Arms-Length Airport Won’t End Subsidies

A plan to create an arms-length organisation to run Ronaldsway will reduce, but not end, the reliance on taxpayer money.

Tynwald will be asked to support moving to step two of the arms-length process later this month.

Having been delayed by the pandemic, the move to an arms-length run airport has taken flight under the Cannan administration, with the latest report recommending that the gov continuing on its ‘stepped transitional process’.

In this year’s Budget, the airport is ‘subvented’ by £6.4m, with aeronautical income presently makes up approximately 75% of the income of the airport.

However, a report in 2018 by York Aviation LLC (the York Report) identified issues around commercial opportunities at Ronaldsway, and the ‘low level of non-aeronautical income’, as a key driver for change.

The gov’s latest report, which is due to go to Tynwald later this month, said: ‘That [York] report suggests that the current operating model is characterised by a lack of focus on revenue generation, with income being seen as a ‘contribution to covering the cost base, rather than as a primary business driver’, concluding that the airport has little ability or incentive to control costs.

This lack of focus on non-aeronautical income is highlighted by an average spend of £1.98 per passenger, which is perhaps reflective of the lack of offering at Ronaldsway, with its small shop, Costa and bar.

The gov’s report said: ‘With the introduction of additional commercial support and expertise, York suggested it may be possible to improve non-aeronautical revenue per passenger, and increase income from retail and catering, car parking, and potentially also aircraft hangarage.’

It could be argued however that this fails to note the small size of the departure lounge at Ronaldsway, or that, if you’re like Gef, many of us turn up, go through security and hope to board in as short a time as possible.

The gov report says that the current structure ‘makes it difficult to focus on commercial outcomes’ and therefore recommends that the gov continue with its arms-length plans to remove bureaucracy around decision making at Ronaldsway.

Through the creation of an, at present, shadow board and eventual move to an arms-length operation with a board responsible for the airport’s operation, it is believed that airport can make better use of its commercial potential, including the land which is in gov ownership around it.

Despite these changes, the York Report calculated that within five years, the airport ‘could see a reduction in the deficit of up to £995,000’.

The gov’s own report says: ‘Any reduction in subvention would not be immediate, however if changes were made it would at least begin the process of reducing the potential amount paid in future years.’

You can read the full report here.