Wednesday, 7 March 2012
Topical Issue Matters
I thank the Ceann Comhairle for selecting this important issue and the Minister for being present to discuss it. I welcome the Minister's publication of the Booz & Company report, which is very comprehensive. The company consulted widely and brought considerable experience to the report while reviewing international models for ownership and management of airports, which is helpful.
The Minister is well aware that the report has identified five options and evaluated each in order to distil them into two broadly based recommendations identified in the report. The first is termed a restructuring of the Dublin Airport Authority, DAA, with each airport given status as an independent subsidiary within an overall airport grouping, with each airport having an independent board with the capacity to set strategic direction, appoint management teams and develop business plans. I would favour this and recommended it on behalf of my party in our submission to Booz & Company.
The second recommendation indicates that Shannon Airport could be separated from the other two airports, with a local concession established involving local authorities in Clare and Limerick and a regional development agency in the guise of Shannon Development. It is clearly indicated that the capacity of Shannon Airport to survive either on its own or in a new structure would be less than viable if there were fewer than 5 million passengers. There is mention of the airport being in real jeopardy in such a case and we are all concerned about that.
Either of the two options recognise that Shannon has a significant problem and the difficulty is in a separated environment where it is cut adrift from an overall airport umbrella or the DAA. In such a case it would be left with a cash requirement of approximately €8 million per year. Involving the local authorities and Shannon Development or expecting that the land bank can be monetised in the current climate is farcical. I accept the Minister has not made a determination on it, but I want to use the opportunity to clearly state the future viability of Shannon Airport would be compromised greatly if local authorities or Shannon Development were expected to provide additional revenues to meet the ongoing running costs of an airport which is the default location for transatlantic emergencies and required to be open 24 hours a day, seven days a week. This service cannot be provided without a subvention, unless the number of passengers is 5 million. The report clearly indicates this is not possible or feasible, even in the medium term.
The report calls on the Government to clarify its overall aviation policy, which is important. I expect in any review or restatement of the Government's policy on aviation regional development to be rightly identified as an important component.
The report speaks about whether the Government needs to restate its position on competition. I am not sure competition between the three State airports is such a big issue because they serve very different markets.
The report mentions the benefits in having a less crowded airport landscape which may require the Minister to move towards reducing their number. It also mentions the issues of debt and pensions which need to be addressed.
Tá a fhios ag an Teachta gur chuir an Aire Iompair a bhí ann i 2008 an cinneadh maidir le scarúint Aerfort Chorcaí agus Aerfort na Sionainne, mar a bhí beartaithe faoin Acht um Aerfoirt Stáit 2004, ar ceal go dtí an bhliain seo caite. Ar cúpla fáth, bhí an cinneadh sin curtha siar i ndiaidh achtú an reachtaíocht chumasúcháin. Ní dóigh liom gur féidir leanúint i bhfad níos faide leis an socrú atá ann ó 2004, ina bhfuil a mboird féin ag Aerfort Chorcaí agus Aerfort na Sionainne ach gan mórán saoirse ó Údarás Aerfort Bhaile Átha Cliath a bheith acu. Ní féidir leanúint ach an oiread leis an meicníocht ina bhfuil caillteanais Aerfort Chorcaí agus Aerfort na Sionainne á ghlacadh ag Údarás Aerfort Bhaile Átha Cliath. Tá mé den tuairim go bhfuil sé in am cinntí daingne a thógáil faoi todhchaí na haerfoirt. As a first step in the process, I consulted the Dublin, Cork and Shannon Airport authorities on separation and their unanimous view was there was no support for separation, as originally envisaged under the State Airports Act.
Taking account of these responses and following a public procurement process, I commissioned Booz & Company to identify and analyse all likely options regarding the ownership and operation of Cork and Shannon Airports and make clear recommendations on the optimal ownership and operational structures for them. The consultants who are experts in aviation matters with international experience were asked to consult as widely as possible with stakeholders in Cork and Shannon on sustainable options for the two airports. Their report was finalised and submitted to me in December. The report analyses the viability and sustainability of Cork and Shannon Airports and, on this basis, suggests two recommended approaches with regard to their future.
A redacted version of the report is available on my Department's website at www.dttas.ie with any commercially sensitive information omitted. I do not propose to go into the detail of the consultants' recommendations now, as, even with these redactions, their recommendations are clear for anyone interested in accessing the report.
