Oireachtas Joint and Select Committees
Wednesday, 20 July 2016
Select Committee on Transport, Tourism and Sport
Dublin Airport Authority: Discussion with Chairman Designate
I remind members to ensure their mobile telephones are switched off for the duration of this meeting as they interfere with the broadcasting equipment even when in silent mode. The purpose of this meeting is to engage with the chairperson designate of the Dublin Airport Authority to discuss the approach he proposes to take if and when reappointed to the role, as well as his views on the challenges currently facing the authority. All members are well aware by now of the Government decision of May 2011 that put in place the new arrangements for the appointment of persons to State boards and bodies. The committee welcomes the opportunity to meet the chairperson designate to hear his views and we trust this provides greater transparency to the process of appointment to State boards and bodies.
On behalf of the committee, I welcome Mr. Pádraig Ó Ríordáin. I draw his attention to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to this committee. If he is directed by the Chairman to cease giving evidence on a particular matter and he continues to so do, he is entitled thereafter only to a 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 he is asked to respect the parliamentary practice to the effect that, where possible, he should not criticise or 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 that any submission or opening statement he makes 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 House, or an official by name or in such a way as to make him or her identifiable.
I invite Mr. Pádraig Ó Ríordáin to make his opening remarks. I also should explain to him that at 3:30 p.m., I will be obliged to vacate the Chair for other parliamentary business and so if he sees me leaving, he should not take it personally.
Mr. Pádraig Ó Ríordáin:
I thank the Chairman and members of the committee for inviting me to attend today's meeting. It has been a real privilege for me to serve as chairman of daa since I was first appointed in January 2012 and then reappointed 18 months ago in February 2015. I am honoured that the Minister for Transport, Tourism and Sport, Deputy Ross, has asked me to attend this meeting today in respect of reappointment to the role for the next 18 months, which is a key period for daa. I am conscious of the core importance to Ireland of Dublin and Cork Airports and it has been a great pleasure for me to work with the Minister’s predecessors, his Department and the daa board in defining the strategic direction for daa in alignment with national policy, as well as in ensuring that that policy is implemented. I look forward to continuing to contribute to daa as a key engine for Irish growth and to continue to help deliver on its potential for the economy and community as a whole.
Before turning my attention to the daa, it may be helpful to outline briefly my own background and experience. I am from Bishopstown in Cork and studied law at University College Cork to postgraduate level. I qualified as a barrister in King's Inns in Dublin and then moved to the United States, where I completed a master of laws degree at Harvard Law School. I qualified as an attorney in New York and 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 with Arthur Cox after seven years in the US. I was elected managing partner of Arthur Cox, which effectively is its chief executive, in 2003 and was re-elected to the position for a second and final four-year term in 2007. I continue as a practising corporate partner in the firm, which now employs 700 people and is one of Ireland's largest law firms. I also am a non-executive director of Paddy Power Betfair plc, which is listed on the Irish and London Stock Exchanges and now employs more than 7,500 people, having joined the Paddy Power board in 2008.
Since I appeared before the Oireachtas Joint Committee on Transport and Communications in early 2015, there has been strong growth in the Irish economy, which daa has both contributed to and benefitted from. Most notably, passenger numbers at Dublin Airport are at record highs with more than 25 million passengers in 2015, which surpasses the peak pre-crisis levels. This growth momentum continues with volumes up by 13% in the first six months and more seats on sale every week from 16 May to 2 October in 2016 than the peak week in the summer of 2015. Cork Airport, a key focus for the daa board over the past few years, has taken longer to recover but has now also returned to sustainable growth since the final quarter of 2015 and the prospects for Cork are good. I will elaborate further on the impact of this traffic growth at both Dublin and Cork a little later. Meanwhile, daa’s international businesses have had a very successful year, winning significant new duty-free contracts in the new Abu Dhabi airport, Muscat and New Zealand. In Saudi Arabia, we have been appointed to manage the new Terminal 5 in Riyadh, the first big win for daa International, our fledgling airport management business.
The growth in our business has been achieved with the unstinting support of our staff who safely and securely run our airports and give a great passenger experience. daa is a commercial semi-State company that pays its own way and does not receive any Exchequer funds directly or indirectly. The group finances all its investments from the cash it generates and from debt raised in the same way as normal commercial businesses. As a commercial State company, we are also - rightly - expected to pay dividends to our shareholder. Over the past four years, we have prudently managed our finances and structurally, the company’s debt levels are in a better position now with net debt €100 million lower and debt as a multiple of our earnings reduced from more than five times to just three times and we have improved our credit rating.
All of these have repositioned us well for the completion of a 12-year €400 million re-financing, which we completed in June on notably attractive terms. The long-standing pension problems, which created so much risk for employees and uncertainty for the company, were resolved during 2015 and a new pension scheme is in place since the beginning of the year.
We have announced plans to move forward with the new parallel runway at Dublin Airport, something I will return to in more detail later. The last 18 months have also been particularly important in respect of the developments in the environment in which the daa operates. These include the publication of the national aviation policy, the takeover of Aer Lingus by IAG and the review of the regulatory regime for airport charges currently under way. In this period, security, particularly in light of renewed terrorist attacks internationally, has been a central focus for us while other international developments such as Brexit have only begun to play out. Again, I will return to these themes.
