Two years ago, writing in The Irish Times about the Aer Lingus report and accounts for the 21 months, ended December 1994, I criticised the omission of any data on the performance of the airline such as the traffic carried, percentage of space sold, hours and miles flown, etc.
Oireachtas Eireann and the shareholders - the Irish people - are entitled to as much information about the performance of our troubled national airline as can be published without prejudice to its commercial interests. Now it may be possible to argue that information on such items as the cost per unit of output and the revenue per unit of sale is commercially sensitive - although such data was always published from the late 1940s until March 1993.
However that may be, what certainly cannot be defended is the failure to include in the Aer Lingus annual report traffic and operations data which, like all other IATA airlines including Ryanair and CityJet, it submits annually to the International Air Traffic Association (IATA) for publication. This data, published by the IATA on July 4th last, is available to everyone in the airline industry - but is inexplicably withheld by Aer Lingus from its annual report.
It seems to me to provide material for the kind of "bench-marking" provided for in the 1993 Government decisions in "Employment Through Enterprise".
Taken in conjunction with the figures for total air and sea traffic published monthly by the CSO, the data shows that the Aer Lingus share of traffic to and from the State, which had fallen from 39 per cent to 30 per cent between 1992 and 1994, continued to decline in both 1995 and 1996 - and dropped to 29 per cent last year. Its share of air traffic to and from the State has declined from 58 per cent in 1990 to 43 per cent in 1995 and 40 per cent last year.
The decline in its share of total international traffic has not been due to increased competition from surface transport: carryings by ship dropped to under 29 per cent of the total in 1996. As for foreign airlines - they had increased their traffic share from 15 per cent to 21 per cent between 1992 and 1995, but they failed to improve upon this figure in 1996.
In 1996, as in earlier years, it was Ryanair that dominated the market. Last year it carried 22 per cent of all international passenger traffic to and from Ireland, thus continuing the progress which had brought its share of this traffic from 9 per cent in 1992 to 16 per cent in 1995.
The fact is that in a rapidly expanding market - since 1993 air traffic to and from Ireland has been growing by over 15 per cent a year - Aer Lingus has been increasing its passenger numbers by a fraction of this growth rate, less than 6 per cent a year.
However, the transatlantic component of this traffic has been increasing during this period at about twice that rate - to the point where Aer Lingus is currently operating 38 scheduled flights from the US each week. This shift in the balance of Aer Lingus business towards the transatlantic route has been evident in the increase of one-eighth in the length of the average Aer Lingus passenger journey and of almost one-fifth in the average Aer Lingus stage length since 1993.
During these three years it can be deduced from a combination of these traffic figures and the revenue figures in its accounts that Aer Lingus revenue per tonne-kilometre of traffic has fallen by one-tenth.
However, in the absence of any breakdown of revenue between the company's transatlantic and European routes it is impossible to say how much of this has reflected competitive pressures on its European routes and how much has been due to the fact that the revenue rate is much lower on its more rapidly-growing transatlantic routes.
And in the absence of any breakdown of Aer Lingus's expenditure between its air transport operations and its other activities, it is impossible to assess how well it is controlling its air transport costs.
What can, however, be said is that the proportion of seats sold, or passenger load factor, has improved consistently since 1991. Indeed during this five-year period this figure has risen by one-eighth, from 65.7 per cent in 1991 to 73.6 per cent last year.
Moreover, the utilisation of its six Boeing-400 and eight Boeing-500 aircraft has also been higher in 1995 and 1996 than at any earlier time in the decade - averaging just under 3,100 hours per annum.
The utilisation figures for the national airline's smaller aircraft - the six Fokker 50s and four BAe 146-300s, used mainly on shorter domestic and cross-channel routes, has tended to be significantly lower, at around 2,400 hours. But in the case of the Fokker 50, this figure was pushed up last year to almost 2,850 hours. And of course the four Airbus 330 transatlantic aircraft - increased to five this year - have been achieving a utilisation of over 4,000 hours a year.
In itself, of course, this is satisfactory. But it does not leave much room for improvement and, given the recent indication that the airline will need to improve its financial performance by some tens of millions of pounds over the next few years, that is worrying.
