The winter season has definitely hit the market. Low-cost airlines have therefore increased their measures to cut costs, at any costs… Ryanair leads the market making lots of announcements to drag media attention, but also adds more pressure on airports. The relationship between Ryanair and airports is very interesting, as they both need each other for their business, but the balance of power clearly leans toward the carrier. Airports not only provide necessary cash to the airlines, they are also pawns in a lobby game played by Ryanair to reduce taxes from the government.

The Shannon Airport Case

This month, Ryanair has threatened to pull 75pc of its business out of Shannon airport unless the Government axes the 10 Euros 'travel tax' and the airport makes a 50% decrease of airport charges. Even if 'blackmail' is a too strong term, this way of making business really sounds like it. Ryanair knows it is perceived as a “passengers/consumers” provider to regions. So the carrier signs deals with a well known attitude: “Take it or we leave!” This pressure is not new on Shannon airport, Ryanair already said a year ago that it would pull three of its four aircraft from the airport if the 10 Euros 'departure tax' was not axed. "You will see tumbleweed rolling across the ground at Shannon" said Michael O'Leary then.

Ryanair tries to pull down prices from airports all the time. Concerning Shannon, the 5 year contract expires in April 2010, so putting pressure of the airport authorities 6 months before makes sense as it lets time to Ryanair to find new airports for its planes to land and take off. Then, the deal is quite simple, either Shannon airport lowers its taxes by 50%, either Ryanair leaves the airport.

However, what really doesn't make sense is the declaration from the airline saying it has been making a loss for the whole duration of the contract. Ryanair doesn't worry to cut routes and change airports if they don't make money, so why did the airline stayed so long if it were losing money? We don't have access to Shannon/Ryanair accounts, but it is sure that Ryanair must gain something from this deal. This statement of losing money, like most of the others, is part of its PR strategy: playing on words and launching non-real news (ie: toilet tax…) to drag the attention of the media as a vector for their lobby actions.

Last September 2009, Michael O'Leary declared that only 5 airports had viable futures, and Shannon airport was among them. What a change of consideration in just 1 month! Could the story between Ryanair and Shannon airport be different? In June 2009, the Shannon Airport Authority (SAA) was expected to sue Ryanair for financial compensation of at least €2m for breaching the terms of a five-year contractual agreement with the airport. Ryanair was pointed out because of cutbacks in services in March 2009, and is expected to handle just 800 000 passengers compared with 1.9 million agreed with the airport. It seems from an outside point of view that Ryanair didn't succeed in attracting passengers on its Shannon routes. So why keep pretending other reasons caused this failure and not taking responsabilities?

In fact, this attitude is part of the culture of Ryanair. In October 2008, a High Court judge has accused Ryanair of entirely unattractive behavior and of using disreputable tactics against the Dublin Airport Authority (DAA). Ryanair initially refused to pay the DAA around €8.4m in airport charges and fees which it owed for August and September 2008 for Dublin, Shannon and Cork airports. Mr Justice Kelly said Ryanair had been engaging in brinksmanship, and issued a judgment against Ryanair for the 57 000 Euros of interest on the delayed payments still owed by it.

Kerry Airport: Different airport, but same story...

In July 2008, Michael O'Leary also declared that Kerry was a good base. Ryanair announced this week it will cut flights with Stansted airport. Once again, Ryanair didn't consider itself responsible for this drop and blamed the Government's 10 Euros 'travel tax' for the decision.

Michael O'Leary also declared regional airports were only surviving because of massive subsidies. Ironic declaration indeed when we compare with Ryanair receiving huge amounts of subsidies from airports and regions to open routes. Especially with Kerry airport in May 2008 when Ryanair accepted to be paid a subsidy of 7.5 milllion Euros for running the service, under a grant from a public service obligation (PSO) fund. This accession to the PSO route came just two months after the airline called on the Government to scrap the scheme. "This money is being poured down the drain by the Irish Government. One can only imagine how many hospital beds or autism schools or cystic fibrosis centers could be built and run with these vast sums of money" said Ryanair's then-communications boss Peter Sherrard.

How to sum up? Ryanair accepts public subsidies from airports and from Government, but refuses to pay taxes by “blackmailing” airports, and never finds itself responsible for any decision it is 'forced' to make… By pushing its luck, could Ryanair be considered as a 'rogue company'?

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Matthias, WhichBudget Airline Market Analyst

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