Oireachtas Joint and Select Committees
Wednesday, 23 January 2013
Joint Oireachtas Committee on Transport and Communications
Shannon Airport: Discussion with Shannon Airport Authority
I welcome Ms Rose Hynes, chairman of the newly formed Shannon Airport Authority. The purpose of the meeting is to discuss the approach she will take in her new role and the challenges facing the authority. Members will be aware of the Government’s decision in May 2011 to put new arrangements in place for the appointment of persons to State boards and bodies. The joint committee welcomes the opportunity to meet the chairman to hear her views and trusts this will provide for greater transparency in the process of making appointments to State boards and bodies.
By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by it to cease giving evidence on a particular matter and continue to so do, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against a person, persons or an entity by name or in such a way as to make him, her or it identifiable. Witnesses' opening statements to the committee will be published on its website. Members are advised and reminded of the long-standing ruling of the Chair to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable.
Ms Rose Hynes:
I am honoured to have been asked by the Minister for Transport, Tourism and Sport, Deputy Leo Varadkar, to be chairman of Shannon Airport Authority plc. I thank the Chairman and members of the joint committee for the invitation to present to it. I will provide it with an overview of my professional background and outline the key challenges I see for the company in the next few years, as well as my role as chairman in addressing them.
I grew up in New Quay in north Clare, a village near Ballyvaughan in the heart of the Burren. I went to secondary school in Lisdoonvarna, County Clare, after which I studied law in University College Dublin. I qualified as a solicitor in 1979 and specialised in corporate tax law for one year. During this time I became an associate of the Irish Institute of Taxation and obtained a diploma in applied finance. I later became an associate of the Chartered Institute of Arbitrators. Following a period as stagiaire with the European Commission in the Directorate General for Financial Institutions and Taxation in Brussels, I returned to general practice with Moylan and Company, solicitors, in Galway. During this time I also tutored part-time in taxation law for the Law Society of Ireland.
I always had a strong interest in business, corporate and commercial matters. With a view to pursuing such interests, I joined Guinness Peat Aviation Group plc, GPA, in Shannon in 1988 and remained with the company for 14 years. In 1988 GPA was the world's largest aviation company with Mr. Tony Ryan at the helm. It dealt with the purchase, leasing, financing and sale of aircraft. I worked for the first few years in the treasury department and was responsible for the financing of aircraft. The company then had corporate credit facilities of US$6.5 billion with circa 135 banks and was buying aircraft at the rate of two a week from manufacturers. It was a hectic and fascinating time.
In 1992 the GPA initial public offering, IPO, failed and the company went into crisis. At this point GPA had liabilities of approximately US$12 billion, including bank debt. I became part of a small management team which was tasked with the complete restructuring of the company. This was an extremely onerous and difficult task which took many years to complete, involving extensive stakeholder management, downsizing, refinancing, the sale of non-core assets, development of new business, mergers and acquisitions to achieve scale, taking in Texas Pacific Group as a shareholder and, ultimately, the sale of the company. GPA repaid all of its creditors in full.
The GPA diaspora has played a significant role in establishing Ireland as a world leader in aviation leasing and financing. During my time in GPA I held various senior management roles, including chief legal officer, followed by head of the commercial department. In 1997 I was appointed a non-executive director of Aer Lingus and in 2002 and 2003 offered several other non-executive director roles. In the past ten years I have gained extensive board and corporate governance experience. In 2009 I was appointed chairman of Bord Gáis and my other current principal board directorships include Total Produce plc since 2006 and also One51 plc since 2012.
In May 2012 the Government made the decision in principle to separate Shannon Airport from the Dublin Airport Authority, DAA, and merge it with a restructured Shannon Development. Two task forces were established to advise on how best this could be done. In June 2012 I was appointed chairman of the Shannon aviation business development task force. Its mandate was to seek out new opportunities for an independent Shannon Airport and evaluate the feasibility of creating an international aviation centre of excellence in Shannon. The chairs of the two task forces reported during the five month period to a steering group which was co-chaired by the Secretaries General of the Department of Transport, Tourism and Sport and the Department of Jobs, Enterprise and Innovation and attended by the Secretary General of the Department of Finance, as well as senior officials of the Department of Public Expenditure and Reform and the Department of the Environment, Community and Local Government.
My task force issued its report which included several detailed recommendations in November 2012. The overarching conclusion and recommendation was the separation of Shannon Airport from the DAA by December 2012, followed in a second phase by its combination with a restructured Shannon Development, to occur by July 2013. On 31 December 2012 Shannon Airport was separated from the DAA under the provisions of the State Airports Act 2004. New legislation is required to deal with its merger with Shannon Development.
In the course of my task force's work we met over 100 stakeholders, including local councils, public representatives, international airlines, aircraft manufacturers, indigenous and multinational businesses and educational institutions. My colleagues and I on the task force were repeatedly struck by the level of stakeholder support for a reinvigorated Shannon Airport, not just as an airport but also as a broader centre of aviation excellence.
It is important to emphasise that what my colleagues and I repeatedly heard was not romantic nostalgia for Irish coffee and thatched cottages but a measured appraisal of the global opportunities in aviation and a recognition of how Shannon Airport was well situated to grasp and benefit from these opportunities. The task force's report sets out an ambitious vision for Shannon Airport, grounded in its strengths and validated by our discussions with industry stakeholders. The Shannon business plan was externally validated by KPMG on behalf of the steering group and the Department of Transport, Tourism and Sport.
I am genuinely excited at the opportunities I see for Shannon Airport, but of course I recognise the challenges. Perhaps it would be useful if I set out some of the key challenges I anticipate and which have been identified in recent months. The first is the appointment of a CEO. It will be the task of the new entity to develop both the airport and its property assets, sustainably grow annual passenger numbers and create an international aviation services centre. This involves bringing together the airport and Shannon Development into a new entity that combines and builds on the best of both. For this to succeed, we must ensure the new organisation has the necessary leadership at CEO level to develop Shannon Airport on this broad basis. The recruitment process for a CEO is under way and the timely and successful conclusion of this search is one of my immediate priorities.
