John O'Mahony (Mayo, Fine Gael)
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The meeting will be carried live on UPC channel 207, eVision channel 504 and Sky channel 574. I remind members to turn off their mobile telephones. Apologies have been received from Deputies Helen McEntee, Michael McCarthy and Noel Harrington.

The purpose of this meeting is to discuss with the chairperson designate of daa the approach he proposes to take, if and when he is reappointed to the role, as well as his view on the challenges currently facing the authority. We are all aware of the Government's decision in May 2011, which put new arrangements in place for the appointment of persons to State boards and bodies. The committee welcomes the opportunity to meet the chairperson designate in public session to hear his views and we trust that this provides greater transparency to the process of appointment to our State boards and bodies.

On behalf of the committee, I welcome Mr. Pádraig Ó Ríordáin and draw his attention to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, he is protected by absolute privilege in respect of his evidence to this committee. However, if he is directed by the Chairman to cease giving evidence on a particular matter and continue to so do, he is entitled thereafter only to qualified privilege in respect of his evidence. He is 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, he should not criticise nor make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable. I also wish to advise him that any submissions or opening statements he has provided to the committee will be published on the committee website after the meeting. Members are reminded of the long-standing parliamentary practice 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.

I now invite Mr. Ó Ríordáin to make his opening statement, copies of which have already been provided to committee members. He may wish to provide us with a synopsis.

Mr. Pádraig Ó Ríordáin:

I might go through the statement because it will probably answer many of the questions that are likely to come up. I thank the Chairman and members of the committee for inviting me to attend today's meeting. It has been a privilege for me to serve as chairman of the Dublin Airport Authority, DAA, since January 2012 when I was nominated to the position by the then Minister for Transport, Tourism and Sport, Deputy Varadkar and last appeared before this committee. I am honoured that the current Minister for Transport, Tourism and Sport, Deputy Donohoe, has now nominated me to serve a second term as chairman of the group. It has been a pleasure to work with him and his team in defining the objectives and direction of the DAA.

Before turning my attention to the DAA over the past three years and the objectives of the group going forward, it may be helpful to briefly outline my own background and qualifications for the job. I am from Bishopstown in Cork. I studied law at University College Cork and qualified as a barrister in King's Inns in Dublin. I then moved to the United States of America, where I completed a Master of Laws degree at Harvard Law School. I began my career with a Wall Street law firm before joining the Irish law firm, Arthur Cox, to run its New York office. I returned home to Ireland in 1996 after seven years in the US. I was elected managing partner of Arthur Cox in 2003 and re-elected to the position for a second and final term in 2007. I continued to be a practising corporate partner in Arthur Cox, which employs 700 people and is one of Ireland's largest law firms. I am also a non-executive director of Paddy Power plc which is listed on the Dublin and London stock exchanges and now employs over 3,000 people.

When I became chairman of the DAA in early 2012, the company faced some significant challenges which I outlined in my nomination hearing before this committee at that time. The previous chairman of the company had resigned, the term of the company's then chief executive was coming to an end and there were several vacancies at board level. Traffic at the airports was weak, debt levels were high and relations between the company and the shareholder - the State - as well as some of its primary customers, were often quite strained. Morale among staff at the DAA was low and shortly after my appointment, Dublin Airport was served with an Article 15 security compliance notice by the European Commission.

Since then I am happy to say that traffic at Dublin Airport has increased by 16% to 21.7 million passengers, making it one of the best-performing EU airports in terms of traffic growth over that period. We have reduced our debt levels by 20%, or €150 million. We have rebuilt a very strong and cohesive board and critically, have found an exceptional chief executive in Mr. Kevin Toland to lead the group forward. Under Mr. Toland's leadership we have restructured and reinforced management and the way we run the company. We have redefined the company's values and developed a clear strategic plan. We have been clear in our objectives and have communicated actively with all of our stakeholders in realising them. We have refocused Aer Rianta International, ARI, our international duty-free business and have initiated a promising new business in daa International.

Our relationship with our shareholder, that is, the State and the Department, is cohesive and transparent and we have returned to our roots of being a customer-focused organisation. We have totally reorganised and reinforced our approach to security and have been focused on restoring staff confidence in management and sense of purpose as a team. Above all, we are playing our role in the economic recovery of the country, in terms of passenger numbers and our intention to return to paying dividends to the State. Dublin Airport and Cork Airport are also providing the central support to the ConnectIreland initiative, which is creating more than 1,000 sustainable jobs in the country over the next three to five years. Despite the progress we have made in each of these areas, real and immediate challenges remain for the group. The two primary challenges are the resolution of the pensions position for our staff and the reduced traffic levels at Cork Airport, to which I will return in some detail. Before that, I will focus on our journey at the daa over the past three years.

A good chief executive is the primary driver of everything at a company the size and importance of the daa. He or she defines the business priorities, builds the teams and relationships and provides the leadership that makes a company successful. The most important job for any chairman is to ensure that the correct chief executive is identified and appointed as well as supporting and challenging that chief executive in appropriate measure.

As our previous chief executive, Declan Collier, was leaving the company, my immediate priority when I was appointed was to find a new chief executive to lead the company. Between the search process and notice periods this took nearly a year to complete, but the time was well worth it. We were particularly fortunate to attract a person of the calibre of Kevin Toland, who at the time was chief executive and president of Glanbia USA and Glanbia Nutritionals, to join the daa in January 2013. Mr. Toland had been with Glanbia since 1999 and had previously held the roles of group development director, chief executive of consumer foods and director of strategy and marketing. Mr. Toland has been a transformational chief executive and precisely the kind of person we need in senior roles in the State sector. Given time, I believe Mr. Toland will lead the daa back to being the jewel in the crown of semi-State companies it once was as Aer Rianta, for all stakeholders, including the State, customers and our employees.

I argued strongly before Mr. Toland's appointment for a remuneration policy at Government level which would allow the daa to pay its chief executive at a level more in line with his private sector value. I make that argument even more strongly now, in respect of base salary and in reintroducing performance-related pay at chief executive level. It is critical to the semi-State sector to find and retain leaders of Mr. Toland's ability. I urge the committee to do what it can to assist the board of the daa in achieving this objective.

In addition to recruiting a new chief executive, the board of the daa was in a transition phase when I was appointed chairman, since the term of a number of non-executive directors had already ended. I worked with the Minister on the range of skills and competencies required to build an effective board and I am pleased the Minister has put in place a board of strong calibre, the members of which, together with our worker directors, have worked in a focused and cohesive way to deliver our key shareholder priorities. I wish to take this opportunity to thank my board for its support and dedication. Moreover, I thank the former Minister, Deputy Varadkar, and the current Minister, Deputy Donohoe, for the care they have taken to equip the board with the people and skills we need.

In the transformation of Dublin Airport and the building of terminal 2, which has become a real success for Dublin Airport, the group took substantial levels of debt onto its balance sheet. Over the past three years, we have made significant progress in eroding this debt. In the three years from 2010 until 2013, the daa's net debt was reduced by €151 million to €614 million, which is equivalent to a 20% reduction in debt. The daa has not yet produced its annual results for 2014 and, therefore, I am somewhat constrained in the detail that I can provide on last year's performance. The accounts, when published, are likely to show a further overall reduction in net debt levels. As with many large infrastructural businesses, the daa's debt profile is related to its capital expenditure programme and debt levels had increased to fund necessary capital investments at the airport.

At the end of 2011 the daa had a credit rating of BBB CreditWatch negative. I am pleased that on the back of strong growth in the daa's business and its current profile the group's credit rating was late last year raised to BBB+ with a stable outlook. This rating bodes well for the group as it prepares to re-finance its long-term debt over the next two years. This is critical to the company.

