The reaction to the dropping of the Shannon-Heathrow provides an opportunity for many groups to show the limits of their frame of reference. Government, Unions, pilots, management and others are all lining up to be ‘surprised’ at the real world.
The airline are walking into the trap of ‘maximising shareholder value’ – the idea that this quarters figures must be better than last quarters figures, and that next quarters must be better still. There lies the path to madness – if you buy into the cycle of needing to continually improve dividend forecasts every 3 months, then you risking having your business driven by the media and the stock market rather than the market that matters – your customers. That road produces great business headlines for a few years, and then usually leads to a big hard fall in the end. Some companies can survive this, and a very few prosper, but I don’t think Aer Lingus is one of them. Real compaines need real customers who click on their booking websites first because they know they can get the service they want there. Aer Lingus was set up as a national airline to provide international connectivity for Ireland. Now that is has been mostly privatised, it needs to work out what it’s mission is for the future. If it is going to be just another airline, it is not big enough to survive in the long run. There is a market, albeit a limited one, for a distinctively Irish airline, serving Irish routes, but it appears that Aer Lingus does not see itself as that airline. Right now, they appear to be happy to flush 60 years of brand building down the tubes for this quarter’s figures. There are a limited number of market analysts and business journalists in the world – probably less than the number of people who need a reliable Shannon-Heathrow service.
You also have to ask how good the management team are who are closing down profitable routes in order to chase routes that might be more profitable. Shannon-Heathrow makes money, and as long as someone runs a business friendly morning and evening flight on the route, business passengers will continue to book it and fly it, all year round. Apparently, Aer Lingus has 16 flights a day from Dublin to Heathrow, but will have none from Shannon. One has to wonder why they couldn’t switch a few Dublin slots, or hold on until the slots at Heathrow which they have leased to other carriers come back to Aer Lingus. No comprehensive case has been laid out to show the numbers on these, because business’ don’t release commercially sensitive information, but I have a sneaking suspicion that the Aer Lingus analysis might not stand up to scrutiny, if it was done in detail.
The Government, who sold off all but 25.3% of the airline last year, now find themselves caught flatfooted. The reason given by Martin Cullen for retaining that shareholding was that it would be sufficient to allow the government to protect routes which were important for the rest of the economy. How did they think 25.3% would allow them to do this? Most ministers found out that the Shannon-Heathrow routes were being dropped from the press- they didn’t even get the courtesy of a ‘heads-up’ from the management team to warn them that there was going to be a media storm. 25.3% allows them to collect some dividends, but it is not enough to win a vote at a General Meeting unless, and ins’t this fun, they vote with Michael O’Leary and Ryanair. Funnily enough, they can spit fire and brimstone at other political parties during an election, and then cosy up to them in coalition afterwards, but when it comes to taking it on the chin and lining up on the same side as the not-so-great satan O’Leary, FF can’t do it. Within the little box of politics, apparently, you can bitch-fight all you want, and make up tomorrow, but if someone from outside that little box plays hardball with you, Bertie and the boys can’t forgive him. In the real world, sometimes your worst enemy is right, and sometimes you have to suck it up and smile – as the DUP and SF did.
I suspect that a big part of the business case for dropping Shannon in favour of Belfast has less to do with projected passenger numbers than with hiring new pilots on different terms and conditions. This has the pilots up in arms, especially the prospect that the new crews will no longer be on a defined benefits pension scheme but will have to pay into a fund and hope the market doesn’t collapse – as it did last week, wiping £27bn off UK pension fund values. Why are the pilots surprised at this? Every major business has moved away from defined benefit pensions to like and lump it funds. I work in the public sector, and I don’t have a defined benefit pension, so how did the Aer Lingus pilots think they were going to be special? And why did the markets fall off last week? Follow the trail back – US financial institutions go caught out on sub-prime mortgage lending, or, in plain language, lending to bad risks. Why did they do that? Could it have been to make their quarter figures look better in the short term? Did I already mention this trend? Buy, Buy Buy, Sell, Sell, Sell, Crash, Crash, Crash.
I can’t leave this topic without mentioning the climate change protesters at Heathrow. They are specifically objecting to the plans to add a new runway at Heathrow which would make more slots available there. That would not completely solve the Shannon-Heathrow problem, but it would certainly help. Heathrow is busy and landing slots there are precious. A new runway would ease that problem and make it it possible for another airline to get in to the Shannon-Heathrow route. Now, I’m not saying that the protesters are wrong – in the long run, they might be right. However, while all the politicians from the west have been lining up to moan about the loss of the Shannon-Heathrow link, I did not hear any of them suggest that BAA should get on with it and build the new runway. I don’t think this is because it would be politically incorrect to bash the nice eco-warriors, I actually think it is because the politicians field of view is not wide enough to see the linkage.
The other group who need to look at their thinking are business. Apparently, thousands of jobs will be lost in the Mid-West because Johnny Exec can no longer fly off to meet face to face with his fellow managers. To say that this is a feeble excuse in the age of the net is not exactly correct. It is true to say that most actual business communication between multinationals and their Shannon-based subsidiaries could be done over the net. However, as people know, the meeting is only a tiny part of the meeting – there is the meeting before the meeting, the chat during the coffee break and the meeting after the meeting when everyone heads off to the pub for lunch. Now, I can happily do a lot of this socialisation and politicking over the web, and some of the students I now teach are quite happy to do this, but there are a great many people, too many in fact, who do not have enough digital literacy to do this. Since, in the long run, air travel will become more expensive, we need more and more people who are both comfortable with the web and also literate enough to express themselves well on it, and to ‘read’ other people on the web. That’d be part of my job, wouldn’t it. Back to work then.
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