A second challenge is the appointment of a board. A relatively short-term challenge for the Shannon Airport Authority and, ultimately, the new Shannon entity is the appointment of an effective board that can provide guidance and support for the CEO and the management team and to ensure there is good corporate governance. The new dynamic in Shannon means that we require a strong, cohesive, committed and internationally experienced board. The board will also have an important role in the transfer and integration of the property portfolio and employees from the restructured Shannon Development. The appointment of the new board is a matter for the Minister and under way. It will be a central part of the chairman's role to lead and manage the board and ensure there is strong communication and transparency between the company and the Department of Transport, Tourism and Sport.
The third challenge is to increase passenger numbers. Shannon Airport's trajectory in recent years has been away from commercial sustainability. That trajectory must be halted and reversed in order for the airport to attain the profitability and growth of which it is capable. The committee will know that Shannon Airport's passenger traffic is made up of terminal passengers, in other words, people who start or end their journeys at the airport, and transit passengers, mostly in military aircraft making refuelling stops. In 2012 Shannon Airport recorded a total of 1.4 million passengers. Of this total, 90% were terminal passengers, 6% lower than in 2011. The remaining 10% were transit passengers. Transit traffic was down over 50% on the figure for 2011, reflecting principally the reduction in United States troop movements to and from the Middle East. Overall, Shannon Airport traffic was down 14% on the figure for the previous year.
The fall in terminal traffic is disappointing, but we see grounds for cautious optimism in 2013. A number of airlines have announced new Shannon services for the coming summer. United Airlines will operate a Shannon-Chicago route, US Airways will serve a Shannon-Philadelphia route, while Aer Lingus will add a Shannon-Faro service to its existing network. While these new services are very welcome and I am confident they will be successful, they are not sufficient. The airport's focus must be on developing commercial passenger numbers to a sustainable level. We must reach a sustainable equilibrium, where our revenues will be in line with our costs. The task force's report sets out the aspiration of reaching 2.5 million passengers within five years.
There is no silver bullet for Shannon Airport. In order to increase passenger numbers, it will have to attract a range of airlines on short and long-haul routes and also airlines making transit stops en route to North America. We are in discussions with a range of airlines and a number of these discussions are particularly advanced. The committee will understand I am unable to be more precise for reasons of commercial confidentiality.
In discussing the challenge of growing passenger numbers at Shannon Airport there are a couple of points I would like to make. First, when we talk about 2 million or even 2.5 million passengers a year, this is considerably less than in the relatively recent past. In 2006 and 2007 over 3.5 million passengers used Shannon Airport. Of course, we live in different economic times and passenger growth needs to be on a sustainable basis. Shannon Airport must, however, grow its passenger traffic. It does not follow that this is necessarily to the detriment of other Irish airports. We are all aware of the importance of balanced regional development.
We are not going to focus solely on outbound traffic. We will also focus on the development of inbound tourism and seek to attract tourists for the benefit of the wider region. We will work with the tourism authorities and tourism industry stakeholders as part of a collective development of Ireland's profile to maximise the number of inbound tourists. We see another part of our growth figures coming from responding better to the needs of Shannon Airport's natural catchment. Business people in the mid-west need connectivity and would welcome a wider choice of routes direct to the main European cities. Having these direct services is one way of enhancing the business attractiveness of the whole region.
The fourth challenge facing us is to continue to reduce costs. As I said, the airport will have to reach a sustainable equilibrium, where our costs will be in line with our revenues. We will be working hard to boost revenues, but we also have to look carefully at our costs. The task force's report notes that the new Shannon entity will have to deliver conspicuous value for money, whether by winning new airline business or attracting new industry. This will require a competitive cost structure. The airport's cost base is currently higher than that of its industry peers, partly because of its reduced traffic levels. Productivity improvements and flexible work practices can help to reduce this disadvantage.
The fifth challenge facing us is the development of an international aviation services centre and the development of a wider property portfolio. I passionately believe in the potential of Shannon Airport as a successful and sustainable airport but also as the location for a major global aviation cluster. This would both anchor the existing industry and attract jobs which would otherwise not be created in Ireland. Our job is to articulate the vision and build the momentum to achieve this. That means we need to sell Shannon Airport and the opportunities it offers. We need to attract businesses and airlines and give people a reason to fly to and from Shannon Airport and we need to develop our wider property portfolio and work with existing businesses. We will also work closely with IDA Ireland and Enterprise Ireland to win new job creating investments, boost opportunities for our existing businesses and develop our property portfolio. Shannon Airport has advantages as an aviation cluster that competing locations abroad do not have. It has ample space and a skilled workforce. Some 1,600 people already work in aerospace companies in and around Shannon. Therefore, this cluster is not being created from nothing. Shannon Airport already has strong links with the aviation leasing community.
I have enumerated five challenges and with the Chairman's permission, I would like to mention a final one. I will then be happy to take questions.
I have spoken about the task force's meetings with stakeholders in Ireland and abroad and the enthusiasm and support expressed for the plans to reinvigorate Shannon Airport. One further challenge facing us is that of winning buy-in from people and businesses who want to believe but who have perhaps witnessed the decline of Shannon Airport during the years. My task and that of the CEO, the board, the management team and the staff of the new Shannon entity will be to create the foundation for this belief. It will be a privilege for me to become chairman of the new Shannon entity and work with the board, the chief executive and the staff in the company. My goal as chairman will be to manage and lead the board in an effective and efficient manner to achieve our stated objectives. I look forward to the challenges ahead.
I thank the Chairman and members of the committee for the invitation to appear before them today. I am happy to respond to questions they may have.
I thank Ms Hynes for such a comprehensive overview of what is happening at Shannon Airport. Before I call on members, there is one area she did not seem to cover, that is, the number of people employed at Shannon Airport. Will there be redundancies and job losses in the context of the new structure being put in place? How does Ms Hynes propose to deal with this issue? Obviously, Shannon Airport is now only operating at half the capacity at which it operated some years ago. Are changes in work practices required? Will Ms Hynes outline to the committee the proposals made in this regard?
Ms Rose Hynes:
There are circa 230 people working in Shannon Airport. There is no intention to reduce the number of jobs; rather, the intention is to grow the pie and increase passenger numbers. The airport caters for just 1.4 million passengers, but it has the capacity to cater for 4.5 million. The target is to achieve a figure of 2.5 million. What will be required in this regard is significant cost efficiency. We need to grow revenues and passenger numbers and have effective work practices. We will work with our staff to this end.
