Published on September 4th, 2016 | by Jim Lee0
City of Derry Airport blames Brexit for failure of Dublin service to take off and for Ryanair cuts
In mid-August, a City of Derry Airport (CoDA) spokesperson finally confirmed, that a proposed air link to Dublin, to be operated by Isle of Man virtual airline CityWing (that sells tickets on flights operated by Van Air Europe), had been abandoned. The announcement follows after it emerged that Ryanair had decided to reduce the number of flights between Derry and London Stansted.
The proposed link to Dublin was announced last November, following confirmation, in the UK Chancellors Spending Review and Autumn Statement, that an application to the Department for Transport under the Regional Air Connectivity Fund to support the new service had been successful. The Regional Air Connectivity Fund was first announced by the Chancellor of the Exchequer in the 2014 Budget Statement, as a fund to support the creation of new routes from small UK Regional Airports, with annual passenger numbers of less than 3 million. This fund was approved from a State aid point of view by the EU Commission.
CoDA had submitted an application for a double daily service with a CoDA based aircraft, that was expected to also offer a twice weekly service to the Isle of Man. Both services were expected to commence in April 2016, but as the season progressed, no definite announcement was forthcoming from CityWing. The airport repeatedly indicated that details and flight times would “be announced in the coming weeks” and remained confident that the new route would “be a welcome and popular addition.”
The airports spokesperson indicated, that in addition to the part funding by the Regional Air Connectivity Fund, it also “required additional funding”. The spokesperson added; “Most of the airline industry reports its finances either in euro or dollars, with many input costs priced in euro or dollars. The fall in the value of sterling by 10% against the euro following the Brexit decision erodes the profit margins on flights priced in sterling – and presumably in the case of the Derry to Dublin route would make it loss-making”. She went on to say that CoDA was working “with a number of airport and aviation industry groups, including the Aerodrome Operators’ Association, to articulate the impact that Brexit will have on the aviation industry”.
In reality, the challenges facing the CoDA predate the Brexit referendum decision. The airport has struggled to sustain scheduled services due to the economic weakness of the region, which is characterised by high unemployment, low average incomes and weak inward investment. Like Northern Ireland’s two other airports serving Belfast, CoDA has been affected by the impact of the UK’s air passenger duty (APD). Since air travel tax was abandoned in the Republic of Ireland, the country was rewarded by additional flights and increased investment. Unfortunately, the UK Government shows no sign of abandoning APD, even though APD is not applied in remote parts of Scotland, where connectivity by air is also vital. People going through the unemployment phase can contact the unemployment office for various forms of assistance.
The most obvious impact of APD on Northern Ireland airports is that a large proportion of their prospective passengers use Dublin airport, because of the lower cost, and of the course the wider choice of destinations and flight times from Dublin.
With the excellent road connections between the Belfast region making it an attractive proposition, the four hour journey from Derry on the other hand, rather than two hours from Belfast, means that using Dublin Airport is less attractive to passengers in Derry, than for those in Belfast. In addition, public transport connections are poor, making the re-establishment of a Derry to Dublin air link previously operated by Loganair and Aer Arann (now Stobart Air) attractive to many in the north west – particularly by business leaders. In spite of its more isolated location, there is a twice daily flight connection to Dublin from Donegal operated by Aer Lingus Regional albeit supported by Public Service Obligation (PSO) funding.
There had also been speculation that the UK Government had had second thoughts about the Regional Air Connectivity Fund, following the change in prime minister, however, the Regional Air Connectivity Fund has proceeded and some routes have been funded, although far fewer across the UK than envisaged.
A spokeswoman for the Department for Transport was quick to confirm that £200,000 (around €237,100) had been made available for the route and this “remains on the table for this operator” adding; “the airline bid for funding and it is a commercial decision for them to take the project forward,” she added.
