Aviation interests let fly at Government over state of industry and lack of recovery plan

Blame for Aer Lingus closure at Shannon and the parlous state of the airline lies at Government’s doorstep

An idle Aer Lingus jet at Shannon Airport. Photograph:  Brendan Gleeson

An idle Aer Lingus jet at Shannon Airport. Photograph: Brendan Gleeson

 

On Monday Tánaiste Leo Varadkar reminded the launch of Fine Gael’s Dublin Bay South byelection campaign that it was “against the law” to leave the State for non-essential reasons. The following day he received a letter from Aer Lingus informing him of plans to close its Shannon Airport base, with the potential loss of 126 jobs, and of likely cuts in Cork and Dublin.

The same day, Tuesday, the Cabinet was due to discuss plans to reopen air travel after 14 months of tough Covid-19 restrictions, but postponed this to next week. That agenda will include debate on mandatory hotel quarantine, a restriction applying to among others, visitors from EU neighbours, Belgium, France and Italy.

Willie Walsh, Irish chief executive and director of the International Air Transport Association, on Thursday dubbed quarantine “repressive” and “dangerous” in an address to politicians. Walsh, founder and former chief executive of International Airlines Group (IAG), owner of Aer Lingus and British Airways, observed that his native country’s attitude to travel throughout the Covid-19 crisis “amazed” him.

He told Joint Oireachtas Committee on Transport and Communications Networks that he himself had not travelled to the Republic since February last year, a consequence of policies that he argued were based on the mistaken notion that “everyone flying in here” is infected with the virus.

For months, even with job losses in airlines and airports hovering at the 4,000 mark, the Government has managed to avoid much public criticism of its tough stance against travel, or of its seeming lack of a plan to reverse that position as vaccines reopen the rest of the world.

But events this week threw the issue into sharp focus. A few hours before Varadkar suggested that heading for a Mediterranean beach might be a crime, Ryanair published results showing it lost €815 million in the 12 months to the end of March. However, its chief executive, Michael O’Leary was bullish about the months ahead. He predicted that the Irish giant could carry four million passengers next month.

“If we get to four million in June, it could be anything from seven to nine million in July,” he informed US and European brokers’ analysts. The upper end of that forecast would be 61 per cent of the 14.8 million people that Ryanair flew in July 2019, but twice what it carried in the same month in 2020, when the airline relaunched after being grounded for three months.

O’Leary said summer bookings from the UK, Germany, the Benelux countries, Scandinavia and eastern Europe were beginning to accelerate as vaccinations took hold and people looked beyond lingering restrictions and concerns. “Families are going to be moving in very large volumes to the beaches of southern Europe,” he declared.

He doesn’t believe it will stop there. Assuming that a vaccine-resistant Covid variant does not emerge, then O’Leary calculates that Ryanair’s passenger numbers will recover through the second half of the year to around 90 per cent of pre-virus levels. From that point, they could return to normal during the airline’s next financial year, which ends on March 31st, 2023.

O’Leary told his audience of Wall Street, City of London and European analysts that there was only one black spot in all this: Ryanair’s home nation. He added that the carrier had moved aircraft from Dublin and “won’t be moving them back” this year, as the Republic was the only place where airports were not looking to add capacity.

He dismissed Irish restrictions, including hotel quarantine, as “stupid” and “ineffective”, arguing that they were easily circumvented, but still gave the impression that the State was closed to visitors. The airline boss reserved much of his ire for Eamon Ryan, Minister for Transport, whom he said had left proposals from the industry for restarting travel “gathering dust on his desk for 10 months”.

Even by O’Leary’s normally outspoken standards, his frustration with Government was obvious. Despite emphasising that the Republic was a small part of Ryanair’s business, he took several opportunities to fire broadsides at its travel policy during the conference call with analysts.

The same frustration was equally clear – if more muted – from Aer Lingus chief people officer, Brian Bowden’s letter to Varadkar, sent to the Fine Gael leader in his capacity as enterprise minister, to inform him of the company’s intention to lay off workers.

He stated that Aer Lingus has suffered significant damage as a result of the Covid-19 crisis “particularly as travel restrictions in Ireland have been more stringent than in any country in Europe”.

