A MEMBER of the board of Shannon Airport Authority from 2003 to 2008, Tadhg Kearney claims the Clare airport is on the cusp of being made a victim of ‘corporate larceny’.

 

Mr Kearney also said a broader view needs to be taken regarding Shannon’s debt and matters like the hundreds of millions generated by the sale of the Great Southern Hotels and the ARI shareholding in Birmingham need to be borne in mind.

“My own personal view is that of the €800 million released from the sale of non-core assets over the last 10 years, a fair distribution would have been half to Dublin, a quarter to Cork and a quarter to Shannon, for arguments sake,” he said.
Mr Kearney, who owns a Limerick City-based jewellery business, is a past president of the Limerick Chamber of Commerce and is also a past chair of the Air Transport Users Council of Chambers Ireland. He also wrote one of the first papers on the separation of the three State airports in 1996.
On Monday, he said Shannon didn’t benefit proportionately from the sale of former Aer Rianta assets and it has a major claim to Aer Rianta International (ARI).

“There are two points I’d make. One is about ARI and the other is about the sale by the DAA over the last six or seven years of the non-core airport assets. By that I mean assets that are not directly attached to Cork, Dublin or Shannon airports. In my view, in the interim situation when the DAA not only operated Dublin Airport but was also the corporate body for all three airports, the money from the sale of non-core assets should have been held in trust by the DAA, pending the separation of all three airports and the distribution of that money.
“What happened was that money was plundered and used to build T2 in Dublin. That to me is nothing short of corporate larceny, as well as being bad corporate governance. They’ve already plundered the company in that particular way.

“Then come to ARI. ARI was set up by a management team in Shannon when it was profitable in the ’80s. It was also the main backbone of the retailing operation. Dublin had only a small retailing operation because Shannon had the Atlantic business and it invented and created world duty free. The skill set that was within the company was in Shannon and it was that skill set that was used by the management to turn ARI into a world-class airport retail operator.
“That was done with a specific objective in mind. They weren’t concerned at the time about the stopover going, more than they knew that duty free in Europe was going. They knew that was the backbone of the business model in Shannon Airport so they set up a company with a specific objective to develop ancillary services that would underwrite the future business model for Shannon Airport.

“This wasn’t something that was an accident of history, it was set up to underpin the future business model of Shannon Airport and that was done with the full consent of the then Aer Rianta Board and people like Dermot Desmond, who was then chairman of the company.”
However, he said ARI couldn’t be looked at as merely a vehicle to cover losses at Shannon. “There might be a misconception that ARI should be handed over to Shannon so that it can underpin the losses in Shannon and everything else. That’s not what’s being proposed, certainly not by me. The company should stay with Shannon, or a large part of it should but it’s incredibly important that it be allowed to develop and continue to be as successful as it is at present.”

When Shannon first came under the DAA, there was still a positive attitude towards Shannon but it didn’t last, according to Mr Kearney.
“Gary McGann was the first DAA chairman, having previously been CEO of Aer Lingus. Whilst he was chairman of DAA, I believed his heart was in the right place and he wanted to do right by Shannon. But the moment he stepped down as chairman, I think the game changed completely. I think the DAA moved from being the corporate body for all three airports and under Declan Collier, in particular, it moved from Cork and Shannon being part of a group to being branches of Dublin Airport.
“Every capital expenditure need had to be cleared by Dublin. Certainly, there was an attitude from Declan Collier, in particular, that ARI was none of our business and that we were acting above our station by even mentioning it. He was not someone with whom you negotiated; it was more by dictat.
“In a very specific example of how we were disadvantaged, I think the plundering of the assets in Aer Rianta resulted in the building of a 21st century airport in Cork, a 21st century airport in Dublin and then the coffers were empty and Shannon is still very much a last-century airport that has significant needs.”

He says there has been too much focus on Shannon’s estimated €100m debt and not enough on where the money raised from the disposal of assets went.
“In many ways there is too much focus on the debt and not on the assets. I’m not saying that the debt has to be forgiven automatically and we have to decide who owes what to whom. I think Shannon is owed significantly more than the present debt,” he concluded.

 

Debt-free status is no substitute for ARI

FORMER head of finance at Shannon, Michael Hanrahan is stunned at the lack of any political or business response to the impending loss of Aer Rianta International (ARI).
“I’m amazed at how docile a lot of the Clare people are, that they haven’t kicked up hell over this. It amazes me. A lot of these people who went on television after the announcement saying it was great for Shannon haven’t a clue what they’re talking about. I was astounded at some of them,” he told The Clare Champion.