We will move on to questions from members. As there is significant interest in this issue, there are many Members present. We will allow members of the committee to put their questions first and we will then move on to take questions from non-members who signal that they wish to contribute.
I wish to extend a very warm welcome to Ms Rose Hynes, who clearly outlined her deep understanding of the aviation sector and also of Shannon, particularly in the context of its geography, hinterland, etc. When she referred to her role with GPA and the capacity of the latter to repay all of its outstanding debts, I immediately thought she might like to take on a role with the IBRC or one of the pillar banks. We will certainly be supporting Ms Hynes's appointment because she has the skillset that is required for the position.
As Ms Hynes indicated, she was involved in the preparation of the business plan. The latter is certainly ambitious and I wish her well with its implementation. The plan refers to increasing passenger numbers at the airport by approximately 500,000 during the next 12 to 18 months. Will Ms Hynes outline the type of strategy she would envisage being deployed in order to achieve this increase? The proposal also envisages an amalgamation of the property assets of Shannon Development and Ms Hynes referred to the necessity to appoint a CEO who will have the capacity to deal with both aspects. Since the primary business here relates to driving traffic through the airport, will she indicate the type of organisational chart she would put in place? What other key skills will it be necessary to bring on board in order to chase the inbound tourism business that will be vital for the future success of the airport?
The Chairman referred to job losses so I will not comment on the matter. Ms Hynes will be well aware, from recent commentary in the newspapers, of Ryanair's intention and desire to take control of Aer Lingus. Comments made in the past few days indicate that this now appears more likely than was the case some months ago. Does Ms Hynes have any thoughts on this matter? Are there any plans she would deploy in the event of there being a lack of competition in the Irish aviation sector as a result of the merger of the two airlines? Would such a merger impact in any way on the strategy she developed in the preparation of the business plan?
In the context of the development of the cargo sector, Ms Hynes will be familiar with the report of the mid-west task force prepared by Mr. Denis Brosnan. Sections of that report were liberally referred to by one of the parties in government in the run-up to the most recent general election. The party in question placed a great deal of emphasis on the development of a cargo hub at Shannon. As Ms Hynes is aware, some proposals were made in the past in respect of Lynx Cargo. Does she have any views on this matter which she would like to share with the committee?
I wish Ms Hynes well in her new role. I know she will bring a particular vitality and focus to the work of the airport.
Ms Rose Hynes:
In the context of the business plan, we are in discussions with several airlines. As stated earlier, some of these discussions are at an advanced stage. If, when it was in existence, my task force was of the view that it was going to make any recommendations in its final report, it tended to get ahead of those recommendations in order to give them momentum. As a result, we engaged in discussions with many airlines in respect of increasing passenger numbers. This gave matters a particular momentum. We did not want to leave behind in a report a set of recommendations which might or might not have been implemented. We created momentum for the recommendations and gave some of them a good nudge forward. The discussions to which I refer are, therefore, more advanced than would otherwise have been the case. As already indicated, passenger capacity on a number of different routes to the US will increase by 23% or 24% this summer. We are starting from a very low base - 1.4 million passengers - and, therefore, any increase is going to be significant. Our strategy is that there is not one particular answer in respect of this matter but rather that a range of opportunities must be pursued.
We are also working hard to see what might be done to increase transit traffic. In that context, we are working with the Department of Transport, Tourism and Sport in respect of giving freedom rights to airlines from other countries to stop at Shannon before travelling on to the US. As already stated, a range of options - rather than just one - must be pursued. The first challenge we face is to arrest the downward spiral. After that, we must stabilise the business and then grow it. As the Deputy will be aware, I cannot state exactly what we are doing but discussions are well under way.
On the question of appointing a CEO, he or she and the management team will have all of the relevant experience. Deputy Dooley will probably have seen the job advertised in the newspapers last weekend. The person who will be appointed to the position of CEO will have an experience and a track record. He or she will also have the vision and appetite to take on a challenge. He or she will be someone who wants to make a name for himself or herself, particularly as doing so is a possibility in this instance. We will be obliged to fill gaps in the management team and it will be the responsibility of the CEO to identify and fill those gaps. In the circumstances in which we find ourselves, the existence of such gaps is inevitable.
I will not comment on the situation regarding Ryanair and Aer Lingus, particularly as it would not be appropriate for me to do so. I will also not engage in hypothetical speculation on the matter. We are considering this issue but it would not be appropriate for me to speculate on it.
Ms Rose Hynes:
I am aware of the report on cargo by the mid-west task force, compiled by Mr. Denis Brosnan. The task force did very good work on that matter. We have identified this as one of the main areas in which Shannon can grow. The Deputy referred to Lynx Cargo. Representatives from the latter are coming to visit us next week.
I welcome Ms Hynes and thank her for her presentation. She is obviously very eminently qualified for the task ahead.
Ms Hynes pointed out the challenges and opportunities for the airport. She referred to the 14% decline in passenger numbers, the 6% decline in terminal traffic and 50% decline in transit traffic. Ms Hynes indicated that the challenge for the new authority is to increase passenger numbers to 2.5 million and she suggested that what Shannon will do to achieve this will not be to the detriment of any other airport. Shannon's immediate competitors are Cork Airport, Kerry Airport and Ireland West Airport Knock, which is located in the part of the country in which I live. The catchment area relating to Cork and Kerry airports comprises a population of 1.2 million or 1.3 million and the number of people who live in the catchment area of Ireland West Airport Knock is 800,000. In other words, these three airports are located in quite a small area. How will it be possible for Shannon to increase passenger numbers to 2.5 million without affecting those other airports in a detrimental way? I am not stating that there is anything wrong in this regard but I fail to see how what is envisaged can be achieved without there being an impact on the other three airports to which I refer. How would Ms Hynes respond to the accusation that the debt write-off of €100 million places Shannon in a very favourable position and will lead to those other airports operating on a very uneven playing field?
What is the position with regard to reducing costs? I understand that for each passenger who passes through Shannon, there is a cost of €6. The equivalent cost at Ireland West Airport Knock is 87 cent. Does Ms Hynes accept these figures?
Where are the opportunities arising for cost reductions? What is the reason for the decline of 14%?
