1 April 2015 Edition
Aer Lingus sell-off could be another Eircom fiasco
In November 2014, Greencore (formerly Suicre Éireann) reported profits of €104.5million from a turnover of €1.6billion – imagine if the Irish Government hadn’t sold off the taxpayers’ shareholding
DOES the looming sale of Aer Lingus give you a feeling that you have been here before
Auctioning off our national assets is nothing new. Various Irish coalition governments run by Fianna Fáil, Fine Gael and Labour have all in recent decades signed up to sell out.
As the vultures circle Aer Lingus, gently increasing the bids, ROBBIE SMYTH guides us through the wreckage of previous government fire sales but first asks: ‘Why do we own these companies?’
The semi-state principle
So why does (or did) the Irish Government own or hold shares in so many businesses? The simple answer is that no one else wanted to. As the state floundered in the years after partition, the Irish and international private sector were reluctant (unwilling even) to invest in the new state.
And so successive Irish governments made investments on our behalf in electricity supply, gas networks, forests, insurance, banking, developing our bogs, ports, airports, telecommunications, horse and dog racing, ship building, steel . . . It’s a long list and there are still 29 semi-state companies on the Government books according to www.gov.ie.
Sure enough, when the businesses got profitable or corporate sharks scented difficult trading conditions (the business equivalent of blood in the water), suddenly there was lots of hungry interest.
This is where Aer Lingus finds itself today. A third bid from IAG of €1.36billion has been made yet the value of the airline’s Heathrow landing slots alone has been independently put at €1.2billion based on the value of slots recently negotiated by the SAS airline.
Established in 1939, Irish Life is now part of Canadian financial group Great-West Lifeco.
In 1939, 18% of the company shares were held by the Irish Finance minister. In 1991, it was floated on the stock exchange. The state took nearly €602million at the time. Since then, the group went on a disastrous spate of acquisitions and mergers, ending in the Irish Government taking over the Irish Life and Irish Permanent group in 2012 and pumping in €4billion. Irish Life was sold in 2013 to Great West for €1.3billion.
For now, the net cost to you, the taxpayer, is still something north of €2billion!
Also sold off in 1991 was Suicre Éireann, now called Greencore. The state got €210.65million from the stock market floatation. In November 2014, the company reported profits of €104.5million from a turnover of €1.6billion.
Imagine if the Irish Government had kept a shareholding like it has now in Aer Lingus. There would be a steady dividend stream and some real long-term payback to the Irish economy.
Irish Shipping and B&I Ferries
Started in 1941 to secure the passage of goods to the island during World War Two, the company grew in terms of fleet and tonnage transported. It was part of the consortium that started ferries from Rosslare to France, a business that is still profitable today.
In 1984, the then Fine Gael/Labour Government allowed the firm to go into liquidation. In 1992, the Fianna Fáil/Progressive Democrats coalition approved the sale of the Government’s shares in B&I Ferries for €10.8million
In the years since, the volume of trade has massively increased through Irish ports. The wages and working conditions of many of the workers on those ships has deteriorated though.
• Sinn Féin TDs opposing Aer Lingus privatisation plans in 2006
Maybe like me, you have lost count of the owners and sales of Eircom since the €6.399billion flotation of the firm in 1999. Then Eircom had debts of €540million; by 2012, and five owners later, the firm had debts of €3.8billion.
According to the most recent State of the Internet Index, two-thirds of the 26 Counties has web speeds of 10Mbs, a rate the EU designates as sub-standard. The Irish Government is committed to spending €500million to improve broadband access. If we owned Eircom still, this might be a very different story.
Oil and gas rights
It has taken an investment of €3.4billion to develop the Corrib gas field, off County Mayo, the scale of which we were led to believe the Irish Government could not afford. They are not even a shareholder in the business that will now pump the gas equivalent of 9,700 barrels of oil a day and would be able to meet 60% of Irish gas demand.
The irony that the Norwegian Government (through its Statoil company) owns more of Irish natural resources than the Irish Government should be lost on no one.