Irish politicians were almost unanimously delighted to abandon our national currency and join a currency of countries with which we do modest trade and with whom we have almost no traditional demographic links. These same politicians appear to be unwilling to sell their bit of our national airline to the one carrier that makes commercial sense.
Why is this?
Why would you wholeheartedly give away the currency – which affects everyone’s lives profoundly – to Germany, yet fight tooth and nail for a national carrier because it is being bought by a British carrier? This despite the fact that Britain is our most significant economic, social and cultural partner and Irish visits to Britain and vice versa are the single biggest source of air traffic?
Would there be a similar level of local opposition if the buyer were German? Just asking!
If Aer Lingus is to be sold to anyone, we all know that BA is the obvious partner.
Don’t get me wrong: I love flying Aer Lingus and I get a real feeling of coming home when I fly back to the country on Aer Lingus. For years, Aer Lingus was, in my head anyway, synonymous with home. It still is, but given what is happening to the global airline business, it is hard to see the future for the company without the significant balance sheet, access to cash and access to routes of another bigger carrier. That is just the way the airline business is going.
Maybe the best way to safeguard Aer Lingus is to sell it.
Before I come back to that substantive point about the future of the airline and the trends in the airline business, it might be worthwhile addressing briefly the concept of the ‘national interest’.
For some 1950s reason, airlines are the property of the national project. By this I mean that in many people’s imaginations, proper countries have national airlines – yet, given the way we embrace Ryanair, we like the idea of a national carrier but are quite happy to fly with anyone! Patriotism alone isn’t enough to secure Aer Lingus’s future.
We don’t think this way about cars, or trains, or even shipping.
National airlines are an industrial fetish, a bit like the economic equivalent of Fifty Shades of Grey.
The plain vanilla commercial reality is that, unfortunately, it is not who owns them that determines whether they thrive or not, but how many choose to travel with them.
So the national interest is whether the airline has a solid future.
Think about it from another perspective. Many people continue to argue that “we need links to the outside world” and therefore having a domestically-owned, or at least part domestically-owned, national carrier is essential.
Why should this be?
Has it ever crossed your mind that Ireland became an exporting and trading phenomenon without a national shipping company, yet the vast majority of our trade goes by sea?
This is because we don’t need the hyper-nativist approach to transport or economics. Many shipping companies use our ports. They are competitive, they do the job and do you have any idea what they are called? Do you care? The same goes for air transport. You don’t need a government-controlled airline to be a normal country plugged into the world; nor do you need a government-controlled shipping company to be a trading economy.
Once we appreciate this fact, it’s easier to see what is in the best interest of Aer Lingus, the company and its staff. The single best underwriter of Aer Lingus will be the number of passengers.
We have seen unambiguously that people are travelling in a totally different way these days. The main beneficiaries in Europe are the low-cost airlines. Even today, people think of Ryanair as the upstart and Aer Lingus as the incumbent, and yet Ryanair will carry 90 million passengers to Aer Lingus’s nine million. The upstart is ten times bigger than the old hand.
Even BA, a company indelibly linked with British air travel, is only the third biggest carrier in Britain, behind Easyjet and Ryanair. In fact, Ryanair’s ambition is to grow to 150 million passengers by 2020 and next year to knock Easyjet off its number one perch across the water. Ryanair is three times bigger than BA and 30 per cent bigger than German giant Lufthansa.
If you look around Europe, you see that low-cost airlines are the only ones really growing in Europe. What this tells us is that the low-cost model of airline travel is winning. Ryanair has spawned copycat airlines such as Norwegian, Pegasus Airways, Wings and Wizz, all challenging conventional carriers. The future of mass-market air travel in Europe is low cost. And the trick the low-cost carriers stumbled upon is a bit of consumer psychology that we never thought about: people don’t so much travel to destinations as travel at a price – and if you make the price low enough, people will take a chance.
What does Aer Lingus do in this context?
It is a small carrier much like SAS, LOT and Finnair. Its growth is constrained by the national market. The national markets are not growing in the mid-price section and the national populations aren’t growing either. Therefore, it has to figure out another strategy.
The smaller national airlines above all talk about having an Asian strategy – tapping into the only mid-priced market that is growing, namely Asia, by flying Asians to and from Europe using their national airports as hubs. This seems to be a pretty crowded market and it also strikes me as a ‘me too’ strategy.
