A guest post by Drs Donal Palcic and Eoin Reeves from UL:
Yesterday the Minister for Transport signalled the possibility of selling the remaining 25 per cent stake in Aer Lingus (as recommended by the report of the Review Group on State Assets and Liabilities published last April). News of other planned sales, such as the sale of a partial stake in the ESB, is expected over the coming days. So does the sale of the remaining government held shares in Aer Lingus make sense? This can be assessed in terms of the government’s objectives. First, this is about raising exchequer revenues, so how much can the government expect to realise? With shares trading at 67.5 cent as of this morning (compared to the IPO price of 220 cent) a 25 per cent stake is likely to be worth in the region of €90m (leaving a lot more to be sold if the €2bn target in the programme for government is to be reached). Net revenues will of course be reduced when professional expenses and discounts are taken into account.
Are there any other advantages to be accrued from the mooted sale? The common argument in support of selling state owned enterprises (SOEs) is that performance will improve under private ownership. But Aer Lingus operates as a privately owned enterprise and is not subject to obvious political interference (a problem traditionally faced by some SOEs). So selling the remaining 25 per cent will not have any impact in terms of improving enterprise performance.
What are the likely downsides to the possible sale? The obvious one is that the 25 per cent stake constitutes an important degree of state influence over the island economy’s airline. We have discussed the importance of the state retaining control over strategically important industries before here and here. But suffice to say that Eircom provides an example of one of the biggest privatisation failures worldwide and this could have been avoided if the state had not relinquished complete control when it privatised the company. The lessons in relation to Aer Lingus are obvious.
One of the big strategic issues in relation to Aer Lingus concerns the Heathrow slots. The Minister for Transport stated that the strategic reasons for retaining a stake in the airline no longer exist and that the issue of Heathrow landing slots was not as important as it was since people are now using connections other than Heathrow. Aer Lingus has 23 landing slots in Heathrow. Currently 13 slots are being used on the Dublin route [BMI also operates on this route and has 4 landing slots], 4 on the Cork route, 3 on the Shannon route and 3 on the Belfast route.
Data from the UK’s Civil Aviation Authority shows that, in 2010, over 9.5 million passengers travelled from the Republic of Ireland to the UK, with just over 51 per cent of all passengers travelling to London. A quick glance at the traffic on the Dublin, Cork and Shannon to Heathrow routes for 2010 (see table above) illustrates the importance of the Heathrow link, with slightly over 44 per cent of passengers to London going through Heathrow. In general, the vast majority of passengers from Ireland to Heathrow are carried by Aer lingus (they are the sole operator from Cork and Shannon; while on the Dublin Heathrow route they operate significantly more flights than BMI).
While the number of passengers travelling to airports in London other than Heathrow has increased considerably over the years, based on the above figures for 2010, it is hard to see how the Minister can claim that the “strategic” argument for retaining a stake in Aer Lingus no longer applies. For an island nation like Ireland, which is heavily dependent on international connectivity, the Dublin/Cork/Shannon to Heathrow routes are of considerable strategic importance. Although the sale of the government’s 25 per cent stake does not mean that flights on these routes will stop overnight, it does leave the government powerless to prevent an undesirable change in ownership in the future (think Eircom).
Given the relatively small amount of cash that is likely to be raised, one must question whether this mooted proposal makes sense. Our scepticism appears to be shared by the company itself, which reportedly is not in favour of a quick sale. Moreover, Joe Gill of Bloxham sounded a sceptical note when interviewed by Matt Cooper on Today FM yesterday. Mr. Gill raised the issue of the Heathrow slots and also highlighted the difficulties posed by the company’s pension deficit (in the region of €400m). He also suggested that a special dividend by cash-rich Aer Lingus (it has cash balances of approximately €350 million) offers an easier way for the government to raise much needed cash from the company. Notwithstanding the issues that arise in forcing a special dividend one wonders if this route makes more sense than relinquishing full control over the airline.
