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"UPROAR's observations
on
Aviation Regulator's proposed airport charges."
60
Martello Court
Portmarnock
County Dublin
24 June 2005
Mr.
Cathal Guiomard,
Head of Economic Affairs,
Commission for Aviation Regulation,
Alexandra House,
Dublin
Dear
Mr. Guiomard
Uproar
(United Portmarnock Residents Opposing Another Runway) is a group
of residents in North County Dublin (mainly Portmarnock) opposed to
the building of the new runway at Dublin Airport. We met Commissioner
Prasifka on 14 February last and explained our position to him and
two of his colleagues. On behalf of Uproar I wish to respond to the
Commission's Draft Determination (CP2/2005) and am pleased to pass
on the following comments.
It
is stated on page 4 that the purpose of publishing a draft determination
is to allow interested parties to ascertain the impact or effect of
the proposed levels of maximum airport charges. In that regard you
will not be surprised that our comments relate to the effects on us
of the airport operations that are subject to and affected by these
charges. These effects include the prospective blighting of the lives
of 10,000 plus people by the new runway; the negative impact on our
health and on our children's education; the never-ending torture of
our community by night flights and flights deviating from their flight
paths; and road congestion resulting in millions of road users, many
of them airport users, suffering serious inconvenience due to congested
roads around Dublin airport. Our points are made under seven numbered
headings.
1. Off-peak traffic.
There
are various mentions of off-peak traffic in the draft report and on
page 54 the Commission says that it will consider the continued application
of the sub-cap on off-peak landing and take off charges. We have not
been able to find in the report where off-peak hours are defined and
are concerned that this sub-cap that is intended to make better use
of off-peak hours might encourage even more nighttime flying, which
is a serious abuse of the rights of the people of Portmarnock to a
night's rest. As you will be aware, Dublin Airport is one of the few
large airports in Europe that does not have a nighttime curfew. Might
the Commission take the opportunity to discourage nighttime operations
by clearly defining nighttime (e.g. 22:00 - 07:00) and while maintaining
the sub-cap for off-peak operation outside those hours, introduce
a penal charge which would act as a disincentive to nighttime operations
(see also below)?
2. Runway capacity.
As
noted below, the WHA consultants' report on capacity in Annex 3 estimates
that the existing 10/28 main runway will reach maximum capacity around
2013/14. We could quibble with that early date but are more concerned
that no capacity analysis was done of the proposed new runway. An
eminent airport design consultant has advised us that the new runway
will rapidly run into diminishing returns. In his opinion, pending
confirmatory analysis, the restricted manoeuvring area available airside
will severely limit the operating capacity of the new runway. It might
be limited to no more than half the capacity of the existing 10/28
runway. If this is so, it means that the investment envisaged in the
new runway will be very wasteful in comparison with the construction
of a new runway and new terminal on a greenfield and uncongested site,
i.e. a second Dublin airport. The Draft Determination says on page
8: "…the amendment has strengthened the emphasis on economic
efficiency as a principle of airport charges regulation." It
would appear to be incumbent on the Commission to analyse thoroughly
the capacity of the new runway, with particular attention given to
the effects of airside congestion, if the Commission is to ensure
that the price cap determined will enable and oblige Dublin Airport
to invest and operate in an economically efficient manner.
3.
Road traffic congestion.
On
page 20 the Commission says: "The price cap seeks to provide
the DAA with a level of revenue that is sufficient to operate and
develop airport facilities on an efficient and economic basis in line
with the reasonable requirements of current and prospective users."
"Users" are now widely defined and clearly include passengers
and business people trying to access the airport by road.
Robert
Kelly, a transport expert, has carried out on Uproar's behalf a review
of the traffic and transport impacts of the new runway proposal as
set out in the DAA's EIS. A copy of his draft report is attached.
He concludes that the traffic analysis is wrong, and that the impacts
predicted for the road network surrounding the airport do not correctly
reflect either existing observed traffic flows or likely future flows.
This arises from incorrect use of a traffic model by the DAA and means
that the road traffic impact conclusions of the EIS are misleading.
