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Dear MEP I refer to the Commission paper: "Proposal for a Directive of The European Parliament and of The Council on Airport Charges." It was sent to me, with two other airport-related papers, by Cllr Peter Coyle of Fingal who is an alternate member of the EU Committee of the Regions (COR) that is preparing comments on the draft directive. We are the Portmarnock Community Association and are opposed to the unsustainable expansion of Dublin Airport. We believe it is bad for us as a community but also bad for the country as a whole. UPROAR's website is here: www.norunway.com. Following on our appeal against a new runway, we have appealed the Fingal County Council planning decision in favour of a new terminal to An Bord Pleanála and our appeal can be read here: www.norunway.com/t2a/appt2.htm. There is one aspect of airport charges that is of particular concern to the residents of Portmarnock. That is the hidden public subsidy paid to Dublin Airport by way of a failure to charge properly for the use of the land assets it holds on behalf of taxpayers. This subsidy is largely responsible for the accelerating growth of Dublin Airport at the expense of other state airports in Ireland and the exclusion of competition from private interests who cannot compete with a subsidised Dublin Airport. Such subsidies may also be common elsewhere in Europe. If so, they contribute to the unsustainable growth of European aviation that is threatening our environment as the fastest growing contributor to climate change. We believe the draft directive is an opportunity to tackle these subsidies by making their existence transparent and by bringing the attention of the competition authorities to them, with a view to their elimination. In our opinion, Dublin Airport is heavily subsidised because of its low passenger charge. The DAA is proud of the fact that has the lowest charge in Europe at €6.34 per passenger. Is it not odd that airport services are so cheap in the "Celtic Tiger Ireland", where nothing else is? In Dublin Airport's case, this arises because the value of the public land is virtually ignored in determining the airport charge. All land (1000 hectares) is valued by the aviation regulator at under €20 million in total, when it is worth about €5 million a hectare, or €5 billion in total. The land charge is only about €0.07 (7 cents) per passenger instead of a possible €18.(1) That is a huge anti-competitive and distorting state aid. The Commission report says: "The majority of EU airports are still publicly owned and as a result the public authorities have an interest to maximize profits from airport operations." Dublin Airport is not maximising "profits" that should accrue to taxpayers (the owners of the airport) if charges were economically determined. We do not know the situation in Europe but suspect that public airports in Europe are similarly and widely subsidised, if possibly less so, given Dublin's very low charge by European standards. It is likely that regional airports are disadvantaged, as in the Irish case, if the higher value of land at major airports is improperly discounted in the determination of charges. This should be a matter of concern for our European representatives and the Commission. We have to ask to what extent publicly-owned airports in Europe are subsidised by a failure of public authorities to charge an unsubsidised market rate for the use of all airport assets. The Commission report says (page 2): "Public authorities have an interest to facilitate charges increases at airports that are in the preparatory stages to privatisation so as to generate optimal revenues from the sale of an airport to private investors." The clear implication of this statement is that publicly-owned airports are not currently charging a competitive rate and are therefore being publicly subsidised. As well as distorting competition, this subsidy is also driving the unsustainable expansion of European aviation that airport advocates are encouraging us to meet by expanded (subsidised) airport capacity. Private airports cannot survive without charging fully for the use of their assets. State airports should be required to charge an economic rent for the use of the airport site based on its full market opportunity cost. If all airports were required to charge competitively for their services, the cost of air travel would rise. This would also help to restrain the unsustainable expansion of aviation in favour of more cost effective and environmentally compatible forms of transport such as bus and rail, especially if coupled with appropriate environmental taxes to internalise the externalities of aviation fuel-burning that contribute to climate change and other environmental degradation, such as noise pollution. It is striking that the only reference to distorting competition in the draft directive is in the area of charges for security services because: "significant differences in the way security costs are passed on, or not, to airport users between one airport and another can have a distortive effect on competition." (Page 6) These differences must be minor in comparison to the differences in the treatment of the value of land in the determination of charges and the distorting impact on those charges, if the Dublin Airport case is a guide. The report refers to an ICAO document "Policies on charges for airports and air navigation services" and its recommendations about the need for the economic regulation of airports to include elements such as non-discrimination in the application of the charges, the ensuring of transparency…." Should these recommendations on non-discrimination and transparency not embrace the issue of subsidised charges at state airports? We have seen much concern at a European level about the issue of state aids to regional airports and guidelines have been issued.(2) There is little in these Guidelines dealing with land-related subsidies but there is a clear indication that a market valuation should apply where public land is provided. This is in a reference to the possible use of land sales as a means of subsidy. (See: 4.1. Financing of airport infrastructure). The Guidelines stipulate that no state aid is involved "if these operations are made at market prices, in particular where the price is the outcome of a sufficiently well-publicised, open, unconditional and non-discriminatory bidding procedure which ensures that potential applicants are treated equally." The Guidelines go on to say: "...the same kind of reasoning applies in principle, mutatis mutandis, to the sale or provision of infrastructure by public authorities." This would imply that in charging for the use of public land provided by the state, a transparent application of open market prices should also apply to the charging for use of that land, if unjustified state aids are to be avoided. If there is to be Community legislation on airport charges we should insist that these regressive, anti-competitive and environmentally damaging land subsidies be outlawed. The proposed directive on airport charges: "is limited to the definition of a minimum of rules to be respected when Member States and/or airport operators determine the levels of airport charges." The directive will set: "Basic principles with regard to airport charges that have to be respected by airport operators when applying and levying their charges." (Page 7). At the very least, the existing EU rules and guidelines governing state-aids should be applied to ensure that these hidden subsidies are removed. The draft directive should be modified to reflect this. Under "Transparency", in Article 5 of the current draft directive, the extent of an airport's land asset base, its value assumed for charge determination and its market opportunity cost, should be required items. As this directive would apply to all airports, public and private, transparency on land assets would make a significant contribution to the elimination of such regressive, competition-distorting and environmentally damaging subsidies. In the
draft, there is an overwhelming concern with terminal charges and their
differentiation, to the exclusion of other infrastructure. (Page 5 and
Article 8.) Terminals are not the only facility provided at airports
that need to be transparently addressed in a charges directive. The
word "runway" does not appear in the directive. Runways are
the key infrastructural component of an airport and consume the most
land, the asset whose real value is most ignored. As relatively simple
land-extensive structures, runways probably also have the highest and
most realisable opportunity cost of all built airport assets. (They
can be converted relatively cheaply to their best alternative use).
While, under "Transparency" in Article 5, there is a reference
to providing a list of infrastructure, there needs to be a clearer reference
to runways and the extent of their land occupation.
Matt Harley
(2) SEE:
COMMUNITY GUIDELINES ON FINANCING OF AIRPORTS AND START-UP AID TO AIRLINES
DEPARTING FROM REGIONAL AIRPORTS (2005/C 312/01) and "Guidelines
on State aid for developing regional airports" at http://europa.eu/scadplus/leg/en/lvb/l06030.htm |