Looking at Aer Lingus, for years the idea was that Aer Lingus would use its slots at Heathrow to propel Irish people out into the great world. However, Heathrow isn’t the only hub in the world. There are plenty of others. In fact, tying Irish travellers to Heathrow because you want to preserve the ownership structure of the company is strange bit of logic.
This is made all the more odd when you think that the company that wants to buy Aer Lingus is BA, the dominant player in Heathrow. As long as the routes are busy, where’s the problem? Aer Lingus is also being promised by BA that nothing will happen to the slots for five years. Would another suitor promise this?
Then, you think, if it is unlikely that Aer Lingus remains on its own for long, who would be a better suitor? Maybe there is one, but it doesn’t look like that to me.
Fifty Shades of Shite, more like. Morning chaps.
Irish people don’t think like that about cars because they’ve never built any to my knowledge.
The French are well into their Renault, Peugeot and Citroën, and I expect the Irish would be into the Paddymobile if it came out, but it won’t.
Who makes trains for Irish Rail, the DART, trams for LUAS etc.?
As for Aer Lingus – sell it. Life goes on.
So maybe now someone can tell us why we need to have a national airline? Or a national broadcaster or the wasteful form of ‘Imitate the Brits’-type of national government that we all seem SO anxious to fund? Bit of ‘outside the box’-thinking badly needed in this over-priced, over-taxed and over-borrowed tiny island, lying off an island off the coast of Europe.
Hi David,
Plenty of talk about the aircraft slots in Heathrow but no talk of the job slots in Aer lingus. 1 In 4 to lose their jobs;
I suppose they could negotiate a cheap flight as part of their severance package for the first part of their trip to Australia where they can get a job that pays properly.
Michael.
… conspiracy to defraud nations of their taxation!
I am struggling to see how Ireland’s interests and Willie Walsh’s interests could possibly be one and the same.
Willie is very good at what he does. Dublin-Heathrow will become an IAG monopoly route and Willie will raise prices. Passenger headcount will drop and magically, we’ll have the commercial rationale for re-assigning the infamous slots.
Willie’s a numbers man so let’s use numbers. The state stand to make approx. €300m on the sale – they can fund that at 1.9% over 30 years currently. So the justification for taking this money is…as I said I’m struggling.
Unless you book way in advance. Ryanair would still be cheaper but you can get a decent price on Aer Lingus a few months in advance.
The love affair with all things German goes back to the very early years in this state. Impoverished and ostracised it was going no where and with a distinct possibility of having to beg to be let back into the union. Then in 1925 along came the Germans with a proposal to build a hydro-electric dam on the Shannon. This state was only three years into going it alone and the Germans were on the floor, being screwed for war reparations by the British, French and all the other go the road merchants. Down but not out, the Germans took… Read more »
@michaelcolgan – Ah Michael, waving your declaration of human rights about the place might help the ethics of a nation that’s unable to employ its people without bribing multinationals to cheat on their people. It’s sorta moral thingy that the UDHR is supposed to cover but … ?!
Hi Mike.
You can get return from Dublin to London on eurolines coach service for 74 euro.
If price is your sole consideration why not travel with them?
Michael.
Yesterday, Cormac Lucy’s ‘Sunday Times Business Section’ piece on just how dire Ireland’s debt is (2nd most indebted country in the world after Japan, those two countries jut out like sore thumbs on a global debt chart, by the way Greece is sixth and looks respectful compared to us) and how our national government no longer serves the ‘national interest’ but simply serves up propaganda. My own plagiarised analogy is the Irish economy is a runaway bus hurtling down a hill towards the edge of a cliff and the government-driver’s solution is to simply blacken out the windows and tell… Read more »
@michaelcolgan … & just 2 B sure, ‘… the right to work, the free choice òf employment…’ are very different and laudable concepts, light years removed from a nation’s amoral scramble to PROVIDE employment, dressed up as ‘Inward Foreign Investment’.
How come nobody has mentioned the issue of slots in other busy continental airports, like AMS, FRA, Paris CDG, Milan-Linate or Malpensa ? Not a word about it. I flew BA twice, and I never went back. They lost my luggage in one direction, and nearly caused me to miss my connection in the other. BA are also very expensive. More expensive than Aer Lingus, or KLM most of the time. IAG are simply buying up a competitor, so that they will have one less to deal with. Where is the competition authority of Ireland ? They are once again… Read more »
This is the second time that David has touched on this subject. Frankly I am quite disappointed in the fiscal stance that David is taking, reminiscent of that iconic film involving Geckos’ speech “greed is good” where he was posing as the Knight in shining armour, and would go in and turn the company around but in the end really just wanted the blue star for its assets and landing slots. Aer Lingus is a business, yes that is true, and companies have to make money to survive, that is there fundamental point of existence. Regretfully Aer Lingus and many… Read more »
Price evidently isn’t everything for some people. They value the convenience and the tube and efficient connection that Heathrow brings.
