Selling off state assets (Aer Lingus)

RainyDay

Blackjack wrote:

Perhaps the NTMA is planning to purhase a holding - who knows, apart from the NTMA?.

You can be damn sure that if NTMA involvement was a possibility, they would be shouting it from the rooftops at every opportunity.

RainyDay

Blackjack wrote:

Perhaps the NTMA is planning to purhase a holding - who knows, apart from the NTMA?.

You can be damn sure that if NTMA involvement was a possibility, they would be shouting it from the rooftops at every opportunity.

Blackjack

I would imagine that for whatever reason the Goverment is not allowed to make investment in the Airline (if indeed it is not allowed) are the same reasons that the NTMA are not allowed to.

Schuhart

The Government have simply decided to seek external funding for Aer Lingus because they don’t want to raise taxes, and have not really pursued in detail whether the EU Commission would veto a direct investment.

This seems in line with their policy of using PPPs for motorway building, which as we know means the public will end up paying a much higher cost through tolls to private operators than they would if the roads were simply paid for out of taxation – but presumably allows them to continue their low tax policy.

This approach is not appearing to be in the national interest. In addition to the poor value for money of PPPs in roads we have the example of Eircom, and the State having to step in to invest directly in broadband.

The simple conclusion is the textbook theory behind privatisation simply has not worked out in practice in Ireland. Maybe it has to do with our domestic market being so small that control of monopoly positions is more important that notional competition benefits that will not actually be achieved. But, for whatever reason, the practice is very different to the theory.

RainyDay

Blackjack wrote:

I would imagine that for whatever reason the Goverment is not allowed to make investment in the Airline (if indeed it is not allowed) are the same reasons that the NTMA are not allowed to.

I guess you didn't read my earlier posts. There is no blanket ban on Govt investments. The only ban applies to investments which distort the competitive market, i.e. are not done on a commercial basis.

Schuhart wrote:

The Government have simply decided to seek external funding for Aer Lingus because they don’t want to raise taxes, and have not really pursued in detail whether the EU Commission would veto a direct investment.

This seems in line with their policy of using PPPs for motorway building, which as we know means the public will end up paying a much higher cost through tolls to private operators than they would if the roads were simply paid for out of taxation – but presumably allows them to continue their low tax policy.

Just to be clear, there is no question of taxes needed to be raised to support the investment. The NTMA has money burning a hole in its pocket, just waiting to be invested in the markets.

And the PPP policy is even more crazy when you realise that Govt can borrow money at much better rates than the private sector, so why should it turn to private sector borrowing which is guaranteed to be at a higher rate plus a profit margin on top.

D'Peoples Voice

RainyDay wrote:

If it's not a good investment, the private buyers won't be lining up to hand over their cash. Strange that FF/PD won't consider the NTMA option....

Rainyday,
As trustees of a fund, they are prohibited from over-concentration in any one particular asset/company. they are also to invest the money in such a way as to out-perform the market, that is, they sub-contract investment managers who have to specific targets with respect to the market. Could Aer lingus out perform the market index?
Also, you have the correlation factor, Aer Lingus is heavily correlated with the Irish economy, government tax revenue is also heavily correlated with the Irish economy, therefore should a recession hit, the tax revenue will fall, and the gov still need to fund pensions. But if their pension fund has also invested in a stock dependent on the Irish economy, they are pretty shagged.
that's why the NTMA are independent of the Gov!

RainyDay

D'Peoples Voice wrote:

Rainyday,
As trustees of a fund, they are prohibited from over-concentration in any one particular asset/company. they are also to invest the money in such a way as to out-perform the market, that is, they sub-contract investment managers who have to specific targets with respect to the market. Could Aer lingus out perform the market index?

If it's not going to outperform the index, do you reckon the external investors will be interested? If it's a good investment for them, it's a good investment for the NTMA.

D'Peoples Voice wrote:

Rainyday,
Also, you have the correlation factor, Aer Lingus is heavily correlated with the Irish economy, government tax revenue is also heavily correlated with the Irish economy, therefore should a recession hit, the tax revenue will fall, and the gov still need to fund pensions. But if their pension fund has also invested in a stock dependent on the Irish economy, they are pretty shagged.
that's why the NTMA are independent of the Gov!

The size of the AL investment is just a drop in the ocean in the context of the overall pension fund, and would have any significant impact on the risk of hitting the fund.