Breen Questions Ryanair CEO at the Transport Committee

December 18th, 2008 - Pat Breen

 

Deputy Pat Breen’s Questions to Michael Leary at the Transport Committee Meeting on Thursday, 18th December 2008.

Chairman:      Mr. O’Leary has said that already. We will have a question from Deputy Breen and we will then bring in Aer Lingus.

Deputy Pat Breen:      I welcome Mr. O’Leary to the meeting. I acknowledge his contribution to Shannon Airport over the last number of years and the contract is up for renewal in 2010. Returning to the issue of the Aer Lingus slots, Mr. O’Leary said he would reinstate routes from Shannon to Heathrow twice a day. Is that correct?

Mr. Michael O’Leary:  Yes.

Deputy Pat Breen:      At whose expense would Mr. O’Leary do that? There are only so many slots in Dublin, Cork and Belfast. When Mr. Dermot Mannion appeared before this committee he said the only slots available were on lease, and were daytime slots which were no good for connectivity purposes. Who would suffer at the expense of Mr. O’Leary?

Mr. Michael O’Leary:  No one will suffer at our expense. This is an issue to be determined by the management of Aer Lingus.

Deputy Pat Breen:      Mr. O’Leary should answer the question. He stated he would bring back morning and evening slots. Who will suffer? Will Belfast, Dublin or Cork services be reduced?

Mr. Michael O’Leary:  I was going to answer the question. It is ultimately a matter for Aer Lingus management. The obvious way to do it would be to take one slot from Belfast and Dublin, respectively. Belfast currently has five slots and four would be more than sufficient. Dublin has 18 slots.

Deputy Pat Breen:      I thought Belfast had only four slots.

Mr. Michael O’Leary:  I think it has five, but if it has four that is fine. Belfast can go to three. Dublin, which has 18 slots, can go to 17. That is not an unreasonable position, particularly where, thanks to Ryanair’s ownership of Aer Lingus, the fares on routes from Belfast, Dublin, Shannon and Cork to Heathrow will be lower than is presently the case with Aer Lingus.

Deputy Pat Breen:      Mr. O’Leary spoke on the need for competition and against monopolies. He said Ryanair makes mistakes. Ryanair already has 60% of the business in Shannon. If Aer Lingus and Ryanair joined together they would control 90% of the business at Shannon. Is that correct?

Mr. Michael O’Leary:  No. We have 100% of the short-haul business at Shannon.

Deputy Pat Breen:      We are talking about 60% of it.

Mr. Michael O’Leary:  There are two different markets. Aer Lingus has 100% of the long-haul market at Shannon and Ryanair has 100% of the short-haul market. One would not be changing any monopolies.

Deputy Pat Breen:      I believe it is 60% overall. Mr. O’Leary has brought a significant amount of business to the airport but many airlines have left the route. We lost EasyJet, Hapagfly, Flybe, Centralwings and many other German charters. If Mr. O’Leary has a monopoly, there will be little competition.

Chairman:      I mentioned that on the last occasion Mr. O’Leary was here. He said then he was losing money on Shannon and if it continued he would close down operations in it in the next 12 months. He will have an increase in landing charges in Shannon in accordance with the agreement.

Is there a danger that Mr. O’Leary could pull out of Shannon? Regarding regional airports, he said, “Close them down. Forget about Aer Arann”. What will happen in that situation if Mr. O’Leary is successful?

Deputy Pat Breen:      Mr. O’Leary has said that he is losing money in Shannon. Why should he stay there if that is the case? He will not remain there for our good. He is happy making money. He has a contract which, I believe, is up for renewal in 2010.

Mr. Michael O’Leary:  Yes, 2010.

Deputy Pat Breen:      What is Mr. O’Leary charged at the moment? Is it approximately €1 per passenger?

Mr. Michael O’Leary:  For the incremental passenger, yes

Deputy Pat Breen:      Will he will be asking the Shannon Airport authorities to pay him to come in?

