Interview: Flying higher with DAA

One of DAA chief executive Dalton Philips's first memories of Dublin Airport is of sitting on the grass close to one of its fringes watching his mother Susan take off in a light aircraft on what was her first solo flight.

"It was out there," he says, pointing out the window at a distant green area lying beyond a pier, lined with blue-and-white Ryanair Boeings, overlooked by his office.

Philips was about six at the time. Both his mother and father, Tim, had pilots' licences. His grandfather, Barry Aikman, set up an airline, Aquila, using flying boats no longer needed after the second World War, which he subsequently sold to British Airways, now a customer of DAA and a sister airline of Aer Lingus.

“So this business is very much in my blood,” he says. Philips himself has a pilot’s licence but, somewhat ironically running DAA does not leave him with much time for flying.

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It is a year since he succeeded Kevin Toland as chief executive at the State-owned company responsible for operating Dublin and Cork airports and duty free retailer, Aer Rianta International.

Philips’s appointment surprised some, as he had spent his career in retailing, where previous jobs included running Irish upmarket department store group Brown Thomas.

He was thrilled to get the job, not just because of his family’s love of flying, but because it puts him at the “epicentre of the Irish economy”.

If that’s where DAA sits, things look good. Dublin Airport is poised to beat the record of 30 million passengers set last year. Numbers are a million ahead of where they were this time in 2017.

“We have had 85 days of 100,000-plus passengers in a day,” he says. “Every single day in July we had more than 100,000 passengers.” Cork is up about 4 per cent, consolidating its position as the State’s second-biggest airport. However, the capital’s figures dwarf it – Dublin Airport is by far the biggest gateway into the country.

New runway

This success has created problems: DAA plans a new runway for the northern side of its site, easing what its chief executive calls a key constraint. “The good news is that we’re in the tender process now for the contractors to provide that infrastructure and we hope to be awarding that contract next month, and we will commence building of that third runway towards the end of this year,” he says.

Most call the proposed facility the second runway, but in fact it’s the third, as Dublin already has two. The second, called the cross runway, is rarely used, mainly in extreme weather.

The third should begin operating in 2021. It will allow more craft to use Dublin, but there are bottlenecks in other parts of the airport, too. “The challenge we have is in the existing infrastructure,” Philips explains. The squeeze now is most keenly felt along the stands and piers, where aircraft park and passengers board and disembark.

Philips distinguishes clearly between them and the terminals, which, he explains, are the areas where you go check in your bags and go through security, before heading to the departure gates.

With adjustments, Dublin’s two terminals, T1 on the northern side of what he calls the campus and T2 at the southern end, can handle more than 40 million people a year.

Airlines have been increasingly highlighting bottlenecks in stands and piers, whose smooth operation is vital to getting flights in and out on time. Aer Lingus, which wants to develop Dublin as a transfer hub connecting its European and transatlantic services, has been particularly vocal on the issue.

Philips says DAA has been discussing plans to solve the problem with the carrier and rivals such as Ryanair. The bottom line is that the company plans to spend €500 million adding new stands and piers to the southern side of the airport and €400 million doing the same with the northern end of its campus, a total of €900 million.

In addition, DAA wants to develop Dublin as a transfer hub, where passengers can connect to flights between Europe and North America. The idea is to exploit Ireland's position on Europe's western edge, which means that virtually all traffic across the north Atlantic flies through its airspace.

Philips points out that using Dublin as a hub ensures that many of its routes are viable, particularly those connecting it with North America. "Take, for example, Seattle-Dublin, which Aer Lingus have put on," he says. "Because they are hubbing people in from Seattle, into Dublin and out into Europe, or vice versa, you can have up to a third of that plane carrying people who are going to Europe or coming from Europe; that underpins the viability of the route.

“So, it’s very important in terms of Ireland’s place in the world that we develop the hub capability because hub capability means more routes. We put on 127 new routes in the last five years and the more that we can connect people, the better.”

