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Hardships facing the North West's airport go beyond consequences of leaving EU

By Paul Gosling

Published 30/08/2016

City of Derry Airport has suffered as a result of air passenger duty and the competition airports in Belfast provide
City of Derry Airport has suffered as a result of air passenger duty and the competition airports in Belfast provide

Northern Ireland's economy is already being affected by the decision to leave the EU. The decision to abandon plans for the revival of a Derry to Dublin air link is one of the impacts.

Citywing was to have launched a route between Derry and Dublin this year, but the plans have now been abandoned. The announcement follows after it emerged that Ryanair is to reduce the number of flights between Derry and London Stansted. Both decisions are an indirect result of Brexit.

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.

A spokeswoman for the City of Derry Airport said: "The proposed new route was due to be part funded by the Government's Regional Air Connectivity Fund, but also required additional funding.

"The impact of the referendum vote in favour of Brexit has led to significant devaluation in sterling. Given that the airline industry operates in euro and dollars, the economics of the route deteriorated to a position which has made the operation of this route commercially difficult."

There has been speculation that the Government had second thoughts about the Regional Air Connectivity Fund following the change in prime minister - former Chancellor George Osborne had announced financial support for the route and other Osborne policies have been abandoned.

The airport's spokeswoman responded: "The (Regional Air Connectivity) Fund has proceeded and some routes have been funded, albeit far fewer across the UK than envisaged."

A spokeswoman for the Department for Transport said that £200,000 had been made available for the route, which "remains on the table for this operator".

"The airline bid for funding and it is a commercial decision for them to take the project forward," she added.

Discussions are now taking place with other airlines about taking over the Derry to Dublin route.

It was run in the past by Aer Arann, until the flight fell victim to the recession and the loss of subsidy from the Irish Government.

In truth, the challenges facing the City of Derry Airport go beyond Brexit. One obvious factor is the economic weakness of the region. High unemployment, low average incomes and weak inward investment are not helpful in driving demand for flight tickets.

But City of Derry also suffers, like the two Belfast airports, from the impact of air passenger duty - APD. Ireland used to have its equivalent, the air travel tax, but under pressure from airlines, in particular Ryanair, the Irish Government abandoned this. The country was rewarded by additional flights and increased investment.

The UK Government has shown no signs of similarly abandoning APD. Interestingly, APD is not applied in remote parts of Scotland on the basis that they are dependent on flights and have no practical alternative to using planes for connections with other parts of Britain. London politicians have not been persuaded that the same argument applies to Northern Ireland.

It is easy to see the impact of APD on Northern Ireland airports. A large proportion of passengers use the Dublin airports instead of those in the north because of the lower cost. Moreover, there is more choice of destinations and flight times from Dublin.

Using Dublin Airport is less attractive to passengers in Derry than for those in Belfast. It is a three to four hour journey from Derry, rather than two hours from Belfast, and public transport connections are poor. That is one of the reasons the re-establishment of a Derry to Dublin flight would have been welcomed by many in the north west - particularly by business leaders, who are very frustrated by the weak transport connectivity in the region.

Paradoxically, there is a twice daily flight connection to Dublin from the far western coast of Donegal, from where Aer Lingus Regional runs a service.

It is exactly this type of regional airline that offers the best prospect for the survival of the City of Derry Airport, which has repeatedly had to deal with rumours suggesting that Ryanair may reconsider its commitment.

With the Derry City and Strabane Council providing an annual subsidy of almost £3.5m, there are some councillors who would prefer the airport to close.

An ideal solution would be to entice Flybe to operate regional services from Derry, but Flybe has had its own financial difficulties in recent years. And it has also been hit by the sterling devaluation and economic uncertainty that followed from the Brexit vote.

While we have yet to see the full impact of Brexit, the knock-on effects are now being felt.

Belfast Telegraph

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