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The 1 billion white elephant at Dublin Airport


* While the Government and airlines supported the need for a low-cost (€170m) T2 in 2003, this was supposed to be an independent competitor to the high-cost, inefficient DAA monopoly.

* The Department of Transport announced in 2005 that the contract for the second terminal would instead be awarded to the DAA monopoly which had so spectacularly mismanaged the existing terminal.

* Having wasted €200m building a new terminal at Cork airport (which Cork’s airlines neither needed nor wanted), the DAA then announced it would build the second terminal for “between €170m to €200m”. Four years later the DAA has delivered a monstrous white elephant T2 at a cost of some €1.3bn, a sevenfold over-run).

* With the new Pier D, the existing terminal at Dublin can handle 30 million passengers per annum, yet traffic at Dublin airport is collapsing to just 20 million passengers in 2009, under the twin burden of the DAA’s high costs and the Government’s crazy €10 tourist tax.

* The DAA did not consult with its airline customers, it ignored them. Ryanair, the DAA’s largest customer, consistently advocated a low-cost €20m terminal. The DAA’s claim that Ryanair opposes improvements in airport facilities is false given that Ryanair has repeatedly offered to pay for and build a €200m competing second terminal at Dublin.

* If there was a competing terminal at Dublin, airport charges would be falling and traffic rising. Instead we have a €1.3bn white elephant T2, with the Government ordering the regulator to approve a 40% price increase which will cause Dublin airport traffic to collapse even further next year.

* Rising airport charges at Dublin and the Government’s €10 tourist tax are the principal barriers to traffic and tourism growth in Ireland. All of the major airlines, including Aer Lingus, British Midland and Ryanair, have confirmed that Dublin airport’s costs are very high by EU standards. How else can the DAA explain why Dublin airport will lose more than three million passengers this year, when both Ryanair and Aer Lingus will grow traffic (but all of this growth is taking place at lower cost airports outside Ireland).


* Mr O’Kane’s claim that “passenger volumes are driven by GDP trends” is rubbish. Passenger volumes are driven by low-cost access and low-cost efficient airports. Thanks to Ryanair, traffic at Dublin airport grew consistently from 1986 to 2008, through three recessions. The collapse in traffic at Dublin airport this year is entirely due to the DAA’s high and rising costs, which are forcing Irish and overseas airlines to switch routes and capacity from Dublin. The white elephant T2 will worsen this trend in 2010, when the supposedly independent aviation regulator has been ordered by the Department of Transport (the downtown office of the DAA) to jack up passenger fees by 40%.

* All of this was avoidable. Ryanair and 12 other parties offered to build a competing second terminal at Dublin airport at no cost to the Government or taxpayer. As the late Seamus Brennan confirmed: The taxpayer gets this for nothing, so we would be mad not to do it”. Sadly, the Department of Transport is not just mad, it repeatedly protects the vested interest of the Government-owned airport monopoly over the greater interest of consumers, tourism and job creation in Ireland.

There is a solution, even now. T2 should be mothballed. It’s not needed. Better still convert it to shops, offices or a conference centre.

The Government should return to Seamus Brennan’s original vision which was to break up the DAA monopoly by selling off Cork and Shannon airports to competent, efficient airport operators, and allow a competing terminal to be built at Dublin airport — financed by any one of the 13 parties that previously expressed an interest in doing so — and allow competition and efficient facilities to force down the DAA’s high costs and return Ireland to traffic and tourist growth. This will allow competition to succeed where the monopoly protection policy of the Department of Transport has failed.

The irascible O'Leary addresses the nation ..

By RONALD QUINLAN

Sunday Independent February 15 2009

RYANAIR chief executive Michael O'Leary has challenged the Government to throw down the gauntlet to the unions, and press ahead with plans for public sector reform despite the growing threat of industrial action.

And in a stinging criticism of Taoiseach Brian Cowen's attempts to get to grips with the deterioration in the public finances, Mr O'Leary accused his administration of having shown "no leadership . . . no spine and no balls."

The outspoken aviation boss was speaking to the Sunday Independent as Ryanair revealed its plan last Thursday to shed 200 jobs at Dublin airport in response to the Government's introduction in April of a new €10 travel tax on all flights departing from Ireland.

Asked if he believed the impending departure tax suggested the Government was more concerned with balancing the public finances than in protecting jobs, Mr O'Leary mounted a blistering attack on the current administration for its failure to tackle the public sector over its refusal to accept pay cuts or the pension levy.

"There are much bigger issues at stake here. The reality is the Government has not tackled the public finance deficit. It's going to be much worse in the next 12 months. They need to be out there on the front foot reducing their costs. There's going to have to be pay cuts in the public service. They're not addressing pay cuts, nor are they addressing the lamentable productivity in the public service.''

