DAA has to spend more on infrastructure to meet increasing demand, writes Emmet Oliver.

It is difficult to say whether the continuing love affair between Irish people and foreign travel has been good or bad for the Dublin Airport Authority (DAA), formerly Aer Rianta.On the one hand, it has delivered strong profit growth for the company and rising sales.

But equally, airport infrastructure, particularly at Dublin airport, has struggled to cope with the rising number of passengers.

The airport authorities have also struggled to cope with the demands of no-frills carriers like Ryanair, which are constantly seeking a reduction in airport charges.

The annual report and accounts of the authority illustrate the problem.

The number of passengers using Dublin airport was up 7.7 per cent at 18.4 million, but the company will have to spend €1.2 billion over the next four years just to cope with the expected demand.

That €1.2 billion will be spent on the second terminal, on two new passenger piers and other associated infrastructure.

This is expected to meet future demand based on traffic forecasts, but forecasts are not always reliable.

Over the last few years, traffic growth at the three airports has hovered between 3 and 6 per cent, but in 2005 it jumped dramatically by 12.4 per cent. In Dublin, it increased by 7.7 per cent.

Most of the activity is driven by Ryanair and Aer Lingus, which supply 66 per cent of the traffic at Dublin airport for instance.

Both these airlines, but most notably Ryanair, have long complained about the level of airport charges at Dublin.

Yesterday, the directors of the airport authority struck a different tone.

They said that the aviation regulator's decision not to grant the company a €7.50 per passenger charge could jeopardise the €1.2 billion investment programme.

They also said that Dublin airport had one of the lowest airport charges per passenger in Europe.

The chairman of the authority, Gary McGann, also took up another assertion made by Ryanair on several occasions - that the DAA should sell off some of its overseas assets and use the proceeds to reduce its charges and pay for the new infrastructure itself.

It has done this in some respects - for example, the Great Southern Group is due to come on the market next month after losing €4 million in 2005.

But McGann, who works with Smurfit Kappa Group, said that it would be a "foolish organisation that raids all the cupboards" just because things were going well at present.

The authority has a range of overseas interests, including stakes in Birmingham, Düsseldorf and Hamburg airports and duty free operations in Bahrain, St Petersburg, Moscow, Montreal, Kiev and a retail operation at New York's JFK.

The airport authority has not disclosed the value of these interests, but clearly they are significant and would go a long way toward paying for badly needed infrastructure.

But McGann said the airlines only wanted them sold so that airport charges would be subsidised.

"We will not dispose of assets that are generating a satisfactory return, and that are likely to enhance their value over time, in order to provide our airport users with an inappropriately subsidised passenger charge," McGann said in probably the most hard-hitting part of yesterday's presentation.

While not specific about who these "airport users" were, there was little doubt that Ryanair was the subject of the authority's remarks.

Ironically, the constant controversy generated by Ryanair and other airlines about passenger charges has obscured the fact that the airport authority is now generating more than 50 per cent of its revenue from car parking fees, food and drink sales, retail activities and property transactions.