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15 January 2004 Edition

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Aer Rianta and the fantasyland of free market economics

Next week will see the opening shots being fired in an industrial conflict that has the potential to dominate politics, and the issue of transport in particular, over the next six months. Barring a change of mind by SIPTU, within the next seven days workers in Aer Rianta will engage in a two-hour work stoppage targeted directly at the EU Presidency Programme next Thursday.

The Irish Independent described it in a condemnatory editorial as the 'nuclear option'. The warning from SIPTU's National Industrial Secretary Michael Halpenny that bus, rail and taxi SIPTU members will consider co-ordinated action in an effort to exert maximum pressure on the Coalition shows the level of anger in Ireland's largest union. It is also an indication of the raw power the union movement still has in Irish society and its ability to take on the Government when absolutely necessary for the good of the country.

Speaking after the announcement, Sinn Féin Dáil spokesperson on Transport Seán Crowe said: "The media, and the wider public, should be in no mistake that the responsibility for this rests solely and squarely on the shoulders of Minister Séamus Brennan, whose intransigence in pushing for the break-up of Aer Rianta without either explanation or justification has pushed workers to taking this action."

The decision by SIPTU to deliberately target high-profile EU meetings and undermine the EU presidency through work stoppages is calculated to put maximum pressure on Bertie Ahern and the floundering Dublin Government, who badly need a positive EU presidency in the run up to the elections this summer.

The so-called Social Partnership process will be put under acute levels of stress by these developments. If SIPTU workers outside of Aer Rianta become involved it may lead to the largest industrial dispute since Ahern took power in 1997, dwarfing the ASTI's pay campaign.

Aer Rianta is perhaps the most glaring example of the ideological idiocy driving Government policy towards the public sector. By any measurement, it is a successful, profitable and productive company. The Government's own Price Waterhouse Coopers report states that any break-up of the company would result in Cork and Shannon Airports losing money and clearly they would find it impossible to survive in the longterm.

A variety of myths, and outright lies, are peddled about Aer Rianta in the media and by its opponents in business and politics. According to Séamus Brennan's view of the world, breaking up the company will inevitably make it more efficient, cheaper and more competitive.

The truth is somewhat different. Far from being overly expensive as repeatedly claimed by Ryan Air, Aer Rianta's airport charges are among the lowest in Europe. Professor Rigas Doganis, retained by the Taoiseach to examine Aer Rianta's charges, described them as "historically very low compared to other major European airports". In fact, they are 15% below the average for all European airports.

Consultants appointed by Minister Brennan to investigate the case for a private terminal at Dublin Airport said the charges were 'unrealistically low' and a range of other reports from various independent consultancies and commissions underlines the fact that Aer Rianta's airport charges are among the lowest in Europe. Despite such low pricing, the company is still extremely profitable. Last year, it made a profit after tax of €36.2 million, a substantial increase on 2001.

In 2002, Dublin Airport was one of the three highest growth airports in Europe. Since 1995, passenger traffic in this state has increased by over 80%. Last year, workers moved 19 million passengers and 87,000 tonnes of freight through Dublin, Cork and Shannon Airports.

Minister Brennan believes that the break up of the company would allow Dublin, Shannon and Cork to compete against each other for custom. This is based on the theory that Aer Rianta is too focussed on Dublin Airport and as a result, operations in Cork and Shannon are suffering.

In reality, Cork Airport is continuing to grow. Passenger figures for the Airport grew 5.6% last year, almost 1.9 million people. Numbers travelling to Britain were up a minimum of 10% and as much as 29% to London Stansted, while there was a 16% increase in travellers to Europe.

While the figures for Shannon Airport showed a small decline, this was expected given the reduction in transatlantic services but there were hopeful signs in a massive increase in European traffic. Certainly there is no evidence to suggest that by itself, Shannon Airport could do any better. If Brennan does away with the compulsory Shannon stopover, it would cripple the airport, with an estimated 900,000 fall in passenger numbers as a consequence.

In all likelihood, the regional airports would be the first to suffer from the break-up. When economic commentators report on company mergers they often point to the reduced costs as various administrative and back-up services are combined. The reverse is also true. By splitting the company into three, the individual airports would no longer be able to share central administration, accounting and middle management, putting a heavy burden on the new companies.

The smaller individual companies would also have a great deal of difficulty raising money through loans for further development. While Aer Rianta's credit rating has already been adversely affected by the confusion generated by Minister Brennan, it is still far superior to what would be enjoyed by each airport standing alone. Higher interest rates on loans mean higher charges for airlines and passengers.

This does not take into account the Minister's decision to also hamstring Dublin Airport's future development from the beginning by saddling it with the debt for the entire Aer Rianta group. This currently stands at €376 million and does not include an extra €150 million for a new development planned for Cork Airport.

If Séamus Brennan's goal was to cripple our three major Irish airports he could not do it better. After the break-up Dublin Airport will find itself with a debt of over half a billion euros. Cork and Shannon Airports will find themselves with rising costs and no support in standing up to the airlines.

SIPTU points to the experience in New Zealand, another small island economy, where, with little economic justification for the decision, the Government decided to privatise most of its publicly owned services in the 1990s, including the state airline and the airports. It has now been obliged to buy back Air New Zealand for twice what they sold it for and has launched a process of reviewing its airport structures.

The case of Aer Rianta is a classic example of the fantasyland of free market economics. As SIPTU have put it, "the Minister for Transport has offered no explanation or justification for the decision — other than his 'passionate belief' that competition is inherently good and a 'hunch' that everything will be right at the end of the day."

Seán Crowe has assured SIPTU of Sinn Féin's full support. "There is no economic sense behind Minister Brennan's proposals whatsoever but he seems determined to sleepwalk Aer Rianta into the abyss. If strike action is the last resort available to bring this man to his senses, then SIPTU is to be commended in having the courage to push ahead with it."

Economic and transport policy in this state being crafted on the basis of soundbites and shallow thinking. SIPTU's industrial campaign might just be the last hope to avert disaster.

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