The Brexit Challenge for Aviation in Ireland - Robert Troy T.D. Spokesperson on Transport, Tourism and Sport - Fianna Fail
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The Brexit Challenge for Aviation in Ireland Spokesperson on Transport, Tourism and Sport Robert Troy T.D.
1|Brexit Challenge for Irish Aviation The Brexit Challenge for Aviation in Ireland – Fianna Fáil Policy Paper Foreword Brexit will have very significant consequences for Ireland and the Irish economy, affecting many sectors in particular, from food production, tourism and the aviation sector. The aviation sector is critically important to a small open economy like Ireland. As an island nation, we are strongly dependent on a competitive, safe and efficient aviation industry for economic success and prosperity. Given the centrality of the sector to our economy, we need a national mitigation plan to reduce the impact of Brexit and global uncertainty on our aviation, freight and transport sectors. Unfortunately, the current government has not provided any mitigation plan to reassure the sector that there is a strategy in place for dealing with the fallout from Brexit. This policy document, which I have consulted upon widely with stakeholders from across the aviation sector, sketches out a new overarching transport and aviation policy that seeks to do just that. It is no exaggeration to say that the future of the Ireland’s aviation sector hinges on the retention of existing rights to UK Aerospace. If a favourable deal cannot be struck with the UK government, the consequences for us as an island nation will be very severe. It is discouraging that the industry and the public have heard next to nothing from the Government or Department officials on the threat to Irish aviation from Brexit. So far there has been very little engagement with other EU countries on the special importance of aviation access for Irish citizens and for business. It is essential that our EU partners understand that a bad aviation deal for the UK is bad for Ireland, which will be more affected than any other EU country. When it comes to Ireland’s priorities, it is essential that a good outcome for aviation is at the forefront of the negotiations. As a State we have to be more vocal within the EU on our priorities. Getting the right deal on aviation is in our vital national interest. Ireland cannot afford to be quiet on this and to simply go along with the tide any longer. Robert Troy, T.D.
2|Brexit Challenge for Irish Aviation Contents Foreword 1 Executive Summary: 3 Introduction 4 1. Secure the Right Aviation Brexit Result 6 2. Maximise Sustainable Employment in the Aviation Sector 8 3. Provide Airport Capacity and Infrastructure 8 Dublin Airport 8 Shannon Airport and International Aviation Services Centre 12 Cork Airport 13 Regional Airports (Waterford, Ireland West Knock Airport, Donegal, Kerry) 13 4. Facilitate Increased Connectivity 14 5. Facilitate Airline Growth 15 6. Ownership and Control. 17 7. Develop Aviation ‘Tourism, Heritage, Education and Promotion’ 17 8. Develop Aviation Training and Aerospace 18 9. Support the Air Finance and Leasing Sector 19 10. Maintain the Highest Safety and Security Standards 20 11. New National Aviation Policy 20 12. Aircraft maintenance (MRO) and other support services 21 13. Aviation & the Environment 22
3|Brexit Challenge for Irish Aviation Executive Summary ✈ Securing the Right Brexit Deal: As an island nation and the only EU member not connected by land to our EU partners it is essential that our unique positon is taken into consideration when negotiating any new aviation deal. Ireland cannot be left isolated on the periphery of Europe as a result of the Brexit result ✈ Maintaining Status Quo: Ireland must work closely with its European partners especially Spain, Italy, Portugal, Greece and Central European countries to ensure that the Brexit agreement with regard to aviation retains as much of the status quo as possible ✈ Early Agreement on Aviation: The Government should advocate at EU level for an early aviation agreement to be reached between the EU and UK at least 1-year ahead of the official Brexit deadline of March 2019 ✈ Fully Liberalised Skies: The Irish aim in the Brexit negotiations should be to maintain a fully liberalised European Open Sky with the UK and European airlines continuing to have unrestricted access to the totality of markets affected ✈ Irish Airports Capacity and Infrastructure Quality: The focus of Transport Policy should be to enhance Airport Capacity and Infrastructure by fast-tracking second runway at Dublin Airport, supporting measures which facilitate the development of Shannon Airport and Cork Airport and continuing operational and capital funding to all regional airports ✈ OpenSkies Rights and Connectivity: Increased Connectivity to the EU and third countries will be essential by securing OpenSkies frameworks (including Fifth Freedom rights) with as many countries as possible ✈ Outdated Airline Ownership Rules: The State should advocate for changes to European legislation with regard to ownership and control of airlines ✈ Recognise Irish Aviation Heritage: Government should Develop Aviation Tourism, Heritage, Education and Promotion showcase for tourism and to encourage future generations into aviation ✈ New National Aviation Policy: Redevelop outdated National Aviation Policy to take account of Brexit and other more recent developments ✈ Promote Our Safety Record: Development Authorities need to do more to promote Ireland’s strong safety regulation reputation to prospective aviation partners ✈ State Role in Attracting Talent: Greater ‘social conditions’ are required for attracting and maintaining international mobile executives in the sector, especially to maintain cutting edge of Ireland’s Aviation Leasing sector ✈ Development MRO Industry: A new Irish Aviation Policy should develop a growth strategy for the aircraft maintenance, repair and overhaul as a key industrial sector and create opportunities to enable Irish MRO companies to compete globally.