I will comment on policy and industry developments. I very much welcome the new national aviation policy which the Government has adopted. This is the first comprehensive and integrated strategy for the aviation sector published for over two decades and it provides a cohesive direction for growth. The daa will energetically play its central role in helping to deliver the benefits of this policy, not only through the development of the northern runway but in working with the Minister, the Department and all other stakeholders on the strategy.
I welcome the announcement by Government of the Metro North transport option as a frequent service with fast journey times connecting the centre of the airport to the city centre. I urge, however, for this project to be accelerated as delivery by 2026 loses many years of structural economic benefit to Dublin and the country. The most significant industry development of the last 18 months for the daa was the acquisition of Aer Lingus by IAG. This offers new potential for growth both in Dublin and Cork airports, not least the quickly emerging potential of Dublin to become a European transatlantic gateway, a topic to which I will return.
As I mentioned, last year Dublin Airport handled over 25 million passengers and this year we are potentially on path to break the 27 million mark. Traffic at Dublin has grown 33.7% in the four years since I joined the board of the daa. Dublin Airport is now the second fastest-growing airport in Europe. We are constantly expanding connectivity and service in Dublin with 39 new routes and nine new airline operators in 2015 and 2016. This expanded connectivity of Ireland to the world is at the core of the daa's economic contribution to the country and we consider it a central part of our mandate. The ongoing development of Dublin Airport as a gateway to and from the United States is central to the ongoing development of this connectivity as passengers transiting through Dublin strongly support the global network and frequency of routes available to those passengers whose origin or destination is Ireland. The key success factors in developing this potential include our US Customs and Borders Protection service in Dublin, the continuing development of Dublin Airport as a transatlantic gateway for European and US travellers and the increase in capacity through the northern runway.
The daa has focused significantly on the development of Cork Airport in recent years. The environment in Cork has been challenging since the financial crisis and the airport was also adversely affected by the terms offered by Shannon Airport since its separation. I am pleased to report, however, that it has now turned a corner. Cork has now achieved nine months of passenger growth and is back up to 2.15 million passengers, the second largest airport in the State. Although the CityJet Cork to London City route failed, there are seven new routes into Cork this year, as well as three summer routes that are becoming year-round services. The other core growth opportunity through Cork Airport for the Munster region, the Wild Atlantic Way and Ireland's Ancient East remains the proposed Norwegian three-times-a-week flight to Boston. The US authorities continue to delay granting Norwegian a foreign carrier permit. I urge all stakeholders to continue to work to urgently resolve this issue and the daa will play its part in this regard.
The development of a new parallel northern runway at Dublin Airport has been incorporated in county development plans since the 1970s. In contrast to airports like Heathrow, generations of previous boards and management of the company had the vision and foresight to assemble and preserve the lands and environs required to build it. Although planning permission was granted in 2007, it is only now that the economic pace of the country and the growth of passengers at Dublin Airport require the development of this key national infrastructure, and it a core part of the national aviation policy.
The development of a parallel runway is necessary not only to sustain passenger growth at Dublin Airport but, critically, also to realise the potential for Ireland's connectivity with the world. In addition to relieving ever-increasing congestion at the airport, the new runway, which will be 3,100 m in length, will facilitate new long-range routes from Ireland to cities such as Beijing, Hong Kong, Singapore, Tokyo and Sao Paulo.
To sustain the levels of growth I described earlier, the objective of the daa is to deliver the new northern runway by 2020, which is as soon as is feasible. The cost of the runway was estimated at €245 million in 2014 for the regulatory process and the actual cost is currently estimated at €320 million. The change in the estimate is due to a combination of factors, including cost inflation, more comprehensive scope items and the added expense of working on a far busier airfield. The project will, of course, be competitively tendered to ensure it is built at the lowest available actual cost. Until that is done we cannot confirm the final price. However, we can confirm that the project will be funded entirely by the daa without recourse to the taxpayer.
The planning permission for the new runway, as granted, contains 31 conditions, two of which are particularly onerous and would restrict the usage of the airport to a degree that would largely obviate the purpose of the new runway. Should these two conditions remain, building the new runway would materially reduce the current capacity of Dublin Airport rather than increase it during the hours of 11 p.m. and 7 a.m. Specifically, the planning conditions provide that if the new runway is built there can be no more than 65 movements on the existing runways between 11 p.m. and 7 a.m. in contrast with approximately 100 such movements currently and would also require that the new runway would have to be entirely closed during those hours. These two planning conditions were designed and included many years ago at a single point in time and without any in-built mechanism to respond to changing conditions. Such changing conditions in the intervening years have included the development of far quieter aircraft, which now account for 95% of all flights to and from Dublin. As a result, the daa will apply to the planning authorities to have these conditions removed. In doing so, we are centrally conscious at board level and throughout the executive management of our place in the community and the potential impacts on our neighbours.
