Regulator critical of Aer Rianta policy

The decision paper published yesterday by the aviation regulator, Mr Bill Prasifka, differs radically from a draft he published in June.

It contains a blunt indictment of Aer Rianta's significant capital expenditure programme, which was designed to pave the way for a stock market flotation. It also reflects a direction from the Minister for Public Enterprise, Ms O'Rourke, who asked that new airport charges take account of the Government's regional policy.

Where the draft proposed that Aer Rianta be allowed increase the passenger landing fees it charges, Mr Prasifka spoke of "very significant reductions" in his determination.

The paper ran to 537 pages, although the regulator was far more succinct when asked if he was confident that airlines would pass the decreases on to their passengers. "Of course not," he said.

The price of air tickets was determined by a deregulated market. Efficiencies created at airports "over time" could lead to lower ticket prices, Mr Prasifka said, but he added that the industry was in downturn.

If Mr Prasifka's paper contained an abundance of mathematical formulae beyond the grasp of those with ordinary numeracy levels, its message, after a little explanation, was reasonably clear.

Because trade discounts often apply to airport charges, the regulator said the current rates were something of a moving target. However, he deduced that the average charge per passenger at Aer Rianta's airports was £4.65 this year, "but may be higher".

When the determination becomes effective next month, the average charge per passenger at Dublin would decrease to £4.41. Aer Rianta's average per passenger charge at Cork and Shannon could increase to a maximum of £5.29, Mr Prasifka said, although he emphasised that a decision to increase tariffs was for the State company to make.

The draft determination abandoned by Mr Prasifka provided for a rise in average passenger charges at Cork to £7.15; to £6.05 in Shannon; and to £4.96 in Dublin.

This reflected a direction from Ms O'Rourke earlier this month which said airports played a key role in supporting regional development. "It helped us clarify our thinking on certain matters," Mr Prasifka said.

He implied the other changes to the draft did not arise directly from the many concerns expressed by the Department of Tourism & Sport, Bord Fβilte, Aer Lingus, SIPTU, IMPACT and Ryanair, among others.

"It's really quite simple. The draft determination was a draft. We had not yet reached a final conclusion."

The new fee structure will apply for one year. When the year elapses, the tariffs will decrease according to a formula that also reflects increases in the cost of living generally. The rate of decrease after inflation was described as the "X factor" - 5 per cent less than inflation in Cork and Shannon; 7 per cent less in Dublin.

Such figures, said Mr Prasifka, allowed for an "appropriate cost of capital for a semi-State, sole provider entity".

Aer Rianta did not comment yesterday on the "X-factor", although it is understood that senior figures are "very disappointed" at Mr Prasifka's determination.

The object of their disappointment, no doubt, is Mr Prasifka's decision to rule out £726 million in capital expenditure as "recoverable" from the tariffs sanctioned by the regulator.

Among other developments, Aer Rianta plans a £100 million internal rail system at Dublin airport. The company has argued that overcrowding at the airport has arisen because it was four years behind schedule in a building programme.

It wanted the new fees to reflect capital expenditure of £998 million over five years.

But Mr Prasifka ruled that only £272 million of the programme was adequately justified "in terms of contributing to the operation and development of cost-effective airports that meet the requirements of users".

This means the charges he sanctioned are substantially lower than those sought by Aer Rianta.

Among the alleged weaknesses in Aer Rianta's submission identified by the regulator were: poor consultation with users of the airport; lack of transparency in quality of information, particularly as to planned costs of projects; failure to surrender certain details due to "commercial sensitivity"; construction of facilities that are inefficient and/or fail to meet users' requirements; inadequate or non-existent cost-benefit-analysis or business cases undertaken to justify specific expenditure; inconsistencies in information supplied.

The regulator added: "The recoverable capital expenditure programme covers all safety and compliance projects in the Aer Rianta capital expenditure, together with all projects to increase the needed capacity (aeronautical and commercial) at the airports."

That included a new terminal at Cork Airport and additional facilities to relieve congestion in Dublin.