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Future of City of Derry Airport dependent on £750,000 of additional funds

Council to engage with government to secure Airport’s sustainability

5 airport

Members of Derry City and Strabane District Council’s Governance and Strategic Planning Committee today agreed to approve an additional £750,000 of funding to secure the future of the City of Derry Airport.

It paves the way for the Council to engage formally with Central Government to request financial assistance to secure the sustainability of the City of Derry Airport beyond 31 March 2021.

At the meeting, members agreed to approve a "maximum additional underwrite of funding for CODA between now and 31st March 2021 of £750k from in-year capital savings."

The total funding required to ensure the airport can continue to operate beyond 31st March 2021 is a sum of almost £6m per annum. This requirement includes continued operating subsidy (£2.3m-£2.6m), London PSO subvention (£2.1m-£2.5m)
as well as capital costs to ensure compliance with aviation regulations.

Councillors heard how the City of Derry Airport while facing a number of challenges, currently offers customers five key routes across the UK including London, Glasgow and Manchester, Edinburgh and Liverpool providing better connectivity than ever for both businesses and visitors to the region.

The Airport, a key employer that positively impacts on local economy through business productivity and tourism and provides an overall estimated annual GVA to the NI economy of £14.2m, is working very proactively on route development to build on this foundation and improve links to the North West to open up the gateway to the City and Region.

Members of the committee heard in detail about the significant amount of work done to secure Government support up to the end of March 2021, and how additional Government funding for a minimum six-year period would assist in retaining this connectivity to key destinations in the UK beyond the 31 March 2021, while essential rail infrastructure investment across the North West is progressed, in particular the A6 and A5.

It was outlined to members that the rationale for additional support for the airport would further consolidate the work that has gone into developing the airport and further developing its potential as a vital link within Ireland, the UK and Europe. The move will protect investment in the region, build confidence in our ability to deliver as a centre for business and promote further interest in the North West.

Members were told that ultimately the main objective of Council and its strategic partners is the growth and development of the City and Region. The airport has a pivotal role to play contributing to the delivery of a number of priorities outlined in a series of key relevant government strategies including the draft Programme for Government, Regional Development Strategy, draft Industrial Strategy for Northern Ireland and the ROI National Development Plan 2040. 

Members were informed how UK Government funding subvention for the PSO route from Derry to London is currently provided at 100% until March 2021 but will reduce to 50% thereafter. Council would not have the financial resources to bear this additional cost beyond that point and the full support of Government or Governments for the continued operation of the Airport beyond March 2021 is required.

The Council Chief Executive outlined to Members the need for Government(s) to work with the Council to provide additional financial support in the form of continued 100% PSO subvention as well as operational and capital funding support for the Airport post 2021 to ensure its medium term viability in providing continual connectivity to London and other key UK destinations.

Members of the committee heard of the current financial challenges being faced by the Airport. Reduced passenger numbers have had a substantial impact on income and changes to flight schedules has resulted in the airport to stay open longer, which has in turn had an impact on the operational costs.

Other challenges include -  Air Passenger Duty (APD) of £13 the single issue affecting growth in the UK and particularly NI; Route development, which is directly linked to APD because the heavy tax burden imposed by APD, makes it more attractive for carriers to start up new routes elsewhere. The significant Central Government funding provided to airports in other regions of the UK and Ireland to ensure the sustainability and operation of small regional airports, the current global economic crisis including the lowering of disposable income, high fuel costs and lowering the tendency to fly and the uncertainty around Brexit.

It was outlined how European Commission state aid guidelines acknowledge that under current market conditions airports operating under 200,000 passengers are experiencing difficulty covering operational costs.

Members of the Committee also agreed that Council underwrite an additional sum up to £750,000 to keep the City of Derry operational to March 2021 as an interim measure to allow the Airport to operate whilst engagement continues with Government. Members were informed that this additional subvention would be allocated from in-year capital savings and therefore have no recurring impact on rates.

Members were informed that this additional support will also directly protect up to 110 jobs at the airport, a further 70 jobs through indirect and induced employment and a further 200 jobs through catalytic impacts of business productivity and tourism and provides an overall estimated annual GVA to the NI economy of £14.2m and that said despite the challenges, intensive cost saving measures carried out by the Airport Board over the past number of months were not sufficient to mitigate against these pressures and an increased subvention was necessary.

Members were also advised that moving beyond 2021, it is hoped that the proposed formal engagement with Central Government in relation to contributions towards ongoing revenue costs would allow Council’s current funding to substantially reduce with associated savings then being available for other key strategic projects identified in the Council’s Strategic Inclusive Growth Plan.

It was outlined at the meeting how the Strategic Inclusive Growth Plan 2017- 2032 recognises that highly effective transport infrastructure is vital for the economy and the integral role played by City of Derry Airport in making Derry-Londonderry and the wider North West City Region a more attractive and competitive proposition for inward investors. Its importance in terms of the development and growth of the region’s tourism potential, whilst also delivering economic and social benefits to local communities and the North-West region as a whole, were relayed to members.

Members were informed how a key action highlighted within the Strategic Plan is improved connectivity and frequency of flights from City of Derry Airport to major business hubs. The development and sustainability of the Airport and the need for support from government for City of Derry Airport to help the development of new routes, improve connectivity and boost economic growth for the wider city region by increasing access, is also included in the Strategic Growth Plan. 

The proposals agreed by members are subject to ratification by Full Council later in the month.

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