We are committed to approaching these issues in a transparent and helpful way, listening to the concerns of neighbours and addressing them to the extent that we can in an open, constructive and objective manner. We have already commenced this process of actively engaging with the community. An environmental impact study will be undertaken for review by the relevant authorities and a comprehensive study of noise contours from the new runway will be completed to European standards. We do not intend using compulsory purchase orders for any houses and we intend to go beyond what is required of us in the planning permission in terms of mitigating the impact of noise as we seek to find balanced constructive and responsive ways of addressing concerns.
The current system of regulation of airport charges has been in place since 2001 and, as noted in the national aviation policy, involves more onerous regulatory intervention than is required by European law. Although the approach to regulation has evolved little during those 15 years, the industry it relates to in Ireland has changed dramatically, as have its competitive dynamics. In that period, Ryanair has gone from being a small, primarily Irish and UK based airline to a world leader and Aer Lingus is now owned by IAG, one of the largest and most successful global aviation players. These are our two major customers. We value them decidedly and both have tremendous competitive power. They can move aircraft, the most mobile of assets, from Dublin or Cork with ease and deploy them elsewhere in their international networks if the financial conditions in our airports are not appealing.
The regulatory system continues to ignore these realities. It is costly, overly complex and disproportionate to the market position of the airport. It has been striking to me during the past four years the level of distortion this system can cause. It seems the regulator rather than the board determines the nature, level and timing of the daa's investment strategy for the airport. In doing so, it often prioritises short-term considerations over long-term strategic investment in the airport, which is what is needed in Ireland's primary gateway. Dividend return to the State, as the daa's shareholder, is de-prioritised in favour of increased return to the airlines and there appears to be little alignment between the regulator's mandate and the goals of the national aviation policy.
Last year, the Department of Transport, Tourism and Sport commenced a process of reviewing the regulatory regime in the aviation sector, a process we very much welcomed.
The Department has now commenced a public consultation on future policy, inviting submissions on a recently published report by Indecon that is assisting the Department. It is of concern that this report recommends reinforcing the current regulatory approach or making it even more onerous while making no reference in its analysis to Dublin's two nearest potential competitor airports in Belfast, both less than 180 km away, or to the goals of the national aviation policy. The daa will be making submissions to the Department on this report in the coming weeks. Central to our submission will be the theme that Dublin Airport needs to operate within a regulatory system that equips it to develop the right infrastructure for long-term national economic development within an environment of competitive airport charges and adequate return to the shareholder.
In addition to the daa's two airports in Ireland, the daa Group also operates a successful international travel retail business, Aer Rianta International, ARI. This business is truly global, operating in the Middle East, Asia, India, New Zealand and North America, and continues to expand its footprint. Group turnover reported for 2015 in our international business was in the order of €180 million, generating €22 million in profit. We have developed a new international business in recent years, daa International, daai, which provides international airport management advisory services and aviation training services. Earlier this year, daai won a contract to manage and operate the new Terminal 5 facility in Riyadh, Saudi Arabia. This terminal is now up and running. We see promise in this business and will continue to work to expand it into a contributor of scale to the group.
Approximately 70 acres of uniquely located lands within Dublin Airport are suitable for development. Dublin Airport central is about developing modern, sustainable office development on that footprint. Members may have noticed the redevelopment of the former Aer Lingus head office building on the site over the past 12 months. This is now a modern office building that will shortly be occupied by ESB International. We plan to develop the site further commercially in the coming years, potentially in partnership with others, subject to obtaining the requisite planning permissions.
The daa is a service-led business and we have a great and dedicated staff who deliver continuous excellent service on a 24-7 basis. The daa Group offers more than 3,300 full-time equivalent jobs, of which 2,500 are based at our Irish airports. In 2012 when I became chairman, our airports were ranked among the lowest for customer services against comparable European airports. That situation has changed dramatically and both Cork and Dublin Airports are now ranked among the highest for customer service. I am particularly proud of the efforts of all staff in achieving the best customer service standards among peer airports, most especially while meeting the demands of a fast-growing business. Equally, I am conscious of the need to deliver to staff and to create a cohesive, evolutionary employment environment that can flex and grow with the ever-changing needs of the business while creating a fair, forward-looking workplace in which our staff can thrive. To achieve these goals, we have embarked on a transformation programme aimed at changing how all levels of the company work together, how employees are rewarded and build careers and how the company manages change in a fast-moving, dynamic airport environment. I am happy to report that there is active engagement between management and staff representatives on these matters.
I mentioned a number of international developments that are likely to have an impact on our business. In particular, we will be closely monitoring the impact of the UK leaving the EU. At a national level, we see the importance of the UK-Ireland economic and tourism links, with Dublin-London the largest international route in the world. In 2016, we expect just over 11 million passengers to travel to and from the UK through Dublin and Cork Airports. Any change to the operation of the common travel area through the reintroduction of border controls between Ireland, Northern Ireland and Great Britain would make travel between the countries more difficult and could have negative impacts on trade and tourism apart from the significant cost and complexity implications at airports. Equally, we are conscious that there may be opportunities related to Brexit and we are focused on identifying these at the earliest possible stage.
