Bombs in Brussels will never stop the seemingly inexorable growth of the Irish aviation sector
With global passenger numbers set to keep rising, last week's Brussels terrorist attacks are likely to have only a temporary impact on Ireland's €4.1bn aviation sector
It was a traumatic week for the aviation sector. The tragic events in Brussels are likely to lead to a further tightening of airport security. While these may or may not prevent future attacks, they will certainly lengthen passenger queues and push up the costs of airlines and airport operators.
Terrible as the Brussels attacks were, life goes on.
On Thursday, CityJet founder Pat Byrne revealed that he and a group of investors had bought the airline, which carries about two million passengers a year, with a view to floating it on the stock exchange in two or three years' time. Mr Byrne declined to reveal what price the new owners had paid.
The CityJet sale was a welcome vote of confidence in Ireland's aviation sector. A 2015 Department of Transport report estimated that the aviation sector contributes €4.1bn to Irish GDP and supports 26,000 jobs directly and a further 16,000 indirectly. Tourism, which employs 180,000 people, is obviously heavily dependent on the aviation sector.
CityJet is the second Irish airline to be sold in less than 12 months. IAG, the owner of British Airways and Iberia, paid €1.4bn to acquire the former Irish flag carrier Aer Lingus last year.
However, the 800lb gorilla of the Irish aviation sector is low-cost airline Ryanair. It carried almost 105 million passengers in the year to the end of last month, up 17pc on the previous 12 months, and is now the second-largest European airline in terms of passenger numbers after Germany's Lufthansa.
The enormous lead that Ryanair had opened up over its one-time deadly rival Aer Lingus is illustrated by the fact that it is now carrying more passengers during some of the busy summer months than Aer Lingus in a year.
It flew 10.4 million passengers in August 2015. Aer Lingus flew 9.7 million passengers during its last full year as an independent company in 2014.
Ryanair operates 1,600 flights daily on 200 routes and employs 9,500 people. The company, which reports its annual results on May 25, is guiding after-tax profits of €1.225bn for the year to the end of this month.
Analysts are being slightly more optimistic, with Oliver Sleath of Barclays Capital forecasting €1.284bn and Cantor Fitzgerald's Robin Byde pencilling in €1.262bn.
And Ryanair is going to get even bigger. It currently has a fleet of 300 Boeing 737-800s, with a further 283 aircraft on order from the US manufacturer. These new planes will allow it to achieve its target of flying 160 million passengers a year by 2024. With a market capitalisation of over €18bn, Ryanair is second only to CRH as the most valuable company whose shares are traded on the Irish Stock Exchange.
Of course, not all of Ryanair's routes are to and from Ireland. In the year to March 2015, it flew almost seven million passengers whose journeys began at Irish airports, slightly less than Aer Lingus did in the same year.
That was only 7pc of the 100 million passengers it flew that year.
Furthermore, this number seriously understates the full extent of Ryanair's contribution to the Irish aviation sector.
Given the way in which Ryanair calculates its passenger numbers, passengers travelling to Ireland but whose flights began in other countries are categorised as being from the country of origin.
This means that a passenger flying to Ireland from the UK would be included in Ryanair's UK passenger total, which was almost 19 million in the year to March 2015.
To get a more accurate fix on the contribution to the Irish aviation sector of Ryanair and the other airlines operating out of this country, one needs to look at the passenger statistics of the Irish airports, Dublin in particular.
Last year, a record 25 million passengers flew through Dublin Airport. Not alone was this a 15pc increase on the 21.7 million who used the airport in 2014, it comfortably exceeded the previous peak of 23.5 million recorded at Dublin in 2008.
The strong recovery in passenger numbers at Dublin seems to have silenced critics of the €600m Terminal 2, chief among them Ryanair boss Michael O'Leary, who once famously dubbed Terminal 2 the "Taj Mahal".
Even if the actual cost of the project, as estimated by the Dublin Airport Authority, excludes approximately another €600m spent on associated airport infrastructure, such as new roads, it is hard to see how Dublin Airport, which had a maximum capacity of 20 million passengers before T2 opened in 2010, could now operate safely without it.
