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Monday, April 6, 2009

Aer Lingus Gatwick hub and Mannon's parachute proves opponents of privatisation right

Just 3 years ago the Irish taxpayer was sold a line on Aer Lingus that privatistion was in the interest of Irish consumers. We were told that as a small island having 2 airlines competing would be in our interests. A private airline could develop more routes out of Ireland. The slots at Heathrow were ring fenced for Ireland. We know that when Aer Lingus set up in Belfast that the argument was that it would have benefits for Donegal and the North West. I’m pleased that Aer Lingus have recognised the madness of the decision to end the Shannon Heathrow flights and that they have re-opened that route. The argument made at the time that the Irish public would benefit from privitisation is begingin now to be seen for the ruse that it was, it was all about the company being profitable regardless. As a result the board does what it sees fit to be profitable.
So maybe Minister Dempsey may be able to tell me how does the economy benefit by having aircraft based on Gatwick to serve Dublin and Knock among other routes to be served from the British hub. These aircraft it seems were bought with money raised by the company after privatisation and now crewed by workers based outside the country. One wonders whether the customary cuplá focal will be spoken to the passengers anymore on flights inward onto Ireland from Gatwick. I remember predicting on local radio at the time of privatisation that soon the only thing original about the company would be the shamrock on the tail and unfortunately it seems I’m proved right again. I believe that many tickets on these new routes out of Gatwick are being off loaded below cost so as to compete with Easy Jet.
Aer Lingus’s history of setting up routes based on UK to European traffic hasn’t been good. In the 90’s they exploited a relaxation in rules on third country carriers by opening routes from Birmingham and Bristol to the low countries and got badly burnt. Gatwick is a huge gamble that the Irish travelling public does not have to subsidise but may suffer the consequences should the company lose significantly while attempting to expand during a recession. While Aer Lingus sits on a significant cash reserve, one more significant than many other airlines, money is no defence against bad business decisions. It already has to fund a redundancy deal and has bought more long haul aircraft than it uses. The CEO who should have understood the Middle East better lost heavily on a route to Dubai. Why did they not link with another airline flying onward to Australia through here? how does investing in Gatwick benefit the Irish economy right now?
While the popular view is that privatisation allows management take decisions in line with the market, who takes the decisions in the interest of our economy? The government have already admitted that their 25% stake holding couldn’t protect the Shannon route, so how can they influence a whole board as it sets out into the wider market? This morning's decision by Dermot Mannion to resign and take wiht him a golden handshake at a time when workers are being shed is a smack in the face for those workers who took a hit. The golden parachute has opened. Who'll miss him? Turbulent times and tears may well be ahead.

1 comment:

Catherine said...

I thought he was shamed into refusing the golden handshake back in Feb when it was disclosed he would get a few mill in the event of a takeover, I suppose this will not preclude him from taking a hefty handshake now he's decided to fall on his sword. Agree about the privatisation thing, it doesn't work in aerlingus no more than in co-located hospitals - where are they again??? I hope they never see the light of day - they are inherently immoral.