CITY OF DERRY AIRPORT
27. The City of Derry Airport plays an important
role for the Northwest of the island of Ireland[49]
and is regarded by the Londonderry Chamber of Commerce as "an
important tool in the drive to improve social and economic conditions"
in the area.[50] Whilst
there appears to be no recent data to quantify the number of travellers
from the Republic using the airport, its importance to the region
is widely recognised. The Department for Regional Development
told us that "The Republic of Ireland has a strategic
interest in the continuing operation and potential development
of the City of Derry Airport",[51]
a view that was echoed by Inter-trade Ireland.[52]
Indeed, the Irish Government, which supports the service between
the City of Derry and Dublin through a Public Service Obligation
(PSO),[53] also jointly
funded an expansion of the airport in 1998.[54]
28. Despite recording the most rapid growth of any
airport in Northern Ireland during 2004 with an increase of some
15.5% in passenger numbers compared with 2003, City of Derry with
just under 0.25 million passengers was still approximately one
twentieth of the size of Belfast International. It is also well
below the 1.0-1.5 million passengers which are generally regarded
as the minimum throughput at which an airport is likely to be
profitable.[55]
29. The Londonderry Chamber of Commerce emphasised
that "one of the difficulties of chasing further expansion
is that there are constraints which block the future development
of the airport".[56]
A bid for substantial public funding to extend the runway and
develop the airport terminal is currently being considered by
the two Governments. The Minister told us "We are hopeful
of trying to get a decision in the not too distant future".[57]
The Council argued that the extension was necessary to meet new
international requirements for safety zones at each end of the
runway, and they saw this as "affecting [their] ability to
attract new operators and expand current routes particularly in
the low cost sector".[58]
30. The Stop Eglinton Airport Evictions Group questioned
the need for the extension to the runway, not least due to the
impact that it would have on their homes. They argued that an
alternative and more practical direction for the runway was feasible,
which would remove the need for some of their Group to have to
move house.[59] However,
the views expressed by this group appeared not to be universally
held by all the residents affected directly.[60]
31. The airport operates at a deficit and in the
last financial year reported a loss of £1.3 million which
continues to be borne by the ratepayers of Derry City Council.[61]
The Council and City of Derry Airport are making strenuous efforts
to reduce this deficit and pointed out that £0.6 million
of this relates to repayment of Government capital loans taken
out some time ago at exceptionally high fixed rates of interest.[62]
We urge the Minister for Regional
Development to consider what action can be taken to reduce the
financial burden of the City of Derry Airport deficit on the ratepayers
in the Derry City Council area, such as refinancing the loans
or rescheduling payments.
32. The targets set within the future development
plan for the airport, which under option 2 suggested passenger
volumes of 0.83 million by 2010, appear to be heavily dependent
upon the establishment of additional services by Ryanair.[63]
The analysis also appears to rely heavily on assumptions in terms
of route developments and load factors, which seem more appropriate
to the experience at Stansted and a number of witnesses questioned
their validity.[64]
33. At the start of the 2004/05 winter timetable,
Ryanair reduced its frequency to Stansted from two to one a day.
More recently, the airline, although introducing its new and larger
Boeing 737-800 onto the route, has restricted the number of seats
that can be used to remain within safety margins,[65]
and this results in the airline encountering a financial penalty.[66]
Ryanair's management informally indicated to us that unless there
were tangible signs of the extension programme going ahead in
the very near term then the remaining service that they operated
was likely to cease. Conversely they also indicated that if the
extension was to take place then there was a real prospect of
them operating a range of services from their other bases to the
City of Derry and they considered that this would result in a
boost to inward tourism.
34. Belfast International Airport argued that if
the development of City of Derry was "allowed to proceed
with grant assistance, this expansion could harm the development
of Belfast International Airport, lead to passenger displacement
and involve the wholly inappropriate use of public funds".[67]
We fully understand the
importance of City of Derry Airport for the North West region
and we recognise that its future rests on its ability to develop
and expand to attract new services. We therefore wholeheartedly
welcome the decision in principle by the two Governments to provide
£10 million for development[68]
and urge the Minister for Regional Development to ensure that
the outstanding conditions are addressed as quickly as possible.
35. The management
of City of Derry Airport called for the Airports Act 1986 to be
extended to Northern Ireland to enable the setting up of a public
airport company to run the airport.[69]
The Department confirmed that this "is one of the options
that will be looked at as part of the review of governance arrangements"
but consideration seemed to be at an early stage.[70]
We call on the Minister for
Regional Development to undertake the review of governance of
the City of Derry Airport as a matter of urgency.
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