Saturday 26 April 2008

Too early to tell whether airport city will fly

ANALYSIS: The DAA has yet to tell us how it will fund the project or how it will manage the scheme, writes Ciarán Hancock

Whatever else its critics might say, the Dublin Airport Authority cannot be accused of lacking ambition following yesterday's announcement that it plans to develop a new €4 billion "airport city" over the next 20 years.

Even Ryanair's response was muted: "We thought that was called Swords," the budget airline told The Irish Times.

It's a hugely ambitious project, particularly when funding is tight on global markets and the cost of borrowing has ticked upwards recently. That's to say nothing of the global economic downturn, the effects of which are being felt here.

It also comes at a time when the DAA is in the middle of a much-needed €2 billion revamp of its airport facilities.

The DAA says the 350-acre development is needed to secure its long-term future and hinted that the revenue streams that the new business district will generate could be used to keep airport charges in check.

DAA chief executive Declan Collier estimated that it would generate about €600 million in revenues for the airport manager over the lifetime of the construction.

This is not to be sniffed at, although the devil will be in the detail. The DAA has yet to tell us how it will fund the project or how it will manage the scheme.

The expectation is that a separate company, with significant private sector involvement, will be set up to manage the construction and operation of the project.

Quite what return the DAA will generate on a continual basis remains to be seen. The €4 billion price tag might also turn out to be just a stab in the dark.

Taoiseach Bertie Ahern said it would be a "strategic gateway" for the national economy and would strengthen the attractiveness of the Dublin-Belfast economic corridor.

The 30,000 jobs will be a huge boon to the area, which explains why Fingal County Council is enthusiastically on board. But only 10,000 will be "new" jobs. The rest will be displaced from other parts of the city or country.

Will there be sufficient demand or will this simply be a white elephant in post-Celtic Tiger Ireland?

The Irish economy has slowed dramatically this year - Goodbody Stockbrokers predicted this week that GDP growth could be just 1.1 per cent.

DAA chairman Gary McGann acknowledged that there are risks involved. "We're planning to take a risk-managed approach," he explained, adding that each phase would be pre-funded and pre-let to tenants.

Airport cities are nothing new. They exist across the United States and in many European capitals. Schiphol in Amsterdam is a good example. China has 15 in various stages of planning.

The trick is making them fly. Dublin Airport City, if completed to plan, would be about one-third the size of the London Docklands, a rather sterile area at night.

But, Park West in Dublin has failed so far to establish itself as a vibrant business district and not just another traffic-choked over-sized industrial estate.

The DAA's plan has to deliver something totally different and more sustainable. With nothing more than a few computer-generated graphics to go on, it's too early to say if the project will actually get off the ground.

Key figures
Cost: €4 billion
Site: 350 acres east of Dublin airport
Size: 600,000sq m of offices; 40,000sq m of retail, hotel and conference facilities
Projected employment: 30,000 (10,000 new jobs to be created)
Time frame: 15 to 20 years, with the first tenants expected in 2012/2013

The Irish Times

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