Continental sees clear skies with or without Shannon stopover

Using an analogy that farming folk in the west of Ireland will understand, Mike Carter compares airlines to grazing sheep.

"Airlines can be like shepherds on the hillside, they graze and graze and graze, until all the grass is gone and then they move on to the next hill," he says.

He uses the analogy to explain what might happen when the Shannon stopover ends. Airlines may rush to provide services direct to Dublin but in time the market will become saturated and things will revert to 2003 levels of traffic. That is one theory at any rate, he says.

Mr Carter, senior director, Continental Airlines, Britain and Ireland, admits that while Shannon has put a restraint on the freedom of US carriers, it has not stopped Continental drawing decent profits from its Irish routes.

That is why he is in Dublin, to mark the fifth anniversary of Continental's operations in Ireland. He says profits have increased each year during this period, although, separate figures for the Irish operation are not available.

What we do know is that Continental has flown more than 750,000 passengers between Ireland and the US since it entered the Irish market five years ago. It has successfully managed to build a presence in a transatlantic market traditionally controlled by Aer Lingus.

But Mr Carter, a chartered accountant who previously worked with a subsidiary of British Airways, is not particularly interested in the State-owned airline. Asked would Continental be interested in buying Aer Lingus, he is, eh... blunt. "Certainly not."

With SARS and terrorism squeezing the profits of the big carriers, Mr Carter has a lot more than Shannon and the Irish tourist industry to worry about, but he keeps a watching brief on both and in particular Shannon.

Does he support getting rid of the stopover? "Our general proposition as a Texas-based airline is we don't like any government telling us what to do. We'd sooner have the flexibility to operate as the market demands.

"Having said that, Shannon has worked well for us. Obviously there is a very strong in-bound tourism market there. So our general proposition is we have worked well with the Shannon policy, we haven't been pressing hard for it to be changed. We would welcome the opportunity to have more freedom. And we certainly would like to look at more non-stop services to Dublin which is the prime business and political location in Ireland.

"It reminds me a little of what happened in the UK. It had a policy that all US services outside of London had to use Prestwick. When that policy was changed around 1991, there was a great rush of carriers opening services to Glasgow - North West, United Airlines, British Airways - all operated from there, but after about three years there was only one airline left."

Asked what will happen when Shannon eventually crumbles, Mr Carter is sanguine.

"If the airlines are given more freedom, rather like what happened at Prestwick and at Glasgow Airport the market will find its own level, in terms of what can be sustained."

But surely the stopover places major commercial burdens on a carrier like Continental?

"We have managed to operate to Shannon by using 757s, which are less expensive, particularly in the winter. We have been able, because we have 550 aircraft, to be flexible and operate by season. Plus the fact we are in New York which is the most important destination for Ireland across the Atlantic. So we think we are in as good a position as anyone to exploit Shannon."

Something more pressing, says Mr Carter, is the terrific exchange rate between the dollar and the euro. Terrific for Irish consumers, but not so good for American tourists and consequently for Continental.

"There are a lot of dynamics in the market. The strength of the euro against the US dollar is a significant factor. It's great for Irish originated sales and they have been going up every year for the last five years. Which means for Irish residents it is the best time ever to go to the US," he says.

Reviewing the five years of Continental's Irish operations, Mr Carter has few complaints and certainly not about Aer Rianta. He stoutly refuses to join in the catcalling of one Michael O'Leary. For example he describes Aer Rianta's airport charges as "quite competitive" internationally.

"Mr O'Leary is running a very different operation to us. We are running a multi-class product, business class, economy and a cargo operation. So we are looking at a number of different things and not just short haul, low-cost solutions," he says.

While some passengers might be queasy about flying with Ryanair for say 11 hours to the west coast of the US, is there any prospect no-frills operators could enter the transatlantic market?

"I think not. The few that have tried have failed. One of the problems is seasonality, the fact that tourism tends to be much stronger, and the rates higher, in the summer months. There is a great deal of volume then. But it's difficult for those low fares carriers to compete for business traffic in the weak winter months, when businessmen still want to travel," he says.

But could they do it at least in the summer?

"Well then they'd be reliant on the leisure passenger and the margins are not so strong. Remember you're talking even five or six hours even from Ireland. You've got to feed people. Entertain them. These are value-added products. And none of the low fares operators has cracked that yet," he states.