Monday, February 15, 2010

Michael O'Leary - again in the news

A major issue has arisen at Dublin Airport with Michael O'Leary once again centre stage.

It appears that 200 aircraft maintenance jobs have been lost to Prestwick Airport due to the inaction of The Minister for Enterprise Trade and Employment (Mary Coughlan). Cleverly, by highlighting that these jobs have already gone with a further 300 still up for grabs he has considerably raised the political stakes with respect to the Government's response.

The background to the dispute is as follows. For many years a large skilled base of aircraft maintenance engineers existed at Dublin Airport formerly known as Team Aer Lingus and more recently as SR Technics. However due to the pressures in the airline sector SR Technics (a Zurich based firm) announced in early 2009 that it was to cease operations in Ireland with the loss of over 1100 jobs (citing the high costs of doing business at Dublin Airport as a major factor).

The Dublin Airport Authority (DAA) which is responsible for the running of the airport is a state owned monopoly lacking any true business initiative. Michael O'Leary for years has been looking for the opportunity to open up an alternative terminal at Dublin that would have offered just the kind of competition for the DAA that was needed. But the Government - operating from no sensible commercial logic - persistently refused the idea.

Then when former head Willie Walsh acted decisively to rescue Aer Lingus from imminent collapse he was so frustrated by the then Taoiseash Bertie Ahern regarding his (i.e. Walsh's) future plans for the airline that he decided to leave. Then more recently the Government in a deep recession has imposed a nonsensical travel tax (which can only act to further reduce airline traffic at a difficult time).

Unfortunately the DAA if anything is even worse. In its previous incarnation as Aer Rianta it had a stranglehold over the decisions taken at the other major airports (Cork and Shannon) until Seamus Brennan, who in fairness was always supportive of competition, ended this practice.

However things have not improved much at Dublin Airport with the DAA acting as a typical monopoly always ready to take the easy option in making decisions. So rather than properly tackling costs and inefficiency it has simply sought to raise revenue initially through their "Customs Free" Operation, then from excessive parking fees and from rapidly increasing airport charges. Even their attempt to build a second terminal (in preference to facing competition from one financed by Ryan Air) has proven a largely botched affair with significant delays and increased costs during the construction process. And now when it has come on stream, airline traffic has dramatically fallen off due to the recession.

And of course DAA's high cost strategy is hardly likely to boost business. Rather it will seek to keep raising airport charges even higher in future years so as to recover the cost of its investment.

Since the loss of the SR Technics operation, apart from Ryan Air there have been various proposals as to how perhaps some of these skilled jobs could be saved. At present Hangar 6 (which Michael O'Leary considers ideal in terms of his proposal) is leased on to Aer Lingus for line maintenance on their aircraft with somewhat vague proposals for the creation of about 250 jobs over 5 years. However one could hardly be excited at this prospect, as Aer Lingus' heavy maintenance is already carried out abroad and given the present state of the airline market one could validly question whether Aer Lingus will even still be in existence in 5 years time!

On the other hand we had the Ryan Air proposal to create 500 jobs immediately (now 300) with the prospect of further growth in future years (through continual expansion and other airlines perhaps switching their maintenance requirements back to Dublin).

So from this perspective it seems a no-brainer. However with Michael O'Leary things are never quite that easy. For one thing he refuses to deal directly with the DAA (which is responsible for addressing any such proposal). Now this is a clearly deliberate tactic by O'Leary whose business approach would represent a total polar opposite to that of the DAA.

In fact in this regard I would support O'Leary. If he negotiated with the DAA, while pretending to be supportive, it would probably attempt to tie him up indefinitely in red tape before pleading that it cannot accept his plans in their present form. And then a weak Minister, afraid to overrule the Authority, would meekly accept its decision. So by appealing directly to the Minister, he is removing this convenient line of cover and highlighting what he sees as the central issue i.e. in a deep recession with unemployment so high, that the airport's needs would be better served by a highly competitive company like Ryan Air than a self serving monopoly such as the DAA!

But in the world of crony politics, which still infects the way decisions are taken at every level in Ireland, O'Leary knows quite rightly that the issue will never be addressed unless he can cause considerable embarrassment for the Government.

Another possible barrier that has been raised with respect to O'Leary's proposals is the fact that Hangar 6 (which clearly is his favoured site for operations) is already leased out to Aer Lingus. However this is perhaps a red herring. One must remember that Ryan Air and the Government are the two principle shareholders in Aer Lingus. Therefore if they both agree that it is now preferable that Ryan Air take control of Hanger 6 (with Aer Lingus being adequately facilitated elsewhere), there really should be no issue.

However there are other problems that are likely to arise. Michael O'Leary is notorious for driving a hard bargain. So even if in principle a decision is taken to go along with his plans, the aircraft maintenance workers may be in for a rude awakening with respect to their new work conditions.

This was a continual problem in the old days both with Team Aer Lingus and SR Technics. Though in fairness the quality of their work was recognised, the heavily unionised approach under which they operated led to a high cost operation and disastrous industrial stoppages. In a cut throat business this was certainly not geared to ensure their long run survival. Even Aer Lingus, who one might of thought would have been most anxious to remain at Dublin, had already under Dermot Mannion moved abroad to carry out its heavy aircraft maintenance.

Indeed listening to Live Line yesterday, it was remarkable to hear what seemed like 100% support from former SR Technics workers for the Ryan Air proposals. One would have imagined that these same people would have been bitterly opposed to Michael O'Leary (and everything he stood for) under the old unionised regime. However faced with the loss of skilled jobs and no realistic prospects of future employment their attitude has changed utterly.

And there is a lesson here! For the very same plight facing these now could well face Aer Lingus workers in the not too distant future. So perhaps they may recognise that O'Leary probably offers them the best chance of maintaining their jobs in the long run.

Of course if the Government does finally bow to the strong public pressure over the possible loss of these 300 jobs, the DAA will indeed have every reason to be concerned. For one thing is certain. Michael O'Leary's campaign against it is likely to greatly intensify once he gets a foothold in Hangar 6. I would imagine the decision to maintain these jobs on an on-going basis at Dublin will be made dependent on all sorts of changes at Dublin Airport that will be anathema to the DAA.

So Michael O'Leary might get his wish and end up effectively running an airport terminal in Dublin after all.

Then again, we cannot be quite sure that he is even truly serious about these maintenance jobs. He is very shrewd and might have already judged that there is no realistic prospect of his plans now being approved. Meanwhile however he can score a wonderful public relations success posing as the worker's champion while causing acute embarrassment for both the Government and the DAA.

And who would have thought it for if this current trend continues he could wind up even more popular than George Lee!

No comments:

Post a Comment