Ms Rose Hynes:
I will deal with Deputy O'Mahony's first question about the catchment area. There are two types of airport in Ireland, the three State airports at Cork, Dublin and Shannon and the regional airports. Shannon Airport is both an international and a transatlantic airport. It is one of the two transatlantic airports in Ireland. This is one area in which we are already working. We have secured an increase in our passenger numbers for the coming year and years. Shannon Airport is different to Knock airport in that it also has connections to the Heathrow hub. When I said that it does not necessarily have to be to the detriment of other airports, of course competition will mean that we will compete with the other airports. We will compete with Dublin Airport. Many people in Shannon and the immediate surrounding area drive to Dublin because they cannot get the flights from Shannon. I want to be able to say to those people that they need to be able to travel from Shannon. Nobody was complaining when Shannon had 3.5 million passengers. Now Shannon Airport figures are at an all-time low and it is trying to grow back up to those figures. Shannon's current position is unsustainable. It must stop the decline because Shannon's own position is under threat.
We are considering a range of options. Shannon Airport is owned by the taxpayer and an intervention was imperative. The reason for the decline in passenger numbers relates to five years ago. Passenger numbers declined by 50% in those five years. The first reason was a change in the economic climate. Second, Ryanair pulled out of Shannon. They were the two factors that caused the decline in the past five years. In the past year there has been a decline of 14% in traffic. This is attributable to two factors. The first factor has been the cloud of uncertainty hanging over Shannon as to whether the airport would separate. The State Airports Act was enacted in 2004. Everybody has been talking for ten years about whether Shannon Airport would separate from the others. The Booz report was published 18 months ago. The cloud of uncertainty exists. I have spoken to various stakeholders over the past five to six months. I have been told that nobody will do business with an airport which has a cloud of uncertainty hanging over it. On that basis we discussed deals with many airlines but none was prepared to do a deal. They fear the unknown. That uncertainty has been eliminated now. It is important for Shannon Airport to get on its own feet. As I see it, this is not about Knock and Shannon; it is about the recovery of Shannon and about stemming the losses there. Shannon Airport was part of the DAA group which had group rules on the basis of one size fits all. That did not work to Shannon's advantage. Shannon needs its own focus. I would say that this situation plus the uncertainty were the primary reasons for the decline in numbers, particularly in the last year.
I will deal with Deputy O'Mahony's question about costs. Because of the situation in which it finds itself, Shannon Airport must look at its costs. There is not a business in Ireland that is not looking at its costs. We are already examining work practices and every area of costs. This is an imperative from our perspective. On the question of a level playing field, I will not comment on Knock because I am not here to talk about Knock, I am here to talk about Shannon. It was necessary that the intervention be made. What has been happening in Shannon has been going on since 2004. The question was asked as to whether Shannon or Cork would separate. There has been uncertainty about Shannon. The downward trend in passenger numbers and in overall revenue meant that something had to happen. There is no package available for Shannon. The State decided to reorder its assets with regard to the three State-owned airports. This is a restructuring and a reordering of State assets. I do not see it as anything other than that.
If I may make a brief point. I do not see it like that. I agree that it is important to see growth at Shannon. I have an interest in my local area. My question was about the overall situation. Cork Airport is a State airport as well. I am looking at the global picture and I wonder what will be the situation in 20 years' time. What airports will exist in Ireland then? What infrastructure is required to maximise the potential for the country? I have an interest in Knock airport but I want to hear Ms Hynes's vision for the future.
Ms Rose Hynes:
That is a very good point. We are endeavouring to do something wider than just the airport. We are trying to grow an international aviation services centre at Shannon, as I said in my opening remarks. There are many reasons for this policy. Ireland has a very strong position in the aviation industry. More than one in five of the managed aircraft in the world is managed or owned out of Ireland. We must build on that situation. Those businesses are here and we can do it. Ireland needs to anchor its aviation community. If Ireland does not do that, someone else will eat our lunch. I refer to a headline yesterday in a Canadian newspaper, The Globe and Mail , "Ireland Defends Aircraft Leasing Crown as Asia Rises". This is not about Knock or Shannon or Cork; this is about Ireland. It is about what Ireland can do to protect what it has. Places like Singapore are trying to eat our lunch. We need to anchor what we have and we need to build on it. Approximately 40 aviation-related businesses are currently located in Shannon, employing 1,600 people. That is more of an aviation cluster than what Singapore had when it began. Singapore is copying our tax policies. We are either going to let them eat our lunch or else we are going to fight back. In my view we need to fight back. They are writing about us even in Canada so it is important from our perspective in Ireland.
I thank Ms Hynes for her presentation. I note her curriculum vitae which is very impressive. She outlined the reasons for the dramatic drop in passenger numbers over the period, such as Ryanair pulling its services. I assume the strategy will be to attract back some of the people who pulled out over the years. I will not comment on the issue of Knock versus Shannon. It is argued that Knock airport has a bigger catchment area than Shannon Airport. Is this a stumbling block? The committee has been informed by people making presentations about Knock airport that its catchment area is bigger and this is the reason for the increase in its passenger numbers. I ask for Ms Hynes's opinion on this matter.
We are informed there had been an imbalance in the apportionment of subventions, with more going to Shannon than to Knock. It is impossible to imagine that the subvention to Shannon would be cut off.
It will be needed in the coming years even though technically it is independent.
In regard to the military use of Shannon, I am curious about the board's input in monitoring such use. While the number of military aircraft landing there has decreased does that have a huge monetary effect? Is there any indication of the amount of employment for which it is responsible? The Shannon business plan was mentioned. Will the witness please outline some of the ideas in the plan, given that everyone is seeking to attract industry to the airport? I am aware that services available in Shannon could be expanded. The same issue arose in Dublin Airport which had many services for aircraft which eventually collapsed to the point where there are very few services there now. What is the scope for expanding such services?
On the issue of the debt write-down, while it was never going to be paid, has it created a better environment? Has the write-down been positive or is it a book saving issue?
Ms Rose Hynes:
The job at Shannon is a major challenge. There is nothing easy about it and there is no guarantee it can be achieved. However, we have an ambitious plan. I do not apologise to anybody for having a high ambition for Shannon. The danger is not that we aim too high and miss our goal but that we aim too low and achieve it. The Deputy asked about the debt write-down. There was not actually a debt write-down. Shannon was part of the DAA group which had debt. When Shannon was separated from the DAA group, the debt remained with the DAA group. Therefore, the DAA group is responsible for the debt. That deals with that issue.
