Shannon to seek €2m from Ryanair as five routes cut

THE SHANNON Airport Authority (SAA) is expected to pursue Ryanair for financial compensation of up to €2 million for breaching the terms of a five-year sweetheart deal on airport passenger charges that was due to end in April 2010.

This follows Ryanair’s announcement yesterday that it is axing five routes from Shannon and reducing its number of aircraft there from six to four from the end of March.

Routes to Luton, Berlin, Newcastle, Gdansk and Katowice will be cut and 100 Ryanair jobs will be moved to other bases.

Ryanair chief executive Michael O’Leary blamed the Government’s “insane” €10 air travel tax for the decision.

Ryanair said its annual traffic through Shannon would reduce to 1.2 million from its current level of 1.9 million.

It is understood that Ryanair’s deal with the SAA involves it paying between €1 and €2 per passenger in airport charges over the five years. Shannon’s standard airport charge is €4 per departing passenger, according to its website.

Ryanair was required to deliver about two million passengers in the year to the end of April 2010 or pay the full charge on any shortfall. With Ryanair set to fall shy of its agreed target by 800,000, the SAA is expected to pursue the airline for compensation of between €1.5 million and €2 million, with court action a possibility.

Mr O’Leary told a press conference yesterday that the Government’s exit tax “renders the passenger target unachievable”.

“We will be in dispute with the SAA at the end of the year and they will be looking for compensation for failure to achieve traffic targets,” he said. “And we will be saying ‘Sorry, the traffic target will be rendered null and void by the Government travel tax’.”

Mr O’Leary said Ryanair’s Shannon operation “is still loss-making”. He said the losses “are substantial, single-digit millions per annum, more than one and less than 10”.

He added: “We have never made money at Shannon. We are not overly concerned about it . . . We’re big boys, we can handle those kind of losses, as long as we’re building something that is sustainable over time.”

Mr O’Leary said there was no possibility of Ryanair renewing its five-year deal at Shannon.

“I think that the Shannon operation will get smaller and smaller. I think you could see Shannon figures returning to where it was before the five-year deal.”

The SAA said yesterday it was “disappointed” with Ryanair’s decision.

“Shannon airport has met all its obligations in respect of the five-year agreement and we expect the airline will likewise honour its commitments,” the SAA said.

“We do not accept that Ryanair can avoid its contractual commitment on the basis of the air travel tax introduced by the Government.

“We look forward to holding discussions with Ryanair to agree ongoing traffic development well beyond the current agreement.”

Mr O’Leary said he would announce further route closures out of Dublin and other Irish airports next week in response to the Government’s new air travel tax.