Shannon fears for future under strategic alliance

The proposed strategic alliance between Aer Lingus and British Airways/American Airlines will have "stark" consequences for Shannon Airport, according to a new report presented to the Minister for Public Enterprise, Ms O'Rourke.

The report says transatlantic business through Shannon would fall from the current figure of 600,000 passengers to 180,000.

The report, a copy of which has been seen by The Irish Times, was commissioned by the Shannon Airport Marketing Consultative Committee, a body set up by the Government in 1995. Its members include Shannon Development, SIPTU and Clare County Council. It urges Ms O'Rourke to consider the damage to regional development in the west of Ireland when weighing up the advantages to Aer Lingus of the proposed commercial alliance.

The report was commissioned from Aviation Research and Analysis, which is based in Washington DC in the US. It assumes that the Republic's aviation policy will be totally liberalised - producing the so-called open skies in which airlines will be free to serve whichever markets they choose.

The consultants predict that, under open skies, half of Shannon's current transatlantic traffic would shift to Dublin.

Such a decline in passenger numbers would cost Aer Rianta about £5 million (€6.35 million) annually in lost duty-free sales and passenger load fees.

With American Airlines feeding business in the US to Aer Lingus, the consultants claim the Irish carrier could reduce its costs on the transatlantic route by about £18 million per year. The proposed alliance is therefore good for Aer Lingus, the consultants conclude, but devastating for the economic interests of the west of Ireland.

"The consultants' prediction for Shannon, in a scenario where Aer Lingus is a member of the OneWorld (British Airways, American Airlines) alliance under an open skies regime, is stark in the extreme. Simply put, the Shannon Airport Marketing Consultative Committee does not consider it to be an acceptable outcome for Shannon, the west of Ireland or the country as whole," the report says.

Ms O'Rourke is urged to put balanced economic development before profit maximisation, though the report acknowledges that the choice is difficult as Aer Lingus' commercial viability depends to securing a partner, whose interest in developing the west of Ireland may be minimal. The report concludes: "The potential impact of an open skies regime in the US-Ireland market is a major threat to Shannon Airport and the surrounding regions. If combined with Aer Lingus' entry into the OneWorld alliance, the prospects are unthinkable."

The Minister is due to receive within the next couple of weeks a report from consultants she appointed on the options for the future of Aer Lingus.

The airline group itself has recommended the strategic alliance with British Airways/American Airlines and has indicated that it sees an initial public offering of its shares as an option thereafter to raise funds for investment.