Published on September 1st, 2015 | by Jim Lee0
How did it come about that Aer Árann Islands lost the contract to serve the Aran Islands?
The news that Aer Árann Islands had lost the contract to serve the Aran Islands came in a short statement on 26th August, when Minister of State for Gaeltacht Affairs, Joe McHugh announced that the preferred tenderer and the winner of the tender to supply the air service contract to the Aran Islands, was Executive Helicopters Limited. (https://youtu.be/86ezvAWThiY) For Aer Árann Islands, which was established in 1970, and which has been servicing the Aran Islands bringing Islanders, tourists and cargo to and from all three Islands all year round, it was a dramatic and sudden blow, and one that will have the most serious consequences for the future of the company. (See companion piece on the history of the company posted here on 29th August).
The Department of Arts, Heritage and the Gaeltacht’s statement noted it was intended that as the contracting authority, it would “conclude a contract with the preferred bidder (Galway airport based Executive Helicopters) after 9th September following the standstill period”.
The Office of Government Procurement was responsible for organising the public procurement process regarding tenders for the air service. Under the new contract, daily return flights by helicopter will be provided between the islands and Galway Airport for the period from 1st October 2015 to 30th September 2019.
Making the announcement, Minister of State McHugh said that he was “pleased that his Department was in a position to agree a new contract which will ensure a regular daily air service to the Aran Islands over the next four years”. “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.
From the initial reaction, the Minister of State is the only one to “pleased” by the announcement, as local and non-local interests, roundly condemned the decision. Residents of the Aran Islands, shocked at the loss the existing service, which had proved a reliable and consistent lifeline to them over the last 45 years, plan to fight the Government decision. It is expected that up to 40 jobs will be lost as a result of Aer Árann Islands losing the contract and Aer Arann Islands owner Pádraig Ó Céidigh said he was ‘devastated’ at the decision, which he said, represented a blow to the islands. This was a view echoed by Inis Meáin Knitting Company’s managing director, Tarlach de Blácam, who said people had been taken aback at the decision and he believed that a helicopter service was simply not viable. “A helicopter service simply won’t work, not with the weather conditions we get here in the winter. What they want is to offer us is a ‘Mickey Mouse’ service and when that is proven not to work, and then pull it completely. It’s obvious they want to kill the service,” he added.
Mr de Blacam, who is Inis Meáín’s representative on an action group formed to retain the air service, said that he did not know how he could continue to run his knitwear business, which employs 18 people, under the new arrangement.
Islanders formed Coiste leis an Seirbhís Aeir a Chosaint (Save our Air Service committee) three years ago after widespread speculation, that the public service obligation (PSO) funding, to maintain the service, was to be withdrawn by the Government. The campaign got a new lease of life, after the new tender for the scheduled PSO air service to the three Aran Islands, was announced and which put a cap on the overall cost at €900,000 annually, representing a 30% cut.
Sinn Féin spokesperson for the Irish Language and the Gaeltacht, Senator Trevor Ó Clochartaigh, said the Minister of State for Gaeltacht Affairs Joe McHugh, must clarify how the contract was awarded. “All information in relation to the tenders that were submitted, the scoring system that was used and the results which were arrived at must be made available for scrutiny. It is difficult to comprehend what improvements for service users can be envisaged on foot of this decision, or what are the expected benefits for the taxpayer and I would like the Minister to explain that to us” he added. The Office of Government Procurement only commenced operations in 2014 and Senator Ó Clochartaigh said “we should be told who was on the evaluation panel and what experience they have in running an air service to offshore islands”.
Responding to these concerns, the Minister of State has agreed to meet an Aran Islands delegation on 1st September. Other than explain the decision, it is unclear what powers he has to reverse it. Mr Ó Céidigh has also said that he is looking at appealing the decision, but again it is hard to see how such appeal, even if it was possible, might succeed. In advance of that meeting with the Minister, over 250 Islanders held a public meeting on Inis Mór on 30th August, where there was a palatable mood of anger and defiance. The big question on many of the attendees lips was; ‘why’ and there was the widespread view that “if it’s not broken don’t fix it”. Not surprisingly, the meeting unanimously demanded it be reversed.
Danger signs obvious for some time
The danger signs for the future of the service, and particularly Aer Árann Islands continued operation of it, were obvious for some time. The seeds of this faithful decision lie in the Government’s decision to make the service a Public Service Obligation (PSO) service, as provided for under Council Regulation 1 2 2408/92/EC. The PSO took effect from February 2002. This followed a review of the financial implications of ensuring continuity of services and at the time, it was concluded that the appropriate way to guarantee these services in the future and to comply with the relevant EU requirements, was by the imposition of a PSO contract.