Bowden pointed out that the Shannon base has been inefficient and out of line with the market for a significant period. “In addition, we have not operated a commercial flight to or from Shannon since April 2020 and the current timeline for a resumption in flying from this base is uncertain, as a consequence of which all staff to include cabin crew in the base remain on temporary lay off,” he says.

Hitting it harder

Unlike Ryanair, which has a Europe-wide network, Aer Lingus depends completely on the Irish market, so the freeze in travel is hitting it harder than its much bigger rival. Its business lost €103 million in the first three months of this year, while it shed €361 million through 2020.

Recently appointed chief executive, Lynne Embleton, told staff this month that the company had too many resources. She warned that Government policy left it facing the loss of a second summer, the period in which it earns most of its revenues. Like Ryanair, it is shifting aircraft elsewhere.

From this summer, Aer Lingus intends flying to the US from Manchester, using Airbus jets originally destined to serve transatlantic routes from the Republic. Ironically, one of the cities it will serve from the English airport will be Boston, which boasts one of North America’s largest Irish communities.

Whether or not the Government believes it’s justified, blame for the Shannon closure and the parlous state of Aer Lingus lies on its doorstep. Ashley Connolly, who heads the services and enterprise division of Fórsa, the cabin crew’s trade union, said the news might have been avoided had the Government moved faster to support aviation and given a clear indication of when and how air travel would resume.

Mary Considine, chief executive of the mid-western airport’s owner, Shannon Group, avoided direct criticism of the Government, which is the company’s shareholder, but she pointed out that a “clear roadmap” for travel’s restoration was vital to the post-Covid recovery.

It is the lack of any plan, clear or otherwise, that angers air travel businesses and their workers, whose future looks increasingly uncertain. Industry figures warn that this does not only affect them, it has broader implications for the Republic as a whole, which depends heavily on inward investment, exports and tourism.

Years to reinstate

Walsh told the Oireachtas committee that the transatlantic network built by Aer Lingus in the half decade or so before Covid struck will take years to reinstate. He predicted that the airline would park the launch of any new routes announced before the pandemic.

Others that were only “maturing financially” such as Seattle and San Francisco, home to the US tech industry, could remain suspended, he predicted. US airlines will return after we reopen, but only seasonally rather than all year around. “That’s going to hit inward investment,” Walsh said bluntly.

O’Leary was blunter still. He said the Republic would miss out on the tourism and jobs boost that the return of travel – however limited at this point – would bring, all because the authorities here “don’t have a clue”.

Both men warned that airlines will simply base aircraft elsewhere while the Republic stays locked down to travel. So it will miss out on the crucial early stages of recovery in Europe. Walsh points out that demand has been strong in the US, China and Russia, where domestic travel has returned. In fact, he notes that it has overtaken pre-Covid levels in some parts of the US.

Ryan and Minister of State Hildegarde Naughton stressed this week that they were keenly aware of the challenges that Covid travel restrictions had imposed on Irish aviation. They met Embleton the day after the Aer Lingus announcement and assured her that there would be no sudden end to employment supports.

Their joint statement stressed that both realised that a plan for restoring international travel “when circumstances allow” was critical for the industry. “The Government will set out an initial pathway for the reopening of travel at its meeting next week,” they said.

None of this is very comforting to those about to lose their jobs in Shannon, or to others who fear they may be next. Aer Lingus now employs about 4,400 people but had Covid not intervened, that would have been more than 6,000. DAA, operator of Cork and Dublin airports, says 2,000 will have gone from its business once its voluntary redundancy programme has run its course.

Meanwhile, things are moving ahead at pace in other parts of Europe. The Council of Ministers this week agreed that vaccinated US residents should be allowed to travel freely in the bloc, something signalled last month by the European Commission. Brussels is also laying the ground work for digital green certificates, designed to get EU citizens themselves travelling.

These will feature a public key, confirming the holder is vaccinated, immune or has tested negative, which will be held on a national directory. The commission is putting a system in place that will allow members access to each other’s national directories. This will allow each state to verify all the others’ certificates. The EU’s central system should be functioning next month, at which point member states will start connecting to it. The Government says our system for issuing certificates will be ready by the end of July or early August.

However, this now seems far too late for an Irish air travel industry that sees the rest of Europe queuing at the departure gates while the Republic misses yet another bus to the airport.

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