Increased traffic and income coupled with a reduction in deficit funding required to operate its 10 airports were highlighted in the annual report and group accounts for 2006/07 published by Highlands and Islands Airports Limited today (8 August 2007).

Total passenger numbers at HIAL’s airports increased by 7% to a record 1,232,782 in the sixth consecutive year of growth while aircraft movements rose by 9% to a record 101,223.

This growth was partly due to new routes and additional frequency while the introduction of the Scottish Executive’s Air Discount Scheme in May 2006 made air travel more affordable to residents of the region’s remoter communities and has stimulated traffic at HIAL’s airports.

Subsidies received from the Scottish Ministers for the year amounted to £22,198,000, made up of revenue of £14,197,000 and capital of £8,001,000. Revenue earned from traffic operations and other activities increased by 14% to £13,635,000. It was the second year in a row that HIAL’s revenue subsidy requirement reduced and it now stands at a five year low. This was achieved through a combination of business development, the removal of the Inverness terminal PFI and associated charges last year, an increase in revenue earned and efficiencies achieved within the business.

The trading profit for the period, after taxation, amounted to £1,257,000. This was partly due to a profit realised from a sale of non-operational land at Wick for commercial development. The Scottish Executive agreed that this income could be held as cash at the year end and used to fund future property development projects at HIAL’s airports which will help to offset revenue subsidy requirements and support economic development activity in the region.

HIAL’s responsibility for maintaining and, where appropriate, upgrading airport infrastructure required capital investment of £9,497,000 to be made in the year and included the following major works from our rolling capital programme.

• At Benbecula, improvements to the terminal building required to meet increased security and operational requirements were completed at a cost of £456,000.
• At Inverness, a project to provide additional aircraft parking to accommodate continued growth on the south apron was completed at a cost of £352,000. A long stay car park was built to improve facilities for passengers at a cost of £691,000. The north apron was strengthened to provide additional parking for larger aircraft at a cost of £1,433,000. A project to provide a dedicated airport radar service commenced at a cost of £696,000. As part of a company wide project to improve safety, areas of the airfield were ramped at a cost of £345,000. A replacement fire training simulator was purchased, to facilitate the ongoing requirement for hot fire training, at a cost of £365,000.
• At Sumburgh, the 09/27 runway extension project was completed at a cost of £2,862,000 in the year giving a total cost to date of £9,740,000. The 09/27 runway extension project has been developed by the Sumburgh Airport Strategic Partnership, which comprises Shetland Islands Council, Shetland Enterprise, Sumburgh Airport Consultative Committee and Highlands and Islands Airports Limited. The project attracted partnership funding during the year of £1,250,000 from the Scottish Executive, £852,000 from Shetland Islands Council and £702,000 from the European Regional Development Fund via the Highlands and Islands Special Transitional Programme 2000-2006.
• A new car park was built at Sumburgh to increase capacity at a cost of £333,000. Areas of the 09/27 runway were also resurfaced during the year at a cost of £927,000.
• At Wick, a water main was replaced and improved at a cost of £169,000.

Future infrastructure requirements at Inverness, HIAL’s largest airport, were set out in the airport master plan which was published in draft format for public consultation in December 2006. The largest single element within this plan is the need for additional terminal capacity to meet regulatory and commercial needs. Detailed planning work to inform a capital submission to the Scottish Executive’s 2007 Spending Review has been completed.

In February 2007, it was confirmed that HIAL would assume operational and management responsibility for Dundee Airport from Dundee City Council with effect from 1 September 2007. Work therefore commenced to ensure a smooth transition of the operation, including the provision of adequate additional subsidy to HIAL from the Scottish Executive to support the Dundee operation.

HIAL, as a partner in the joint venture, participated in work to bring forward the first phase of development on Inverness Airport Business Park (IABP). The air connections provided by the airport and the location of IABP mean that it has a significant role to play in attracting inward investment and enabling business growth in the area in the years ahead. Preparatory work for a revised planning submission to The Highland Council was initiated and the first development site, for an airport hotel, was brought to the market, attracting a high level of interest. In the longer term IABP is planned to accommodate a high amenity, mixed use development comprising office, science park, light industrial, freight and aircraft maintenance accommodation for up to 5,000 jobs. It is therefore a project of strategic significance for the whole region.

David Sutherland, HIAL’s chairman, said: “We continued to focus on development and efficiency in the operation of our 10 airports. Our strategic objectives for the year were to provide safe and fit for purpose airports; achieve enhancements to the region’s air network; and to provide value for money to our shareholder, the Scottish Ministers.

“The senior management team at HIAL achieved increases to traffic and income along with a reduction in the total revenue subsidy requirement from the Scottish Executive and are to be commended for this. The region has therefore benefited from better access to air services while the performance of the business has improved markedly.”

Mr Sutherland also paid tribute to his predecessor Sandy Matheson who retired as chairman of HIAL in February this year.

“Sandy has a long and distinguished record in public service and brought his many skills to bear at HIAL. His contribution to HIAL’s work and development was considerable; driven by a desire to see the company be efficient and outward looking,” said Mr Sutherland.

HIAL’s annual report and group accounts for 2006/07 can be downloaded from the corporate section of the www.hial.co.uk website.