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As a semi-state company with a clear commercial mandate, the Dublin Airport Authority (DAA) must address all loss-making and under-performing business operations for the sake of those businesses themselves and to underpin the viability of Ireland’s principal transit gateway, Dublin Airport, according to the Chairman of the DAA, Gary McGann.
Mr McGann was speaking at the publication of the DAA’s financial results for 2004, in Dublin today (Wed. April 27). The Company announced profits of €31.1 m for the year ending December 31, 2004. This represents an increase of 54% compared with equivalent profits of €20.2m in 2003. Turnover rose by 6.6% last year to €466m.
“Given the clear commercial mandate set out in the State Airports Act, the funding requirements of our core business operations, and the current regulatory environment which constrains our revenue-generating capacity, the Board of the DAA believes it must address the challenges posed by its loss-making businesses and those that are under-performing significantly.
“Unless addressed, in time these could undermine the viability and potential development of the DAA itself. It is only through the professional management of successful commercial operations that the best interests of all the DAA’s stakeholders – including its employees – can be secured,” Mr McGann said.
The new Chief Executive of the DAA, Declan Collier, said his priority would be to improve the experience of passengers travelling through Dublin Airport. He said there were many ways in which customer service standards and operational processes could be enhanced by all service providers at the Airport, but that any radical improvement in the passenger experience required investment in new terminal facilities.
“The need is clear and the DAA will implement whatever decision its shareholder, the Government, takes with regard to new terminal facilities. There is no quick fix. Even if a decision to sanction new terminal facilities were made today, it would take three to four years before those facilities became fully operational. The DAA will ensure all new facilities provided by the Company are built and operated as cost-effectively as any third party could achieve and is prepared to have its costs subjected to independent adjudication, if and when appropriate.
“But investment of this scale by any company, semi-state or private, must be remunerated. Without direct Government subvention, the only way in which investment in new terminal facilities can be remunerated commercially is through appropriate airport charges.
“Airport charges at Dublin Airport are currently capped at less than €5 per passenger, approximately half the average level for European airports of Dublin’s size. These charges will have to rise if DAA, or any other developer, is to invest in a new terminal and other airport infrastructure,” Mr Collier added.
All the DAA’s key profitability benchmarks moved in a positive direction during 2004, but the Company is still not generating sufficient profits to finance its capital investment requirements appropriately. Net debt increased by €7m to €384m.
“This level of borrowings leaves us with higher gearing, or debt to equity ratios, than most comparable airport management companies. But as with any loan or mortgage, it is not necessarily the level of debt itself that is most significant; it is whether the debt has been used to fund essential or productive investment and whether income levels are adequate to service it,” Declan Collier noted.
The Board of the DAA has not proposed payment of a dividend to the Exchequer for the financial year, 2004. This decision arose from the requirement to maximise the Company’s distributable reserves so as best to meet the objectives of the State Airports Act, 2004 in restructuring the assets of the former Aer Rianta.
As mandated by the State Airports Act, strategic business plans are currently being formulated by the Dublin, Shannon and Cork Airport Authorities. When approved by the appropriate boards, these plans will be presented to the Ministers for Transport and Finance for their evaluation as to whether the three airports have a viable future as separate, self-sustaining business entities.
Passenger numbers increased by 6.6% to 21.8m across the three airports,
Dublin, Shannon and Cork last year. This represented the highest level of growth
since 2000.
Passenger numbers at Dublin Airport rose by 8% to 17.2m, an 8%
increase compared with 2003. Overall passenger numbers through Shannon last year
were on a par with the previous year at 2.4m, while passenger volumes increased
at Cork by 3% to 2.25m.
Aer Rianta International (ARI) DAA’s subsidiary company, which manages airport investments and airport retailing activities overseas, improved its profitability significantly last year after a difficult year in 2003. The profit contribution from ARI’s combined international interests rose to €9.6m in 2004 from €5.1m the previous year.
Losses at Great Southern Hotels (GSH) amounted to €2.2m last year. This compares with profits of €2.9m in 2003, though these incorporated exceptional gains of €3.8m before tax, arising from the disposal of the Torc Hotel in Killarney.
The financial position of GSH continues to deteriorate, where difficult
trading conditions are compounded by payroll costs that are significantly higher
than comparable operators in an increasingly competitive hotels
sector.
Addressing these losses is one of the key challenges facing the
management of GSH and the DAA alike.
For Further Information
Contact Vincent Wall:
(01) 8144107 (087) 6860727
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