In regard to subvention, Shannon is one of the three State airports. For State aid reasons, Shannon must make its own way in the world. It is independent, it is a commercial semi-State company and is not entitled to receive subvention. The reason Shannon was separated from the group was to allow it take on the challenges. Shannon, as part of the group, was in danger and was going only one way.
On the issue of military traffic, we will do what we can to grow military traffic. There is a certain slice of the pie at any particular point in time, depending on US troop movements to various places, and we will certainly do what we can to increase our share of such traffic. In regard to a Shannon business plan, there is no silver bullet for Shannon and there are many opportunities to be explored. The issue is not about passengers alone. The bigger point in respect of Shannon is the creation of an aviation centre of excellence which will not just be about Shannon. Currently, Shannon is an important driver for the mid-west region but it could become an important driver for Ireland if we can achieve that goal. The big picture for Shannon is much broader than passenger numbers. It is not a picnic, it is a serious challenge and there is no guarantee it can be achieved.
I welcome Ms Rose Hynes. I am delighted to see a woman at the head of the authority. Her CV is very impressive. While Deputy Ellis has touched on the military issue, was there an over-reliance on the military side of business? When business was easy, was there was a laissez-faire attitude? That may not have been the case. I am aware that Shannon Airport is very strong in the Irish psyche. We would certainly want to promote and do everything we can for Shannon Airport. From a safety point of view, Shannon is extremely important. I do not recall the particular incident but a couple of weeks ago there was an emergency landing at Shannon which was the only airport at which the aeroplane could land.
The passenger experience at Shannon is extremely good. What type of passenger is Shannon Airport trying to attract? Is passenger traffic mainly business or tourist or a mixture of both and how is it intended to increase passenger numbers?
I wish Ms Rose Hynes well in her role which is hugely important not only for the mid-west region but the whole western region. Following on from two earlier comments, there is a need to look at Shannon Airport not in the context of a transatlantic route from the mid-west but as the only transatlantic route from Malin Head to Mizen Head. That has been lost in recent years to the detriment of the airport. A former Member made a prophesy that the rabbits would be running around in the airport at Shannon. Had the Government not done what it did, there would be a wildlife sanctuary on the runway. I wish Ms Hynes well in that context.
On the issue of military traffic, the irony was not lost on me or on other Members, given that some political parties have had a field day protesting outside Shannon and then expressing concern at the jobs that might be lost as a result. Is it only the US that uses Shannon for that purpose or are other countries interested because obviously the issue of jobs is hugely important?
Shannon Free Airport Development Company Limited has a huge landbank across the region, which includes a considerable amount of County Limerick. For many years, west Limerick has fallen off the radar in terms of inward investment and job creation due to the mixed relationship involving IDA, local authorities and Shannon Development in regard to the landbank. Given that the landbank will be transferred to the ownership of the company, how does the witness envisage the board providing itself with the necessary expertise to ensure it is properly utilised? What level of expertise should be brought on to the board to ensure that happens? We in County Limerick, north Tipperary, Offaly and parts of Clare do not want to find that the emphasis is on the Shannon free zone and the rest of the region and its landbank is left there for buachallán.
In terms of private sector involvement, I am aware the company advertised for a CEO last week. Is the chairperson designate anxious to have such involvement in the board membership and in the chief management positions? To break the mindset at Shannon, given the fall in passenger numbers from 3.5 million to the present level, how important are the backgrounds of those who will be in management positions to drive the airport forward? What level of expertise and experience is it envisaged those people would bring to the table? I wish the witness well. This is not about one airport over another. I am based at an equal distance from Cork and Shannon but Shannon Airport is hugely important to maintain a transatlantic emphasis from Cork to Donegal.
Furthermore, I urge the authority to look to emerging markets in the Middle East and beyond.
Ms Rose Hynes:
On Deputy Patrick O'Donovan's point on the passenger experience, I received a really nice letter just two days ago from a woman who described herself as of advanced years. She has travelled to the United States from Shannon Airport in the past ten years but while arranging her last trip she got everything mixed up. Despite this, she was very complimentary about the airport, which was gratifying.
We will attract all types of passenger and want to improve the passenger experience for everybody. Shannon Airport is largely uncongested and represents an easy run for passengers. One can park outside the door and go in and out easily. It is the customer who decides where he or she will go. To us, the customer experience is what is important. We will offer the best experience we can and focus on customers, thereby winning as many as we can. It is not just a case of competing with other airports; it is about the customer deciding. The customer will ultimately go where he or she wants and where the best deal and experience are to be found. We want the customer experience to be memorable for the right reasons.
With regard to over-reliance on the military, the maximum number of military passengers in Shannon Airport has been approximately 340,000. Therefore, there has not been an over-reliance on them. We have sought the business and it has been important. Military traffic has been in the DNA of Shannon Airport for many years. It is important and lucrative and we will certainly target as much of it as we can get.
On the question of safety, Shannon Airport is unique in that it is the only 24 hour airport in Ireland. For this, it does not receive an immediate reimbursement. In the task force report we have said we need to keep this under surveillance, as it is important to us. As the military traffic uses the 24 hour service, it makes sense to remain open. With regard to Deputy Patrick O'Donovan's comments, I have not yet seen any rabbits. We intend to increase the volume of military traffic, but we will consider trying to attract traffic from other areas, as the Deputy suggested.
With regard to the land-bank and the people required to manage the new operation, the restructuring of Shannon Development will occur in the next six months and the legislation will be dealt with. During that period it will be decided exactly what lands and properties will be transferred. A number of the people in Shannon Development dealing with the properties will be transferred also. As I stated, we will be seeking to fill gaps in our management group once we see what our full complement of staff will be following the exercise. Members may rest assured that we will work with IDA Ireland and Enterprise Ireland to ensure the region will benefit. The very intention of putting Shannon Development and Shannon Airport together is to enable both entities to achieve their full potential to the benefit of the region, not otherwise. I will certainly play my part to ensure the region will benefit.
I welcome Ms Hynes and wish her well.
