RYANAIR LIMITED SUBMISSION TO THE COMMISSION FOR AVIATION REGULATION ON THE DETERMINATION OF AIRPORT CHARGES 27 MARCH 2001 Table of Contents 1. Introduction 2 2. Background on Ryanair 5 3. Background on Aer Rianta's Charging Policy 9 4. Key Issues 14 5. Comments on the Statutory Background 15 6. Submissions on Questions raised 20 Confidential Annex (Separate Document) - WITHHELD 1. INTRODUCTION This paper sets out Ryanair's submissions on the determination of airport charges by the Commission for Aviation Regulation (the "Commission") by reference to the Commission's paper entitled "Economic Regulation of Airport Charges in Ireland" (the "Consultation Paper"). The welcome appointment of the Commission comes at a critical juncture in the development of the air transport industry in Ireland when costs at the Irish airports controlled by Aer Rianta cpt ("Aer Rianta" or the "Airport Operator") have been escalating, whereas the level of service provided is unacceptably low. This has had a markedly negative effect on traffic volumes over the past year, particularly as regards travel from the United Kingdom, Ireland's largest market, which has stagnated at a time when Sterling has never been stronger. This stagnation in traffic and the absence of airlines willing to develop new routes in the current environment have wider implications than just the profitability of the Airport Operator or the airport users ("Users"). More importantly, this situation affects the strength and development of the Irish economy as a whole given the vital nature of air access for a peripheral island nation. Given the recent shocks to the Irish economy, including the downturn in the US economy and the outbreak of foot and mouth disease, the development of air transport is a crucial factor in sustaining the strength of the Irish economy. The foot and mouth crisis also points to the danger of over reliance on the UK market for air transport services. Currently, 57% of Irish air traffic is between Ireland and the UK. The situation at the Irish airports is in stark contrast to the rapid growth of air transport services elsewhere in Europe and particularly to the development of low fares air services out of the UK. The low fares sector is now the fastest growing sector of the European aviation industry. Minetel's February 1999 'Low-Frills/Low-Cost Report' predicted that the sector will grow from 5.4 million passengers in 1998 to 15 million by 2003. This is probably a conservative estimate given that Ryanair's traffic alone will increase to approximately 9 million in 2001. Ryanair was largely responsible for lowering air fares, which created the boom in air travel between Ireland and the UK in the 1980's and early 1990's following deregulation between those markets and is now having the same effect offering low fares services from the UK to the European Continent. Indeed, the UK has seen much more growth in the low fares airline sector than any other European country to date. The UK has also benefited from having been one of the first countries to introduce a more commercial approach to airport management. This has helped to ensure that UK airports meet the needs of their users while keeping their costs low. The result is that many of the heaviest air passenger flows in Europe are between London and other major European cities. High and rising costs and inefficient facilities in Ireland are hampering the ability of Ryanair and others to offer similar low fare services from Ireland to the Continent and increasing capacity from Ireland to UK destinations. Stagnation of traffic on existing routes and the absence of any significant new route development are likely to continue unless the Commission is successful in introducing a regulatory environment that simulates competition, i.e., increases efficiency and reduces costs. Such an environment would inevitably lead to lower fares, new route development, increased passenger volumes and higher levels...
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