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What Price? Deadlock May Be the Best Option

Robin Copland

A recurring theme when you read about Ryanair's negotiations - be they with aircraft manufacturers or airport operators - are the words "breakdown of negotiations".  The confrontational style that the airline seems to employ should not necessarily be knocked.  It continues to buck the trend and return excellent operating results, but, as it is discovering, its negotiating partners seem less keen than hitherto to bow down and accept the tough proposals that the airline puts forward.

The latest example of this is contained in a press story on Tuesday 21 February, in which Ryanair announced cutbacks in summer services from Edinburgh.  The airline warned that there will be cuts in flights from the Scottish capital from 140 to 110 per week and that there will be up to 300 job losses.

The Herald newspaper reported that Michael O'Leary, Ryanair chief executive, said: "Ryanair regrets BAA Edinburgh Airport's rejection of our proposals for a competitive cost base which would allow Ryanair to further grow our traffic and routes for summer 2012.  Sadly, BAA Edinburgh seems to prefer higher costs, even if it means fewer passengers and jobs at Edinburgh.

"While Ryanair remains committed to Edinburgh Airport, and with 1.5 million passengers and 35 routes, we continue to be one of the largest airlines operating to-from Edinburgh, BAA Edinburgh cannot continue to ignore the competitive marketplace where airports all over the UK and Europe have been reducing costs and lowering charges in return for traffic growth.  We hope even at this late stage that BAA Edinburgh will realise that the way to grow traffic and jobs is by working with Ryanair to lower passengers fares, not raise them."

I suspect that Edinburgh airport's problem was one of precedent.  Had they acceded to Ryanair's ambitious proposals, other airlines - some much bigger players at Edinburgh than Ryanair - would have been beating a path to the airport's door demanding a better deal for themselves as well.

Negotiators need to know their bottom line.  Often, this will be easily identified by having a look at the market and working out what the next best alternative is to a negotiated settlement.  Always though, negotiators need to look at the wider picture.  It must have been tempting for the airport to cave in, but if by so doing, it opened up other deals to scrutiny, deadlocking was probably the cheapest option in the long term.

Robin Copland

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