Improved roads threaten to derail air routes
THE link between the recently opened 29km dual carriageway on the N6 between Kilbeggan and Athlone and Ireland’s aviation industry may not be immediately obvious but the country’s rapidly improving road network is placing fresh doubts over the commercial future of some of the country’s regional airports.
Similar upgrades along most of the main national routes out of Dublin combined with improved rail services are threatening the long-term viability of air services between the regions and the capital due to reduced car and train journey times on such routes.
Although all the country’s regional airports (Kerry, Knock, Galway, Waterford, Sligo and Donegal) have had varying degrees of success in recent years attracting airlines to operate direct routes to Britain and mainland Europe, many remain highly dependent on Government funding for their air links to Dublin to continue operating on a commercial basis.
All the republic’s regional airports (with the exception of Waterford) as well as Derry receive annual funding from the exchequer under the Essential Air Services Programme (EASP), which has been in operation since 1987.
State-sponsored funding is allowed under EU legislation for Public Service Obligation (PSO) routes deemed vital for the economic development of peripheral regions which otherwise would not be served on a commercial basis by airlines.
In May, Transport Minister Noel Dempsey announced details of the latest round of funding which will see €44.6m allocated up to 2011 to airlines operating a daily PSO service from the regions to Dublin.
However, the PSO budget is on a downward trend having fallen from €62.8m in 2002-2005 to €45.8m for the past three years.
Ryanair chief executive Michael O’Leary described such expenditure as “a complete waste of money”.
“The day the Government turns off the PSO subsidy tap, those services will disappear,” O’Leary told a recent meeting of the Oireachtas transport committee.
Aer Arann chief executive Garry Cullen argues that subvention levels for PSO routes operating in Ireland are considerably less than elsewhere in the EU where more than 200 routes have been approved for state funding. However, there is a widespread acknowledgement among aviation experts that funding for PSO routes are likely to fall further post-2011.
Under EU rules due to come into effect later this year as part of the so-called Third Aviation Package, funding under the EASP will oblige the Government to take special account of routes where there are “suitable train services with a journey time of less than three hours”.
A Department of Transport spokesman claimed PSO funding was based on the objective of achieving balanced regional development and complementing state support for regional bus and rail transport links.
“Any proposals for the renewal of PSO contracts after 2011 will have to take account of the amended regime,” he remarked.
To some extent, the PSO routes have become a victim of their own success having gone from carrying 93,000 passengers in 1995 to more than 295,000 last year (excluding Derry).
Uncertainty about the future of the EASP is nothing new as the scheme was already the subject of a major review by DKM Economic Consultants on behalf of the Department of Transport in 2003.
It found that taxpayers were forking out €5 for every €1 spent by passengers on the Knock route and €2 for every passenger flying from Sligo and Donegal at a time when the EASP budget was equivalent to all Government funding for Bus Éireann. Although the subvention levels for air services have declined somewhat since then, the subsidy remains substantial.
Based on passenger traffic levels, the PSO budget is providing more than €100 for every person flying on the Knock-Dublin route and almost €70 per passenger flying out of Sligo and Donegal to the capital. On average, all passengers flying to Dublin from the regional airports are subsidised by just more than €50 per journey.
The consultant’s report also highlighted the fragility of such services given the low population bases served by regional airports combined with the road and rail transport alternatives.
“In the absence of subsidy to air service, some of the regional airports would be likely to close to commercial traffic,” it concluded.
The report pinpointed Galway, Sligo and Donegal as the airports that were “particularly vulnerable” to closure in the event of the EASP being discontinued, although it believes that Kerry and Knock would survive because they can accommodate larger, more cost-effective aircraft.
Its authors also believed that an indirect consequence of scrapping the EASP services would be to improve the commercial potential for those regional airports which would survive their removal.
Even Kerry Airport financial director, Basil Sheering, admits that it is still “very dependent” on the PSO route even though it now only accounts for 25% of traffic at Farranfore.
The unattractiveness of PSO routes for some airlines was highlighted by last month’s announcement that Cityjet would not be proceeding with its plans to provide a daily service from Knock to Dublin, despite being awarded a PSO licence for the route just two months earlier. It blamed rising fuel costs and logistical issues for the decision which has meant there has been no service on the route since July 21.
However, Knock Airport chief executive officer Robert Grealis has been a strong advocate of the need for the Government to consider international PSO routes for state funding.
Although relatively rare, they do exist. Ostrava, the third largest city in the Czech Republic with a population of 330,000, has PSO routes to Brussels, London and Amsterdam.
“Such services are considered crucial for regions. For example, there is a case to be made for designating Shannon-Heathrow as an international PSO,” says Grealis.
Given the shuddering turnaround in the fortunes of the aviation sector in the past few months, the future of regional airports might well depend on British destinations replacing Dublin for PSO funding.
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