Decision time for Aer Lingus shareholders

British Airways plc

IMPACT communications officer Niall Shanahan reflects on a week dominated by the bid by IAG to take over Aer Lingus.

Another Aer Lingus takeover bid, another media frenzy. And so the process of deliberation begins, as Aer Lingus shareholders are encouraged to consider a proposed offer from the International Airlines Group (IAG) to buy up the former national carrier.

All eyes are on the Government, guardian of the State’s 25.1% share in the airline. It’s likely to be some weeks before we get any sense of what direction the Government will take. But early signs suggest that most Dáil TDs share the concerns of many about jobs, connectivity and the wider implications for the Irish economy if the takeover is to go ahead.

In the meantime, there’ll be huge anticipation about what the other big shareholder (Ryanair) will do. There’s likely to be a level of showmanship to any announcement by them, all the more reason to keep an eager media waiting on a decision.

So that leaves a substantial information vacuum to fill in the meantime. Media commentary this week was split between those who welcome the prospect of a successful takeover and those who are more circumspect.

The news was largely dominated by the diverse group sounding caution on the takeover. These included IMPACT, chambers of commerce in Cork and Shannon, Chambers Ireland, the Irish Hotels Federation and the Irish Travel Agents Association. The Irish Independent’s editorial today (Friday) takes a strong stand against the sale of the State’s share.

Foregone conclusion?

On Monday night, Alison Comyn of UTV Ireland asked me if this was “the last roll of the dice” for Aer Lingus. A final opportunity to be absorbed (rescued?) by the benign embrace of IAG. I thought it was a slightly strange question at first, and one that seemed to suppose there was a real urgency to sell the airline.

To Alison’s credit, it was the first time that day I’d been asked a question that forced me to think about whether Aer Lingus needed to be sold at all. Reflecting on my answer, I recalled the various hurdles the airline has overcome, including the aftermath of 9/11 and trading through the worst recession in Irish history.

In an excellent piece in the Irish Times on Wednesday (The Bottom Line: Let’s not forget Aer Lingus’s impressive track record), Ciaran Hancock explored this much further, and highlighted the fact that the airline had also survived a world war and global oil crisis.

And of course, all of this brought me back to the role played by Aer Lingus staff in helping the company through the worst of times.

Conflict

The complexity of industrial relations at Aer Lingus is widely commented on, and often characterised (unfairly in my opinion) as one that is locked in a state of perpetual conflict. IMPACT and other unions representing Aer Lingus workers have had to work through some extremely difficult issues. But the process of engagement has always helped the airline continue to grow and trade profitably long after everyone had written off its chances.

In eight years of working with our members at Aer Lingus, there has only been one day of strike action that I’ve been witness to. That was Friday, 30th May last year. As in all strike situations, it was the action of last resort as cabin crew had exhausted every other avenue to engage with Aer Lingus management on the issue of rosters.

Management had dug its heels in, avoiding any meaningful engagement. The strike took place on one of the busiest travel days of the year, and could have been avoided altogether if management had engaged with cabin crew members earlier.

And in conversation with a colleague this week, we reflected on how difficult it was to get Aer Lingus management to talk to us in the run up to that dispute. Then we considered how much more challenging it would be if the Aer Lingus senior management team were relocated in London within the behemoth of IAG.

Remote

In a post-takeover Aer Lingus, it’s almost certain that the real decision making power would be remotely located to London, along with any functions considered ‘unnecessary duplication’ in Dublin. That means job losses.

IAG has said that IMPACT’s claims of job losses of the order of 1,000 to 1,200 are ‘wide of the mark’ but implicit in that statement is the fact that job losses are inevitable.

In the absence of a detailed plan from IAG, we can only assume the company would take the same approach as it did when Iberia merged with British Airways to form IAG. Iberia was forced to shed 4,500 jobs. Our estimate is adjusted for scale, and analysts in Dublin and London have confirmed that our figures are closer to the mark.

Those who claim there would be fewer job losses – because Aer Lingus has already gone through restructuring – are casually dismissing the jobs that were shed under those restructuring procedures.

Given the cyclical nature of the aviation industry, at the first sign of trouble in a post-takeover Aer Lingus, IAG will have the power to limit this island’s air connectivity to London and the US in order to lower its overheads.

These are two of the most important pumping arteries of the Irish economy. An economy in recovery, like ours, cannot afford to trade the future of these connections away.

We can never expect or assume that IAG would see them the same way.

IAG’s commercial interests will always come first.

Niall Shanahan, communications officer