Aviation regulator warns of 22% rise in charges

Airport passenger charges are likely to rise to an average €7.75 between 2010 and 2014, the aviation regulator Cathal Guiomard said yesterday.

This represents a 22 per cent increase on the current €6.34 average charge. The price rise is aimed at helping the Dublin Airport Authority (DAA) to pay for Terminal 2 (T2) and related projects, which are set to cost almost €1.2 billion.

The problem for the DAA is that Mr Guiomard has decided against allowing it to increase charges before 2010. This means the DAA will have to borrow about €1 billion to build the facility and pay the interest costs associated with that level of debt.

The DAA already has debts of about €200 million. Fortunately for the airport manager, the Government has raised its potential debt ceiling to €1.8 billion, giving it the headroom to borrow for T2's construction.

Revenues are also rising strongly. The €525 million turnover in 2005 is expected to show a double-digit increase when the DAA publishes its 2006 results. But the DAA will be heavily geared and probably face an annual interest bill of about €50 million.

The DAA had hoped that the regulator would increase the average charge to €7.50 to 2009 and by up to €8.50 for the five-year period after that. It argues that this "smoother, phased increase" was more desirable than the "larger, incremental increase" being proposed by the regulator.

Ryanair, which opposes the building of T2 and wants passenger charges reduced, believes there is no need to increase passenger charges to build the terminal.

Michael O'Leary argues that the airport manager has netted a €700 million windfall from the sale of non-core assets recently. This ignores, however, the fact that the DAA could be lumbered with Cork Airport's near €220 million debt by the next government, while it also has to pay out €36 million on a redundancy programme at Shannon Airport. These costs are a hangover from the break-up of Aer Rianta.

"Why are my passengers paying for this shiny new toy, which they'll never use?" Mr O'Leary asked.

The Ryanair boss ruffled Mr Guiomard's feathers yesterday by gate-crashing his press briefing to grill him on the findings of his draft decision.

Ryanair has said it won't use T2, nor will Aer Lingus if it succeeds in getting control of the company.

Mr O'Leary also questions whether T2 will achieve the throughput of 4,200 passengers an hour at peak times as projected by DAA.

"T2 could become one of our great white elephants, up there with the Port Tunnel," he said.