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Good afternoon ladies and gentlemen and thank you once again for taking the time to attend the DAA’s annual media briefing.
For those of you who haven’t met us before, my name is Gary McGann, Chairman of the DAA and beside me is Declan Collier, Chief Executive of the company who, in a few moments, will take you through a presentation of our financial performance for 2006 and an update on current business issues.
We’re also joined by our colleagues, Oliver Cussen, Company Secretary and Bob Hilliard, Director Dublin Airport.
I’d like to begin proceedings this afternoon by setting out the DAA’s vision for its business – which is, “To deliver a quality airport travel experience to the best international standards”.
In simple terms, the company is principally focused on all its customers’ existing and future requirements as they journey through our airports and on its responsibility to its shareholder and to the Irish economy generally in terms of developing the critical transport hubs we own and manage. The company is also focused on one other key requirement – that it should operate in a fully commercial fashion and generate the profitability needed to sustain its operations and capital investments.
The DAA’s own vision of what it must strive to achieve is underpinned by the Government’s mandate that the company should deliver, as quickly as possible, the required capacity at its airports and at Dublin Airport in particular, in order to meet the needs of current and prospective passengers and other customers. In undertaking our airport development initiatives we are driven by their need to be appropriate for purpose, cost effective, and capable of delivering optimum benefits to a broad range of users.
In this context, I would like to take you through some of the milestones I believe have been achieved by the DAA and to briefly outline some of the issues currently impacting on the achievement of further milestones.
The DAA formally came into being in October 2004 and, therefore, the Board, which I chair, is now about half way through its five-year term.
It is fair to say that during this period, the company, and Dublin Airport in
particular, has remained the focus of intense criticism from time to time.
Some of that criticism is merited. We have been the first to acknowledge
that the infrastructure at Dublin Airport is less than adequate and comfort
levels can deteriorate rapidly there during busy travel periods. This has arisen
principally due to the combination of unprecedented traffic growth, underpinned
by economic success, and failure to make timely and adequate investment in
facilities to cater for that traffic growth. The second factor will not happen
again under our watch.
As is the case with any service company, we must continue to enhance our offering to customers – (we have 90,000 passengers on busy days) - irrespective of the inadequate current status of the buildings and circumstances in which we work. But while it may not always be immediately obvious to the traveling public nor even to commentators like yourselves, I believe significant progress has been made by the DAA over the past two-and-a-half years.
In that period for example, we have decisively addressed the challenge of some long-standing, loss-making business units, namely the Great Southern Hotels Group and Shannon Airport.
The individual GSH hotels were sold last autumn as going concerns at an attractive price and the manner in which the sale process was structured ensured the interests of all stakeholders, including employees, were managed equitably.
The recent restructuring agreement at Shannon Airport is only beginning to be implemented. But by aligning Shannon’s cost base more closely with those of its direct competitors, the agreement establishes a sustainable base from which the airport can grow and prosper.
The Board inherited the responsibility to complete the redevelopment of Cork Airport, which was at an advanced stage when we took office. The successful transfer of operations to the airport’s new terminal at the height of last summer’s busy travel season represented a significant logistical accomplishment by Cork Airport management and employees and the people of Cork and Munster now have a 21st century gateway of which they can be justifiably proud.
Dublin Airport has presented twin tests for all those who work for the DAA. The first, has been to keep the airport operating effectively in an environment of severe capacity constraint and unprecedented traffic growth. The second, has been to manage delivery of the Government’s Aviation Action Plan and its principal requirement of completing a new boarding gate pier and a new passenger terminal within a short timeframe and in the context of significant challenges to the process.
It is important to note that Dublin Airport, with close to 23m passengers per annum, is now the ninth busiest international airport in Europe and the fastest-growing major airport in the world last year. The 15% growth in passenger numbers in 2006 represented an average additional 7,500 passengers per day, through the same-sized terminal and at a time when airport security challenges worldwide were growing exponentially.
In the period since it took up office, the DAA has done everything within its control to either deliver on the Government’s mandate and patent customer need, or to put itself in a position to do so. For example, Pier D, with its 12 new boarding gates and 14 aircraft contact stands will open on time and on budget next October. We are ready to build T2 this summer subject to two significant caveats – planning and prudent financing. Remember, it is now two years since the Government, after long debate, decided the DAA should build the airport’s new terminal on the existing airport campus site.
In the intervening period, the company has assembled an expert team to design and build T2 and it has conducted a consultation process with customers on an unprecedented scale. Arising from this, and having regard to all inputs, it has designed an appropriate, cost effective facility that will support the growth of long-haul and short-haul traffic, at the airport, up to 35m passengers per annum; it has obtained confirmation from independent consultants, appointed by Government, that the consultation process, budgeting methodology and projected costs of T2 are in line with equivalent facilities overseas; the vast bulk of its capital programme has been accepted by the Regulator and it has obtained planning permission for the terminal and linked infrastructure from Fingal County Council.
All in all, this is an impressive achievement in the context of the other challenges facing the company. As to the caveats I have mentioned, on the planning side we are still awaiting a decision from An Bord Pleanala as to whether and when we can proceed with building T2.
The new terminal has a two-year construction schedule and five-month commissioning schedule which by any standard is extremely tight. Consequently, we need to have planning clarity by the end of June to begin preliminary construction activity by mid-July if we are to deliver an operational facility before the end of 2009 as the Government has directed.
The DAA fully appreciates An Bord Pleanala’s very heavy workload and the care it has taken in processing the T2 planning appeal to date. However, the company had expected an outcome to the appeals process within six to eight months of obtaining planning permission in October last. We must hope, given An Bord Pleanala’s many commitments, that it is in a position to prioritise its deliberations on T2 due to its strategic importance for millions of passengers and the overall economy.
Turning to funding, as you know the company had sought an immediate increase in airport charges to €7.50 per passenger and a subsequent increase to €8.50 per passenger for the next regulatory period - both in 2006 values. This would have brought the average charge over both periods to about €8 per passenger.
These relatively small increases would have given the Board of the DAA the
financial platform to borrow and service the significant funds required to
finance the €2bn Dublin Airport Transformation Plan - even in the event of
an unexpected economic downturn and subsequent slowing of aviation traffic
growth.
It would have allowed airline customers incorporate small, smoothed
increases into their budgeted airport costs over the next decade, secure in the
knowledge that the new and refurbished infrastructure at the airport would
sustain effective operations and that Dublin Airport would remain extremely
competitive relative to other major European counterparts.
The Regulator confirmed that increased charges are required to adequately fund the investments, but not until T2 is built. Without this confirmation, the Board could not have prudently proceeded to implement Government strategy. Based on recent consultation with the Regulator, we now believe we can do so.
Finally, it is important that all Dublin Airport’s stakeholders – the Government, business customers, industry and tourism representative groups, employees and above all passengers, reiterate their demands for the earliest possible completion of the investment plan.
This programme is urgently needed; it has been mandated by Government; it has the support of airlines carrying the majority of the airport’s passengers and most of the economic stakeholders. It will attract new aviation services and traffic to Ireland. It has been independently cost-verified and will involve very reasonable passenger charge increases. And it will transform the travel experience of those who ultimately pay for all the services and investment at Dublin Airport - the airlines’passengers.
It is also passengers who will suffer most if the DAA (the only organisation that can now deliver a new terminal within a reasonable timeframe) is further delayed from doing so. As a Board and management, we intend to do everything in our power to ensure we deliver on our mandate.
Thank you for your attention.
Before opening up to questions, I would now like to ask our CEO, Declan, Collier, to present to you.
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