Aer Lingus and Ryanair - The acceptable and unacceptable faces of capitalism?
20 October 2006
‘There is no point in the Government standing by and wringing its hands, like bystanders at a mugging. The Government is entirely responsible for this debacle and must act now, while the situation is still retrievable.’ So wrote Michael Halpenny, national industrial secretary of SIPTU.
He was reacting to news that Michael O’Leary’s Ryanair had launched a take-over bid for the newly privatised Aer Lingus. Despite paying over €35m to more than three dozen financial advisors the new owners of Aer Lingus had all failed to anticipate the move, and crisis had quickly become panic.
The furore kicked up has exposed so much hypocrisy it would be difficult for the politically naive to work out just exactly what principles beyond naked greed are involved. This turn of events however has tremendous educational significance and is a real object lesson for the Aer Lingus workers and the working class as a whole.
The reaction of the new owners, which includes the workforce backed by the unions under the aegis of an Employees Share Owning Trust (ESOT), has declared that the offer by Ryanair of €2.80 per share ‘significantly undervalues the group’s businesses.’ This despite the fact that privatisation sold the company at €2.20 per share.
But what does this mean if it is true? Nothing less than that the unions leading the workforce have ripped off the rest of the Irish people who nominally at least owned the company before privatisation. It means that they and the Government have knowingly conspired to steal hundreds of millions of euros from the Irish people for their own selfish gain.
The ESOT has complained that the offer by Ryanair - while it may seem to offer each of its members €60,000 each – in fact, once capital gains tax of 20% and PRSI contributions are included, would actually result in an effective tax hit of up to 62 per cent. But again, what does this mean?
The process of privatisation has advanced everywhere through the illusion that workers can become part of the new ownership of their companies and gain along with their new capitalist partners. The rejection of the Ryanair offer, not on the basis of the inevitable loss of jobs or reduction in terms and conditions, but because they would not make sufficient profit, confirms the arguments of socialists.
Schemes of employee share ownership do not turn workers into mini-capitalists. Their income, living standards and social position continues to depend overwhelmingly on their salaries and wages, not on capital gains or dividends. The ESOT reaction is an inadvertent admission of this. The sectional and marginal gains from share ownership by the Aer Lingus workers is not only at the expense of the rest of the working class, not only in opposition to their longer term class interests but even against their not so long term interests as employees of the privatised company.
Masses of workers cannot become mini-capitalists as a result of privatisation. They still fundamentally depend on their ability to sell their labour power and get the best price for it. The real owners of Aer Lingus rely solely on capital gains and dividends and this ultimately depends on reducing the amount paid to labour.
In this sense a lot of the conflicting debate over Ryanair’s motive is beside the point in the longer term. Analysts seem to have been divided and changed their minds over the motive for the bid. Is it opportunistic, a means of putting pressure on the government for concessions elsewhere? Perhaps an attempt to prevent other rivals from taking over the company? Or is it in order to bring Ryanair’s management to bear on Aer Lingus’s costs?
O’Leary has promised that Aer Lingus would continue to operate as a separate company but under the Ryanair umbrella, and that Ryanair would not seek representation on the Aer Lingus board! It has been called Aer Lingus lite as opposed to Ryanair Mk 2, but the obvious question is whether there is any difference. If costs, for which read jobs and conditions, can be cut does anyone really believe O’Leary will not cut as much as he can? After all, if wheelchair users have felt the brunt of his drive for profit why would he show tender mercy to Aer Lingus employees?
This much is obvious – hence the apprehension among workers. Isn’t Tony Ryan, O’Leary’s mentor, not credited with saying that the world is made up of ‘fuckers and fuckee and in our relationship, you are my fuckee,’ And isn’t O’Leary’s own style described as running ‘the place by kicking people in the head.’
What isn’t so obvious is that buying into privatisation means buying into a position where majority ownership resides with those whose sole interest is in maximising shareholder value i.e. maximising profit. This includes accepting the offer of whoever holds out the best prospect of this happening. More than this it means signing on to the rules of a game where profit is the only objective that matters – and accepting the consequences.
In this respect it will not matter in the long term who owns Aer Lingus. If it runs as a capitalist company it will have to work as hard as possible to make the greatest profits, and if Ryanair sets the target level of profitability then sooner or later this will have to be achieved by Aer Lingus. That, or the company will go bust or be taken over. This object lesson has just come a lot quicker than many anticipated.
It is these realities of the capitalist market that has set commentators off on gleeful sneering at union leaders who are now trumpeting the need for the government to intervene and support competition.
In ‘The Irish Times’ free market hack Marc Coleman wrote an open letter to SIPTU president Jack O’Connor in which he contemptuously ridicules his conversion to the need for competition in the aviation market. ‘Comrade’ O’Connor instead should welcome the contribution of O’Leary ‘to the liberation of Irish workers from the shackles of exploitation by semi-state monopolies,’ he should support the ‘revolution’ that O’Leary has brought about and follow his ‘hero’ Karl Marx in encouraging the Aer Lingus workers to work harder.
