Aer Lingus fiasco shows coalition incompetence
Vincent Browne's editorial on the privitisation of Aer Lingus and the government's failure to forsee Ryanair's share buying.
The government's privatisation of Aer Lingus has turned into a staggering debacle and would be a cause of acute embarrassment and perhaps terminal damage to the electoral prospects of the governing parties were it not for the distractions of the last three weeks.
The privatisation was undertaken supposedly to bring more competition into the airline market, to permit the re-financing of the airline and to further enrich the exchequer coffers. The outcome has been a serious threat to ongoing competition on the main airline routes relevant to Ireland, increased difficulty in raising the necessary finance for the development of Aer Lingus and possibly the depletion of the exchequer coffers (the latter prospect arising from the possibility that the government may be forced to buy back shares in Aer Lingus at a price far higher than the price for which they sold them to prevent the Ryanair takeover of the company).
It is obvious that none of the consultants or advisors who were paid a total of €30 million to advise on the privatisation, nor anybody in the Department of Transport or the Department of Finance, nor anybody in the government foresaw the possibility that the cash-rich Ryanair would make a grab for the Aer Lingus jewels. It was a breathtaking oversight calling into question the competence of everyone involved.
Whereas at the time of writing it seems the Ryanair bid has stalled, it could well be revived by an improved offer which could topple a majority of the shareholders into the Ryanair lap including, possibly, the ESOT 14 per cent shareholding.
If Ryanair does acquire a majority shareholding the likelihood is that this would be sanctioned by the EU Commission, albeit subject to a requirement that either Ryanair or Aer Lingus divest itself of the 17 routes where, at present, the two airlines are in competition. But otherwise, the likelihood is that the deal would be approved no matter how vigorously Martin Cullen and others huff and puff. The damage would have been done.
Alternatively, Ryanair may not succeed in getting the majority shareholding but it certainly seems likely it will acquire a blocking 25 per cent which will do terrible damage to the prospects of Aer Lingus finding a suitable airline partner and adequate finance for its future development.
There never was any persuasive case advanced for the privatisation of Aer Lingus in the first place.
It wasn't as though "the dead hand of the State" was inhibiting its commercial development. Under State ownership, it had been rescued from the brink of bankruptcy and turned into a hugely profitable airline.
And claims that the State could not give the finance to Aer Lingus needed for the purchase of new aircraft as of EU competition law are deliberate falsehoods.
As for the State needing to conserve its financial resources, why, if Aer Lingus shares are such a good deal for everyone else, are they a bad for the State to hold on to and anyway the State coffers are brimming with surpluses.
There then of course is the price at which Aer Lingus was sold. It went to the market at €2.20 a share but within three days, the shares had leapt to €2.80 and now, at the time of writing, stand at over €3. The question arises why was the public short-changed so spectacularly in the sale of one of its most prized resources?
Again a massive blunder and one which has robbed the public of the real value of the Aer Lingus shares that have been sold, a blunder running to hundreds of millions of euros.
This debacle is embarrassing for the entire government but especially for the Transport Minister, Martin Cullen, and the Progressive Democrats, the ideologues of privatisation. That the person who, as junior minister, bought Farmleigh house for £23m after it had gone on public sale for £12m, has made such a spectacular hames of this Aer Lingus venture is hardly a surprise. Neither is it a surprise that a project driven by the market-driven PDs should end up as a fiasco.
The chief claim to a third term that this government advances is its competence in running the country. This disaster proves otherwise.