If price was the only metric, London City Airport wouldn’t exist, but it does, as evidently people are willing to pay more to fly even closer to the metropolis than Ryanair offer.
I feel far more sentimental about the Irish landscape than I do about Cunni lingus. I would support the sale. I would not however support the windfarms that are blighting the landscape so the electricity can be sold to mainland Europe or England. The recent asinine suggestion that pylons be erected in the middle of the Comeragh Mountains is another one worth fighting against. But the airline, eh, let it go.
Now, as for 50 shades? Here is what happens when counterculture mixes with the mainstream. https://www.youtube.com/watch?v=0rNKWAqzxzU&feature=youtu.be
Just to remind ourselves, 1. A few years ago Aer lingus(like all national airlines) was going bust fast) we hired Willie Walsh to save it and he did by turning it into a Ryanair. 2. Willie proposed a management buyout of Aer lingus so he could finish the job free of govmnt interference, he was laughed at so left for the gig at BA. 3. The government then went and sold Aer lingus by IPO keeping a MINORITY share of 25%. That’s right folks….we don’t actually own Aer lingus except for a minority share holding….we already sold it. If we… Read more »
Who are the real European patriots here? Another great explanation of what is at stake here by Yanis Yaroufakis:
http://www.nytimes.com/2015/02/17/opinion/yanis-varoufakis-no-time-for-games-in-europe.html?partner=rssnyt&emc=rss
This could never have been written by a current Irish minister. Our elected have become servile and slavish or maybe the words “blue shirt” gets to the heart of it.
I’m surprised no one has mentioned that bellwether of some airline brands: the stewardess. Singapore Airlines in particular has made great capital out of this, and I would hate to see our finest in green with the cheery smiles and soft accents lose their jobs. They are one reason I’m flying the last leg of my flight to Ireland from Asia this summer from AMS (the other reasons being price and the connection at Schiphol). If you’re faced with a choice between the battleaxes of Aeroflot and our colleens, which would you choose? If Willie gets Aer Lingus, I’m sure… Read more »
I don’t have any idealogical view on this sale. All I know is that monopolies are bad for everybody (except those working for them (in the short term anyhow)), and that selling to Ryanair would have been a complete disaster for Ireland as a whole. Selling to IAG(BA), fine, I’ve no issue whatsoever, except the government should perhaps see if they can take out the Heathrow slots from the parent company and accept cash plus retain the slots which they would agree to leaseback to Aer Lingus for 10 years say. The slots are really the only strategic thing of… Read more »
A rational proposal:
The Irish Government and Ryanair should set up a holding company (called Irish Air Holdings, IAH for example), transfer the Aer Lingus Heathrow landing rights to this company and sell the remaining Aer Lingus operation to IAG.
Ladies and gentleman, I give you David’s favourite journalist – the prolific George Monbiot: “A maverick currency scheme from the 1930s could save the Greek economy” http://www.theguardian.com/commentisfree/2015/feb/17/currency-scheme-1930s-save-greek-economy-eurozone-crisis “One of these radical ideas was proposed a few months ago by Martin Wolf in the Financial Times. He suggests stripping private banks of their remarkable power to create money out of thin air. Simply by issuing credit, they spawn between 95% and 97% of the money supply. If the state were to assert a monopoly on money creation, governments could increase their supply without increasing debt. Seigniorage (the difference between the cost… Read more »
Yanis Varoufakis in today’s Guardian:
“Yanis Varoufakis: How I became an erratic Marxist”
http://www.theguardian.com/news/2015/feb/18/yanis-varoufakis-how-i-became-an-erratic-marxist
[…] Even though loyalty has a part to play, travel (and logistics in general) is about convenience – that is, value for money, the shortest route and the fastest time. Keeping a healthy network of connections open, both by air and sea, is an essential survival strategy for any island nation – not only for leisure or business travel, but also for trade links. […]
[…] Even though loyalty has a part to play, travel (and logistics in general) is about convenience – that is, value for money, the shortest route and the fastest time. Keeping a healthy network of connections open, both by air and sea, is an essential survival strategy for any island nation – not only for leisure or business travel, but also for trade links. […]