However, while Dublin Airport has come roaring back, it has been a different story for the most of the country's other airports.
While Shannon Airport, which was hived off from the DAA in 2012 to become an independent airport, has staged a modest recovery in recent years, with over 1.7 million passengers flying through it in 2015, it is a different story at Cork, still just about the country's second-busiest airport.
Cork is locked in a loveless marriage with the DAA, both sides continuing to squabble over who should shoulder the burden of the €200m debt incurred on building the new terminal building at Cork. Meanwhile, Cork continues to lose routes and haemorrhage passenger numbers. While it has yet to publish its 2015 passenger numbers, they are unlikely to have been much more than two million, down almost 40pc on the almost 3.3 million passengers recorded in 2008.
The other two significant airports are Ireland West (Knock) and Kerry, neither of which have released 2015 passenger numbers.
When they do, they are unlikely to vary much from the 703,000 passengers recorded at Knock and the 295,000 at Kerry in 2014.
What this means is that the number of passengers using Irish airports in 2015 was about 29.8 million, almost back to the 2008 peak of 29.9 million.
However, there has been a significant change over the past seven years in the airports being chosen by travellers. Whereas in 2008 78.6pc of passengers flying to or from Ireland went through Dublin, this had risen to almost 84pc by 2015. At least half of the passengers using Irish airports last year began their journeys outside of Ireland.
The airlines and airports are merely the visible parts of the Irish aviation sector. Ever since the late Tony Ryan founded GPA in 1975 Ireland has been a global leader in aviation leasing. Fourteen of the top 15 aircraft-leasing companies by fleet size are based in Ireland with 22pc of all the world's aircraft and 40pc of all leased aircraft being managed out of Ireland.
The numbers involved are enormous.
In 2012, Japanese bank Sumitomo Mitsui paid €7bn for RBS Aviation Capital's fleet of 240 Irish-managed aircraft. In 2014, AerCap paid AIG $5bn in cash and shares for its ILFC aircraft-leasing subsidiary.
The combined AerCap/ILFC is the world's second-largest aircraft leasing company, with 1,300 aircraft on its books and a further 400 on order. It has offices in both Dublin and Shannon. The value of the leased aircraft managed out of Ireland exceeds €100bn.
About 1,200 Irish people are employed in aircraft leasing, both directly by leasing companies themselves and indirectly in the provision of professional services, such as accountancy, tax and legal advice.
The impact of the leasing industry extends far beyond these 1,200 jobs. It was GPA's Tony Ryan who in 1985 funded the establishment of Ryanair and then dug deep into his pockets to keep the fledgling airline flying through its loss-making early years. Without his willingness to pump in tens of millions of euro, it would almost certainly have never become the giant that it is today.
On the other hand, the indigenous aviation sector contributed directly to the development of Irish aircraft leasing. Tony Ryan was a mid-ranking Aer Lingus employee when, in the early 1970s, the company gave him the job of trying to find other airlines willing to rent a number of its aircraft that had been rendered temporarily surplus to requirements following the collapse in passenger numbers caused by the outbreak of the northern Troubles.
So what, if any, will be the impact of the Brussels attacks on the Irish aviation sector?
One of the features of global aviation is that while it is acutely vulnerable to short-term shocks, the long-term fundamentals remain overwhelmingly positive. The International Air Transport Association calculates that the world's airlines carried 3.5 billion passengers last year and forecasts that this will double to 7 billion by 2034, the equivalent of a 3.8pc annual growth rate in passenger numbers.
Although much of this will come from east and south Asia, IATA predicts a 2.7pc annual growth rate in European passenger numbers over this period. That is 65pc or 591 million extra passengers by 2034.
Suddenly Mr O'Leary's target of 160 million Ryanair passengers by 2024 doesn't look quite so unrealistic.
While there will almost certainly be a dip in short-term passenger numbers following the Brussels attacks, growth will quickly resume once the initial shock has worn off - most of us will continue to value the convenience of air travel ahead of the remote risk of terrorist attack. Irish aviation will weather this turbulence as it has so often in the past.
Sunday Indo Business