Economic Impact of the Development of Dublin Airport As a Hub
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Economic Impact of the development of Dublin Airport as a Hub Reliance Restricted 07 September 2018 | Final Ernst & Young Tel: + 353 1 475 0555 Business Advisory Services Fax: + 353 1 475 0599 Harcourt Centre ey.com Harcourt Street Dublin 2 Ireland Reliance Restricted 07 September 2018 Donal Moriarty Chief Corporate Affairs Officer Aer Lingus Hangar 6 Dublin Airport Dublin Economic impact of the development of Dublin Airport as a Hub Dear Donal In accordance with the terms of the engagement letter with you, we have assisted you in the assessment of the economic impact of the development of Dublin Airport as a Hub (“The Purpose”). This report sets out our assessment of these risks. Limitations of Scope We have not, except to such extent as you requested and we agreed in writing, sought to verify the accuracy of the data, information and explanations provided by yourselves, and you are solely responsible for this data, information and explanations. We have therefore relied on the information provided by you to be accurate and complete in all material respects. Use and distribution of this report Ernst & Young only accepts responsibility to the addressees of this letter on the basis of the engagement agreement and assumes no responsibility whatsoever in respect of or arising out of or in connection with the contents of this letter to parties other than yourselves. If other parties choose to rely in any way on the contents of this letter they do so entirely at their own risk. To the fullest extent permitted by law, Ernst & Young and its members, employees and agents do not accept or assume any responsibility or liability in respect of this report, or decisions based on it, to any reader of the report. EY reserve all rights in this report. We appreciate the opportunity to have provided EY’s services to Aer Lingus. Should you have any queries or comments regarding this report or if we may be of any further assistance, please do not hesitate to contact me on 01 221 2611. Yours sincerely Simon MacAllister Partner D Dennis, J Fenton, M Gageby, J Hannigan, S MacAllister, S MacSweeney, B McCarthy, D McSwiney, J Maher, A Meagher, I O’Brien, R O’Connor, F O’Dea, E O’Reilly, C Ryan, P Traynor, A Walsh, R Walsh. The Irish firm Ernst & Young is a member practice of Ernst & Young Global Limited. It is authorised by the Institute of Chartered Accountants in Ireland to carry on investment business in the Republic of Ireland. Dashboard 1 Executive Summary 2 Context and Rationale Table of contents 3 Economic Impact of the Hub 4 Qualitative Benefits of the Hub 5 Literature Review Executive Context and Economic Impact of Qualitative Benefits Summary Rationale the Hub of the Hub 1 2 3 4 Page 3 Page 8 Page 25 Page 35 Literature Review 5 Page 42 07 September 2018 | Final Economic Impact of the development of Dublin Airport as a Hub Page 1 Page 2 07 September 2018 | Final 1 Executive Summary 07 September 2018 | Final Economic Impact of the development of Dublin Airport as a Hub Page 3 Economic impact of the development of Dublin airport as a hub €18.6bn 33,950 GDP additional jobs 2018 - 2033 in 2033 €6bn Additional Exchequer revenue 2018 - 2033 Tourism Aeronautical and Capital Tourism Aeronautical and €10.4bn non-aeronautical €317m 26,990 non-aeronautical €7.9bn 6,960 €3.3bn €784m €2.0bn Payroll Profits Consumption 5m Extra Connectivity Exports to the Cargo traffic Tourism Employment Retail spend Passengers generated US generated increased by opportunities increased by in 2033 through increased through ‘stopover’ tourism in aviation greater dwell increased long through greater increased through the related time of and short-haul frequencies and widebody aircraft Dublin Gateway employment, connecting traffic services destinations to operation tourism and at Dublin airport US cities wider business activity Page 4 Economic Impact of the development of Dublin Airport as a Hub 07 September 2018 | Final 1 Executive Summary 1 Executive Summary 2 Context and Rationale 33,950 jobs could be created by 2033 by the successful development of a 3 Economic Impact of the Hub 4 Qualitative Benefits of the Hub hub at Dublin Airport 5 Literature Review Total additional Irish GDP Additional employment by Average additional Additional Exchequer 2033 employment - Capital revenues Investment €18.6bn 33,950 jobs 1,147 jobs €6.0bn 2019 - 2033 2033 2019 - 2023 (annual average) 2019 – 2033 The hub will generate an In 2033, the hub would have During construction, an The Exchequer will benefit incremental €18.6bn of GDP accounted for an additional average of 1,147 jobs would be from increases in a variety of from the following sources: 33,950 jobs in the Irish created taxes including VAT, excise, economy, across the following corporation tax and payroll ► Tourism (2021-2033): areas: taxes, from the following areas: €10.4bn ► Tourism (2033): 26,990 jobs ► Tourism sector (2021- ► Aeronautical and non- 2033): €4.0bn aeronautical (2021-2033): ► Aeronautical