing pinch points.”

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