Wednesday, 28 January 2015

We might be experiencing a little turbulence!



I grew up so near Dublin Airport that I always presumed  as a child that there was no difference between Aer Lingus and Dublin Airport.  Up the northside you cannot underestimate what Dublin Airport, Aer Lingus and Ryanair mean to the local economy.  Aviation nowadays is enormous.  25% of all aircraft operated around the world are either Irish operated, leased,  financed or registered.  We’ve come a long way since I was a kid.
So when Fianna Fail privatised a majority stake holding in Aer Lingus 9 years ago there was concern at what that might eventually mean.  The purchase by Ryanair of a large stake of the company with a view to a proposed merger raised concerns about a monopoly.  Now there is a final proposal from IAG the owners of British Airways to buy Aer Lingus.
My concern at how the debate has gone seems to focus on Heathrow and access to Ireland from London.  Isn’t there something 1980’s about all that?  Sure London is very important and there needs to be access to international flights, there is real concern that jobs will go as the larger group will provide synergies, the sale of the last public influence in Aer Lingus will expose the former state airline to full blooded hard nosed business.  The strings will be cut and the notion of the Department of transport being the downtown office of Aer Lingus will be consigned to history. Due to EU rules it is sink or swim in aviation.  Just look at how Cyprus Air folded a few weeks ago, leaving another island without control over its own access.
There are other issues that don’t seem to register.  Firstly Dublin Airport is itself developing into a hub as passengers from the UK take transatlantic flights. 25% of Aer Lingus transatlantic passengers originate elsewhere in Europe and join a flight here.  The stands at Dublin Airport for wide body aircraft are at 100% usage as it is, even with the new Terminal 2.  I don’t know where the room that IAG claim they have to expand Aer Lingus long haul services out of Dublin may be.  An A 380 which is the long haul aircraft of the future will need a longer runway than what Dublin has at present to take off fully loaded to travel long haul.
 I also think that IAG will get more out of the deal than the present shareholders.  Aer Lingus happens to have about €400M in cash, the total sale of government shares would only realise about €320M for the state.  IAG propose to give the state cash up front, but what else is there in this for the government? 
Dublin Airport on the other hand carries 75% of all airline passengers from Ireland.  What is the attraction for Irish passengers to Heathrow as a hub?  If you’re travelling to Australia it is faster to travel by Ethiad or Emirates to make just one stop rather than two travelling by Heathrow.  There are 15 destinations from Dublin in North America. Again it’s faster to connect there.  There are 2 separate issues; what is in the interest of Aer Lingus to ensure it has a role into the future and secondly how do you get more planes landing in Ireland?  There’s more to Irish aviation than just Dublin Airport. 
Dublin and Shannon have one plus and that is immigration clearance for the US.  There is enormous to potential to develop westwards across the Atlantic.  Heathrow is simply in the wrong place for that.  What is in the strategic interest of Aer Lingus is the need to work with a Middle Eastern or North American airline. 
What is important is that we have daily connections to San Francisco so as to develop industrial policy with the IT industry.  What is important is that air transport facilitates the development of the country.  What seems to me is that IAG are thinking IAG first and Ireland second. That's why they want the entire shareholding, pitching cleverly at a price that might attract Ryanair to sell and under stock exchange rules taking the company private but within IAG.  For me it’s not good enough to sell what Fianna Fail left behind on the shelf.   I’d hold on to the states shares.

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