"They should be making real, tough decisions. And they should start out by saying: 'Right, everybody is now working 40 hours a week, and if you don't like it, go. Everybody in the public service is getting 20 days holidays like everybody in the private sector, and if you don't like it, go.' And they should shut down this pensions scandal," he said.

Mr O'Leary called on the Government to face down the threat of industrial action from the public sector unions over its plans to introduce a pension levy for public service workers.

"And if the response of the public sector or unions is 'well we're going to go on a day of action', fine, you go on your day of action and if there's any strikes we're going to implement these decisions anyway. This Government has demonstrated no leadership, and they've no spine and no balls."

Asked if he believes Irish workers will have to work "cheaper and harder" to bring about an improvement in the economy, he said that while that message had already got through to the private sector, the public sector had yet to follow suit.

"We're going to have to work longer and for less. There's no other way of dealing with this. In fairness, you look at most companies in the private sector and that message has already got through. Pay cuts are wholesale in the private sector, yet there's no pay cuts in the fat of the public sector, who are remarkably inefficient," he said.

Mr O'Leary went on to express strong views on the refusal by union bosses to countenance pay cuts -- or even the alternative of the pension levy -- for public sector workers.

"And if I have to hear people like David Begg of ICTU lecturing me again, when he has his snout in the trough with €45,000 as a non-executive director of Aer Lingus. And your man, McCloone, the chairman of FAS meeting and greeting down in Mount Juliet, playing golf and all that kind of nonsense. Throw them out of Government Buildings. They're not going to be the solution to this problem," he said.

Asked what he made of Siptu chief Jack O'Connor's view that there was an ongoing effort to set private sector workers against those in the public sector, Mr O'Leary was dismissive.

"Jack O'Connor is an idiot. Don't mind Jack O'Connor. Jack O'Connor just mouths off. I mean who do they (union bosses) represent? Largely the public sector unions. They represent a tiny minority of public sector workers. But who are the people taking the real pain? The public sector hasn't taken any pain at all.

"But before you want pay cuts in the public sector, you want productivity enhancements. So tell the nurses they're not working 34 hours; that they're working 40 hours. Tell the prison officers they're not getting 40 days holidays. We need to get productivity up there.

"That inevitably will lead to job losses. But where is there a line in the Constitution that says you can't be made redundant if you're a public sector worker? Make them redundant."

Regarding the issue of the Government's plans to introduce its €10 travel tax, a measure which would see Ryanair carry two million fewer passengers into Ireland this year, Mr O'Leary said it was a move which could "kill the fatted calf" of tourism.

"The travel tax is the kind of stupidity you get when you have civil servants framing budgets. They look at how other governments, the UK and Dutch governments have raised money by just taxing people. So they put in a travel tax without focussing on the reality that we're an island on the periphery of Europe," he said.

The Ryanair chief added: "We are a small country that has enjoyed a boom in tourism in recent years, almost all of it delivered by Ryanair, and now this Government just wants to kill the fatted calf. But if that's what you're going to do, that's what you're going to get."

- RONALD QUINLAN

The domination days are done.!

 

 

Seconds out for the big fight: Michael O’Leary vs The Rest

08 October 2006  By David MacWilliams
This is the big one. This is Ali versus Foreman, Dublin versus Kerry, Ireland versus England, Kilkenny versus Cork, Keane versus Viera and O’Driscoll versus Umaga, all rolled into one. Forget the Ryder Cup, this truly will be epic. Ryanair versus Aer Lingus is the real thing.

This war pits Michael O’Leary against everyone he has fought in the past 15 years. It’s time to sit back, get front row seats and enjoy the scrap.

We are about to see a battle for the heart and soul of corporate Ireland. O’Leary versus the establishment signals that we have come full circle since the days of Ireland being run by cosy corporations, trade unions, politicians and favoured middle men. Doubtless Ryanair is a big company, but O’Leary is an outsider.

He might be enormously wealthy, but he is still a maverick. He remains - of his own choice - firmly outside the tent. This is what will make the confrontation fascinating. In a country of prevaricators, spoofers, spinners and people in high places who won’t admit something is plainly wrong, Michael O’Leary is a straight-talker who is honest and tells it as he sees it, in plain English. Whether you like what comes out of his mouth or not, you have to admit that, with Ryanair, you know where you stand.

Contrast this refreshing, if not always welcome, bluntness with the pathetic, lily-livered carry-on we witnessed in the Dail last week where our so-called ‘leaders’ – from the Taoiseach down - came out with manure like it was ‘‘not incorrect’’, ‘‘ill-advised’’ or ‘‘inappropriate’’, instead of just wrong. Do they think we are fools? On one level, the battle is about these people versus O’Leary. The government has said it won’t sell its stake in Aer Lingus now that the airline is in play. Why not?

