Friday, 4 November 2011

Irish Aviation Policy: Setting A New Course ©

The new Irish Government which was elected on the 25th of February made tourism a key element of its Programme for Government, recognizing the aviation can play a key contribution to recovery, with new policies which will set a new course for the aviation sector reversing the loss of competitiveness.

The new Transport Minister Leo Varadkar has achieved a number of objectives as set out in the Programme for Government with the launch of a new Tourism Marketing Fund which was announced on the 14th of October collaborating with Aer Arann, Aer Lingus, Etihad Airways, Emirates Airlines, US Airways using revenues from the air travel tax Merrion Street (October 2011), and a new short-stay Visa Wavier programme to tap growth from emerging BRIC economies Irish Times (July 2011).

In tandem with the initiatives announced above the government job initiative introduced a new low VAT rate of 9% for the tourism sector KPMG (May 2011), and the Dublin Airport Authority announced a new route incentive scheme to encourage growth at Cork, Dublin and Shannon Airports DAA (May 2011).   

The Transport Minister Leo Varadkar advised the Dail that he was unable to reach agreement with the airlines on increasing capacity for winter 2011 and accordingly did not sign the act to terminate the €3 Air Travel Tax, but stated the department would continue negotiations with the airlines; the decision will be reviewed in Spring 2012 Irish Times (July 2011).

However in a highly significant change of policy the Minister in a statement on the 9th of September the Dublin Airport Authority ownership of the three state airports was “Not Tenable” High Beam Research (10TH of September).  In the summer month’s airline CEO’s where extremely vocal of airport policy, indicating the status quo could no longer continue, with domestic demand weak and high fuel costs.

The path to restore competitiveness to the sector took another step forward with the commission for Aviation Regulation announcing on the 24th of October it was reducing Irish Aviation Authority (IAA) Air Traffic Services by 40% with effect from the 1st of January 2012, with an immediate 25% reduction in 2012 followed by 6% thereafter up to December 2015 CAR (24th October 2011).

The Minister Leo Varadkar welcomed the announcement stating “Lower costs for airlines should boost the Government’s efforts to encourage more visitors and build on the tourism-promotion measures in the jobs initiative” Irish Times (25th October 2011).

To further build on the reducing costs to airlines the Minister stated he was working with the Commission of Aviation Regulation (CAR), and the Dublin Airport Authority (DAA) on reducing airport charges noting the DAA did have an upper and lower pricing ceiling in the current 2010-2014 airport charges determination Business ETC (25th October).

The current Irish Aviation Airport Regulatory framework is modeled on the UK which has seen the Competition Authority direct the British Airports Authority (BAA) sell London Gatwick, London Stansted and Edinburgh airports to create a competitive airport environment.

Therefore the outcome of the Irish Airports review which is currently being undertaken by Booz and Company on behalf of the Department of Transport will be eagerly awaited. The Transport Minister Leo Varadkar stated “It’s my objective to break up the monopoly that is there and to free Cork and Shannon as much as possible from the control of Dublin”, Cork Independent (27TH October 2011).


Irish Aviation Research Institute © 4th November 2011 All Rights Reserved.

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