Michael O’Leary claims there was “very little appetite” at government level for the facility up to 500 jobs
Ryanair group chief executive Michael O’Leary said that while Shannon was considered in the early stages for the facility, it no longer is. Derry is the only possible candidate on the island.
He claimed there was “very little appetite” at government level for the investment in Shannon.
Mr O’Leary said a final decision on the locations of the facilities would be made before Christmas. One will be in eastern Europe, likely in Poland or one of the Baltic states. Each site will be capable of overhauling about 200 engines a year.
“We had some discussions with Shannon, but there was very little government support,” said Mr O’Leary. “Ireland is operating at full employment, certainly in the aviation space. There was very little appetite at government level for an investment of this scale or the creation of these jobs in Ireland.”
The news will come as a blow to the Shannon region, which already has a strong aviation sector, with aircraft overhaul, jet leasing and other related business based there.
While Derry remains in the running, it’s not among the lead contenders, according to Mr O’Leary. “The Northern Ireland authorities are very keen to be selected,” he said. “They are much more active.”
“It’s certainly not going to be the first one chosen,” said Mr O’Leary. of Derry. “It would be running well behind. We’re in active negotiations with six sites and it’s probably running at number four or five.”
Mr O’Leary pointed out that a decision on where to base a facility in western Europe isn’t dependent on government incentives. “Each site is going to cost us about €400m,” he said. “You’re talking about small change coming from government. What really will drive a decision on these sites is demographics, the availability of trained labour.”
“In Northern Ireland, there is a lot of very skilled aviation labour in Belfast, which has a history with Bombardier and others, but there’s nothing in Derry,” he added. “So, Derry is one of the [potential] sites, but the issue it struggles with is the availability of trained labour and you’re not going to get loads of people from Belfast to decamp to Derry, for obvious historical reasons.”
The budget for each facility includes about €250m in construction costs and €150m for the purchase of spare engine parts. Ryanair currently has an engine overhaul and repair contract with GE.
“The labour side is the much bigger driver of this,” he said. “Whether a government comes up with a grant package of €20m or €30m doesn’t make any difference in a €400m site.”
The two engine-repair and overhaul sites will meet Ryanair’s needs for up to 15 years.
Speaking after Ryanair’s annual general meeting, Mr O’Leary said that the airline group expects the cost of engine maintenance to soar in coming years. Having its own overhaul facilities will insulate the group from “rapidly escalating engine repair costs going forward”.
He estimated that the market rate for engine overhaul will eventually jump from the current rate of about $11m to $20m.
The airline is already in advanced negotiations with GE and CFM regarding a long-term engine spares support package, he said.