Report calls for Shannon financial support

IF Shannon leaves DAA control, arrangements need to be put in place regarding funding, according to the Booz report.
“Depending on the option selected and policies on competition, there may be a need to clarify the mechanism under which Shannon Airport is part-subsidised, either through integration with adjoining industrial land or via direct financial support from the owner or from Government.
“The amount of support provided to a fully separated Shannon Airport has consequences for the other DAA airports in terms of greater competition and a challenge lies in determining the appropriate support that balances local development with national competition objectives. Given current economic conditions, Government support is highly unlikely.”
While the losses incurred at Shannon are blacked out, the report states that some policies implemented by the DAA are viewed as being detrimental to Shannon. “There are also a number of well-informed stakeholders that consider the DAA’s current approach to managing risks across its three airports is preventing Shannon from achieving the scale it needs to survive and grow. The implementation of uniform route incentive schemes is cited as a policy that significantly limits the capacity of Shannon to compete with other airports.
With regard to Aer Rianta International (ARI), it states, “ARI is viewed by many stakeholders as a legacy asset of the old Shannon Airport. As such, to these stakeholders, it represents an important negotiation point in any debt settlement between the airport and the DAA, should separation take place.”
Creating a separate entity at Shannon would need to be cautiously managed, it states. “Creating a viable airport business under separate ownership arrangements requires the new airport operator to significantly improve its financial performance and to be able to access sufficient funds to maintain and invest in the airport over the longer term. In this context, the Government may need to consider appropriate mechanisms for ongoing support. For example, integrating the airport with the adjoining industrial developments (that is, the Shannon Free Zone, supported by the inclusion of Shannon Development in the new holding company structure) and appointing a concessionaire that is experienced in developing successful aero-industrial airport businesses, could better ensure sustainability of the airport and surrounding areas.”
The report states labour costs at Shannon could be reduced. “Booz and Co consider that, in relation to Shannon Airport, labour costs could be better managed through the implementation of more flexible working arrangements that better align staffing rotations to daily and seasonal traffic flows, thus supporting a reduction in the use of casual labour and overtime arrangements. In relation to the fixed cost of 24-hour operations that cannot be avoided, the airport should look to explore ways of recovering the costs associated with its status as an emergency diversion airport. For example, this could include exploring the possibility for some revenue sharing with the Irish Aviation Authority.”
It recommends the Shannon look at new ways of generating money. “New sources of revenue should be explored, including exploitation of land banks, exploration of cargo business potential and improved leverage and expansion of the US pre-clearance facilities to include cargo. The airport lacks sufficient integration with the surrounding industrial land bank, with current management having no function in developing alternative ventures within a mixed aero-industrial complex.
“On balance, and unless there is a change in strategic direction, we think there is good reason to believe Shannon Airport will continue to require subsidies from the DAA and that traffic will not recover to previous levels, at least in the short-run.”