4|Brexit Challenge for Irish Aviation Introduction Since 1992, the liberalisation of the European aviation market has led to an explosion of growth across the industry, including the success of low cost airlines which has been of enormous benefit to consumers. Prior to the establishment of the Single Aviation Market in 1992, there were just fewer than 700 city-pair routes across the EU. By the end of 2015, this had risen to over 3,200. This liberalisation has also facilitated the rise of Ireland’s Global Aviation Leasing Sector. With assets of an estimated €113 billion, 50 per cent of the world’s leased commercial aircraft are managed from here, with an Irish-leased aircraft taking-off every two seconds somewhere across the globe. Certain Brexit scenarios could endanger this global industry. The ‘Hard Brexit’ scenario will be if the UK government decides to exit the EU’s Open Skies Agreement, which enables EU carriers to operate freely to and from UK airports. A threat also comes from other EU countries responding in a retaliatory way to Brexit and there is huge potential for diverging Member State interests in the Brexit aviation negotiation. Irish Government negotiators have to be upfront and clear, that Ireland’s interest is in maintaining a fully liberalised aviation market between the EU and UK. Given the extent of business, leisure and tourism interdependencies between Ireland and the UK we could not tolerate a restrictive air transport agreement. Air Service Agreements provide for certain access rights. For example, “7th Freedom” rights allow air carriers registered in one EU Member State to operate freely between two other EU Member States; this has enabled Ryanair and Aer Lingus to grow dramatically throughout the EU over the last 20 to 30 years. Similarly, “9th Freedom” rights allow an air carriers registered in one Member State to operate domestically within another Member State – for example Ryanair accounts for over 6% of the total domestic traffic within the UK. The UK currently has 155 Air Service Agreements, 42 of which are through its membership of the EU. Once the UK leaves the EU, a new Air Service Agreement will have to be put in place between the EU- 27 and the UK which could affect any one of these rights and constrain the ability to fly easily between Ireland and the UK. So far, the signs are not good with warnings from key players in the EU the UK's decision to exit the EU will have consequences and implications for aviation. Speaking at an event on 8 February, Director general for mobility and transport, Henrik Hololei, said that while there is "nothing I
5|Brexit Challenge for Irish Aviation would love more than if our aviation relations would continue on the same basis as today [after Brexit], let's not also mislead ourselves into thinking it would be the case". Air connectivity between Ireland and the UK is hugely important to our economy. In excess of 11m passengers (>110,000 aircraft movements) flow annually between Ireland and the UK. The UK market accounts for over 60 percent of passengers from Shannon, Kerry and Knock and 40 percent from Dublin. 44 percent of all business trips taken from Ireland to the EU are to the UK. It is a crucial enabler for the Irish economy. If existing air traffic rights are not retained in a replacement Air Service Agreement the economic consequences for Ireland will be dire. A bad aviation deal for the UK is bad for Ireland, which will be more affected than any other EU country. When it comes to Ireland’s priorities, it is vitally important that a good outcome for aviation is at the forefront of the negotiations. There is such interconnectivity that the common travel area has been in place for many decades. The global aviation industry is set to double from 3.5 billion passengers annually in 2016 to around 7 billion by approximately 2036. Likewise, the world’s aircraft fleet will double from 22,000 aircraft to 44,000 aircraft and therefore hundreds of thousands of new pilots and aircraft maintenance engineers will be required. Much of the expansion is expected to be in China, India and other Developing Economies such as Indonesia and Brazil. At the same time, air travel in Europe will also continue to grow year by year. Building on Ireland’s strong aviation skill set and capability, Ireland has the capacity to exploit this growth and prosper. To achieve this Ireland must create an environment in which the industry can maximise its potential for the benefit of the wider economy. Without the right measures and business environment, Ireland will find it hard to compete on the global aviation stage in the years ahead. We are facing a period of unprecedented uncertainty because of Brexit, which has the potential to create significant problems for Irish airlines and to constrain demand for transport between Ireland and the UK. The air finance industry is facing stiffer and stiffer competition from the Far East. Some international stakeholders are already pressing for more protectionist aviation policies which will constrain Ireland’s capability to further expand its aviation industry. The current Government has not realised the risks to aviation and its impact on the wider economy, which will be brought about by Brexit and our need to take urgent actions on an EU level.
6|Brexit Challenge for Irish Aviation This document sets out 13 areas where we believe the Irish Government has to set out a clear plan for the Brexit negotiations with the UK as well as to bolster the industry for the aftermath of Brexit. These are areas where a strategy is needed which recognise the unique threats as well as opportunities arising from Brexit. 1. Secure the Right Aviation Brexit Result The effects of Brexit on aviation may be far reaching. The air service agreements, which underpin travel to and from the UK, lapse with the UK’s departure from the EU and will need to be renegotiated. There is a risk that Brexit will reduce current levels of air connectivity between the UK and Ireland, as well as the UK with all other EU Member States. Consequently, Brexit puts at risk the economic benefits that Ireland and its fellow EU Member States derive from air connectivity with the UK if suitable arrangements cannot be put in place to allow air services to continue. The combined economic impact on trade, investment and tourism from lost air connectivity could imply a reduction in Ireland’s GDP of up to 1.9% and approximately 52,000 jobs1. In relative terms, Ireland would be among the most affected countries in the EU27. The UK is by far the most important origin and destination for international passengers to and from Ireland and the Dublin/London route is the second busiest city-pair in the world. In excess of 11m passengers and 110,000 aircraft movements flow annually between Ireland and the UK. Passengers to the UK represent 43% of passengers from Ireland travelling within the EU. Crucially, 63% of trips to the UK by air would not take place using alternative modes of transport. If existing traffic rights are not retained, and particularly given the close links between Ireland and the UK, the economic consequences for Irish business and tourism will be substantial. Brexit also threatens the passenger volumes of Irish airlines within Europe (in addition to traffic to/from Ireland). For example Ryanair currently carries 40m passengers per annum between the UK and other European countries, while Aer Lingus is an integral part of the IAG Group, whose biggest airline, BA, is a UK carrier. In terms of the wider impact on the aviation sector, the overall economic effect of Brexit on the UK and European economies is likely to be negative with a consequential downward pressure on the overall level of aviation activity. However, since Ireland is a global player in the aviation market, the Brexit focus should be broader than simply Irish-UK traffic rights. 1 Frontier Economics, 2016, Brexit Pathways: Insights from Selected Industries.
