In his first interview with the Irish media since his appointment at the national airline, Dermot Mannion wants to destroy a few myths, writes Emmet Oliver
After almost nine months of upheaval, controversy, political in-fighting and a fair amount of Government dithering, Aer Lingus may just start to resemble a normal company come early August.
It will at least have a chief executive and chairman in place and the Government is now prepared to allow the airline to access fresh funding for its long-haul fleet.
While working busily in Dubai for the past few months, Dermot Mannion realises that Aer Lingus has been through some serious turbulence.
The company was plunged into a full-scale crisis last November when the airline's three most senior executives - Willie Walsh, Brian Dunne and Séamus Kearney - signalled their intention to step down.
While the original announcement seemed to suggest a clean break, the three executives did not end up leaving until the end of January. Unfortunately for Aer Lingus, the three men, who are widely credited with saving the airline from bankruptcy in the wake of 9/11, were not replaced for some time.
Whether it was fair or not, outside observers began to use the word "vacuum". There was some justification for this in the sense that Mannion's appointment was not announced until April 22nd.
John Sharman, the airline's chairman, firmly denied he took the "scenic route" in picking a successor to Walsh and emphasised that getting the appointment right was more important than getting it done quickly.
The choice of Mannion appears to have justified this approach. The former Emirates man has several obvious advantages: he is Irish, he is familiar with raising airline finance and he is well used to handling major aircraft manufacturers Boeing and Airbus.
However, even with his appointment, the controversy did not end. Some observers suggested that Mannion only climbed on board because he was given guarantees by Government over the future direction of the company.
So one of the first items on the agenda for Mannion when he decided to do his first interview with the Irish media was to destroy a few myths.
"One thing I noticed in a lot of the coverage was that I insisted on certain things from the Government in relation to the direction of the airline. There is no truth in that whatsoever. I did not seek a guarantee that the airline would be privatised. I also did not seek access to the books before I made my decision.
"I have made a leap of faith - a significant leap of faith - and I hope others will make a similar leap," he says.
As if to re-emphasise the point, he adds: "I am leaving the third-largest airline in the world, in terms of profitability, and moving to the 45th-largest airline in the world. That is the extent of the leap".
Mannion realises that, in the period between Walsh's departure and his start date, the airline's financial performance may have slipped. While airlines around the world rarely stray into the black in the first few months of the year, the main problem for Aer Lingus is the lack of progress on cost savings and work practice changes.
Mannion admits this is a problem. "The airline is behind target in relation to its cost-savings programme. It is clear the airline is behind target. The airline is on record as saying that costs are higher in the the first five months of the year. So we are behind target, although the fuel price is not helping in that. So we have to do something to turn that around," he says.
He denies that the airline has been going through a damaging interregnum period since the three managers left earlier this year.
"On the contrary, I have to pay tribute to the job done by John Sharman. He has stepped in and done a great job in keeping morale up. He has been impressively loyal to the airline and the top management team has been very loyal to him."
However, Mannion admits that he will need to roll his sleeves up once he plants his feet under the desk come August 8th.
"We need a 'fly anywhere' cabin crew agreement. The lack of agreement at present is a major constraint on us operating on any new long-haul routes," he comments.
The work practice changes are needed because Mannion firmly believes that the airline's future depends on a new long-haul strategy. He is very blunt about this.
"To be honest, with Ryanair and several other airlines operating out of Ireland, growth on the short-haul side is going to be very, very limited. We simply have to look at long haul. That is the business I know. That is where the growth is. We simply have to create a significant long-haul business," he says.
As for institutional investors, he says there is only one way they are going to invest.
"We simply must have a long-haul future. The investors need to see potential, otherwise they will simply not be interested. So we have to show we have a viable growth strategy based on long haul.
"I believe the traffic numbers are there. Take a look at Scotland, which is about the same size as Ireland. Emirates now has a long-haul service to Glasgow. Yes, it is very ambitious but it has high load factors and the route is profitable. So that gives us some idea in Ireland what's possible.
"But we probably need to find some way to feed traffic into another network. For example, I think the opportunities to Australia are very substantial. Now we could go it alone, but we probably need links with another airline.
"If you look at any of the successful airlines around the world at present, it's all about feeding traffic into larger networks. So we need to look at that.
"I will be putting a lot of effort into that as chief executive, linking with other carriers."
He says that there are several ways to achieve this. "We could do it through a link with the One World alliance, of which we are members.
"In order to go eastwards, we are probably going to need some kind of intermediate airport, something like Singapore or Dubai, where we can feed in traffic and operate from there on a code-share basis," he explains.
He says that Dublin has many advantages for price-conscious executives looking for another way into the UK or the US. "Heathrow, for example, is a very difficult airport to get through. So it is a twin-track approach.
Short haul is going in the right direction. It is right to be low cost, I have no quibble with that. But we need to get going on long haul and there will be no downsizing of that product while I am chief executive."
There is certainly room to grow long haul. At present, less than 20 per cent of the airline's scheduled passengers are long-haul customers, although it does make up almost 40 per cent of passenger revenues.
The airline has been aggressively slashing its average long-haul fares, which are down from €327.77 in 2001 to €252.67 last year, a fall of almost 23 per cent. Average short-haul fares have fallen by almost the same amount.
How it can stimulate the long-haul market any further is hard to say. Making the long-haul cabin more luxurious may not necessarily be the answer.
Mannion says that the luxurious offerings of some long-haul operations may be overblown. Ironically, he is not necessarily too excited by the flat-bed sleeper seats offered by British Airways and Virgin, for instance.
"Emirates doesn't actually have flat beds and it's done pretty well without them. My own personal view is that in-flight entertainment systems, for example, have become too complicated," he comments.
At the same time, he is not going to let the Aer Lingus long-haul offering decline.
"Once we make a firm decision on our existing fleet, we will refurbish our long-haul aircraft. We have got to bring them up to the standard of our competitors and there is a three to four-year period in the middle when you are waiting on the new aircraft to come into commission," he says.
He says capacity constraints at Dublin Airport also represent a major obstacle for the airline. "It is very congested on the land side. I am not as familiar with the air side, but I suspect it is somethingsimilar. Either way, it appears these problems will be with us for three to four years".
As for the sale of the company Mannion says it will be next year.
"It could happen very quickly. I anticipate it will be 2006, most likely the second half of 2006. That is not an Aer Lingus position, that is what I anticipate the Government wants to do. It is a tight time schedule to be honest, but it probably needs that kind of impetus. It concentrates the mind and we are prepared to deliver on that timescale."
As for the key question of how the airline will be sold, Mannion says the Government should stay out of a corner and not rule out anything.
"I think all of the parties will have to be pragmatic. The timing of this is all important. If the stock markets are doing well, are very buoyant, flotation will be the right thing to do. But if the markets are not doing well, then a private placement may be the route.
"I think the Government should keep its options open right down to the 11th hour."
He is clear what his role will be, whatever route the Government decides.
"My job is to create a value proposition of interest to the investment community but also one that can be sold to staff, who have been through a lot in recent years.
"They also need to buy into this. I think we could do a better job of selling the airline to the staff. So it's all about creating external and internal value. What we need is a long-term plan for the airline, a plan that everyone signs up for," he explains.
Mannion says he is very familiar with the Airbus 330-200 and Airbus 330-300 aircraft that Aer Lingus uses on transatlantic routes but says they have a limited future.
"They are good aircraft but are getting towards the end of their range. I have an open mind about replacing them. Both manufacturers are offering good products at the moment. The first thing we need to do is work out our route network. That is key."