38 replies on “Full Privatisation of Aer Lingus”
“…Eircom provides an example of one of the biggest privatisation failures worldwide….”
Seriously? I thought the government got a terrific price in 1999. It’s the poor suckers who bought the shares I feel sorry for.
@ Kevin Donoghue. Rural broadband provision in Ireland is really poor. There has been inadequate private telecom investment outside of the main cities over the last decade. I would think that the author is alluding to this point rather than the original Telecom Eireann sale price.
I agree with the main point of the article about the Aer Lingus stake. The amount involved (<€100m) is small in the overall scheme of things and the Heathrow routes are clearly strategically important. I can’t see why the government would sell its Aer Lingus stake before looking at a lot of other potential asset sales such as the lotto etc.
Aer Lingus’s pension situation seems to be quite complex. As far as I understand it, at IPO time the airline injected cash into the fund on the basis that it would not have to make any further injections in the future. Hence from the employer’s point of view it is now a DC scheme. However, the employees still have defined benefit policies which are currently hugely underfunded. Also, it seems that the scheme is joined with that of DAA workers to further complicate matters. Does anyone know any more about this?
Thus, it appears the net cash position of the company may actually be negative once you factor in the pension deficit (which the company may not have to make good). Airline balance sheets need to be adjusted for airline rental costs as well, so I suspect the true Aer Lingus NAV is far from the rosy pictures its published accounts would indicate – a fact reflected in the share price of course.
@ Donal Palcic & Eoin Reeves
‘For an island nation like Ireland, which is heavily dependent on international connectivity, the Dublin/Cork/Shannon to Heathrow routes are of considerable strategic importance.’
100% agree.
A simple interim solution to the “strategic asset” debate would be to “sell” the 25% share for 90 million to the NRPF in fiscal year 2012. This would give time to every stakeholder to examine and debate the pros and cons.
We have a lot of decisions to make as a nation over the next few years (including formation of a blueprint for an alternative currency if the Euro implodes) so the less time debating the pros and cons of this pssible sale ,and the other 2BN Euro of state assets, should be left until 2014 or 2015 when we can make decisions under less duress.
In the interim the NRPF can “buy” 2BN worth of state assets which will probably appreciate/perform quite well at some stage during this decade.
The government has to come up with a list of assets it intends to sell rather than sell assets today. It would appear that the current share price undervalues the company, so a fire sale is hardly going to achieve value for the tax payer. However, one might wonder whether the government stake is actually depressing the share price (indeed the Ryanair holding also complicates matters).
There are plenty of examples around the world where privatisation has worked well and there are plenty of examples where it has not. Indeed there are plenty of examples of state owned companies that have not worked well (and one does not have to look to far to find some). Selectively pointing to the Eircom privatisation is not useful. As was pointed out the State achieved a very good price for the tax payer. Investors took their chances. The big failure was not the privatisation but not to regulate properly, which explains the lack of investment. By the way there are other interesting examples where the same mistake was made. As a consequence these mistakes are well understood and it should therefore not be all that difficult to avoid similar mistakes.
So the government’s 25% stake is worth €90m and the company has €350m in cash reserves? Undervalued indeed.
@Edgar Morgenroth
We point to the Eircom privatisation because most of the problems afte privatisation can be attributed to takeovers by highly leveraged private equity groups with little commitment to investing in infrastructure. These takeovers might have been blocked if the government hadn’t sold it entire shareholding in one go. Yes there was regulatory failure but the takeovers did the damage. So the lesson is that the government should retain a degree of control of strategically important SOEs. The merit of retaining a stake in Aer Lingus was demonstrated when it was used to thwart the Ryanair takeover bid. Also, it is worth noting that shares in Eircom were initially floated at an 18.46% discount which doesn’t constitute a good price for the state. Revenues would have been increased if the shares were sold in stages. This is another lesson from the Eircom debacle that our policy makers will hopefully bear in mind over the coming months.