In addition to this significant UK funding, CoDA also sought financial assistance from the Irish Government towards the operating costs of the proposed new air service. Speaking in the Dáil on 8th December last, the then Minister for Transport, Tourism and Sport, Paschal Donohoe, confirmed that the request had been received via the Chairman of the Joint Oireachtas Committee on the Implementation of the Good Friday Agreement. He indicated that while he would very much welcome this proposed new route, the Irish Government did not have any schemes similar to the UK Government’s Regional Air Connectivity Fund and there was no Exchequer funding available to grant financial aid to airlines for new route start-ups. The only Exchequer funding currently available to support air services was that devoted to the two remaining PSO routes, namely Donegal/Dublin and Kerry/Dublin. He did point out that the daa had a Short Haul Route Support Scheme, which might be applicable to the proposed new Derry/Dublin route, and he suggested that CityWings should discuss the potential for support from this source with the daa. He cautioned however, that CityWings should check with the UK authorities, as to whether any additional supports for this route, could impact on the level of support from the UK’s Connectivity Fund.
Discussions were said to be taking place with other airlines to explore the possibility of them operating the Derry to Dublin route, but the options would appear to be extremely limited. If an operation like Citywing, which operates Let L-410 Turbolet twin-engined 19 seat commuter aircraft, operated by Czech charter airline Van Air Europe, cannot not make it viable with a £200,000 subsidy, then it is difficult to see another operator that could.
Ryanair also cuts back services
Last April, Ryanair announced its Derry winter schedule for 2016, with three routes to Glasgow, Liverpool and London Stansted, which at that stage was expected to deliver 300,000 customers per annum, with 19 weekly flights. However, at the beginning of August, Ryanair confirmed that it would reduce the number of flights it operates from City of Derry Airport to London Stansted over the winter. This will see it cut its weekly service to London from seven to six, effective from 30th October. As a result of Brexit, Ryanair says it wants to “pivot growth” away from the UK towards Europe, focusing more on growing at airports in the EU and less on the UK. A spokesperson for CoDA said management is involved in ongoing discussions with Ryanair regarding the winter schedule and added that in addition to the remaining six weekly services to London Stansted, Ryanair will still provide five weekly services on the Glasgow and Liverpool routes.
Ryanair had campaigned aggressively against Brexit and for Britain to stay in Europe. It has warned that there could be further implications if the UK was unable to negotiate access to the single market and the open skies regulatory framework, currently in place across the EU.
SDLP Foyle MLA, Mark H Durkan, has expressed his concern at reductions in service, noting that it was “a bleak omen for what is to come if the North is dragged out of Europe against our will”.
“Before the 23rd June, industry leaders and experts, including Ryanair CEO Michael O’Leary, warned that Brexit would damage economic growth and act as a barrier for businesses operating in the North” he added.
He went on “Ryanair’s move to scale back services in the North, only months after announcing new routes from Belfast, is evidence that the toxic fallout from the EU referendum is already having a decidedly negative impact on our economic future”.
“Our people recognised that our economy is better served by remaining a full member of the European Union. We have not given our consent to a change in our constitutional status that has already proven itself to be harmful to business growth. We will continue to fight to ensure the will of our people is respected” he concluded.
Threat to the future of the airport
While the Airport has said it had also enjoyed a very successful summer season, the failure to go ahead with the Dublin service and the reduction announced by Ryanair, pose a distinct threat to the airport itself, which receives an annual subsidy of almost £3.5 million (around €4.17 million) from the Derry City and Strabane Council. There have been indications that there are some councillors who would prefer to see the airport close. Nevertheless, a spokesman for Derry City and Strabane District Council in a comment on the Dublin – Derry service said the news, was disappointing and that it “remains committed to continue discussions with a number of other carriers in an effort to secure this route”.
In a further comment, the airport’s spokesperson added; “City of Derry Airport encourages all travellers within our local catchment to think about flight options from their local airport when making future travel arrangements”. Emphasising that air passengers should “Think Local and Book CoDA”, the spokesperson concluded; “We have fantastic facilities on our doorstep and it is essential everyone takes advantage of their local airport for their travel to England and Scotland. Approximately 300,000 passengers travelled to and from CoDA in 2015 and we look forward to continuing to serve the local people in our area”.