Mr. Michael McGrail:

I am delighted to have been appointed Chair designate of the Irish Aviation Authority, IAA, three weeks ago by the Minister for Transport, Tourism and Sport, Deputy Shane Ross. I thank the committee for the invitation to provide an overview of my professional background to set out the challenges facing the Irish Aviation Authority as I see them and how I hope to support the chief executive, management and staff of IAA in coming years. I look forward to answering members' questions after my short presentation.

I have included a CV with the documentation sent to members. I was born in Belfast but have lived most of my life in Dublin. Following school, I obtained a commerce degree from UCD and then joined Coopers & Lybrand, now PwC, and qualified as a chartered accountant. In 1986, I was appointed a partner in the Irish firm with responsibility for establishing a corporate finance service. I then subsequently became partner in charge of the firm’s management consultancy service. In 1998, on the merger of Coopers & Lybrand and Pricewaterhouse to form PwC, I was appointed to lead the firms’ combined consultancy services. In these roles, I acted for many clients in the transport, telecommunications, financial services and food industry, including public and private corporates, State enterprises, Government Departments and bodies. In 2006, I retired as a partner in PwC. In 2010, I joined the Royal College of Surgeons in Ireland, RCSI, as director of corporate strategy. My responsibilities in RCSI include banking relationships here and in overseas locations, major infrastructure projects, investments, assessment of new education markets and the commercial aspects of overseas operations.

I have a passionate and continuing interest in aviation, which I believe can be a key enabler for social and economic betterment. This is particularly true for Ireland as an island with an open economy on the periphery of Europe where connectivity is crucial. It is this interest and belief that led me to apply for this position. I will spend a little time outlining Ireland’s role in the global aviation industry, in particular its significance to the Irish economy, the role of the Irish Aviation Authority within this industry, and where I see its current challenges.

As an island, we are far more dependent on aviation than many of our continental neighbours and trading partners. A recent report commissioned by the DAA indicates that the sector contributes €8.3 billion to our GDP, including aviation supply chain industries. The sector supports almost 30,000 jobs directly and a further 16,000 in the aviation supply chain, before considering retail jobs at airports and retail supply chain jobs. Jobs in the aviation sector tend to be highly skilled jobs, including engineers, pilots, air traffic controllers and financial services, but more than this, aviation is an enabling industry. Tourism is heavily dependent upon aviation, while reliable and efficient connectivity to the UK, Europe, North America and indeed Asia is now imperative for Irish business in the global economy. Aviation is therefore one of the vital cogs in the Irish economy – and this is one of the key reasons I was interested in this position.

Within this global industry, Ireland’s role is significant. Fourteen of the world’s 15 largest aircraft leasing companies are located in Ireland, with approximately 50% of the world's leased fleet being managed from Ireland, equivalent to 4,300 aircraft. This equates to a total value of US$125 billion. An Irish managed aircraft departs every two seconds across the globe. Europe’s largest airline, Ryanair, with 446 aircraft, is based in Ireland, while Aer Lingus, is growing as a transatlantic and European airline, as are Norwegian, Cityjet and Stobart Air.

All of our airports are important. Dublin Airport is now becoming an internationally significant hub - it handled 30 million passengers for the first time in 2017 and 216,000 commercial flight movements. Cork, Shannon and Knock international airports are also increasing passenger numbers, albeit at a slower rate. Ireland also has a strategic prominence in the North Atlantic in terms of air traffic management - 90% of all the air traffic to and from the US travels through our airspace, the busiest oceanic airspace in the world. Ireland’s significance in the aviation sector has been achieved through a combination of the appropriate regulatory and financial environment, Government policy which supports aviation, a highly skilled workforce, visionary thinking and strong aviation leadership. The challenge is to maintain this position while ensuring we continue to grow the industry and grow jobs while never compromising on our standards of excellence.

The IAA fills a key role across all of the sectors just mentioned. It is responsible for the management of Irish controlled airspace, the safety regulation of Irish civil aviation and the oversight of civil aviation security in Ireland. The IAA’s remit is to always act in the interest of public safety. The IAA manages Irish controlled airspace covering some 451,000 square km. Its air traffic management role includes the provision of operational services, engineering and communications in this airspace and the provision of the related air traffic technological infrastructure. The IAA is among the most efficient service provider in Europe and, despite the challenges of a significant growth in air traffic levels in the past three to four years, the IAA continues to offer a competitively priced, high quality service to its airline customers. The IAA had a record breaking year in 2017, handling upwards of 1.13 million flights. This includes flights taking off or landing at Irish airports, aircraft over-flying Ireland, and our north Atlantic communications service for transatlantic flights. This is an additional and important service that IAA provides to aircraft in the region of the north Atlantic called Shanwick, west of Irish airspace.