@Eoin – it is simply not true that all such privatisations went wrong. There are lots of privatised airlines and indeed lots of privatised airports where there is no government stake and that work perfectly OK i.e. companies that post privatisation are not highly leveraged and are investing. This can be taken care off with appropriate regulation and indeed it would be good to put in place legislation that allows the government to step in if key requirements are not met. The take overs would not have happened if all that was in place, so they would not have done the damage they obviously did.
The Ryanairs takeover bid would have failed even if the State had no stake in Aer Lingus – the EU Commission stopped it (by the way I wonder what the Ryanair investors make of the wonderful investment in Aer Lingus?).
Re 18.46% discount – we subsequently found out the real market value of Eircom (there are similar examples elsewhere).
@Edgar Morgenroth
Selectively pointing to the Eircom privatisation is not useful.
It is certainly not useful if you are broadly in favour of privatization.
Eircom, successful flotation though it was, seems a pretty clear example of the dangers to interests of a small state of fully privatizing near monopoly players in a strategically important sector of the economy.
Indeed there are plenty of examples of state owned companies that have not worked well
Off the top of your can you think of any of them that have cost the state its sovereignty?
The question for me is whether the costs and downside risks to the state in developing and enforcing an elaborate regulatory framework for a particular market outweigh those of either maintaining a degree of control over the largest player through part ownership or nationalizing the sector.
@Edgar.
Of course there are privatisations that have worked well but it’s a mixed bag. If there was no such thing as privatisation failure there would be no need to consider step-in rights etc.
There are definite advantages to the retention of ownership stakes in strategic sectors and I think we are all aware of the limits of regulation. Regulation may have prevented the takeovers of Eircom but it would have come down to the effectiveness of regulatory design and there are no guarantees in this regard. To illustrate – whereas golden shares were once used as a safeguard against unwanted takeovers after privatisation it now appears they are illegal on competition grounds. Retaining a degree of state ownership is a more efficient means of safeguarding strategic interests. Not surprisingly the retention of government stakes in in sectors like airports is the norm across Europe.
@shay – you need to read my previous post carefully. The emphasis is on selectively. I have no problem discussing Eircom but this is hardly the only relevant example – most European countries privatised their telecoms but you do not see the problems we have.
@Edgar,
Yes, every other EU15 country privatised their national operators but the key point is the manner in which they did it. We are the only country that sold its entire government shareholding at the IPO stage. Every other country sold partial stakes at first, followed by a gradual reduction in ownership. Even in some countries where the State’s shareholding was reduced to zero, government’s often retained a degree of control through the use of golden shares. While regulation is obviously a very important factor in the development of telecoms markets, I would argue that the method of telecoms privatisation used in other countries was one of the main reasons why you didn’t see the problems we have.
Selling off state assets for a sort term gain is just daft. Eircom has been a joke, it’s on it forth owner and stangled by debt that the previous owns lumbered on the company. In Britian the cost of water rose by 300% for the comsumer after ten years of privatisation, what real benefit does that have for society. The only winners will be the people who advise on the sales and the ones that buy and sell our state assets for profit. Strategically important state assets should not be sold to the highest bidder. Look what happened with Digicell. That was another disgrace.
@edga morgenroth
” most European countries privatised their telecoms but you do not see the problems we have. ”
Maybe you could just say “most European countries ….you do not see the problems we have FULL STOP.” If it can be f–ked up, it will be f–cked up in Ireland. Decisions that leave decisions involving billions in the hands of politicians and civil servants are alaways a dodgy proposition in a small non-functioning democracy. The oligarchy that has total sway over all governments will ‘advise’ privatisations that will incidentally make them very rich.
Some Nabob from IBEC wrote recently to the SBS that we should not oppose privatisation because because of Eircom, we should look at the huge success of Greencore! In IBEC-world the privatisation of the Sugar Comapny was a scuccess! Greencore does not employ anyone in this country any more , just speculates in the UK (having needlessly closed down beet growing and sugar processing). But to doctrinaire neo-liberals, that constitutes ‘sucess’ because it enrich a few oligarchs.
