Published on November 6th, 2016 | by Jim Lee0
Belfast International Airport deal with United Airlines falls foul of the European Commission
Earlier this summer, Northern Ireland’s Economy Minister Simon Hamilton MLA was faced with an ultimatum from United Airlines, that without additional support from the Northern Ireland Executive, they would withdraw Northern Ireland’s only transatlantic route, the service from Belfast International Airport to Newark’s Liberty Airport, gateway to New York. United uses a Boeing 757 with 169 seats on the Belfast route, which operates daily in the summer and three times a week in the winter.
In a statement, Minister Hamilton said: “Given the importance of air connectivity to North America, I sought and received Executive support for a package of assistance that would keep the route in place. Our decision to support the route was praised by many and had we not have made an effort to save the United flight we would have been rightly criticised”.
The United States is the largest source of Foreign Direct Investment into Northern Ireland (NI). A direct transatlantic route from Belfast to North America has been vital for Northern Ireland’s economy over the past decade in terms of increasing tourism, enhancing its prospects in attracting US based investors and helping local companies to export their products and services.
A three-year deal with United worth around £3 million (around €3.38 million) per year, was approved in August by Minister Hamilton, when he issued a ministerial direction, which was endorsed by First Minister Arlene Foster and Deputy First Minister Martin McGuinness, under what described by the NI Auditor General, Kieran Donnelly, as an “emergency procedure”.
Mr Donnelly made the comment, when he appeared in front of the NI Public Accounts Committee (NIPAC), on 14th September. He added that the direction was made, after the department’s Permanent Secretary, raised issues about value for money and “irregularity”. At that meeting, Alliance MLA Trevor Lunn described the aid package as “outrageous.” “This is madness. United will be laughing all the way to the bank,” he added. More seriously, Mr Donnelly said there was no precedent for the bail-out, which would now be scrutinised by the European Commission (EC) under state-aid rules, adding that he was “monitoring the situation”. The NIPAC agreed to write to the Executive Office to establish “the political rationale” for the aid decision. A number of questions were put down in the NI Assembly, but have so far remained unanswered.
While it is understood that most of the bail-out was to come from the Executive a contribution of around a third was to come from the airport. Little detail of the agreement has emerged, as the Minister has said that details of the agreement “is commercially sensitive”. United Airlines, for its part, which recently received the first payment under the agreement, will not permit any monitoring of the financial assistance, which it is receiving.
Minister Hamilton would not be drawn on whether there were any conditions attached to the subsidy, or would it impose any restraint on fare increases, other than to state that the agreement imposed no constraints on the Executive, or indeed Belfast international Airport, in relation to attracting competitors onto the route.
In 2011, the Belfast Telegraph revealed that United’s Newark service had only been saved from the chop, after Air Passenger Duty (APD), on long-haul flights from Northern Ireland, was scrapped. Control over APD was devolved to the Executive from London and its removal by the Executive, which resulted in a loss of £2.4 million (around €2.7 million) a year in tax revenue, was seen as a previous effort to ensure United retained the route.
EU says no!
NI Auditor General, Kieran Donnelly’s warning that the agreement could fall foul of the EC proved prophetic, as the Commission has recently ruled against the funding package. All Minister Hamilton could do was to express his deep regret at the decision, and the news that United Airlines is to withdraw its Belfast to Newark service, with the last departure from Belfast taking place on 9th January 2017. The EC has said that EU rules do not allow public authorities to grant a specific airline an “undue advantage”.
In a statement on 4th November, Minister Hamilton said: “The Executive did the right thing with its bid to save this key route. There was a risk to the flight and we stepped in to save it. Faced with the same circumstances again I would make the same decisions. All public money has been recouped with interest and we retained the route for a longer period”.
He went on; “We were always aware of the potential of an issue around state aid compliance, but given the tight timescale to put a package of support in place, approval by the European Commission could not be sought in advance of agreeing a deal with United and it was our view, on balance, that given this was our only direct flight to the USA, state aid was not a factor. It is, therefore, deeply regrettable that unelected bureaucrats in Brussels have effectively scuppered this important flight for Northern Ireland”.
In conclusion he said; “I am determined to make every effort to improve Northern Ireland’s air connectivity. I have signalled my intention to establish an Air Routes Task Force to devise new policies and interventions that will secure more flights to key inbound tourism and trade markets and I have already been in discussions about bringing new airlines to Northern Ireland. In spite of this setback, I will not shy away from doing all that I can to enhance our air connectivity”. Perhaps an opportunity for Norwegian or even WOW Air?