7|Brexit Challenge for Irish Aviation There is a potential for diverging Member State interests in Brexit aviation negotiation. Ireland’s interest is in maintaining a fully liberalised aviation market between the EU and the UK follows from the substantial extent of the Ireland-UK business, leisure and tourism inter-dependencies. States that are likely to share a common view in maintaining full liberalisation include Spain, Italy, Portugal, Greece and Central European countries that are seeking to develop their tourism industry. In a “Hard Brexit” scenario for aviation, i.e. one that constrains travel to/from the UK, Ireland will be disproportionally impacted in relation to a negative impact on trade and tourism. All sectors of the economy are dependent on ensuring that the UK/EU Brexit divorce retains as much of the aviation agreements (status quo) as possible as failure to do so will constrain or reduce tourism and trade between Ireland and the UK. It will also impact on the rights of Irish airlines to operate freely from the UK to/from Europe as it does today. Airlines sell their tickets one year in advance and at the Public Hearing held on the 11th July in the European Parliament Transport Committee discussing the impact of Brexit, Ryanair declared that they will start pulling capacity out of the UK from September 2018 onwards if there is no clarity on the aviation deal. Other stakeholders also at the Public Hearing (including the CEO’s of Dublin Airport, IAG and Heathrow) called for aviation to be prioritised in order for the airline industry to adjust and make commercial decisions a year ahead of the official deadline for Brexit in March 2019. To mitigate these risks, Ireland must: ✈ Work closely with its European partners, especially Spain, Italy, Portugal, Greece and Central European countries, to ensure that the Brexit agreement between the EU and the UK with regard to aviation is based on a policy of retaining as much of the status quo as possible. ✈ Call for an early aviation agreement be reached between the EU and UK at least 1-year ahead of the official Brexit deadline of March 2019. ✈ Advocate that the aim of the Brexit negotiations should be to maintain the fully liberalised European Open Sky, with the UK and European airlines continuing to have unrestricted access to the totality of markets affected: UK-EU, intra-UK, intra-EU (including within individual countries) EU to third country, and UK to third country. ✈ Advocate that EU and UK nationals should be treated equally in the context of airline ownership restrictions (which is a significant issue for both Ryanair and Aer Lingus). ✈ Seek to play a leading role as part of the EU’s Brexit negotiation team with regard to aviation related negotiations.
8|Brexit Challenge for Irish Aviation 2. Maximise Sustainable Employment in the Aviation Sector The Irish aviation sector includes Irish based airlines responsible for the transportation of people and freight and the supporting ground based infrastructure which include airports, airport facilities and other essential services. The aviation sector’s contribution to the Irish economy both in terms of employment and economic output is through a number of distinct recognised channels including; Direct; Indirect; Induced; and Catalytic. Direct channel relates to the output and employment of the firms within the aviation sector while indirect represents the output and employment of the supply chain to the Irish aviation sector. Induced is the employment and spending of those employed both directly and indirectly in the aviation sector and Catalytic refers to wider benefits associated with aviation sector i.e. spend of foreign visitors and level of trade enabled by air freight transportation The mitigating actions identified within this policy paper are intended to support this key objective. 3. Provide Airport Capacity and Infrastructure Efficient airport capacity is the primary enabler to facilitate air traffic connectivity and therefore wider economic expansion. The plight of the UK with regard to a lack of airport capacity in the South East is well documented and the UK is many years away from building the single additional runway at Heathrow (2030 at the earliest). This is an opportunity for Ireland. Ireland has three State Airports at Dublin, Shannon and Cork, as well as four regional airports at Kerry, Donegal, Ireland West Knock and Waterford. All of these airports have gone through significant changes since the economic downturn in 2008. Dublin has recovered its lost traffic and in 2016 carried over 27.9m passengers. Cork and Shannon grew in 2016 but both airports are operating at approximately 40% below their previous peak levels. Dublin Airport Dublin Airport is of critical importance to the national economy (contributing over 4% of GDP and over 100,000 jobs). Ensuring the continued ability of Dublin Airport to function as a centre of economic growth is crucial.