Mr Hanrahan twice put Leo Varadkar on the defensive by raising ARI when the Transport Minister came to the Mid-West to speak publicly about Shannon’s future, while he berated Jan O’Sullivan at the Greenhills Hotel last week on the same matter, just before he met The Clare Champion. “A quiet priest never got a parish,” he said.
It’s clear that the loss of ARI to Shannon is something he is passionate about and feels is very wrong.
“It’s a huge mistake. It’s too high a price to pay for this €100 million that Shannon has on its books (in debt). It’s wrong, you can see the surpluses that ARI are making. In the past I made a proposal to Minister Noonan, who said he’d pass it on to Minister Varadkar; that at least Shannon would get some financial support, notwithstanding this €100m that they’re talking about; every year for 10 or 15 years. It could be a third or a half of the net profits of ARI. If it has to stay in Dublin there must be an annual consideration given to Shannon, without any shadow of a doubt. Why shouldn’t there be? Why should it go to Dublin? Why shouldn’t Cork get some of it too?”

Mr Hanrahan said he is concerned Shannon will ultimately become the seventh regional airport, while he doesn’t feel it will be allowed to take on the other State airports in a meaningful way once it exits the DAA structure.
“Do you think if Shannon goes off and tries to bring in traffic and if the rates offered are any way preferential, particularly to Dublin, they won’t be hauled back in by the Department of Transport and Tourism? They won’t allow them to compete fairly.”

Leaving Shannon debt free isn’t going to compensate for the loss of ARI, which has been a gigantic cash cow for the DAA and Aer Rianta before it.
“It’s no substitute. If they made €31m last year, they’d have the €100m cleared in three and a half years. Why wouldn’t you take on the €100m and keep ARI? Even it was only making €15 or €20m, it’d be cleared in a few years. In the fullness of time you’ll find they’ll move the staff to Dublin gradually. The people in ARI in Shannon will all be replaced in the fullness of time with a position back in Dublin. You can be 100% sure that’s how it’ll operate.”

He was involved when an operation began in Dubai in 1983, which he feels helped develop confidence that what became ARI could be successful.
“Because Dubai was successful, I think the airport people were quite happy that we could do overseas assignments. At that time there was talk of inter-EU duty free going and Shannon would have been left in the lurch without that, so the spur for this was something that would replace the losses in the future by going overseas.
“As it happened, Boris Krivchenko was the station manger for Aeroflot in Shannon. He left Shannon and Aeroflot appointed him as head of joint ventures. He was very anxious to make his mark and he came back to people in Shannon that he knew and he asked would Shannon take on the role of looking at Moscow Duty Free and maybe setting up a duty-free shop. I know Liam Skelly and a few others went over at that stage. They came back full of enthusiasm about the whole idea and the rest is history. The shop was set up and opened on May 1, 1988.”

After a successful start at Moscow, ARI expanded quickly. However, Mr Hanrahan said but for Shannon, the company would never have started. “I don’t think they’d even have had the confidence in Dublin to do it. The Dublin Duty Free in ’88 was a very small operation.”
The rate at which ARI expanded was fantastic, he said. “It developed from Moscow into St Petersburg, Kiev, lots of other airports in Russia, it branched into the Middle East and it spread to Cyprus, Bahrain, Qatar and lots of other places. It’s in Canada and loads of other places.”

He acknowledged Shannon was part of an overall Aer Rianta structure when ARI began in 1988 but said Shannon was by no means subject to Dublin, while ARI has been based in the Mid-West since its inception.
“Our chief executive at the time was Liam Skelly and he would have dealt with the chief executive of Aer Rianta. The head office was in Dublin, but it could have been in Athlone or anywhere else. There was no question of our chief executive reporting to Dublin Airport.
“The business development managers (with ARI) were based in Shannon and that’s where it was happening from. The chief executive of ARI was based in Shannon from 1988 to about six months ago. He’s after taking early retirement and the DAA have used it as an opportunity to place the CEO position in Dublin now.”

Shannon will need a significant amount of finance after separation and he believes ARI could have been a huge factor in it making progress.
“Shannon needs financial support, not to start off at break even. It needs several million to support a strong marketing campaign on an ongoing basis, without a shadow of a doubt. It’s absolutely scurrilous what’s after happening.”
He feels Clare’s four TDs have to fight for Shannon now. “Let them stand up and be counted now and the TDs in Limerick as well. Shannon is essentially a Clare airport but Limerick has benefited tremendously from it and always did, so why shouldn’t they stick by the region. But the drive must come from Clare,” Mr Hanrahan concluded.

 

 

Difficult time ahead

MICHAEL Guerin was the first general manager of Aer Rianta International and is a former director of Shannon Airport. He recalled his role in its early days when he met with The Clare Champion.
“I came to Shannon in 1966 and in ’69, Aer Rianta took over and we had a new commercial outlook. I was involved in promoting transit traffic and we had some major successes with Pan Am and more particularly with Aeroflot in the 1980s. I went to Moscow and made a deal with Aeroflot that they would move their operations to Shannon if we built and stored their aviation fuel. It was out of that, that Aer Rianta International came because the relationship was built up over the years.
“When Gorbachev announced joint ventures as a way of developing Russia, the opportunity arose because of the relationship that had developed over the years. Aer Rianta was in a position to provide the duty free and they knew what they were getting. I was the first general manager of ARI but after a year or so, the business began to expand more and more and we had to reorganise to meet that situation. Then I took on the role of airport director and a separate unit had to be developed to run ARI so I wasn’t involved then.”

