Aer Rianta urged to consider reducing airport charges

AER Rianta, the State airports operator, has been told to examine its airport charges and try to reduce them further, especially…

AER Rianta, the State airports operator, has been told to examine its airport charges and try to reduce them further, especially as there has been a surge in passenger numbers and revenue.

The issue of charges has been one of serious contention between Aer Rianta and the privately owned Ryanair airline and has resulted in angry exchanges between the two.

The request to examine whether Aer Rianta could become more competitive was made by the Minister for Transport, Energy and Communications, Mr Lowry, who met the Aer Rianta board yesterday. In a statement issued after the meeting, Mr Lowry said charges at the country's three main airports compared favourably with charges elsewhere in Europe.

However, he stressed that the more important question was whether Aer Rianta could be even more competitive "in the particular circumstances of growth in revenues and passenger numbers at Irish airports - especially in Dublin".

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Aer Rianta airports in Dublin Cork and Shannon have experienced a surge in passenger numbers over the past six years. Last year, Aer Rianta's pre tax profits grew by 20 per cent to £37.6 million. The three airports handled an additional 1.25 million passengers or 10.57 million in total.

Net profits are said to have increased by 86 per cent between 1990 and 1995. This year, pre tax profits are likely to be £40 million, an all time high. Passenger numbers are up 40 per cent in the period 1990-1995.

Aer Rianta said last night that it had been steadily reducing its airport charges for a number of years. In response to the Minister, however, our board will be examining what opportunities exist for further reductions to stimulate growth," a spokesman said. He described the meeting with Mr Lowry as "very fruitful".

The Minister said the abolition of duty free on intra EU flights from mid-1999 would impact substantially on Aer Rianta's bottom line. Aer Rianta has said it is likely to cost the organisation £20 million a year in lost earnings.

Ironically, it warned during the summer that the loss of duty free sales would force it to increase charges to airlines and this, in turn, would oblige the airlines to charge higher air fares.

The Minister also urged Aer Rianta to "conduct its business strategies so as to make prudent provision for necessary renewal of airport assets into the future without recourse to the Exchequer".

In his statement, Mr Lowry praised Aer Rianta for its "notably successful overseas ventures of recent years". He said new business opportunities "organically linked to the core business, should continue to be exploited, to anticipate possible duty free abolition and, more generally, to assist in discharging the company's essential mandate from the shareholder of keeping Irish air access costs as low as possible".

Mr Lowry stressed that any new opportunity should not be at the expense of the "the proper management and development of Dublin, Shannon and. Cork airports". Aer Rianta has been very active in seeking overseas ventures and in September opened a new duty free store in Beijing, China. It is also seeking opportunities to run airports in Australia and is involved in a Joint venture to take a stake in Birmingham International Airport.

. Mr Lowry said he had obtained Government approval to draft a Bill to change Aer Rianta's status from that of agent of the Minister to that of a normal commercial State body. The measure should become law next year. He said this change of status would facilitate "a more rigorous commercial climate in the company and improved cost effectiveness".