9|Brexit Challenge for Irish Aviation In 2015, the DAA announced its plans to build the new parallel runway by Q1 2020 and it commenced consultation will residents in 2016. Dublin Airport has experienced rapid growth in recent years as the economy rebounded and is now running close to its maximum capacity. The latest information available indicates that the new runway will not be available until 2021 and therefore over the next number of years passengers can expect delays, especially during the peak summer period; all due to the lack of available capacity. The new runway should be provided at the earliest opportunity and with the lowest cost feasible based at commercially available rates, with the lowest burden on airport users. The DAA is seeking the removal of two conditions of the current permission, which places operating restrictions on the airport once the new runway opens (i.e. airport restricted to 65 movements between 23:00 to 07:00 and a ban on flights on the new runway during those same hours). In fact, 06:00 to 07:00 is the busiest time of day for departures at Dublin Airport and is the key window for the two primary air carriers, Aer Lingus and Ryanair. Currently, approximately 100 aircraft operate during this period 23:00 to 07:00. Therefore, the concept of reducing capacity to 65 movements once the second runway is available is illogical as this will reduce the number of passengers by 3 million, i.e. larger than both Shannon and Cork’s total passenger number per annum. Consideration should be given to the fact that Dublin Airport is not a direct comparator with any other major EU airport at a capital city. Dublin Airport has a number of competitive disadvantages; it is one hour behind Central European Time; there is no other way to reach mainland Europe except via air travel; and the travel time to reach continental (core) Europe takes at least two hours. These factors have an important bearing on the demand for Irish business passengers to avail of flights prior to 07:00. Other airports in core Europe do not face with such issues. It have been almost a full year since the Minister for Transport, Tourism and Sport announced (in September 2016) details of the new Airport Noise Regulatory Framework, including the manner in which EU Regulation 598/2014 is to be implemented in Ireland (with respect to Dublin Airport). His announcement included the designation of the IAA, by way of a Statutory Instrument (SI), as the independent competent authority to oversee the delivery of the new approach to airport noise management (exclusively) with the requisite powers to implement the regulation in Ireland. The Minister’s announcement confirmed the requirement for the IAA to undertake a review of the noise situation at Dublin Airport immediately following commencement of the legislation. As the Competent Authority for airport noise, the IAA will be legally responsible for ensuring that the principles contained within the ICAO Balanced Approach for Airport Noise are applied and the IAA will
10 | B r e x i t C h a l l e n g e f o r I r i s h A v i a t i o n be responsible for determining if noise-related operating restrictions are necessary. The Minister envisaged that the designation of the IAA would be completed by the end of 2016 but this has slipped into 2017 and it is not clear when the legislation will come into force. Furthermore, primary legislation is critically necessary to support the Ministerial SI. Thanks to advancements in aircraft engine technology new aircraft generate dramatically less noise than previous models. For example, Ryanair’s current Boeing 737-800 aircraft generates 75% less noise than its previous Boeing 737-200 aircraft. This figure rises to 90% when compared to its new Boeing 737 MAX (which commences delivery in 2018). Notwithstanding this economic disadvantage, the local community must not be plagued by night time noise pollution from airport operations. Therefore, in its designation as the Competent Authority, the IAA must ensure that it consults with the local community and ensure that the Balanced Approach is applied which meets the needs of the local community and airport business demands. In late 2016 DAA commenced enabling works and the full civil works are expected to commence in 2018. At the same time, the IAA’s Air Traffic Control service provider has commenced work on the construction of a new Air Traffic Visual Control Tower to enable safe parallel runway operations at a major international airport; this is required to be ready by the in Q1 2020, well ahead of the commissioning of the new parallel runway. As it stands, the State is already facing three years of economic constraint due to the delayed development of the new runway. Recent media reports have indicated that the construction of the new runway is at risk of delay by up to one year as a result of the unnecessary delay in associated legislation. This is an unacceptable situation and will result in further constraints on national economic growth. To ensure that Dublin Airport can continue to expand and benefit the wider economy that national mitigation plan should: ✈ Recognise the need for Dublin Airport infrastructure investment to support the growth of both airline operating business models (Point to Point and Hub carrier) ✈ Promote the development of Dublin airport as an international Hub with the right enabling transfer infrastructure and capability ✈ Recognise that Dublin Airport currently represents an infrastructural constraint on aviation sector and that it is critical to ensure optimisation of existing runway infrastructure and facilities and pursue short term investment opportunities in advance of 3rd runway being built is achieved
11 | B r e x i t C h a l l e n g e f o r I r i s h A v i a t i o n ✈ Commit to no further delay to the crucial national infrastructure projects to construct a new parallel runway and the necessary visual control tower; DAA and IAA Air Traffic Control should complete their projects at the earliest opportunity. ✈ Outline legislation to transpose EU Regulation 598/2014 with regard to Airport Noise should be implemented as soon as possible, including the designation of the IAA as the exclusive Competent Authority for Airport Noise, and essential primary legislation. The rights of local communities and airport users should be respected through the application of the ICAO balanced approach for noise. ✈ Ensure operating restrictions imposed on Dublin Airport concerning the new runway should be reviewed by the IAA in accordance with its legal responsibility to ensure that the Balanced Approach is applied at Dublin Airport to meet the needs of the local community and airport business demands ✈ Designate Dublin Airport in the National Planning Framework as an economic zone ✈ Seek to further develop its hub capability to take advantage of Brexit and the slower provision of runway capacity in the south east of the UK National Airport Capacity Review In Q4 2016, the Minister for Transport, Tourism and Sport announced plans for the long-term development of Dublin, Cork and Shannon airports to 2050. In June 2017, the Government announced that Oxford Economics and Cambridge Economics Policy Associates (CEPA) had been selected as the preferred tenderer to undertake the Review of the Capacity Needs for Ireland's State Airports. This brings forward by three years a planned action from the National Aviation Policy to review airport capacity. In the case of Dublin Airport only, the review is expected to recommend the timeframe for the development of new terminal capacity – Terminal 3 – and its appropriate design and optimum location, as well as the relative advantages and disadvantages of the funding and operation of Terminal 3 by the existing airport operator in comparison to being operated on an independent basis. Parallel to this consultation, it would be important to consider Dublin Airport’s new Masterplan and assess what policy support would be required to help deliver it.
