GROUND FLOOR: It's quite some time since I had to get the red-eye to Heathrow and I was surprised to arrive at Dublin airport and see it so crammed at 5.30 a.m., writes Sheila O'Flanagan.
Then I remembered that it was a bank holiday weekend and that people were queuing up for the Great Escape. The plane to London had a fair few holiday-makers, which balanced out the suits. I'm never quite sure what I am on these flights - part business since I was travelling to a book do, but thankfully not to the kind of meeting where I had to sit and listen to the latest Market-Led Business Plan. Been there, done that, you know how it is. I felt a bit sorry for the bloke beside me who spent the flight working on a PowerPoint presentation about his company's IT strategy.
I wanted to tell him that he could lose all the jargon and make it a much more interesting talk but I kept my nose out of other people's business for once and immersed myself in the crossword instead.
There were quite a number of people in business class, which really surprised me because I can't fathom the rationale for it on a 55-minute flight. Aer Lingus has talked about doing away with it since the higher ticket price doesn't, apparently, cover the cost of the extra cabin crew needed to tend the needs of the overly-stressed. Quite honestly if I was a business I wouldn't dream of sending anyone to London at a premium rate: it's a wasteful use of company funds. Back in economy they've now stopped giving us biscuits with the cup of coffee they serve thus saving another few bob for the Aer Lingus dotcom marketing budget. Eventually they'll bite the bullet and get rid of the trolley service altogether thus increasing the savings still more.
Of course the airline is potentially being prepped for a sale, though there have been conflicting news stories about it over the past few weeks. I can understand why, when it has dragged itself out of its almost bottomless pit, the notion of selling it off seems tempting. The question is, however, whether or not the government would be selling an asset at the bottom of the market. Or whether there's still so much more to go on the downside for the air travel industry that it feels it should jump at any possible chance of offloading it.
According to Darryl Jenkins, the director of the Aviation Institute at George Washington University, the situation in the industry has reached "biblical proportions" of doom and gloom. He's astonished that we haven't seen a couple of major carriers being liquidated before now since the prediction of losses for the quarter is more than $3 billion (€2.73 billion). The events of September 11th coupled with the war in Iraq and now the outbreak of the SARS virus have all combined to deal the sectors blows that even the most robust industries would find it difficult to withstand. And the industry wasn't robust in the first place - before September 11th there were already major concerns about aviation. Out of the top 11 US carriers, 10 were already totalling losses of close to $8 billion. By 2002 those losses were $10 billion.
The problem for the airlines is confidence. Not in flying itself (though clearly that was badly dented anyway) but business confidence. Back in the 1990s it was thrusting new-economy businesses that were filling those premium seats. Now they're almost impossible to fill, certainly at the kind of prices the airlines need. Both the war and the virus have choked off nascent demand and airlines have seen a fall-off in ticket sales. (Except niche low-cost carriers who happily continue to ply their trade, move the masses and keep shareholders happy.) The big carriers are in a bind. There is a market for an added-value service but is it sustainable in the current economic climate? Should airlines try to ride out the storm while repositioning themselves to be leaner and more efficient for the future? American Airlines is a case in point. It has been teetering on the brink of bankruptcy for months and a plan that was part of a scheme to pare $1.8 billion from labour costs was passed by the workers last week. However, the unions nearly went berserk when they discovered management planned to award bonuses to company executives that were the equivalent of twice their basic salaries. That's not implementing a company rescue plan. Did management really sit around in the oak-panelled office and think "great, we've got the cabin staff down by a few dollars, let's reward ourselves for that"? American Airlines came out with an announcement rescinding the bonuses the next day. But how much damage has already been done? Chairman and chief executive Donald J Carty said that "those executives who have made the personal commitment to remain with American during this financial crisis, myself included, are not here solely for monetary reasons". Thing is, Donald, most of your employees are. They need the pay-check to deal with bills.
Willie Walsh continues to try and turn Aer Lingus into a profitable and competitive carrier. The more he succeeds, the more likely it is that the airline will be sold. Really the question isn't whether or not the deal is on the table, it's the price. Ryanair might have set the price for Buzz but can the Government afford the kind of redundancies that go with that type of purchaser? Selling Aer Lingus now, when they've hung on for so long, is like getting rid of the IT shares you bought just as the company has actually found a few customers. But then you have to decide on the long-term future of the sector anyway. And that's still a very shaky call.
www.sheilaoflanagan.net