We are also responsible for the safety regulation of the civil aviation industry in Ireland. Safety is at the very heart of IAA’s operations; it is in essence our corporate mission and underpins everything that we do. The board and executive management foster a culture throughout the organisation where safety is paramount. At the end of August 2018, there were 1,422 aircraft on the Irish register of which 957 are large aircraft, overseen by the IAA’s inspectors. These aircraft are located around the world, from Ireland to Italy, Mexico to Mongolia and Russia. We licence 11,500 flight crew, 1,700 aircraft maintenance engineers, as well as air traffic controllers, training organisations, maintenance and parts companies.

Through its 689 staff across six locations, the authority ensures that Irish civil aviation operates to international and European safety standards and systems, in accordance with international agreements and protocols. In 2017, Ireland was ranked among the best in the world for overall civil aviation safety oversight in an annual ICAO, International Civil Aviation Organization, and EASA, European Aviation Safety Agency, ranking process – Ireland ranked second in Europe and fifth in the world, ahead of countries such as the UK, USA, Germany and the Netherlands. Indeed our air traffic management safety was ranked joint first among European states in 2017 in an annual CANSO, Civil Air Navigation Services Organisation, benchmarking process. Safety is an ongoing process, requiring continual monitoring and improvement. Continuing to improve safety standards and performance will be a key priority of mine as Chair.

The IAA is also responsible for security oversight. We audit and inspect civil aviation installations in terms of their compliance with national and international security requirements. This is also a high priority area; the IAA works closely with the Government, national security agencies and the airports to ensure the appropriate level of security is in place to protect passengers and cargo freight.

Although owned by the State, the IAA receives no funding directly aside from its initial share capital. Our revenues are generated through charges and fees raised from our regulatory clients and airline customers in respect of their regulatory and operating activities. The IAA is a profitable company. In 2017, it generated an operating profit of €33.5 million on a turnover of €193.4 million and paid a dividend to the State of €19.5 million from after-tax profits. The IAA has no debt and, assuming continued profitability, it has adequate cash to service its planned expenditure on our critical technological needs over the next five years. There are, however, financial challenges, in particular those charging structures which will require close monitoring.

I will discuss some of those challenges briefly, but first I will highlight some of the wider challenges which the aviation sector in Ireland faces. Aviation is a highly competitive and very mobile industry and must continually adapt and innovate to stay competitive. Dublin Airport, in particular, is competing with other international hubs, including London Heathrow, Amsterdam, Paris and Manchester, yet Dublin Airport is operating at near capacity. The timely development and optimal operation of the new parallel north runway is a crucial element to allow Dublin be competitive and maintain growth in the sector. Our leasing industry also faces competitive threats from emerging leasing hubs such as Amsterdam and Hong Kong. We must continue to offer an attractive location for aircraft leasing by ensuring that Government policy continues to support this sector of our economy as an attractive location for the type of skilled employees needed.

I will turn now to the specific challenges for the IAA. The first of these is the Government's reform of aviation in Ireland. This project will see the commercial air traffic management functions of the IAA separated from the safety and regulatory functions with the expansion of the existing aviation regulatory body. The separation process will present challenges for the IAA and our staff, but we are committed to delivering the project and are actively working with the Department of Transport, Tourism and Sport and the Commission for Aviation Regulation. Our focus is to ensure a smooth separation in accordance with Government policy.

Moving to Brexit, and given the apparent impasse between the UK and the EU, a satisfactory withdrawal agreement, transition period and future relationship is in doubt. Apart from the disruption for aviation and the travelling public, a hard Brexit would have a significant negative impact on our wider economy. The Department is carrying out scenario planning to ensure the minimisation of any negative consequences, and the IAA is working in close collaboration with the Department and other agencies on this. Innovation and technology play a key role in safe and efficient air traffic management, ATM. We are developing a new visual control tower and associated infrastructure at Dublin Airport. This investment of €55 million will be a state-of-the-art aircraft traffic management facility necessary to operate Dublin Airport when the new north runway is built.

Dublin Airport reached capacity levels this summer. There is an urgent need for the new north runway to be built to allow for traffic levels to grow with passenger demand. The IAA has been successful in keeping delays at Dublin Airport to a minimum, but I cannot overstate the importance and necessity of the new infrastructure. The IAA’s staff expertly manages up to 50 flight movements per hour on the single runway at Dublin Airport, almost one per minute at peak times. During August alone, the IAA safely managed 21,452 arrivals and departures at Dublin Airport, an average of 692 per day. Aside from Dublin, our en routecentre at Ballycasey Cross in Shannon has managed 233,000 flights to the end of August, with our North Atlantic communications centre managing 340,000 flights so far this year.We are on course for a record year, exceeding the 1.13 million flights managed by the IAA in 2017.

