Friday, August 10, 2007

The problem with Aer Lingus Privatization

After the debacle of Eircom you would think that the government would have realized the problem with privatization. Much of the flack over the privatisation of Eircom center on the fact that it failed. This was attributed to the fact that it was privatised not to the actually factors that made it fail. The reason it failed was because they didn't follow Mary Harney's mantra. "If there is anything worse then a public monopoly it is a private monopoly". Whether she heard her own advice we will never know.

The problem arises from the fact that Eircom have a monopoly on the lines. They can do what ever they like with the infrastructure as they have no competition in this area. Hence they can use this position to control the rest of the market.

The same goes with Aer Lingus. The problem is that Aer Lingus had a monopoly on the slots in Heatrow. These slots were deemed necessary for our countries good and should have been kept by the government in a holding company. Myself and Dan among others suggested this when the privatization was done. We should have had the situation where the 4 Shannon slots should have been available on franchise to however wanted to run this service. Be they Aer Lingus, Aer Arann or Air France.

But by again repeating the mistake of the Eircom privatization and putting the monopolistic infrastructure in the hands of a private company. That is the lesson to be learned from privatization. At least with the ESB the ESB and the grid are already separated so if the ESB is broken up the grid can remain with the government.

With Ryanair, workers and the government over 50% of shareholders are against this move. It will be interesting to see if they change this. Indeed could they oust the board? But one thing they should do, and I think Ryanair would support this move. Is to try to use this 50% to move the slots back into public ownership. Whether this is possible or not is not clear. But certainly if the government care about spatial strategies they have little choice even if it costs.

moves to takeover Aer Ryanair are getting great publicity from this highlighting their commitment to Shannon and that they had no plans to get rid of these slots. I wonder are people regretting not supporting Ryanair's Aer Lingus takeover bid. They committed to keeping the Heatrow links, and have shown great support for Shannon and Ireland throughout the years. If they had taken over we probably would not be in this mess.


CK said...

Maybe my company law knowledge should be able to answer this but it doesn't - should there not have been more input from the majority shareholders in making such a decision, so that we would never have arrived at this situation.

Also, it seems to escape people who are to protect our national interests that we are an island with a deeply unbalanced economic distribution and limited infrastructure, it is not pragmatic to have our national airline work with purely commercial objectives in mind.

Anonymous said...

Shannon has been cossetted and protected from reality for far too long by Government and all the local pressure groups and King Canutes in the mid-West. IMHO, the airport screwed up by not having a 'Plan B' in place. They simply assumed that Aer Lingus would keep serving LHR from SNN and made no contingency plans. This despite the fact that they bent over backwards to accomodate Ryanair - at the expense of Aer Lingus and other operators - and have spent the last number of years slagging off Aer Lingus every time they made any kind of changes to the transatlantic service. Aer Lingus owe Shannon no favours and management made a rational commercial decision which is what they're paid to do. Shannon got stuffed and well deserved.