He said after beginning in Moscow, ARI quickly moved into what was then Leningard and developed in other areas right up to the border area near Finland.
Mr Guerin said he wasn’t aware that ARI had been so profitable over the last decade and he is adamant it should be retained by Shannon.
“They are very significant earnings and I wasn’t aware it was as high over the last 10 years. By the time I retired, the profits would have been more modest. I would concur that it should be retained at Shannon because it started there. It was an opportunity that developed at Shannon. We developed the business with Aeroflot and ARI was an offshoot of that. It should remain there after all the hard work that went into it by those who pioneered the whole operation.”

Shannon is facing a very difficult time after it exits the DAA, he believes. “It’s undoubtedly going to be a very difficult job to make Shannon viable in the future without that [ARI] and with all the other happenings that haven’t been helpful, like the arrival of open skies and the Ryanair business going to other airports. It is significant that only after the Shannon announcement was made, Dublin Airport announced redundancies because of the drop in traffic and the fact that those people who are travelling are spending less. That shows you it’s going to be a very difficult task for Shannon to turn the traffic figures around.”

However, leaving ARI with the newly-independent Shannon operation would have been a very positive step towards making the airport sustainable.
“It would certainly have given it the means by which it could continue and maintain the services that are there on a 24/7 basis. I’m surprised that the move was made to transfer it to Dublin. It’s been working at Shannon for 20-odd years and that it can’t continue there doesn’t make sense. It should be left where it started. After all, Shannon was the home of duty free originally,” Mr Guerin concluded.

 

Fitzgerald ‘disappointed’ with Government decision

PROBABLY best known for his role in Clare GAA, Pat Fitzgerald also had a long career in Shannon beginning in 1966. He was appointed to the board of Aer Rianta in 1994 and to the DAA board in 2005, before resigning in 2007.

He doesn’t agree with the recent move to sever the link between ARI and Shannon.
“It’s a decision that I’m very disappointed in. The business was the brainchild of people in Shannon and it started in Shannon. Shannon is now under significant financial threat and the new type of operation that is proposed for it, I’d be very concerned about it.
“From what I can see, they’re saying that they’re amalgamating the Shannon Development business. The assets that I’m aware of in Shannon Development are in the industrial estate. Everybody knows that the assets in the industrial estate are badly in need of repair and refurbishment. My information is that refurbishment is going to take in excess of €30 million,” he said.

He said that while funding for the development of ARI might not have come from Shannon, leaving it at its base in Shannon would be the best move. “While Dublin Airport may have funded the development, I do think it should be left with Shannon and I think that makes sense in many ways. It would form part of a business case to put Shannon out on its own. You would have a profitable business with ARI.”

Shannon Airport lost €7m last year and Mr Fitzgerald said this indicates the airport will be facing a loss, even if its debt is written off and no further repayments on it are required.
“It would suggest there is €3m [of a loss] even if the debt is written off. So they get a business tomorrow with a loss of €3m and the assets of Shannon Development, which needs to be refurbished at a significant cost. They are also competing with Dublin and Cork. The view of quite a number of people is that for T2 in Dublin they need 20 million passengers; that’s what’s being suggested. Heretofore Shannon was part of the family but now they’re not and in the current financial climate, where is it going to generate the business?”

He said the question of where to get the additional revenue required after Shannon leaves the DAA had a ready-made answer but the Government opted to give ARI to Dublin, something he believes is “very foolish”.
“I believe ARI could certainly put Shannon Airport on a more sound footing and give it a better chance of becoming a vibrant and thriving business going forward.”

Mr Fitzgerald said he never understood why Shannon was put under a structure that retained the name Dublin Airport Authority, which he said would raise issues when marketing Shannon abroad. “I’d question why, number one, a brand name was put out there of Dublin Airport, when you’re running three airports. For the life of me I can’t understand it. It identifies automatically with the capital of Ireland when they are running another two airports, one in the west and one in the south. Can you understand that? If they wanted to change from Aer Rianta, why not Irish Airports?”
The most recent proposals aren’t positive for the region, he feels. “From a Shannon point of view and being parochial, the structure proposed would suggest that the West of Ireland was not taken fully into account. I believe that Shannon is the hub of the West of Ireland and I believe you could have a very lucrative business that would drive the economy around here and create a little more prosperity than might be here going forward and I believe that chance is lost,” he concluded.