This is not just DAA strategy, it is part of the Government’s aviation policy, which recognises Dublin as the Republic’s key link to the rest of the world. Using the airport as a hub leaves it less dependent on passengers who simply want to travel to and from this country. It also means that the Republic benefits from sitting in the centre of a network linking European and North American cities.

The €900 million that DAA plans spending in Dublin will increase the number of stands from 112 to 147 – “about 30 per cent” – Philips says.

This will give the airport the capacity handle up to 40 million passengers a year comfortably. The work will embrace security and immigration areas and the US customs and border patrol’s pre-clearance post.

A map that Philips rolls out on his office conference table shows the route to the new northern gates running behind existing hangars to an unused area that can seen from the airport’s exit road. A second block of boarding gates, accessed by bus, will sit across an aircraft parking area from this. On the southern side, a new pier with gates will extend down into an existing cargo area that will be moved to a new zone of its own.

Philips intends doing this without increasing passenger charges, that is, the fees that airports levy on airlines to pay for their facilities. Otherwise, he fears that carriers will simply base their craft elsewhere. “I think one of the things that underpins our airfield is that we have to be strong value for money,” he says. “Because, it’s a hugely competitive market, airlines have got the ultimate moveable asset. They can go wherever they want.”

The new facilities, he argues, must be built “faster, cheaper and better” than anywhere else. This should be music to airlines’ ears. Charges are a flashpoint between them and DAA.

The Commission for Aviation Regulation (CAR) determines Dublin's fees following exhaustive periodic reviews involving all interested parties, which generally involve rows between the State company and customers such as Ryanair, Aer Lingus or others.

Philips says the informal talks DAA has had with the airlines have been positive. The formal consultation with the CAR begins this month and will end in September 2019 when the regulator determines what Dublin can charge for the succeeding five years. The airport is currently allowed a maximum of €9.06 for each departing passenger. This will fall to €8.68 next year.

Even more ambitious than getting new stands and piers built at no extra charge is Philips’s aim to have them completed by 2022-2023. “We need to get this done,” he says bluntly. “The airfield is at capacity. We are constrained and we rapidly need this infrastructure and we need it now. I feel strongly that any delay in this infrastructure would have very serious consequences for the country. We could bring more flights into this country today if we had the capacity.”

Report

Another possible solution to the constraints is a third terminal. Shane Ross, the Minister for Transport, Tourism and Sport, has commissioned a report exploring this among other things, as well as the possibility of getting a private-sector player to operate such a facility in competition with DAA.

His predecessor, Kevin Toland, was adamant that Dublin did not need a third terminal. “We haven’t seen the output of this report, the capacity study, and we’ll wait to see that,” Philips says. “People will challenge us and say we have a monopolistic position here in Dublin, and I would say that we live in one of the most competitive environments that I’ve worked in. You’re competing against the Manchesters and the Copenhagens and the Amsterdams.”

He urges caution on the question of an independently-run third terminal. “It’s never been done anywhere else in the world, and I think to trial something when you’re so utterly dependent on one airport as the gateway to the country and the driver of the economic engine brings huge risks.”

However keen Philips is to press ahead with the new piers, his organisation will need planning permission. The DAA is more likely to apply to do the work in phases. On the plus side, the project should not affect anyone beyond the airport’s boundaries. He argues that diligent planning submissions, allied with the economic imperative, should succeed.

"We're going to have to navigate our way through that," he concedes. One question the DAA faces is whether or not this will count as critical infrastructure, which would at least allow it the benefit of a streamlined process overseen by An Bord Pleanála.

A new regime, overseen by a noise regulator – a role that legislation will shortly assign to Fingal County Council – could mean that developments at Dublin are taken out of that system. Philips says he and his colleagues are "scratching our heads" over how a data centre could be considered critical infrastructure while an airport may not be.

The economic argument is one to which he frequently returns alongside Dublin's place in aviation policy. Estimates of the number of direct and indirect jobs that the airport could create if allowed to fly, so to speak, exceed 17,000. So the lost opportunity, Philips argues, would make tech giant Apple's recent decision not to build a data centre in Athenry, Co Galway, "look like a rounding exercise".

