The outgoing chief executive of the Dublin and Cork airport operator has warned that the COVID pandemic has inflicted “profound and lasting damage” on DAA’s finances.
In submission to the Aviation Regulation Commission as to the plan for passenger charges to be implemented between 2023 and 2026, Dalton Phillips said DAA’s net debt had doubled to a record €1bn and its balance sheet was now “materially affected by”.
“Providing a high quality airport experience through an ultra-low passenger charge is a volatile permutation,” he warned the commission.
Mr Phillips has argued that a 15 per cent increase in tariffs is needed to restore Dublin Airport’s charging status as in 2019.
“Sadly, Dublin Airport entered the pandemic with consistently low airport fees, low income and limited financial headroom to face downside risks or external shocks,” Mr. Phillips said in a submission to the DAA. .
Airports saw their passenger numbers drop during the pandemic and nearly 1,000 of the DAA’s Ireland-based staff – a third of its total in the country – left business.
The post-pandemic recovery in air travel has left airport operators and airlines in Europe scrambling in their efforts to cope with demand. Some airlines have had to cancel flights due to staffing issues, while airports, including Dublin, have faced a shortage of security staff, leaving passengers to wait for hours for clearance.
“The entire aviation value chain will experience service delivery challenges this summer,” warned Mr. Phillips. “Frontline functions reduced their coverage throughout 2020/1 and the baseline has now been revived to support only a gradual recovery through 2025, as opposed to an increase in holiday activity this summer.”
He said: “Covid-19 has exposed some gaps in the resilience of the overall airport. Recent experiences have highlighted that passengers are generally expecting a rapid return to pre-pandemic service levels. Unfortunately, improving standards from current minimum levels will take time, cost and additional human resources.
The Aviation Regulation Commission sets passenger fees for Dublin Airport – the only airport in the country to have regulated tariffs.
It seeks to set a charging range that is implemented over several years that takes into account the expected passenger numbers as well as the capital expenditure required at Dublin Airport. It also seeks to ensure that efficiency is achieved to help reduce charges for passengers.
“Price competition has always been at the core of Dublin Airport’s business strategy, but charging reset is needed to allow the airport to invest appropriately in providing flexibility, efficiency and a great experience for passengers, ‘ Mr Phillips insisted.
He said the DAA faces “few real choices” on its development plan for the next five to 10 years. DAA plans a €2.5bn capital investment at Dublin Airport to help it cater to 40 million passengers annually. Before the pandemic, it was handling around 33 million per year.
Mr Phillips said Dublin Airport’s funding capacity has been “severely compromised” and it also needs €400m in additional investment to meet national carbon reduction targets by 2030.
“Record levels of capital expenditure are needed for consecutive years from 2024-2026,” he said, adding that the DAA’s “growing debt” means it needs to be able to generate higher income to maintain credit metrics. needed.
“The parallel pursuit of growth, efficiency, sustainability and affordability requires difficult trade-offs,” Mr. Phillips said. “After the pandemic, the reality is that consumers and airlines need a ‘value’ proposition that cannot be delivered under the current artificially low price.”