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DAA Forecasts Losses As Recession Hits Passenger Traffic

Dublin Airport Authority’s core airport business, comprising Dublin, Cork and Shannon airports, is expected to be loss-making this year, and if present trends continue, is facing significantly higher losses next year, according to the DAA.
DAA chief executive Declan Collier said the recession had led to a drop in passenger numbers and a fall in spending patterns that was having a significant effect on the company’s business.
“The scale of this downturn is unprecedented and it is having a dramatic impact on travel patterns throughout the world,” Mr Collier said. “Passenger traffic is falling at our three airports in line with similar declines at airports throughout Europe. With fewer people travelling, airlines are also cutting capacity.”
Mr Collier was speaking as the DAA published its financial results for 2008, which showed a 28% decline in the Group’s profits excluding exceptional items.  The DAA began to feel the impact of the recession in the final quarter of last year, as passenger numbers at Dublin, Cork and Shannon fell marginally during 2008 – the first decline since the Gulf War in 1991.
In recent months however, the situation has worsened significantly and the company is forecasting an 11% drop in passenger numbers this year across its three Irish airports. Up to 2011, the DAA expects minimal passenger growth, given the global economic climate and the dramatic fall off in Irish GDP. 
“The company is facing a very difficult financial situation,” according to Mr Collier. “This is the deepest recession since the 1930s and it is having a huge impact on the aviation sector.” 
Due to the challenging business environment, the DAA has been reviewing all aspects of its business, with a particular focus on costs, including capital development and operating expenditure. Discussions will begin shortly with DAA staff representatives on a major cost recovery programme.
The DAA has also reduced its investment plans at Dublin Airport for the 2010-2014 period by about 50% to less than €400 million to take account of the current economic downturn. A number of major projects, including the planned new second runway and additional aircraft parking areas, will be deferred. These projects will be reactivated when appropriate circumstances dictate. 

This scaled-down investment programme is effectively the minimum level of spend required to keep the airport functioning safely and efficiently, coupled with a small number of revenue generating projects.  It includes an overhaul of the existing runway, and the reconstruction of certain aircraft parking stands and taxiways – some of which are 40 years old.
The current €1.2 billion Transforming Dublin Airport capital programme, which is already providing much needed improvements in facilities for the travelling public, will be completed over the next 18 months.  Construction of Dublin Airport’s new passenger terminal T2, which is the central element of the Transforming programme, will be completed in February 2010, 12 weeks behind the original schedule.
As agreed with T2’s main tenant Aer Lingus, and to coincide with airline scheduling and allow for efficient commissioning and testing, the new terminal will open fully by November 2010. The construction of T2 is providing almost 2,000 jobs on site and significant further employment offsite.
“The delivery of T2 will transform Ireland’s premier gateway and position the country to take advantage of the economic upturn when it comes,” Mr Collier said. “We believe the new terminal will stimulate traffic and help make Ireland a more attractive destination for investment, and business and leisure travel.”
Earlier this week, the latest element in the Transforming Dublin Airport programme was opened ahead of time and on budget when the €54 million T1X facility welcomed its first passengers. The new facility improves the passenger journey to Pier A and Pier D and also provides additional airside retail and food and beverage choices for the travelling public. About 150 new jobs will be created by the new retail and catering outlets.
Before the DAA started construction of T2 in 2007, the Commission for Aviation Regulation (CAR) which sets airport charges at Dublin Airport, signalled that it would remunerate the new terminal and other projects when it made its next determination in 2009. 
It is imperative that the regulator now sanctions a price increase to cover the cost of the new facilities being delivered. The regulator’s decision, in tandem with the DAA’s cost recovery programme, is fundamental to the financial future of the company. The current passenger charges at Dublin Airport are among the lowest of any major European airport and have actually fallen by more than 30% in real terms over the past 20 years.
Excluding exceptional items, the Group made profits of €78 million for the year to 31 December 2008, a like-for-like decline of 28% from the previous year.  Total passenger numbers at Dublin, Cork and Shannon airports were 29.9 million, a decline of 0.6% on 2007.
Group turnover increased by 1% to €631 million. Earnings before interest, taxation, depreciation and amortisation (EBITDA) declined by 9% to €155 million. Gross borrowings were more than €1 billion at the year-end, as the Group raised debt to fund investments in better airport infrastructure.

Mr Collier said the DAA had “recorded a satisfactory performance during 2008 against the background of a much more difficult operating environment”. He added that lower passenger numbers, weaker economic conditions, increased competition, and lower disposable income all impacted upon the financial performance during the year.
Dublin Airport had its busiest year on record in 2008, handling almost 23.5 million passengers. This satisfactory performance was underpinned by the steady growth enjoyed during the first six months of the year; however passenger traffic declined during the second half.
Passenger volumes at Cork Airport increased by 2.5% to almost 3.3 million during 2008, marking the 17th consecutive year of growth at the airport. Terminal traffic at Shannon Airport, which is the number of passengers who began or ended their journey at the airport, declined by 10% to 2.8 million during the year.  Overall passenger volumes declined by 12% to almost 3.2 million.
Aer Rianta International (ARI), which manages the Group’s overseas airport investments and international airport retail operations, had another successful year as it contributed about €25 million or 32% of Group profits (excluding exceptional items), a decrease of 13% compared to 2007. On a like-for-like basis, profits at ARI increased by 6% during the year.

Ends
April 24, 2009
For further information contact:
Paul O’Kane
Tel 353 1 8141897, 353 86 6090221