The likely result is that, with the expansion of activity proposed
by the DAA, Dublin airport will be difficult to access by road, due
to traffic and public transport congestion. Journey times to and from
the airport will be unacceptably long and unpredictable due to the
congested road network. He further concludes that proposed improvements
to the road network and the building of a metro link to the airport
will not resolve the congestion.
It
is estimated by the DAA that 38.4 million passengers will pass through
Dublin airport by 2025, 10 million of whom due to the new runway.
Therefore millions of passengers trying to access or leave the airport
will be severely inconvenienced if this runway is built. So will people
doing business at the airport. This inconvenience means that significant
economic costs will be imposed on these users. If the Commission's
brief it to ensure efficient investment and operation in line with
the requirements of users, it must consider these costs to users when
considering the DAA's capex proposals and determining the appropriate
price cap. Surely a reasonably convenient level of access would be
a "reasonable requirement" of users. Indeed, as set out
below, road congestion costs should actually be included in the price
cap and would help to bring about a better outcome for users. Whether
or not that is done, the Commission will be remiss in its duty if
the huge consequences for millions of users are ignored in its determination
of the price cap. If economic efficiency really is a principle of
airport charges regulation these costs cannot be ignored even if they
do not appear on DAA's balance sheet.
4. Runway building dates.
Is
the new runway included in those scenarios which include DAA capex,
e.g. S4?
On
page 43 it is stated: "Accordingly, the Commission seeks submissions
from all users on the DAA Capex Programme as set out in Annex 7."
The table in Annex 7, Part 3, has no title but indeed it looks like
the DAA's capex programme. Under "Stands and Airfield" for
the years 2012, 2013 and 2014 we have capex amounting to €141.65
million. A figure of €141 million labelled "runway"
in 2013 also appears in a chart entitled "10 Year Capital Plan
Elements" in Annex 7, Part 2, "Capital Investment Programme
2005-2014." This seems to confirm that the DAA's capex plan envisages
the runway being built around 2013. Page 19 of Annex 3, the WHA capacity
assessment, says: "Therefore, based on the maximum mixed operations
runway capacity of 45 aircraft movements per hour … an initial
assessment indicates that the hourly capacity of Runway 10/28 will
be reached by approximately 2013/14, at which time a second parallel
runway will be required." These dates correspond to what Minister
Ivor Callely told Uproar at a meeting on 23 May last.
As
the determination is intended to apply to the period 2006 to 2010,
it would seem that no allowance should have been made for the runway
capex in the determination, if the runway is to be built in 2012-2014.
However, on page 26 of the main text, in explaining the differences
between S4 and S1 the report says: "Removing the costs of capacity-driven
capex projects (Pier D, the second terminal and the second runway)
from the resulting €5.94 (a per passenger reduction of €0.82)
reconciles the DAA base case with the Commission's base case of €5.12."
This clearly says that the runway capex is included in S4.
On
page 14, the text says for S4: "This scenario uses the same assumptions
as S2 but the RAB is rolled forward on the basis of the full capex
programme of the DAA in the years 2006 to 2010." Which implies
that the DAA capex programme is being used unmodified. If it is the
case that the runway expenditure has been erroneously included in
the 2006-2010 determination then those caps are clearly exaggerated.
If the capex programme as outlined by DAA was modified to envisage
the second runway completed by 2010, some explanation for the conflict
should be given.
It
is stated on page 5 of the FCC Planning Officer's Report (Ref P/0436/05)
of 10 February 2005:
"It
is anticipated that the proposal will take three years to build, with
construction proposed to commence in January 2007."
Table
6.8 of the EIS also implies that the new runway will exist by 2010
even though this flatly contradicts the DAA sources above which have
it being built around 2013.
Does
the Commission assume the runway will be built by 2010 and if so,
why does that date contradict some of the documents supplied by the
DAA, which date construction to around 2013? The confusion obviously
started with the DAA but how can this conflict in dates be resolved
for the purposes of this determination? In this regard I note that
on page 42 it is stated: "An assessment as to the required CAPEX
programme and its efficiency is, therefore, a central element of the
economic regulation of airports. Consequently, it is necessary that
a regulated firm's investment plans be carefully scrutinised as to
their timing and efficiency." If this scrutinising was done,
it has not been made clear in the Draft Determination what the Commission
believes the timing of the runway investment to be.