Before concluding, I wish to say a word about security, which in all of its aspects continues to be perhaps the key priority area for the company. The terrorist attacks in recent months in Europe are disturbing and, as a company, we have studied each as it has occurred. The safety and security of passengers and staff are primary board priorities and we continue to review actively our security arrangements and keep in regular contact with the Garda and other relevant State agencies regarding airport security matters.
I wish to highlight the work of my colleagues on the daa board who have worked well and cohesively with me over the past four years to formulate a pragmatic but ambitious strategy for the group that is aligned with national priorities and customer expectations. In particular, I wish to acknowledge Mr. Kevin Toland, our CEO, who has done an exceptional job, not just for the daa, but in helping it to reach its potential as a key source of growth for the economy as a whole. Under his stewardship, the business is performing strikingly well, with record traffic and profit levels, continued expansion abroad and ever-increasing connectivity. I have made this point a number of times previously but I am certain that the yawning pay gap between what a CEO of Mr. Toland's ability is paid in the public sector and what he would be paid for doing the same job in the private sector is the most false of all economies for the country. The positive impact that he has made in igniting Dublin and Cork Airports as key Irish assets speaks for itself. I urge the committee to take the urgently required remuneration steps necessary to enable boards like mine to retain exceptional people of Mr. Toland's calibre within the public system where their energies are dedicated to advancing the economic interests of Ireland as a whole.
I thank the staff of the daa for their hard work, dedication and commitment to making our airports the best in Europe. I thank the Minister for Transport, Tourism and Sport, Deputy Ross, and his officials, with whom we have good professional relationships, for their commitment and their ongoing support for all aspects of our business. Thanks also to the group's shareholder, the Minister for Public Expenditure and Reform, Deputy Donohoe, whom I also worked with as Minister for Transport, Tourism and Sport, and the former Minister, Deputy Howlin, and his officials for their support over the past 18 months.
It would be a privilege to rededicate my own efforts to the daa over the next 18 months and to continue to fulfil the role of chairman of the company for that period. I thank the Chairman and the members of the committee for the invitation to appear before them today and I am happy to address whatever questions they may have.
I thank Mr. Ó Ríordáin for his informative statement. I wish to ask a couple of questions, particularly on the new runway. According to the daa's report, it has already commenced the process of actively engaging with the community. Will Mr. Ó Ríordáin update us on how that is progressing? Has agreement been reached? Mr. Ó Ríordáin stated that an environmental impact study would be carried out. Is the daa conducting that study or will it engage an independent body? He also stated that the daa did not intend to use compulsory purchase orders, CPOs, for any house. There are 40 homes in question. If some families do not want to move, how will the daa be fixed then?
Mr. Pádraig Ó Ríordáin:
The engagement with the community regarding the second runway is at the core of our thinking in every respect. When discussing the second runway at board level, engagement gets a great deal of attention. We started that engagement with the community in St. Margaret's even before we publicly stated what our next steps would be. The night before, our CEO met the community to inform everyone of what was happening and what the next steps would be. This process has been under way since. We have met a broad range of community groups, their representatives and individuals. If anyone wants to engage with us, we will meet him or her, generally at a senior level, by which I mean from the CEO and senior executive levels down. This is not being outsourced, as we are taking this seriously at the core of our business. We have dropped approximately 30,000 information leaflets and we have a website dedicated to the project for everyone affected.
We have also answered every question that has been asked of us. We are trying to be very transparent from the start about everything we are doing, why we are doing it and the consequences of that.
That feeds into the second question which was about the environmental impact statement. The scope of the environmental impact statement is being worked through. As part of that there is consultation with not only each of the statutory stakeholders but also with the community and everybody else who wishes to participate, so the scope of the statement is defined having heard and listened to all of those voices. The next step is that we appoint consultants who undertake the environmental impact statement in accordance with international standards. They come back at the end of that and there is a further consultation at that stage on their environmental impact statement. To the extent that mitigation factors are required we would propose those.
Mr. Pádraig Ó Ríordáin:
They are consultants who are appointed by us and who are acting to international standards. I am not an expert on this but there are international standards for environmental impact statements. There is a series of chapters and each of them must be addressed. The outside consultants are experts who do that to international standards. Of course, that can be critiqued by anybody because once it is produced it is put out for consultation again. People can offer their views on it or critique it. It is a standard process and is as objective as one can get.
I will turn to the Deputy's third question about the homes. Nothing that we do will be involuntary, because clearly that would be the wrong approach from our perspective. Regarding the houses affected in terms of purchase, we will make an offer to purchase those houses. As the Deputy says, it may very well be that families do not wish to move and do not wish to take up that offer. If they do not, we will leave the offer open for a year after the runway becomes operational. We are not simply asking people now if they wish to move and to take up the offer. We will leave it open so they know what the actual experience with the runway is and can make the decision in that context. If they do not wish to move, that is their choice. We will offer them insulation in their houses to ameliorate any effects of noise.
First, I congratulate Mr. Ó Ríordáin on his re-appointment, which is obviously a vote of confidence. The report is positive after the traumatic times of the last number of years. As a Cork man my first question, of course, is about the Cork-Boston transatlantic connection that has been promised for so long. Why is it taking so long? There have been deputations, ministerial intervention and goodwill groups from local authorities to Boston and Norwegian Air Shuttle. There is a European-American transatlantic agreement in place. What is the reason this is being held up? Is it because the American presidential election is under way at present? I hope Mr. Ó Ríordáin can reply on that.
