An interview with Dalton Philips, Chief Executive, daa – operator of Dublin and Cork airports. By Ross Falconer
A passion for aviation is in the genes for daa Chief Executive Dalton Philips (51). His father Tim was an ardent aviator, staging air shows on the family farm in Co Wicklow (south of Dublin) in the 1960s. Dalton got his own private pilot’s licence at the age of 21 and considered a career as an airline pilot before choosing retail.
“Like many Irish people who graduated in the early-1990s, when there was 18% unemployment, I went abroad and built my career in retailing,” he begins.
In a quite astonishing statistic, Philips reflects that he has worked in 14 countries, always in retail, spanning senior leadership roles with Walmart in Brazil, Germany and Spain, before moving to Loblaw (Canada’s leading supermarket chain), then ending with Morrisons supermarkets in the UK. The eldest of his three children has lived in six countries; little wonder that he and his wife Penny thought the time was right to return home to Dublin.
“Then this incredible opportunity arose to return and run daa, in a sector I’ve always been deeply fascinated by at the epicentre of the Irish economy and with vast overseas interests – in addition to operating Dublin and Cork airports, we have investments in Düsseldorf, Cyprus and Riyadh, and a €1 billion travel retail business – Aer Rianta International. It was an opportunity I could not miss.”
Challenging regulator’s charging cuts
Right now, Philips is especially energised by the upcoming regulatory decision on charges for the next five years. In May 2019, Ireland’s Commission for Aviation Regulation (CAR) issued a draft determination, recommending a 22% cut in airport charges at Dublin Airport to €7.50 per passenger for the period from 2020 to 2024. The final determination is expected by early-October.
“We pride ourselves on being one of the lowest-priced airports in our category – if you compare our pricing to other airports of similar scale, we’re 30-40% cheaper,” says Philips. “We’re challenging the regulator to benchmark us against other airports. They should find that we’re extremely efficient and cost-competitive – they just need to examine this properly, and scientifically.”
Dalton Philips curriculum vitae
Dalton Philips (51) became Chief Executive of daa in October 2017, having previously held a number of senior leadership roles in retail and related industries.
2016-2017: Senior Advisor, The Boston Consulting Group
2010-2015: CEO Wm Morrison Supermarkets (UK)
2007-2010: COO Loblaw Companies (Canada)
2005-2007: CEO Brown Thomas (Ireland)
2002-2005: Vice President & COO, Walmart Germany
Threat could halve €2 billion investment
Dublin is slot constrained at peak hours and the terminals at maximum capacity utilisation. A new, second €320 million North Runway is being built to facilitate continued growth, and a completely separate €2 billion investment will support the traffic the runway is expected to generate with new piers and aircraft stands.
Philips is unequivocal: “With a 22% reduction, we can’t finance this €2 billion programme. Therefore, we can’t build the infrastructure the country needs. So, it’s an existential threat for us, and it’s an existential threat for ‘Ireland Inc’, because the entire economy loses out if we can’t build this infrastructure.”
He describes this as “a clear example of short-termism”. Philips believes that airlines, like retailers, live from quarter to quarter, and will always be in favour of short-term price reductions. In contrast, airports must plan “generations ahead” and think about the long-term sustainability of their investments. Meanwhile, the cold reality is that Philips estimates that the proposed airport charges cut will mean axing up to €1 billion off the investment plan.
“CAR can’t have it both ways, it can’t say it approves all of the projects in our capital programme, while simultaneously refusing to allow daa to properly fund the investment.”
Philips also says the timing of CAR’s action is very bad: “With Brexit, we already have unprecedented uncertainties for the Irish economy, and in that context, we should be investing at Dublin Airport and improving, and deepening Ireland’s links with the world, not finding ways to impact trade and tourism.”
He describes a “virtuous circle” in which competitive airport charges have attracted record numbers of airlines and routes. Passenger numbers were again up by 6% in the first seven months of 2019. Indeed, since 2014, when CAR issued its last pricing determination, the number of scheduled airlines at Dublin has increased from 29 to 48, while the number of destinations has increased from 178 to 203 – including many new transatlantic destinations.
DUB “already 30-40% cheaper than peers”
“The role of CAR is to ensure fair and healthy competition, but actually there’s never been more competition within Dublin Airport and between us and other airports – and we offer a price that’s 30-40% cheaper than our peers,” says Philips. “The consumer is already winning by the model that we have and will lose by the changes CAR wants.”
