One world for whom?
BY NEIL FORDE
The privatisation bandwagon rolls on this week with the announcement
of a possible strategic alliance for Aer Lingus with the One World
airline consortium. One World is the largest global alliance of
airlines and includes British Airways (BA), American Airlines, Cathay
Pacific, Canadian Airlines. Quantas, Iberia and FinnAir. BA, the
world's largest airline, is undoubtedly the dominant airline in the
consortium.
There are, though, two sides to every story. Last week's announcement
of a strategic alliance for Aer Lingus is such a case. We have in one
corner the successful competitive dynamic airline company eager to
grow and forge new alliances. In the other we have the company back
from the brink of financial disaster forced to sell out to foreign
opposition.
We have a strategic alliance promised for Aer Lingus which will be a
``mutually beneficial partnership'' or could it be an alliance that is
in fact a gradual take-over of Aer Lingus by BA?
We have two government policies on the Aer Lingus alliance. Public
Enterprise minister Mary O'Rourke has stated that she doesn't
envisage any foreign company taking equity in Aer Lingus. However,
Employment and Enterprise Minister Mary Harney thinks BA taking
equity in Aer Lingus would be a logical step.
So what is the real story of Aer Lingus's proposed alliance? In the
early 1990s, Aer Lingus was a heavily indebted company on the brink
of disaster. A series of managerial mistakes and failures brought the
airline to its knees. Apart from failure to control non-wage costs,
Aer Lingus had leased aircraft that sat on tarmac for over a year
costing the airline hundreds of thousands of pounds.
Even Aer Lingus's subsidiaries were in trouble, with its travel
company, Aer Lingus Holiday, running up debts of over £10 million. A
further £7.2 million had to be set aside to cover other losses. The
company's accounts had been falsified for five years, hiding the
losses. In the case of Aer Lingus itself, the Dublin government had
to put up £175 million to secure its future.
Now the bad days have been forgotten at the national airline. Last
year, they registered pre-tax profits of £52.4 million, an increase
of 14% on 1997. Passenger numbers increased by 10% to 5.8 million.
Received wisdom is that if Aer Lingus is to grow further it must
forge an alliance with other companies outside Ireland. This would
give it access to more passengers, higher sales and more profits.
At first glance this sounds like a good deal. However, there has been
little comment about the proposed strategic alliance partners. What
role, for example, will British Airways play in the future of Aer
Lingus? If they did end up holding a share of Aer Lingus, would their
industrial relations practices be implemented in Aer Lingus?
In 1997, BA had an industrial dispute with its workers. They
threatened to sack and sue cabin crew and ground staff who went on
strike. A letter sent to each worker threatened ``You could be
dismissed and you could be sued by BA for damages as a result of the
losses incurred''. They would also lose the prospect of promotion and
the option of early retirement if they went on strike.
Workers were coerced to break the strike and were told they would be
transported secretly into Heathrow and housed in hotels at the
airport. Senior management at BA formed a committee called the
``Miner's Group''. to encourage the strikers to split as the
coalminer's union had done in the 1984 strike. Their aim was to
reduce ``the hold of trade union power over cabin crew members''. The
group reported to Robert Ayling, who is now BA's chief executive
In the end of the dispute, BA lost £125 million. The cost cuts the
union wanted to fight would have saved the company only £42 million.
The recent chequered past of Both Aer Lingus and BA was glossed over
last week when the strategic alliance announcement was made. It seems
that the media, Aer Lingus and the Dublin government are only
interested in the sunny side of this story.
The reality is that there is possibly only one likely outcome from
the alliance process. Yes, Aer Lingus might end up with more
passengers and more profits, but this might also mean less workers
earning less wages, working in worse conditions with less benefits
flowing to the Irish people. Are ministers O'Rourke and Harney
prepared for that eventuality?
Cablelink - sell off or sell out
BY NEIL FORDE
It was privatisation alright, but not as we know it. The sell off of
Cablelink was a case of privatisation for consenting adults last
week. The allegations counter allegations and High Court writs flew.
At stake is control of a simple wire network that runs into 360,000
homes across small pockets of the 26 Counties but mostly concentrated
in Dublin. This network is owned by Telecom and RTE. Telecom are the
major shareholder owning 75% of the company. Cablelink has to be sold
off as part of the Telecom privatisation process.
Just last December Cablelink was valued at £160 million by BSkyB.
Cablelink's last recorded profits were just £5 million. This week
ESAT Telecom were demanding that they should be allowed buy the
company for £410 million. Another company NTL owned by Bill Gates'
Microsoft is prepared to top any bid made for the company by 15%.
Clearly something fundamentally important is up for grabs. The fact
that ESAT who last year lost £44 million and already plan to spend
£100 million on capital developments this year see something very
valuable in Cablelink.
So does Tony O'Reilly. His Independent Newspapers is part of a
consortium including TCI the largest cable company in the USA. ESAT's
beef with the Cablelink sell off was a simple one. They believe that
NTL tried to rig the bidding process asking them to bid lower prices
and then make a tender that offered to bid more than any of the
tenders. This week all the parties are in court fighting it out.
What has been overlooked is why Cablelink's network is so important.
The reason is this. In a world where households are buying more and
more communications and information based products control of one of
the methods of delivery is crucially important.
The cable into your home cannot only deliver TV but could also be a
phone connection, internet service, video on demand, video phone,
pay-per-view TV, home shopping and banking. There are a range of
profitable commercial enterprises waiting to be exploited.
The fact that companies like Microsoft and Independent Newspapers are
interested in Cablelink shows that there must be significant gains to
be made.
Surely there is a need for such a potent communications medium to
remain in public ownership. Last week we highlighted the fact the
public are not being include in the Cablelink sell off. Why not?
Something is very rotten in the Cablelink sell off. It is wrong that
the Dublin Government are standing by while the corporate dogs fight
it out. They should retain control of Cablelink. A quick £500 million
now is not enough. In the long run £500 million will seem paltry
compared to the money Cablelink could make for the Irish people.
Afterall we are going to be ones buying the videos, using the
internet and watching the television programmes. Why should we not
share the profits? Bill Gates and Tony OReilly already have enough
money.
Telecom workers threaten strike
Members of The Communications Workers Union of Ireland, meeting at
the their annual conference in Waterford this week, have threatened
to ballot their members on strike action.
The CWU want the worker directors who are currently on the board of
Telecom to be promised places on the board when it becomes a public
limited company.
MEP's expenses
Irish voices were silent in Brussels this week as the 500 other MEPs
fought it out over proposals that they should receive fixed salaries,
paying tax and that they should have to produce receipts for their
expenses.
The European Council wants MEPs to be paid an average of the rate
paid to members of national parliaments and to pay tax in the states
they represent.
The council also wants the MEPs to actually produce receipts for the
expenses they claim. Up until now, the MEPs have been claiming the
top rate of expenses and pocketing the money they didn't actually
spend.
Some Irish MEPs have said they will support the proposals even though
British MEPs will lose out because of exchange rate changes as
sterling is not participating in the euro project. Sympathy for the
pampered and overpaid MEPs is not high in An Phoblacht. They already
enjoy an income that is over twice the average industrial wage.
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