‘One little hangar’ = 300 jobs and a load of political bull…

Ryanair boss, Michael O’Leary, once remarked he wouldn’t get elected as a dog-catcher. He doesn’t need to. He knows all he has to do is give politicians the sniff of a few jobs and they quickly become a man’s best friend. He can make them jump through hoops, watch them snap at each other’s heels in the Dail and on the airwaves, making themselves ridiculous as they dance to Michael’s Hangar tune.

At the height of Michael’s “one little hangar” furore, O’Leary gave the game away to Richard Curran in the Sunday Business Post. His purpose in raising the issue of his getting Hangar 6, an issue dead and buried since last September, was :

“…to ‘‘embarrass the government’’ .

He wanted to be able to put them on the spot. To say: ‘‘You lost 200 jobs.”

Curran wrote: “According to O’Leary, the story gathered momentum and the political debate became one around whether the remaining 300 jobs could still be created at the airport. It may not have been O’Leary’s original intention to engage in this process, but he decided to go for it, ‘‘as a long shot’’.

‘‘The issue then became: could they [the jobs] be got back . . . do I think we’ll get Hangar 6? No,” he said.

”O’Leary expects to announce details of several hundred more maintenance jobs by Ryanair at a continental European location in the coming weeks. This makes it sound like much of last week’s brinkmanship was overcooked and, as O’Leary originally contended last Sunday, these jobs were already gone.”

So just why was Michael O’Leary so bent on getting Hangar 6? He says he wanted the hangar because it was the only hangar in Dublin Airport in which five or six aircraft could be lined up together for base maintenance.

Shortly after SRT Technics had announced its decision to close its Dublin operation with the loss of several hundred skilled jobs in February 2009, O’Leary wrote directly to the Tanaiste. For several months thereafter, O’Leary enjoyed the attentions of the IDA Chief Executive, Barry O’Leary, with the Tanaiste and the Minister for Transport engaged on the periphery as discussions continued. From the correspondence disclosed by Ryanair at the height of last month’s row, Ryanair’s jobs offer to the Tanaiste was conditional on it obtaining sole occupancy of Hangar 6 and, significantly, on no negotiations involving the DAA.

The Dublin Airports Authority had moved quickly to take over the leases on Hangars 1-5 and Hangar 6 following SRT’s announcement of its withdrawal from Dublin. DAA paid SRT €20m for the lease on Hangars 1-5 and the separate lease on Hangar 6 and set about securing new tenants and projects for these facilities, in conjunction with other government agencies.

The lease covering Hangars 1-5 was straightforward and Ryanair negotiated with the DAA for space in Hangars 1 and 2. Ryanair denies direct negotiations with the DAA on this lease, stating  it was done by the two sides’ legal teams. Other projects, such as Dublin Aerospace, which in time is expected to generate up to 250 new maintenance jobs, also became a DAA hangar tenant.

Legally, the lease on Hangar 6 was complicated. DAA Chairman, Declan Collier, told the Oireachtas Committee on Transport last week that as far back as February 2008, a year before they first approached the government with their jobs’ offer, Ryanair was aware of the complex arrangements surrounding the lease to Hangar 6, amounting to a requirement for consent by Aer Lingus to any change in the leasehold arrangements for that facility.

In a letter to Barry O’Leary on 2 July last year, Michael O’Leary clarified the terms and conditions under which Ryanair would acquire Hangar 6. It would take over the lease and reimburse DAA €13m of the €20m the Authority had paid SRT for both leases. It would pay €200,000 in annual rent, for the remaining life – about 80 years – of the lease. A 50% reduction in the €700,000 rates charge from Fingal County Council would be required “in perpetuity”, in light of Ryanair’s substantial contribution to job creation in the County. Ryanair would also sign a restrictive covenant on its use of the hangar for aircraft maintenance purposes only, and would further sign a clause allowing the DAA to terminate its occupancy if necessary, for airport development purposes, but only if alternative facilities on the same terms and conditions were provided.

Presumably, the IDA and Ryanair never got down to the nitty gritty of how many jobs and how they would be phased in over what time period as O’Leary pulled the plug on the negotiations in mid-September last year when it became clear that no deal on hangar 6 would be possible without direct negotiations with the DAA.

By then the DAA was embroiled in its own difficulties with Aer Lingus on the future of hangar 6 and that airline’s plans for its fleet maintenance at Dublin. O’Leary was pressing ahead with his own negotiations with the Scottish agencies to build a new 6,000 sq m hangar at Prestwick airport to add to its existing 200 job maintenance operation there that Ryanair had opened in 2004.