Mr. Michael O’Leary:  That would be a good opening negotiating position. I will try as best as I can to answer the various questions. EasyJet showed up at Shannon and pulled out long before Ryanair announced a base there, as did Hapagfly, Express and others. That is distant history. No one has pulled out of Shannon since Ryanair opened its base there, with the exception of Aer Lingus.

Our response to its withdrawal from Shannon was to go in and add more flights to Luton, Stansted and Gatwick, which enhanced Shannon’s connectivity.

Deputy Pat Breen:      Centralwings has gone since Ryanair went into Shannon.

Mr. Michael O’Leary:  Centralwings was not competing with Ryanair on any if its routes.

Deputy Pat Breen:      It flew to Poland.

Mr. Michael O’Leary:  It was not competing with Ryanair. Centralwings pulled out because it could not make money flying to and from Ireland.

I did not say at the last meeting that if Ryanair continued to lose money in Shannon we would pull out. I said the opposite, that I do not mind, we will continue to make losses at Shannon and meet our passenger traffic forecasts. However, if there is any increase in costs at Shannon in 2010 we will not accept paying higher costs at a base where we lose money. The Shannon Airport authorities are aware of that. We will continue to lose money at Shannon. I put that to the members of the committee and compared and contrasted with what Aer Lingus has done in Shannon, which is to cut and run, as it did in Kerry and Knock.

It is somewhat offensive. Everyone questions Ryanair’s commitment to growth and lowering fares at airports where we effectively have a monopoly. We have a monopoly at Shannon and have more than doubled the traffic from fewer than 1 million passengers to more than 2 million. We have done it by offering lower fares at Shannon and have lost money doing so. People should stop questioning Ryanair’s commitment to this country or regional airports in the country because no one can question it.

The next group to appear before the committee should be asked what it has done for the regions of Ireland, which is nothing. What it has done for Dublin in the last two years has been to increase fares and scalp passengers for unjustified fuel charges. In the last two weeks it is rumoured to be talking about restoring the Heathrow to Shannon route. One wonders why. It is talking about four times a week, which is not a service. It is rubbish.

Chairman:      We have to conclude.

Mr. Michael O’Leary:  I am sorry. The Chairman asked a question on regional airports. It is very important to be accurate in what I said at the last meeting. I said I believed there is no future for the small regional airports of Ireland, such as Waterford, Galway, Sligo and Donegal, which fundamentally depend on a loss-making airline, Aer Arann, and receive massive Government subsidies on an annual basis. They receive €15 million per year.

We must question a Government which, in a recession when teenage girls are not receiving medical screening for the sake of €10 million, continues to give a subsidy of €15 million per year to Aer Arann to provide business people in the west of Ireland with connections to flights to and from Dublin, when they have good motorways and train services.

The regional airports that will survive and thrive under the Ryanair-Aer Lingus merger proposal are Dublin, Cork, Knock, Shannon and Kerry which have jet runways. In a country with 4 million people, trying to sustain five international airports is trying to do something which does not happen anywhere else in the world. It could not happen without Ryanair, Europe’s lowest fare and largest airline sustaining these things because we have a commitment to this country. Sadly, our national airline does not and chose to switch the Shannon slots to a different country.

Aer Lingus should be asked about its commitment to this country. It has not demonstrated one. We have been lowering fares for the last two years while it has raised them. We have been growing our business while it has declined. This is the future and it is sadly in the distant past.

Chairman:      I put to Mr. O’Leary that the Government has a regional policy. The need for a connection from west Donegal to Dublin is important. The Government must continue to have that regional policy and it costs money to have it in place because it is a subsidy. From the regional point of view, Mr. O’Leary will not get away with closing down what are significant services from the airports which give connectivity to the regions.

I thank Mr. O’Leary for his contribution. It has been very useful for us to have the opportunity to hear what he has to say. I was vehemently opposed to the idea of a takeover in the past. I have an open mind about it; I do not say I support it. I am interested to hear the response from Aer Lingus.