Ryanair urges end to regional subsidies

RYANAIR HAS renewed its calls to end the Government’s subsidisation of regional airline routes, despite being in line to receive more than €5 million for its Kerry-Dublin route over the next three years.

From July 2008 until 2011, the Government will pay €45 million in public service obligation (PSO) subsidies to airlines operating a range of routes including Derry-Dublin, Knock-Dublin and Galway-Dublin. The subvention is designed to make up the shortfall between turnover on the one hand and the airlines’ costs and margins on the other.

Ryanair will receive €5.25 million for the Kerry-Dublin route, previously operated by Aer Arann. Since the last round of POS funding, this subsidy has decreased by 40 per cent from €9 million.

Ryanair chief executive Michael O’Leary said the money could be better spent on the healthcare service or education system, and that if Aer Arann and others can’t survive without Government assistance, then they should redeploy their aircraft to develop economic routes to or from Ireland that don’t depend on subsidies.

Although Aer Arann lost the subsidies on the Kerry route, it is still set to benefit the most from the PSO subsidies, receiving more than €30 million over the next three years for its routes from Derry, Sligo, Donegal and Galway. The most heavily subsidised routes are those from Derry and Knock, with the airlines receiving almost €100 per passenger on average.

While Mr O’Leary maintains that the Kerry route would still be economical without the subsidies, he said it would not justify the number of daily flights currently run on the route by Aer Arann.

Padraig O’Ceidigh, the owner and chairman of Aer Arann, was downbeat yesterday, saying the airline may seek a financial partner or lease out surplus aircraft as fuel costs soar and a slowing economy crimps demand for travel.

Aer Arann, which had sales of about €100 million last year, may reopen talks with possible investors who approached it in the past, said the Dublin-based carrier’s owner and chairman. “We’re not going to float because of the market at the moment, but certainly we’re interested in looking up potential investors,” Mr O’Ceidigh said in London.

Separately, although Ryanair’s case against the Commission for Aviation Regulator (CAR) regarding capital expenditure for Terminal Two at Dublin airport was rejected by the High Court on Tuesday, the airline has since filed a further legal challenge against a decision by the CAR to approve a 50 per cent increase in check-in desk charges at the airport. – (Additional reporting, Bloomberg)