Aer Lingus chiefs antagonise Government

AER LINGUS management is doing its best to alienate both workers and their political masters.

That’s the impression one could reasonably take from its actions since it first announced top management’s intention to table a management buyout (MBO).

Since then it has gone on to announce its plans to cut its workforce by a third or another 1,300 and that it is cutting back on its cargo services while also scaling back business-class services.

Some time back, I wrote Aer Lingus should be down on its knees giving thanks to Ryanair for its determination in putting together one of the most successful airlines on the globe. Little did anyone think that when Aer Lingus got its new management line-up, after Michael Foley’s premature departure, that the new incumbent would set about practically carbon-copying the Ryanair model.

At this juncture, it seems like the smartest move it could have made. A quick glance across most of the other airlines show they have struggled for a considerable time, some more than others, with few making adequate returns on the money invested.

That’s for another day, however, and Davy issued some interesting findings, highlighting the negative impact on rising oil prices across the industry.

Most guesstimates put the price range between $35 a barrel and $45 over the next two years, putting further pressure on airline returns.

Clearly, the less flexible will have less room to cope with the new-found pressures and costs.

It is difficult to take issue with the Aer Lingus strategy given the Ryanair success and the abysmal failure of many of the bigger carriers to generate serious profits anymore.

Aer Lingus’s recent actions concerning short-haul cargo and the scaling down of first-class travel, damage the exporting interests of key elements of the hi-tech sector from Dell to Intel, while the exporters in general have expressed deep concern. In the case of the first-class passenger, the group is set to damage its membership of One World, meaning travellers will be significantly inconvenienced when travelling long-haul.

If Aer Lingus loses is partnership, travellers will have to pick up luggage at the end of transitional flights, making journeys out of Ireland significantly less convenient than at present.

Right now, as I understand it, Aer Lingus management has succeeded in antagonising the Government and even possibly supporters by their latest actions.

Tánaiste Mary Harney will hardly be best-pleased with the notion of the airline cutting back short-haul carrier services, making American multinationals dissatisfied with the basic infrastructure the country has to offer.

In the political realm, the word has been that management in Aer Lingus did themselves no favours by jumping in with a management buyout before the Government had decided the long-term future of the group.

At this juncture, it is believed that the management buyout has only one full advocate in the Government and that is Séamus Brennan, whose star is not exactly burning brightly right now in Bertie’s favourites league table. John O’Donoghue is anti-privatisation, and the Taoiseach will wait to see which way the political wind is blowing.

Overall, therefore, the sub-committee of Ahern, Brennan and O’Donoghue is not ideologically driven towards management buyout or public flotation in the way outgoing Finance Minister Charlie McCreevy is or his out-of-favour PD bosom pal Tánaiste Mary Harney.

As the war with the unions intensifies, the chief executive said the unions were trying to hide behind the privatisation issue, which was not the core question for the airline. For him, the issue is cost-competitiveness and nothing more.

But his drive to imitate Ryanair, sources say, alienated him from the Government - particularly those who are capable of deciding the airline’s future.

It could be, of course, that his actions are nothing short of a letter of application for a senior job with Michael O’Leary at Ryanair.

Who knows, but it is certainly the case that in many ways the top brass have been sending very mixed signals into the broader political and business arena that probably has not done their cause any favours.