"Airlines could face 50% rise in Irish airport charges"

Friday, May 21, 2004

Airlines could face 50% rise in airport charges
By Emmet Oliver 
The Irish Times


Airlines based at Dublin Airport could be facing a rise of 50 per cent or
more in airport charges if the break-up of Aer Rianta goes ahead, a
confidential report seen by The Irish Times reveals.

The current per-passenger charge of ?5 will need to rise by at least ?2.50
and possibly up to ?4 because of the break-up, warns the report from
PricewaterhouseCoopers (PWC). Increases in airport charges are normally
passed on to passengers by airlines.

The report is likely to increase pressure from trade unions and the
Opposition on the Minister for Transport, Mr Brennan, to modify or abandon
his plans to break up the company.

It was commissioned by a working group which included Aer Rianta, the
Department of Transport and company trade unions.

SIPTU, in a statement yesterday announcing that it was going back into pay
talks as part of the national agreement, said it had received reassurances
that workers' interests in relation to charges in the aviation sector would
be honoured.

The Government had earlier committed itself to full consultation in
restructuring Aer Rianta and SIPTU, the main unions in Aer Rianta, and
indicated that recent talks with Mr Dermot McCarthy, secretary general in
the Taoiseach's Department, had reaffirmed this.

However, it remains to be seen whether the unions will be satisfied with the
level of consultation in advance of the publication of legislation on the
break-up.

Sources believe the issue could still prove highly contentious, particularly
if Mr Brennan pushes ahead with the publication of legislation before what
the unions consider adequate consultation.

The report warns that Dublin Airport may need to sell off "ancillary assets"
in future to meet its debts. This is because the debts of Cork and Shannon
Airports would be transferred to Dublin.

The report states that breaking Aer Rianta into three separate airport
authorities - Dublin, Cork and Shannon - will involve rebalancing funding
between the airports, but it warns that this comes at a cost.

"Given the present financial position, it is estimated that increases in
charges in the range of ?2.50 per passenger to ?4 per passenger, alongside
further efficiency improvements, would be required to rebalance the funding
ratios."

It says such increases would be needed for other purposes "to enable Dublin
Airport authority to meet its capital expenditure requirements to fund
capacity growth, service its debt levels and operate to a commercial
mandate". The current airport charges at Dublin Airport are capped by the
Commission for Aviation Regulation (CAR).

The report acknowledges that any changes would be subject to the
determination of this body.

The report points out that Aer Rianta itself is already facing "financial
strain" due to an ambitious expansion programme at Cork, proposals for a
terminal known as Pier D at Dublin and high debt levels compared with
income.

The report outlines six scenarios for the future of Shannon Airport. One of
these, based on figures previously produced by the international ratings
agency, Standards & Poor, is extremely pessimistic. It suggests Shannon
Airport will have debts of ?125 million by the end of 2008 which would be
"clearly unsustainable".

The authors suggest a new low-cost model for Shannon where the airport takes
advantage of a new "open skies" policy likely to be in place by 2007-2008.

But it warns that a start-up investment of at least ?20 million will be
needed to get the airport up and running as an independent entity and that
another ?10 million could be required to protect against "external shocks".

The Department of Transport declined to comment on the report. The board of
Aer Rianta held a special meeting yesterday to consider it.

The company issues its annual results next week, and the Minister's plans
are likely to be addressed by its chairman, Mr Noel Hanlon.


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