Brace for a hard impact
The airline boss has already shown that he is prepared for a tough union battle to instigate transformation plans
Published 29/01/2011 | 05:00
The Aer Lingus showdown with the IMPACT trade union over the cabin crew dispute shows that the airline's tough-talking German boss Christoph Mueller is determined to sweep away any obstacles to his plans to transform the formerly state-owned company.
When he first arrived at Aer Lingus in September 2009, having been previously chief executive of former Belgian flag carrier Sabena, Mr Mueller certainly talked tough, stating that what the airline needed was "amputation" rather than "cosmetic surgery".
He wasn't joking. Five weeks later he unveiled his cost-cutting plan which was designed to cut €97m from the airline's annual operating costs.
Under the plan 700 permanent Aer Lingus staff lost their jobs while the contracts of a further 100 temporary staff weren't renewed.
The plan also imposed pay cuts on all staff earning more than €35,000 per year and closed the Aer Lingus defined benefit pension scheme and replaced it with a far less generous defined contribution scheme.
Although the plan was initially fiercely opposed by all of the Aer Lingus trade unions, most of them eventually grudgingly accepted it. Except IMPACT, the largest public sector trade union, which represents some of the airline's cabin crew.
Over the past 15 months IMPACT has engaged in seemingly endless delaying tactics. It has balloted its members not once but three times on the restructuring plan under which the annual flying hours of cabin crew would be increased from 700 to 850 hours.
There were two ballots in March 2010 on the restructuring plan itself. After the first ballot, when almost two-thirds of IMPACT cabin crew voted to reject the restructuring plan. Mr Mueller struck back hard.
After being threatened with compulsory redundancies the recalcitrant cabin crew quickly did an about-turn with 92pc of them voting in favour of the restructuring plan just three weeks later.
However, anyone who thought that the twin March 2010 ballots were the end of the affair was rapidly disabused. Instead, in what has become a passable Irish impersonation of Groundhog Day, the dispute has rumbled on and on.
In August, IMPACT balloted its members a third time. With the trade union having ostensibly accepted the terms of the restructuring plan following the second March ballot, it was now balloting its members over the actual implementation of the plan to which it had previously supposedly agreed.
It is a distinction that will have been lost to the thousands of Aer Lingus customers who have had their travel plans disrupted over the past two weeks.
The result of the August ballot was that 96pc of cabin crew voted to reject the new rosters that Aer Lingus was seeking to introduce under the terms of the restructuring plan.
However, instead of laying down the law as he had done in March, Mr Mueller bided his time following the August ballot. There were of course good business reasons for doing so. August is peak season for Northern Hemisphere airlines.
With all airlines full to bursting point, an August industrial dispute would have maximised the disruption suffered by customers and the commercial damage suffered by Aer Lingus.
Instead Mr Mueller displayed uncharacteristic patience in his dealings with the IMPACT refusniks. Even when the trade union began a work-to-rule in October, Mr Mueller declined to react.
What had come over Mr Mueller? Had the tough German boss suddenly morphed into a big softie?
Not a bit of it. On January 14, with the busy Christmas period safely behind it, Aer Lingus struck back. It announced that any cabin crew not agreeing to work the new rosters would be suspended. The airline was as good as its word with more than 200 cabin crew now having been suspended.
While there is never a good time for an airline to suffer a strike or industrial dispute, January is almost certainly the least bad month.
Traditionally a very quiet month in the aviation business, this makes it much easier for Aer Lingus to re-book passengers on to flights with other airlines, principally Ryanair, or if it has to wet-lease (with crews) aircraft from other operators.
One of the most remarkable features of the past two weeks has been the crocodile tears being so profusely shed by IMPACT spokespeople, alleging that Aer Lingus is spending €400,000 per day on hiring aircraft from other airlines.
This is almost certainly a huge over-estimate. While the daily cost of hiring in aircraft could easily hit €400,000 in July or August, the actual cost in January is likely to be only a fraction of that figure.
Aer Lingus has also been helped by the fact that its biggest competitor, and largest shareholder, Ryanair, has leased it six aircraft at below-market rates.
Ryanair's decision, despite bitter commercial rivalry, to lend Aer Lingus a hand in its dispute with IMPACT is only one of the factors indicating that the cabin crew are on a hiding to nothing.
Even more telling has been the refusal of the other Aer Lingus trade unions, all of whom have signed up -- no matter how reluctantly -- to the restructuring deal, to get involved.
That SIPTU, the other trade union representing cabin crew, is one of the trade unions agreeing to implement the restructuring deal, has further undermined the position of IMPACT.
Adding extra spice to the affair is the fact that SIPTU originally represented all of the Aer Lingus cabin crew until most of them defected en masse to IMPACT in 2000.
Clearly there is no love lost between these two trade unions at Aer Lingus.
IMPACT's sole riposte to the suspensions, having 28 cabin crew complain to the Equality Tribunal about the allegedly discriminatory nature of the disputed rosters, struck most observers as decidedly limp-wristed.
By Thursday, with over 200 of its members having been thrown off the Aer Lingus payroll, several cabin crew members facing the sack and the other trade unions at the airline conspicuously refusing to get involved, it seemed as if IMPACT was destined to suffer an ignominious defeat.
Then, in what looks suspiciously like a co-ordinated effort to provide IMPACT with a face-saving formula to disguise a humiliating climbdown, the Irish Congress of Trade Unions and employers' body IBEC wrote to both sides inviting them to talks. These were to be followed by "final and binding" arbitration from the Labour Relations Commission's Kieran Mulvey, who has previously mediated in the dispute.
No one who has followed the affair closely doubts that the final outcome will result in the cabin crew having to work something very similar to the disputed rosters. This would represent another victory for Mr Mueller in his battle to transform Aer Lingus.
When he first arrived at the airline it had just reported first-half losses of €93m for the first half of 2009.
This compares to the near-€30m profit which the airline is expecting to record for the whole of 2010. The notion that Mr Mueller will allow IMPACT to jeopardise this turnaround seems absurd.
Now that IMPACT has been offered a way out of the current impasse, it would be well advised to take it.
Mr Mueller's record demonstrates that he is a formidable opponent. By continuing the dispute IMPACT would be facing certain defeat and condemning most of the Aer Lingus cabin crew to a future on the dole.