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14 October 2004 Edition

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Cabinet confusion on Aer Lingus

BY ROBBIE SMYTH

We might have a new cabinet with a new Minister for Transport, but when it comes to the running of Aer Lingus and developing strategy for the state airline, confusion reigns. Events of the past week have shown gaping differences between Bertie Ahern and his Tánaiste, not to mention between the executive directors of Aer Lingus and the Government.

Then, just to add the icing on the cake, there are potentially misleading comments made by Bertie Ahern when speaking in Leinster House last week, as well as yet another 'expert' report on the future of the airline presented to new Transport Minister Martin Cullen.

MANAGEMENT BUYOUT NOT APPROPRIATE

Confusion began when Fianna Fáil leader Bertie Ahern told Leinster House deputies that he didn't think a management buyout was "compatible with the mandate of Aer Lingus". It was not "appropriate".

However, the same day Progressive Democrats leader Mary Harney told journalists that all options for the future of the airline should be "kept open".

We needn't worry about any fallout between the government partners and shouldn't start printing the election posters just yet, as on the same day Willie Walsh, Aer Lingus chief executive, turned up in Leinster House to give a presentation on the airline to the Joint Committee on Transport and proclaimed that he and other executive board members had dropped their plans for a management buyout.

Walsh had written to Julie O'Neill, secretary general of the Department of Transport, three days previously stating his changed intentions. What we don't know is whether the Minister for Transport knew of this change of strategy. It seems, though, that if Martin Cullen did know he had not got around to telling other cabinet members.

AHERN'S MISSING €185 MILLION

The confusion doesn't end there though; Ahern told Leinster House that the state had pumped £360 million into Aer Lingus in the early 1990s, when the actual figure is £175 million

Ahern also claimed that the government had put very substantial resources into Aer Lingus in the aftermath of 9/11. This though was only €6.7 million and was only to compensate the company for the loss of revenue due to the temporary closure of US airspace

What Ahern didn't say was that US airlines were heavily subsidised by their government during the same time period.

Also unclear was Ahern's assertion that "while Aer Lingus has difficulties and aviation is having enormous difficulties there are now restrictions on investing capital".

But isn't Aer Lingus going to deliver over €90 million in profits this year on top of over €60 million last year and isn't it the case that there are no restrictions on investing capital as a shareholder investment? Any money given to Aer Lingus now would be a commercial investment from the shareholder, as the company is profitable and any such investment would not be a subsidy.

ALITALIA DOUBLE STANDARD

Ahern also focused on the Italian airline Alitalia, which is to cut 3,700 jobs but was, according to Ahern, in danger of "going under altogether". Ahern also said that the Irish aviation industry could not act differently from elsewhere in Europe.

But this week, this seems to be what the Italian government and Alitalia have done. He failed to say that Alitalia, although in severe financial difficulty, has agreed a deal with unions and government that would unlock a €400 million emergency government loan.

The Italian government is also to spend another €300 million paying for the 3,700 redundancies, which includes two years comprehensive welfare payments during which those laid off would still be regarded legally as employees.

There will then be a three-year period while those laid off would be placed on a programme and continue to draw part of their original salary. This seems a bit different treatment from the compulsory redundancies being demanded of Aer Lingus workers.

Finally, this week we have the leaks of the government commissioned Goldman Sachs report of future strategies for Aer Lingus. It recommends the floatation of Aer Lingus as the best way to raise funds.

The report and other matters are to be considered "quickly" by a special cabinet subcommittee. Judging by this week's crossed lines, one wonders will they all be able to get to the meeting at the right place, right time?

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