Vandals and Aer Lingus

The arguments in favour of privatisation have no merit and the arguments against have not been addressed

The decision to sell off part of Aer Lingus is inexplicable. Every reason advanced is so clearly inadequate, as is the accumulation of reasons. Those reasons advanced so far are:

• Privatising Aer Lingus will “unshackle” the airline from the dead-hand of government control and enable it to compete vigorously in the international arena, to the betterment of tourism, jobs in the airline and the company itself.
• While State investment in Aer Lingus would now be permissible under EU law, a bail-out investment at some time in the future, were the airline to get into financial difficulties, would be in contravention of those laws and there would be nothing the State could do then to save the airline in crisis.
• The State needs the money from a sale of part of Aer Lingus to fund the health service, education and other areas of spending.
The reasons against privatisation have never been properly addressed, whether by the Government or by the other advocates of privatisation:
• That Aer Lingus can be a hugely profitable enterprise, yielding significant dividends to the Irish people via the State.
• That there is a risk that if the privatisation process is commenced it will lead ultimately to the vandalisation of a major national asset, rather in the way that Eircom was vandalised by private investors over the last few years to the great detriment to the national interest and particularly to broadband infrastructure.

Aer Lingus has been transformed in the past five years. Two thousand, five hundred jobs have been cut from the workforce of about 6,800 – nearly 40 per cent. In all, more than €350 million was cut from the cost base. Internet booking was introduced and aircraft are flying more hours per day. From being a complacent, high-cost airline, it is now a lean, low-cost carrier, operating very profitably – it showed an operating profit of €107 million in 2004.

So the argument that the airline needs to be “unshackled” from the dead-hand of State control has no plausibility. It is already unshackled, it has already undergone the process of adapting to market demands, it is now a hugely profitable airline and the conditions for that were created by a combination of innovative management under the departed CEO, Willie Walsh, the workforce, and responsible trade union leadership. Further streamlining may be required, but what reason is there to think that could not be done with the same combination of factors?

As for the crisis scenario and the EU impediment to further investment by the State, were the airline to run close to bankruptcy: again the argument has no plausibility. There is or would be no EU impediment to the State investing money in Aer Lingus in a crisis situation, provided it acted on the basis of calculations that any private owner would act in the circumstances – this means that, while an ongoing subsidy would certainly be prohibited by EU laws, a crisis bail-out investment, made on a rational commercial basis, would not be prohibited.

As for the State needing the money? The return on a sale would be at most in the region of €300m. Last year the State's finances were in all €1.5 billion better than projected. There is no shortage of cash.

The argument against privatisation that Aer Lingus is a valuable national asset, likely to yield significant substantial benefit to the Irish people through dividends has never been addressed. Why should only private investors be entitled to benefit from investment in an airline?

Neither has the other argument been confronted: the vandalisation one. If Aer Lingus is now to be partly privatised, then within five, ten or 20 years it will be taken over entirely by some major airline corporation, whose focus will be on profitability alone, heedless of the Irish national interest. Precisely the same calculations that drive the vandalisation of Eircom will apply. Why should we permit this? Or rather enable this?

vincent browne