Demise of duty free leaves airport facing turbulent times

"No knee jerk reaction." When Knock International Airport chairman, Mr Cathal Duffy, promised there would be no job losses over the abolition of duty free last month his defiant tone could not quite mask a genuine concern. Almost 14 years after the first commercial flights took off from the heart of Connacht, the controversial airport faces another tussle to survive.

And who will have sympathy for its situation? Not the former Fine Gael minister who dubbed it a "foggy boggy" location, and not the coalition government which pulled the plug on the funding for its development plan. Not the critics of the late Mgr Horan who dismissed it as a white elephant, nor those local business interests who feared that Church interests would limits its general appeal.

The fact that it is still running suggests that Knock has confounded many of those critics - not least because much of the traffic has little or no bearing on the local Marian shrine. With Ryanair as its main customer, the other carriers include British Airways, Lufthansa and Aer Lingus. The airport has 11 flights to Stansted, four to Manchester and one to Birmingham weekly.

In addition, there are four charter flights from Germany and Switzerland every weekend during the summer months. Last year, it had a throughput of 200,000 passengers, and the target is 500,000 by 2003. A profit of £406,000 (€516,000) was recorded in 1998 on a turnover of £2.526 million. Duty free accounted for around 50 per cent of the profits.

Mgr Dominic Grealy, current Church representative on the board, agrees that it is a modest enough performance; but the figures should be judged against a background of official disinterest over many years. He still remembers having to send out letters of appeal to finish the project after Fianna Fail went out of power and the 1982-87 Fine Gael/Labour coalition abandoned it.

"It was so closely identified with the former Taoiseach, Mr Haughey, and the coalition hated having to pick up on it," he recalls. After State aid of £9.9 million funds had been spent, the money was stopped. A "confidential" government report leaked to the press forecast that it had no prospect of viability, as the air service would frequently be disrupted by low cloud and poor visibility.

That initial pessimism was not shared by Ryanair, which sought permission in 1985 to begin daily flights between Knock and Gatwick airport in London, using 44-seater turbo-prop aircraft.

Almost 14 years later, Ryanair is still flying into Mayo, but not out of the goodness of its heart. Its much publicised aggressive business approach, which resulted in one of its aircraft being impounded recently at Manchester for refusing to pay landing charges, extends to Connacht.

The airport board declines to comment on the relationship; so far, it has not had to pay the company to land there, unlike at least one other regional airport.

The abolition of duty free has come as something of a shock however, and Mgr Grealy makes no secret of this. "We were worried for some time, like every other airport, but we had been given to believe that there would be a transition - and that there would be some breathing space, at least for three years. In fact, we only had one month's breathing space. We are still trying to come to terms with that."

"Flying is wonderful for the general public, but people don't realise that it comes at a price," Mgr Grealy says. "Thirteen years ago, when I came here, the cheapest ticket to London was £208 return. Now you can buy one-way tickets for £19. The business is so cut-throat in terms of dealing with airlines that duty free had become the lifeline. Staff have to be paid, safety provisions have to be in place - including air traffic controllers, fire fighters, security, baggage handlers, and all that."

The Knock Airport board has sought transitional funding from the Minister for Public Enterprise, Ms O'Rourke, to tide it over for the next six months, on the basis that it is not a private company and is providing a national service. In 1991, the directors agreed to put their shares into a trust fund and a deed of trust was drawn up. "We have been competing against Shannon, Cork and Dublin which have State subventions. We have none."

However, new lighting was recently provided with EU structural fund assistance, at a cost of £950,000; the 2,300-metre runway is suitable for all types of jet aircraft.

In the long term, the board is still ploughing ahead with its plans for an industrial base - plans which were never fully realised, partly because of inadequate incentives. The Texan, Mr Ross Perot, was one of several investors unsuccessfully wooed with a view to establishing a freight forwarding operation at Knock.

Shortly before he left office, the former tourism minister and Fine Gael TD for Mayo, Mr Enda Kenny, had secured an amendment to the 1997 Finance Act which classified 200 acres at the airport for an enterprise area attracting appropriate tax concessions in approved cases. However, given the need for European Commission sanction, the full value of this can only be tested in specific proposals, Mr Kenny pointed out recently, when he called for greater Government support for Knock.

Last October, the Government's position was reflected in a Dail statement by the Minister for Finance, Mr McCreevy. Speaking about the controversy over the Dublin Docklands designation, he said that the European Commission had made no secret of its opposition to extending the Shannon free zone 10 per cent corporation tax status to Knock.

Just before the local and European elections, the Knock board announced that it intended to build a 30,000-square foot advance factory costing 1.5 £1.5 million, as part of a £30 million long-term development plan. The board chairman, Mr Duffy, cited a report drawn up by international consultants, Alliance International Ltd of Texas and Deloitte and Touche Fantus Consulting, which described the airport as a gateway for future investors.

The airport board called on the Government to extend the date for tax allowances on construction of qualifying buildings to June 30th, 2003.

Mgr Grealy says that planning permission has been applied for, and a tenant has been found. Much more pressing in his view, however, is the need for provision of basic services which had been promised some time ago. "We've had a number of industrialists who have called and talked to us, but what has put them off is the lack of such services - water and sewerage," he says. "We are talking about a mere £1.2 million, which Mayo County Council has sought for us."

"We see billions being spent, and we have been given all sorts of promises which have not, as yet, been fulfilled," he says. The board has had two meetings with the Taoiseach, Mr Ahern. "We are just asking for the same chance to realise our potential as everywhere else."