About to pass into the control of Lufthansa, BMI is the third largest operator at Dublin, writes CIARÁN HANCOCK

IN 1989 Ireland’s first commercial radio station (the now defunct Century Radio) went live, Charlie Haughey resigned as taoiseach, the Irish soccer team qualified for its first World Cup and Aer Rianta gave its five millionth passenger a trip to Florida.

Heady times.

It was also the year that saw British airline BMI (then known as British Midland) start flying between Dublin and London Heathrow, a route then dominated by Aer Lingus.

Twenty years on and BMI, which is soon to pass into the control of German flag carrier Lufthansa, is now the third biggest operator at Dublin airport.

At a trade lunch in Dublin on Wednesday to celebrate the milestone, BMI’s managing director Peter Spencer noted that the airline has carried 12.1 million passengers between Dublin and London over the past 20 years on a distance equivalent to travelling to Mars.

There are probably a few people here who would happily fly to Mars now to escape the relentless stream of bad news in Ireland. Spencer acknowledges that the recession has forced BMI to tweak its Dublin-London offering. “We have cut capacity by 20 per cent but not frequency,” he said. “We’re using smaller aircraft. And we’re flying fewer premium customers.”

It’s a familiar story across the industry. BMI carried about 600,000 passengers on the Dublin-London route last year. Spencer expects that figure to drop to about 530,000 in 2009 – a decline of 11 per cent. It operates seven flights a day between the cities.

“It’s not as good as the average across the company but it’s a better performance than on some of our other European routes .”

BMI earned revenues of about €20 million in Ireland last year, according to Spencer. It’s a tidy sum. More importantly for BMI, about 40 per cent of Irish passengers make onward connections at Heathrow on its network of long-haul flights, to places like Russia and the Middle East. In terms of revenues, Dublin is the third best connecting route into Heathrow for BMI.

Just four weeks ago, BMI launched flights from Heathrow to Kiev. Dublin and Belfast are the two best performing interconnecting routes for this service. “Dublin didn’t come up on our radar in planning that route but it’s been a very strong connecting destination point for us.”

BMI operates eight flights a day out of Belfast City Airport to Heathrow and says passenger traffic has held up in spite of competition from Aer Lingus.

That decision by Aer Lingus resulted in it axing services from Shannon to Heathrow (since restored) amid much controversy.

At the time, efforts were made to attract BMI on the route but the airline demurred. How serious were the talks?

“We seriously considered it,” he explained. “We had a look but decided not to do it because we had alternative things that we wanted to do with our aircraft and slots.”

Would BMI consider launching on the route in the future? “I would say no. I don’t believe it would add the type of feed traffic we want on our mid-haul aircraft.”

BMI hasn’t been immune to the recession. It recently culled domestic routes from Heathrow, including services to Jersey, Leeds Bradford and Durham Teesside. Its passenger traffic declined by 4 per cent in the first quarter on a schedule with 10 per cent less capacity. As with all airlines, yields (average fares) are under major pressure. “That’s a tough nut to crack,” he said.

As a group – including its low-cost offshoot BMI Baby –, BMI lost £100 million last year. How is this year shaping up? “It’s so difficult to forecast . . . it will be better.”

BMI continues to offer an on-board service as part of the fare and a business-class cabin. It doesn’t charge for checking in a bag and it will assign you a seat for free.

These are nice touches but, with everyone obsessed by price, won’t BMI have to recognise reality and follow the lead of the low-cost carriers?

“Price isn’t everything,” he said. “People are looking for value for money, which means you give them a spectrum of choice. What we need to make clear to our customers both in Ireland and the UK is that they should be smarter about how much they are paying for a journey .”

Spencer argues that, often, when you add in baggage charges and other fees, BMI is cheaper than its low-cost rivals.

Will BMI ever charge for checked-in luggage?

“I’ll go where the customer goes on that one,” he says. “I wonder if the customer will go back the other way. We will keep our ears to the ground but at the moment the answer is no.”

He’s also got a clear view on the Government’s recently introduced €10 airport exit tax for flights of more than 300km, a move described by Ryanair boss Michael O’Leary as “tourism suicide”.

“We would be against it,” Spencer said.

“These taxes are just another way to line the Government’s coffers without the money going to the place it’s intended.

“I’d say to them, ‘It’s okay to change your mind’. For example, Holland, where they withdrew the tax.”