Coleman obviously welcomes Ryanair’s move but the charge of hypocrisy could equally be levelled at him. The merging of Aer Lingus and Ryanair would undoubtedly serve to create monopoly conditions in the Irish market with the combined company having 80 per cent of the top five European markets from Ireland and 59 per cent of short-haul seat departures from the country.
Those who believe that a Ryanair monopoly would be exercised to benefit consumers i.e. low fares (at the expense of so much else) show a remarkable misunderstanding of how capitalism works. Low fares, or cost cutting, is not an object in itself but simply the only means Ryanair had to maximise profits. It is maximising profits that is Ryanair’s raison d’etre. Like all capitalists who wax lyrical about taking risks or facing competition they detest both. Capitalists systematically attempt to avoid risk, minimise it, make it some one else’s problem or pass it on to their workforce through things like flexibility. A veritable industry has been created in attempts to avoid risk or pass it on.
The same with competition. What capitalist like is competition within workers seeking to sell their labour power. What they dislike is the uncertainty and threat to profits that is entailed by competition.
It would be tempting to rush to O’Connor’s defence against the Irish Times drivel but this would be to descend into the same depth of stupidity as Coleman. We should read the statement by Michael Halpenny at the start of this article and answer in kind: ‘There is no point in the Union standing by and wringing its hands, like bystanders at a mugging. The Union is entirely responsible for this debacle and must act now, while the situation is still retrievable.’
How is the union responsible?
Faced with the accusation in ‘The Irish Times’ that SIPTU had welcomed the privatisation process Michael Halpenny wrote a letter in response. He pointed out that SIPTU had written a pamphlet opposing privatisation and informed the government, who obviously had no idea about this, that it could indeed invest in Aer Lingus to modernise the company without the EU imposing a veto.
Halpenny’s weak response to the criticism mirrors SIPTU’s pathetic pretence that it had opposed privatisation. SIPTU maintained for a long time that privatisation was a political decision and that it could therefore not take effective action against it. In practice this meant seeking useless guarantees on conditions (how useless we can now see) and convincing workers to accept privatisation once these useless guarantees had been received.
Far from leading opposition to privatisation SIPTU has for years been in open partnership with the government that threatened the privatisation, and with the bosses who stood ready to benefit from it. To seriously think they represented an opposition to privatisation is to enter the surreal world of the Marc Colemans in which O’Connor follows the teachings of Karl Marx!
For socialists and workers SIPTU bears the responsibility for this debacle. Can we really blame O’Leary? Does anyone seriously expect him to act differently? Are we really to blame a right wing government that made its intentions to privatise clear years ago? Is it not crystal clear that it is those who claimed to opposes privatisation - while in partnership with those carrying it out, who were acting as a more efficient obstacle to organising resistance than the Government. Isn’t it clear that it is these people, from the workers point of view, who deserve blame for this situation?
If anyone needs convincing they need only reflect on the demands of the ESOT and unions now. It isn’t re-nationalisation but demands that the government buy more shares, that ESOT buys more shares or that workers’ pensions are also made dependent on the profitability of the company.
It has been reported that the unions wanted Sir Anthony O’Reilly to become chairman, owner of the company that wouldn’t even honour the last social partnership deal. Now Denis O’Brien, the tax exile, is their saviour, with reports that one union rep has his photo on the wall as a sign of gratitude and another saying that he will be toasting him with a glass of champagne. (They obviously must be bureaucrats). In short, buy more into the process that is shafting you.
Significantly it has been pointed out that the initial ESOT statement did not reject Ryanair’s bid but complained about the price, while Ryanair is seeking to make its bid more tax efficient for the ESOT shareholders.
Those who doubt such scenarios should reflect on the fact that the partnership road to hell leads precisely to its destination. What after all, is the essential difference between Michael O’Leary, Sir Anthony O’Reilly and Denis O’Brien?
No doubt we will hear that we should not forget who the real enemy is – the capitalists and government. But what should we do when defence of workers interests is sabotaged by those within our own ranks? Call for unity while forgetting those who betray us?
Worse – what are we to do when those who betray us are our leaders and openly display their treachery through partnership?
We think the answer to these questions is obvious and the accusation of ignoring the real enemy does not concern us. It often comes from those who claim Marx as their hero while foisting the likes of O’Connor onto ‘anti-capitalist’ platforms. It comes from those who call for unity while failing to tell us exactly what unity is for.
Just as the O’Learys of this world can only succeed because governments create the conditions for them to thrive, and trade union bureaucrats collaborate through partnership, so does the obverse process occur on the left. Ostensible socialists seek unity with left bureaucrats who seek unity with right bureaucrats who are in unity with . . .the capitalist class.
The alternative is working class independence.
Socialists must explain just exactly what sort of politics this requires.
It means recognition of the treacherous role of the trade union leadership
and the creation of a political alternative based directly on the self-organisation
of workers themselves. This alternative is a long and difficult road
but it has just been given one more example of its truthfulness and relevance
because the whole mirage of workers as shareholders as been so clearly
debunked by the Aer Lingus / Ryanair saga.