Published on September 27th, 2015 | by Jim Lee0
Aran Islands Air Service tender process cancelled, is it back to the drawing board or off to the courts?
It is often been said that a week is a long time in politics. When Minister of State for Gaeltacht Affairs, Joe McHugh, stood up in the Dáil on Tuesday, 22nd September to respond to a Topical Issue Debate on “the need to ensure a secure and effective air service for the people of the Aran Islands” in the name of Deputy Derek Nolan (Labour Party member for Galway West), was he thinking of this or that by Friday 25th of September, his Department would be announcing the cancellation of the tender process, that sparked the entire controversy.
Deputy Nolan asked two specific questions. First, he said he understood, that the Minister of State had asked Aer Árann Islands to continue the service for a number of months (see here) and asked him to “update the House on that matter”. He also asked when the Minister of State will be “in a position to sort out this mess”. “The process has shown flaws” he added and he asked Minister of State to “give certainty and comfort to those on the Aran Islands who desperately need this service to continue”.
In a feeble response, Minister of State McHugh said he was “not in a position” to answer “the questions raised by the Deputy, since the process is ongoing”. “The decision is not made” he added. In an attempt to wash his hands of the controversy, he went on to say, that he was “not responsible for the decision to be made by the Office of Government Procurement (OGP), which is responsible for the process and the decision is in another Department (the Department of Public Expenditure and Reform)”. Such spinelessness, should be seen in the context of his decision to cap the overall cost of the service at €900,000 annually, representing a 30% cut, fuelling an inevitable cut in service levels. It also contrasts with his initial statement on 26th August, when he said that he was “pleased” to be able to make the announcement, that “Executive Helicopters Limited was the preferred tenderer for the air service contract to the Aran Islands”. “The agreement between my Department and Executive Helicopters Limited ensures that the air service to the Aran Islands will continue over the next four years”, he added (see here). He went to add that the Department of Arts, Heritage and the Gaeltacht, as the contracting authority, would conclude a contract with the preferred bidder, after 9th September, following the standstill period. No doubts, no ambiguity there.
Again ducking the issue, he said that he had “been advised that it would not be appropriate to make any comment on same or say anything, that might in any way prejudice it, or any appeal that might be made regarding the outcome of the procurement process, by way of a judicial review to the High Court”.
Making reference to the comprehensive review of the need for a public service obligation (PSO), service to the Aran Islands, commissioned in 2014 and published in May of last year, he said he was “satisfied that it was rigorous in its investigations and fair in its findings”. He went on “the review recognised the importance of the air service to the island communities and its contribution to island life. At the same time, the report recognised that the cost of providing the air service had increased dramatically by 136% during the ten-year period under review, that the efficiency of the programme had deteriorated over the period in question and that the continuation of this trend into the future was unsustainable”.
Returning to the defensive he said “I had no involvement in the procurement process itself following my decision that a PSO air service should continue to be provided. I am aware that questions have been raised regarding issues relating to the procurement process, such as the type of aircraft to be used, the inclusion of Galway Airport as a mainland departure point and the expertise of the tender assessment committee. I have been assured that proper and appropriate procedures were adhered to at all times throughout the process”.
Yet just three days later, he issued a brief statement which said, he had “cancelled the tender process for the award of an air service contract for the Aran Islands.” The statement went on, “It is intended to advise the European Commission of the position as soon as possible and to commence a fresh tender process for the air service”. “The Minister indicated that the Department will enter discussions with the existing service provider for the provision of an interim service with a view to enabling the re-tender to take place, while ensuring that there is no disruption in service” it concluded. No explanation, no secure deal to extend the service and little more than bluff and bluster.
Executive Helicopters Ltd’s initial position was that the company would not be commenting on the matter, “due to constraints imposed on bidders, as part of the tendering process”. However in the aftermath of the decision to extend the ‘standstill period’ to 16th November and extend Aer Árann Islands’ existing contract to 1st February 2016, announced on 10th September (see above), the company decided to break its silence. In a statement circulated to the mainstream media (but not supplied to Flying in Ireland, before this piece was completed), it reportedly made the following points.
- It stated that a helicopter service would be of commercial and social benefit to the Aran Islands, Galway City and County and the greater region.
- It stated that it is fully capable of fulfilling all the requirements of the tender. “Executive Helicopters are in a position to fulfil all requirements under the PSO tender for the Aran Islands air service vis a vis, capacities, personnel and aircraft. The helicopters for the routes will have a greater passenger capacity, will have similar luggage/cargo capacity and can fly in a greater range and variety of weather conditions.” We might add that they do not currently have aircraft with a capacity larger than the Islander on the Irish register with the Eurocopter AS355N, EI-LOW and Eurocopter EC120B, EI-MIK being the only aircraft registered. There have been suggestions that they might acquire a Eurocopter AS365 Dauphin for the service. Section 3.1 of the draft contract notes that the successful tenderer shall be required to use aircraft with a minimum of eight passenger seats. Eight passengers seats is considered to be the optimal aircraft capacity based on historic patterns of passenger numbers.