Coming from County Leitrim, my concerns are obviously about the future viability of Ireland West Airport Knock. I appreciate that Ms Hynes is present primarily to talk about increasing passenger numbers and making Shannon Airport viable again. Anybody in the west would welcome this in principle. My focus is very much on one aspect of Ms Hynes's excellent presentation in which she referred to Shannon Airport being used as a terminal and said she wanted to increase the number of passengers entering the country. This, in a sense, counters the concerns about existing catchment areas within Ireland. Obviously, the growth in numbers will require an increase in the number of passengers from overseas. What plans are there at this early stage to attract more passengers from markets that are already reasonably well developed such as the German market?
I understand commercial sensitivities prevent Ms Hynes from answering certain questions. That said, it seems one of the key areas concerns Ryanair. The relationship Shannon Airport has had with Ryanair has been somewhat fraught during the years. How does Ms Hynes envisage that relationship panning out during her term of office? It seems it could be a key driver for bringing more people into Ireland. The problem is that the increase in tourist numbers in recent years, modest as it has been, seems to be centred almost exclusively on Dublin and surrounding counties. It is not filtering into the west. In spite of there being a very developed tourism infrastructure across the west, including counties Kerry, Limerick, Clare, Galway, Mayo, Leitrim and Donegal, we are not gaining from the increase. Many family-owned businesses in the tourism sector are actually struggling and will obviously be looking on Shannon as an international airport. It is very deep in the psyche of the Irish people. That is why I would like Ms Hynes's views on increasing the number of passengers coming to Ireland from some of the developed tourism markets.
I welcome Ms Hynes. I thank her for her presentation and wish her well in her endeavours for Shannon Airport.
With regard to the dramatic fall in the number of passengers which plummeted from over 3 million in 2007 to 1.5 million at present, I am worried about the reliance on transatlantic passenger traffic. Tourists from the United States and Canada are now selecting destinations in South America, including Peru and Colombia. This has been a growing trend in the past two to three years and it is very worrying for the Irish tourism industry. What efforts will be made to counteract this? Can we increase passenger numbers, given this phenomenon?
I read the report on freight and cargo. Shannon Airport only attracts 10% of the cargo trade, while 90% of exports leave from Dublin. Some years ago the former CEO of Shannon Development Mr. Liam McElligott met the then Taoiseach, Mr. Bertie Ahern, and another individual to propose that Shannon Airport become an international flight hub concentrating exclusively on the freight market. Geographically, the airport is in an ideal location for this. Mr. Bertie Ahern asked whether there was a model to draw on. There was not; in this regard, Mr. McElligott was ahead of his time, as there was considerable potential. Owing to possible implications at political level involving the Dublin Airport Authority, for example, the proposal was never advanced. I ask Ms Hynes to consider reviving the proposal with her board. At any given time the vast majority of freight appears to be transported by air.
As part of a delegation, I attended a meeting some 12 months ago with the former US ambassador, Mr. Dan Rooney. In a discussion on Irish economic circumstances I raised the issue of Shannon Airport and other airports along the western seaboard, including the regional airport in Kerry. Mr. Rooney stated Shannon Airport had great potential to be an international freight hub. Perhaps Ms Hynes might consider having 50% of its business based on freight and 50% on passengers.
Perhaps this would ensure the future viability of the likes of Kerry Airport. We could develop it into one similar to Knock airport and could perhaps get more international traffic with the development of the runway and so on. Perhaps there should be a sea change in our thinking in regard to these aspects of developing Shannon Airport.
I congratulate Ms Hynes on her appointment. I was going to mention cargo but Deputy Fleming covered that. Ms Hynes has a very ambitious plan and a very challenging job to increase passenger numbers and I do not expect she will get those numbers overnight. There will have to be a steady increase. She will report through the Minister on, I hope, increased passenger numbers at Shannon Airport. Will she give us some idea on whether there is a critical mass of passenger numbers on which the survival of Shannon Airport depends? How will Ms Hynes look at alternative business? Deputy Fleming mentioned cargo and there is miliary aircraft maintenance and so on. Essentially, is there a plan B for Shannon Airport if the minimum targets are not met?
Ms Rose Hynes:
In response to Senator Mooney, as I said earlier, I am here to talk about Shannon Airport and he reflected that in his comments. Ryanair was in Shannon Airport when we had high passenger numbers. It is still an important customer of Shannon Airport and we have a number of Ryanair flights. We have a very good relationship with Ryanair and we are in discussion with it as well as with a number of other airlines. We will be seeking to increase passenger numbers in Shannon Airport, both inbound and outbound.
The Senator mentioned the German market, in particular. Without giving the game away, I can confirm to him that we are already in discussion with the German market in regard to inbound flights. Passengers coming into Shannon Airport will go up and down the west coast. They are more likely to stay on the west coast than if they came into Dublin Airport.
We do not intend unsustainable growth with Ryanair. That was an issue in the past. We will not go there again. We have to learn from the problems of the past. We certainly see passengers travelling up to and down from Dublin. We will certainly target those passengers.
It was sort of linked to the question from Deputy O'Mahony about costs. It seemed to me from the arguments put forward at the time that Ryanair's relationship with Shannon Airport was to do with landing costs. I am curious-----
I appreciate that. I am just saying that the cost factor seems to be a major one if there is a difference, as outlined by Deputy O'Mahony, between say Knock and Shannon airports. Obviously, it is an area at which Ms Hynes will have to look.
Ms Rose Hynes:
I am not going to get into comparing Knock and Shannon airports. We will do everything we can to cut our cost base and to work on that. We know we have to do that and we have to try to get it into line with, or as close as we can to, our peers. That is a big task and a big challenge but we will do it. That is already under way. We are certainly going to do what we can to increase passenger numbers but, as I said, it will be inbound and outbound.
Shannon Airport is an international and a transatlantic airport. Its transatlantic catchment area is from one side of the country to the other. It is the only transatlantic airport on the west coast. I see areas where we can work together in terms of inbound traffic and in terms of the western seaboard and what we can do. There are areas where we can work with the tourism authorities for the benefit of all.
Deputy Fleming referred to South American and Canadian traffic. We will certainly work with the tourism agencies to see what we can do. This year with The Gathering, it is really important for us to attract as many travellers as we can from throughout the world, but in particular from the US. We are certainly working on that and are very focused on it.
