Silence of backbench TDs shows Aer Lingus sale is no flight of fancy

The Government believes it can get unions onside, writes Chief Political Correspondent Mark Brennock

The Government believes it can get unions onside, writes Chief Political Correspondent Mark Brennock

Governments tampering with national aviation policy usually take their political life in their hands. During the 1992-1994 Fianna Fáil/Labour coalition, four north Dublin Labour TDs refused to support the government as it pushed through redundancies at Aer Lingus's loss-making subsidiary TEAM Aer Lingus. They lost their party whip.

Similarly, moves in 1992 to allow those flying from the US to Dublin to do so without landing at Shannon led two Fianna Fáil backbenchers in Clare, Síle de Valera and Tony Killeen, to resign the party whip in protest.

At all other times, decisions affecting Dublin or Shannon airports or the national carrier have been seen as threatening a handful of government seats, either in north Dublin or in Clare and Limerick, depending on the issue. They have also been liable to rouse strong opposition from trade unions, providing an additional issue for social partnership talks or being thrown into discussions on a range of seemingly unrelated issues.

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Yet the Government is now moving steadily towards an autumn sale of a majority of Aer Lingus, and Ministers seem confident they will get away with it without either electoral loss or lasting damage to Government-union relations. Yesterday the Cabinet decided to sell around 60 per cent, retaining a 25.1 per cent holding which may well be diluted further as the new majority owners seek to raise more money from private investors. Airline staff currently own some 14.9 per cent.

Government backbenchers remain relatively quiet on the issue. Siptu has not come out against a sale in all circumstances but is threatening industrial action in the event of unilateral decisions affecting their terms and conditions of employment, pensions or job security. Impact has not rejected the idea of a sale but wants five conditions to be met. Yesterday's Government announcement promised negotiations with the unions on the key issues of concern to staff.

However, the sale has not happened yet. The best estimate from Government is that it will not happen before summer but may take place in the autumn.

Former minister for public enterprise Mary O'Rourke is among those who have questioned whether this timetable will be adhered to.

"I have a gut feeling it won't go ahead at the end of next year because we'll be within three to four months of a general election," she said last September. "The end of 2006 means one thing - that the general election is directly around the corner - so my guess is that it won't happen." Many with this view have questioned the Taoiseach's personal commitment to selling off the State airline.

His northside roots and his life of doing union-placating deals would all seem to militate against his pushing a sale that may only antagonise both his fellow northsiders and the unions. But Mr Ahern went out of his way a few weeks ago to announce his personal backing for a sale. "We've gone on with the Aer Lingus decision; the decision is made now, it's not going to be reversed," he said in an interview last month.

The Government is more confident of winning the acquiescence of those northsiders and unions this time, for the key reason that the airline's staff has several reasons to believe that privatisation may have positive benefits for them.

One major staff concern - the shortfall of some €340 million in the company pension fund - has been accepted as a central issue, and the Government is shaping up to ensure that when the airline is sold, the gap will be substantially plugged using some of the sale proceeds.

Secondly, the workers also have the incentive provided by a look at what happened after the Eircom flotation. While small-scale investors attracted by the hype around the idea of becoming citizen shareholders got burned, the staff did and continue to do very nicely through their holding. Aer Lingus staff hold 14.9 per cent of their company. Its value is currently limited by the fact that these shares cannot be sold to private investors. But once the staff share becomes tradeable when the company is put on the market, it becomes very valuable indeed.

The third point making it easier for the Government is that it and the airline have successfully sold the argument that privatisation is key to the company's future success. The company is successful and profitable. However, the argument for privatisation is that the company needs major investment of up to €2 billion to allow it to expand hugely, replace old aircraft and buy more for newer routes. The argument further insists that this investment can only come from the private sector.

The regularly repeated view that the EU would prevent the State from making such investment is incorrect: EU rules only prevent State investment in loss-making State enterprises and would not bar it from investing substantially in Aer Lingus.

The choice is political, not economic. On the one hand is the argument that owning the national airline gives the State an extra tool to be used in pursuit of Ireland's economic and social interests. On the other is the argument that the State should not be involved in such a complex and difficult business as aviation, and that there are better uses for State money than aircraft purchase. (The €2 billion the airline says it needs - over a four- to five-year period - to buy aircraft is equivalent to the total capital spend on all transport projects this year.) The Government has clearly come down on the latter side of the argument.

Estimates have suggested the sale may raise some €800 million for the State, €200 million of which could be put towards plugging the €340 million pension fund shortfall.

So with staff relatively content, Government backbenchers on the northside remain relatively content too. Fianna Fáilers on the Oireachtas Transport Committee did agree to hold hearings on the possible sale - representatives of company management and the trade unions Siptu and Impact will give evidence at the committee tomorrow. But there is no serious backbench grandstanding on the issue, which points to one simple fact: none believe a Government decision to sell a majority of the airline will lose them many votes.