Aer Lingus rejects DAA claim lower passenger levy will impede airport

Airline says it will pass on proposed 15% drop in charges to passengers

The DAA claims the reduction in charges would leave it unable to finance a €1.8 billion upgrade to Dublin Airport’s facilities. Photograph: Bryan O’Brien

The DAA claims the reduction in charges would leave it unable to finance a €1.8 billion upgrade to Dublin Airport’s facilities. Photograph: Bryan O’Brien

 

Aer Lingus chief executive Sean Doyle has rejected the DAA’s claim that it would not be able to finance €1.8 billion of new infrastructure at Dublin Airport if a proposed reduction in passenger charges goes ahead.

Mr Doyle also said Aer Lingus would pass on to its customers the 15 per cent reduction in passenger charges that has been proposed by the Commission for Aviation Regulation, which regulates such fees at Dublin Airport.

In a draft determination published in May, CAR proposed reducing the maximum passenger charge at Dublin Airport to €7.50 from 2020 to 2024. This represented a cut of 15 per cent on the €8.81 charge that applied in the previous five-year period, although DAA says the actual charge is closer to €9.30 a head.

DAA claims the reduction in charges would leave it unable to finance a €1.8 billion upgrade to Dublin Airport’s facilities that is needed to cater for expected growth in passenger numbers, which rose by 6 per cent last year to 31.5 million.

The regulator said the lower charge proposed reflects a lower cost of debt and equity for funding projects, rising passenger numbers, and increased commercial revenue at Dublin Airport.

Transatlantic routes

Aer Lingus is one of Dublin Airport’s biggest customers and is planning major growth on transatlantic routes in the coming years. This is contingent on the DAA building new facilities to cater for an increase in the number of aircraft and passengers using the airport.

“We believe [the new infrastructure] is financable at the €7.50 outcome,” Mr Doyle said. “We’ve got expert advice to that effect and we have encouraged the regulator to get their own independent advice . . . and we believe the outcome of that analysis will be the same as our expert analysis. We can’t quite understand why it’s almost this ‘all duck or no dinner’ approach [by DAA].”

Mr Doyle also noted that the price cap could be “uplifted within the regulatory period [2020 to 2024]” if any “challenge” was to arise to the DAA’s ability to finance the new infrastructure.

“This is a big capital plan and it’s complicated. If things change, there should be flexibility within the regulatory period to adjust up the price cap if the DAA finds pressure on financing this. Our number-one priority is to build the infrastructure and we want a financial framework that incentivises it. We think the economics work at the draft [€7.50] outcome but, if flexibility is needed to respond to changing environments and circumstances, then let’s build that in.”

Cost reduction

The DAA’s chief executive Dalton Philips has also suggested that any reduction in passenger charges would not be passed on to customers by the airlines.

However, Mr Doyle rejected this suggestion. “I want to be clear that reductions in airport charges are passed on to our guests. We maintain a clear focus on cost reduction and efficiency in order to both provide value to our guests in our fares and facilitate investment in new routes and greater frequencies. This is how the consumer benefits.

“The idea that the benefit of reductions in costs [including airport charges] is not passed through to passengers using Dublin Airport, displays a lack of understanding of the business models of the main airline customers of the airport.”

CAR is expected to make a final determination on passenger charges at Dublin Airport in the coming weeks.