If
an allowance for a new runway is included prematurely and a price
cap is set accordingly, it will allow the building of a new runway
earlier than needed. In fact, Uproar believes it should never be built
and if traffic looks like growing to a point where a new runway is
needed, it should probably be built on a green-field site west or
southwest of Dublin. Ryanair is also of the opinion that this runway
is not needed and formally advised the County Manager of FCC to that
effect in a letter dated 9 March 2005, a copy of which we have sent
to the Commission.
5. Scenarios and actual developments.
It
is not entirely clear if the Commission intends to choose one of the
seven scenarios analysed when it makes its final determination or
if the seven scenarios or a subset of them as finally determined will
constitute a set of determinations which will apply in the light of
developments at Dublin Airport. Presumably, in this case, the scenario
that most closely reflects the real situation at a given time would
apply. But if this is so, it would appear that the determination is
reactive rather than proactive. Rather than using the determination
to direct Dublin Airport to take an efficient path, Dublin Airport
may be tempted to take the path that would maximize revenues to finance
unneeded expansion. On the other hand, if one scenario is chosen to
set the cap, what will happen if the outcome in the 2006-2010 period
does not correspond to the assumptions made for that scenario? For
example, what will happen if S4 is chosen to set the cap but the runway
is not started or built by 2010?
6. Opex and jobs.
On
page 20 it is stated that in determining operating expenses (opex):
"The Commission was required, in its first Determination, to
project opex and commercial revenues using a simplistic assumption
of a one-to-one linear relationship with passenger traffic."
It is also said that the projections were drawn in part from the DAA's
own projections. As the Commission will be aware, in Chapter 6 of
the DAA's EIS, entitled "Employment and Economics", the
DAA projected that without a new runway, jobs at the airport would
actually decline by 2025. This comes about from a serious misuse of
out-of-date ESRI projections for labour productivity growth. If the
runway is built, jobs are projected by DAA to increase somewhat by
2025.
As
the DAA's projections did not assume a simple linear relationship
between passenger numbers and opex, because of its allowance for (exaggerated)
labour productivity growth, it appears that the Commission is not
following the DAA's EIS projections. It is therefore not clear what
assumption the Commission made. If it did follow strictly the DAA's
method as presented in the EIS, then payroll costs are seriously underestimated
because the DAA's job projections are grossly underestimated. See
the attached Word file entitled "Jobs modified" where this
is explained. Presumably the Commission only projected opex to 2010.
In the light of item 4 above about the confusion of the timing of
the building of the new runway, it is not at all clear what DAA job
projection figures were used and how reliable they are.
7.
Economic efficiency.
On
page 8 it is stated that the Commission is permitted to regulate airport
charges with reference to productive, dynamic and allocative efficiency.
Welfare economics is the branch of economics concerned with the application
of economics to public policy questions. Charges at Dublin Airport
are clearly a public policy issue. Therefore the principles of welfare
economics should apply to the determination of airport charges. Welfare
economics requires that social costs and benefits be considered in
determining economic efficiency in the widest public policy sense.
As such, the negative externalities generated by the operation of
Dublin Airport on populations living under or near flight paths and
on commuters and businesses forced to use congested roads should be
included in the price cap, whether they be airport users or not. This
welfare approach is also required under the Guidelines for the Appraisal
and Management of Capital Expenditure Proposals in the Public Sector,
published by the Department of Finance in February 2005.
If
a welfare economic approach were taken by the Commission, a welfare
maximising optimum outcome could be brought about by a regime of charges,
tailored to reflect full social costs and benefits. All aircraft would
pay the full social costs of their operation. Noisier and more polluting
aircraft would pay more. As suggested above, nighttime flying and
deviating from flight paths could be penalised and discouraged. If
charges would be expected to rise as road congestion due to airport
operations increased, serious attention would be given early to expanding
airport capacity at a green-field site with uncongested access and
good transport links, away from established population centres.
Does
the Commission believe this to be an appropriate way forward?
We
would welcome your observations on our comments at your earliest convenience.
We
would also be happy to expand on our comments should you believe that
to be appropriate.
Yours
sincerely on behalf of Uproar,
Matthew
Harley