The Government has asked six airlines for tenders to operate five regional routes after the current operator, Aer Arann, said it could not guarantee the services from next month.
Aer Arann, which receives £8.75 million (€11.11 million) a year in Exchequer funding to operate the routes, has blamed rising costs and "the changing aviation landscape" for its decision.
A company spokesman said last night it was not in financial difficulties, claiming that it had asked the Department of Public Enterprise to retender the contracts, which it had been awarded for a three-year period last January.
Aer Arann, which employs up to 200 people, flies five public service obligation routes, which are subsidised by the Exchequer. They include Galway-Dublin, Kerry-Dublin, Knock-Dublin, Sligo-Dublin and Donegal-Dublin. The spokesman indicated that the general aviation downturn had affected the company and said costs had risen "across the board".
Aer Arann told the Department of Public Enterprise that it could not guarantee the continued operation of services on the routes after November 4th, according to a Department spokesman.
The Department wrote to six airlines on October 10th saying that "due to a number of unforeseen developments", the level of Exchequer compensation originally provided for "will not be sufficient to support services on these routes under current arrangements".
The new tendering process is an interim measure - the contract is only for six months and the airlines were given just seven days to submit tenders. The Public Enterprise spokesman said the tendering process usually takes about six months. The Department will advertise the contracts again on a longer-term basis in the coming weeks. The Exchequer contributes £10 million a year towards all regional routes, including Derry-Dublin. The cash is allocated subject to European Commission approval.
The Public Enterprise spokesman said the Department had consulted the Attorney General and the European Commission on the issue. The Department was advised that it should advertise the contracts again. The six airlines that have been asked to tender are Aer Lingus, Ryanair, CityJet, Irish Air Transport, Loganair (which operates the Derry-Dublin route) and Aer Arann.
The Aer Arann spokesman said the firm would tender again for the contracts. However, several other operators privately indicated last night that they had no interest in submitting tenders.
The Department criteria are quite demanding. For example, the successful applicant must be in a position to commence the required services on Monday, November 5th, but must apply by noon today.
The five routes are being offered as a group - airlines cannot submit a quote in respect of one, or some, of the five. The successful applicant must operate certain minimum frequency of flights, at specified prices.
Aer Arann was set up in the 1970s to serve the Aran Islands. It opened a base at Dublin Airport in 1998, began flying domestic routes from Dublin and rebranded them as Aer Arann Express. In March 1998 it began operating the Donegal-Dublin route.
Its latest annual return, made in September 1999, provides no information on profits and losses.
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