Inside The World Of Business
Industrial action likely as airline plays same old tune
HERE WE go again with Aer Lingus. For the third time in as many years, the airline wants staff to agree to a multimillion euro restructuring plan. If they don’t, management has warned that the airline could eventually disappear off the radar.
Sound familiar? It should do. Former chief executive Willie Walsh spoke in similar terms post-9/11 and his successor Dermot Mannion went to the well twice looking for cuts of €20 million and €100 million respectively from Aer Lingus staff.
This time around, the headline figure is €97 million but the cuts are deeper, with the airline wanting to let 676 staff go.
That’s 17.3 per cent of its workforce. And the redundancy terms won’t be as attractive as the previous packages.
Industrial action seems inevitable.
Waterford Wedgwood endured a similar drip-drip effect before collapsing earlier this year. Even Sir Anthony O’Reilly’s millions and his A-list connections couldn’t save the crystal and ceramics business. Unlike Waterford Wedgwood, Aer Lingus has cash in the bank and there is demand for its services.
The global credit crunch and the domestic recession are helpful to management’s plans to tackle the cost base in a meaningful way.
The problem for Aer Lingus and its management is one of credibility, both with staff and investors.
In the past, they have promised much yet failed to deliver. Dermot Mannion never bit the bullet on restructuring, always backing down in the face of union opposition and compromising on key issues.
In parallel with that, the airline displayed a unique knack for shooting itself in the foot – remember the kerfuffle around the withdrawal of the Shannon-Heathrow service in 2007? Or the botched IPO in 2006 that allowed Ryanair to become a shareholder?
New chief executive Christoph Mueller only joined last month while chairman Colm Barrington and finance director Seán Coyle are in place for a little over one year.
Maybe they will deliver the radical restructuring that they say is necessary for Aer Lingus to survive as an independent. Then again, maybe not. Ciarán Hancock
And then there were four
THE APPOINTMENT of Roger McGreal as a non-executive director brings to four the number of Investment Bank of Ireland (IBI) alumni appointed to key roles at Irish Nationwide Building Society. McGreal’s appointment follows the resignation of Terry Cooney in June.
While a change of board and management at the society is welcome and overdue, the decision by chairman Danny Kitchen (who was a former director of IBI Corporate Finance) to return to the well of his alma matter to such an extent raises its own issues. His two other ex-IBI appointees are chief executive Gerry McGinn and Valerie Mulhall, who will liaise with Nama.
The arguments for playing it safe and appointing trusted former associates has some merit given the job in hand – dismantling a failed building society which ranks just below Anglo Irish Bank in terms of national opprobrium. Indeed Mr Kitchen may well have had to avail of his personal relationships to actually get the individuals in question to take the jobs.
That said, it does seem a bit at odds with the national mood and in particular the belief that crony capitalism and mutual back-scratching played no small part in forging the ungodly alliance between banks and developers which was such a part of of our undoing.
But assuming Mr Kitchen and his team do what is required of them – put the INBS out of its misery as soon as possible – then the issue may soon be academic. John McManus
Good start for bank chief
THE CHANGE in tone at Dame Street is refreshing to say the least, and the obvious question is how much of it has to do with the arrival of Patrick Honohan as governor of the Central Bank.
The bank’s reputation and the morale of its staff have taken a battering over the past year. The various attempts by the outgoing governor to rewrite history, in particular the bank’s failure to raise sufficient warning about the dangers of the property bubble, only made matters worse. The bank’s central – but unacknowledged – role in failing to rein in the banks has also serious damaged it.
Prof Honohan only officially took up the reins at the start of the month but it must be assumed that the refreshingly frank and clear assessment of the economy presented by assistant director Tom O'Connell had his imprimatur. John McManus
Richard Cantillon
Ballyheigue, Co Kerry-born Richard Cantillon can lay claim to be the father of modern economics. His Essai Sur la Nature du Commerce en Général(Essay on the Nature of Commerce in General) was written in 1730 and published in England in 1755, 21 years after his death and some two decades before Adam Smith's Wealth of Nations.
He is also credited with the origin of the term “entrepreneur” and he enjoyed success as a merchant in London and a banker in Paris, before dying in a house fire allegedly set by a disgruntled employee.
He is a suitable namesake for a new column in which Irish Timesbusiness journalists will endeavour to offer timely analysis and comment on the business and economic issues of the day. This column will appear on Tuesdays, Thursday and Saturdays.
Today
The inflation numbers (consumer price index) for September will be released this morning. Last month saw inflation turn positive after almost a year of deflation. CC is due to publish its interim figures, and presumably update on the takeover of Tennents.
It is vital that the Central Bank reasserts its authority as a dispassionate and credible commentator on Irish economic affairs. Its lunch, in that regard, is currently being eaten by both the ESRI and, more dangerously, the plethora of economists working in the various banks and stockbrokers around town.
Tuesday was a good start, but there is a long road ahead. John McManus