The proposed reduction would also be a “nightmare scenario” for Cork and the other Irish regional airports, which would have to respond by under-cutting Dublin. Philips estimates that Cork Airport will “senselessly” lose around €8 million a year.
“To bring it back to the world I used to occupy in retail, there was a huge problem when I worked in UK retailing centred around the below-cost selling of milk, which caused permanent damage to farming and other associated businesses. That’s what’s now going to happen here! You would have the largest airport selling at way below cost at €7.50 per pax. Then other regionals would have to price under it; they’ll lose money, and the whole regional infrastructure will be impacted.”
New runway to double DUB capacity
Over the past decade, Dublin has rapidly transformed into a centre of excellence for tech companies such as Google, Facebook, Linkedin and Twitter, turning its industrial-looking docklands into what is now known as ‘Silicon Docks.’
This has contributed to the huge increase in passenger traffic. Dublin’s passenger numbers have grown by 50% since 2014, reaching a record 31.5 million last year. That trend has continued in 2019, with the 6% so far this year, although Philips cautions that growth is slowing as the airport nears capacity.
Dublin Airport supports some 120,000 jobs in the Irish economy, including nearly 20,000 on the airport campus. The economic activity underpinned by Dublin Airport, in terms of the spin-off benefits through trade, tourism, and jobs, is worth an estimated €8.3 billion to the Irish economy, according to Philips.
To protect and expand this economic impact, work began on the new €320 million North Runway in February – it will be ready for operations at the end of 2021. Philips salutes the foresight of the planners who 50 years ago safeguarded the land for future use.
Philips explains: “We’re very constrained at the moment, and the new runway will double our capacity while it opens potential to reach parts of the globe that we’re less able to target today, because we just don’t have the capacity.”
South American routes targeted
There are currently no direct links between Dublin and South America, which is a key target, as are more services to Asia where Cathay Pacific already operates to Hong Kong, while Hainan Airlines flies to Beijing and Shenzhen.
Dublin is also continuing to strengthen its position as a key gateway between Europe and North America. Connecting passenger traffic increased by 18% to 2.1 million in 2018; and was again up 9% in the first seven months of 2019.
“We have a very strong, competitive advantage in two areas,” says Philips. “One is a geographic advantage – anyone who flies from Europe to North America goes over Ireland. Secondly, we have a US CBP Pre-clearance facility, so US-bound travellers can undertake all US customs and immigration procedures at Dublin prior to departure, and thereby are able to arrive at domestic terminals in the US – making very speedy downtown arrivals and onward connections. We’re still relatively small as a hub, but we’re growing and have doubled our transfer passengers over the last four years. We see maintaining and growing this strategy as a very significant opportunity.”
Award-winning Cork’s “aggressive business development”
Cork Airport, which won this year’s ACI EUROPE Best Airport Award in the ‘under 5 million passengers’ category, is in its fourth consecutive year of growth, with passengers forecast to grow by 10% to 2.6 million in 2019. Philips notes that the airport has been “aggressive” in its business development, with eight new routes launched in the current summer schedule.
The south west region is also a thriving part of the Irish economy. It is home to several tech firms including Apple’s European headquarters, as well as many pharmaceutical companies (GlaxoSmithKline, Johnson & Johnson, Pfizer).
“Cork has been performing strongly, particularly into Europe with traffic up 20% year-to-date,” says Philips. “They’re really stimulating the market with destination marketing initiatives, and also offering great deals and partnerships to airlines.”
Indeed, Philips says that daa works very closely, not only with its airline partners, but also the other agencies such as Enterprise Ireland, Tourism Ireland, Fáilte Ireland, and IDA Ireland (the agency responsible for attracting foreign direct investment).
“If you take Cathay Pacific’s service from Dublin to Hong Kong, which was launched last year, that was a real partnership in every sense – what we would call ‘Team Ireland’ in the way that we all sat down in Hong Kong as a united stakeholder group together with the Ambassador to thrash out how to make the connectivity happen. As one of the most open countries in Europe and the world, and being a small island nation, we depend on being very outward-looking and working together with all the different agencies to get the desired results.”