I will set out the position on increasing passenger numbers. In 2011 traffic at the daa's three airports was poor and had increased in that 12 month period only by 0.5%.

Since then, overall passenger numbers at Dublin and Cork airports have increased by 13% between 2012 and 2014. This was due to a combination of the improving economy, Government policy on travel tax and VAT and very focused efforts by daa to attract and keep new airlines and routes over that period. At Dublin, passenger traffic levels are moving back towards peak levels and in some sectors of the business, we are seeing record levels of business. Passenger numbers at Dublin increased by 8% to 21.7 million last year, helped by a record 2.1 million transatlantic passengers and good growth across all major markets comprising Britain, continental Europe, the Middle East and North Africa.

Last year's 8% increase at Dublin Airport followed a 6% increase in passenger numbers in 2013. This growth at Dublin is outpacing the average traffic performance at airports within the European Union, as recent ACI Europe data show that passenger numbers across airports within the EU increased by 4.9% last year. Dublin is also positioning itself as a significant hub for transatlantic transfer traffic, which is a new development, as a record 750,000 passengers connected at Dublin last year. Pre-clearance into the United States by the US Customs and Border Protection in Dublin is at the core of our ability to provide this connectivity and is essential to the future growth of Dublin Airport as a hub.

I now turn to Shannon Airport and the renaming of daa. In early 2012, when I was appointed chairman of daa, the Government was considering a number of options for the future structure of Cork and Shannon Airports. In May 2012, the Government announced that it planned to restructure the State airports by separating Shannon Airport from daa and putting the former Shannon Development and Shannon Airport under a new group structure. The establishment of the Shannon Group in 2014 brought together Shannon Airport, Shannon Commercial Enterprises Limited, which includes the Shannon Free Zone and a significant property portfolio, Shannon Heritage and an International Aviation Services Centre, IASC.

Shannon Airport was separated from daa on the basis that daa retained all of the €100 million debt attributed to Shannon and this, together with the significant rent roll of the new entity, has provided particularly strong long-term financial support for Shannon. In order to reflect the new structure of the business, the group's name changed from Dublin Airport Authority to daa last year after the State Airports Act 2014 became law. The new name more accurately reflects the group's business, which now comprises Dublin Airport, Cork Airport and two overseas businesses, Aer Rianta International and DAA International.

I now turn to Cork Airport, which is a key focus of the company and of the board. The growth in passenger numbers in daa is all generated in Dublin and masks the challenging situation in Cork, where passenger numbers continue to decline. As a Corkman who grew up close to Cork Airport, this is a problem very close to my heart. Despite a global survey finding in 2014 that Cork Airport was rated the World's Best Regional Airport for Customer Service by both business and leisure customers, passenger numbers declined in Cork Airport by 5% to 2.1 million last year. Last year's traffic decline at Cork Airport was due primarily to Ryanair moving some of its eastern European flights from Cork Airport to Shannon Airport. This was an unintended consequence of the separation of Shannon Airport from daa, with Shannon Airport now able to offer airlines materially greater incentives than Cork.

Kerry Airport enjoys direct State support and also has the advantage of direct State subsidy of certain airlines flying there on the basis of a public service obligation contract. In contrast to Shannon and Kerry, Cork Airport has no such advantages. In this environment, despite very dedicated efforts by daa management in Cork and Dublin to reverse the trend, traffic at Cork has continued to decline, despite the fact that airport charges at Cork have not increased in more than ten years and are highly competitive when compared to Cork's peers in Britain and continental Europe.

However, this is only part of the picture. An airport is, in many ways, like a bus station. It cannot generate traffic on its own. It needs the active support of the region and active marketing to visitors to come to the region. We are perfectly poised to take advantage of this. We have an excellent airport facility in Cork and provide a world-class product in terms of the customer service that we offer to passengers. As a relatively small regional airport, Cork provides exceptional service, with 42 scheduled routes and great connectivity into Heathrow, Schiphol and Charles de Gaulle, the three major European hubs. Therefore, we remain optimistic and are actively seeking answers to Cork. We have established the Cork Airport Development Council to assist us in that task. For the first time we have full board meetings each year in Cork and have a permanent sub-committee of the board focused on Cork Airport.

Only 37% of Cork Airport's passengers are inbound, which is notably low by international standards. This signals that there is significant potential for tourism growth into Cork and the wider Munster area. However, this potential can only be realised by a cohesive and funded regional tourism emphasis on the region, perhaps most obviously in marketing Cork and the region more generally as the start of the Wild Atlantic Way.

The airport will continue to work closely with tourism and all other relevant agencies and organisations to exploit this potential market. I ask the committee’s support in generating the necessary tourism, policy and other initiatives to improve traffic to and from Cork. In the meantime, we continue to work hard to attract new business to Cork and sustain the traffic we have. This summer, Cork will welcome a new twice-weekly scheduled service to Prague from CSA Czech Airlines and the airport continues to engage with customers and stakeholders to help expand its overall traffic base. We will continue to stay very focused on doing whatever we can to restore Cork to growth.

A focus on costs is a constant within the aviation sector, as it is within many spheres of business. Between 2010 and 2013, overall costs at the group grew from €248 million to €250 million, which is an increase of less than 1% during those three years. Within the Irish element of the business, costs have increased somewhat, due primarily to additional staffing in security areas, whereas costs in daa’s overseas operation have declined as the mix of our businesses has changed. Costs to our airline customers have not increased in recent years. Airport charges at Dublin have been effectively flat since 2012 and will decline by 4% this year, while charges at Cork Airport have not increased in more than ten years.

Turning to pensions, which is a critical issue for us, finding a sustainable resolution to the challenges that faced the multi-employer Irish Airlines Superannuation Scheme, IASS, has been a major focus for the group for several years. It is an area of critical importance to the lives of our employees and, as a board, we have enormous focus on resolving it in the best possible way. The IASS had been seriously under-funded for many years and the roots of the problem stretch back to flaws in the scheme since its establishment nearly 60 years ago. Last March, an expert panel was established by the Government, ICTU and IBEC to review how a final resolution of the industrial relations issues relating to the IASS could be secured. The expert panel issued its report in June 2014, with separate recommendations for daa and Aer Lingus. The extent of the funding issues in the IASS were such that the issues in question could not be resolved by the scheme’s trustee without some impact on members. In this context, resolving the issue was never going to be easy or painless.

It was unfortunate that the company found itself in a situation last March, faced with a potential closure of Dublin and Cork airports, that we had no choice but to secure injunctive relief from the High Court to avoid a SIPTU strike at the airport in regard to the pensions issue. The view of daa was that the planned industrial action by SIPTU was unwarranted and untimely, as the expert panel had just been established to consider the matter. Since the injunction was granted in March, the expert panel has reported and we have now, I believe, put forward an offer to staff and deferred members of the scheme which significantly bridges the cuts that have been made by the trustee to pensions they had contributed to, and offers a way forward on this very complex and understandably emotive issue.

daa is making a very significant investment to resolve this issue, with €72 million being invested for employees and deferred members of the IASS. daa will also fund higher ongoing employer contributions into the new defined contribution pension scheme for all current employees, which comprises 1,400 employees who were previously members of the IASS and 1,200 other daa employees.

Regrettably, despite protracted opportunities for engagement with unions, the company offer, which reflects the expert panel recommendations and which is open until 15 March, has not, as yet, been made within a collective bargaining framework. As a result, the company has gone with the only available alternative. In a situation where the IASS was frozen by its trustee on 31 December, daa has honoured its commitments within the expert panel report and made the offer available to staff and deferred members on an individual basis. Deferred staff are in a position to benefit from moneys invested by the company in a pension scheme resolution. Some deferred members are aggrieved that they are not in a position now to avail of an anomaly in the scheme which had previously allowed them to receive what was in effect a double pension – a full pension from the IASS with a State pension on top of that again. The IASS was never funded on this basis and this anomaly has been removed by the trustee as part of the overall solution to the pension issue.

