Irish Election are pleased to announce our collection of Irish 
The problem with the Privatization of Aer Lingus.
Read more about: End of Shannon-Heathrow, Munster
After the debacle of Eircom you would think that the government would have realized the problem with privatization. Much of the flack over the privatisation of Eircom center on the fact that it failed. This was attributed to the fact that it was privatised not to the actually factors that made it fail. The reason it failed was because they didn’t follow Mary Harney’s mantra. “If there is anything worse then a public monopoly it is a private monopoly”. Whether she heard her own advice we will never know.
The problem arises from the fact that Eircom have a monopoly on the lines. They can do what ever they like with the infrastructure as they have no competition in this area. Hence they can use this position to control the rest of the market.
The same goes with Aer Lingus. The problem is that Aer Lingus had a monopoly on the slots in Heatrow. These slots were deemed necessary for our countries good and should have been kept by the government in a holding company. Myself and Dan among others suggested this when the privatization was done. We should have had the situation where the 4 Shannon slots should have been available on franchise to however wanted to run this service. Be they Aer Lingus, Aer Arann or Air France.
But by again repeating the mistake of the Eircom privatization and putting the monopolistic infrastructure in the hands of a private company. That is the lesson to be learned from privatization. At least with the ESB the ESB and the grid are already separated so if the ESB is broken up the grid can remain with the government.
With Ryanair, workers and the government over 50% of shareholders are against this move. It will be interesting to see if they change this. Indeed could they oust the board? But one thing they should do, and I think Ryanair would support this move. Is to try to use this 50% to move the slots back into public ownership. Whether this is possible or not is not clear. But certainly if the government care about spatial strategies they have little choice even if it costs.
moves to takeover Aer Ryanair are getting great publicity from this highlighting their commitment to Shannon and that they had no plans to get rid of these slots. I wonder are people regretting not supporting Ryanair’s Aer Lingus takeover bid. They committed to keeping the Heatrow links, and have shown great support for Shannon and Ireland throughout the years. If they had taken over we probably would not be in this mess. Then again if it wasn’t privatized in the first place……..
I think the emerging Shannon lobby group is not going to get anywhere without government intervention — at national or EU level — to support their case. The crux should be the monopoly issue that you identify. Here is the text of the EU commission press release blocking the Ryanair takeover. Unfortunately it’s very superficial, they refer to background work that they did but it’s not on the website. Anyway, here’s their conclusion –
This was the first time the Commission had to assess a proposed merger of the two main airlines in a single country, with both operating from the same “home” airport – Dublin. It was also the first time the Commission had to assess a merger of two “low-cost” airlines, operating on a “point-to-point” basis. Finally, the number of overlapping routes is unprecedented compared with previous airline cases.
i.e. single country merger, same business model, same type of airline service, overlapping routes. Someone (Michael O’Leary?) should now be querying whether any of these conditions are still valid. The Heathrow slots make Aer Lingus a hub-and-spoke airline, feeding passengers to BA. They’ve clearly decided that’s the part of the business they want to develop — at Shannon’s expense. Furthermore, it’s no longer a single-country operation with the Belfast base. And flying to Heathrow is not a “low cost” business — the turnaround times at Heathrow are simply too long for a low-cost airline.
Overall, the mind just boggles at how the connectivity of a lagging region of the country was left in the hands of a single private company.
Simon, I’ve suggested much the same in talks I’ve had, basically my view is that the government should seek to create a holding company, call it “Aer Landus”, convene a meeting and make an order to the board for the sale of the slots to this new state owned holding company. I believe that RyanAir would go along with this simply out of badness and the fact that they would stand a better chance of getting access to those slots than they do now, fact is RyanAir, the employees and the state owns more than enough to sanction this action. All they have to do is make sure the state pays a fair price, if they fail to do this then I think Cork and Dublin will lose slots over the coming 18 months as Aer Lingus seeks to make the shift from being an Irish (both based and branded) to being a much more substantive medium sized carrier.
Interesting response to a Dail question in 2005 from the then minister Martin Cullen on the issue of the Heathrow slots. I’ve quoted the last paragraph below
http://transport.ie/viewitem.asp?id=6669&lang=ENG&loc=1857
“However, I want to assure the House that in the context of any decision to reduce State ownership in Aer Lingus, all the options available within the regulatory framework will be examined to ensure adequate ongoing access to Heathrow for Irish consumers.”
So what were the options explored in detail and why were they not used?
Absolutely right Dan, those comments were either lies or rubbish and the government have completely dropped the ball on this one.
Simon spot on but the thing is in a market so small there is a difficulty in bringing about plurality and profitability in the private sector.