- The company stressed that helicopters are safe to fly in all weather conditions. It also addressed the suggestion that airplanes are better capable of operating in worse weather conditions than helicopters. “Airplanes are not permitted by law to operate in worse weather than Helicopters for this route. Airplanes require a minimum visibility of almost twice (1,500m) that required by a helicopter (800m) to operate to the relevant airports.”
- It noted that Executive Helicopters have been operating helicopters in the west of Ireland for almost 20 years without any problems whatsoever.
- Its statement highlighted that helicopters are used off the west coast by the Irish Coast Guard, Search and Rescue services and the Irish Air Corps Medical Service and these services are readily acceptable and welcomed by all island and coastal communities along the Atlantic seaboard. The Irish Lights have also been using helicopters to service the light houses around the country, including the west coast since the 1970s.
- It went on to say that helicopters are already the mainstay and air transport of choice to many offshore islands in open ocean conditions. The Tory Island service off Donegal coast has been operating since 1985 and is part-funded by the Department of the Gaeltacht. The 85 km (53 miles) Væroy – Bodø PSO service in Norway is operated by helicopter with two flights per day/seven days per week and helicopters have operated there since 1973, in ‘more severe’ conditions, than those experienced in the West of Ireland. For the information of our readers, a review of the previous PSO contract operated Lufttransport, noted it was flown by two Eurocopter AS365 Dauphin 2 with 4.3 tons MTOW and about six seats. It gave the costs of the service at around 40 million Norwegian Krones (€4.18 million), with a last reported subsidy of 4,341 NOK (€453.87) per passenger (2011/2012).Currently 15-seat AgustaWestland AW139s are operated by Lufttransport, 12 per week, with a 25 minute sector time and a ‘normal fare’ of NOK 1,690 (around €180) round trip. Reduced fares are available for some, presumably including local islanders.
- Controversially, it stated “that a helicopter is better placed to deal with deleterious situations such as rapidly deteriorating weather as it has the option to either slow down or land whereas the fixed wing aeroplane has to seek a suitable diversion airfield. Safety statistics show that helicopters are every bit as safe as airplanes.”
- Finally the statement dealt with the issue of the airport selected. It notes “The Request for Tenders required a connecting road transport service from Galway Airport / Na Mine to and from Galway City. The transport time from the Aran Islands to Galway City via Galway airport is approximately 30 minutes less by Helicopter than the alternative by airplane to Na Mine airport and road transfer to the city. The Request to Tender document specifically limited the service to operate from either Na Mine or Galway Airports. Executive Helicopters submitted its tender to operate the service from Galway Airport; it being one of the two airports it was obliged to tender from.”
Following the announcement on 25th September, a statement by Executive Helicopters on 26th September noted:
- “Executive Helicopters is very disappointed with the decision of the Department of Arts Heritage and Gaeltacht to cancel the PSO tender for an air service to the Aran Islands based on the uncertainty over the future use of Galway airport for commercial aviation purposes after December 2015. We will be considering all our options in relation to the announcement over the coming days”.
- The Aran Islands PSO stipulated that only Galway airport or Na Mina airport could be used for the tender. Executive helicopters approached both airports (Galway and Na Mine) for costs in relation to operating flights for the PSO contract to the Aran Islands and received costs from both airports for Landing fees and Passenger fees for the PSO contract. Na Mina airport, owned by Aer Árann Islands quoted Executive Helicopters Landing and Handling fees that were in excess of €2 million for the four year contract, which was over four times the cost of using Galway Airport.
- If the PSO service is re tendered by the Department then we will be calling on them to include an alternative site to Na Mine airport in the Rossaveal area so as to allow for a competitive tender process, value for the Irish tax payer, and would meet the concerns of the Islanders in relation to access to the Ferry”.
It should be noted however in the ‘Request for Tenders; it was stated that the Department was responsible for the payment of both aircraft landing and departing passenger charges for the PSO schedule and the successful tenderer would have no obligation in this regard. In practice this meant that the operator would pay these charges directly and be reimbursed by the Department as appropriate on a monthly basis.
A spokesperson for Aer Árann defended the quotations given for the use of facilities at Na Mine airport. The company says the same calculations and fees applied to the costings it submitted in its tender.