In terms of the cargo hub, that is something the task force recommended and at which we are actively looking. We see it as very important. Over the weekend, I read about the volumes of cargo going through Foynes in Deputy O'Donovan's area-----
Ms Rose Hynes:
Yes. There are very high volumes going through Foynes as well, so we intend to join the dots in regard to all of that. The greatest volume of cargo traffic leaving Ireland leaves in lorries and trucks. It does not leave Ireland by air. We are looking at that and are working with the Irish Exporters Association. In its recent report, it was very positive in regard to the opportunities for Shannon Airport. We are right in there following that.
In response to Deputy Harrington, we have an ambitious plan. He asked if we had a plan B. One always has a plan B but I will not tell him what it is.
All the members have put their questions so we will move to non-members now. They have waited a while so I will take the four of them - Deputies Breen, O'Donnell, Mulcahy and Carey - together and they can ask questions. They should keep to the point as much as possible. Ms Hynes has been well congratulated, so if the Deputies could ask questions-----
I add my voice to the congratulations to Ms Hynes and wish her well in the future. Obviously, her job is very challenging. She spoke about an all-time high of 3.5 million passengers to 1.4 million this year, so there is a task to be done. Connectivity is extremely important for an island nation.
I have a few questions but I would like to comment briefly on the situation which has been emerging from Knock and Kerry airports. It is extremely important that Knock, Shannon and Kerry airports work together for the benefit of the west of Ireland. We have seen a huge surge in traffic to the east coast of Ireland. The area of balanced regional development is extremely important. I listened to the debate on an Adjournment matter in the Seanad last night. I hope the Member who made that complaint to the European Commission might consider his position because it is ill-judged and it would be in the best interest of the whole of the west of Ireland if we all worked together.
Nobody spoke about the customs and border protection pre-clearance facility put into Shannon Airport a few years ago at a cost of €20 million. It is now in Dublin Airport as well but it is totally under-utilised. It was one of the first such facilities in the world outside of an island off the coast of Venezuela. This facility was put in place in the interest of corporate traffic and scheduled traffic. It is currently being used by British Airways and a number of others. Will Ms Hynes comment on the role of this in regard to corporate jets because it is an important area in the Middle East? Many corporate jets cross the Atlantic on a daily and weekly basis. How much of that traffic can Shannon Airport capture because I know it has been tried in the past and, unfortunately, we do not have the volume we should have in that area?
Ms Hynes spoke about scheduled flights and transit traffic. During the year of the 3.5 million passengers, we were over-reliant on Ryanair and some of the previous speakers referred to that. Ms Hynes said we have learned from the past. I hope we have done so because we saw Shannon Airport go down as a result of Ryanair dropping services from the airport.
Will Ms Hynes comment on the importance of the transatlantic business for Shannon Airport and how she intends to increase it?
I was pleased to hear that the airport is in negotiations with a German airline. A hub destination for Shannon is especially important for business people and I know that the airport had a connection to the hub in Paris previously. How important is this for Shannon, London Heathrow Airport aside? The London Heathrow connection is important, but it is important to have an alternative hub in mainland Europe as well which would fulfil the role Ms Hynes has adverted to with regard to tourism, business and connectivity to other areas. I realise other speakers wish to raise the matter and that it is important. Therefore, I have no wish to go over questions that were asked before on the US Customs and Border Protection pre-clearance facility and transatlantic traffic. That is decidedly important for Shannon and always has been. How does Ms Hynes intend to increase business in this area, especially in the year of The Gathering? I realise she has referred to the new services coming in, but what are the other areas where we can increase traffic from the mainland?
I wish Ms Hynes well in her new role. I am a Deputy representing Limerick city. Shannon Airport is synonymous with the city and is very important to it. I wish to take up a point on transatlantic business made by Deputy Breen in the discussion on what Shannon Airport brings. We need a counterpoint to the east side of the country. Shannon Airport brings the transatlantic option which the other airports do not have, but they are complementary. I agree with Deputy Breen. What marketing resources will Ms Hynes put into play to market the airport and promote the pre-clearance facility in order that Shannon Airport can become a transatlantic international hub? The way I see it, a rising tide lifts all boats. I am keen to concentrate on the distinguishing features of Shannon Airport over other airports along the western seaboard.
What is Ms Hynes's vision? If I were to ask her what she envisages for five years' time, how does she see Shannon Airport and the region in respect of the reorganisation, re-energising and reincarnation of the airport? What would she like to see? What does she expect to see? How will all of this benefit the region?
I congratulate Ms Hynes and I pledge my support to the Shannon project. I have lived in the town for 35 years and I have watched the decline of the airport as it has occurred dramatically during the past ten years. I fully agree with Ms Hynes that the challenges are global, but they bring global opportunities as well. I take advice from a friend of mine on the aviation industry. He has informed me that there is a good deal of opportunity abroad, and my questions centre on this issue. One problem is that in general we tend to focus on passenger numbers and the numbers coming through the airport. There is no question that these numbers are important, but the Shannon project is about greater proposals, and I call on Ms Hynes to address some of these.
Deputy O'Donnell has probably hit the nail on the head in his question about a vision for where we should be in five years' time. Specifically, will Ms Hynes comment on the aviation overhaul and maintenance industry and where she envisages it will be? Where will the aircraft leasing and support industry be? What will feature in the growth of industry and the industrial estates in the area? What role will the IDA and Enterprise Ireland play? Will they have a direct involvement in the board? I believe that could be important.
Deputy Breen raised the issue of expansion of the pre-clearance passenger and cargo facilities. How does Ms Hynes envisage these coming together? I believe all of these issues are more important than passenger numbers, because these areas are where the real job growth lies. If Ms Hynes delivered an increase of 10% in jobs in the industrial estate that would be an extra 900 jobs, but if there were a 10% increase in jobs in the airport that would represent only 23 more jobs. It stands to reason that we should concentrate on the industrial base and where we can tie into it. We have a considerable aviation base at the moment but we need to take on the international challenges.
I congratulate Ms Hynes on her appointment and on her work to date on the project. It is clear that she has a vision and an ambition for the region. I have every confidence that Ms Hynes will make Shannon Airport a success. Something had to happen and I believe this is the best outcome for Shannon Airport and the region.
