The decision by the Minister for Public Enterprise, Ms O'Rourke, and Aer Lingus management, to suspend attempts to find an investor for the troubled airline until after the general election has produced another political twist in a complicated commercial saga.
The decision by the Minister for Public Enterprise, Ms O'Rourke, and Aer Lingus management, to suspend attempts to find an investor for the troubled airline until after the general election has produced another political twist in a complicated commercial saga. During the past four years, the Government has, in turn, favoured flotation of the company and a trade sale as alternatives to further State investment. But economic circumstances, political considerations and poor industrial relations at the company have all conspired to prevent these options being exercised. As things stand, the next government will have to pick up the pieces and proceed with the search for an investor, or explore the rather remote possibility of injecting further State equity into the troubled company.
Last weekend, the Tánaiste and leader of the Progressive Democrats, Ms Harney, declared that her party, in government, would release Aer Lingus from State control. Ms O'Rourke and Fianna Fáil could be expected to adopt a similar view. But the Labour Party is opposed to a fire-sale and has spoken of more State investment.
Back in December, 1999, when Aer Lingus was making profits of £40m a year, the Government decided to float the airline on the stock exchange, in the same way that Telecom (Eircom) had been sold. The Minister for Public Enterprise spoke of raising £600m from the flotation for investment in new aircraft and the development of the company. The poor performance of Eircom shares on the stock exchange, however, caused the Government to hesitate. Worsening industrial relations added to the difficulties and the Government decided - following terrorist attacks on New York last September - to opt for a trade sale. Now, however, with a general election looming and agreement on a new redundancy/restructuring package pending, the process has been put on hold.
There is tacit acceptance in Government circles that the days of Aer Lingus as a national airline are numbered. But the circumstances are very different from 1999, when a profitable company envisaged flotation and a strategic alliance as ways of expanding its business. Now, Aer Lingus proposes to dispose of seven of its 40 aircraft; cut its routes and compete in the low-cost market. The Government must be held at least partly responsible for the current difficulties.