The proposal to sell the 25% Govt stake in Aer Lingus fo approx €100 million is a fundementally stupid one. In order to make sense from a national point of view, the price to be achieved is the value of a €900m annuity.
So what is the value of a €900m annuity.
My calculation is as follows, and is based on the Aer Lingus accounts for the year ended dec 2010.
http://www.aerlingus.com/media/aerlinguscom/content/pdfs/corporate/AerLingusGroupplcAnnualReport2010FINAL.pdf
The ‘Irish sourced expenditure’ of Aer Lingus (estimated p44 of report) is total expenditure less fuel and oil (1158M less 256M= 902m).
One must start with assumption that all this expenditure will be lost to the State if Aer Lingus eventually leaves Ireland. There may be a small amount replaced but there is no guarantee of that.
Therefore unless the value paid is approx the value of a 900m annuity, then the State stands to lose on this sale.
The principal difficulty is that Heathrow slots must be owned by an entity holding an Air Operators Certificate. If the government could contrive to create a small airline with an AOC (perhaps transferring MATS from military to civil) this could hold the slots and then lease these back to Aer Lingus. Problem is, this would have been a lot easier to accomplish before the first 75pc was sold off.
@all
Question: anyone care to place a ‘value’ on those slots in Heathrow? Long term value even?
@DO’D: Long Term value – very close to nil.
Air travel is on the cusp of a significant downslope. Give it 2, possibly 3 years to have a better idea of the likely trajectory. Aviation kerosene prices will increase, plateau (maybe even decrease), then continue upward.
Brian Snr.
http://www.timesonline.co.uk/tol/travel/news/article4340478.ece
That article is from 2008 so prices will be lower now, but it gives an indication of the value of the slots. Aer Lingus has 23 slots spread throughout the day, so not all are ‘prime’ slots in terms of takeoff demand.
If Aer Lingus sold them tomorrow as a block, I think it could certainly look to get €100m for them and maybe more. That value is not seen in the company’s accounts along with the pension deficit or aircraft rental costs so Aer Lingus’s net asset value bears little to no relation to its accounting book cost.
@Brian Woods Snr.
Ta. Not so sure on ‘close to nil’ …
@Carson
From the link provided 2008 –
‘Heathrow, the world’s busiest international airport, is so constrained in the number of flights it can accommodate that an airline wanting to set up operations there can pay up to £30 million for a good pair of take-off and landing times. When Continental Airlines, the American carrier, wanted to start operations from Heathrow this year it had to spend more than £100 million on only four slots, and there are rumours that other carriers have paid much more.’
The slots are ‘strategic’ [to use the much abused term] and perhaps more valuable than AerLingus itself …. 25% shareholding will do grand for the mo … might sell 5% to a biggie if a suitable partner to be found.
@The Minister for Transport
LBW on this one – your maiden duck one might say 😆
@edgar morgenroth
most European countries privatised their telecoms but you do not see the problems we have.
Absolutely, Ireland made a particularly awful mess of it.
I remain to be convinced that Ireland has the scale to support efficient market solutions for several types of goods and services, it seems that a more dirigiste approach has comparable costs and lower risks for us than the neoliberal approach with its requirement to maintain an extensive regulatory and enforcement framework.
@ Minister Varadkar
Patricia the Irish_Sovereign_in_Exile is exploring the ‘intangible value’ of getting to afternoon tea with HRH on time via the Heathrow Flier ….
She suggests some net-time reading …
http://www.oecdobserver.org/news/fullstory.php/aid/3556
There will always be a strong Ireland-UK aviation market.
However, a key aspect missing from this analysis on Heathrow is the issue of connecting to onward flights from the UK, from Terminals 2-5.
Apart from passport control, depending on which airline Aer Lingus has a tie-in, the need to get a boarding card and then the security, is a hassle to be avoided.