EU regulations provide that Member States may impose a PSO in respect of scheduled air services, serving a peripheral or development region, where it is considered vital for the economic and social development of that region. The PSO should be imposed to the extent necessary and should satisfy certain standards of continuity, regularity, pricing and minimum capacity, set by the Member State’s authorities. A key element of this process is regular tendering, which in the case of other Irish PSO routes has led to changes in the operator providing the service. The current contract was awarded to Aer Árann Islands for a one year period from 1st October 2013 to 30th September 2014, with the possibility of extension for an additional year, under the same terms. On 8th July 2014, the then Minister of State at the Department of Arts, Heritage and the Gaeltacht, Dinny McGinley, announced that this option had been exercised and his Department’s contract with Aer Arann had been extended to 30th September 2015. The Minister also extended the separate airstrip management contract by one year.
The necessity for the air service was reviewed as required under EU Regulation 1008/2008/EC and following a tendering process, the consultants EY were appointed to conduct the review which covered the period from 2003 to 2013. On 28th May, Minister of State Dinny McGinley announced the publication of the consultant’s report. The report, which cost €41,795, is available here.
The report assessed the level and trend of costs for the air service and the consistency between the public service obligation and the economic development needs of the region. Among other things, the report showed that the Department’s annual expenditure on the air service had increased by 136% during the review period from €800,000 in 2003 to €1.9 million in 2013. The number of passengers remained roughly the same during the period at about 40,000 passengers per year. Therefore, the report stated that it was necessary to look at various options for better value for money for the Exchequer.
On 1st April, a call for tenders was announced, prepared by the Department of Arts, Heritage and the Gaeltacht, in conjunction with the Office of Government Procurement, with a closing date of on 8th June. Amongst other things the request for tenders put a cap of €900,000 per annum on the level of subvention for this contract as mentioned above. That subvention level would remain constant for each of the four years of the contract. Tenderers were also required to provide a connecting road transport service to connect all air services from Galway and a cap of €20,000 per annum was placed on any subvention paid for the provision of this road transport service. The subvention cap excluded aircraft landing charges and departing passenger charges. The Department is responsible for the payment of both of these charges (for the PSO schedule only) and the successful tenderer has no obligation in this regard. The tender also allowed for use of both Connemara Airport at Inverin and Galway Airport at Carnmore. It also set the maximum fares as follows:-
|Maximum Air Fares|
|Student (U. 26) (Non-islanders)||€50.05|
|Island Students (U 26)||€27.60|
|U 18’s (Islanders)||€27.60|
The full tender document can be found here.
The cap of €900,000 per annum has to be seen in the context of the Department’s current allocation of €5.9 million for transport services across all the inhabited offshore islands in 2015 (see here).
A capital allocation of €0.644 million has also been provided by the Department for Arts, Heritage and the Gaeltacht for island infrastructure expenditure in 2015. Since 1997, the Department has approved expenditure in the region of €120 million on island infrastructure. In addition, the Department is the lead partner in relation to the Aran LIFE project, which is being core funded by the EU under the LIFE programme and which is aimed at generating more sustainable farming practices on the Aran Islands. The project, which has a net value of €2.6 million, commenced in 2014 and runs for four years. As a result, island life has improved considerably and populations on many offshore islands have stabilised or increased. However, this obviously bad decision may impede, or even reverse, these improvements.
Is it just a fear of the unknown?
So is it just a case of fear of the unknown on the part of the islanders? Is it just a sentimental attachment to the familiar and should they at least give the new service a chance? Well for starters there is a real threat to 40 jobs and many of the existing workers will be unable to transfer to the new operator, given the change in equipment and base, notwithstanding the European Communities (Protection of Employees on Transfer of Undertakings) Regulations 2003. These regulations provide that a new employer is legally obliged to take on the existing employees of a business which is taken over or where the employees work is “sold off or contracted out”.
Many have questioned the business case that can see a helicopter being cheaper to operate than a fixed wing aircraft. There is a real fear that if the new operator is unsuccessful and if Aer Árann Islands was to cease operations in the interim, then there was no going back, with no other fixed wing operator on the horizon. There are also concerns over the capacity of helicopters, such as the EC-135, compared to the Islander, both in terms of passenger and freight carrying capability. Finally, there is the issue of the change of base on the mainland. Aer Árann Islands’ base is located at Connemara Regional Airport in the townland of Inverin, just 30.5km (19 miles) west of Galway city. It is just 8km (5 miles), or nine minutes, by road from the ferry port of Rossaveal. Carnmore on the other hand is 52km (32.5 miles) from Rossaveal and is a one-hour road journey, seriously compromising the option of using the ferry if flights are cancelled due to weather.
Apart from the aviation aspects of this decision, many of which are questionable, there are also wider economic and social considerations. Many aspects of this decision, once finalised, are irreversible, so it is vital that the right decision is made now and the reasons for it fully explained.