The company has communicated extensively to members of the IASS in respect of the offer and the board believes it has done everything it can to support as fully as possible the pensions position of its members.

The company is actively encouraging members of the IASS scheme to avail of the offer before the cut-off date. I hope members accept this offer and secure their pension position, but I accept the decision is entirely within their hands.

The expert panel is currently re-engaging with SIPTU and ICTU to provide clarification on a number of points and the daa is assisting with this. The daa's preference throughout this process has been to secure collective agreement for the company’s proposal, which is a full and final offer to resolve the pension issues at the company and follows the recommendations of both the Labour Court and the expert panel. I cannot however rule out the prospect of further industrial action being contemplated by trade unions over the coming weeks as we approach the deadline for acceptance of the offer. We need to move forward, to bring closure to this difficult issue for everyone involved, for our employees for whom this is a critical issue, and for the company. Deferring the date for acceptance of offer is not an option. The Retired Aviation Staff Association, RASA, which represents former employees of the daa and Aer Lingus, has indicated in recent days that its members have voted to proceed with a legal challenge in regard to cuts in pension benefits imposed by the IASS trustee. It is not clear against whom such a case would be taken.

On the question of regulation, airport charges at Dublin Airport are regulated by the Commission for Aviation Regulation, CAR, which last autumn completed its determination for the period 2015-19. The daa's intention, which had been communicated to the CAR, had been to keep charges flat over the next five years to stimulate passenger growth while simultaneously prudently investing in key areas to facilitate expansion and further improve the overall passenger experience at Dublin Airport. Instead, the regulator opted to reduce airport charges at Dublin by 19% during the period. Dublin’s charges are already 22% lower than the average airport charge at its peer European airports. We believe this significant additional reduction is unwarranted and will inhibit the development of Dublin Airport as the key gateway to the country and materially reduce the daa’s ability to return dividends to the State, with this value being transferred to private airlines.

The regulator’s latest determination is further confirmation that the current prescriptive regulatory model is not working. Dublin Airport typically accounts for less than two thirds of all air travel to and from the island of Ireland. This provides the necessary scale for Dublin Airport to function as a hub and is clearly a strong market position. However, Dublin does face competition, both from other airports on the island of Ireland and, crucially, airports in other countries seeking to attract airline capacity. Airlines operate mobile assets and exert considerable competitive pressure on airports. Capacity can and does move from airport to airport, as we have recently seen in Cork. Dublin Airport also faces considerable market pressure, as its two largest customers account for approximately 75% of its traffic and, individually and collectively, exert considerable buying power. Dublin Airport does not have market power to price that the current regulatory environment presupposes that it has. This is evidenced by the fact that Dublin Airport has chosen in specific years not to price to the current price cap, precisely for reasons relating to the potential impact of such pricing on the market.

A more responsive regulatory model that would set broad parameters for the business should be the aim of the forthcoming regulatory review. The regulator should be supportive of investment in airport infrastructure that meets current and future requirements of the country and also enables the airport to comply with all necessary safety, security and policy regulations. The regulated business should be able to have the confidence of the financial markets, and be able to grow value for its shareholder, the State.

In regard to security, in March 2012, shortly after I became chairman of the daa, a regular EU audit of security processes at Dublin Airport regrettably identified a series of legacy security issues that required intervention at EU level and remediation. The issues raised by the EU auditors, which resulted in an Article 15 notice being issued, were taken very seriously by the daa. The company reviewed all of its security processes in light of the findings and worked closely with senior officials in the Department of Transport on resolving these issues. One of the issues flagged was rectified immediately, while the other matter was resolved within a month. Neither issue related to the screening of passengers or their luggage at Dublin Airport. In the wake of the audit, the board immediately undertook a root and branch analysis of the manner in which security was implemented and monitored at Dublin Airport. This resulted in a thorough overhaul of the systems and management of our security processes and has resulted in a sea-change in our approach to security.

With regard to the future, in recent weeks there has been much comment in regard to the proposed takeover of Aer Lingus by IAG and having requested our view, this committee received submissions from both Dublin Airport and Cork Airport with regard to this issue in late January. As indicated at that time, based on the limited information which has been issued by both parties, it appears there may some potential positives for Dublin Airport should the transaction proceed.

If a takeover were to go ahead, management at Cork Airport would work, not just to maintain the existing services offered by Aer Lingus at Cork, but would also examine the potential for new services from IAG's key airline subsidiaries and its membership of the Oneworld alliance. No formal takeover offer has yet been made by IAG and it is not yet certain whether such an offer will be made. In the absence of a formal offer document, and given that Aer Lingus, British Airways, Iberia and Vueling are all customers of daa, there is little further that I can add in regard to the potential takeover at this stage.

The core purpose of daa is to connect Ireland with the world and this is at the heart of what we do on a daily basis at our two Irish airports in Dublin and Cork. It plays a vital role in the Irish economy to boost trade, tourism and investment.

As indicated previously, Dublin Airport is currently enjoying strong passenger growth and will welcome 15 new services this year. daa is continuing to develop Dublin as a transfer hub for transatlantic traffic and this is working well. Last year, transfer passengers numbers increased by 34% to three quarters of a million. The group's near-term target is to grow this business to two million passengers per year. These additional transfer passengers can play a major role in underpinning the viability of new routes at Dublin, and also encourage airlines to expand the number of flights they offer on existing services. The Aer Lingus service to San Francisco is a perfect example of the importance of a steady flow of transfer traffic for overall connectivity from Dublin Airport. Aer Lingus launched the new San Francisco route last year and operated four return flights per week. A direct connection to the west coast of the United States was warmly welcomed by IDA Ireland and many US technology firms that have operations in Ireland. This year, thanks in no small measure to the transfer business on the route, Aer Lingus will operate a daily return service from Dublin to San Francisco.

This summer, Dublin will be the sixth largest airport in Europe for transatlantic connectivity as only the major hubs of Heathrow, Schiphol, Paris, Frankfurt and Madrid will have more flights to North America. The airport is increasingly winning business from passengers in Britain and continental Europe who are now choosing to transfer via Dublin.

Dublin has also witnessed a significant expansion in long-haul services to the Middle East in recent years. Dublin Airport's passenger numbers to the Middle East and North Africa doubled between 2011 and 2013, and increased by a further 19% last year. Etihad and Emirates both now operate double daily services from Dublin to the Middle East and offer passengers onward connections to India, Asia, Australia and New Zealand.

Short-haul services are also growing at Dublin. Aer Lingus and Ryanair have added extra services over the past couple of years. New overseas airlines such as Vueling, Transavia, and Wow Air are all entering the Irish market for the first time this year.

Given the growth at Dublin, there will be a requirement for the company to build a second runway at the airport in due course. daa received planning permission for the construction of a second parallel runway in 2007. The various options with regard to the development of a second runway will be considered.

