John Simpson: Does Northern Ireland require better aviation connectivity?
Congratulations to the Department for the Economy: it has published a frank study of the factors involved in consideration of how to improve Northern Ireland's aviation connectivity, prepared by consultants at Oxford Economics.
There is no big policy change that stands out as a single critical issue although many policy suggestions have been examined.
The key questions were whether (and how) existing air passenger services available to Northern Ireland businesses and in-bound tourists could or should be enhanced using ideas developed by Stormont, local authorities or business groups which would better serve the local economy. Using an index of the number of seats on aircraft movements, relative to the size of the population, Northern Ireland has a lower level of connectivity than the Republic of Ireland, Denmark, New Zealand, Scotland and Finland.
Since Northern Ireland has a population of less than 1.9m people, there is little surprise that direct air connectivity for travel outside the borders of the UK and Ireland is constrained. Direct flights (excluding outward holiday travel usually in southern Europe or to North America) outside the domestic UK and Irish market rely on transfers through hub airports such as Dublin, Manchester and the London airports.
There is no surprise that these main hub airports are based on the nearest large catchment areas. In an assessment of possible route development options, Oxford Economics narrows the policy choices down to consideration of prospects for connecting air services from Belfast airports to, or through:
• A hub in the middle east: Doha.
• North America east coast: New York JFK, Toronto Pearson, Boston Massport.
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• Short haul direct links to: Frankfurt/Dusseldorf, Copenhagen/Oslo/Stockholm, Brussels, Madrid and Munich.
For Derry-Londonderry, the consultants tentatively consider prospects for support for routes to Dublin, Manchester and/or Birmingham.
Within these options, there is no identified priority rank order to sequence development efforts. The consultants review policy levers which Northern Ireland agencies, particularly Stormont, might apply in consultation with prospective providers of air services.
The policy levers examined include:
• Discounting Air Passenger Duty (APD) for selected routes.
• Offering financial support through Public Service Obligation (PSO) agreements.
• Co-operative marketing agreements with interested parties.
• Making available designated route development funds.
The report is constrained by testing the capacity of Stormont, or local agencies, to introduce these levers.
APD has already been discounted for long-haul routes from Northern Ireland.
The removal of APD did not prove strong enough to retain the links to North America with United Airlines or Norwegian but Stormont now has this lever to pull if it would attract another transatlantic service.
The possible elimination of APD on shorter routes, which would be at the expense of the Northern Ireland budget, is not supported since this would be unlikely to offer value for money, subsidising existing services which do not require financial support.
Also, if APD reductions were confined to specific routes, there is the added complication that any decisions would be vulnerable to State Aid rules.
The consultants make three general recommendations:
1. For any potential long-haul routes either to the middle-east or North America, support should offer a combination of zero APD and co-operative marketing assistance.
2. Selected new short-haul international routes should be supported by co-operative marketing and/or a PSO form of assistance.
3. Any new routes from Derry-Londonderry would be best supported by a PSO.
In addition, the consultants open the door to a possible elimination of APD on all flights which would increase Northern Ireland's aviation connectivity but would not offer value for money to Stormont since the tax forgone would come out of the Stormont budget.
A more targeted strategy is commended but this would risk challenge for State Aid compliance.
This report has opened the way to several strands of new policies. The key test is value for money to Stormont.
There are no easy significant gains for the local economy.
No firm conclusions are on offer!
Company report: Unilin Distribution
Unilin Distribution is based in the Greenbank estate in Newry. The main activity of the company is as a specialist distributor of wooden flooring.
The company is a subsidiary of a Luxembourg registered business, Mohawk Industries.
Parent company, Mohawk Industries is registered in the USA.
Unilin reports that it aims to be the leading wholesale floor distributor in the UK and relies on its offer of quality products with appropriate standards to support this focus. In a reference to Brexit, the company says that it will have an impact on its financials which has been taken into account. It adds that for them there in no business risk related with Brexit.
In the last three years, business turnover has steadily increased annually.
In 2017, trading results showed lower operating and pre-tax profits, falling significantly when compared to 2016.
However, in 2018 the profit figures recovered to a pre-tax profit of £1.6m.
Employment in Unilin has remained stable and has increased slightly in recent years.
Post-tax profits have been retained in the business each year.
As a result, the balance sheet value of shareholders’ funds has risen to reach £13.7m at the end of 2018.