At this year’s ACI EUROPE Annual Assembly & Congress in Cyprus, Dublin and Cork joined almost 200 other airports in signing a landmark commitment to become net zero for carbon emissions by 2050 at the latest.
“daa has invested significantly in environmental management in recent years, but we need to do more and committing to net zero emissions is moving up a gear in our efforts,” says Philips.
Dublin and Cork airports are both accredited at Level 2 Reduction of ACI’s Airport Carbon Accreditation. “Dublin Airport is in fact already committed to being carbon neutral by next year, and Cork Airport is also targeting carbon neutrality in the near-term. By 2020, Dublin will have reduced its emissions by 33% compared to 2009 levels, while Cork has reduced its energy usage by 44% since 2008.”
Dublin Airport factbox
- 2018: 31.5 million passengers
- 2018 passenger traffic growth: 6%
- 2019 passenger traffic growth
- (Jan-July): 6%
- Routes: 200+
- Key airline customers: Aer Lingus, Ryanair
- Top 5 destinations: London, Amsterdam, Manchester, New York, Birmingham
Cork Airport factbox
2018: 2.4 million passengers
2018 passenger traffic growth: 4%
2019 forecast: 2.6 million passengers (+10%)
Key airline customers: Aer Lingus, Ryanair
Top 5 destinations: London, Amsterdam, Málaga, Paris, Faro
The commitment to sustainability across both airports includes introducing more low-emission vehicles, switching to LED lighting, reducing energy and water usage, and increasing waste recycling. A solar farm was opened at Dublin Airport last year, and more are planned.
daa was one of the early pioneers of the €1 bottle of water airside, with its Plane Water available at both Dublin and Cork airports, supporting local charities for the first two years. “We want to reduce single-use plastic, so we are testing different packaging alongside the existing Plane Water bottle to better understand consumer preferences,” Philips explains. “The existing Plane Water bottles are 100% recyclable and can be reused, but we wanted to offer consumers an alternative side-by-side to see how each product would perform. We tested a carton made from paper and plant-based plastic, meaning that 82% of the packaging comes from renewable resources. We also tested a resealable aluminium water can, and we sold reusable steel water bottles. Finally, we’ve retro-fitted our water fountains to make it easier to fill reusable bottles and have rebranded them to make them more visible.”
Trialling biometrics to deliver “seamless travel”
daa takes a similarly progressive approach to the passenger experience. In 2016, Dublin became the first airport in the world to introduce “touchless bag drops” where travellers print their bag tags at a self-service kiosk before proceeding to the bag drop counter without the traveller needing to touch any button or screen.
“Dublin Airport also recently partnered with Bristol Airport and an undisclosed airline in a trial using biometrics to help passengers travel seamlessly between the two airports,” Philips explains.
Travellers opting into the SelfPass process had the biometric data from their passport securely stored. The biometric information was used at self-service check-in and was linked to their boarding card and self-drop bag tag. Using facial recognition their image was checked at the boarding gate and cross-referenced with the boarding card information automatically.
“We’re about to launch another significant biometric trial that travellers will be able to opt into,” says Philips. “We regularly communicate with our customers about the introduction of new technology, using it to solve problems and bring new opportunities to enhance the passenger experience.”
Philips adds that behind the scenes Dublin Airport has created an airport geographic information systems app to track its assets in real time. “This monitors the large number of assets across the airport, including lifts, escalators, car parks, security and baggage systems, boarding gates, runways and taxiways. The system enables us to more accurately and efficiently respond to issues as they arise.”
“Planning for future growth”
Looking ahead, Philips enthuses about the opening of Abu Dhabi Airport’s new Midfield Terminal in late-2019, where Aer Rianta International (ARI) has a 10-year contract to retail the perfume, cosmetics, sunglasses and fashion jewellery categories. “I absolutely love airport retail, especially coming from the domestic grocery sector where growth is zero – if you’re lucky! In contrast, ARI is up 8% year-to-date, and our international businesses are all performing well.”
In the short-term, Philips adds that daa is very much focused on challenging CAR’s draft airport pricing proposals. “In the medium-term, it’s about building the new runway, delivering our infrastructure plan, and managing the economic headwinds of Brexit and trade wars. In the long-term, we are planning for the future growth of our airport division and our international airport retail business. All of this requires the right strategy and the right talent – we are totally focused on fully ensuring we have both.”