The equity which the Government holds in Aer Lingus could be used to fund a new airline flying to Heathrow, writes Roger G H Downer
There can be little question that, without appropriate remedial action, the decision of Aer Lingus to discontinue the service between Shannon and Heathrow will have serious long-term implications for the west of Ireland. Already, two major business expansions have been put on hold with the potential loss of 600 jobs.
The tourism industry is severely threatened and many regionally-based companies are developing contingency plans, including relocation to countries with better global connectivity.
Businesses operating in international markets require efficient, reliable air connectivity and the responsibility for providing this infrastructure rests with the Government. The critical question is: What can or should the Government do to ensure that the west has the air transport services necessary to ensure global competitiveness?
The most obvious possibility is for Aer Lingus to reverse its decision. However, such an outcome is neither simple nor necessarily desirable. The management and board of any publicly listed company have a responsibility to protect and enhance the investment of shareholders.
The management of Aer Lingus has concluded that the long-term interests of the company are best served by the withdrawal of the Heathrow service from Shannon and has presented this recommendation to the board. It is entirely appropriate for management to make such a recommendation but the board has a responsibility to shareholders to ensure that major strategic decisions are sound and must not accept blindly every management recommendation.
Many of the recent corporate scandals and law suits in north America resulted from poor corporate governance and the failure of boards to exercise appropriate diligence in challenging management decisions. Furthermore, it is entirely appropriate for shareholders to request an egm if they are not satisfied with a proposed corporate strategy.
Management must explain satisfactorily why alternative strategies, which would enable the company to enter the Belfast market and retain a service to Shannon, have been rejected. Such strategies would, in the short term, involve the redistribution of available landing slots between Belfast, Cork, Dublin and Shannon but might produce a more favourable long-term outcome when additional slots, including those that are currently leased out, become available.
Questions should be asked also about the ability of Aer Lingus to compete with the excellent service provided by British Midland between Belfast and Heathrow and to justify the increased revenue that they expect to obtain over that currently earned with the same number of flights on the profitable Shannon to Heathrow route, especially given the potential windfall available with the more favourable terms offered by the Shannon Airport Authority
The board should also consider the long-term implications of loss of goodwill among the 350,000 Shannon-based passengers, both individual and corporate
The airline's abandonment of Shannon-based clients has caused strong alienation in the west, boycotts have been threatened and negative impressions of Aer Lingus are emanating from Irish groups in the US.
However, if the management of Aer Lingus succeed in addressing these concerns then, as an independent international airline with no commitment to Ireland, they have the prerogative to proceed with their proposed plan and should not be made to reverse their decision. Neither the Government nor the region would be well served by forcing any airline to operate out of Shannon if management is not fully committed to building and growing the business as a major hub. An uncommitted partner will exit Shannon at the first opportunity and the current unhealthy situation will return.
If Aer Lingus is not persuaded by the soundness of the business case for the continuation of the Shannon-Heathrow connection, then the Government must find another solution. However, an increased service to other airports in the greater London area does not accommodate the advantage of Heathrow as a major hub for global travel and the suggestion that Shannon-based passengers should use Dublin would cause inconvenience and place unacceptable demands on an already overcrowded Dublin airport and its road links. The use of another international hub such as Paris or Amsterdam is unlikely to be viable because fewer point-to-point passengers would not sustain more than one daily flight and would be considered unfavourably by international corporations and clients. The only reasonable solution is to provide Shannon with direct flights to Heathrow. A strong business case can be presented to potential carriers given the profitability of the current service and the lack of competition. However, unless the Government can facilitate the acquisition of landing slots, other carriers would have to redeploy their own valuable slots and this may require some financial incentive.
In return for such consideration and favourable airport charges, the carrier(s) should be required to make a long-term commitment to remain at Shannon and to grow the business.
A possible source of funding for this cost is the equity which the Government currently holds in Aer Lingus and, because of the Government's appropriate reluctance to interfere in commercial decisions, clearly serves no benefit to the people of Ireland. One of the more disturbing aspects of the current debate is the revelation of a deep gap between the west and the rest of Ireland. At a time when we are rejoicing in the strengthening relationship between North and South, it is worrying to see a widening east-west divide.
The threat to the economic future of the west is dismissed by journalists and politicians as inconsequential and exaggerated hyperbole. Those who deride the "whingers" in the Shannon region may well be singing from a different song sheet should Aer Lingus decide to reduce or close the service from Heathrow to Belfast, Cork or Dublin in favour of more lucrative routes to destinations in Europe or, as the airline's chief executive Dermot Mannion has indicated in the light of the EU/US open skies reality, to maximise the benefit of Heathrow slots through more long haul destinations.
This is a time for the country to unite and help to ensure a strong, vibrant, sustainable economy and future for all parts of the country.
Roger Downer is president emeritus, of the University of Limerick and a member of the board of Shannon Development. He is a frequent traveller on the Aer Lingus Shannon to Heathrow route