12 | B r e x i t C h a l l e n g e f o r I r i s h A v i a t i o n ✈ The capacity review for the three State airports should be completed in full by the end of 2017 ✈ The results of the capacity review should be subject to immediate consultation with stakeholders. Review of Airport Charges Economic Regulation (Dublin Airport) Economic regulation of airport charges (i.e. passenger service charges) is based on economic determinations by the Commission for Aviation Regulation (CAR). Over the years, the existing process has been fraught with legal challenges and Ministerial Directions have been provided for all four previous CAR price determinations. A review was carried out in 2015/16 by independent consultants, Indecon, who completed their report in March 2016 and this was published by the Department in August 2016. The Government policy position for this area was due to be published by the end of 2016. It is understood that in July 2017 a draft policy on the future airport charges framework was issued to key stakeholders but many of its findings were not been supported. It is still not clear when this policy position will be published. This is not acceptable. A number of important changes appear necessary. The new regime should incentivise prudent cost- efficient investment. There should also be a genuinely independent appeals mechanism, which can issue binding findings to CAR that cannot be overruled by Ministerial directions. Furthermore, the regulatory regime should provide flexibility for the price cap determination to be suspended if Dublin Airport reaches commercial agreement with customers accounting for over 75% of total passenger volume. This mechanism reflects the arrangements in place in the UK (for Gatwick and Stansted) and was unanimously recommended by the members of the National Civil Aviation Development Forum, including Ryanair, Aer Lingus, Dublin Airport and CAR. ✈ The Government policy position for airport charges should be published by the end of Q3 2017. ✈ The future system for airport charges should ensure that it sufficiently meets the needs of both the airport operating and its customer airlines. Shannon Airport and International Aviation Services Centre Since its separation from the DAA, Shannon Airport (as part of the Shannon Group) has struggled to grow passenger numbers. 2016 delivered modest growth (less than 4%) but the airport is still operating approximately 40% below its peak in 2007.
13 | B r e x i t C h a l l e n g e f o r I r i s h A v i a t i o n However the International Aviation Services Centre (as part of the Shannon Group) has tapped into its land bank and favourable taxation terms to offer the airport as a ‘one stop shop’ for other aviation services such as a centre for the MRO industry or the General Aviation corporate jet industry which bodes well for the future development of this industry in Shannon. ✈ Government should continue to support measures which facilitate the development of Shannon Airport and the International Aviation Services Centre (IASC) ✈ A review on the progress of IASC should be conducted in the second half of 2017 and key findings implemented ✈ Additional promotion of Shannon to Air Carriers operating new and highly efficient narrow-body aircraft types, such as Boeing 737MAX and Airbus A320 Neo aircraft should be done as these aircraft types can be economically viable to support thinner point-to-point routes. Cork Airport Although the Cork Airport grew in 2016 and is expected to grow further in 2017, passenger numbers are still running at approximately 40% below levels last achieved in 2007 (when there were over 1 million domestic passengers). Cork is suffering from similar demand issues as Shannon, e.g. motorway access to Dublin. Following its approval in December 2016, Norwegian Air International commenced operations to the east coast of the USA in July 2017, which will bring about the first direct scheduled service to the USA from Cork. ✈ Cork Airport should remain part of the DAA group however the opportunity for Cork to price independently of Dublin should be investigated ✈ A further Transatlantic connection between Cork and New York should be actively sought and encouraged ✈ Cork should seek to expand its European network Regional Airports (Waterford, Ireland West Knock Airport, Donegal, Kerry) Regional airports provide crucial connectivity both domestically and internationally. The OpEx and CapEx programme to support regional airports is due to discontinue in the years ahead. This is likely to have a detrimental impact on the economic viability to these airports.
14 | B r e x i t C h a l l e n g e f o r I r i s h A v i a t i o n Demand from Knock is highest (circa 600,000 passengers) but much lower at the other airports and Waterford now has no scheduled services at all. To ensure regional connectivity is maintained: ✈ All regional airports should continue to receive operational and capital funding from the State. ✈ Kerry and Donegal should continue to receive State support via PSO services for routes connecting with Dublin. ✈ The State should reduce the regulatory burden on smaller airports by adopting approaches similar to those applied in other European member States and in the UK. ✈ All Regional Airports with scheduled air services should be invited to produce an integrated, cost effective strategy on the future viability and growth together with the economic regional contribution. This strategy should then be integrated into an overall economic regional development plan. ✈ The Aran Islands and other island PSO air and ferry services should come under the remit of the Department of Transport. 4. Facilitate Increased Connectivity As an island on the periphery of Europe, Ireland is deeply dependant on securing and growing routes to/from Ireland. Air route connectivity leads to more trade and tourism. The greatest potential to generate additional inbound tourism in Ireland exists in Europe. Beyond Europe, the international aviation route system is based on bilateral agreements. Ireland continues to lag in the revision and development of new Air Service agreements in particular with emerging markets which impede ability to establish market presence in new markets. It is key that the DTTAS pro-actively develop and pursue a clear bilateral air services agreement agenda. Fifth Freedom rights are generally supported by all stakeholders as they lead to more routes and therefore more tourism and trade. However, provision of Fifth Freedom rights should not be at the expense of sustainable growth of the Irish Aviation sector, particularly when airport infrastructure is currently constrained. When an Irish Airline establishes a new route this creates Irish employment within aviation sector within Ireland.
