Tuesday 24 October 2017

Aer Lingus chief says today’s passengers should not pay for tomorrows’ runway

Aer Lingus ceo Stephen Kavanagh is focused on developing the airline’s ‘quality of network’ rather than a great spread of destinations
Aer Lingus ceo Stephen Kavanagh is focused on developing the airline’s ‘quality of network’ rather than a great spread of destinations
John Mulligan

John Mulligan

There's "no reason" why the State should continue to own terminals at airports including Dublin, according to Aer Lingus ceo Stephen Kavanagh, who has also argued that privatised infrastructure would be operated even more efficiently.

"You can separate runways and terminals," he said in an interview with the Irish Independent. "I think runways are of such strategic importance, particularly for an open economy as Ireland is, that there continues to be a role for some regulatory or State involvement in runways."

Dublin and Cork airports are operated by the semi-state DAA, while Shannon now operates as an independent, State-owned facility. Aer Lingus is now part of International Airlines Group, which also owns British Airways, Iberia and Vueling.

"With terminals, I think it's a different issue," he insisted. "There's no reason why the State needs to own the terminals. It's not to say they are doing a bad job at it.

" The competitive dynamic in the provision of most services ends up with a more efficient solution."

There are currently two terminals at Dublin Airport, with the €600m Terminal 2 which opened in 2010 already operating at or close to capacity. The DAA has also been investing heavily in Terminal 1, spending millions on a revamp of the facility.

Last year, Transport Minister Shane Ross said a capacity review of Dublin Airport would consider the pros and cons of a privately-owned third terminal.

Mr Kavanagh added that he's not "indifferent" to the third terminal being privately owned.

"As long as there's a competitive dynamic - either through regulation or the open market," he said. "Our ambition is to pay competitive prices for appropriate infrastructure."

Dublin Airport handled a record of just under 28 million passengers last year, and is building a third runway at an expected cost of €320m, which includes associated infrastructure.

A 59 cent increase in passenger charges has been proposed by the Commission for Aviation Regulation (CAR), which regulates such charges at Dublin Airport, to ensure the DAA has sufficient financial resources to meet the cost of the new runway, which is expected to open in 2020, and to maintain its credit ratings.

"We'd have issues in the short term as to whether existing infrastructure is being fully exploited," said Mr Kavanagh.

He said that a way needs to be found to finance such projects over their economic life, and not "frontloading the recovery of capital". "There are reasons as to why a single overview of how an airport evolves as an ecosystem is of value, but as many of the components as possible within that system that can be opened to competition is a positive," said Mr Kavanagh.

He criticised the fact that passengers will pay for a runway that he claimed "ultimately does not add any value to them".

He claimed there's "something wrong" when the DAA wants to raise prices to build infrastructure to enable growth.

He said the cost of jets Aer Lingus has added to its fleet in the past 18 months is more than the cost of the new runway.

"We're financing in the open market."

Mr Kavanagh added: "The DAA runs a good business. It's capable of raising finance. The question I'd have is - is that finance for building hotels?"

Indo Business

Also in Business