At Cork Airport, which is the State's second largest airport, the intention as I have described, is to work with the regional and tourism agencies to stabilise traffic and return to passenger growth. Our focus is on building sustainable demand from both inbound traffic and Cork Airport's hinterland, which has a population of 1.2 million people within a 90-minute drive.

daa welcomes the publication of the State's draft national aviation policy, NAP, to which we have contributed. daa looks forward to the publication of the final NAP shortly. We are particularly pleased to see the inclusion of a number of important initiatives in the draft NAP that will enhance Ireland's connectivity and enable traffic growth. In particular the following: support for the development of Dublin Airport as a secondary hub; the co-ordination of enterprise and tourism marketing efforts in support of new route development at airports; and a commitment to a more liberal approach to the award of fifth freedoms as part of aviation agreements. We have some concerns about the position of Cork Airport in the draft NAP, given that Cork is the second largest airport in the State and a key national asset. While there is explicit provision for other airports, there is no specific designation for Cork Airport in the draft policy. We would be hopeful that the final policy, when published, will address this issue.

daa also intends to continue to grow revenue from its international activities, ARI and daa International. ARI operates in eight countries and made a profit of more than €29 million in 2013. ARI manages travel retail outlets in countries such as Canada, India and Cyprus. It runs daa's award winning Irish retail operation and it also owns a 20% stake in Dusseldorf Airport. ARI is a hidden Irish multinational, as through its partnerships and joint ventures it had managed turnover of more than $1 billion in 2013 and employed more than 3,500 people worldwide.

During the past three years, the company successfully and in a very timely manner completed its planned withdrawal from operations in Russia and the Ukraine to focus on higher growth opportunities in its core markets. Last year, ARI significantly expanded its Cypriot business when it acquired full control of CTC-ARI, the company that has the concession to run the retail outlets at Larnaca and Paphos airports. ARI now operates almost 5,000 sq. m of retail space across the two airports in Cyprus and employs approximately 375 people directly in those stores. ARI also operates airport retail stores in locations such as New Delhi, Beirut, Barbados, Montreal and Muscat.

At home, ARI is close to completing a major upgrade of the retail offer in terminal 1 at Dublin Airport which will bring in a number of new innovations. As a major travel retailer with international operations, ARI can leverage its expertise and skills across the business to great effect. For example, the award-winning Christmas marketing campaign, Joy of Giving, which was originally devised for the Irish market, is now being successfully used in Canada, Cyprus, Bahrain, Delhi and Muscat. Through ARI, daa is constantly exposed to the latest trends in the international travel retail sector. The revenue earned by ARI is vital for the group as the income from its Irish operations effectively subsidises airport charges at Dublin and Cork while funds generated by the overseas business are typically re-invested in the Irish market. This income is crucial to the group, as the core Irish airport business was barely profitable in 2013.

Given the essential role played by the ongoing revenue generated by ARI's overseas business and shareholdings, the group has taken a strategic decision to continue to hold these assets and seek to expand income from these areas. Over the past three years, the group has created a new overseas business daa International to take advantage of the broader skills base within the organisation as well as the very strong reputation of daa as an airport operator internationally. The experience of the investment programme delivered at both Dublin and Cork airports and the way in which new assets were delivered successfully into operational use have helped built a knowledge bank internally and an excellent brand for daa within the international aviation sector. As such, daa International is positioned to provide airport management services to financial investors in the global airport sector and also operates an international aviation training business, which has significant potential.

There is a large amount of acquisitions activity within the global airport sector and many of the financial investors in airports are keen to partner with industry experts and airport managers such as daa. In this regard, daa has already won business in the Middle East, India, Australia and the United States of America and has a strong pipeline of potential deals in its core markets. Our strategy is to build this into a second significant international business which delivers value to the State. The group is also a recognised leader in airport car park management systems, having pioneered a yield management structure for its long-term and short-term car parks. This expertise is now being sold to airports in North America and Europe.

Against the backdrop of a slowly recovering Irish economy, daa has made significant progress over the past three years. Overall passenger numbers at Dublin and Cork increased by 13% between 2012 and the end of 2014. Traffic at Dublin Airport increased by 16% during the same period, with particular growth in long-haul passenger numbers. Transatlantic traffic increased by one third over the past three years and is now at record levels. Dublin is becoming a hub for transatlantic connections and now has 750,000 transfer passengers. Despite the growth in passenger numbers, daa's core airports business was only marginally profitable in 2013, which is the most recent period for which figures are publicly available. The passenger experience at both airports has been improved while there has been a continued focus on cost control. Net debt levels were reduced by 16% between the end of 2011 and the end of 2013.

ARI has continued to trade well during the period. It has refocused on its core geographies and significantly expanded its business in Cyprus. The group has also launched a new international arm with significant long-term potential. It would be a privilege for me to contribute to these initiatives as chairman of daa and to continue to do what I can to help optimise the contribution daa makes to the economy as a whole. Again, I thank the Chairman and members of the committee for the invitation to appear this morning and I am happy to address any questions.

John O'Mahony (Mayo, Fine Gael)
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I thank Mr. Ó Ríordáin for that long and thorough statement. It covered a great many issues and may have answered many of our questions before they were even asked. I hand straight over to Senator Darragh O'Brien who is deputising for Deputy Timmy Dooley.

Darragh O'Brien (Fianna Fail)
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I thank Mr. Ó Ríordáin for his comprehensive statement. I have a few questions, which I will ask together.

In Mr. Ó Ríordáin's statement, he said he would be seeking the committee's support for his argument that remuneration policy should reflect the equivalent post in the private sector. He said that he makes that argument even more strongly now, both in respect of base salary and in reintroducing performance-related pay at chief executive level. Before the committee can decide whether to support that argument it needs to know the levels of pay and bonuses Mr. Ó Ríordáin is proposing for Mr. Toland. Could Mr. Ó Ríordáin comment on this? If that bonus structure is agreed - Mr. Ó Ríordáin refers to performance-related pay so it is effectively a bonus - on what basis are the targets set and who would be assessing the chief executive's performance in that regard? Before the committee makes a decision, it would need some more details.

I will focus on Dublin Airport in respect of it being a transatlantic hub. It is very interesting to see that three-quarters of a million passengers, which is a record number, connected through Dublin. Perhaps Mr. Ó Ríordáin might be able to expand on future plans. The free clearance both in immigration and customs at Dublin Airport gives us a distinct advantage. There has been talk about Air India and various other airlines. Mr. Ó Ríordáin might not want to talk about specifics but there is massive potential there. Added to that is the small comment in Mr. Ó Ríordáin's statement on the second runway at Dublin Airport for which planning permission was granted through An Bord Pleanála in 2007. A number of conditions were set at the time in respect of the planning permission that the daa said would make it too restrictive. Those of us who live beside the airport would be very aware of the number of jobs that are created. I have supported the daa and the airport over that period. One thing that is missing from Mr. Ó Ríordáin's statement is information about how the daa, which has responsibility for Dublin and Cork, is interacting with the community and how to ensure that the daa is a good neighbour. People have genuine concerns about a second runway although they want to see the airport expand and more jobs being created. Mr. Ó Ríordáin has quoted a figure of between 3,000 and 5,000 new jobs to be created over a five-year period. That is very welcome. I know many people who work in the airport. Could Mr. Ó Ríordáin expand on what the next step will be? He has spoken about moving towards what is effectively the construction of the second runway. Is he happy that the daa can do that under the conditions laid down by An Bord Pleanála in 2007?

In respect of the good neighbour strategy, the daa has a good social responsibility fund. My concern is more to do with the day-to-day operation of it. Why has the daa remained silent on the greater Dublin drainage proposals for the largest sewage plant in the country to be established within two miles of the airport and very close to the flight path when it also knows that the daa is very active, as is Aer Rianta, in commenting on other planning applications in the area for agricultural buildings? That is strange. Was it because one of the proposed plants is a State contract and proposal? The plant will be four times the size of Croke Park and very close to the airport. I would have thought that the authority would have some comment or interest in that regard and I would welcome a comment on it.

Mr. Ó Ríordáin outlined the daa's perspective on the IASS pension scheme. Many of us here, including Senator Barrett, Deputy Flanagan and I, have commented on this. In fairness, Mr. Ó Ríordáin has mentioned that it is very emotive and has affected 15,000 members of the scheme, many of whom are former employees of the daa. The deferred members came in for particularly savage cuts as part of what is termed the expert panel's proposals.

