Viewed through the front window of the cockpit, 2026 was looking good for Ireland’s airlines. The State’s airports had just handled a record 52.3 million passengers. The politicians had agreed the Dublin Airport passenger cap had to be removed. Rapid and unrestricted growth was back on the flight plan of our two healthy airlines (three if you count our sometimes forgotten third-largest, Emerald).
Six months on, things have changed. The war in the Middle East is taking longer than its protagonists had bet on. Aer Lingus is looking a lot less shiny in the eyes of its owners. And the Dublin Airport cap, through the legislative process, is potentially facing the uncertainty of new brushes with regulatory and legal roadblocks during a 28-week statutory time allowance.
Causing an even greater impact on demand than either war or volatile fuel prices, however, is consumer confidence, which has been shaken. Passengers are booking later, and paying less when they do. Recent surveys from operators such as Clickandgo and Tui show nearly a fifth of summer holiday-makers booked their flights less than a fortnight before departure.
This is good for consumers, but bad for airlines, and bad for inbound tourism. At a time when costs have risen for airlines, yield has fallen. At a recent gathering at the congress of the world’s airlines, IATA, in Brazil, each member of a panel of chief executives picked out consumer demand as the biggest single threat facing the industry.
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Michael O’Leary has said publicly that close-in demand is strong, but customers are waiting too late to book. The succession of 48-hours seat sales for Ryanair indicates his remedy for the problem is, as always, to stimulate sales with price.
Earlier this month, the airline announced that it was on track to increase April-October passenger numbers by more than 5 per cent, from 138 million to 145 million. However, it also announced a trimming in its full-year target from 216 million to 214 million passengers as a result of surging fuel prices.
The passenger cap is going, but not gone, and certainly not forgotten. While the limit of 32 million, imposed nearly two decades ago, is being ignored as we await the post-legislation process, and the court process continues at glacial pace, Dublin Airport is on course to handle 38 million passengers in 2026. The rolling annual total is already 37.4 million, making it the 12th largest airport in Europe.
That sends the message that political delays are irrelevant in the eyes of the airport, but they matter to airlines, especially when it comes to making decisions on new routes and where to invest each of their expensive aircraft.
The legislation, signed into law, will almost certainly be challenged in court, given the strength and profile of the lobby groups in Ireland and elsewhere which are opposed to its removal. The airport has formally requested the Minister for Transport Darragh O’Brien to raise the limit to 40 million as it awaits abolition of the cap. In the meantime, other indicators suggest growth may be about to slow.
Corridor of opportunity
Each year, when the airlines plan their schedules for the summer ahead, we expect Irish airports to feature prominently in the new signings. This year’s biggies were Albania’s capital, Tirana, and Pittsburgh, in the US. In 2023, we had 52 new routes. Even in the depths of the global financial recession, in 2010, we had five. Next year we have one. There is not much prospect of others unless the fuel price takes a downturn.
Transatlantic has been a corridor of opportunity of late. Air Canada is starting its Vancouver route earlier in 2027. United, which has a base in Denver, might be expected to consider a Dublin-Denver route, building on the demand Aer Lingus has established. Delta has a strong position in Seattle. When fuel prices are high, however, the economics of launching long-haul routes are less attractive.
East-coast routes are a different story. American airlines have boosted capacity on Irish routes by over a third already, with more due for winter. US airlines taking delivery of the game-changing A321XLR will be tempted to look at a turnaround in Ireland.
Headwinds
While there are headwinds, Ireland is not alone. Aviation everywhere has been having a bumpy ride. Recovering from the pandemic has been slower and more painful for the industry than expected. In central Europe, the mood changed after the industry was grounded. Growth is no longer an aspiration in some countries and is seen as genuinely undesirable in others. This was something that moved the debate about Dublin Airport’s cap on to issues that had nothing to do with the original planning conditions of 2007, based on the capacity of the M50.
In Ireland it appeared at first that we were immune to these problems. While passenger numbers elsewhere remained largely unchanged, Ryanair blossomed, and Aer Lingus grew aggressively in the North Atlantic and turned Dublin into one of Europe’s major aviation hubs.
Europe’s second-largest airline group, Lufthansa, is still 7 per cent behind pre-pandemic levels. Air France/KLM is just over 1 per cent behind. Meanwhile, Ryanair sits 50 per cent ahead of 2019.
Airports are having a mixed year, but at first sight, Ireland is not. Figures for the first six months show Paris, Amsterdam, Heathrow and Frankfurt flat, and Gatwick in decline. Stansted is growing at about 2 per cent, Madrid at 4.2 per cent, around the industry average, and Dublin at 6 per cent.
Historically, when airport passenger numbers grow, the economy tends to match that growth almost to a percentage point
Like most factors of note in Dublin Airport in recent years, this is not as clear cut a sign of growth as it seems. The first three months saw growth of more than 11 per cent because the figures were skewed by the passenger restrictions of winter 2024-25. For six months, the Irish Aviation Authority enforced Dublin’s notional passenger cap with flight restrictions. Since March, Dublin Airport’s growth has been a more modest 2.3 per cent.
The regions show a similar picture: growth of 3.5 per cent in the two Belfast airports masks the fact that they are barely back to pre-pandemic levels, seriously behind in the case of Belfast City. A decline of 1.4 per cent in Cork is balanced by growth in Shannon after Ryanair switched some of its Munster Polish routes for a better deal. Irish aviation is growing at half the industry average.
Supply chain
Supply chain has been as big an obstacle as the passenger cap in attracting new business to Dublin, curtailing negotiations on a São Paulo service by LATAM Airlines. But even the delay in supply of new parts and new aircraft has been good for Ireland, albeit in a roundabout way. Because new aircraft are unavailable or slow to deliver, profits have burgeoned in the aviation leasing industry, led by three Dublin-based operators, the home-grown AerCap and Avolon, and the Dublin-headquartered SMBC. Irish-based leasing companies own 10,000 aircraft, 69 per cent of the world’s leased fleet by value. And that value is growing, as airlines cannot get the new aircraft they have on order.
Even the new pressures on fuel costs and supply caused by war were somebody else’s difficulty. Ryanair entered the war hedged at 80 per cent, Aer Lingus at 60 per cent, with Emerald at similar levels. But hedging decreases by the quarter, and new fuel has to be bought at an inflated price.
What next? Ryanair has promised two extra aircraft based in Dublin when the passenger cap is definitely removed.
We can expect more consolidation in Europe, with TAP on the sales block, likely bound for Lufthansa, and SAS being integrated into Air France/KLM group, its chief executive departing for Air Canada. Counting Russia, that would mean 70 per cent of Europe’s total air passengers next year will fly with just seven airline groups, and about 18 per cent of them with Ryanair.
Consumers won the game of summer 2026, getting their fares at an average of €5 cheaper than was predicted by the airlines, but will likely pay the price with less choice of routes and frequency.
Ireland’s inbound tourism sector is a hostage to consumer sentiment in the US. Outbound travel from the US is down about 2.2 per cent at a time when it was expected to grow. While American airlines are still interested in Irish routes, the signs are they are looking elsewhere, to Spain and even to Greece, for growth in 2027.
The evidence shows that the Irish economy is closely linked to the State’s air connectivity. Historically, when airport passenger numbers grow, the economy tends to match that growth almost to a percentage point. When they contract, the economy tends to contract.
Growth of 2 per cent is regarded as recessionary by the aviation industry. Through a combination of factors, some home-grown and some imported, Ireland has squandered its advantages and is coming perilously close to that figure. Time to lower the oxygen mask.
