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DAA profits rise but review of airport charges needed to deliver government and customer requirements in full
The Dublin Airport Authority (DAA) will not be able to deliver the full investment programme required by Dublin Airport and/or the separation of Dublin, Shannon and Cork as stand-alone airports unless the Commission for Aviation Regulation (Commission) reviews its current unsatisfactory determination concerning maximum airport charges at Dublin Airport, according to the Chairman of the DAA, Gary McGann.
Mr McGann was speaking at the publication of the DAA's annual results for the past financial year in Dublin today (Monday, April 10). The company announced profits of EUR50m for the year ending December 31, 2005. This represents an increase of 63% compared with equivalent profits of EUR31.1m in 2004. Turnover rose by 13% during 2005 to EUR525m.
"The Commission's current determination of a maximum average charge per passenger at Dublin Airport of EUR6.14 in real terms for the next four years compares with a current equivalent charge at principal European airports of approximately EUR11 per passenger. This leaves Dublin Airport significantly under-funded at a time when it must deliver a EUR1.2 billion development programme at the airport over the next decade and much of its more critical and costly components over the next four years," he added.
"In deference to the remit from its shareholder and the urgent needs of its customers, the Board of the DAA has decided to move ahead with the initial phase of the development programme at Dublin Airport despite the current unsatisfactory regulatory position. In this context the company welcomes the recent findings of the statutory Appeal Panel to refer aspects of its determination, back to the Commission and will continue to press for an early review by the Commission of the key capital investment component of that determination."
Mr McGann said significant time and effort had been expended in developing the strategic business plans required by the State Airports Act to support any government decision as to whether Dublin, Shannon and Cork Airports could stand alone as commercially viable entities. The principal outstanding issues in the business planning process related to the securing of an agreement with employees at Shannon Airport for a comprehensive restructuring programme, and to ensuring the significant investment in new airport facilities at Cork Airport is remunerated appropriately.
"With regard to the implementation of airport separation, the principal objective of the State Airports Act, progress has been slow. The timeframe reflects company law requirements whereby the DAA needs sufficient distributable reserves to facilitate the transfer of Shannon and Cork Airports as a dividend, either sequentially or together. As matters currently stand, the DAA does not have sufficient distributable reserves though the Board will seek to increase their value over time," he noted.
The Chief Executive of the DAA, Declan Collier, said the degree to which the DAA could fund its full airport investment programme cost-effectively and prudently would determine the minimum levels of service that could be delivered to customers in terms of space comfort and efficiency. He said the company was putting in place the structures and resources required to move efficiently through the procurement, consultation and planning phases.
"The good news for our customers is that the initial phase of the development programme is underway. Preliminary construction work has begun on Pier D and delivery of this facility, comprising 14 new aircraft boarding gates, is scheduled for the autumn of 2007. A planning application for the second passenger terminal and the associated Pier E will be lodged in the summer so as to meet the Government’s requirement to have these facilities operational by late 2009," he added.
All the DAA's key measures of profitability continued to move in a positive direction during 2005, including the key EBITDA (earnings before interest, taxation, depreciation and amortisation) figure, which rose by EUR21 million to EUR111 million.
"These trends are very welcome but the company is still some way from generating sufficient profits to finance the major capital investment programme it has launched at Dublin Airport within objectively-measured and prudent parameters of financial risk. Profit levels are also well below the levels delivered by many in our peer group of airports," Mr Collier noted.
Combined passenger numbers at Dublin, Shannon and Cork Airports increased by an impressive 12.4% to 24.5 million last year. This represented the highest level of growth since 1996. Passenger numbers at Dublin Airport totalled 18.5 million, a rise of 8% for the second successive year. Shannon and Cork Airports also achieved record passenger volumes with Shannon’s numbers 35% higher at 3.3 million and those at Cork, 21% up at 2.7 million.
Aer Rianta International (ARI) the DAA's subsidiary company, which manages airport investments and airport retailing activities overseas, enjoyed another very successful year. The profit contribution from ARI’s combined interests rose to EUR17.4 million in 2005, up from EUR9.4 million the previous year.
The trading environment at Great Southern Hotels (GSH) disimproved markedly during 2005 with losses increasing by EUR1.8 million to EUR4 million. But for the decision of the Board of the DAA to waive interest payments of EUR1.5 million on an inter-company loan, the hotel group's losses would have worsened by the equivalent amount.
The waiving of interest payments followed the decision by the Board of GSH in February to sell its hotel assets as going concerns. Corporate finance and property consultants to the sale have since been appointed and a communications process has been initiated with the employees of GSH who have served the company through very difficult circumstances.
Ends
10th April, 2006
Further information contact: Vincent Wall at 087.6860727
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