I take issue with one comment made by Mr. Ó Ríordáin, that they were allowed to receive what was in effect a double pension. If those were the terms of the pension scheme they signed up to, that was not the problem of the scheme being underfunded.

I put it to Mr. Ó Ríordáin that the trustees, including the current trustees, badly managed the scheme. The deficit doubled in the past two years, from €360 million to more than €700 million when we knew this was coming down the track. I hope there is a resolution to it but I do not believe there will be. RASA, the retired aviation staff association, has stated it will take a legal case.

I do not want to spend more time on the pensions issue, as we are working on it, but let me put the following point to Mr. Ó Ríordáin and the trustees of Aer Lingus that when the plan is put to individual members, those members have to waive their rights to taking legal action or being part of any legal action in the future. While the staff are being offered a deal, one is saying to them that if they accept the deal they are waiving all future rights to being a party to a legal action against the trustees. That does not seem to be the best way of trying to gain agreement. The people for whom a resolution is most desirable is effectively the employer.

There are two general issues that are important to transport. It is good to see the increasing numbers using Dublin Airport. Why has there been no comment in the statement on the North Dublin Transport Study? The airport has a significant role in that plan. There is no mention of metro north in Mr. Ó Ríordáin's statement although there are advance plans for future passengers and development of the airport but there is no mention of a rail connection. Most people do not want a spur from Clongriffin to the airport. As chairman of the daa, Mr. Ó Ríordáin has referred to future development vis-à-vis,the second runway but fails to mention connectivity to the airport itself. He mentioned car parking and the expertise Dublin Airport Authority has in the operation of car parks but as the sixth busiest airport in transatlantic travel surely it would have been an absolute priority for the daa to ensure that metro north or something similar is delivered. I have been surprised, as a representative for the area, that the daa has not been more vocal on that issue in the North Dublin Transport Study. Fingal County Council has been very clear that it would support the metro. I have not heard that from the Dublin Airport Authority but perhaps Mr. Ó Ríordáin could say so here. It would be great were he to do so.

My last point is procurement, an area in which Mr. Ó Ríordáin gained expertise with Arthur Cox. He mentioned Aer Rianta International, ARI. For those who travel in and out of the airport all of the time that is very important. Will he comment on the position of the airport as a showcase for Irish retailers? The comment has been made and I would not completely disagree that when one looks at all the retailers and the concessions located in terminal 2 it is akin to flying into Manchester Airport, with its WHSmith's and so on. There are very few Irish owned companies, with a few notable exceptions. I believe we could showcase Irish businesses much better. Will Mr. Ó Ríordáin comment on the procurement and the tendering process for concessions at the airport? I do not believe it is as transparent as it could be. I receive many complaints from Irish indigenous businesses. When people come into our airport we can offer them the opportunity to see Irish businesses but the Irish owned and run shops are in a minority in both terminals 1 and 2. The daa is due to embark on major works on terminal 1 and I am aware that the tender for food has been awarded to an Irish company.

John O'Mahony (Mayo, Fine Gael)
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I thought we had pre-empted all the questions but a number have been raised there.

Mr. Pádraig Ó Ríordáin:

I thank Senator O'Brien for his pertinent questions. I will address the first question on remuneration policy for the chief executive. This issue goes beyond the daa because of the issue of State policy on chief executive pay throughout the sector.

I understand there are different perspectives concerning the country as a whole. I come at this from the perspective of trying to get a company to operate optimally for the benefit of the State. People like Mr. Kevin Toland are genuinely a rare commodity. He has come back from a job in which he earned a significant multiple of what he will earn with daa. It is a job he does extraordinarily well. It is important for us as a country to value that type of leader because they really do make a difference in how a company operates. I can already see that clearly in daa. In a couple of years, this will be seen amazingly clearly. I am not here to propose Mr. Toland’s salary should be moved to X or Y. When he was appointed, the Government was looking at a policy of introducing performance-related pay. That has not come to pass, however, which I am sure is a disappointment for him. He is still on exactly the same salary that he was on several years ago. I am very much of the view that a bonus means a bonus or that performance-related pay should be related to real performance. This is done all the time throughout private companies, whereby remuneration committees set very clear targets. Mr. Toland himself sets very clear targets for his people internally which was not really the case before in the daa. I agree some of these matters need to be carefully calibrated and implemented. The point I am making, however, is that there really is a necessity for this to retain people in the system.

Developing Dublin as a transatlantic hub is one of the biggest developments in the airport for several years. It will give the airport much critical mass and will support connectivity from Ireland across the globe. We can support that connectivity with English and Scottish air passengers who come through Dublin Airport and use its routes. It does not just support the airport financially with, say, landing charges and what people spend in the airport, but it also supports how we can market Dublin to a greater range of international airlines. We can tell airlines that if they have the passenger loads, we can produce them, and it is not just from the Irish population but also by feeding people in. It is a fantastically strong message. We have new relationships, to which the Senator alluded, such as Ethiopian Airlines coming through Dublin to pick up passengers and move on under fifth freedom rights, an exciting development. Capital expenditure will be needed because we have to reconfigure some parts of the airport to make the product for transfers much more efficient. This is a significant priority. There has been some resistance to this by some of the airlines at regulation level but it is important to the company’s development.

I referred to the second runway because we are moving to a phase where we will need one. A second runway would be tremendously good for Ireland in the long term. It is amazing when one looks back at how previous generations of daa management had worked on planning for a second runway. Their work is fantastic and quite extraordinary in comparison with other airports like, say, Heathrow. A good landbank has been secured to ensure the airport is not on top of its neighbours. It is too early to get into the details of this. I am just flagging this as something we will look at in the medium to longer term to start that process. There is nothing imminent in this area but it is a development we keep an eye on all the time. We will have a full conversation with our neighbours when the time comes. The daa in general is very conscious of its position in the community and of its neighbours.

I am not sure why we have not commented on the greater Dublin drainage plan. It may be an issue concerning the project’s distance from the airport but I will check it out for the Senator. Generally, we pay a lot of attention to any planning issues or projects that will affect the development of the airport in the long term and we do respond reasonably well to these.

Pension provision is a very emotive issue. As a board, we really care about this issue because it impacts on individuals’ lives for a long period, as well as their quality of life in retirement.

The problem we face is one that has not been addressed in 60 years. Some of the anomalies in the scheme genuinely are anomalies. For example, there is a double pension in the scheme. I will try to explain how it works. I was amazed when I took up my position at the airport to learn how this works. Generally speaking under a defined benefit scheme a €30,000 pension is met with €18,000 from the scheme, with the remainder being met through the State pension. That is how it operates everywhere. Because of an anomaly in the IAS scheme, a person who retired on his or her 65th birthday would get a €30,000 pension but a person who retired earlier than that would receive a pension of €30,000 from the IAS scheme plus the State pension, bringing the total pension to €42,000. The difficulty is that none of this was funded. People who contributed to the scheme were contributing to the €30,000 pension, not the €42,000 pension. That level of payment becomes unaffordable because, as I said, it is unfunded. Under the IAS scheme, the trustee has been paying that for some time. It is a double pension.

In terms of what is now being proposed - this has gone through the Labour Court, the LRC and the expert panel - the expert panel has proposed that the fairest possible way of resolving this is exactly what has been proposed by daa, namely, that all active members of the scheme would have their pensions reduced by approximately 20%, that €72 million be provided by daa to bring their final pensions back up to €30,000 and there be no further payments of the double pension. People have said that what is proposed is very complex. I agree it is very detailed. However, when it comes down to what is on the table, as proposed by the expert panel, and what daa, as a company, has genuinely stretched to do, it is a fair offer.

Darragh O'Brien (Fianna Fail)
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We cannot debate that issue now.

