Ryanair’s Michael O’Leary warned last week that the threatened passenger cap at Dublin Airport would push up airfares next summer, and possibly sooner.
Dublin’s 31.9 million passengers in 2023 accounted for 85% of all those using airports in the Republic – Cork handled just 7% of passengers using airports last year, while Shannon handled under 5%.
Fare increases at Dublin would impact almost all arriving and departing travellers and Ireland needs accessibility as Mr O’Leary insists.
He is also sceptical about the early availability of new kinds of aviation fuel which would reduce emissions and feels local concerns about aircraft noise are exaggerated.
Paradoxically, one of the beneficiaries of the threatened passenger cap would be Ryanair. Airlines at slot-constrained airports face an excess of demand over supply induced by the slot limit.
They are entitled to automatic renewal of slots provided they use them, so they are carried forward year to year.
An airline which has an extensive schedule at a popular airport could be forgiven if it welcomed slot constraints, since they can translate seat scarcity into higher fares, with the same flights and operating costs.
If slots are freely available, as they should be if there is enough runway and terminal capacity, expanded schedules from new or existing airlines will help to contain ticket prices. When slots are rationed, any airline choosing to forego the opportunity to boost margins can reduce their schedule and sell or lease their slots to carriers who wish to expand.
Constrained
There are numerous slot-constrained airports in Europe and a market in spare slot entitlements.
One of the airports where these ‘second-hand’ slots are most valuable is London Heathrow, where inadequate runway capacity has limited the number of aircraft movements that can be accommodated.
Slots at the most favoured hours, especially the early morning timings preferred by long-haul operators, have changed hands for €45m and upwards, with far lower prices later in the day. You might ask why Heathrow does not increase landing charges and trouser the money. They are not allowed to by the regulator, who controls charges, and regards Heathrow, rightly, as a local monopolist with market power.
Heathrow cannot create more slots unless a third runway gets to be built. Land must be acquired outside the airport’s boundary, including a large slice of the suburb of Harmondsworth, and estimates of the total cost including new terminals run to €20 billion.
Roughly €6 billion of this would relate to the runway element, including property acquisition and the demolition of existing buildings. At Dublin, the position is different and the new runway, at just €325m, looks like a bargain.
The airport operator, the State-owned DAA, has just completed this second parallel runway to match the current main runway 10/28, which opened in 1989.
There is also a crosswind runway, rarely used. Runway 10/28 has catered for over 90% of activity at Dublin for over three decades and it had been foreseen that traffic growth would eventually mean a second main runway.
To the credit of the people involved at the time, vacant land for a second runway was acquired in the 1980s, which helped to keep the cost inside the €325m budget.
There were no demolition costs since there were no buildings, making it one of the least expensive runways built in a European city in recent times.
The project had been planned more than 20 years ago, but was deferred by DAA after the banking bust as traffic turned down, then revived in time for the post-Covid traffic recovery.
Dublin may continue to be short of slots but not because of inadequate runway capacity.
The new runway has been built and paid for.
If it enters the regulated asset base on which landing charges are based, the customers get to pay twice – higher passenger charges to the airport and higher fares.
Some objectors are unhappy about the aviation industry because it contributes about 3%-4% to worldwide carbon emissions and they would not care if fares were higher.
Aviation is hard to decarbonise for technical reasons but there are other ways to discourage excessive flying. For example, airfares are not subject to VAT, currently 23% in Ireland on goods and services regarded as non-essentials.
Objections to the full utilisation of the new runway also revolve around the issue of local aircraft noise.
DAA maintains that compensation terms for nearby residents are generous and that the numbers affected are small. This matter is headed for the courts but looks like a natural for arbitration.
The alternative is to leave the capacity cap where it was before the new runway, which was in public plans for decades, was delivered on time, on budget and a bargain.
Even by the standards of Irish infrastructure planning, this should be filed under ‘Would you believe it?”
SHARING OPTIONS: