Irish Airport Authority merger with UK recommended

THE possibility of merging Irish Aviation Authority (IAA), which has employees at Shannon Airport as well as at Ballygirreen and Ballycasey in Clare, with the UK national air navigation service NATS should be explored.

That was the view of the Review Group on State Assets and Liabilities, which published its report last week.
It found that there are some issues with the company’s pension arrangements. “IAA’s pension cash costs have averaged 39% of employee costs, net of social welfare and pensions, over the past four years. These relatively high pension payments by the company have had little impact on IAA’s pension deficit, which has suffered in line with most other defined pension schemes over the last number of years. At the end of 2009, plan assets of €255.7 million represented just 64% of liabilities (€396.9m) compared with 56% in 2008 and 83% in 2007. A degree of volatility is down to the fact that 74% of plan assets were invested in equities at the end of 2009.”
However, it found pension-related difficulties can be overcome. “As is the case with other defined pension schemes, the deficit is significant but manageable over the medium term provided the company and staff can agree a more sustainable funding arrangement, including significantly increased employee contributions. The review group understands that the IAA and its staff have agreed new pension-funding provisions along such lines, following a recommendation by the Labour Court. It is in the company and staff’s long-term interest to implement this fully and to understand that future pension fund coverage is in both their interests. Expecting the employer to meet the bulk of the funding requirement is no longer sustainable.”
Regarding the possibility of its privatisation, the report states, “The review group is not in a position to comment conclusively as to whether the current regulatory framework is appropriate for regulating a private provider of air traffic control services in Ireland as compared with the present situation of a State entity providing these services. Assuming the issue of regulation can be dealt with-and the review group does not underestimate the challenge in this regard, there is certainly a significant commercial value in the IAA’s air traffic control services.”
It states that the industry is “moving towards ever-increasing levels of interoperability between air traffic control agencies across the EU, irrespective of ownership. One option, therefore, could be to merge UK and Irish air navigation services and release some value to the State.”
Further on it states, “The Irish and UK operations, jointly responsible for the eastern half of the main transatlantic corridor, are logical partners and already co-operate closely. The IAA has been part of a functional airspace block with the UK since 2008, and the creation of this route-free upper airspace block and night-time fuel-saving routes is already generating substantial savings. Since European policy is moving in this direction anyway, an obvious option is for the two countries to lead the Single European Sky process and merge their air navigation providers. Such a merger could include other EU member states in North-Western Europe.”
In its recommendation on the IAA, which concludes section 13 of the report, it states, “The review group recommends that the Government explore the possibility of merging Irish air navigation operations with NATS and possibly other North-West European services. In the event of a merger, the State’s share should be disposed of for the benefit of the exchequer.”