Friday 15 December 2017

'How can you have an independent regulator if the same player is trying to get a dividend?' - Airline body questions state role as airport owner and regulator


Airlines for Europe (A4E) members include Ryanair and Aer Lingus owner IAG
Airlines for Europe (A4E) members include Ryanair and Aer Lingus owner IAG
John Mulligan

John Mulligan

There's no reason why airports such as Dublin's should continue to be state-owned, especially when governments have a vested interest in them through the receipt of dividends from the facilities, according to the chief executive of lobbying giant Airlines for Europe.

Speaking to the Irish Independent, Thomas Reynaert questioned the relationship between regulators and governments. Airlines for Europe (A4E) was founded last year and its members include Ryanair, Aer Lingus owner IAG, Lufthansa, EasyJet, Air France-KLM and other European carriers.

"What we see in a lot of European airports is that the regulator and the person getting the dividends from the investment is the same - it's the government. How can you have an independent regulator if the same player, the government, is trying to get a dividend?" he said.

Airport charges at Dublin Airport are regulated by the Commission for Aviation Regulation (CAR).

It seeks stakeholder input when determining the maximum allowable passenger charges at Dublin, and sets the allowable rates based on a range of factors such as the expected capital expenditure to be shouldered by the DAA, and the number of passengers likely to use the airport within a specified timeframe.

However, the CAR's determinations can effectively be over-ridden - and have been in the past - by the Minister for Transport. The minister can direct the CAR to ensure the DAA has sufficient funds to implement Government policy, which typically means ensuring it has enough to invest in infrastructure. Last year, the DAA paid an €18.3m dividend to the State.

The DAA argues that its passenger charges are among the most competitive in Europe.

"You have to have a clear division between the aegis of government ... looking for a return on investment on one hand, and having a truly independent regulator on the other hand," said Mr Reynaert.

But Mr Reynaert said A4E is "agnostic" about the private ownership of terminals for instance, as long as the terminals are as efficient in terms of cost and operations as possible.

Speaking to Newstalk Breakfast on Tuesday morning, Mr Reynaert the Commission will "hopefully" come out with a list of recommendations of how member states can avoid strikes.

"We have also talked to some French presidential election candidates and we have asked that strikers give 72 hours notice of their action. Marcon’s team quite receptive to our ideas, they are looking for a practical solution, lets see what the final result of the election says and how the parliament is composed politically," he said.

"Italy is a different case, they have been able to notify us in advance and have a plan B in place," he added.

Mr Reynaert told the radio show that the aviation sector and airline business is "the only business fully paying for its own infrastructure, we want to keep the price of tickets down".

"The tax on fuel – non existent VRT on fuel - is the result of international negotiations. We don’t get the subsidies that rail and road get to on net I think it’s fairly balanced. We want to make sure that our passengers continue to benefit from the results of a liberalised market," he said.

Dublin Airport handled just under 28 million passengers last year and this year the tally is likely to approach 29.5 million.

A review of airport capacity being undertaken for Transport Minister Shane Ross will analyse the possibility that a third terminal at Dublin would be privately operated.

Mr Reynaert also said that it was too early to say how the aviation sector will be impacted by Brexit. Ryanair chief marketing officer Kenny Jacobs has argued that if the UK and the EU cannot agree a Brexit aviation deal by next year, it could leave the UK - at least temporarily - without any flights to the EU once Brexit happens in 2019.

"We are struggling to see how it's going to impact our business," said Mr Reynaert of Brexit. "We want the consumer to continue to enjoy the same freedom of travel as they have done until now. What this means in legal and political terms, it's very early days."

Irish Independent

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