I have been taken by Ms Hynes's ability to bring people and organisations on board. It is clear that the region and people involved in businesses and tourism welcome what has happened in Shannon and look forward to the project getting under way. I have raised this subject with Ms Hynes in a private capacity. I believe we need to build on what has been done. There should be regional meetings throughout Ireland at which Ms Hynes could outline her vision for the airport and where she sees it going, and to get buy-in from stakeholders and those involved in tourism and business to sell the message about Shannon. This could be done in an international sense as well to get key people involved in the airport.
To build on the progress to date there is a need for reform, and people must support the airport and its endeavours in future. I see a role in this regard for an entity underneath the board. The board should be tight and focused and have people with an appropriate background and knowledge as well as a vision and an ambition for the region. I look forward to the appointment of the board. I am keen to hear Ms Hynes's view on the need for a forum. There should be a set of regional meetings in order that she can outline her vision and the vision of Shannon Airport for the region and, principally, to get buy-in from industry and people in tourism throughout the country, especially those along the western seaboard.
I do not intend to go over ground that has been covered before, but one issue has been raised already. There are questions about the business plan. I believe it is ambitious but achievable. Will Ms Hynes nail down the question and outline to people how it stands up and how it will work? It is clearly achievable for the airport to increase passenger traffic by 1 million in the coming years, and the development of the international aviation services centre is a key part of this. It is a key selling point. It has the capacity to increase the number of jobs and growth in the region. Does Ms Hynes envisage job announcements in the near future from companies that are coming on board?
Ms Rose Hynes:
There are several common themes but perhaps I will start with the position in five years' time. A combination of Shannon Airport and a restructured Shannon Development could be successful. What would success look like in five years' time? The aim and ambition is to have passenger numbers of 2.5 million or thereabouts, to have created a cargo hub and a transit passenger hub and to have gone much of the way towards an international aviation services centre. That is what I envisage for five years' time. None of this will happen overnight, but in a three- to five-year period I believe we will see things happening.
Ms Rose Hynes:
That was the estimate for within a five-year period. It will take five years to achieve it. It will not occur overnight because it depends on infrastructure. One of the first things we need to do is to develop an integration plan, because a land bank is being added to the airport, giving us more than 1,000 hectares. Such an integration plan is necessary and possibly we will push out air side.
One looks at all of that and then one determines what one can build. Someone asked about private investment and we will be attempting to attract private investment, on a joint venture basis, for new businesses at Shannon. That is the game plan for the next five years.
On the question of the forum, I am all for collaboration. Unless we collaborate, we will not get this done. This is not about any one airport or any one place. To me it is about Ireland Inc. and about the entire west coast, in particular. We must all work together to achieve this. I am certainly open to collaborating with others, including competitors at other airports. We need to grow the pie here. We must look at the big picture. I am in favour of collaboration, whether it is called a forum or something else. I certainly intend to collaborate because this will not be done otherwise. No solo run will get this done. We must collaborate.
The composition of the board is a matter for the Minister and as I said, that process is under way. The Minister will decide who is appointed to the board. I agree that we must get buy-in from the IDA and Enterprise Ireland and, indeed, they were involved in the task force. I have had meetings with the CEOs of both organisations in the last month and we intend to continue those discussions and to work with them closely because they are the people who will be charged with delivery of the jobs. We have to work together because it is not going to happen any other way.
Customs and Border Protection, CBP, is a hugely important facility for Shannon and, as was said already, Shannon is the only place outside of the Americas where it exists. I agree that it is under utilised and a big part of our marketing campaign will focus on increasing its usage in the business travel sector. The corporate jet market is wide open. The small island of Malta set up a task force in 2008 which looked at the worldwide aviation market and determined that Malta should target the corporate jet market and it has done quite well in that regard. Malta is an island that only measures 25 km by 17 km and is about the size of one of our counties. We cannot let those guys eat our lunch. We have to go after that market. The Maltese also looked at what Ireland was doing in aviation in general terms and copied some of it. This is not about one Irish airport versus another but about the international competition. We will certainly be going after the corporate jet market and indeed, that is one of the recommendations of the task force report. The report also recommends examining the possibility of establishing a separate registry for corporate jets and we are currently in discussions with the Irish Aviation Authority on that. We have set up a working group on the issue. The more we can do to attract people and the more we can do to market Ireland to the corporate jet market the better. I have no doubt we can increase our share of that pie.
Transatlantic traffic is hugely important, especially in the context of The Gathering this year. We intend to push that market more. As I have said, we have already got increased capacity for the summer of this year but that is not enough. We are going to push this and get more capacity. That, again, increases the pie for Ireland Inc.
Creating a hub for transit passengers is another recommendation of the task force report. Heathrow is very important in this regard but we must develop another hub outside of Heathrow and we are working on that at the moment.
I agree that the rising tide can lift all boats. A question was posed about the distinguishing features of Shannon. It has the longest runway in Ireland, is one of two transatlantic airports on the western seaboard and has connectivity to Heathrow. It has many firsts and has a history of innovation. That spirit of innovation is alive in Shannon but it has under-utilised infrastructure. It will have a land bank of over 1,100 hectares which is really important. There is already a cluster of aviation activity in Shannon and that cluster is greater than what places like Singapore, Dubai or Hamburg had when they started. We have 40 aviation-related entities employing 1,600 people, including Shannon Aerospace and GECAS, which is one of the largest aviation companies in the world. We must look after what we already have. Shannon has a huge history of innovation. Aer Rianta International was born in Shannon. The airport has a good future but the challenge is enormous. We must all work together on this.
I hope I have addressed all of the questions and points raised.
In the context of the point made earlier about Shannon and the military flights, what mechanism does the board have to deal with that? Human rights issues have been raised in this regard. Does the board make a judgment on any of that? We have no way of monitoring these flights so how does the board make a judgment on, for example, a request for more military flights? How does the board make a decision on whether that is acceptable or is such a decision left to the Government?
That concludes our consideration of this topic. There are huge challenges facing Shannon which cannot be underestimated but having listened to this morning's discussion, it is obvious that determination is needed to drive it forward. That is the big issue and Ms Hynes has shown her determination to the committee today. I wish her well and thank her for coming before the committee. A transcript of today's proceedings will be forwarded to the Minister for his information.
I wish Ms Hynes well and thank her again for her attendance.