and non- €7.9bn aeronautical (2033): 6,960 ► Aeronautical and non- jobs aeronautical expenditure ► Capital (2019-2023): €317m (2021-2033): €1.9bn ► Capital Investment (2019- 2023): €129m 07 September 2018 | Final Economic Impact of the development of Dublin Airport as a Hub Page 5 1 Executive Summary 1 Executive Summary 2 Context and Rationale Dublin airport has an opportunity to develop significant traffic growth if it can 3 Economic Impact of the Hub 4 Qualitative Benefits of the Hub develop itself as a hub airport 5 Literature Review Hub airports have been shown to have significant benefits: As Dublin Airport strengthens its position as a Hub so too will the associated qualitative benefits for FDI and indigenous firms. FDI has played a significant role in ► Reduced airline costs per passenger through economies of traffic density allows advancing Ireland’s economic development over the past number of decades and airlines to offer competitive fares, boosting demand for airlines evidence shows that there strong links between increased connectivity and ► Competitive fares, increased route frequencies and direct access to a wider harnessing inward and outward investment. selection of routes that would otherwise be feasible, offer benefits to all Airport hubs are shown to act as a facilitator for development and expansion. customers Schiphol Airport in Amsterdam, for example, has successfully developed an airport ► Airports benefit from hub and spoke models through higher retail revenue and business park of more than 1,000 firms across a wide range of sectors. There are freight opportunities created by the increased flow of passengers currently 37 FDI-backed firms within 5km of Dublin airport – some way off the level of development in Amsterdam but an indication of the importance certain Dublin airport has a number of advantages which would support it’s development as firms/sectors put on access to transatlantic connectivity. a hub: The Government recognises the growth occurring at Dublin Airport and the benefits 1. Strong network carriers already operating at the airport for the wider economy and has outlined, through its policy document, the National 2. A large route network (short and long haul) which support the aggregation and Aviation Policy, how it intends to develop Dublin Airport as a hub in Europe, utilising connection of passengers its natural advantage and dealing with capacity issues at the airport. 3. A geographic advantage to service the Transatlantic market As passenger numbers grow, Dublin Airport’s capacity has become strained. Numerous pinch points across the airport have been identified, including the Dublin Airport has recorded significant growth over the past number of years with runway, contact stands, immigration facilities and security. particularly strong growth in the Transatlantic market. Aer Lingus has delivered a significant element of this growth however growth has also come from existing Our analysis and identified economic benefits are based on a defined level of carriers, but importantly, also from new carriers such as Air Transat, WestJet and investment in infrastructure and passenger growth. Any investment in excess of Norwegian. these assumptions would drive additional growth and economic benefits which are not included in our analysis. Extra routes both short and long haul have contributed to Dublin Airport facilitating 1.6 million connecting passengers in 2018, with one third of all seats on Transatlantic routes occupied by connecting passengers. Another contributing factor has been Ireland’s status as the only country in Europe to have US pre- clearance. This service is particularly attractive to customers who wish to continue on a connecting flight once they arrive in the US and allows airlines to use domestic terminals. Page 6 Economic Impact of the development of Dublin Airport as a Hub 07 September 2018 | Final 1 Executive Summary 1 Executive Summary 2 Context and Rationale 3 Economic Impact of the Hub 4 Qualitative Benefits of the Hub 5 Literature Review This report assesses the economic impact on the Irish economy of the proposed enhancement of Dublin Airport as an international hub. The report is structured as follows: ► Section 2 sets the context and rationale for the development of a Hub at Dublin Airport. We outline the opportunity that exists, why Dublin can take advantage of the opportunity and what is required to do so. ► Section 3 contains findings from the Economic Impact Assessment. The primary purpose of the economic impact is to ascertain the contribution that a Hub at Dublin Airport would make to the Irish economy by way of additional GDP, employment and Exchequer revenues. Impacts are captured during the construction phase and subsequent operational phase of the development. Catalytic impacts, in the form of increased tourism revenue, are also reported. ► Section 4 assesses the qualitative economic benefits of a Hub development in Dublin and focuses on the positive impacts on trade and business investment associated with improved connectivity.