CALLS ON AVIATION REGULATOR
Ryanair Holdings PLC
21 June 2007
RYANAIR CALLS ON AVIATION REGULATOR
TO BLOCK GOLD PLATED TERMINAL
OR MAKE AER LINGUS PAY FOR IT
Ryanair, Ireland's national airline, today (Thursday, 21st June 2007) filed
comments on the Commission for Aviation Regulation's ('CAR's') Draft Decision on
the Review of Airport Charges. Ryanair called on CAR to either block DAA's gold
plated plans for the €850m Second Terminal at Dublin Airport, as it is the wrong
size, in the wrong location and wrong cost, or force Aer Lingus, who will occupy
the massively oversized and grossly expensive facility, to pay for it. Ryanair's
passengers should not be forced to pay higher charges for a terminal they will
never use. The CAR's own consultants have now confirmed what Ryanair has been
saying all along, i.e., that the size of T2 is between 32% and 56% too big and
too expensive.
Ryanair also criticised the CAR for its inaction over the past two years, which
has allowed the airport monopoly to more than double planned capital expenditure
(from €571m. to €1,178m.), increase the size of T2 by 50% (from 50,000m2 to over
75,000m2), with the costs more than quadrupling (from between €170m.- €200m. to
over €850m.).
Commenting on the CAR's Draft Decision and Ryanair's response, Ryanair's Head of
Regulatory Affairs, Jim Callaghan, said:
'The CAR's draft decision has now confirmed what Ryanair has been saying
all along - DAA's T2 is excessively large and grossly expensive. DAA is
driving this development for the sole purpose of inflating its so-called
regulated asset base (RAB), from which airport charged are derived,
which will allow it to an almost doubling in airport charges. Despite
this, the CAR is allowing DAA to proceed with this development and the
Regulator expects Ryanair's passengers to subsidise this white elephant,
which will never be fully utilised because of Fingal County Council
planning restrictions, which place a ceiling on the combined capacity of
Terminal 1 and Terminal 2 of 30-35 mppa.
'Ryanair's submission to the CAR focuses on the following points:
•Excessive Size and Cost of Terminal 2 The CAR has finally forced DAA to
produce the passenger forecasts and busy hour rates that DAA claims to be
the basis for the massive increase in the size and cost of T2. As a result,
the CAR's consultants have verified what Ryanair has been saying all along -
i.e., that the numbers produced by DAA are entirely fictitious and that the
size of T2 is grossly excessive. DAA is building a facility for 25 mppa as
opposed to the 10 mppa permitted under the Fingal County Council Local Area
Plan (LAP). It is now clear that T2 as proposed by DAA is inappropriate and
DAA must be forced to provide a low cost, efficient facility that meets the
requirements of the vast majority of users at Dublin Airport.
•The Capacity of Terminal 1 and the Requirement for Additional Capacity at
Dublin Airport. The CAR should be analysing the total capacity of both T1
and T2 and ensuring that DAA is prevented from building excessive capacity
that cannot be used given the current 30-35 mppa cap on traffic by Fingal
County Council. By Ryanair's calculation, DAA is proposing to build between
15 mppa and 20 mppa of entirely unnecessary capacity between T1 and T2 and
the CAR cannot allow DAA to recover its costs on any of this excessive
capacity.
•Lack of Proper Consultation. Consultation has been farcical throughout
the T2 and CIP (Capital Investment Programme) processes and the CAR has
failed to attend any of the so-called consultation meetings, despite
repeated requests from users. DAA has consistently stonewalled users'
reasonable requests for information and has refused to consider lower cost
options for airport developments. This has led to grossly inefficient and
expensive developments, including T2, the proposed terminal 1 extension
(T1X), and Pier D. DAA should not be allowed any recovery on these
developments beyond what meets the reasonable requirements of users and
based on objective cost benchmarking.
•Excessive Cost of Other Developments. Although the Draft Decision and
related reports confirm that DAA's costs for various developments are
excessive, the analysis does not go far enough and merely relies on DAA's
own benchmarking report - which generally compares costs with other DAA
projects or BAA developments - another highly inefficient airport monopoly.
The CAR also fails to consider the work carried out by its own consultants
regarding benchmarking against other low cost facilities around Europe. For
example, DAA intends to spend a further €400m. on extending/refurbishing T1
but stated at the planning inquiry that at the same time it intends to
reduce the capacity of T1 from the current 25mppa to 15mppa. It is
incomprehensible that the CAR should contemplate allowing DAA to waste a
further €400m. on T1 when DAA has stated that it will reduce capacity by
some 40%.
•The Charges Determination for the Period 2006-2009. Ryanair has
demonstrated that the current charges being paid by airport users under the
regulatory cap are too high given the fact that there are unjustified costs
in the RAB (Regulated Asset Base) and the number of passengers currently
using Dublin Airport is considerably higher than originally forecast by DAA.
Charges should therefore be reduced. Moreover, passenger charges should be
further reduced in the next review based on a much lower cost for T2
(approximately €150 million for a 10 mppa terminal) and other developments,
including Area 14 and Pier D.
Based on the above, Ryanair has called on the CAR to:
1. •The DAA should only be allowed to recover the financing costs on 10 mppa
worth of capacity in T2, given the current planning restrictions on the
Eastern Campus, taking into account the 25 mppa threshold of capacity
provided by Terminal 1;
2. •The DAA should therefore only be allowed to recover reasonable costs for T2
- i.e., no more than €150 million necessary to build a 10 mppa terminal
facility;
3. •Require Aer Lingus and any other T2 users to pay for the cost of T2.
Ryanair's passengers should not be forced to cross subsidise a terminal they
will never use;
4. •Claw back the cost of Pier C, the €150m., 7-year old pier which will now
become redundant under DAA's plans for T2.
5. •Claw back the excessive financing costs allowed in the current regulatory
determination;
6. •Claw back the grossly excessive costs of Pier D and other projects when
benchmarked against other low cost developments elsewhere in Europe;
7. •Disallow any future projects that do not meet the reasonable requirements of
users, following proper consultation, and that do not have the agreement of
the majority of airport users.
8. •Provide for strict requirements regarding information disclosure, including
the independently verified costs of each project, by the regulated monopoly
and actual consultation with users regarding all of the options;
9. •Attendance by the CAR at all future consultation meetings to ensure that the
regulated monopoly is properly consulting with users.
Ends. Thursday, 21st June 2007
For reference: Peter Sherrard - Ryanair Pauline McAlester - Murray Consultants
Tel: +353-1-8121228 Tel: +353-1-4980300
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