Aer Lingus eventually accepted a lease from the DAA on hangar 6 on 17 December last, on terms that appear more financially preferential to the DAA – a total of €24m according to the DAA –  than what was on offer from Ryanair.

At the Oireachtas Committee, Aer Lingus CEO, Christoph Muellar, explained that hangar 6 is the only existing hangar with sufficient height to accommodate the tailfins of its wide-bodied A330 aircraft as well as several narrow bodied aircraft at the same time. . The advantages to Aer Lingus include efficiency and productivity in fleet maintenance. Aer Lingus would gladly leave the dilapidated and poorly insulated hangar 6 if it was offered equally suitable accommodation elsewhere at the airport, Muellar suggested. But none such exists. Aer Lingus would vacate hangar 6 if the DAA gave adequate notice – 24 months as per the terms of its lease – but only for genuine reasons of airport development like the construction of a new runway which would require demolition of hangar 6. In his view, the definition of “sufficient reason” does not include substituting Aer Lingus in hangar 6 with another tenant. Leaving it to make way for Ryanair and its jobs promises clearly isn’t what he has in mind.

Being forced out of hangar 6 immediately would cost Aer Lingus a great deal of money, Christoph Muellar said, and could not be justified to the company’s shareholders.

“We will not move out of Hangar 6,” he said.

Applying some common sense to what was going on here, it’s self-evident that this was never about jobs. More likely it was about control of a piece of strategic infrastructure at Dublin Airport and getting control of that on the optimum terms and conditions. The jobs are secondary, window-dressing of sorts.

The IDA and thus the Government, were well aware that Ryanair had alternatives for their fleet maintenance needs lined up, including a new hangar at Prestwick, about which Ryanair were engaged in negotiation with the Scottish authorities throughout the entire period they were haggling with the IDA and the Government over possession of hangar 6 at Dublin Airport.

If, as Declan Collier has claimed, Ryanair already knew that Aer Lingus had what amounted to a lien on the ultimate tenancy of hangar 6, it made sense for Ryanair to initially approach the Government and its agencies, rather than the DAA. The Government and the IDA could be expected to attach more importance to a jobs spin-off than the DAA, whose remit is airport management. Ryanair saw a commercial strategic opportunity, with 500 jobs as the carrot to wave under the politicians’ noses, and went for it. Hence no alternative in hangers 3 or 4 or even the offer of a purpose built facility for Ryanair were ever going to be acceptable.

All the rest of it, the posturing, the play-acting, the name calling, is just bull, as Michael O’Leary might put it himself. As he summed it up at the end of his Oireachtas Committee appearance: “Nothing happens here without hangar 6.”

Michael O’Leary must be greatly amused by the antics of the politicians, who fail to understand that Ryanair is not in the job creation business any more than Aer Lingus is is the hangar collecting business. Private organizations in the aviation sector exist to make profits for their shareholders and that’s as far as their loyalty goes or should be expected to go.

But on all sides, our politicians were rightly suckered and fell for the charade. It wasn’t a pleasant sight.

The Tanaiste , Mary Coughlan, made the first mistake when she replied to O’Leary in February 2009 referring him to the IDA without reference to the crucial role that the DAA would have in signing off on any deal involving hangar 6. The limitations on the government’s role and powers to hand over pieces of infrastructure at Dublin Airport to all comers should have been made perfectly clear from the first contact. If she had called O’Leary’s bluff in February 2009, she might have avoided having to listen to his ‘Call my bluff’ mantra in February 2010.

Instead, as political dolts on all side fell over themselves on the airwaves and in the Dail demanding political intervention to save jobs that no longer existed, it was left to the Taoiseach to state the bleedin’ obvious.

“It may be news to Deputy Kenny that neither Governments nor State bodies can act unlawfully,” the Taoiseach told the Opposition leader who ranted about the DAA showing “two fingers” to 300 families in North Dublin and Meath and engaged in shouting about ‘putting it up’ to the DAA and Aer Lingus.
“The Government, as owner of DAA, is like any other shareholder in that it cannot direct a company in which it owns shares to breach a contract,” Cowen said. “To do so would amount to inducing a breach of contract and would be unlawful and render the Government liable to damages to Aer Lingus for all losses suffered.”
Two weeks later, the political argument rumbles on with Michael O’Leary poised to light a spark under it at any time of his own choosing. Fiery hoops might be a nice trick.