Apple’s plan for Athenry fell over a planning row that stalled the project. Even before Dublin Airport begins extending piers its third runway faces a potential planning hurdle. When DAA first got permission, a condition imposed in response to local residents’ concerns limited flights between 11pm and 7am to 65. That does not apply until the new airstrip opens. If it did, the airport would be seriously in breach, as the actual number of aircraft movements between these hours is close to twice that level.

Needless to say, the airport wants the condition lifted. “It’s not the night time, it’s this issue that 11pm to midnight and six to seven in the morning are two critical times in the airport’s 24-hour cycle,” Philips says. “Because we’re an hour behind the rest of Europe, between six and seven we need to get those flights out and we need those aircraft home in the evening.”

Changing those times, he warns, would threaten the viability of many of those flights, prompting airlines to move craft elsewhere. DAA has been discussing this with locals. “My view is that Dublin Airport has had very strong and meaningful engagement with the community over many, many years,” Philips says. “This is a really difficult subject, noise pollution, and it’s important that we do engage.”

For the most exposed residents, DAA has house purchase and noise insulation schemes. The company also has a €10 million fund to support community activities. Nevertheless, its chief executive acknowledges that people are “challenged” by the prospect of more airport noise.

Legislation

Appointing Fingal as the competent authority to regulate this, in line with an EU directive, is a practical step towards easing the restriction. That requires legislation, which was due to be passed a year ago, but which has yet to make it through the Oireachtas. Philips is optimistic that this will happen shortly.

“We have had very meaningful and positive dialogue with the department (of transport, tourism and sport) and other parts of government,” he says, “and I must say that I’m feeling much more positive about it and that we’ll see legislation by the end of this year.”

He adds that people at all levels of government recognise “the economic catastrophe that would happen to this country” if the authority was not functioning when the new runway is built.

A looming challenge, one that could put everything else in the shade is – of course – Brexit. Britain is the airport’s biggest market; Dublin-London is Europe’s busiest route, some 4.9 million passengers travelled between the cities last year.

The outcome of the UK’s June 2016 vote to leave the EU has already hit. In 2017, British passenger numbers fell 6 per cent. “So, there’s clearly an impact,” he says. “I do not see any scenario where it’s a net positive.”

To date this year, they are up 1 per cent, compared with 7 per cent for the rest of Europe and 17 per cent for North America.

DAA is working on how immigration will have to deal with a possible end to the Irish-British Common Travel Area. For growth, it is focusing on Europe, North American and Asia. The company is also contributing to the debate via the Government. Ultimately, Philips acknowledges, a lot lies in the hands of EU chief Brexit negotiator Michel Barnier and British prime minister Theresa May.

Brexit is characterised as part of a widespread backlash against globalisation, which should threaten aviation and airports. However, Philips counters that the longer-term momentum still favours globalisation. Advances in aircraft technology, which cut the cost of long-haul travel, are playing their part in that, he explains. “Whilst we do need to be worried, you’ve got to invest, and you have got to stay ahead of the curve.”

CV

Name: Dalton Philips

Age: 50

Position: Chief executive DAA.

Why is he in the news? Dublin Airport plans a €900 million extension and will shortly begin building a third runway.

Career: From Wicklow, after UCD he joined the retail arm of conglomerate Jardine Matheson. After stints in Australia, New Zealand and Spain, Philips left and did an MBA in Harvard, after which he joined Walmart. He spent seven years in its operations in Brazil and Germany. He returned to run Brown Thomas, whose owners, the Weston family, then asked him to move to Canada, where he remained for three years. He became chief executive of British retailer Morrisons in 2010, followed by a period spent consulting before applying for and getting the DAA job.

Family: Married with two boys and a girl.

Hobbies: Runs marathons and coaches rugby. He played centre for Old Wesley in Dublin.

Something you might expect: His family has a long connection with aviation.

Something that might surprise: His father raced aircraft in a throwback to a bygone era. Philips and his sisters would sometimes sit in the back of his aircraft during contests, to act as a weight handicap.