Confirming the news, United said it had taken the decision because of the route’s poor financial performance. “We will contact customers with bookings for flights beyond those dates to provide refunds and re-accommodate where possible. We apologise for any inconvenience caused,” it added in a brief comment.
Belfast International sees red over ‘Abysmal’ EU decision
Obviously Belfast International Airport was not impressed with the EU ruling, saying that the decision to block the funding package to protect Northern Ireland’s one and only scheduled trans-Atlantic service, “defies logic and is an example of ‘abysmal Brussels decision-making”.
The airport’s Managing Director, Graham Keddie, in a statement, said: “You could hardly get a worse example of process-driven madness. To block a support package for an airline that delivers direct access to the United States is almost beyond comprehension.
“This is a vital link for business and losing it will be a body blow to Executive Ministers who use it to promote Northern Ireland to would-be investors from the United States.
“The adverse impact is all the greater, coming as it does ahead of the crucial decision to make Northern Ireland more competitive with reduced Corporation Tax designed to stimulate inward investment.
“This is a bad day for the Executive and a bad day for Northern Ireland, which is still finding its feet after a generation lost to conflict. The United service was well supported and only recently carried its one millionth passenger.
“We have worked tirelessly to safeguard the service, but Brussels took a different view, believing the support package gave United an unfair advantage over services from elsewhere.
“That, on its own, is bizarre as the package in no way competes or conflicts with competitors within the United Kingdom. The EU decision-making process is abysmal, biased and unfair and has resulted in the loss of this service.
“I would like to establish the level of representation made by any rival airline and competing airports before rushing to judgement. However, if there was interference, then our Government ought to make strenuous protest.
“Several key political figures worked with us to avert this disastrous decision. I would like to thank local MPs, Danny Kinahan and Ian Paisley, the Economy Minister, Simon Hamilton MLA, the Secretary of State, James Brokenshire MP, and the Transport Secretary, Chris Grayling. Their efforts went above and beyond, but in the end the faceless Eurocrats, and others ill-disposed to Northern Ireland, won the day.”
Belfast expands service following its busiest September ever
Obviously, the news of the loss of the United service is a serious blow for the airport, which was looking forward to a busy winter, with Ryanair launching new services to Krakow, Wroclaw, Lanzarote and Tenerife at the end of October, followed by Warsaw and Gdansk on the 2nd November. easyJet, which operates twenty-eight routes and carries 3.5 million passengers, has also announced a record number of flights and routes from Belfast International for Spring 2017.
Mr Keddie said: “All of our airlines are putting in stellar performances. We have the Halloween break and then the Christmas rush to look forward to, and this year we could see other records tumble”. He was commenting after the airport reported its busiest September ever with record numbers of passengers using the facility.
A total of over 488,000 passengers passed through the airport, which exceeded by 7,800 the previous September record set in 2007. The figure is up 73,000, or 17.5%, over September last year. The figure brought to over 3.8 million the total number of passengers in the first nine months of the year.
The remaining three months of the year are set to see further impressive growth as new routes and increased airline capacity make an impact. A monthly breakdown is given below:-
Keddie again calls for the abolition of Air Passenger Duty (APD)
Mr. Keddie was keen to point out that the September figures, augur well for the rest of the year and into 2017, noting that “all of this growth is without any Government support, and all the additional 800 or so jobs created since last December are privately funded”.
He went on; “We ran our second Job Fair on 10th October, and several hundred people turned up to hear what was on offer. There are more than 100 new jobs being created across the board, and we believe that 2017 will see further employment opportunities as the airport and its airlines expand further.
“We’ve been saying it for some time, but if the Government and our devolved administration removed the deadweight that is APD, then many hundreds more jobs would be created. As well as that, we know that existing airlines would rush to open new routes to important tourism markets and that, in turn, would produce greater prosperity for Northern Ireland.
“Getting rid of APD is a no-brainer. It is not exaggerating it to say that if APD disappeared, we could almost double passenger numbers and add dozens of new routes. That, in turn, would lead to the creation of thousands of new jobs at what would be a vibrant employment and enterprise hub.” Unfortunately it was not enough to save United’s Newark route however.