The aviation regulator has questioned whether it makes sense for State airport company DAA to pay an annual dividend worth tens of millions to Government coffers.

DAA paid a dividend of €40m into the Exchequer last year – making it the second biggest semi-State contributor to the Government after Ervia.

Any move to lower the profitable company’s dividend could cause a political storm. But the aviation regulator has suggested – as part of its plan to slash airport charges at Dublin Airport – that it may not be appropriate for DAA to pay such a large dividend.

DAA owns and runs Dublin and Cork airports for the State but also has lucrative international airport and duty free assets and its shareholder – the Government – has long benefited through the dividend from the success of these businesses.

But the Commission for Aviation Regulation (CAR) argued as part of its draft determination on the maximum level of airport charges at Dublin that infrastructure investment by DAA is greatly adding to the value of the company, benefiting the State.

DAA, it said, was planning to grow its regulated asset base by almost 90pc and “this will increase the value of the company to the shareholder, while the shareholder will not have invested any equity (other than retained earnings)”.

“A rule of thumb, in terms of dividend policies, is that growing companies give return to shareholders via the value growth of the company rather than by paying out dividends,” said the regulator.

“With this in mind, the dividend policy should consider that Dublin Airport is seeking to deliver key pieces of national infrastructure in the period, and a lower dividend requirement would reduce debt and hence the financial risk the company would need to take on to achieve this,” it said.

DAA did not comment on the regulator’s dividend suggestion, but has said that it is extremely concerned at CAR’s proposal to reduce airport charges at Dublin Airport by more than 22pc over the next five years, describing the plan as “fundamentally flawed” and a threat to growth and development at the airport.

Source: Read Full Article