Cork Airport lumbered with crippling €113m debt for unwanted passenger terminal that DAA foisted on it
LAST week Transport Minister Leo Varadkar announced he was setting up yet another study to determine the commercial future of Ireland’s major airports – Dublin, Cork and Shannon.
For Leesiders, the writing is in the sky. Many believe the task for the authors of the study, the quaintly-named Booz and Company, is to sweeten a very bitter privatisation pill that the Real Capital will be forced to swallow. Cork Airport, a commercial basket case, will be sold to the highest bidder – assuming there are bidders.
The Booz Company report comes in the wake of Colm McCarthy’ Review Group on State Assets. McCarthy favoured the sale of Cork, Shannon and Dublin airports. The current situation is that the Dublin Airport Authority, (DAA), owns the three airports and has financial and legal responsibility for them, although Shannon and Cork have a limited degree of autonomy.
As well, there is the Cassells Report into Cork Airport, which did not advocate privatisation. Instead it proposed the sale of the airport’s development land and business park in order to generate income.
Problems for Cork
In all, the omens do not look good. Last year, Cork’s operating losses were ten million euros. Irish Aviation Authority figures show commercial traffic fell by 11.8%, and, to top it all, the airport is lumbered with a crippling €113m debt for an unwanted passenger terminal that the DAA foisted on it.
When in government, Fianna Fail swore blindly that Cork would get debt free independence from the DAA. Sadly the political promise had absolutely no substance and was little more than a gigantic porkie that Corkonians foolishly swallowed.
Meanwhile, the Dublin Airport Authority (DAA) appears to have little confidence in the future for Cork Airport. For instance, last September, the DAA told Varadkar that the separation of the three airports would not be financially viable and complained that it was ‘expending valuable management time and incurring costs in servicing the authorities at Cork and Shannon airports’.
It takes the line (which is also Varadkar’s) that to continue with the current situation of having three airports operating under DAA control is not tenable because of the losses Cork and Shannon are sustaining.
Up to now, profits from Dublin Airport and Aer Rianta International covered the losses – but, according to Varadkar, that is going to stop. Pronto.
All options open
The minister recently told RTE radio that his preference was a separation of Cork and Shannon airports from Dublin. Ominously he did not rule out the privatisation option. ‘There are going to have to be big changes at both airports because we cannot continue to have them losing the money they are losing now,’ he growled.
The Shannon Airport Authority has already submitted to the DAA a proposal that the airport should be leased to a private company for a period of 15 to 35 years. Cork hasn’t gone down that path, yet.
Indeed, it seems Leesiders are horrified at the prospect of a sell-off. The airport’s reaction to the announcement that the Booz Company was about to investigate all aspects of its activities was limited to a cryptic statement that read: ‘A spokesman for DAA at Cork Airport said the company would engage fully with the Department’s consultants.’
Privately, the Cork Airport Authority is in favour of the three airports operating as subsidiaries of a CIE-style holding company. However, whatever recommendations the Booz people make to Varadkar, the coalition message is clear – there will be no State aid for Cork Airport and, without State aid, the future is grim.
Interestingly, the Fine Gael-Labour Programme for Government does not mention the privatisation of airports, confining itself to a bland statement about the Government ‘working with the Aviation Regulator to cut airport charges in order to increase routes and passenger numbers’.
Bottom of the barrel
For many private enterprise hawks within Fine Gael and Labour, there is no doubt that the sale of Cork Airport is on the cards. In view of the fact that the Coalition has to meet a €2 billion target set by its German and French masters, flogging the place as part of the off-loading of State assets is an attractive proposition.
But, Kenny and the boyos will have to be careful about the way they hand over State-owned businesses to the private sector. The trade unions will oppose the sale of Cork Airport on the grounds that the measure is predicated on bottom-of-the-barrel terms of employment.
Unease will also manifest itself within old Labour, while Sinn Fein will have a field day denouncing the government. Even Micheál Martin, the leader of a party that did so much to damage Cork Airport with false promises, declared he was opposed to a sale.
But, then, it’s difficult to take seriously comments by Fianna Fáil in relation to the airport. In a recent one-paragraph statement, Cork TD, Michael McGrath said that privatisation would focus on profits and would not be ‘a wider view on the airport’s benefits to the region’s economy and tourism.’ And that was it. No analysis, no argument, just a throwaway remark.
Behind the scenes
Of course, the intriguing question is whether Ryanair is twisting Varadkar’s arm. The company has always argued that Cork and Shannon should be sold on the open market, claiming that while the performance of Dublin Airport is poor, the traffic decline in Cork and Shannon has been frightening. Ryanair says Cork suffered a 33% drop in passengers this year.
Ryanair also alleges that the DAA deliberately hides monthly traffic figures at Cork Airport in the hope that no one will notice the collapse that has taken place under what it terms ‘DAA mismanagement.’
For all its guff, Ryanair cannot be considered a friend to Cork Airport. It has its own agenda for wanting the place privatised, namely that the airport would be at the mercy of the low cost airline, with O’Leary playing off Cork against Shannon.
Ryanair already dangled the carrot of new flights into Cork on condition the company got access to the abandoned passenger terminal instead of having to use the new terminal. It is a proposal that Cork Fine Gael TD Dara Murphy enthusiastically supports.
However, Ryanair’s recent decision to abolish its daily flight to Dublin just ahead of the airport’s 50th anniversary hoopla really stuck in the Cork lads’ craw, while the thought of Michael O’Leary playing a major role in the future of the airport –or even owning it – sends shivers up their spines!
Original article: http://www.southernstar.ie
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