Inside the world of business
Mueller and Millar disagree on best airline strategies
AER LINGUS chief executive Christoph Mueller might think the low-cost airline model is “broken” but figures produced by Ryanair yesterday would indicate that, with the right business model, it is very much alive and kicking.
Ryanair expects to post a net profit of €275 million for fiscal 2010 making. By contrast, Aer Lingus made a €94 million loss in the first half of 2009 and a “small profit” in the second half of the year. The full year loss, which will be known in March, will be a chunky.
Globally, airlines globally racked up losses of $11 billion last year.
Ryanair’s finance chief and deputy CEO Howard Millar told The Irish Times yesterday that he disagreed with Mueller’s suggestion. “I think he has got it wrong,” he said, arguing that Aer Lingus’s “middle-of-the-road” strategy would get it run down.
Mueller’s view was based on a lack of availability of aircraft at knockdown prices and the likelihood that incentives to fly from certain airports or regions within Europe would dry up over time. The collapse of talks between Ryanair and Boeing before Christmas would seem to lend some credence to the former view but the latter is disputed by Millar.
“Airports have never been more eager to get Ryanair than now,” he said. Indeed, in his conference call with analysts, Michael O’Leary said the Spanish government had extended its deal on airport charges for the Canary Islands for another couple of years.
Ryanair expects to carry an additional 20 million passengers over the next three years bringing its total to 85 million by 2013.
By then, Ryanair will either have cut a deal with Boeing or its growth will be slowed and shareholders will share in a €1 billion cash windfall. Will Aer Lingus be in a similarly strong position?
Appointments at AIB
The fact that senior positions within AIB would have to go to external appointees was flagged last November, at the time of the row over Colm Doherty’s elevation.
The appointment of an internal candidate to the top job was seen by many as something of a snub to Minister for Finance Brian Lenihan, who had wanted an outsider brought in given the bank’s near collapse and requirement for massive State support.
At the time of Doherty’s appointment, which also saw non-executive chairman Dan O’Connor being appointed to the position of executive chairman, AIB said the appointments were “part of a wider series of management changes with the emphasis on attracting new external talent”.
The announcement to staff yesterday that external people are to be appointed to the roles of chief financial officer and chief risk officer will presumably be popular up in Government Buildings. However, market sources say the appointment of an external person to the role of finance officer would be watched closely, given the role’s key function in relation to Nama, recapitalisation and investor relations.
There will be no opportunity for succession issues or any delay while a new person settles in, the sources said. An internal promotion for someone who would work closely with the external appointee would be one way of reassuring investors.
Number’s up for post codes
Alpha-numeric post codes are almost upon us, judging from the decision of the Department of Communications to issue an invitation to tender for the implementation of the system.
The initial set-up cost for the system, estimated at €10-€15 million, comes in at less than the €22 million in economic benefits that a PA Consulting report says post codes can bring “in the medium term”.
Not everyone is a fan, though, with Labour Party TD Liz McManus highlighting the potential cost impact on businesses as well as the boon to pesky direct marketers.
Updating the company stationery and ditching the domestic junkmail will be the least of it. Once you have post codes, you also invite postcode prejudices – both a curse and a blessing for sellers of real estate, as they spur inflated prices in post codes deemed desirable by people who care about such things and allow for buyer bargains in less fashionable areas.
However, such practices have existed in crude form in the capital for decades; post codes may simply allow for a more nuanced snobbery. In that context, Cantillon wonders whether the winning contractor will also have an arbitration role in postcode disputes – “my restaurant/beauty salon/farmer’s market is in DO4 X12 not DO5 EC8” etc. The Postcode Appeals Board has a nice ring to it.
Efficient categorisation of areas according to location also encourages the speedier identification of geographical disparities in the quality and availability of public services, a phenomenon more snappily known as postcode lotteries.
Again, the introduction of postcodes may prove to be a healthy development, as these disparities exist regardless of whether the postcodes do, but the codes may more easily allow for the embarrassment of those politicians who still have the capacity to be embarrassed about inequality in health, social services, education and . . . ah yes . . . broadband.
Minister for Communications Eamon Ryan – the closest thing the current administration has to a smart economy tsar – is adamant that the post code system, which will be compatible with GPS technology, will also have capability to “provide location code facilities for a range of applications that will develop as the smart economy evolves”. So when it comes to the rollout of high-speed broadband, patches in coverage may be more difficult to disguise.
TODAY
The Department of Finance will give an initial indication of the health of Government tax revenues in 2010 when it publishes Exchequer returns for January this afternoon.
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