Thursday, December 08, 2011

Shannon airport options get grounded


ONE MORE THING: WHILE WE await Booz’s findings into its reviews of options for Cork and Shannon Airports, I have managed to gain an insight into a submission made by worker-directors to minister for transport Leo Varadkar.

It was compiled by Dr Eoin Reeves and Dr Dónal Palcic from the Kemmy Business School at the University of Limerick. They were asked to look at a variety of options for Shannon Airport, including separation from the Dublin Airport Authority, privatisation and the possibility of outsourcing the management of the airport to an outside party.

The verdict? None of the above would work.

This shouldn’t surprise us. Shannon is loss making and its debts are reported to be €100 million. Passenger traffic has collapsed in the past couple of years.

In addition, the workers are unlikely to want to leave the warm embrace of the DAA in the current uncertain financial climate.

The Kemmy consultants found that the privatisation of the DAA was “not a realistic option” as the loss of control over important national infrastructure would have “severe implications” for our tourism and industrial development policies.

They also ruled out separation, stating that this would involve the DAA either assuming or writing off its debt, which is not practical in the current climate.

They also rejected the idea of either the DAA or a separated Shannon authority granting a management contract to run the airport to a private operator.

Based on their assessment of such contracts in other counties, they concluded that there were “potential risks” associated with such a model, namely a loss of control on issues outside the terms of the contract.

They acknowledged that the current situation at Shannon was “unsustainable” and its relationship with the DAA was sub-optimal.

One option, they state, is for Shannon to stay within the DAA but to alter the existing structure. Another is to separate Shannon by creating a new commercial state owned entity.

“Both options involve considerable challenges but it is unlikely that a way forward can be charted without the provision of state resources (possibly through the National Pension Reserve Fund).”

That suggestion is unlikely to fly although Varadkar has indicated that the status quo cannot remain. Here’s hoping Booz has some bright ideas.

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