Aer Rianta warns levy cuts will see service decline

The aviation watchdog's proposals to cut airport charges by 10 per cent will leave Aer Rianta with little or no cash to develop its facilities to meet future demand, the State company warns in a response to the plan.

Mr Bill Prasifka, head of the Commission for Aviation Regulation (CAR), recently published a paper proposing to cut Aer Rianta's maximum charge per passenger to €7.56 from €8.48, and to €4.89 from €5.45 in Dublin.

Earlier this year, the airport authority's chairman, Mr Noel Hanlon, said it would need a 20 per cent increase on current levies in order to meet operating and capital expenditure costs.

In a response published yesterday, Aer Rianta warned that the proposed price cap would not allow it to generate enough cash to provide the investment needed to develop its airports to meet current and future demand. "As a consequence, significant capacity constraints will arise, resulting in congestion, delays, lower service levels and increased costs," its submission says.

It states that the charges for Dublin Airport provide for an investment of €3 per passenger in infrastructure over the regulatory period (2003-2006).

"This compares with investment levels in other international airports of between €6 and €10 per passenger," it says.

The document points out that current capacity at the State's biggest airport, Dublin, is 20 million. At current growth levels, Aer Rianta says it will reach that point in 2007. Aer Rianta also claims that the regulator has over-estimated the company's commercial revenues by €56 million. It points out that the regulator's calculation is based purely on passenger growth and argues that other revenue sources, such as fuel sales, retail concessions and rents, do not increase in line with these figures.

The Commission for Aviation Regulation's proposal is based on a number of points. One is a change in the projected number of passengers using Irish airports between now and 2006. The regulator has cut its forecast by 1.3 million for next year to 21.4 million and by 1.7 million for 2006 to 23.8 million. It has also slashed its prediction for passenger throughput in Dublin Airport in 2006 by almost one million to 18.7 million.

The regulator has factored in increased airport security costs. The total bill for 2003 is likely to be €26.5 million, compared with €22.5 million in 2001, the year of the World Trade Centre attack. Dublin Airport's bill has grown from €15.9 million to €19.5 million.

A number of other groups, including three major airlines, responded to the proposals. However, the commission did not publish Ryanair's contribution, on the grounds that it "offered no specific comments on the content" of the paper. The airline said it would release its response next week if the regulator failed to publish it.

British airline BMI said airports should foot the bill for increased security.

Aer Lingus welcomed the overall proposals but criticised the failure to recognise that Aer Rianta was "acting in a virtually riskless environment".