Ryanair tight-lipped on terms of Shannon deal

By Dan Danaher

Ryanair are remaining tight-lipped on the terms and conditions attached to its latest deal with Shannon Airport

Asked about the terms and exact duration of the latest deal, Ryanair’s deputy chief executive and chief operating officer Michael Cawley declined to comment but joked “plenty of time, well past my retirement”.

He said it would be “rude” to talk about confidential discussions with airport management.
“Shannon has been competitive on this issue. Shannon would not be doing this if it wasn’t good for them. We wouldn’t have been doing it, if it wasn’t good for us and, happily, we have met in the middle. The abolition of the travel tax has been the critical ingredient in making it happen,” he said.

The last deal between the low fares’ airline and Shannon ran from May 2005 until April 2010.

Ryanair paid €3.5 million in January 2011 to the Dublin Airport Authority to settle a legal action relating to the breach of a five-year contract with Shannon Airport on passenger charges.

It is understood that the airport authority had sought about €5 million in damages from Ryanair, but accepted the lower amount in an out-of-court settlement.

The action related to a five-year discount deal on passenger charges between Ryanair and Shannon that was agreed in November 2004. It involved Ryanair being offered a substantial discount on airport charges – it reportedly paid between €1 and €2 per person – in return for carrying an agreed number of passengers. Shannon’s standard charge at the time was €4 per departing passenger.

Ryanair agreed to increase the number of passengers it carried each year of the deal up to a target of two million by April 2010. The carrier based a number of aircraft at Shannon and met its targets for the first three years.

But it failed to hit its target in year four and announced in February 2009 that it was scaling back its operations at Shannon, blaming the introduction of the €10 travel tax in April 2009 and the decision of the DAA to raise airport fees from €1 to €7.50 in May 2010 and by another 33% the following October.

Last year, Mr Cawley promised to almost treble its passenger numbers using Shannon Airport up to one million annually, under a new deal that would deliver 1,000 airport jobs in total.

However, the sting in the tail was the carrier’s request for a free deal on the 635,000 extra passengers it brought into Shannon.
Asked why Ryanair wasn’t in a position to deliver the additional 250,000 passengers it had promised over a year ago, Mr Cawley pointed out it doesn’t have any extra aircraft as capacity growth in all airports is at a premium.

He explained the airline would have to take aircraft from other European destinations in order to facilitate the extra traffic in Shannon.
“You need to be prudent and judicious at the speed in which an airline expands at an airport. Some of these routes are depending on passengers coming to this country. There isn’t a million people in the Mid-West, so we have to grow passenger numbers in a prudent way. There is no lack of growth in the future. The question is the timing of it. We have to bed down what we have, develop more and bed that down,” he explained.
Asked about the danger of giving too many routes to one strong airline like Ryanair in a relatively small airport, like Shannon, he maintained the answer to this is a requirement for other airlines to develop their own business at the airport.

“Ryanair isn’t going to stop growing because there are too many eggs in one basket. There is a fantastic blend in Shannon between transatlantic, flights to the UK and then Ryanair across Europe. A lot of airports of this size in continental Europe only have one carrier.

“Our history with airports is that if they keep a deal with us, we will keep a deal with them. If anyone puts up the charges by seven times, as the DAA did to us here in Shannon, you are going to do something about it,” he charged.

He claimed this was the only reason why the last Shannon deal between the DAA and Ryanair became unstuck.

Ryanair expects it will need to base at least one additional aircraft in Shannon next April to facilitate the transport of up to 300,000 extra passengers.
“Ryanair would not be expanding in Shannon if it didn’t have a good operational experience. Punctuality and service delivery is very good. It was very difficult to deal with Shannon, commercially, previously and was impossible in some cases. For whatever reason, the DAA couldn’t let Shannon be commercial.

“If you are running a hotel in Limerick you are not going to sell it at the same price as you would in Dublin. The DAA were setting the same charges in Dublin, Shannon and Cork, which was farcical because they were different airports.

“Dublin is a monopoly and they regard themselves as a monopoly. They put in things they don’t need to build and expect us to pay for them. Shannon Airport seems to be doing all the right things to be competitive and efficient,” he added.