The contents of the report were noted by the Government at a meeting at the end of January. We are now engaging with relevant stakeholders and the Deputy will appreciate a number of complex issues must be resolved before final decisions can be made. These include the financial implications for the airports in the event of a change in the status quo; the DAA pension deficit; the continued downturn in the aviation market and the possible need for legislative changes. However, when I have consulted all relevant stakeholders, I intend to bring proposals to the Government on the future of Cork and Shannon Airports. I hope to be in a position to do this around Easter.
We can all agree that the status quo at Shannon Airport is not working well and that this year its passenger numbers continue to fall, particularly as a result of the reduction in the number of military flights. Passenger numbers at Cork Airport are increasing, while those at Dublin Airport are falling slightly. As the Deputy pointed out, two models have been put forward. One of these is the CIE model which is an option, but I am not yet satisfied it would result in sufficient change because an independent subsidiarity which requires another for subvention is not really independent. The other option is full independence, the detail of which must be figured out because I can only recommend it to the Government if I believe it will be financially viable. I am not willing to do anything that I do not believe in my heart will be a success. The whole point of the process is to make a success of an airport which has been in decline for some time. Whatever happens I assure anyone with concerns that the airport will stay open. Business interests have raised concerns that there could be a risk to Heathrow flights. Certainly, the airport will remain open and there are no concerns about flights on any of the existing routes. I have discussed the matter with the airlines and assure people in the business community in the region that, based on the information I have available, there is no threat to long-term access.
I thank the Minister and appreciate his clarification. He spoke about subvention and the difficulty that a subsidiary would not be independent if it was dependent on another for subvention. The Booz & Company report makes it clear that an airport with fewer than 5 million passengers would not be self-sustaining. Therefore, it would require a subvention from somewhere and it would be from one arm of the State or another. One cannot expect local authorities to find a fanciful pool of money in the current climate. The Minister is sitting beside the Minister of Finance who is well aware that local authorities do not have the money required; neither does Shannon Development. There was a time when it had a strong rent roll or revenue generating capacity from its asset base, but this has been well compromised because of the downturn in its revenue streams.
The Minister is looking at allowing the local authorities to close the airport should it fall into their hands, as they would be left with no choice but to scale down operations and ultimately close it because of the very significant cost of running it. Even with trimming back airport operations further, I cannot see how it has the capacity to survive. The Minister has made the point that what is needed is something that will initiate growth. I do not know how this growth in passenger numbers will be generated in the short term. At best, as some seek to suggest, with independent status, the airport could somehow compete with Cork and Dublin Airports, but I doubt it has the capacity to compete effectively in this space. All that would happen is passengers would be taken from these airports, which would ultimately compromise their balance sheets and revenue streams.
We need an overall policy. In fairness, the Minister has been working on such a policy through some of the measures he has introduced to increase the level of inward activity which will help all of the airports. However, he must look at the provision of a subvention as the only realistic method of retaining the airport and ensuring its future viability. I question his capacity to subvent it in a separated environment. He can continue to do so while it is attached via an umbilical cord to the umbrella group or the CIE model but outside this he would have real difficulties. Whether he likes it, he may not be in a position to prevent its ultimate closure if there is a further deterioration in economic activity or the level of airline travel.
I appreciate what the Deputy says about airports with fewer than 5 million passengers not being sustainable, but there are airports throughout the world with passenger numbers of approximately 1 million which are sustainable. They have to match their operations with the level of sustainability.
Local authorities may have a role to play in ensuring the future of Shannon Airport, but I do not believe it will be their role to subvent or run it. Notwithstanding the fact that there are very strong local authorities in the region, they do not have the skills to do this and it is not what was intended. When the consultants were examining this issue, they might have been thinking more of Manchester and Leeds-Bradford Airports, but they are within the remit of very different local authorities for areas of population of 1 million to 4 million people.
The overall policy has been to reduce the number of airports. To this end, subvention has been withdrawn from Galway and Sligo Airports. Over time other airports being subvented will have to break even. By 2014 it will be unusual or unique for any airport to receive a subvention. This needs to be borne in mind.
On the future of Shannon Airport, its debt presents a big issue. As the Deputy mentioned, it needs approximately €8 million in cash to break even. If this debt can be written down or part of it left with the Dublin Airport Authority, it would drastically reduce the subvention. This is one of the issues that must be considered. Notwithstanding what action will be taken, at a minimum some form of golden share arrangement will be required to ensure the Government can step in again to ensure there is no risk or concern of closure at any stage.