Anyone with sense, flying on a scheduled flight, would use an airport such as Schiphol.
Why does any government need to hold shares in an airline? There’s an easy answer to this – if the sale price is going to be so poor, give the shares to the taxpayers who are currently footing the real bills around here. For free of course. But no doubt, we are not ‘allowed’ to do that.
@Donal Palcic – thanks for responding. Aer Lingus is not being sold all at once so it is not comparable with Eircom a this stage.
You rightly highlight the key issue in your post i.e. the implications of a full privatisation on the accessibility of Ireland and the cost of travel. In other words the long-run impact and that in my view should be where there is some debate and analysis needed.
In general I am not in favour of selling assets only on the basis of short term needs, but we can’t ignore these short term needs either.
@Shay,
As usual you make some valid points, but the debate here on privatisation totally ignores some key essential features – and these are being ignored in different ways by both sides. And, as the Government struggles to come up with proposals on privatisation (to comply with the Troika’s end-of-year deadline) I expect we will see an intensification of this dialogue of the deaf and the lobbing of mixtures of sense and bullshit from each set of trenches over the next few months.
To begin at the beginning: the left hates markets and competition because it doesn’t, or chooses not to, understand them; the right hates markets and competition because, when they work properly, they threaten to destroy the value of the capital invested by inefficient or unresponsive businesses. Indeed the ultimate threat of bankruptcy is a continuing and underlying threat.
Faced with these threats to their profitability – and ultimately to their continued existence – businesses have two choices. They can focus on efficiency and productivity and develop or embrace new technologies to generate value for their customers and profits for themselves – and try to stay ahead of the game – or they can do everything they can to disrupt (in ways that favour them) the proper functioning of the market that presents this continuing and existential threat and seek to suborn the state to provide them with protection and support. And, of course, they seek to squeeze the pay of workers and to transfer significant information and serach costs to final consumers.
And some businesses will have the resources and capability to pursue a mixture of both courses. These tend to be the larger businesses as small businesses generally are price and policy takers. And over time, most large businesses find that suboring the state is far more efficient (because governments tend to be willing accomplices) than the hard grind of pursuing efficiency and productivity. The amount of ‘social welfare’ – both implict and explicit (and in deadweight costs imposed on final consumers) – provided by the state to businesses in developed economies probably swamps direct transfers to ordinary citizens. (But, of course, the latter are the first to be cut when the fiscal squeeze comes on.)
The right furiously campaigns for free markets and competition, while blithely ignoring the huge amount of ‘social welfare’ and protection businesses receive from the state and the extent to which they seek to distort and subvert markets. And because the state is always and everywhere the source of the solution and because the right and bsuinesses promote them, the left attacks the use of markets and competition. The left, quite rightly seeks to defend workers’ rights and conditions, but sees aggressive taxation as the most effective means of disciplining the rich and businesses (and financing the state’s activities) as it can’t acknowledge the extent to which state-owned firms receive pampering similar to large private firms. And it blindly refuses to recognise that efficient markets and competition are the best friends of the vast majority of citizens.
And so we end up in this futile and never-ending slanging match about markets and competition with the right promoting something they loathe and detest and the left attacking something that is ultimately in their interests. No wonder this whole ‘debate’ is so surreal.
And then we come to market failure where businesses secure (or are granted) a monopoly or dominant position or where natural monopolies arise. For more than a century the presumption in the US has been to break up acquired dominance and to manage natural monoplies in the infrastructure and utility sectors in the public interest using a mixture of regulation and competition. And this approach has evolved considerably over time. In Europe, the tendency has been to give the state almost full responsibility and, as a ‘faux’ process of privatisation and liberalisation has been pursued, to use ‘independent’ regulation to manage the process. But the absence of long term contracts to provide assurance of recovery of the investment in the tyically long-lived and specific assets – together with the depradations of ‘national champions’ – means that regulators have to provide this assurance and have been captured throughout the EU – to the detriment of consumers everywhere. And this has happened irrespective of the mix of private and state ownership.