What now for the Aer Árann Islands service
While the Minister of State indicated that Department would enter discussions “with the existing service provider (Aer Árann Islands) for the provision of an interim service, it is not clear how this can be achieved, before the existing contract is due to end. Prior to the Minister of State’s announcement, Aer Árann Islands had stopped taking bookings beyond 30th September, when its contract was originally due to expire. Around 40 staff at the company remains on protective notice. There has to be serious questions asked, about the frequency and the amount the airline will receive, in order to make it possible for them to operate any interim service. Aer Árann Islands said it was not in a position to comment as it had yet to hear from the Department.
When difficulties surrounding the tender came to a head and began to unravel, Minister of State McHugh had sought to extend Aer Árann Islands’ current contract for a further four months to allow time for the issue to be sorted out. His brief statement on 10th September, also specifically mentioned the need to obtain clarification, on the availability of Galway Airport for the duration of the four year contract, from 1st October 2015, as set out in the Request for Tenders. It added that this was in accordance with “legal advice received and that the Department would be writing to the owners of Galway Airport in that regard”.
However, the option of extending Aer Árann Islands’ current contract for a further four months does not seem to have impressed the airline, as it has instituted judicial review proceedings. In an ex-parte (one side only) application in the High Court on 24th September, Michael Cush SC, who appeared with Darren Lehane for Aer Árann Islands, said a four-year contract until 2019 between the State and Executive Helicopters, which was due to start its services on 1st October, had not yet been signed. He confirmed that the State had offered Aer Árann Islands an extension of its contract until February next year. In its legal action taken against the Minister; the Office of Government Procurement, which operated the tender process, and Executive Helicopters, it was alleged that the decision to award the contract to Executive Helicopter was made “without any proper tender process”.
Aer Árann Islands is also seeking an order prohibiting the Department of the Gaeltacht to conclude any contract with the helicopter company, pending the legal proceedings, or to vary the terms of the tender by changing the commencement date and the contract duration. Mr Justice Henry Abbott ordered that the State be put on notice of the application, which he adjourned for week.
Another key element in the controversy surrounding the tender process was that no permission was ever sought by the Department to include Carnmore Airport in the invitation to tender for the air services, from the airport’s site’s joint owners, Galway City and County Councils. In November 2013, the two councils, agreed to purchase the 115 acres Carnmore site for €1.1 million. They signed a short-term agreement with Carnmore Aviation Limited, a company owned by the Conneely Group in Ballinasloe, in July 2014, to operate the facility. This agreement expires on 15th December.
A Special Meeting of Galway County Council was called for 23rd September “To consider the issues surrounding the potential use of the Galway Airport site for the provision of the Public Service Obligation air service for the Aran Islands”. The motion noted, “that any proposed lease of the airport site would have to be brought before the council for consideration” and therefore the Council “further notes that any proposed use of the Carnmore site for an air service to the Aran Islands for the proposed period of the tender is not currently permitted”. The motion was proposed and seconded by Connemara Councillors Seán Ó Tuairisg and Eileen Mannion and despite reservations by a small number of councillors, regarding the effective meaning of the motion, it was passed without dissent. Independent Councillor Thomas Welby said the only message that people needed to take away from the meeting was that the former airport site in Carnmore “is not available” for a four-year contract. “I’m quite clear that nobody has use of that facility for a four year period” he added. Council Cathaoirleach (Chairman) Peter Roche said he trusted that the motion had given reassurance to the people of the islands.
Earlier in the week the results of a feasibility study undertaken to decide the best course of action for the airport site at Carnmore were released. The study considered how the potential of the site could be utilised and be of the most benefit on a regional basis. The key recommendations of the report were that expressions of interest be sought from parties interested in the establishment of a creative campus centred on the promotion/enhancement of the film industry and the development of a complementary mixed-use business park. The feasibility study on the Carnmore site and its use in the medium to long term is due for discussion at the September meeting of the County Council to be held on 28th September.
However in spite of the apparent victory for the islanders, the future is far from certain. Can agreement be reached with Aer Árann Islands on a sustainable contract figure and frequencies that are acceptable to the islanders? How will the airlines Court challenge pan out and indeed will Executive Helicopters Ltd also go down the legal route? What will the European Commission make of all this given that the tendering process was undertaken in accordance with the requirements of Regulation (EC) 1008/2008, which governs PSO air services. How can any new tender be constructed differently and can the Office of Government Procurement be involved? All in all it’s an unholy mess and one that it may well prove difficult to resolve. In our last post we suggested that maybe it’s time from some fresh thinking and the Scottish model, where the state owns the aircraft and contracts in an operator may well be worth looking at. A four year contract with its EU public service obligation (PSO) funding in doubt, is no way to put the service on a long term and sustainable basis, particularly as replacement of the islanders will appear on the horizon in the not too distant future. Certainly fresh thinking will be required to ensure that this type of debacle ever happens again.