That’s a very interesting point Libero.

So fair play to the contributors here for being so astute.

Another aspect of the controversy seems to have passed by pretty much every commentator. And again it’s an undergraduate-level aspect: the role of subsidy in incentivising private companies to reach publicly desirable outcomes. Classicly, the subsidy approach (being preferred to state ownership) facilitates the benefits of private sector involvement and avoids the downsides of public ownership, all while achieving the public good. It also puts a clear price on the desired outcome. Scandinavians do it with regards to public transport and it appears to have gone down reasonably well. So why not put a clear price on the value of SNN-LHR and offer that subsidy to whichever airline will operate the route, adjusting it for frequency, quality of service, etc.?
Of course there’s a danger of Aer Lingus playing chicken with the government in search of a higher subsidy, and the usual local interests playing this up instead of holding the line…

Very interesting argument and one that could open up a whole can of worms.

Two points worth making:
A shareholder, even a majority shareholder, cannot force a company to make a decision that benefits them at the expense of other shareholders. If I was in the fortunate position of owning 51% of Paddy Power I still could not make it submit to a policy of refunding all of my losing bets. Arguably if the Government and Ryanair acted in concert to force the reversion of the Shannon decision, they could leave themselves and AL open to potential law suits from other shareholders for the losses they would make (’cos the share price would almost certainly tank if this happened).

it seems that the tax payer, when the ECB has to act as lender of last resort, is ultimately the one who pays
The ECB is lending this money and charging interest. This is not a bail out in the way that the funds for IKB were a bail out. Also, although ultimately the ECB is funded by national central banks and hence national governments and hence taxpayers, effectively they are loaning out funds from their reserves and deposits - like any other bank. If you get your mortgage from AIB, it would be a bit of a stretch to thInk that it was AIB shareholders who paid for your house.

You are right that the reference to ‘commercial decision’ did indicate that it was one made as part of the general operations of a private company, and had nothing to do with the board of management or the shareholders. The problem is that it contradicts what the government said previous to the election when the Open Sky treaty came about and also contradicts a long developing regional development policy, which a 25% shareholder in the company (though its various agencies) has been striving to maintain.

You’re right too. The Government knew about this in advance, and it couldn’t interfere directly with Aer Lingus. But AL’s management also knew what the Government had said about the Shannon slots, so it was aware of the repercussions of the decision. The thing is, its not only a commercial decision, its also a political one, or at least it’s a decision which is designed to demonstrate that AL is now a company that has no obligation to its historical role as a cornerstone of Irelands transport infrastructure.

It was suggested on the radio this morning that the Government might as well sell off its share for all the good it does. Maybe it should except that it gets revenue from the profits of the company, and a sell off would simply hand the company over to Ryanair. But why not, if AL are simply morphing into another version of Ryanair anyway, why not let the trade union busting airline take over the whole. Then with the new third runway at Heathrow we’ll have Ryanair flights buzzing disgruntled business people every which way as sit cramped and nostalgic for a day when flight attendants supplied hot towels in the comfortable surrounding of first class.

Now doubt Globalization has worked well for Ireland, pay and conditions and opportunity from Foreign Direct Investment have been good. That potential Belfast employees are happy with the situation can be judged by the fact that they’re sending in their CVs already – who could blame them. But that investment is dependant mainly on the low rate of corporation tax, relatively low wages and incentives from IDA, one of which is transportation links. A multinational company is not acting morally by creating jobs – its only looking at its cost base.

Good point Sean. O’Leary’s memory is very selective.

Keeping the Heathrow slots in State control is something that should have been nailed down at the time. You can’t expect Aer Lingus not to use them now in whatever way they think will be most profitable. Once they became private those slots were no longer State privilege, just an outcome of the negotiations. Aer Lingus can do with them what they like.

“The reason for using Belfast is to reduce costs and not increase jobs.”

In the short term. Overtime Belfast will benefit. Business leaders and public officials there were quite happy with the move and didn’t feel ’screwed over’.

I thought the emphasis on the Shannon decision being a ‘commercial’ one was to distinguish it from it being a ‘board decision’ - one involving governement representatives and hence strongly implying the government knew in advance of the decision.

What moral obligation is there – unless its the obligation to go somewhere else in order to screw people over both there and here?
None of the many of the foreign firms that have invested in Ireland did so to ‘create jobs’, they did it because the costs, the taxes, the workforce, the opportunities here suited them better than a) in their home countries and b) other countries. That does not mean their Irish employess have been screwed. Far from it - we were and are very glad of the work and investment. I would imagine AL’s potential Belfast employees will feel have similar feelings rather than carp about the fact that they don’t get a 20 minute tea break at 11 o’clock like their southern colleagues (or whatever).

I’ll admit, taken in isolation, Aer Lingus since privatization is now the same as any private company and has a responsibility to increase profits for its shareholders. Since the EU directive on competition in the airline industry the Government could not exclusively support Aer Lingus financially.

But the situation is very different for Aer Lingus compared to Ryanair, for example. Aer Lingus, because they were a state airline had dibs on those coveted slots at Heathrow. Something Ryanair wants, but so far hasn’t been able to get. So while the Government had to allow the company to obtain finance elsewhere – although the terms of the sell off was still very much in the Governments control, and I don’t think they kept the national interest in mind when they did so – it doesn’t follow that they can use that state privilege when it goes against the national interest. Or rather they can try, but they shouldn’t be allowed to.

The problem here is not necessarily with the management’s decision – they are trying to cut costs and increase profits – but on the Government’s inaction in trying to keep a national transportation strategy in place. As a leading shareholder you would imagine they would use their remaining weight to try and prevent the main airline company from acting in a way that undermines the commercial wellbeing of a region of the country, and I’m well aware that the extent of how it is being undermined is open to question. It remains though that this action does undermine business.

if Aer Lingus does indeed become more profitable in Belfast they will be able to create more jobs than they would have in Shannon. Do they not then have a moral obligation to go there?

The reason for using Belfast is to reduce costs and not increase jobs. Aer Lingus is not understaffed and anyway those jobs would go to employees in Belfast. Indeed the terms and conditions would be far inferior to those enjoyed by employees in Shannon. What moral obligation is there – unless its the obligation to go somewhere else in order to screw people over both there and here?

Hugh Green of Most Sincerely Folks I think made the point that this scuppers any moves by the Government to work towards a United Ireland, because unity would mean companies couldn’t take advantage of the difference in wage costs and pensions right in the two jurisdictions.

Since Aer Lingus was privatised, only they have the right to make that decision.

But apart from the shortfalls of ‘commercial decisions’, lets look at it another way: if Aer Lingus does indeed become more profitable in Belfast they will be able to create more jobs than they would have in Shannon. Do they not then have a moral obligation to go there? Imagine if US firms decided not to invest in Ireland because of the effects to the domestic jobs market? Is the Shannon uproar really just back to tribalism again?