Inside the world of business
The strange case of lost billions
FOR A MOMENT on Thursday it seemed that Ireland’s rather subdued reaction to austerity and bailing out private institutions might be about to end. The Oireachtas Joint Committee on European Union Affairs had invited in a number of heavy hitters from the world of economics. Prof Karl Whelan of UCD had suggested a whole meeting could be devoted to the issue of Anglo’s promissory notes.
As those who follow such matters know, the State is due to pay €3.1 billion to Anglo at the end of next month as part of the promissory note process whereby it will pay tens times that and more over the coming decade or more, to pay for the incompetence of Seán FitzPatrick, David Drumm and others.
The money trail is odd. Arguably, the €3.1 billion will be borrowed from Europe-IMF in the first place. From the exchequer it will go to IBRC (as Anglo is now known), then to the Irish Central Bank (which has loaned money to IBRC on the basis of the promissory notes, making it the State-owned bank’s main creditor). It will then disappear.
It was created, in the first place, by the Central Bank- European Central Bank, so it could be given to IBRC under the ECB’s emergency liquidity assistance scheme. When it is returned it will go back to where it came from – thin air.
Whelan has in recent times been strongly advocating that the State should not pay the money next month. Prof John McHale told the committee that he supported Whelan’s proposal. However, the committee was quickly disabused of any suggestion that McHale – or Whelan for that matter – was suggesting burning the Irish Central Bank or the ECB (even though they, in turn, would be burning the billions).What they have in mind is a negotiated restructuring whereby the period of time over which the money is repaid is extended, so as to relieve some of the pressure on the beleaguered Irish populace.
This is in fact the Government position and thus should come as no surprise, given McHale is the chairman of the Government’s independent Fiscal Advisory Council.
Ryanair moves quickly after collapse of Malev
RYANAIR HAS wasted no time in filling the void left by Malev’s collapse in Hungary. The airline had clearly smelled blood last month by agreeing a deal to open five routes from Budapest.
Yesterday, that shot up to 31 routes.
A similar story is unfolding in Barcelona, where the airline has been negotiating this week with El Prat airport to ramp up its services in the wake of Spanair’s demise.
In both cases, Ryanair is pushing an open door with airport operators keen to land alternative carriers.
At Budapest’s Franz Liszt airport, Malev accounted for roughly half the traffic. Its crash is akin to Aer Lingus going bust here.
With 80 aircraft grounded this winter, Ryanair had the mettle and financial wherewithal to move swiftly to replace both Spanair and Malev when they slipped off the radar.
Just this week, Ryanair raised its profit guidance to €480 million.
The collapses of Spanair and Malev highlight the success of the Ryanair business model.
Michael O’Leary has made it into a well-oiled money-making machine over the past two decades.
It has two key goals – to drive down every single cost in the business while squeezing customers for every euro possible when flying them from point A to point B.
This is easier said than done, of course, as Malev and Spanair found out to their cost this week.
NEXT WEEK
The euro zone crisis will remain in the spotlight as markets await clarity in relation to debt restructuring in Greece. The European Central Bank will meet on Thursday to discuss euro zone monetary policy.
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