The sustainability of Cork Airport is “fundamentally threatened” by plans to cut airport charges at Dublin Airport by 22%, it has been warned.
The airport’s managing director, Niall McCarthy, said he was “extremely concerned” at proposals by the Commission for Aviation Regulation (CAR) to cut average passenger charges at Dublin Airport to €7.50 per passenger between 2020 and 2024.
He claimed such a price level would wipe out Cork’s operating profits and reduce annual revenue at Cork Airport by over €4m.
“Pricing at this level would represent below-cost selling for regional airports who would be severely challenged in their ability to compete,” he said.
The current airport charge at Dublin is €9.30 per passenger compared to €7.15 at Cork.
Mr McCarthy said recent strong growth in passenger traffic out of Cork and its ability to attract new business would be undermined by the proposed scale of the reduction in airport charges at Dublin.
The DAA, the State-owned company which operates both Dublin and Cork airports, has expressed concern that the proposed reduction in passenger charges could jeopardise its plans to invest €1.8bn in new facilities to allow Dublin Airport cater for up to 40m passengers each year.
DAA had recommended that the charge should be set between €9.05 and €9.94 per passenger.
In submissions to the CAR, Mr McCarthy said Cork Airport had faced significant operational and business challenges over the last decade including seven years of falling passenger traffic levels between 2009 and 2015 where the airport was “essentially insolvent and significant questions were being raised about its future status”.
Mr McCarthy said the situation at Cork had been turned around through a robust and focused growth-led commercial strategy which had delivered an increase in passenger numbers for the past four years.
However, he said the 52 routes now operating out of Cork were hugely exposed to the vagaries of the market, airline strategies and, most importantly, pricing.
Cork Airport has estimated that its passenger charges need to be around 15% lower than Dublin to remain competitive.
“The choices for Cork are stark — retain prices at the same or slightly higher levels than the proposed pricing for Dublin and inevitably lose traffic or reduce prices and be loss-making. In either scenario Cork Airport’s sustainability will be fundamentally threatened,” said Mr McCarthy.
He said Cork Airport continued to operate in a highly competitive environment with three strong competitors on an overlapping catchment area with Dublin Airport being the most significant.
“A central element of Cork’s return to growth, and to our continuing success with our airline customers, has therefore been our ability to offer competitive airport charges pricing relative to other Irish airports, particularly Dublin Airport,” said Mr McCarthy.
He added: “To retain and grow our aviation business into the future, Cork Airport’s charges must, by necessity, remain competitive relative to Dublin Airport’s already low charges.”
Mr McCarthy pointed out that Cork Airport received no subvention or financial support from the State “unlike certain other airports”.
If the CAR ratified the proposed charges at Dublin, he said it would have “extremely negative and immediate impacts for Cork Airport and its ongoing sustainability, as well as other regional Irish airports”.
Mr McCarthy, who met with the CAR commissioner, Cathy Mannion, in June, said the regulator indicated it had not considered the impacts of changes to charges at Dublin on other regional airports to date but would before it makes its final determination.