Fuelling fears of a nosedive

Cuts in funding, Ryanair’s dominance and the economic downturn cast doubt on the sustainability of our airports, writes Seán McCárthaigh.

THE future of Ireland’s aviation industry may not be looking up. Cutbacks of €13 million earmarked for significant infrastructural projects at the country’s regional airports have been announced by Transport Minister Noel Dempsey in a decision that places a further cloud over a sector that has traditionally been dependent on state handouts to avoid a potential freefall.

Already in 2008 the aviation industry has been left reeling from soaring fuel charges, looming environmental taxes and falling demand for leisure travel due to the global economic downturn.

In addition, Ryanair chief executive Michael O’Leary recently pronounced before an Oireachtas committee that four of the country’s six regional airports (Donegal, Sligo, Galway and Waterford) have no future.

“Ireland has more than a sufficient number of airports with Dublin, Cork and Shannon,” O’Leary said.

He is not the first to question if a small country with a population of 4.2 million people can sustain so many airports, especially as a majority of them have overlapping hinterlands. For example, Knock is within 70km or one-hour drive of both Galway and Sligo, while Cork is equally competing with Shannon, Kerry and Waterford for business.

“Sometimes one just has to get over the fact that we live in a lightly populated BMW [Border, Midland and Western] region that cannot support international air services,” said O’Leary.

Fears about the Government losing its appetite for funding non-commercial routes between the regions and Dublin have also increased in the current climate.

It is also a rarely mentioned fact that it is airlines and not airports that decide on service levels. Airlines like Ryanair and Aer Arann enjoy a strong bargaining position, some might even suggest stranglehold, over such airports.

Add in the continuing delay over plans first announced in 2004 to allow Cork and Shannon operate independently of the Dublin Airport Authority, which local interests claim has placed both airports “in limbo”, and you have an industry facing a highly unpredictable future.

Nevertheless, there is an optimism among the various airports that they have developed sufficiently in the past decade to ensure that there will be no casualties.

Such positive views may be grounded in the fact that airports are effectively permanent fixtures that once constructed are a facility to be used for the benefit of all people in their catchment area. “It’s often overlooked in the debate that regional airports are a vital piece of infrastructure for their region and have a huge impact on the local economy. Having easy access to an airport is an important consideration for many businesses,” claims Joe Walsh, managing director of Galway Airport.

His comments are echoed by Joe Corcoran, manager at Sligo Airport, who stresses the Strandhill facility, despite its relatively small size, “plays a crucial role in the prosperity of the region”.

Nevertheless, it can’t be ignored that the sector is dominated by the behemoth that is Dublin Airport, which, with its 23 million-plus travellers per annum, accounts for almost three-quarters of all air passengers in the republic.

Even Cork and Shannon — ranked just outside the top 70 busiest airports within the EU — together can muster less than a third of Dublin’s traffic. By comparison, the combined traffic of the six regional airports accounts for a little less than 1.5 million passengers, or less than 5% of the annual total, despite record growth figures in recent years.

A report prepared for the European Commission in 2002 concluded that airports with less than 500,000 passengers per annum were unlikely to prove viable in the long term as they no longer have income from duty free sales, while traffic volumes are too low to support business from other retail activities. On that synopsis, Knock alone should be the only regional airport to survive.

Another study carried out on behalf of the Department of Transport in 2003 noted that regional airports were very conscious of their reliance on direct and indirect state support.

It observed: “None of the Irish regional airports has any prospect of achieving traffic volumes which would bring them close to operating break-even for the foreseeable future. Kerry and Knock would appear to be the closest but their passenger volumes are dominated by low-fare carriers. These might well withdraw or reduce operations if significant charges were introduced.”

Regional airports have realised their future is dependent on developing services that bypass Dublin and provide direct access to Britain and the Continent and consequently reducing their reliance on subsidised routes serving Dublin.

For example, Galway and Waterford in conjunction with Aer Arann have initiated flights to locations such as Malaga, Faro, Amsterdam and Bordeaux in the recent past with reasonable success, albeit mostly on a seasonal basis. The emergence of viable routes by rivals will invariably attract bigger players like Ryanair with the no-frills carrier’s dominance of the market seen by many as carrying a double-edged sword for airports who do business with O’Leary.

Aer Arann chief Garry Cullen recently expressed fears Ryanair would threaten all forms of competition within the republic.

“It will close the small airports, dominate the others and buy Aer Lingus and then there will be a monopoly,” Cullen warned. He pointed out how Ryanair had driven off competitors such as Go and Easyjet from certain routes before the airline subsequently reduced its own number of flights on the same route.

Meanwhile, Cork looks like it will be saddled with a controversial debt of €113m upon its independence, which means its charges are likely to remain higher than Shannon and Dublin. Furthermore, the Department of Transport appears to have targeted regional airports for €13m of cost-cutting measures because of their failure to avail of existing grants. “There has been a slow drawdown of these grants by the airports due to factors such as planning delays and the necessity for airports to come up with their share of the project costs,” said a department spokesperson.

He pointed out that so far in 2008 regional airports had drawn down just €2.5m of a €24m allocation.

Any slowdown in the plans to develop terminals, runways and navigation aids at the country’s airports is likely to further restrict their potential for growth in the years ahead. Faced with an array of predominantly negative influences in the immediate future, the regional airports as well as Cork and Shannon could be forgiven for thinking their heyday has already come and gone.