If Aer Lingus does not have much room to improve further its utilisation or its load factor, just how can it achieve economies on this scale?
Perhaps some lessons can be learned from a comparison with Ryanair. But first, some facts about that company's performance. In terms of passenger carryings, Ryanair has been catching up rapidly on Aer Lingus. If one excludes Aer Lingus's transatlantic traffic - which probably accounts for about five-sixths of the total direct passenger movement between North America and Ireland - Aer Lingus passenger traffic last year on European international routes must have been about 3.5 million. Ryanair carried 3.3 million passengers, albeit on a route network with an average stage length somewhat shorter than that of Aer Lingus's European routes.
Since 1992, Ryanair's traffic has risen by 2.35 million and non-Irish airlines have increased their traffic by 1.1 million passengers, while CityJet has also carved out a small niche for itself with 0.2 million passengers. But Aer Lingus's European international traffic in 1996 was no greater than four years earlier. During the years from 1994 to 1996, the company merely succeeded in recovering the 450,000 passengers on European routes that it had lost at the time of its crisis in 1993.
Now if Ryanair is profitable on these European routes at lower fares than Aer Lingus, then its costs must be lower. Yet its network passenger load factor last year was fractionally below that of Aer Lingus on its overall network. And even if, as may be the case, the Aer Lingus transatlantic load factor was unusually high, its European load factor cannot, therefore, have been much lower than that of Ryanair.
At the same time Ryanair's aircraft utilisation figure for its Boeing 737-200 fleet was less than two-thirds of the Aer Lingus utilisation figure for its Boeing 737-400 and 737-500 aircraft. While it is true that, with its fleet of lower-priced, second-hand aircraft, utilisation is less important for Ryanair, it can be said that in 1996 the company certainly had no advantage over Aer Lingus in this respect.
Where then lies Ryanair's cost advantage? Major differences certainly exist between the two airlines is staffing. Excluding airport handling staff, the national airline employs between four and five times as many staff as Ryanair - depending on whether one includes staff who in both cases are classified as "Other" and whose degree of involvement in air transport, as distinct from ancillary activities, is not clear.
With Aer Lingus European passenger traffic last year barely 5 per cent above that of Ryanair, the question that has to be asked is whether such a marked disproportion in staffing is justified by those aspects of Aer Lingus's activities which distinguish it from Ryanair and clearly require additional air transport staff, for example, its business class services, its transatlantic operation, and its handling of some 35,000 tons of cargo a year.
When one looks back at the Aer Lingus staffing record since 1990, it is clear that the great bulk of the reductions in its staff during this period was accounted for by the transfer of overhaul staff to a separate TEAM company and later by the sale of ancillary activities such as hotels. The actual reduction in air transport staff that took place between 1991 and 1993 was only 200, or 10 per cent. Staff increases running pro rata with traffic recovery since 1993 have brought numbers up to a figure that is in fact higher than in 1991.
Apart from higher staff numbers, Aer Lingus also seems to have higher levels of pay than Ryanair. A contributory factor here is one which tends to put all State enterprises at a disadvantage visa-vis new competitors. This is the fact that many of its staff are on incremental scales and, because of long service, must be at or near the top of their scales.
Thus, even if basic pay was no higher in Aer Lingus than in Ryanair, Aer Lingus would be at an economic disadvantage vis-a-vis its private enterprise rival.
Finally, Ryanair as a private enterprise has the advantage of having been able to raise capital for expansion by a public offering. By contrast Aer Lingus, as at present constituted, cannot have recourse to its only shareholder, because the Government is precluded by EU law from investing further in it. In these conditions the survival of Aer Lingus seems likely to depend upon its being allowed to open its shareholding to the private sector.
But before Aer Lingus can have any hope of doing this successfully, the cost factors that are currently preventing it from competing on equal terms with Ryanair on its European routes would have to be addressed. This must be done in any event for, if its loss of market share to Ryanair continues, Aer Lingus could prove unable either to survive in its present form as a State enterprise or to transform itself into a company capable of raising equity on the stock market.
For Aer Lingus to survive as a successful and prosperous company, there may now be no alternative to the introduction of private capital.