John O'Mahony (Mayo, Fine Gael)
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I remind members that we are required to vacate this room soon.

Mr. Pádraig Ó Ríordáin:

Senator O'Brien asked why daa as a company would ask people who sign up to this for a waiver. The reason is simple. One of the reasons for the many problems in daa, and not only in terms of pensions, is a lack of clarity. As a country, we lack clarity in relation to so many matters. When this pension problem is resolved it needs to be resolved in a permanent way so that everybody can move on from it and build value in the company. The purpose of the waiver is to ensure this issue does not arise again next year, the following year and the year after that.

On metro north, we support it and have made our position in that regard very clear. We may not have been very vociferous recently but our position is very much that metro north is the right way to go in terms of capacity and frequency.

We have a very strong procurement policy. For example, we have developed the Irish whiskey collection which is now available worldwide. We pay a lot of attention to promoting Irish business. At the same time, we have a mandate from the Oireachtas to ensure we operate the airport in as commercial a manner as possible. This means getting the best franchises we can. While we, too, would prefer to have as much of an Irish flavour as we can, we have a mandate to respond to that requirement.

Sean Barrett (Independent)
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I welcome Mr. Ó Ríordáin to the meeting. I will try not to overlap with the questions raised by my colleague Senator Darragh O'Brien. While I acknowledge the difficulties around security the current arrangements in this regard from the customer point of view are a hassle. While the staff are very courteous security arrangements are making travel an ordeal. I believe security is in part responsible for the decline of Cork Airport. Previously, approximately ten flights a day operated between Dublin and Cork. Now, because of increased security at either end such travel is no longer worth the hassle.

I support what the daa is doing in relation to travel to the US.

I know US immigration must satisfy itself to its standards, but it seems strange to the passenger to go through the same procedures with Mr. Ó Ríordáin's people first and then when they go downstairs it starts all over again. Perhaps it could be harmonised a bit better.

On both projects that were mentioned, the chief executive's pay and the metro, that is just the way this country is. Like daa's chief executive, whom I applaud for his work, I had more as a graduate student in Canada than when I came to work here. It is a bankrupt county that we are trying to rescue and everyone from the Taoiseach down has taken cuts in pay. That must be explained to chief executives. We are not ready to move to a different situation.

Regarding the metro, the access to the airport from the west side, through the M50, is more efficient than people from that area going into St. Stephen's Green at vast expense, going through an underground thing and out to the airport. On the east side, the time from the Point Depot, as we used to call it, to the airport is 15 to 17 minutes away through the port tunnel. We have the access. According to the figures I see, the time from St. Stephen's Green to the airport is 17 minutes. One can do that substantially from both the west of the city and the centre. One must question a plan that involves running up vast amounts of debt to build a metro without proper cost-benefit analysis. We are in a country that is still borrowing and still has a heavy debt-to-GDP ratio. Those projects must be looked at much more stringently.

That is also part of Cork's problem. It built a terminal at the wrong time. I do not know whether it can be sublet or sub-contracted to anybody, but having two terminals in an airport that is declining in passenger numbers is the burden of debt on Cork. I wish Mr. Ó Ríordáin success in his efforts. However, I proposed in the Seanad that Cork should go the same way as Shannon and try to develop itself, but I found remarkably little interest in it in Cork. I imagine daa is trying to drum up interest for its committee. Do Cork people want to promote the airport as actively as people in the west do with Knock? Cork must make that decision itself.

On pensions, I note Mr. Ó Ríordáin's expertise in restructuring AIB, Bank of Ireland and so on. We said when the Governor was here that there seemed to be a tradition in Ireland that trustees could operate with impunity, giving added years and early retirements, as Mr. Ó Ríordáin has said. I do not know whether the same lax standards in banking and accountancy influence the way pension trustees carried on, but as Senator O'Brien said, given the massive increase in debt in a recent two-year or three-year period, we should have been on notice that the pension fund was in trouble. Some accountability by pension fund trustees, wearing their wider financial services hat, is a significant part of that.

The other point Mr. Ó Ríordáin mentioned was the regulation of the airport charges. I like what he is doing now rather than what happened in the past, because I recall academic conferences where the previous regulator, Cathal Guiomard, would give papers and so on. He was a pretty popular fellow among economists. His determination was previously overturned by ministerial order. One can imagine he is trying to referee a contest between daa and the airlines and somebody outside says, "I wish to award all the proceeds to one of the parties". In economics there is a serious fear that the producers always win and consumers never do. It is called regulatory capture. There was about a 40% increase a number of years ago. That has to do with the construction of the terminal. Some studies were done about the number of square feet per passenger, the amount of terminal space and so on. daa is working on those now to get them out of the system so that it can have a more harmonious relationship with the airlines. That is to everyone's credit at present because substantially low-cost airlines, which both Ryanair and Aer Lingus are now, can do deals in airports and there is one airport per million people all through Europe, which are not comparable with the ones in capital cities. Perhaps what daa has now is a low-cost terminal and people want more services.

It was being said that the Dublin charges were lower than any other capital city, while the airlines were saying they were higher than what they paid anywhere else as they negotiated deals and so on. It was the way the airport business changed. That was what Professor Alfred E. Khan questioned during Mr. Ó Ríordáin's term in Harvard, namely, why was it twice as expensive to fly from Boston to Washington as it was from Los Angeles to San Francisco? The second route is in the state of California, which had a low-cost aviation policy, as distinct from the feds, which did not at the time. That has also been changed.

Holding down the costs, as Mr. Ó Ríordáin says, is important. I would be more concerned at what the daa has said about the takeover of Aer Lingus. There is probably the expertise within the daa. What it has done in the north Atlantic and elsewhere is spectacular by comparison with Manchester, Birmingham, Edinburgh, Glasgow and Belfast. I see British Airways as never developing transatlantic routes except in Heathrow. It is a gesture of great faith and trust to say that if it got control of Aer Lingus it would not also divert the business into Heathrow. When I first started to write about this, Heathrow traffic was 35 million. It is now 72 million. There is always enough capacity at Heathrow for British Airways, but everybody else gets kept out through the slots system.

Mr. Ó Ríordáin mentioned the importance of the Aer Rianta International brands. Aer Lingus is one of those brands and what has been done in San Francisco and Washington is huge. I estimate that for a country larger than us, 5.3 million would be impressive. Scotland is doing about 400,000 passengers on the north Atlantic and Ireland is over 2 million. I would hold on to Aer Lingus rather than accept any guarantees regarding what British Airways would do. It is a brand worth having and an airline that has been performing very well. We were saying last week it carried 11 million passengers. That is about what Ryanair and easyJet had at the turn of the century. One has gone on to carry 65 million, the other is heading towards carrying 100 million. It is more difficult to do it now because the other two operators have vastly increased their capacity but it is not out of all bounds of possibility for Aer Lingus to develop well beyond 11 million as the two other airlines have done. I would strongly favour not having the British Airways takeover.

I do not know what IAG brings to the party. Its British end - its home market - is significantly overshadowed by easyJet. Iberia, the other part of it, never did much to develop Spain as a tourism destination. The charters were doing 95% of the market between the UK and the Canaries and so on. We should be looking for some dynamism to help the daa as a dynamic company to hold on to the Aer Lingus management brand, rather than selling it for what is a relatively small amount of money. I wish Mr. Ó Ríordáin well in all of his tasks and compliment him on being returned to office. A lot of people around this table will be trying to accomplish that within the next year or so. If Mr. Ó Ríordáin has any hints we will take them.

John O'Mahony (Mayo, Fine Gael)
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We will take Mr. Ó Ríordáin's comments on or answers to the Senator's contribution. There are two more members wishing to come in.

