Monday, September 03, 2007

INSIDE POLITICS - AER BLING-US

To lose one chief executive of Aer Lingus may be regarded as a misfortune; to lose both looks like callousness.

With apologies to Oscar Wilde, that’s what the Government fears most when it comes to the Shannon Airport mess.

When Willie O’Dea spoke about Armageddon it was about the loss of the Heathrow slots to the mid-west. When the Government thinks of Armageddon, it is a scenario when Dermot Mannion and his top management team walk after being compromised by the Government at an EGM.

Bertie Ahern’s view of Mannion’s predecessor Willie Walsh was jaundiced. It was prompted by what he regarded as Walsh’s audacious cheek at proposing a management buy-out. It got so bad that if Walsh said he was going for walk, Ahern would have gone out of his way to ensure it was along the length of a plank.

Six months later – by which time Walsh had been forced out and had gone to British Airways – you could see that the Anorak was still all ripped up about it.

When Pat Rabbitte asked Ahern in the Dail was he going to give the go-ahead to privatise the airline, the Taoiseach rounded on him, and – by proxy – Willie Walsh.

“I am surprised Deputy Rabbitte is taking up a position that was opposed by every trade unionist in Aer Lingus, when management wanted to steal the assets for themselves through a management buy out, shafting staff interests. Deputy Rabbitte is now defending that position.”

And a little later, he added as an afterthought.

“I am glad those individuals (Willie Walsh and co) went on to prove their worth in the financial marketplace but at least they did not do it by taking the assets away from Aer Lingus.”

Stirring stuff from Red Bertie the Socialist comrade. We were all able to sleep easy in our beds that night. The assets were protected. They had been safely anoraked by the Taoiseach in the Dail.

And then a year later, Aer Lingus was floated. Or about 60% of it was. The employes got about 12% through another ESOT. And the State kept 25.4% which Martin Cullen, the then Transport Minister, told us was a ‘golden share’.

So we still didn’t need to worry about losing the assets. I won’t bore you with the details of the tome Cullen produced last October detailing how that golden share, that magic 25.4%, that cast-iron safeguard against the tyranny of unfettered capitalism would protect Aer Lingus’s assets. And Cullen spelled out what those assets were: they were primarily the Heathrow slots and the services from Dublin, Cork and Shannon.

So what was the difference between Willie Walsh stealing the assets and the Government floating the airline on the private market while retaining a 25.4% ‘golden share’?

None really. Except we got loads of bluster and self-serving bombast from Government when it went down the second avenue.

The golden share! What an abominable business cliché. If Cullen had read his Shakespeare he would have known enough about things that glisten not to mention golden shares.

We learned, when it was sprung on us at the start of August, that pulling the Shannon to Heathrow service was against the Government’s regional and aviation policy and was a disappointment. Though Martin Cullen never told us back in October, the Government knew back then that there was damn all it could do about it. What’s more if Aer Lingus decided to transfer all the Heathrow slots out of Ireland, Bertie the Bystander would live up to his name. He couldn’t do anything about it. Nada. Nothing. And what’s worse, there would be no Willie Walsh to blame.

The Minister for Finance as the nominated Government shareholder could only call an EGM if Aer Lingus ‘disposed of’ (ie sold) the slots rather than transfer them. What’s more, it got advice this week from the Attorney General Paul Gallagher that even if a majority of shareholders ordered management to reverse the decision on Shannon, the service could not be saved at this stage.

The current Transport Minister Noel Dempsey arrived into his Ministry just in time to see that plane take off from the runway. Asked this week about the purpose of the ‘golden share’ he replied that it can help repel a hostile takeover (as happened when RyanAir began huffing and puffing) and will also help prevent the disposal of Heathrow slots.

However, he admitted that down the line all of the Irish slots could be transferred to Dusseldorf or Taipei or Abu Dhabi. He made the fair point that this was highly unlikely, given the sheer volume of air traffic between the two islands of Ireland and Britian. But the point is that, politically, it makes a mockery of the Government’s stern prose from last autumn. It was selling us a pig in a poke back then. And what was worse it knew it.

The following is wild and groundless speculation on my part. But one of the reasons I believe the Government will back Dermot Mannion to the hilt is that otherwise Bertie Ahern will be forced to back an aviation boss he dislikes even more intensely than Willie Walsh.

3 comments:

Dan Sullivan said...

It strikes me as curious that if the government has no plans or intention of intervening whenever Aer Lingus makes a commercial decision even if it contravenes a government policy why the Minister for Finance is the shareholder instead of transferring the 25.4% to the NTMA?

Harry McGee said...

That's a fair point Dan. The Government's logic gor retaining the share doesn't add up to a hill of beans, does it?

Dan Sullivan said...

I would suggest that it amounts to less than the end product of a hill of beans post-digestion. I'm sure if Aer Lingus were to go on and become the largest airline in the world that Brian Cowen (sole state shareholder) will be outside the door with a blow up size dividend cheque like the lottery give out before you can say "hogging the glory". Yet he isn't interested in exercising his perogative on this occasion because the action is a commercial decision. Surely that can't cover everything after all if the board were to make a decision that was commercial in its intent but obviously going to lose the company money shareholders would be dead right to intervene. Fact is shareholders can intervene if they don't fancy the cut of your gib.

You know there is a thing called ethical investing whereby sharedolders seek to encourage companies not to engage in some activities. Is that illegal or even immoral in the state's view? Are the churches wrong to tell priviate companies that they will sell their shares if they go ahead with a plan that is in their view potentially unsafe? Doesn't that breach the supposed code of the stock market?

Oddly enough such a concept of shareholder responsiblity was wildly trumpeted at Ciaran Cuffe when it was found that he had in his posession (as a result of his mother's demise). Now I will admit that none of FG, Labour, the PDs and SF were refraining from casting stones but FF weren't exactly behind the door either in suggesting that Chemical Cuffe was personally responsible for every oil spick, and two headed calf on the planet.