Analysis: Aer Lingus's new chief may be struck by the power of the trade unions, writes Emmet Oliver
It may have taken them six months to land their man, but Aer Lingus appeared reasonably happy with their catch last night. Dermot Mannion, a 47-year-old from Sligo, is by any measure an experienced airline executive.
With Dubai-based airline Emirates since 1987, Mannion had several advantages which must have appealed to Aer Lingus chairman John Sharman - he is Irish, he is familiar with raising airline finance and, as president of group support services, he is well versed in striking good deals with the major airline manufacturers.
These will all come in useful when he arrives in early August to take up his new role.
However, Emirates is a very different commercial beast to Aer Lingus. The obvious difference is size. Emirates has an annual turnover of $3.6 billion (€2.7 billion), whereas Aer Lingus recently reported turnover of €906 million for 2004. The fleets of the two airlines illustrates this point even more clearly. Aer Lingus has seven long-haul aircraft (the relatively modest A330s), whereas Emirates has put an order in for 45 A380s, better known as the super jumbo.
However, the relatively modest scale of Aer Lingus is not the main difference likely to strike Mannion in his first weeks. The power and influence of the trade unions at Aer Lingus is likely to represent more of a culture shock. Industrial action by unions at Emirates is virtually unknown. The airline, which is controlled in large measure by the powerful Maktoum family, does not regularly find itself in industrial relations fora.
In contrast, the first item on Mannion's agenda is likely to be talks with unions about further cost cutting at Aer Lingus. Sharman recently expressed his frustration with the lack of progress in getting work practice changes agreed at the airline.
In fact, payroll costs at Aer Lingus actually rose in 2004 by 1.8 per cent. The average salary and other benefits at the airline is now €65,000. Under previous chief executive Willie Walsh, there was much talk of outsourcing high-cost elements of the business but, recently, the airline said it was prepared to look for "in-house solutions" rather than just concentrating on outsourcing.
This raised eyebrows among some aviation analysts who muttered in private about a sense of "slippage" at the airline since the departure of Walsh and two other key executives, Séamus Kearney and Brian Dunne.
Whether this is deserved or not hardly matters because perception is everything from now on for Aer Lingus.
The institutions, in Dublin and London, will have a major influence over the airline's future. While few observers expect a flotation this year, there is every chance it could happen in early 2006. Mannion's job will be to bring the company to market in the best possible shape. That means cutting costs further and bringing them somewhat into line with the likes of Ryanair and Easyjet.
The company has a good story to tell. It boasts the best operating margin of any flag carrier in Europe and its profit performance, while expected to dip slightly in the years ahead, remains relatively robust. It has also concluded a short-haul deal that gives it decent cost-per-seat statistics compared to many other European airlines. There is also likely to be good news coming down the tracks about access to new airports in the US.
Under a highly restrictive bi-lateral agreement, the airline is confined to just five US airports. If it could get this altered, future growth prospects will be greatly enhanced. Either way there should be plenty of work to occupy Mannion in August.
