Eircom/Aer Lingus privatisation parallels

eircomtribunal

The Eircom parallels argument brought forward by some in the Aer Lingus privatisation discussion stems from not understanding the matter of the private eircom monopoly given free reign in a "natural" monopoly situation, unchecked by an underpowered regulator.
Frank Fitzgibbon puts forward his arguments in today's Sunday Times, and his remarks on the part the CWU played read:

Let us prey on Aer Lingus
I heard someone claim the other day that Aer Lingus is part of our cultural heritage. Really? I suspect they may be confusing the current airline with the one that was operating under the same name about 25 years ago.
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In the same way that the Communications Workers Union (CWU) threatened to go to war ahead of the privatisation of Eircom in 1999, Siptu is merely adjusting its stance to ensure it is well-positioned to shove its nose into the trough of the privately owned venture.

The various jigs and reels at Eircom over the past seven years have seen the CWU’s membership enjoy a bonanza of more than €1 billion from their involvement in the telephone business. Airlines don’t enjoy the same guaranteed revenue streams as dinosaur telephone companies, but Siptu won’t be found wanting when it comes to securing the sweetest possible deal for its members.
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But if you detect something funny about this deal, you’d be right.

The state is selling 60% of the business, but not a single cent is being returned to the taxpayers who lumped €222m into the airline to prevent it going bust in 1993. Bottom line? State employees get their pensions sorted and walk off with a free shareholding in the new company, while the taxpayer gets screwed. Maybe that’s what they mean by cultural heritage.

P.

Solair

They're really not comparable at all other than that they're both semi-state / former semi-state companies.

Aer Lingus has been forced to get realistic about its operations and revenue streams. It's had to compete with Ryanair and it's managed to keep its head above water by adapting to its circumstances. Eircom inherited a comfortable monopoly position and has actual control over infrastructure and access to infrastructure. It would be more like if Aer Lingus and Aer Rianta were a single company and were to be privatised together as "AerIreland PLC" and if any new entrants to the market had to charter Aer Lingus aircraft to access Irish airports.

I can't see a private Aer Lingus being all that different to the currently publically owened entity that behaves exactly like a private company anyway. It's running pretty efficiently and offering pretty excellent value for money.

I have no idea how well Aer Lingus shares will perform in the future, but there really is no parallel with eircom plc.

watty

If Aer Lingus shut up shop to morrow or stopped investing it would make little different to Air Travel.

However Eircom's almost complete monopoly and below par investment over many years has seriously damaged this Country's competitiveness.

I do think the Unions and Execs at Aer Lingus are getting too good a deal and Taxpayer not benefiting. In this it is similar to Eircom privatisation.

Patrickof

Two points I've wondered,

1. Slots at Heathrow. The Gov 'owns' Aer Lingus, why can't they just take the slots out of Aer Lingus' ownership and into Gov ownership, lease them EXCLUSIVELY to Aer Lingus for ,say, €1 a year for 999 years. Therefore any new owner of Aer Lingus is assured of the usage of the slots and cannot sell them on otherwise.

2. Once Aer Lingus (or part of it) is sold on the stock market, by what authority do the proceeds get ploughed back into Aer Lingus? Surely, those funds raised belong to the state and ultimately the taxpayer.

And a question, why is there a pensions shortfall? Why is it automatically assumed that the taxpayer will pay for it?

And finally, won't any employees 'windfall' (their part of the ~15% owned by the staff) be worthless unless sold? (I suppose they could borrow against it)

Patrickof

Apologies, my post above has absolutely nothing to do with broadband.