Bus Éireann on the wrong road?

Bus Éireann’s accounts are going the long way around saying it, but taxpayers will be the backstop if the troubled State-owned public transport company needs cash to stay in business.

A brewing financial crisis there boiled over earlier this year, with fairly predictable results. Management presented rescue proposals to workers, prompting a strike in March and April, followed by a resolution thrashed out in the Labour Court.

That formed the backbone of a rescue plan that chairman Aidan Murphy and his board approved at the end of May. This involves cutting 240 jobs, to save €17 million a year, and various "non-payroll" measures that will cut a further €3 million in costs annually.

Bus Éireann’s intentions are good, but it is hard to have confidence in the plan. Recently lodged accounts for the company show that staff costs increased by €4 million last year to €134 million. It hired 55 more drivers and increased its workforce by 45 to 2,532.

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How could this happen at a loss-making company relying on financial support from its parent company to continue as a going concern?

This all happened as the crisis at the company was emerging. Bus Éireann actually hired Grant Thornton last year to aid it in tackling its financial problems. Part of the company's problem is that it faces competition from rivals with lower labour costs in key businesses such as its Expressway service.

Labour costs

Bus Éireann knew that this was a problem. In fact, it kept saying so. In the directors’ report accompanying its accounts, Murphy and his boardroom colleagues refer to the issue again. The main thrust of its rescue plan is to cut labour costs. Nevertheless, it still allowed those same costs to drift upwards last year.

That should worry taxpayers. Management allowed the crisis to deepen. A similar laxness could affect the rescue plan, leaving the company seeking more cash to stay in business. Its parent, CIÉ, has said it will provide this if needed. However, CIÉ itself cannot rule out that it will need Government support.

While the Government won’t guarantee this and says that the EU may have to approve it, this still leaves taxpayers, who paid €41 million to Bus Éireann last year as a public service payment, facing the prospect of having to pony up yet more funds should the company need money to stay on the road.