What leverage will, or should, the government have over an airline? You can’t have it both ways. Once you put your house up for sale,you have no business vetting the buyer. It amazes me that the overwhelming reaction to Ryanair’s bid is surprise. What is even vaguely surprising about the biggest airline in the country being a possible buyer of the next biggest? I would have thought that Ryanair was the most likely buyer. It is hard to image what the government’s advisers thought O’Leary and his top brass might have said to each other the day when the privatisation was first mooted.

Oh Mick, you see Aer Lingus is up for sale? Really? I didn’t see that. Tea? What page of the paper? Two sugars or one? What’s that got to do with us?

Nothing really, after all, it has eight million passengers who fly from this island, the best facilities in the airport we use, a good fleet, it’s just paid for its costly restructuring, it has just lost its chief executive and senior management team and it’s valued at a sixth of our outfit. Milk?

In fact, with our two billion of funds in the bank, we could buy it for cash. Is that a fact? But you’d never dream of buying it, Mick, would you? Nah. Do something useful and pass me the Racing Post. What’s the ground like at Galway for the 2.30?

Of course Ryanair would have been interested! It is probably the only interested party and, now that it has made its bid, it’s unlikely anyone else will jump.

For someone else to be found, the second suitor would have to be prepared (just like the Valentia consortium at Eircom) to do another sweetheart deal with unions, the government and the employees. When you have a near-monopoly like Eircom, that may be financially do-able; in a small airline like Aer Lingus, it would be commercial suicide. I could be wrong, but it’s fair to say that Ryanair is the only game in town.

The next obstacle for Ryanair is to get close to 94 per cent of the free float. The free float is the amount of shares that are out in the market with willing sellers. So given that the government and the unions and possibly employees won’t sell to O’Leary, 42 per cent of the shares are illiquid. This means he has to buy 51 per cent of the 58 per cent that are left. But this should not be too much trouble.

The question for fund managers is not why you would sell to Ryanair but why wouldn’t you? In a notoriously difficult business for an investor to make money, show me the fund manager who is today being offered a 30 per cent return on investment in two weeks who would dare to have Aer Lingus shares in his portfolio by next March. After all, it was Warren Buffett - the finest investor of all time - who remarked that no one had made money in the airline industry in the full century since the first manned flight. So only a fool will not sell.

Interestingly, the stockbroker community was unusually lukewarm in its response to the news. This is because the Ryanair bid effectively rules out further privatisations from which brokers make great money. The reason is simple: the unions are going ape. They will never allow a state asset to go to the market again. This means that no government run by Bertie Ahern will privatise anything again. Bad news for the brokers.

So now it’s over to the Competition Authority to stop O’Leary. Ryanair says this is a European, not an Irish, issue, and will argue - with validity - that history indicates that Ryanair cuts fares no matter whether it has a full monopoly or is in competition on routes. It is hard to argue with that position.

There is another angle. The government, unions and employees could offer a sweetheart deal (to use Bertie’s own 1993 expression) to Willie Walsh to come in and buy the airline for British Airways. When Eircom was privatised for the second time, the Valentia consortium accepted such a pill, guaranteeing conditions and so on.

However, sweating the assets of a fixed line telephone monopoly is a lot more feasible than sweating the assets of a small carrier with an angry Ryanair breathing down your neck. Equally, even if he was interested, Willie Walsh might enjoy the spectacle of Bertie squirming, given Bertie’s assassination of Walsh under Dail privilege not so long ago. The battle is on between the outsider and the insiders, the cosy and the jagged edge, for the heart and soul of corporate Ireland. If O’Leary wins, the ‘partnership alliance’ will be shattered.

If the partnership alliance wins, swashbuckling, brash enterprise will be knocked back. This is a turning point. Game on. Take your seats. www.davidmcwilliams.ie

Game set and match to Bertie!

Monday October 15 2007 Irish Independent:

RYANAIR boss Michael O'Leary used the platform of the annual Dublin Economic Workshop in Kenmare at the weekend to slate both the Government's record on transport and the board of Aer Lingus.

Only Seamus Brennan escaped unscathed as Mr O'Leary launched into a broadside against the "muppets in the Government who had failed to achieve anything over the past decade".

Mr Brennan, according to the Ryanair chief, had achieved more in six months than had been achieved in the previous decade, but was removed from office after the Government backed down on his decision to go to tender on the building of a competing second terminal at Dublin Airport.

The second terminal was to cost about €200m and would have competed with the existing terminal.

But the Government refused to press ahead with this plan, Mr Brennan got the boot and the job of constructing a second terminal was handed to the Dublin Airports Authority, with the cost of the project soaring from €200m to €1.2bn.

And he also warned that if this organisation was also handed the job of running the terminal, as he believed they would, then passenger charges would double.