Up to 85% of the IAA’s revenue is subject to strict economic regulation under the requirements of the single European sky performance and charging scheme. Our revenues and costs are subject to detailed review by a variety of parties, including the national supervisory authority, the airlines, the European Commission's performance review body and the European Commission itself. We are nearing the end of a five-year regulatory control period for the years 2015 to 2019, referred to as reference period 2, RP2, while preparations for the next five-year period, reference period 3, RP3, from 2020 to 2024, are intensifying. The IAA has been one of the best performers across Europe in recent years, meeting and exceeding our targets in the key performance areas of safety, environment, capacity and cost. In practical terms, this means that aircraft flying in Irish airspace receive a high-quality service, with no delays and at one of the lowest prices in Europe.

We are concerned at the broad thrust of the European Commission's planning for the next regulatory phase, RP3. The focus of the European Commission, and its supporting bodies, is for lower costs. While this may be appropriate for some of the higher cost regions in Europe, this one-size-fits-all approach would be damaging for Ireland. If the European Commission pushes a cost reduction policy onto the IAA for the next five years, the quality of service and efficiency that the IAA offers its customers will suffer. The IAA’s costs are among the lowest in Europe. It will not be possible to go any lower. Given the significant increase in air traffic in recent years and the need to reinvest continually in technology and high-quality people, a cost increase for the IAA is required. Safety will always be our number one priority, but an appropriate cost allowance is needed to ensure that we can continue to be flexible, dynamic and efficient in the way we manage Irish airspace for the benefit of our airline customers. We are calling on the Government to support us in this area and to ensure that European policy does not punish those already best in class, as it were.

The IAA plays a key role in the management of air traffic in the strategically significant area of North Atlantic airspace known as Shanwick, west of Irish and UK airspace. Some 90% of transatlantic flights fly through this area and are managed jointly by the UK and Ireland under an agreement that dates back to 1966. The IAA is responsible for the high frequency, HF, communications to the aircraft while the UK carries out the air traffic management service. It is important that Ireland maintains its position of influence on the North Atlantic in the years to come. With changes in technology, the IAA needs to adapt and ensure the services we offer remain in demand. HF is in decline and it is important that the IAA replaces this service in the years to come with additional services to customers on the North Atlantic. In addition, there is a need to review and revise the 1966 agreement to ensure that the principle of joint service provision between the UK and Ireland remains intact.

The IAA has always stood for innovation and excellence, and this will not change under my stewardship. I have mentioned the new air traffic control tower at Dublin Airport. This is a very visual example of the IAA’s ambitions for the future. The IAA is also at the cutting edge of remote tower technology, and we are developing a state-of-the-art facility for the operation of Shannon Airport remotely in the coming years. We continue to work with our partners in Aireon, our satellite based surveillance company. Recently, the Aireon aircraft locating and emergency response tracking, ALERT, service commenced the registration of aircraft. This new service allows for the global tracking of aircraft registered with the service, something which has not been possible to date. This global service will be based in our centre in Ballygirreen, County Clare.

I must address the Aerospace Qualified Entity, AQE, report on aviation search and rescue oversight, the review of oversight of search and rescue aviation operations in Ireland, which the Minister for Transport, Tourism and Sport published last week. There are a number of recommendations in the report for the IAA to implement. We welcome all of the recommendations and look forward to working with the Department and the other stakeholders to deliver improvements to the regulatory oversight of search and rescue in the State. Continual improvement is a core philosophy in aviation safety management, and the IAA is committed to playing its part to deliver a robust oversight regime for search and rescue. The Minister has made it clear that he wishes all of the recommendations contained in the report to be implemented as soon as possible. This is now a priority for the IAA. An important priority for me will be corporate governance, including ensuring the proper functioning of the board. As the board evolves through reappointments and new members, it will be crucial to have the right balance of skills, views and diversity to support the chief executive, management and staff. We will work with the Department and the Public Appointments Service to deliver the appropriate balance.

As chair of the IAA, my role is to lead and support the board and the executive in their efforts to deal properly with all of the challenges ahead and in their aspirations to achieve and exceed the organisation’s goals. It is my strongly held view that Ireland should continue to support and encourage the aviation sector, exceed normal expectations, and position Ireland as a true centre of excellence for aviation. Through this approach, the aviation industry will be able to provide more high-quality jobs, taxes and wealth in the economy, and to maintain and grow Ireland’s positive reputation in the aviation sector.

The IAA will remain a central element of our success. It is committed to continuing to drive high standards across the sector, working always in the interests of public safety. As chairman of the IAA, I will prioritise this effort and hope to make a contribution to the aviation success story in Ireland.

I thank committee members very much for their attention and I am happy to take questions.