Time for O'Rourke and O'Leary to make up

Let's get one thing clear. Michael O'Leary is not opposed to state aid to Aer Lingus. He is opposed to anything that gets in the way of profit at Ryanair, be it state aid to the national carrier or ice in his customers' drinks.

The rugby shirt wearing chief executive has been more than willing to accept state aid when it suits him. The Government of the Walloon Region is currently cringing with embarrassment following the leaking of the incentive package given to Ryanair to establish a hub at Charleroi outside Brussels. Ryanair is getting something in the region of €12 million (£9.45 million) a year in various subsidies to operate from Charleroi, according to local reports. The Wallonians are arguing that this is regional aid as opposed to state aid, but the European Commission may not see the difference should it choose to investigate on foot of a complaint from a rival. Sabena, which is the subject of a complaint from Ryanair, may yet give the low-cost carrier a dose of its own medicine.

Ryanair was equally happy to accept help from the Irish Government when insurance companies withdrew war risk cover in the aftermath of the attacks on Washington and New York. The Government stepped in to indemnify Ryanair and the other airlines for a month, and may yet have to extend the underwriting if premiums do not return to realistic levels.

The Government was correct to offer the indemnity and Ryanair was right to avail of it. The argument is that if a country cannot guarantee the safety of its skies, its citizens should not be penalised by higher air fairs. But this does not change the fact that Ryanair was the biggest beneficiary of the measure and a willing one to boot. State aid is state aid as Department of Public Enterprise officials are only to happy to point out.

Mr O'Leary is being somewhat disingenuous in accepting state aid when it suits him and opposing it for Aer Lingus. Are you surprised? You shouldn't be. The Ryanair boss is many things, but despite indications to the contrary he is not really on a crusade to stamp out state aid in European aviation.

Neither is he an evangelist for right-wing economics, although he could be mistaken for one on occasion. He is, however, prepared to go further than most chief executives to win advantage for his company. He might draw the line at wearing the dresses that Richard Branson has been known to don, but he has no problem opening up the European competition law books when it suits him.

Paradoxically, on this occasion he has a stronger case than usual and the Government should listen to him.

Consider the following figures. Last year, Ryanair flew almost eight million people to and from Ireland. It employed 1,467 people, most of whom were Irish, at a cost of €61 million. The no-frills airline also paid the Irish Government a chunky €19 million in corporation tax. All these numbers will improve this year, Mr O'Leary predicts.

Aer Lingus, on the other hand, wants something in the region of €125 million from the State to make 2,500 people redundant. The airline is set to lose £200 million between this year and the next and will not be paying corporation tax for quite some time. Passenger numbers are in freefall.

There are many reasons why Aer Lingus should be rescued. Some are rational and others purely emotional. There is tremendous public affection for the airline and this has not been lost on Mr O'Leary. Ryanair has said it will oppose state aid for Aer Lingus but at the same time has also said that it wants its rival to survive.

The Government would appear to have made up its mind on the matter. The Minister for Public Enterprise, Ms O'Rourke, will today head for Luxembourg to set the wheels in motion for another bail-out. It would be an act of monumental folly if the rescue was achieved at the expense of Ryanair. There is little point sacrificing an existing or potential job at Ryanair to save one at Aer Lingus.

How the Government can square this circle is far from obvious, but talking to Mr O'Leary is probably the place to start. Ryanair's opposition could yet turn out to be the most serious obstacle to a restructuring of Aer Lingus. The problem is that relations between Ryanair and Ms O'Rourke are at an all-time low.

The airline is clearly frustrated with the Government and its airport policy in particular, which has denied it Wallonian-style deals. The barrage of highly personal attacks against Ms O'Rourke in recent months would indicate that it has given up on the issue, unless they seriously think the Government is going to allow one of its ministers to be publicly embarrassed and bullied into a change of policy.

Mr O'Leary might as well expend his time and energy trying to reform the clientelist political system that underpins the special treatment doled out to Aer Rianta, Aer Lingus and the other state companies.

The airline's contemptuous dismissal of the incentive scheme launched by Aer Rianta last week indicates that the sledgehammer approach is still the preferred one. But it is also clear that if a deal is to be done between the Government and Ryanair, it will be over landing charges at Dublin. However, if he is serious about expanding his Irish operations, Mr O'Leary might be better advised to start negotiating with his enemies from a position of strength rather than trying to bomb them into submission. But maybe he is watching too much television at the moment.

jmcmanus@irishtimes.ie