31 August 2006 Edition
Aer Lingus : Government floats state airline
Aer Lingus privatisation "disaster"
Minister for Transport Martin Cullen outlined his flotation plans for Aer Lingus on the 28 August, finally confirming the Government's oft-stated intention to sell off the state airline.
There is a strong belief within the Government and among other proponents of privatisation that Aer Lingus's strong performance and cost cutting measures make it an attractive product despite soaring gas prices and constant security alerts which have impacted upon other airlines. The Government seem to be putting a lot of faith in the Open Skies agreement with the US, currently mired in negotiation. This would greatly increase the profitability of the airline by allowing it access to many more American airports but resolution is not expected one way or another until next year.
Another problem for the flotation plan is the exclusion of 600 workers from the former Team Aer Lingus maintenance department. When the department was sold off to S R Technics, the staff were given letters of assurance that they would be treated no differently from other Aer Lingus employees. However, it has emerged from the flotation plan that these workers will not be included in the agreed index-linked pension. This is despite a Supreme Court ruling last year which upheld the validity of the comfort letters.
Christy McQuillan of SIPTU has said that the prospectus for the flotation will have to be changed in order to ensure that the SR Technics staff get their pension entitlements, estimated at about 30 million Euro. If this does not happen, the union will not sign off on the pension agreement and will consider legal action.
The planned flotation is to occur in September -- the same month in which another airline, Sky Europe, will seek investors for ten million new shares. As there are only a limited number of potential investors in the airline industry, this may well have an effect on the Aer Lingus flotation which the Government claims will raise between 850 and 950 million Euro.
"There is so much uncertainty in the industry at present that the responsible course for the Government to take is to call a halt to this process and reappraise the whole project," said SIPTU National Industrial Secretary Mick Halpenny.
"SIPTU has campaigned against the privatisation of Aer Lingus on the grounds that it would not be in the best interests for our members, customers or taxpayers. But the ultimate responsibility for decisions on the future ownership of the company clearly lies with its largest shareholder -- the Government.
"This is bad value proposition. According to the most optimistic forecast, the taxpayer will get only around €300 - €400 million. Aer Lingus itself will not receive a cent directly from the flotation. In fact, for Aer Lingus to get the necessary funding to expand its fleet they will have to issue new shares, post the flotation. Even then, the money they plan to raise through the issuing of new shares will only yield approximately a quarter of the total investment needed.
Given away for a song
"Essentially the national airline will be given away for a song and the electorate will no doubt remember who made that decision when the time comes."
In relation to the strategic implications of privatising the national airline, Sinn Féin Transport spokesperson Seán Crowe TD pointed out the Government's failure to respond to issues raised by the party around European court rulings.
"The Government has neglected to respond to questions raised by Sinn Féin in our submission to the Oireachtas Committee on Transport on the impact of European Court of Justice rulings on Government's holding 'blocking shares', such as the one Minister Cullen says the State's proposed shareholding of 25.1% can serve as," Deputy Crowe said.
"In a decision handed down on the 13 May 2003 (Ref: C-463/00 and C-98/01), the European Court of Justice ruled illegal the holding of a 'golden share' by the British Government in the airport operator BAA, owner of Gatwick and Heathrow. The same judgement ruled illegal the possession of 'golden shares' by the Spanish Government in a range of companies."
The Government's failure to respond to this issue and its obsession with the privatisation agenda may well prove to be a huge mistake, the TD said. The Government is kow-towing to the likes of IBEC instead of listening to the public.
"The actions of Minister Cullen and this Government surrounding Aer Lingus will prove to be a grave error," the Dublin TD predicted. "Sinn Féin is supporting SIPTU in calling on Taoiseach Bertie Ahern to step in and stop what may well prove to be a national disaster before it is too late. We are absolutely committed to continuing our opposition, and would like to reiterate our support for the workers of Aer Lingus in any attempt they make to prevent the sale of the people's airline."