This arises primarily in the infrastructure and utility sectors – in particular, the energy sector. And, given the interest the Troika has expressed in this sector in Ireland, I’m sure there will be much futile debate that will totally ignore the real reasons for the consumer and economy damaging nonsense that will eventually emerge.
In the context of aviation, the relevant market is a European market and probably a global market – and DG COMP was off-the-wall in refusing Ryanair’s takeover. Only players with a regional or global reach have the scale and heft to compete effectively and to generate benefits for passengers. The state has no valid reason to have an ownership role in this business. Indeed its presence banishes the threat of bankruptcy and provides the business with protection from efficiency-driving competition. And we all know who loses out when that happens.
“But Aer Lingus operates as a privately owned enterprise and is not subject to obvious political interference ……..The obvious one is that the 25 per cent stake constitutes an important degree of state influence over the island economy’s airline. ”
Seems inconsistent?
Of course the state has influence, and this influence is worth at least 90m in terms of insuring the economy against lack of air connections due to poor short term margins.
“Aer Lingus operates as a privately owned enterprise and is not subject to obvious political interference (a problem traditionally faced by some SOEs). So selling the remaining 25 per cent will not have any impact in terms of improving enterprise performance.”
and
“What are the likely downsides to the possible sale? The obvious one is that the 25 per cent stake constitutes an important degree of state influence over the island economy’s airline.”
Hmmmm… so the reason not to sell is that there is no political interference so the airline is as efficient as possible and the reason to keep is to continue to interfere politically?
“Mr. Gill raised the issue of the Heathrow slots and also highlighted the difficulties posed by the company’s pension deficit (in the region of €400m). He also suggested that a special dividend by cash-rich Aer Lingus (it has cash balances of approximately €350 million) offers an easier way for the government to raise much needed cash from the company. ”
Mr. Gill, unfortunately, seems to know little about the airline business. Strong cash balances are essential for airlines where abrupt fuel price changes, ash cloud disruption, severe bad weather, ATC strikes, staff strikes etc. can lead to wild swings in profit/loss. For its size, Aer Lingus has minimal cash balances.
Far better to sort out DAA charging in terms of improving Aer Lingus’ bottom line.
@hoganmayhew
Hmmmm… so the reason not to sell is that there is no political interference so the airline is as efficient as possible and the reason to keep is to continue to interfere politically?
I am wary of the words “political interference”, I think we have had far more commercial interference in politics than the other way around.
More generally I like to think the effect of a significant government stake is to constrain important commercial entities in their actions where they might interfere with national priorities. Think of it, pace Schäuble, as the disciplining forces of popular democratic input that markets need.
@Shay,
If you had read my, unfortunately, long comment above, you would see that governments have no proper role within businesses as they queer the efficient functioning of markets and competition. This a perversion of ‘popular democratic input’. Governments have to be on the outside enforcing competition and market rules; and consumers require effective representation of their collective interests before the competition authority and, where they are required, sector regulators operating in a quasi-judicial manner – and not captured, as they are at the moment, by the businesses they regulate. This is the most effective means of securing a ‘popular democratic input’.
@hoganmahew
“Aer Lingus operates as a privately owned enterprise and is not subject to obvious political interference (a problem traditionally faced by some SOEs). So selling the remaining 25 per cent will not have any impact in terms of improving enterprise performance.”
and
“What are the likely downsides to the possible sale? The obvious one is that the 25 per cent stake constitutes an important degree of state influence over the island economy’s airline.”
Hmmmm… so the reason not to sell is that there is no political interference so the airline is as efficient as possible and the reason to keep is to continue to interfere politically?
We are not claiming that the airline is as efficient as possible. The reason to retain a shareholding is to prevent an undesirable takeover which may jeopardise the Dublin/Cork/Shannon to Heathrow routes. There are issues other than performance and efficiency that are at stake when considering the sale of the remaining shareholding in Aer Lingus. International connectivity is critical for an island economy like ours.
