Guest Column: Can Derry's airport be made sustainable?

Last week saw Derry-Strabane councillors set the rates bill for the coming 2023-24 financial year. Unlike in previous years, however, one of the council’s biggest sources of expenditure didn’t seem to feature much in the debate during that process.

The council-owned City of Derry Airport has always operated at a financial loss, and requires a subsidy in the region of £2m-£2.5m per year to run.

The burden of that usually falls entirely upon Derry-Strabane ratepayers – despite the airport being of benefit to the North-West region as a whole, and reportedly 40% of its users coming from Donegal.

To help address this, and to enable longer-term planning for the facility, in 2021 the council sought a subsidy package from Stormont of £15m spread over 6 years.

In response it was only given £3m for a single year (2022-23), however - relieving the immediate burden on ratepayers and enabling the council to reduce its own funding of the airport to £490,000 for the current financial year. Council is still pursuing a longer term funding package for it from Stormont, though the absence of an Executive/Ministers is likely to hamper that task.

As things stand, therefore, council will need to resume its annual subsidy of c.£2.5m to the airport from April 2023 onwards.

CoDA is of considerable economic, social and tourism value to the north-west of this island – contributing an estimated £15m in Gross Value Added (i.e. additional economic activity) to the region every year, and supporting hundreds of jobs directly and indirectly.

We are undeniably better off for having an airport in our region than we would be without it. However - CoDA has struggled to become economically viable, with the operating subsidy required from local ratepayers over the last 6 years amounting to £12.6m (plus an additional £5m from Stormont). It is unacceptable for the financial burden of a regional airport to fall so heavily upon the residents of just one part of that region. And it is difficult to see how – financially or politically - a cash-strapped council with the highest rates in NI can continue to bail the facility out indefinitely.

Sale of the airport to a private operator has long been sought - but who would buy a struggling small facility that has never broken even ? If CoDA is to have a future beyond this decade – and it is my sincere hope that it does – it is essential that a clear pathway be identified and delivered to migrate the facility away from its current reliance upon local ratepayers.

Ideally by getting it to a stage where it is self-financing – or if not, by ensuring that the burden of subsidising it is shared more widely.

New thinking may be required to help achieve these aims, so here are five proposals to get that conversation started:

1) Link Flight Subsidy to Passenger Numbers

Loganair’s Derry-London flight is a PSO (Pubic Service Obligation) route i.e. a ‘lifeline’ service that wouldn’t exist without financial support. Westminster therefore under-writes the cost of providing the service, to ensure an operator is willing to run it. Loganair were awarded the PSO contract in 2017, and receive just over £2m per year in subsidy for it (£2.2m in 2022-23. N.B.

This is separate from, and in addition to, the annual operational subsidy the airport receives). Prior to that Ryanair flew the route without subsidy – using much larger planes and carrying significantly more passengers – but they withdrew in 2017 and currently appear to have no interest in resuming.

Loganair use small 48 seater planes with tickets priced primarily at business users. As a result, Loganair is more interested in trying to sell one last-minute ticket for £199 (with the risk of that seat remaining unsold) than it is in selling ten seats at £20 each much further in-advance (which is the business model budget operators like Ryanair and Easyjet use). This means that Loganair’s Derry-London route tends to sell relatively expensive tickets on small planes that only occasionally sell out.

Meanwhile thousands of people from the north-west continue to travel to and from London via the Belfast airports each year, because flight prices from there are significantly lower. Loganair’s pricing strategy is therefore minimising and deterring use of our local airport – with the irony that many of the residents who help pay for CoDA via their rates being priced out of using the facility.

Every empty seat in or out of CoDA represents a missed opportunity for our airport and our economy (whilst also damaging the climate). Publicly subsidised planes on such a popular route should be incentivised and compelled to minimise their level of empty seats. When renegotiated, the PSO contract for the route should be altered so that the percentage of subsidy received by the operator reflects the percentage of available seats that they fill on that route.

So if Loganair continue with a pricing model that results in flights being only two-thirds full, for example, they should receive only two-thirds of the total PSO subsidy available for it.

Such a change would most likely result in cheaper tickets and busier flights, channelling significantly more passengers through our airport and region.

2) A Passenger Levy?

Readers who have flown out of Knock will be aware that Ireland West Airport charges a €10 ‘development fee’ to all departing passengers over 12yrs old.

That charge then funds future improvements and some specific running costs at the airport. Derry-Strabane council should consider the introduction of a similar charge for CoDA.

For example - a £5 levy per departing passenger would realistically do little to deter users, but could raise somewhere in the region of £400,000 a year to help the cash-strapped facility.

And to reflect the fact that local ratepayers already contribute to the airport’s running costs, a card could be introduced that would exempt Derry-Strabane residents from the charge.

Such a card could also be widened out to enable local residents to access other council-run facilities at preferential rates versus visitors (e.g. museums, leisure centres).

3) Develop an Airport Business Park

A substantial amount of underused industrially-zoned land exists around CoDA. The Council should work with Stormont/Invest NI to develop a new Airport Business Park or ‘Enterprise Zone’ there.

Having an airport on the doorstep of such a facility would be a significant attraction to potential occupants, and in turn generate more business traffic for the airport itself.

4) A Multi-Purpose Railway Halt at the Airport

A major challenge faced by CoDA is that it has a relatively small catchment population for an airport (and much largely competiton 90mins away).

One way to expand that and to make the facility more accessible in general would be to take advantage of the Derry-Belfast rail line that runs alongside it. A new multi-purpose rail halt at CoDA would significantly extend the airport’s catchment area to the east, help attract new users, and assist with attracting new airlines and routes for the facility.

To be deemed viable, however, such a station would require other uses beyond just the airport.

Additional uses could include serving as a local station for nearby residents in Eglinton, Ballykelly etc ; operating as a ‘Park & Rail’ car park to encourage those travelling to the city to switch out of their vehicles (particularly for major events like Halloween and the Maritime Festival); and serving the new Business Park outlined above.

A feasibility study into a new halt at CoDA is already under way, and will hopefully conclude favourably on this idea.

5) A North-South Funding Package

Derry’s Airport is of clear benefit to the entire cross-border North-West region, yet is primarily subsidised by Derry-Strabane residents alone.

Governments north and south of the border should acknowledge the inequitable nature of this arrangement, and resolve to remove that financial burden from local ratepayers.

A cross-border funding package should be introduced to reflect the cross-border benefit that the airport provides - with the Republic’s ‘Shared Island Fund’ an obvious source for contributions towards this.

Steve Bradley is a regeneration consultant and writer. He can be followed on Twitter at @Bradley_Steve