Kerry Airport to have commercial future

9 Aug

Recently Ryanair chief executive Michael O’Leary paid an unexpected tribute to Kerry Airport by forecasting that it alone of the country’s six regional airports had a commercial future. Rather than being a direct criticism of the management of other airports, O’Leary’s observation was a reflection on the fact that Kerry’s distance from Dublin and its location at the heart of the republic’s main tourist region give it several natural advantages over its competitors. It is also one of only two regional airports that has a full jet runway capable of handling larger aircraft used by airlines such as Aer Lingus and Ryanair.

Flushed with the praise of a ruthless businessman like O’Leary, Kerry Airport’s owners will also have been heartened by comments that he would be disappointed if there wasn’t direct flights between Kerry and places like France, Spain and Italy within the next five years. With such endorsement, it would appear that the Farranfore airport should have no fears about the future. Sadly, things are never quite that simple.

Like its regional counterparts, Kerry’s development has been based on year-on-year growth of its PSO route to Dublin over the past decade. But unlike most other PSO routes within the republic (with the exception of Donegal), funding for Kerry-Dublin services after 2011 seems assured on the basis of remoteness as the journey between the two cities will still take in excess of three hours regardless of upgrades to the road and rail networks.

However, geographical location is not the sole criterion for PSO funding and the obstacle to future subsidies for the route is the very success of the Kerry-Dublin service itself. It is the republic’s busiest PSO route, having pushed Galway off the top spot several years ago. More than 98,000 travelled on flights between Farranfore and the capital last year — a significant increase on the 42,000 passengers in its first year of operation back in 1995.

Unusually for PSO routes, the Dublin-Kerry service normally attracts bids from rival airlines, with Aer Lingus, Aer Arann and now Ryanair — since last month — all having held the franchise at some stage. Although no fan of PSOs, Ryanair saw no reason why it should not avail of Government-dispensed cash by underbidding Aer Arann for the Kerry route in the latest round of competition to secure the franchise.

The airline hopes to carry a total of 100,000 passengers on the route in its first full year, even though it is offering six less flights per week than Aer Arann.

However, it appears that Ryanair’s involvement in Kerry’s PSO could create a fresh controversy given the airline’s often volatile relationship with airport authorities.

O’Leary recently criticised Kerry’s attempts to impose a different set of charges for various routes.

“We have low costs out of Kerry for our routes to London and Frankfurt (Hahn) but they want to impose artificially high costs on us on the Dublin route because we get a PSO subsidy for it. That is the scam of the PSO subsidies,” complained the Ryanair boss.

Kerry’s position is perhaps understandable as it is fair to assume that Ryanair’s services make little contribution to the airport’s revenue stream in respect of landing charges. Instead, a controversial levy of €6 on departing passengers has generated €1.1m income for Kerry during 2007.

The level of subsidy on Kerry’s PSO route has fallen since 2003 in further proof of its perceived potential to operate on a strictly commercial basis and it is now by some distance the least subsidised of six PSO routes on a per capita basis.

The great imponderable, however, is for Kerry Airport to calculate how many existing passengers would continue to use the service if fares increased, while the number of daily flights decreased — two events destined to occur in the event that PSO funding is withdrawn.

The most economical option for any airline interested in the route would be to offer one daily return flight on a Boeing 737-type aircraft.

In Kerry’s favour, the airport had reduced its reliance on the PSO route considerably in recent years. Since 2003, when just under half of all passenger traffic at the airport arrived on flights from Dublin, the route now only accounts for 25% of visitors.

Kerry’s financial director Basil Sheering maintains that the route is crucial for the airport’s profitability, especially as the airport’s shareholders have recently become rebellious over the failure of any dividend to be paid since 1992.

However, signs that Kerry is still not immune from the general downturn in the aviation sector came last year when its overall passenger figures recorded a 1% drop — down 3,000 to just under 390,000 with the decline attributed to the loss of a service to Liverpool. Revenue also fell by €500,000 to €6.54m due to the loss of the Liverpool route and grant aid worth around €400,000, although profits were up 18% to almost €566,000.

Kerry Airport chairman Denis Cregan has also expressed concern that the unprecedented rise in energy prices would affect the profitability of airlines and their route expansion plans.

In addition, some of the €17.7m funding promised under Transport 21 may not be forthcoming due to Government cutbacks announced earlier this summer.

Kerry officials have also admitted that they have encountered difficulty in sustaining charter companies to operate out of Farranfore.

Although Aer Arann still has a presence out of Kerry through five weekly flights to Manchester and a weekly flight in summer to Lorient in Brittany, it appears Kerry’s immediate future is tied up with Ryanair — potentially its greatest champion and critic.

via http://archives.tcm.ie/irishexaminer/2008/08/06/story69137.asp
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One Response to “Kerry Airport to have commercial future”

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  1. The fate of Irish Regional Airports - August 9, 2008

    […] The Irish Examiner did an interesting series this week past on Irish Regional Airports. This follows on comments from Ryanair’s CEO Michael O’Leary that only Kerry and Donegal airports out of all our regional airports have a commercial future. I’d imagine comments like this one went down well in Farranfore and Carrickfinn. You can catch the write-up on Kerry Airpot on Kerry News Blog by clicking here. […]

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