15 | B r e x i t C h a l l e n g e f o r I r i s h A v i a t i o n Fifth freedom rights should only be considered on a case by case basis and on the principle that similar benefit must be achieved by the Irish Aviation sector before granting of Fifth freedom rights to foreign carriers. Europe is taking the lead role in negotiating bilateral agreements with third countries, especially in Asia. It is essential that Ireland lobby the EU to secure OpenSkies air transport agreements (which include Fifth Freedom rights) with as many countries as possible. Over the last number of years, Dublin Airport has greatly expanded the volume of connecting traffic with over 1 million passengers connecting through the airport in 2016, mainly with Aer Lingus/Aer Lingus Regional (operated by Stobart). A hard Brexit could cause problems with passenger flows potentially being restricted for traffic to/from the UK and Ireland. Dublin and Shannon have exploited the advantage of the US CBP system, allowing passengers to clear US customs from Ireland and be treated as US domestic passengers. Approximately ten other EU airports are seeking this capability at present, which will limit this unique selling point in the future. To increase connectivity, the National Mitigation Plan should: ✈ Incentivise short- and medium-haul connectivity ✈ Work with our partners in the EU to secure OpenSkies frameworks (including Fifth Freedom rights on a case by case basis) with as many countries as possible ✈ Develop further the amendments of existing Air Service agreements in particular in emerging markets to make provision for airline code-sharing traffic rights including third country rights ✈ Promote advance publication of the Department’s bilateral Air service agenda to facilitate airline planning process ✈ Ensure that the Brexit agreement between the UK and the EU with regard to aviation provides for the continuation of maximising Dublin Airport as a hub airport 5. Facilitate Airline Growth Provided airport capacity is available at an efficient price level, airlines will seek to exploit market demands and commercial potential. Airlines are one of the driving forces in recent years behind the huge tourism boom in Ireland. Measures and conditions need to be provided which encourage airlines
16 | B r e x i t C h a l l e n g e f o r I r i s h A v i a t i o n to enter the Irish market and/or expand their capacity on existing routes. Direct access or connectivity of Ireland with other world cities and market around the word is determined by the Irish aviation networks. Connectivity reflects key demand points and economic importance can determine range, frequency and capacity available through respective airline networks. City pair connections exist on a point to point basis (direct access) where passenger demand justifies airline investment. However, many city-pair connections from Ireland to overseas markets can only be served by airlines aggregating traffic flows from a number of origins through a Hub airport in order to generate a sufficiently dense flow of passenger demand. This hub and spoke or network view is what has facilitated the development growth of Middle Eastern Hubs over the last decade and more. Given size of Irish market alone, there is clear justification for promoting Dublin as a Hub airport with supporting infrastructure investment as this will enable Ireland benefit from a greater range of direct access points supported by the flow of network traffic that would otherwise be unsustainable on a point to point basis. After a long three year battle, NAI finally secured its OpenSkies approval from the US Department of Transportation in December 2016 and commenced new routes from Cork, Shannon and Dublin to the Boston and New York regions in 2017. In July 2017 Qatar became the third Middle-Eastern airline to serve Dublin (Etihad started in 2007, followed by Emirates). These airlines have revolutionised the way many people travel to the Far East and Australasia, i.e. avoid the need to transit via a European hubs such as Heathrow. Ireland has the only European bases for Customs and Border Protection, which allow pre-cleared passengers departing from Dublin and Shannon airports to arrive in the US as domestic passengers. This should be exploited to the maximum possible extent. Airlines have pointed to the Air Travel Tax introduced in 2009 as a contributing factor to the drop-off in traffic at Irish airports. Whilst the Air Travel Tax has been set to zero, it remains in place and could be reactivated in the future. To encourage airline expansion the National Mitigation Plan should: ✈ Promote Dublin Airport HUB potential through appropriate infrastructure investment to ensure Ireland can compete effectively with other global Hub and spoke operating models ✈ Ensure all stakeholders, including the State, continue to support the continued expansion of Ryanair, Aer Lingus, Norwegian Air International and any other airline wishing to enter the Irish market and/or increase capacity
17 | B r e x i t C h a l l e n g e f o r I r i s h A v i a t i o n ✈ Direct connectivity between Ireland and China, India and/or other Developing Economics such as Indonesia and Brazil should be targeted; these are the business and in-bound tourism markets of the future and their potential is vast ✈ Make the process for obtaining visas for visitors to Ireland from outside the EU easier ✈ Commit to removing Air Travel Tax mechanism 6. Ownership and Control The EU’s Single Market for aviation ensures that there are no limits on investment by EU investors in EU airlines. However, under EU Regulation 1008/2008, restrictions and obstacles still exist on investment by non-EU investors which is capped at 49.9%. In the context of Brexit, relaxation of the ownership criterion would provide a ready mechanism to ensure market access, and would avoid undesirable Brexit consequences such as Ryanair or IAG (the Spain based parent company of Aer Lingus) having to restrict the extent of its UK shareholdings in order to meet the 50.1% requirement. ✈ The State should advocate for changes to European legislation with regard to ownership and control. An initial step should be to relax ownership restrictions on a gradual basis by providing the feasibility for non-EU investors to increase their stake to 60% during the first 3 years. 7. Develop Aviation ‘Tourism, Heritage, Education and Promotion Unlike the UK and other EU Member States, there is no centre to showcase the Irish civil aviation history or aviation heritage. This is an area of great tourism and educational potential. There is important work already underway in this area. The Irish Historic Flight Foundation (IHFF) was established by the Irish aviation industry in 2015 to celebrate Ireland’s rich aviation heritage. The IHFF recognises the pivotal role aviation plays in Ireland which, as a peripheral island nation, is heavily reliant upon its aviation sector for continued socio economic development. The Irish aviation sector provides global connectivity for Irish citizens and plays a key role in facilitating exports and attracting foreign direct investment.