Mr. Pádraig Ó Ríordáin:

I thank the Senator. Going through his questions, we have done a huge amount of work on making security as efficient as possible. The regulations for security are imposed on us by Europe and implemented here in Ireland as well. We have to make sure that we are as efficient as we can be in respect of those rules. The new gels rules, for example, and various other aspects do slow things down. I can tell the Senator that we have had our senior management down on the floor of Dublin Airport from 4 a.m. to make sure we understand exactly what is the process and how to make it as efficient as we can.

In terms of US Customs and Border Protection, CBP, I agree with the Senator. It is necessary to go through a second process but their process is different. The difficulty is that if we applied that process to everybody, including those to whom we do not have to apply it, that would slow things down even more.

We pay a huge amount of attention to getting an efficient process and anybody who has used Dublin Airport in recent years will find that we have got a lot better at that in terms of queue times and everything else.

In terms of pay, I totally understand the Senator's point. We have had a stressed country. There is only a certain amount of money to go around but the reason I think about this slightly differently is because I know that a good chief executive can make a difference of potentially tens or even hundreds of millions of euro in terms of the country and in terms of daa. If a new chief executive can increase passenger flow into Ireland by 1% or 2% by making sure that we leverage the company to the maximum of its ability, the benefit to Ireland will be off the charts. In the way I look at the world, to lose something like that would be a shame, but I understand the differences of opinion on that.

With regard to metro west, I am not in a position to go into it too much but our position is that we believe metro west is currently the best option, but we would be very happy to get into the debate on that.

On Cork, what the Senator said is arguable in that €200 million was spent on the Cork terminal. The original terminal was over 50 years old so it had to be renewed, but that came at a bad time in the cycle in terms of what has happened. We are doing everything we can to focus on Cork. There is a permanent sub-committee of the board that focuses only on Cork. We have four Cork people on the board, including myself. Our chief executive travels to Cork very regularly, which was not a feature previously. We have a very good chief executive in Cork. We have the Cork Airport Development Council. A major focus of daa is making sure that Cork improves, and we have a lot to bring to the party in terms of relationship with airlines and so on to do that.

In terms of the pensions and trustees, as the Senator knows, the trustees are separate from the company so I do not want to comment unduly on the trustees. The trustees are regulated by the Pensions Board as well so it has its job to do in regard to that.

On the regulation of airport charges, in recent years we have been very commercial in what we do. What we want to achieve as a board is to make daa a very commercial organisation so we are not relying on price caps or artificial anything to make the business very strong. We are just implementing normal business practice.

I do not think there is regulatory capture. I am being as objective as I can when I say that the current regulatory system does not work because it is defined in a particular way. I will give the committee an example. Developing Dublin Airport as a hub, for example, would benefit Aer Lingus significantly but Aer Lingus opposes the money we would spend on a hub because it sees that as a much shorter-term issue than we do. It will figure that, in the long term, we will have to find some way of getting it built anyway. Sometimes there is a disconnect in terms of what it is we are trying to achieve for the benefit of the country. That is often not reflected very well in the current regulatory scenario, therefore, we welcome the regulatory review.

On IAG, our position is straightforward. We have not seen the IAG offer yet so it is very difficult for us to comment unduly on it but in regard to the slots in Heathrow, for example, the Irish traffic into those slots is very strong. The loads on the Irish routes into Heathrow are very strong, therefore, those routes should be sustainable on their own merits. They also feed a lot of traffic into the British Airways network and into the IAG network, therefore, they are very valuable routes.

In terms of looking at what IAG could potentially contribute on a Dublin basis, it could contribute significantly in regard to transatlantic routes and in regard to the hub. Heathrow is jam-packed. It does not have any customer borders protection, for example, so therefore it is a much less attractive product in terms of getting people from the United Kingdom to the United States. If people are flying from the north of England through Heathrow to the United States, they are much better off flying through Dublin. There are potential merits to having access to that IAG system and channelling it through Dublin. We are quite measured on this and we would like to see what will be the final outline of the transaction.

Terry Brennan (Fine Gael)
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I thank Mr. Pádraig Ó Ríordáin for his very informative statement. He stated that debt at Dublin Airport has been reduced by 20% between 2010 and 2014, and that he hopes to reduce it further. Perhaps he will elaborate on how he plans to further reduce debt. Is Dublin Airport the sixth busiest airport in the world or in Europe?

Mr. Pádraig Ó Ríordáin:

In Europe.

Terry Brennan (Fine Gael)
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Is there connectivity between the top five airports and their respective city centres? He indicated that he is in favour of metro north. It is a necessity if we are to compete successfully with other European airports. Passenger numbers from Dublin Airport to mainland Europe and the United States have greatly increased, with five or seven return flights to San Francisco, and visitor numbers from the United States are at their highest level since figures were first recorded. However, profits have not increased accordingly. Perhaps he can give us the reason for that.

Cork Airport was mentioned by other speakers. I have flown through the airport on a number of occasions. I agree that it needs active support if it is to contribute to tourism growth in the region. There are two flights to Prague every week from the airport. Should it also be connected to other European capitals or would that interfere with other regional airports? Charges at Cork Airport have not increased in ten years but passenger numbers continue to decline. I cannot reconcile these trends.

I congratulate Mr. Ó Ríordáin on his reappointment. Given what I have heard from him, I am confident in his ability to do his job and I wish him well in the years to come.

Terence Flanagan (Dublin North East, Independent)
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I, too, congratulate Mr. Ó Ríordáin on his reappointment and wish him well. In regard to the proposal for an aviation fuel pipeline to connect Dublin Port with the airport, is the planning application ready for submission and what are Mr. Ó Ríordáin's views on the proposal? What benefits will the pipeline bring and has daa identified any safety concerns in regard to it? It will take a number of trucks off the road, but they already use the Dublin Port tunnel. I understand similar plans were drawn up several years ago but they were ultimately shelved because the route was very controversial in that the pipeline would pass through residential areas.

Other members asked about the connectivity between the city centre and the airport. Is he happy with the current scenario and what is his opinion on the Swiftway and train link proposals? CIE has proposed a rail link to Clongriffin DART station, which would connect trains with the rest of the country.

Is more information or documentation available to Deputies and Senators regarding the plan and vision for Dublin Airport as a transatlantic hub? Senator Darragh O'Brien asked about the greater Dublin drainage scheme and the plans to have a monster sewerage plant within two miles of Dublin Airport. What is Mr. Ó Ríordáin's opinion on it? Is it appropriate and acceptable? There is major opposition to the proposals to locate the plant on the periphery of the Fingal County Council area. It would service a number of counties and the location does not seem right. Perhaps a series of smaller plants would have been a better option than one monster plant. What forum exists for the local community, stakeholders and public representatives to make criticisms, ask questions or communicate with the daa? How do they go about it?

Regarding IASS, there is major unhappiness among pensioners at the unfairness. The deferred pensioners in particular feel they are being singled out, that there is no equity in the cuts that have been applied and that the cuts should apply to all workers equally. They feel the terms and conditions of their pension arrangements are being broken and they face cuts of 50% to 60%. Under UK pension law, the deferred pensioners in Northern Ireland and the UK cannot be targeted and must receive their benefits. Only the Irish deferred pensioners are being penalised. As Mr. Ó Ríordáin described earlier, these workers have put significant time, effort and service into the airport companies and I am seeking a fairer deal for them.

