Ryanair says high fees may force it to bypass Ireland

RYANAIR, the privately-owned Irish airline company, has warned it will not consider launching any new routes from Ireland unless Aer Rianta lowers its landing charges.

Within the next three weeks, the company is due to announce that it has bought about seven new aircraft. It plans to launch new European services from London, Stansted, and says it will not operate any from Ireland unless the State airport operator reduces landing charges.

Ryanair's expansion plans come as its latest results show a strong rise in profitability, with industry sources saying it could clock up, at least £6 million to £7 million in profits this year. Tony Ryan has stepped down as chairman, a seat which will now be occupied by US businessman David Bonderman, who heads a consortium which holds 20 per cent of the company.

With profitability growing, expansion is now on the agenda. It is understood that Stansted has agreed a deal of £1 per passenger for new Ryanair routes into Europe.

Ryanair would not be drawn on what routes it will launch, but it is believed that routes under consideration include Paris, Brussels and Amsterdam.

The extent to which any new business will be operated out of Dublin has yet to be decided. Ryanair chief executive, Mr Michael O'Leary, told The Irish Times that an independent report, which his company commissioned, has shown that Dublin Airport has the most expensive airport charges of all the locations it uses. The report by the University of Westminster shows that although Gatwick and Stansted have lower published charges than Aer Rianta, all British airports offer Ryanair unofficial discounts that are far more generous than Aer Rianta's published discount scheme.

Mr O'Leary explained that all airports, with the exception of Aer Rianta operated airports, offer unofficial discounts. Nobody pays the full, published rate. "While Aer Rianta may seem competitive on published rates, this is not the case in reality," he said.

The bulk of the discounts off&red by Aer Rianta relate to new passenger growth, he said, but this is done on an "unwinding basis", meaning that the initial discount is clawed back in the following years.

Mr O'Leary said that Aer Rianta will not guarantee a set rate for landing charges over the next few years - unlike several British airports - and has warned that all agreements on landing charges will be shelved if the airport operator loses its duty free operations in 1999. This makes it even more difficult for a low-cost operator like Ryanair to plan for future growth, he argues.

Mr O'Leary's comments come just one week after the Minister for Transport, Energy and Communications, Mr Lowry met the board of Aer Rianta. The Minister issued a statement afterwards, saying he had asked Aer Rianta to review its landing charges. He also told Aer Rianta to concentrate on developing new business "organically linked" to its core business to prepare for the possible abolition of duty free.

Mr O'Leary says Aer Rianta operates a very complicated system of landing charges. Ryanair pays a landing and a departure, charge at Dublin Airport which is almost twice as expensive as the next most expensive airport in Britain. In some cases it is 10 times as expensive.

Two British airports do not impose any charges on Ryanair, according to Mr O'Leary. "They get revenue from items such as car-parking, duty free and customer services," he says.

Mr O'Leary says airports are highly profitable to run - if you get the passenger, throughput. "The average Ryanair passenger spends £14 at Dublin Airport," he claims.

Reduced landing charges at Dublin Airport are vital for Ryanair, he says. Dublin-Britain Ryanair passengers account lord around 2.5 million passengers using Dublin Airport each year, compared to a total passenger throughput of nine million per year.

The report commissioned by Ryanair says the airline receives the greatest reduction at British regional airports - Prestwick gives the biggest reductions, of those who charge. The smallest average saving Ryanair makes is at Dublin Airport.

"This has the consequence of making Dublin the most expensive airport served by Ryanair," the report says.

The report says that the differential between Dublin and British airports is "accentuated on the more mature routes" in Ryanair's network (Dublin-Stansted, Dublin-Luton and Dublin-Liverpool).

"This is because Ryanair continue to receive substantial discounts at the UK end of the route, although these services do not qualify for much support under Aer Rianta's discount scheme," says the airline.

The report says that, with the exception of Dublin, the airports that are most dependent on Ryanair offer the lowest charges. It says that 72 per cent of the total airport charges paid by Ryanair in its Dublin-Britain operation last year were at Dublin - despite handling only 50 per cent of the traffic.

"Whereas there is vigorous competition between the British airports for Ryanair's traffic - so helping keep prices down - Dublin Airport enjoys a monopoly position, in this market."

Mr O'Leary claims that no airlines are interested in flying into Ireland. "To attract tourism you need low airfares and for low airfares you need to have low access costs."