Saturday 15 December 2018

Opportunities in knock

With six out of every seven passengers now choosing Dublin, what can be done to prevent the regional airports falling further behind, asks Dan White

Aircraft landing at Dublin Airport, which is the standout perfomer in the Irish market, and a major player in the hub and transatlantic markets. Photo: Bloomberg
Aircraft landing at Dublin Airport, which is the standout perfomer in the Irish market, and a major player in the hub and transatlantic markets. Photo: Bloomberg

Dan White

While Dublin may be pulling even further ahead of most of the other Irish airports, one other Irish facility has not only regained but exceeded its previous peak passenger numbers. Ireland West Airport, AKA Knock, handled 748,000 passengers in 2017 - 19pc ahead of its previous 2008 peak.

Passenger numbers climbed a further 2.9pc, to almost 353,000, in the first half of 2018. Knock managing director Joe Gilmore expects the airport to handle at least 775,000 passengers in the full year. Gilmore attributes the increase to Knock's strong diaspora market in the UK, as well as the addition of new routes such as Bristol and Edinburgh.

"The airport is ambitious and is much more than a 'regional airport'. We see it as a true gateway for the West of Ireland and it is working hard to gain entry to the transatlantic market with proven demand existing for services to North America and a recently signed partnership agreement with Stewart Airport in New York highlights the ongoing work being done in this regard."

Shortly before the airport first opened in 1986, a financial journalist asked Knock founder Monsignor James Horan if the airport would be a white elephant. Horan cheekily replied that, in the context of the fiscal excesses of the time, it would be only "a little white elephant". Almost a third of a century later is the little white elephant about to have the last laugh?

The latest figures from the CSO show that the number of passengers flying through Irish airports rose by 5.8pc to almost 17 million in the first six months of this year. While passenger numbers were up at all of the Irish airports, Dublin was once again the standout performer with a 6.1pc increase to almost 14.6 million passengers. Cork recorded a 3.7pc increase to almost 1.1 million passengers while numbers at Shannon rose by 5pc to 763,000 in the first half.

The latest figures demonstrate just how dominant Dublin is in Irish aviation - 86pc, or six out of every seven, of all passengers now fly through Dublin Airport. Although it has always been very much primus inter pares among Irish airports, it has stretched its lead even further over the past decade. In 2007, the last year before the economic crash, fewer than three out of every four passengers flew through the capital's airport.

The 2008 economic crash hit all Irish airports hard. Passenger numbers, which peaked at 31.6 million in 2007, had fallen by eight million, or 25pc, to 23.6 million by 2011.

As by far the largest airport, Dublin took the brunt of the fall in passenger numbers, with its numbers dropping by over 20pc, from 23.5 million to 18.75 million between 2008 and 2011.

The provincial airports suffered even more in proportionate terms with Cork's passenger numbers dropping by 37pc from 3.25 million to just 2.06 million between 2008 and 2015.

Shannon's passenger numbers fell by a massive 65pc, from 3.52 million to 1.28 million between 2007 and 2012.

Not alone did the main provincial airports experience far steeper percentage declines in passenger numbers than Dublin, their recovery has been far slower.

While Dublin's numbers exceeded pre-crash levels by 2015 and the 29.5 million who flew through the airport in 2017 was 25pc ahead of the 2008 figure, the 2.3 million who flew through Cork last year was still 30pc down on the 2008 total while Shannon's 1.6 million passengers was 55pc down on the 2007 peak. So does the increasing dominance of Dublin represent a failure of Irish aviation policy? What can or should be done to reverse this dominance? Should Cork Airport also be hived off from the Dublin Airport Authority (DAA), as Shannon was in 2012?

To understand what has happened to both Cork and Shannon it is necessary to probe more deeply. A decade ago they both had very significant domestic business, ie flights to and from Dublin. In 2008 Cork handled 450,000 domestic passengers and Shannon 211,000. The completion of the motorway network has wiped out this business with no scheduled flights to Dublin from either airport.

"Comparisons with Irish air traffic data in 2008 reflect the fact that there were about 1.4 million people taking domestic flights at that point, including almost 500,000 domestic passengers at Cork Airport," said a DAA spokeman.