18 | B r e x i t C h a l l e n g e f o r I r i s h A v i a t i o n It is envisaged that the facility will be on the scale of the ‘Titanic Belfast’ destination and therefore has significant in-bound tourism potential. Once a suitable site is made available the aviation industry should be encouraged to support and fund this initiative. Aside from the work of the IHFF, air shows are a unique way of connecting people with the aviation sector and create an interest for future generations of pilots, engineers and enthusiasts. The annual Bray Air Display has been particularly successful and attracted over 140,000 spectators in 2016 alone, of which a substantial proportion were international visitors. Other air shows in recent years include the Foynes (annual), Shannon (2015) and FlightFest over the River Liffey (2013). These events should be encouraged. To exploit the potential of aviation tourism, the National Mitigation Plan should: ✈ Support the plans of the Irish Historic Flight Foundation to build a state-of-the-art ‘Aviation Experience Centre’ ✈ Support and facilitate air shows to attract tourism and to create an interest to attract future generations of pilots, engineers, and enthusiasts 8. Develop Aviation Training and Aerospace The global aviation industry is set to double from 3.5 billion passengers annually in 2016 to around 7 billion by approximately 2036. Likewise, the world’s aircraft fleet will double from 22,000 aircraft to 44,000 aircraft and therefore hundreds of thousands of new pilots and aircraft maintenance engineers. Ireland has only limited training capabilities at present, e.g. Atlantic Flight Training Academy in Cork and the National Flight Centre in Weston. This training area has high costs but there is clearly a very large global market which can be exploited by Ireland if the right conditions are in place. The issue of bonding of pilot training schools has still not been addressed despite the collapse of Waterford Pilot Training College a number of years ago. As the global industry grows, so too will the demand for MRO (Maintenance, Repair & Overhaul) and manufacturing services from international customers. This requires a pipeline of skilled aircraft engineers, which require access to training and apprenticeships. To tap into the huge potential for pilots and aircraft maintenance engineers, Ireland should: ✈ Provide State support to for new pilot training colleges
19 | B r e x i t C h a l l e n g e f o r I r i s h A v i a t i o n ✈ Establish new skilled aircraft apprenticeships through SOLAS, Institutes of Technology and industry encouragement Ireland currently has limited businesses involved in the aerospace sector. Again, it is a high cost environment and faces strong competition from the Far East and Eastern Europe. Access to aircraft hangers at competitive rental rates is a particular issue in Ireland at present. Furthermore, local authority council rates are levied on these facilities which are an additional cost that is not the norm for this sector intentionally. However, there is a very large global market which can be exploited by Ireland if the right conditions are in place, such as: ✈ Government review of the charging relating to local authority rates with regard to aircraft hangers ✈ Seek to make suitable aircraft hangers available to the MRO and aerospace sector at competitive rates 9. Support the Air Finance and Leasing Sector It is a well-known fact that Ireland is the centre of the global air finance and leasing sector, with nine of the top-10 market leaders based here and 50% of all leased aircraft managed from Ireland (or over 4,500 aircraft) valued at approximately €125 billion. The industry makes a significant contribution to the Exchequer. However the industry is under threat from places such as Singapore, Hong Kong and the Netherlands. In order to further expand this sector, the National Mitigation Plan should: ✈ Promote Ireland as a hub for air finance and leasing in an integrated manner. The package could include: favourable taxation regime; Cape Town Convention signatory state; double taxation treaties; Article 83 bis agreements for foreign leased aircraft; and access to experienced and skilled air finance specialists. ✈ Support social conditions for attracting and maintaining international mobile executives in the sector, including: Expediting the establishment of an international baccalaureate schools system; Granting work visas for spouses; Reviewing a special assignee relief programme to consider the effects of dual residency in the year of arrival and conditions in relation to external recruitment and possible relaxation of the 30-days to 90-days rule.