I welcome the proposal for a second runway in Dublin and I am glad the airport is not encountering as many intricacies as Heathrow Airport. My question is about the conditions. What is the point of having two runways if one of them must shut down when the other one is functioning? I thought the idea behind having two runways was to deal with the intensity of the number of flights. My understanding of it is that when one runway is open the number of flights is reduced from 100 to 64, but it shuts down then to allow the other runway to operate. What is the advantage of having one runway shut down when the other is functioning? Am I open to correction on that interpretation?
Mr. Pádraig Ó Ríordáin:
I will deal with the Cork-Boston route first. The reason it is stuck, essentially, is that it is a political issue in the United States. As Norwegian is a low cost airline there is an amount of resistance in the US, from a political perspective and particularly from airline unions, to Norwegian coming in.
There is a fear that, for example, it will use staff on lower wage levels and be able to produce a more cost effective product. Norwegian Air Shuttle has made a number of confirmations to indicate that this would not be the case and it would not be using those types of staff, but it has still become a political issue in the US. There is a good deal of pushback because Norwegian is the first. The US Department of Transportation has made a preliminary judgment that there is no legal basis to refuse this. Due to the open skies arrangement between the US and Europe there should not be a legal basis to do it, but that department is still dragging its feet and has not allowed it. The daa and many other stakeholders have been doing everything we can to try to get it progressed, but it is still blocked. One would expect over a period of time that if the United States does not have a legal basis for refusing the permit Norwegian Air Shuttle needs, it would be granted. As a fellow Cork man, who grew up under the flight path of Cork Airport, I am equally exercised about this, but we are being as thoughtful and progressive about it as possible. We are engaging as many stakeholders as possible to get this progressed. We just have to stick with it.
The Deputy asked a good question about the conditions. He is absolutely right. There is a total of 31 conditions but these two are very troublesome. Essentially, they do two things. First, it states that once we build the second runway there is, for the first time, a condition that applies to the entire airport. Once we have a second runway the entire airport cannot have more than 65 movements a night. Currently, we have 100 movements a night. That means approximately 3 million fewer passengers than what we currently have if that condition remains. In addition, as the Deputy said, the new infrastructure we build, which is the new runway, would have to be totally closed down between the hours of 11 p.m. and 7 a.m. When one considers matters such as connectivity, one of the advantages of the new runway is its length at 3.1 km. We have many flights that require that runway and because they are long haul flights they can arrive at any hour. To use the second runway to relieve the congestion that currently exists, because the air field of Dublin Airport is now totally full at various times of the day, and to ensure the airport is open for long haul flights in particular, the second condition that the runway must close down for those hours appears to be unworkable.
There are many other conditions that we will deal with but these two are major hurdles to realising the value of the new runway, not just for the daa but for the country in terms of building passenger numbers and connectivity.
Mr. Pádraig Ó Ríordáin:
It will. That will be a significant part of the environmental impact study. The study will look at these two conditions and say what their effect is now. They will be studied in depth in terms of the noise profile of modern aircraft and the noise contours as well. A noise contour essentially measures where the noise is produced around a runway. As one can imagine, it is like to a long bubble around the runway but it has different effects in different places. All of that will be canvassed as part of the environmental impact statement.
While waiting for the Chairman to come back, I will make my contribution. The figures presented today show turnover is up by 20%, that profit after tax is up, that there has been an improved return on equity, that there are extra passengers and there that has been a return to growth in Cork. There are improved international operations. There is little doubt as to why Mr. Ó Ríordáin has been asked to stay on as chairman. The figures are a ringing endorsement of him and also the staff working under the auspices of the Dublin Airport Authority. As committee members, we should acknowledge this.
Mr. Pádraig Ó Ríordáin:
I thank the Acting Chairman. I attribute the success to the entire organisation. It is a wonderful organisation which has returned to a position of real strength. It went through a period in which it might not have been as strong, but we are back to strength and on the right road. That is certainly not attributable to me but the entire organisation. I thank the Acting Chairman for noting it.
There are a couple of issues I wish to raise, one of which was alluded to, namely, the proposed second runway at Dublin Airport which offers great potential not only for the airport but also Ireland as whole. It would open up Dublin Airport as a transatlantic hub, improve connectivity and our ability to connect with Asia and the Far East.
As I am not living in the constituency in which Dublin Airport is situated, it might be quite easy for me to say the restrictions being imposed under the planning permission criteria of 2007 are simply unworkable if we are to open up the airport and improve traffic numbers and movement through it. Mr. Ó Ríordáin should try, as he proceeds, to have these onerous conditions removed. Every effort should be made, with the local people who will be affected by the proposed new runway, to purchase houses that will need to be purchased and insulate those that will need to be insulated. Treble-glazed windows should be installed. Whatever needs to be done to minimise the impact on the residents living in close proximity to the airport should be done. I understand there are new EU noise regulations to be issued. The airport must adhere to them because we cannot have circumstances in which residents will be adversely affected by the expansion.
