The Dublin Airport Authority (DAA) will have to borrow about €1 billion to fund the construction of Terminal 2 and other airport developments. This follows a draft decision by the aviation regulator yesterday not to allow the company to increase passenger charges before 2010.
Aviation regulator Cathal Guiomard decided that the current average passenger charge of €6.34 should remain until the end of 2009, the end of the current five-year price review period.
He based the decision on a better-than-expected increase in user numbers at Dublin airport over the past two years, which has boosted the DAA's income. Mr Guiomard decided that airport users should begin to pay for Terminal 2 once the facility is built and in use.
The DAA had wanted charges to rise to an average €7.50 to help pre-fund construction of the terminal.
The DAA said it was "disappointed" with the decision not to approve the "modest immediate increase" in passenger charges that would have provided the "full funding clarity required to proceed" with its building programme once the planning appeals process is complete.
"The DAA must borrow very significant sums of capital to fund Dublin airport's second terminal and other passenger and airfield facilities."
Mr Guiomard decided that 95 per cent of the €607 million costs associated with Terminal 2 were "reasonable". He has proposed that €430 million of the cost of building the terminal should be recovered from all airport customers from 2010.
Another €152 million could then be recouped when the airport hits its projected target of 30 million passengers. It currently handles about 21 million passengers a year.
"The DAA therefore bears some element of the commercial risk associated with the development," Mr Guiomard said.
Ryanair chief executive Michael O'Leary criticised the regulator's draft decision. He questioned why Mr Guiomard had "nodded through" the DAA's costings for Terminal 2, which have more than doubled over the past two years.
"He's just decided to do nothing," Mr O'Leary said. "Traffic at Dublin airport is going up so charges should be coming down. It just doesn't make any sense."
Mr Guiomard rejected Ryanair's criticisms. He said the decision was "fair" to all sides.
Mr O'Leary said there was no basis for Ryanair to challenge the regulator's decision but that he would seek leave for a judicial review if An Bord Pleanála approves the terminal later this summer.
Aer Lingus said it was reviewing the document and had no comment to make. Interested parties have until June 21st to lodge submissions.