"Ireland's motorway network and the growth in coach services to Dublin Airport from all over the country has meant this domestic market is now almost negligible.

"The advent of the motorway network also means that most of the State is now easily accessible from Dublin, which wasn't the case in 2008. The Shannon stopover was also still in place, as it was only fully unwound in 2008," the spokesperson added.

Not alone has the completion of the motorway network killed off Cork and Shannon's domestic business, it has also made it much easier for passengers from the provinces and Northern Ireland to fly through Dublin.

About two million passengers from Northern Ireland now fly through Dublin Airport. "This is also traffic which is not being won at the expense of other airports in the Republic of Ireland," the DAA spokesperson argued.

What is attracting passengers from Cork, Limerick or Belfast to take the bus or drive up the motorway to Dublin rather than flying from their local airport?

In operating airports, as in so many other businesses, size matters. There are enormous economies of scale for airlines from using larger airports. Even Ryanair, which for the first 25 years of its existence shunned the large airports in favour of smaller, cheaper ones has started flying into many of the larger airports including Barcelona, Copenhagen and Brussels, in recent years.

And not just the airlines. For passengers a larger airport offers a much wider choice of routes. Transatlantic is just one example of this, with 10 airlines offering 441 flights to 20 North American destinations from Dublin. Its transatlantic passenger numbers have risen by 82pc to 3.5 million over the past five years.

Cork or Shannon will never be able to replicate this level of service, no matter how hard they try.

While the development of the motorway network allied to developments in the aviation sector have certainly helped Dublin to pull even further ahead of Cork and Shannon, there are those who feel that more could be done to help the regional airports.

The capital's greatly increased connectivity has also allowed to build up a large transit business as passengers fly to Dublin to connect with an ongoing flight to their final destination. Dublin Airport handled 1.8 million transit passengers in 2017 and expects more than two million this year.

However, even when one strips out this transit traffic, the increase in transatlantic passenger numbers and passengers from Northern Ireland, it is clear that Dublin Airport has also made major gains at the expense of Cork and Shannon.

"Our primary focus is to have the best level of service at Cork Airport to meet the needs of the business community and the growing tourism sector," said Cork Chamber of Commerce chief executive Conor Healy.

While he praises what he describes as the DAA's "very strong commitment" to growing Cork Airport, Healy says that there is a problem of price competitiveness on certain routes out of Cork vis a vis routes to the same destinations of out of Dublin.

Others are less sanguine about Dublin's dominant position, with Shannon Airport chief executive Matthew Thomas telling Clare County Council last November that Ireland was in danger of becoming a one-airport country if Dublin's growth continued unchecked.

The DAA is unapologetic about Dublin's growing dominance, pointing out that in many other smaller European countries over 80pc of passengers also fly through the major airport.

For example, 90pc of Dutch traffic goes through Schiphol while 84pc of Danish traffic is routed through Copenhagen.

"The premise that Dublin's growth is necessarily at the expense of other regional airports in the State is incorrect. In recent years, for example, Dublin has built a significant hub business… If those passengers don't use Dublin as a hub they'll use an airport in another country and their value will be lost to Ireland," said a DAA spokesperson.

"Dublin Airport competes with other European cities for many new routes rather than with other Irish airports.

"New long-haul routes to cities such as Beijing, Hong Kong, Doha, Dallas and Addis Ababa would be lost to Ireland if those routes didn't operate to and from Dublin. Dublin Airport is in competition for these services, with large overseas airports such as Manchester, Brussels and Copenhagen rather than with Shannon, Belfast or Cork."

Far from being a bad thing, the runaway growth of Dublin Airport has been good for the whole country, argued the DAA spokesman.

"Dublin Airport is one of the most important economic assets in the State as it supports or facilitates 117,300 jobs and contributes €8.3bn annually to the national economy.

"The growth in traffic at Dublin Airport is excellent news for the Irish economy as it boosts tourism, trade, and foreign direct investment throughout the country. Passenger growth at Dublin in the first half of this year underpinned a record performance from Irish tourism in terms of visitor numbers and spend."

Sunday Indo Business

Business Newsletter

Read the leading stories from the world of Business.

Also in Business