The one concern I have about the proposed second runway is the increase in the associated cost. Originally, it was identified as approximately €260 million, but now it has been identified as €320 million. At a time when labour and construction costs are falling, I do not understand why the cost of the second runway is increasing. With due respect, I do not accept people saying it would cost more at Heathrow or another airport. It is not being built at Heathrow Airport.
It is not being built at another report. Based on the foresight of previous boards and CEOs of the Dublin Airport Authority, we are fortunate that we have the required land. Possibly the dearest part of any runway project is the purchase of the land, but we do not have to do this. I would welcome the chairman’s opinion.
With regard to Terminal 2, there is talk of parking slots, parking stands and bus lounges. The Terminal 2 building is open only for a few years and seems to be populated by check-in areas. Capacity has already been reached in terms of parking stands. I understand there is no capacity to extend Terminal 2, yet it is still being sought to extend it by parking buses off-site and bussing passengers to it. Does the chairman believe or accept that Terminal 2 was built in the right location? How much space has been allocated for check-in desks? Most people who go to the airport have already checked in online and are just dropping off a bag, yet when one goes to Terminal 2, there is nothing but rows and rows of check-in desks with nobody at them. I would welcome the chairman’s opinion on that matter.
Last night I was reading the chairman’s statement to a previous committee. He complimented his board members and said they comprised an extremely competent board with the relevant experience to deal with the aviation sector. Are all of the existing board members staying on with Mr. Ó Ríordáin for the following term? Has there been a turnover? Is Mr. Ó Ríordáin happy with his board members?
Pre-clearance at Dublin Airport for transatlantic flights is unique to Ireland and of considerable benefit to the tourism industry. I understand, however, that there have been difficulties with the home office in the United States in having the relevant personnel. While it does not seem to be an issue this summer, it has the potential to be down the line. Is the chairman aware of this and what is his opinion on it?
The chairman referred to national aviation policy. While regional airports do not fall within his remit, what is his view on them? Do they have a role to play? I would welcome his opinion on Knock, Shannon which is no longer under his control and other regional airports such as Kerry Airport. Do they have a role to play, bearing in mind the size of the country? How can the daa interact and engage with the likes of Ireland West Airport Knock?
Reference was made to Cork Airport. It is great to see an increase in growth and a turnaround at that airport. It is disappointing that the transatlantic flights to Boston flagged so many years ago are still in limbo as they would greatly enhance the potential of the Cork region. Could the stalemate be broken through more diplomatic efforts, perhaps involving the Minister for Foreign Affairs and Trade working with the relevant governor or Member of the US Senate to advance the issue?
The chairman is not complimentary of the regulatory system. He does not go into specifics; perhaps he does not wish to. He has rightly identified that the customers of the daa are the airlines, including Ryanair and Aer Lingus, but they could move at the drop of a hat. Are we at a disadvantage regarding the regulations to which we must adhere by comparison with some of the airports with which we compete? If so, will the chairman identify the regulations which are having this considerable effect?
I have two more points to make and I am taking liberty as Acting Chairman. The first point is on security. When one sees what is occurring across the world, including in Nice last week, one realises there are events that almost cannot be planned for. Who would have envisaged a lorry driver doing what he did in Nice? What has the daa done to ensure security? Everyone says Ireland is very low on the list of potential targets. However, what would be done if people decided to get at the Americans in an area in which they chose to take a holiday? A large number of Americans choose to holiday in Ireland. What is being done in that regard?
The chairman spoke about the remuneration of the CEO.
I have never been one to subscribe to a rush to the bottom. I believe that if one pays peanuts, one gets monkeys. If we are to attract the right calibre of people into the appropriate positions, they need to be adequately remunerated. Everybody has had to take a level of pain or a reduction in recent years. It is only right that everyone had to take that level of pain and that those who could give the most gave the most. However, we are now talking about having turned the corner. Mr. Ó Ríordáin spoke about there having been a huge increase in the profits of the Dublin Airport Authority, daa. As he identified improving figures across the board, he might indicate what his thinking on that is as opposed to being bland about it, if he does not mind my saying that.
Mr. Pádraig Ó Ríordáin:
That is quite a menu. I will start at the beginning. I agree entirely with what the Acting Chairman said about the potential for the new runway and the opportunity for connectivity and everything that it will give. Equally, I agree with what he said about every effort being made in that respect. In implementing the new runway, we will make every effort to ensure the impact of that on our community and neighbours in the Dublin area is ameliorated, as the Acting Chairman said, in terms of offers of house purchases and insulation where it is appropriate. We will do all of that. That is very much a central part of our thinking. I can confirm that to the Acting Chairman.
On the issue of noise regulation as we go forward, the Acting Chairman is correct in that under the new directive, there will be an active noise regulator in Dublin Airport as there will be across Europe, which will be helpful. The daa at all stages will comply with whatever those regulations are. These are imposed on an airport by external bodies and we will always adhere to those to the letter.
