BUSINESS OPINION: Airport policy is a prisoner of past mistakes, particularly DAA's €1 billion debt

IT TOOK a while, the best part of a week to be precise, but eventually something close to the true context for the extraordinary war of words between Ryanair and the Government over a hangar at Dublin airport has emerged.

This does not reflect terribly well on any of the parties, but the most serious questions fall at the feet of the Government and concern its airport policy.

When Ryanair’s Michael O’Leary took to the airwaves two Sundays ago to make what looked like a last-ditch attempt to get the Government to see sense on the issue, the game was already up.

Despite this, an elaborate game of charades was played out over the week as public pressure came on Minister for Enterprise Mary Coughlan to try to salvage the situation and “save” 300 jobs.

Predictably it all came to nothing, as those familiar with the backstory to the hangar saga must have known it would all along. However, O’Leary did succeed in one regard: he shone a spotlight on the dysfunctional relationship between the DAA, Aer Lingus and Ryanair, the backdrop to which is the State’s aviation policy.

What emerged last week is that Ryanair, Aer Lingus and the DAA all seem to have been alive to opportunities and threats posed by the vacating of Hangar 6 by SRT.

Ryanair would appear to see it as a chance to hold a prime site at Dublin airport, presumably with a view, in time, of realising its long-held ambition to own and operate its own terminal.

The DAA and Aer Lingus both have reasons to fear this. The DAA because it would see its monopoly on passenger handling broken and Aer Lingus because of the competitive advantage that having its own terminal would give Ryanair.

The DAA moved quickly to buy back the lease on the hangar from SRT – hampering attempts to sell the business – and then entered into an agreement to lease it to Aer Lingus, which would use it for line maintenance.

While O’Leary’s claims that Aer Lingus has no need for a hangar to carry out line maintenance at Dublin need to be treated with caution, the fact does remain that it seems somewhat rash to lease one of your prime assets to someone who only plans to use a small part of its capacity.

Hangar 6 is clearly capable of supporting a level of aircraft maintenance activity that would require more than 600 engineers. Why would you rent it to someone who only plans to put 100 people to work in there? And why would you give them an apparently bullet-proof lease meaning you cannot shift them?

One obvious answer is because they are paying the full rent. We don’t know if this is the case, but if Aer Lingus is paying the full rent on Hangar 6 then it must have a reason that goes far beyond managing their maintenance costs. Likewise, if the DAA is letting Hangar 6 on the cheap, it must have a reason other than value for money.

We don’t know the details of the agreement between the DAA and Aer Lingus, but given that it was forged against the backdrop of their mutual enemy Ryanair trying to get hold of the hangar, it would, one suspects, make interesting reading.

If the above analysis holds true, then the game was up months ago – when Aer Lingus signed the lease – and O’Leary’s decision to go public is a combination of a last throw of the dice and a fit of pique.

You can’t discount the possibility that dumb luck rather than judgment lay behind the outsmarting of Ryanair by Aer Lingus and the DAA. Hopefully it was the latter as this indicates an ability to think and act strategically on the part of both organisations. Something that is not always evident.

It’s hard to fault Aer Lingus’s behaviour. It was acting in the best interest of its shareholders by denying Ryanair a stronger foothold in Dublin. Equally, the DAA was acting in keeping with its commercial mandate. It has far more to lose than gain by letting Ryanair have what it wants.

In fact the only player in the game who does not seem to be capable of thinking strategically is the Government. Current airport policy is a prisoner of past decisions, in particular allowing the DAA run up debts than can only be serviced by allowing it enjoy monopolies at Dublin, Shannon and Cork.

When push comes to shove the Government is not going to do anything that will jeopardise the DAA’s ability to service its €1 billion worth of debt, which carries an implicit State guarantee.

Viewed from this perspective, a Government decision to give Ryanair what it wants at Dublin airport would be a big, big decision with far-reaching consequences for the DAA and the exchequer.

But an Irish airport policy that does not have the ambitions of Europe’s most successful airline – which just happens to be Irish – at its centre is equally short-sighted.