David McCann: Stormy weather as Ryanair tests airport’s mettle

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As the low-frills airline cuts five routes to the Capital, David McCann considers the implications for BAA’s impending sale

WHEN Ryanair boss Michael O’Leary jets into town, the form book usually suggests trouble is brewing.

Never one to mince his words, the businessman’s candour and public outbursts have become so infamous that a book of quotations – “Plane Speaking: The Wit and Wisdom of Michael O’Leary” – has been compiled in his honour.

So when a trip to the Capital for a hastily arranged press conference was announced, the forecast was always likely to contain rumbles of thunder.

And so it transpired as Mr O’Leary firmly locked horns with Edinburgh Airport following a protracted row over the financial terms of Ryanair’s new contract – due to be settled by October.

Announcing five routes to be axed, Mr O’Leary claimed 300 jobs would be put at risk as a result. Of course, experts were quick to cast doubt on the figures, while airport bosses insisted the impact would be minimal.

Insiders suggest Ryanair’s announcement has been deliberately timed to “bully” BAA into agreeing a cut-price deal ahead of an inevitable sale of Edinburgh Airport, foisted on BAA following a ruling from the Competition Commission.

Ryanair has argued that lower airport charges would mean it could grow passenger traffic in Edinburgh, and consequently airport revenue, but BAA chiefs say the low-frills airline believes it is a “special case” by refusing to accept charges that are paid by all other airlines. But what could this very public row now mean for the future of Edinburgh Airport? And are there any implications for its sale?

Laurie Price, director of aviation strategy at consultancy Mott MacDonald, said Ryanair had form for withdrawing routes which were later reinstated. And he suggested that by cutting flights it was responding to reduced demand and soaring fuel prices rather than airport charges.

“To go and blame the airport for a marginal change in passenger tax is actually being a little disingenuous,” he claimed. “Ryanair will blame airport charges so they won’t be seen as the bad guy. It’s a try-on, probably recognising there’s very little BAA can do because they could not leave a legacy for a would-be purchaser [in the coming months]. Remember Ryanair is not the only airline flying into Edinburgh – it’s a minority player.”

Asked how the spat could impact upon the sale of the airport, he said: “I think it would not make one jot of difference. Edinburgh has proved itself to be the number one airport in Scotland.”

Echoing this view, aviation analyst John Strickland, of JLS Consulting, said that, while airport chiefs would be unhappy with the Ryanair decision, there was still much to be positive about.

“Ryanair have been known to cut capacity and put it back in so there’s a certain amount of taking a position in public,” he said.

“I don’t think it will make much difference to the level of interest of people willing to [buy the airport] because they know that low-cost airlines in particular are demanding, but also that Edinburgh is such an important airport to Scotland and that there’s many strings to Edinburgh’s bow in terms of growing traffic.” An airport insider suggested Ryanair was trying to “hold [it] to ransom”. “I don’t think these cuts by Ryanair will have any impact on the airport sale whatsoever but certainly the timing of this is designed to do that,” they said. “I’m sure bidders are concentrating on the bigger picture and looking at the long-term growth of Edinburgh Airport.”

A spokesman for Ryanair denied playing hardball with the airport and explained its figure of 300 job losses had been calculated through an industry standard ratio equating 100,000 passengers with 100 airport jobs.

“If we are removing 300,000 passengers, that’s 300 jobs,” he said.

He added: “If we don’t reach agreement for a deal [when it expires in] October we would heavily cut winter capacity by as much as 50 per cent.

“I think you will see the passenger numbers from Ryanair halve as a result, from 1.5 million to 750,000 per year, causing a dramatic fall in passenger numbers, weekly flights and job numbers. We want to grow there but we want to do it at a reduced cost.”

Four high-calibre buyers are thought to have met a first-round deadline for the Edinburgh Airport bid, which is expected to reach between £600 million and £700m. This comes one week after the airport was rated second best in Europe and among the best in the world for customer satisfaction.

It remains Scotland’s busiest airport and as Ryanair acknowledges the “huge potential”, it seems most likely the airline may have to wait for a new owner before striking a compromise deal. Then we can all look forward to Michael O’Leary returning for another memorable press conference.

High-flier

Edinburgh Airport is Scotland’s busiest airport, with more than 40 airlines serving upwards of 100 destinations, and some 9.3 million passengers a year pass through the airport – figures which are set to grow as Scotland’s international connections develop.

It is the sixth-largest airport in the UK and employs more than 5000 people, annually contributing hundreds of millions of pounds to Scotland’s economy.

However, passenger numbers fell last month by 4.4 per cent year-on-year to 557,400, blamed on “an expected dip” in the airport’s winter schedule.

Glasgow Airport also saw numbers fall, by 0.4 per cent to 416,300.