The initial cost €260 million for the new runway comes from the last regulatory round. That was a paper exercise essentially where we examined what it would cost to build a new runway. If we compare that figure with the current estimate, which is only an estimate, of €320 million, we are not comparing apples with apples. It is more a comparison of apples with oranges in so far as the €320 million estimate is much more inclusive of all the other work around the runway that would have to be done, such as taxiways, aprons, fire houses and all those types of facilities, which were not necessarily included in the original amount. In addition, there is cost inflation and another factor which I had not thought of, namely, that a busy airfield is a difficult place to work from the point of view of security and everything else. The busier the airport, the more expensive it is to do work in it. There are those types of pressures that are building in respect of it. Both the €260 million and the €320 million figures are still only desktop numbers. The runway will be built and, ultimately, we will get the lowest possible price we can to build it through procurement in the same way as any commercial company would. We will make sure that the costs in respect of it are kept to the minimum but, ultimately, to get there, we have to procure all the elements of it individually. Until that is done, we will not know what the final price is.
The Acting Chairman is right in that the contrast with the cost of building a new runway at Heathrow Airport would be a dramatic one. The reason it would be so expensive at Heathrow Airport comes down to the land issue in that land would have to be purchased.
With respect to our terminals, a good deal of our congestion interestingly is more on the air side - in other words, it is more in regard to the runway, the taxiways and the parking stands for aircraft as opposed to only the terminal accommodation. We are providing more gates and we are building more stands where aircraft can overnight because it is very positive to have aircraft come in and overnight in Dublin and from that base, leave early the next morning and come back. We are providing parking stands and remote stands. We have very little busing by international standards, so we are putting in buses to accommodate passengers as well. What we are doing in as thoughtful and as a forward-looking a way as we possibly can is taking account of the airport as it is and asking how can we optimise it currently in terms of the huge increase in passenger numbers that we have experienced in recent years in order to keep the entire engine working.
Those are the initiatives being taken with respect to those elements and infrastructure to meet the current demand prior to the second runway being built.
The Acting Chairman is right in that there is much more automation with the check-in process and that has gone very well. It has taken some of the pressure off the terminal building but currently, the pressure and the constraints are on the air side part of the infrastructure, on which we are greatly focused.
The Acting Chairman asked about the existing board and the combination of its members. It is a very good and open board. We voice concerns, have discussions and conclude matters. It is essentially the same board as 18 months ago with one exception. The term of one of the non-executive directors has expired and she has to be considered in terms of re-appointment or otherwise. The point regarding the board is apposite in that the mix of people on a State board is important in terms of getting the right mix of skills and the right judgment coming from the board.
Preclearance in Dublin Airport is core to the authority. It is a huge advantage to us. The gateway potential for Dublin Airport between Europe and the United States is very promising and customs and border protection, CBP, is a significant part of that. At various times we have had resource constraints, which the Acting Chairman mentioned, but this summer we have not had those. A year or 18 months ago we were in active dialogue, and we continue to engage in active dialogue, with Homeland Protection in the United States on the resources that are necessary for CBP here. Our ambition, and this is currently the case, is that every flight to the United States is covered by CBP. Once we go below those resources when people plan trips they are not sure whether they will get the advantage of CBP and that doubt dissipates a considerable degree of that advantage. It is important that we continue to have the resources we have. We are actively engaged at all stages with Homeland Security in the United States. We cannot pay for any of that because it is a security issue from the US perspective. It is a question of making sure we are speaking to the right people and that they understand what we are trying to plan for and our ambitions in regard to CBP. That is an ongoing dialogue. With the level of growth we have, undoubtedly we will need more resources in that area.
With respect to national aviation policy, the regional airports have a role to play. It is difficult for me to comment unduly on that, as that is very much a matter of national policy. From an international perspective, there are many more airports in Ireland than one would expect, having regard to our geographic area. Airports in Europe are much more dispersed. The general rule of thumb is that for the normal economic footprint - the length of time people will drive to get to a major airport - is an hour and three quarters or two hours of travel time. With have quite a few more airports than one would expect based on that rule of thumb.
Ultimately, the airlines delivering people make decisions to their economic or commercial advantage, which they should. Ultimately also, market forces will dictate where they land, where they deposit passengers and from where passengers are coming. The issue with respect to regional airports is probably more of a national policy issue.
On the issue of the proposed air route by Norwegian Air operating out of Cork, the more diplomatic efforts to address this the better. From a diplomatic or political perspective, we would very much encourage that and the more intervention and dialogue at that level, the better. Ultimately, that is possibly the only thing that will move this on and get it done within a reasonable timeframe. The Acting Chairman is right on that and we would very much encourage such an approach.
The Acting Chairman said I was not complimentary of the regulatory system. I am not. There are a few issues involved. With any regulatory system it depends on what problem the system is designed to address. The regulatory system currently in operation was designed 15 years ago.
When it was designed, Dublin Airport was a monopoly provider of airport facilities in Dublin. There were many smaller airlines and there was an imbalance between the two, but this has changed massively in the 15 years since, as have the competitive dynamics. Our two major customers are among the most successful and competitive airlines in the world. They are wonderful customers and we value them enormously. They are very sophisticated and well able to compete. The daa does not price to our cap. Commercially, we decide to price below it. This is not the behaviour of somebody with a competitive axe to wield. It is commercially rational behaviour with very competitive airline partners.
