The CEO of the Irish discount airline, Ryanair, lashed out last month against government subsidies that support flights to remote regions. In a company press release issued May 21, Michael O'Leary called the so-called Public Service Obligation (PSO) subsidies unjustified, but confirmed that so long as the government handed them out, his company would continue to apply for them.

The PSO subsidies are part of the Irish Department of Transportation's (IDT) Essential Air Service Program, which according to the IDT is intended "to provide air services, to pre-specified standards, for regions regarded as remote and/or underdeveloped and where it would not be commercially viable for air carriers to provide such services."

PSO subsidies make it profitable for airlines to run routes between Dublin airport and remote cities such as Derry and Knock, both located in the south-west corner of the island. The subsidies are handed out via three-year contracts tendered for each of the subsidized routes.

For the three year period ending July 2008 PSO, the PSO subsidies cost Irish tax payers a total of € 45.8 million for six routes. The latest tender, issued in January, concluded with € 45 million awarded to three companies, including Ryanair.

O'Leary's comments were issued a day after the latest PSO contracts were announced, which included one for Ryanair for € 5 million to run the Dublin-Kerry route for the next three years. Kerry is approximately 300 kilometers south west of Dublin, or 4.5 hours by car.

According to O'Leary it is "crazy" for Irish taxpayers to be subsidizing these routes to the tune of € 45 million or almost € 100 per passenger. He added that although the subsidies may have been justified at one point in time, today, with the improvements in the road and rail networks, the subsidies are "unjustified and totally unnecessary."

Mr. O'Leary claimed that the Irish government would "save a fortune" if it offered free bus, rail or taxi fair to the passengers that use these subsidized routes instead of handing out the PSO subsidies for air travel.

However, Mr. O'Leary added that "If unjustified subsidies are available, then Ryanair is right to apply for and win them."

Notably, Ryanair competitor, Aer Arann, another low cost Irish airline, receives most of the PSO funding. Mr. O'Leary also commented that if Aer Arann couldn't survive without subsidies for unnecessary routes, "then they should redeploy their aircraft."

To view the complete Ryanair press release mentioned in this story, please click here.