See for example: http://joeg.oxfordjournals.org/content/8/4/471.abstract
@ Donal – the focus in that paper is on non-stop intercontinental flights. Dublin/Cork/Shannon to Heathrow are a second best to this, as they are essentially feeder routes (Heathtrow would not be my first choice if I am travelling to London). The question is whether the routes are sufficiently profitable to be maintained. To my knowledge at least the Dublin routes are very profitable.
@Edgar, thanks for the comment. I included the link to the paper merely to illustrate the point that there are other issues such as connectivity that must be considered when selling the remaining 25% stake. I was not trying to directly link the findings of the paper in question with the Heathrow routes.
I agree with your previous point on the need to look at the long-term impact of any decision to sell (and not sell on the basis of short-term gain needs). Hopefully there will be more debate of this issue when the Government announces which companies they are targeting for a possible sale.
@hoganmahew and Darren Snow
Public policy decisions such as privatisation involve a degree of choice e.g to privatise or not to privatise, if privatising – how much to privatise etc. The more the government sells the less scope there is for political interference in the day to day running of commercial SOEs (Irish examples of such interference included political efforts to block the closure of the Thurles sugar factory in the 1980s, preventing the ESB from expanding abroad in the early 2000s). But retention of a significant ownership stake can be used to protect strategic interests e,g. undesirable takeovers as in the case of Eircom. In the case of Aer Lingus, I am not aware of the government using its minority stake to interfere in day to day activities (e.g. it did not intervene to prevent the closure of the Shannon- Heathrow link a few years ago). But the minority stake did serve to prevent the unwanted Ryanair takeover a bid (a protection of the national interest – notwithstanding Edgar’s point about the EU Commission making the final decision). Had the government retained a significant shareholding in Eircom it could have helped prevent the takeovers by private equity groups that had no long term interest in the company or the country. Vickers and Yarrow addressed this in their much cited text on privatisation (1988). Using a principal-agent model they show that the more that is privatised the greater the prospects in terms of technical efficiency improvements but the greater the loss in allocative efficiency. Privatisation decisions (especially in the case of utilities) involve trade-offs and policy makers need to strike the right balance.
@Donal – the last point was not meant to be critical. I just wanted to point to the key issue. If the routes are more profitable than other routes into Heathrow they would be maintained. If we found ourselves with significantly less connectivity (nationally) then this would be a problem.
It is inconceivable to me why people think that the Irish gov’t makes one whit of difference in the airline industry. It is a highly competitive industry that abhors vacuums and has now descended to a lowest common denominator service status. The elephant in our case is Ryanair and while given a choice I fly AL as I did from Berlin to Dublin in June I am perfectly willing to fly on any EU regulated and inspected air service.
The responsibility of gov’t is to regulate airline operations and ensure there are safe and competitive services with little oligopoly/monopoly behaviours. In Ireland we seem to think that an Irish elite guiding policy through gov’t is the only way to ensure satisfactory public service. This leads to the unproductive practices and opportunity to enrich politicians that we are only too familiar with.
I agree that we are far too blase about the ownership of overseas slots (primarily heathrow).
The review of State Assets earlier this year, stated a belief that we would retain access to considerable slots simply by virtue of market forces.
Respectfully I totally disagree with the review group on this point. Access to Heathrow (and indeed our other overseas slots) are crucial pieces of our economic infrastructure and as such cannot be left to market forces. We need to hold on to our slots, which are the envy of many other nations with inferior connections to a major airport, especially London.
Long-term, I think this is a case for decoupling. I would like to see the State purchasing back the landing slots in a sale-and-leaseback arrangement with the company. They should never have been sold with the airline. Then the slots could be held in a holding company in State ownership.
I really don’t understand how people can treat this issue so trivially. We talk of a tourism boom, an export boom, a globalised economy -and we seem to think we can just take our chances with our international flight connections.