The competitive dynamic has changed enormously and other airports in Ireland could compete with us very strongly. Two are located only 100 km away in Belfast which, in airport terms, is close by. In analysing the daa's competitive position the Indecon report which was recently prepared made no reference to either of them. I do not believe they were included within its terms of reference. It is not so much that I am not complimentary about the regulatory system; all of those involved in the system are doing the job they were asked to do and in the way the regulatory system was designed, but what is wrong is that the system was designed to solve what is the wrong problem at this stage.
The regulatory system is inhibiting two major issues which will still be issues long after I have left the board and which are very important for Ireland. They are the long-term strategic element of the airport from an Irish and an economic development centric perspective and the return to the State. As we become more efficient, the regulator will come in and take these efficiencies into account and give the benefit to the airlines. That is how the system was designed. This means, for example, that we can give far lower dividends to the State. For me, a commercial company should remunerate its shareholder which, in our case, is the State. The State has a lot of capital tied up in companies such as the daa. These are the issues which are not properly addressed in the regulatory framework and the review presents an opportunity to get some of this right.
I agree that the issue of security is front and central. It is very difficult to predict events such as what happened in Nice and it is very troubling, but we are very focused on the issue. Four years ago we had an Article 50 issue, which meant that Dublin Airport had failed to meet European security protocols. In the four years since we have taken on the problem. Some of the issues had been evident for a number of years. We have radically improved the position and turned it on its head, to the extent that security is now very good. We brought in Mick Feehan, the head of the section with this function in the daa. He is a former Garda assistant commissioner and it is job to run it. We are very thoughtful in how we provide security and about the types of threat faced, but, as the Deputy said, it is difficult to prevent everything. The topic is present at board level.
I raised the issue of the remuneration of the CEO because I am chairman of a semi-State body and it is part of my job to bring to policy makers the real risks faced in the system. I agree entirely that in recent years it has been very difficult for people who have taken pay cuts. I can only speak for the daa, but when we look at what we pay chief executives in State companies generally and particularly people of Mr. Toland's ability, the difference between what he is paid and what he would be paid if he were to lift the telephone and go back to the private sector is an absolutely yawning gap. I do not state what we need to do is to close the gap entirely, but we should make movements to secure people such as Mr. Toland who do these jobs for exactly the right reasons and make an enormous impact.
It is hard to calibrate the level of value that Mr. Toland has brought to Ireland as a whole when we consider passenger growth and how the airports now function. This has a huge knock-on value for Ireland as a whole. If the daa were an unrestrained commercial company, we would absolutely be paying him more because it is a central risk to us that we lose somebody of his calibre and it would be a dreadful pity if it happened.
The Deputy asked me to be specific. At the time Mr. Toland came in, in 2012 or 2013, it was intended there would be a performance-related pay element for chief executives of State companies but this never happened. When he came, in he was on a fixed sum and he is still on the same fixed sum without any performance-related pay, although it was indicated at the time and there was an expectation this element of pay would come in. In addition, chief executives of State companies do not have any participation in equity as they do in private companies. For example, there are no share plans. While I utterly accept that when we look at the figure, the amount of money is very high in comparison to an average salary, from a business point of view we must compare it with the minimum he would be paid in the private sector and the difference is massive. The country could very quickly lose real generators of value if we do not fix this problem. I have been consistent about this from the very beginning but I raise it is today as the chairman of a State company to point out a risk in the system.
I apologise for having had to leave on other business. New politics is in the process of sorting out this problem but we are not there yet. With regard to security, and looking at what happened in Brussels recently, what is there to stop potential terrorists getting to the public areas of airports? Has the daa considered looking at preliminary security on the approach to the airport? Is it logistically possible? There seems to be a risk that things have changed somewhat and we need to up the game even further. Is this something that would be considered at Dublin and Cork Airports or any other airport?
Mr. Pádraig Ó Ríordáin:
We consider everything in conjunction with the Garda at a national level. This is very interesting. Istanbul airport had external clearance zones but this did not stop the attack there. Brussels was different because it did not have this. We look at the various elements and the Chairman will understand that I will not go into the details.
Mr. Pádraig Ó Ríordáin:
We consider all of it. Depending on where we put security, it could move a problem rather than eradicate it. We must think through each of the steps. We have very strong and experienced people going through all of the steps. Security for access to Dublin and Cork Airports is significantly higher than it used to be, without going into the detail of it. Although people can access terminals, it is more secure than it was. We have taken quite a few preventative measures and measures to plan for a reaction if something were to happen because this is also very important. We have learned from some of the incidents that have happened in other airports as to how to minimise damage and deal with a situation if something goes wrong. We think about this along the entire journey, from the inception of an issue and how we prevent it through to moderating its effects.
On behalf of the select committee, I thank the chairman designate for his time and engaging with us so openly. I apologise for the interruption in the middle of the meeting. I propose that a copy of the transcript of the discussion be sent to the Minister for Transport, Tourism and Sport for his consideration. The next meeting will take place on 21 September.