CANTILLON:Inside the world of business...
Glimmers of hope breaking through Aer Lingus gloom
NO SOONER had Aer Lingus confirmed its semi-retreat from Gatwick than its rival, Easyjet, was out of the traps with an expansion. Aer Lingus takes away two aircraft at the London base and Easyjet immediately adds three, bringing its total there to 43.
Aer Lingus’s new Gatwick fleet, if it can be called that, will be a compact assembly of three aircraft. The disparity clearly illustrates the competitive issues faced in the world of international aviation.
These have been undeniably rough times for Aer Lingus, with the gloom showing few signs of receding. Still, the company did signal yesterday that it was on track to register a “small operating profit” for the second half of last year, before exceptional items. It is a positive glimmer which shouldn’t be disregarded. That small profit could easily have been a loss.
Equally though, large stumbling blocks lie between the carrier and the stability it craves. It isn’t helpful, for example, that the airline’s people – the thing that has traditionally set it apart from competitors – are bound to be distracted by the impact of a very substantial restructuring plan. This initiative is designed to save Aer Lingus €97 million per year and could see the departure of close to 700 people. If it works, the airline feels it will be in a good position to meet the challenges it faces; the opposite is, of course, also true.
In the meantime, the strategy being adopted by still newish Aer Lingus chief executive Christoph Mueller is slowly establishing itself. Stop messing around with expensive bases outside the country and focus on the home market seems to form the backbone of his vision, while plans to align with Aer Arann display a desire to have a wider British presence without actually expanding there.
This year will either make or break Mueller and his employer, with the partially positive staff welcome to the restructuring boding well. Yesterday’s uplifting market response to the Gatwick announcement will also provide encouragement. All the airline needs now, along with the rest of the State, is the smallest of economic fillips to help it on its way.
Forecast is for surprises
ONE WOULD be forgiven for thinking that a surprise is something that, well, takes one by surprise, but it turns out that it’s a far more complex concept than that.
When unveiling his investment forecasts for 2010, Bloxham Stockbroker’s managing director Pramit Ghose covered his bases by describing “surprises” rather than predictions. Apparently a surprise, as defined by US investment strategist Bryon Wien, is an event that “consensus opinion thinks has only a one-in-three chance of happening, but which the author thinks has at least a 50 per cent probability of occuring”.
Perhaps economists, whose crystal-ball-gazing abilities have come under fire of late, should take a leaf out of Ghose’s book and couch their predictions in such convoluted terms that no one would be quite sure if they hit the mark or not.
No Christmas cheer for youth
DECEMBER SHOULD have been a good month for young people, with batches of Christmas jobs to take the edge off the otherwise miserable economic position that recession has brought.
Instead, the month saw a part-reversal of the recent drops in claimant numbers among the under-25s, with an additional 1,036 people in that group on the Live Register. This was 10 per cent of the total rise of 10,000 in the number of claimants on an unadjusted basis, according to figures released yesterday.
Youth Work Ireland, the national body that represents a network of local youth work organisations, noted the irony of a rise in youth claimants in a month in which the Government had introduced a range of measures designed to “incentivise” young people to take up training and education places.
In order “to avoid them becoming welfare dependent from a young age”, the Government used the budget to cut the rate of Jobseeker’s Allowance to €100 a week for 20- to 21-year-olds and to €150 a week for 22- to 24-year-olds who are not in training or education schemes.
Because the cuts applied to new claimants only, rather than incentivising people to escape the clutches of long-term unemployment, it appeared to provide a disincentive to young people to sign off: if they did so and subsequently lost their job, they would lose their entitlement to the full rate of €196 a week.
The Government has since clarified this and said that if someone gets a job but ends back up on Jobseeker’s Allowance within 12 months, they will still be entitled to the old full rate. However, according to Youth Work Ireland, young school-leavers fear signing off to take up short-term courses if it means compromising their future benefits.
The latest rise in youth unemployment illustrates the flawed and futile nature of the payment cuts strategy, according to the organisation’s Michael McLoughlin.
Citing figures from the TUI that indicate 30,000 people were turned down for Post-Leaving Certificate (PLC) courses in the current academic year (due to a Government cap in places), McLoughlin had one word to describe the education and training places that under-25s are supposed to take up: “illusory”.
Next Week
Bank of Ireland holds an extraordinary general meeting of shareholders on Tuesday to seek approval for its plans to work with the National Asset Management Agency (Nama)
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