20 | B r e x i t C h a l l e n g e f o r I r i s h A v i a t i o n 10. Maintain the Highest Safety and Security Standards Ireland has an excellent civil aviation safety record. This is independently verified by EASA (Europe) and by ICAO (worldwide) and Ireland is ranked as one of the best jurisdictions for safety regulation in the world. Maintaining this ranking is essential as it benefits the whole of the Irish civil aviation industry, i.e. airlines, lessors, pilots, etc. It is also essential that Ireland’s strong safety regulation reputation is promoted by all stakeholders, including the State. Failure to maintain a secure aviation system could have disastrous consequences. 2016 saw renewed terrorist attacks across Europe on civilian targets (Nice, Berlin, Paris and Brussels Airport). Since 2012, the IAA has been responsible for carrying out aviation security regulation on behalf of the State (with the State maintaining policy responsibility). Funding and resourcing are essential to ensure that both the regulator and the regulated entities can meet national, European and international security standards. Ireland’s reputation as a world class aviation jurisdiction is enhanced by ensuring the highest safety and security standards are applied: ✈ The State, the Irish Aviation Authority and all regulated entities must continuously strive to achieve the highest safety and security standards at all times. 11. New National Aviation Policy It took much too long for the current National Aviation Policy (NAP) to be developed (work commenced in December 2012 and it was published in August 2015). The current NAP is outdated and is not fit for purpose and needs to be immediately redeveloped in order to take account of Brexit and other more recent developments. The new NAP will be an important document, which will provide the best framework for the aviation industry to grow and prosper. To ensure its success: ✈ All actions contained in the current (outdated) NAP published in August 2015 should be implemented as soon as possible and no later than the end of 2017. ✈ A new NAP should be developed immediately to reflect developments and should be published by the end of 2017. As part of the NAP, the National Civil Aviation Development Forum (NCADF) was created in April 2016 to facilitate consultation between the Department and the civil aviation industry. Membership of the
21 | B r e x i t C h a l l e n g e f o r I r i s h A v i a t i o n Steering Committee of the NCADF includes key aviation representatives from Ryanair, Aer Lingus, IAA, daa, AerCap, as well as representatives from the Department of Foreign Affairs and Trade, IBEC, Enterprise Ireland, etc. Their stated objective is “to make Ireland the most competitive country for aviation globally”. During Q1 2017, media reports indicated that that support from its high profile membership was beginning to evaporate as the Government had failed to adequately implement any proposed actions that may be put forward by the NCADF. This must be rectified through prompt government action. The stated objective of the NCADF is highly worthy and to ensure its success: ✈ The Government should always take full account of the views of the NCADF ✈ Reports and recommendations of the NCADF should be implemented by Government as soon as possible and to the maximum extend feasible 12. Aircraft maintenance (MRO) and other support services The Aircraft maintenance industry plays a key role in the aviation and aerospace sector in Ireland. This is a significant industry in its own right and is a vital direct support for airlines, aircraft leasing companies and related businesses. The industry in Ireland has a comprehensive base of skills, experience and capabilities. The country also has a number of advantages as a location including its geographical position, strong reputation and the presence of major airlines and aircraft leasing companies. The main centres of activity are Dublin and Shannon. There is considerable opportunity for growth in this sector with the global aircraft fleet expected to double over the next 15 years. In financial terms this means a worldwide growth from €60bn in 2015 to over €90bn by 2025. Irish maintenance companies currently attract approximately. €300m of this business annually, they employ approximately 3,000 directly and another 7,000 indirectly. Irish Aviation Policy should recognise this key industrial sector and create opportunities to enable Irish MRO companies to compete globally. Such policy action should include: ✈ targeted reduction in operational costs for MRO’s at airports, e.g. Rates ✈ provision of suitable hangars and airport facilities, and ✈ targeted training and apprenticeships to meet the growing demand.
22 | B r e x i t C h a l l e n g e f o r I r i s h A v i a t i o n 13. Aviation & the Environment The potentially negative impact of aviation on our environment is well documented and needs special attention. Advances in technology mean that aircraft are significantly quieter than they were in the past and emit far fewer emissions. However, the benefits of these environmental advances can be outstripped by higher demand for air traffic, which has a harmful effect on communities near airports. In October 2016, Government, industry and civil society representatives from around the world agreed today on a new global market-based measure (GMBM) to control CO2 emissions from international aviation. States (including the EU) will voluntarily participate in the GMBM which will permit the delivery of ICAO’s Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). As a result the existing European Emission Trading Scheme (EU-ETS) will be overtaken by these new global measures. However, there is a transitional period during which EU (and therefore Irish air carriers) may face a period of disadvantage with non-EU airlines. ✈ The Government should deal with EU-ETS, ICAO GMBU and EU airport noise requirements in a manner that ensures full compliance with the requirements, but does not place Irish airlines at a competitive disadvantage with airlines from other EU and non-EU states. ✈ Development of the new runway at Dublin airport should be delivered in accordance with ICAO Balanced Approach for noise, which takes account of the needs of airport users, local communities and the industry.
Robert Troy T.D. Spokesperson on Transport, Tourism and Sport Dáil Éireann, Leinster House, The Manse, Castle Street, Gleeson Street, Athlone, Kildare Street, Dublin 2. Mullingar, Co. Westmeath. Co. Westmeath. W 01 618 4059 (Dáil) W 044 933 4857 L 087 797 9890 Ð firstname.lastname@example.org t www.roberttroy.ie M /robert.troy.98 N @RobertTroyTD 0612
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