Mr. Pádraig Ó Ríordáin:

Senator Brennan asked about the 20% debt reduction. We want to reduce it further. To the extent that we have any degree of profitability in the airports or generated by Aer Rianta International, ARI, we will reduce our debt. We have to refinance all our debt - approximately €550 million - over the next two years. The fact that our credit rating has improved is tremendous because the debt will cost us less, and we continue to be very focused on it. The question on the other six transatlantic airports in Europe which have the same or more transatlantic traffic as Dublin Airport was very interesting. From my memory and knowledge of the airports, I would say all of them probably have very strong connectivity from the city centre to the airports. On the question of why profits have not increased while passenger numbers have, we have high capital expenditure and other expenses. Low regulatory charges inhibit our ability to create profit in the airports. Although our costs have increased by only 1% over the past three years, we still find it very difficult to find profit because of restrictions such as the regulatory caps. Pension costs must also come out of the budget.

Terry Brennan (Fine Gael)
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I was going to mention those also.

Mr. Pádraig Ó Ríordáin:

All of those factors have an influence. Given that we are running the business on a very strongly business-oriented basis and have a proper strategic plan, I hope the financial performance will continue to improve. I could not agree more that Cork Airport needs the active support of the entire region. The fact that only 37% of people who use Cork are inbound travellers indicates that we are not attracting enough visitors. A general tourism initiative needs to be implemented for Cork. The question of whether there should be a public service obligation, PSO, route from Cork to Dublin is very important for transatlantic connectivity into Cork, through Dublin and on to other airports and as a support to airlines that come into Cork, which could advertise their services abroad. Much can be done and we are working hard on it.

In response to Deputy Terence Flanagan's question regarding the aviation fuel pipeline, I am not quite sure what is the current status. However, we can provide that material to the Deputy separately. I simply do not have the brief to hand at present. As for the connectivity with the city centre, from the point of view of the airport and what we can achieve there over a period and in particular, if we have a second airport - again we are talking in the medium to longer term - that degree of connectivity is very important. Of the options we have reviewed to date, the metro north option is the one we would find preferable because it is a long-term solution. It would give us the capacity into Dublin Airport for the conceivable future development of the airport. In terms of an airport in particular, it is really important to think in the long term, not about what is around the corner next year or the following year. As I stated previously, generations of good boards of management in daa have done this for many years. In terms of a long-term solution, metro north is quite strong.

Terence Flanagan (Dublin North East, Independent)
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What about the Swiftway or link to Clongriffin options?

Mr. Pádraig Ó Ríordáin:

Perhaps we could have a separate conversation on that because I would need to be briefed properly in respect of what precisely is our position on each option. However, I would be happy to do that at some stage if the Deputy wishes.

On the plan for Dublin as a transatlantic hub, we would be happy to prepare and circulate a paper on that in order that everybody is aware of what is the plan. It is part of our strategic plan at present. I probably have responded to the question regarding the Dublin drainage scheme already. I am not entirely sure why we have not been an active participant in that discussion. While distance from the airport may be one issue, again I will check separately on that matter.

In respect of daa interaction with the local community, people can interrelate with us in many ways, many of which now are on social media. As we have a good social media programme, we respond to issues quickly and over the past two years, we have become very outward-looking again. Our relationships with all stakeholders, including the State itself, obviously, the airlines, our employees and the community have been strong. Again, it is a particular strength of Kevin Toland that he does this. He does a lot of workshops for people and he goes out and speaks to people in town hall-type settings quite often. Again, if there are individual issues from a community perspective, we absolutely would engage fully in that regard.

As for deferred pensioners - this is an important point - when deferred pensioners are talking about cuts of 50% to 60%, they are talking about cuts of 50% to 60% from the double pension. In the example I gave earlier of a €30,000 pension, they are talking about cuts of 50% to 60% from the €42,000, not from the €30,000. The additional €12,000, the State pension, is something to which they never have contributed. What they are saying is that because of the anomaly in the scheme, they believe they have an entitlement to the €42,000 and therefore, are judging their numbers from there. If one looks at what they have contributed to as pensioners in the scheme, that is, the €30,000, they will be getting a maximum of a 10% cut from that €30,000, which is exactly the same as what the existing pensioners are getting under the restructuring the trustees have put in place. Consequently, they are not being treated very differently from other parties. The other point to remember in respect of the deferred pensioners is that nearly all of them left Dublin Airport Authority on the basis of a voluntary severance scheme or an early retirement plan, both of which involved quite sizeable packages. For example, in recent years, daa has spent €50 million on those packages it has paid either to pensioners or to deferred members of the scheme. When one stands back from this and looks at it objectively, it is not as unfair as one thinks. The expert panel has listened to absolutely everybody on this and has stated the solution to which we now are signing up is the fairest solution. The panel would not have done this were the figures as skewed as a 50% to 60% reduction in pension.

Terence Flanagan (Dublin North East, Independent)
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Through the Chair, what members are hearing as public representatives on the ground is there is huge anger over these cuts.

Mr. Pádraig Ó Ríordáin:

I know.

John O'Mahony (Mayo, Fine Gael)
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The Deputy has made that point. I need to bring this meeting to a conclusion but by way of a final comment, I was interested in Mr. Ó Ríordáin's suggestion that the difficulties of Cork were somewhat increased and that it does not have an even playing field in respect of the advantages of Shannon Airport or even Kerry Airport.

Coming from the west of Ireland, I get plenty of suggestions from Knock airport that it is not a level playing field. Mr. Ó Ríordáin has referred to that and may wish to comment on it.

For the information of members, reference has been made to how we are not sure about the proposal to sell the Government's stake in Aer Lingus and that we do not have the requisite information from IAG. Members will have the opportunity to ask questions of Mr. Willie Walsh on Thursday to address any concerns they may have.

Mr. Pádraig Ó Ríordáin:

The point about Cork Airport is that advantage is given to airports for good and understandable reasons. Cork Airport is competing with Shannon Airport, and when the latter was separated from the daa, the daa retained €100 million of debt. That debt was written off and a substantial rent roll was put into the group so there is non-aeronautical revenue coming into the group. In addition, when assets were moved from the daa to Shannon Airport, they were substantially written down. This means there is a lower depreciation cost for the assets of Shannon Airport. This frees up Shannon to offer deals that are not commercial in Cork. Cork could not responsibly provide these deals. If Shannon is offering deals to airlines, they will naturally follow their commercial interests and go to Shannon. That is why a number of flights, particularly to Poland, have transplanted from Cork to Shannon. The same number of passengers are travelling but coming from a different airport.

It is very important, particularly in the national aviation policy, that we recognise Cork as a sparkling airport with great connectivity and a good hinterland. It has decreasing numbers and we need to focus on it as the second airport in the State and ensure we do what we can for it. This involves a cohesive tourism effort in getting people into Cork. The fact that we have not been able to persuade one of the airlines to fly from Dublin to Cork is a big negative for Cork Airport. People would use it and fly on to Dublin whereas at the moment they are using the motorway. Much can be done for Cork Airport and I ask the committee to focus on it. There has been a big focus on some of the other regions over the past period. I make no comment on Knock airport but refer to Shannon particularly. In Kerry, there is a public service obligation and a subsidy of €270 per passenger. There is none of that for Cork Airport and I ask the committee to focus on that point.

Michael Fitzmaurice (Roscommon-South Leitrim, Independent)
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We must be careful with the language we use. All airports need fairness and Knock has been on the hind teat. We should not single out any airport but we should get people to all parts of Ireland. This is very important, whether it involves Cork, Kerry, Shannon or Knock.

Mr. Pádraig Ó Ríordáin:

I cannot comment on that because it is national policy. I was addressing the point about how Cork Airport has been performing over the past period.

John O'Mahony (Mayo, Fine Gael)
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On behalf of the committee, I thank Mr. Ó Ríordáin for engaging with us in an open and transparent way. This was an informative meeting and I wish Mr. Ó Ríordáin well in his reappointment. His position is in safe hands and I wish him well for the coming years.

I propose a copy of the transcript of today's discussion be forwarded to the Minister for Transport, Tourism and Sport for information and consideration. Is that agreed? Agreed.