ICTU commissioned report questions targets

A REPORT carried out on the business plan for the new entity by Mazars Consulting for the Irish Congress of Trade Unions (ICTU) cast a cold eye, questioning how realistic some of the passenger targets for the airport are. It also raised concerns about the potential difficulties involved in amalgamating different bodies.
Regarding the projected increase in passenger numbers, the report said there are question marks. “Of the total additional passengers projected between 2013 and 2017, almost 65% are expected to come from new markets, rather than displacement of existing markets. This is a high hurdle to achieve in a depressed economic environment, where GDP growth is expected to be in single digits.”
It found that vesting Shannon Development assets with the Newco will bring “a number of establishment risks, including political, legal and organisational matters, which have yet to be fully researched”.
Bringing together people from various backgrounds will also present difficulties. “The Newco is bringing together staff with different skills and coming from organisations with differing cultural backgrounds. Accordingly, there is a cultural and corporate governance risk associated with the task of bringing together successfully the three pillars anticipated in the business plan.”
It states that more productivity will be sought from workers. “In relation to people costs, it is anticipated that the current workforce will be retained at current cost levels. Therefore, improved productivity is anticipated as greater passenger numbers are catered for within current labour force levels. In this regard, it should be noted that the business plan states that local bargaining will be required with employee representatives after separation from the DAA.”
It also states that in the business plan there may not be adequate provision for capital works. “The budgeted capital expenditure is the minimum level required over the coming years. No provision has been made for likely capital contingencies.”
After the transfer of Shannon Development assets, it’s thought that the approximate net book value of tangible assets would be €90 million.
With regard to the development of an International Aviation Services Centre, it states that in this regard the plan is largely aspiration.
“Seven aviation-related business areas were identified, which could form a Shannon-based cluster; maintenance, repair and overhaul (MRO); pilot training; technical training; aviation software and systems development; logistics and cargo; corporate and private aviation and heritage; tourism and networks. While all of these areas are briefly described in the business plan, there is little by way of tangible details offered. In this regard, the business plan is essentially aspirational in nature.”
In its summary conclusions, the Mazars report states there is “a substantial implementation risk in the delivery of the plan”.
It also states, “The business plan anticipates substantial growth in Earnings Before Interest Tax, Depreciation and Amortisation (EBITDA) within airport operations in the short to medium term. Without this growth, the plan is destined to fail.”
Given the level of empty units in the property portfolio coming from Shannon Development, it will be hard to secure returns, it found.
“There are substantial assets proposed from transfer from SFADCO and an income stream of profit rents. However, the level of unoccupied properties is very high. Net income before capital expenditure or capital sales is expected to decline quickly after 2014. The cash contribution forecast from the property portfolio is reliant on a continuing trend of capital asset sales to sustain a positive contribution.
“Overall, in the five years to 2017, without additional capital asset sales, the newly amalgamated property division and International Aviation Services Centre will be only marginally better than cash neutral,” the report stated.