Tuesday 21 November 2017

Bus Éireann told to axe inter-city routes - but warned of 'excessive' €500k packages for senior staff

Model Roz Purcell at the launch of a fleet of 20 luxury Expressway coaches at a cost of €9.2m in 2015. Photo: Naoise Culhane
Model Roz Purcell at the launch of a fleet of 20 luxury Expressway coaches at a cost of €9.2m in 2015. Photo: Naoise Culhane

Anne-Marie Walsh

Bus Éireann has been told to axe its Expressway service completely but warned that it faces "excessive" severance packages of over €500,000 for certain senior managers.

A consultants' report, seen by the Irish Independent, said jettisoning Expressway - which links major towns and cities in Ireland - would be "the most viable option".

The bus service would otherwise have to take drastic measures including dropping six routes, achieve a profit in its school bus business, and still get extra State funding.

The Grant Thornton assessment said it should drop the Expressway service unless it can put its commercial business on a sound financial footing.

However, it warned this could result in voluntary severance packages of over €500,000 for "certain" senior managers and an average redundancy settlement of €166,000. It said these costs were excessive.

The report said the company was a strong performer within the CIÉ Group until 2008 and had been largely loss-making since then. This was mainly due to the issuing of commercial bus licences to private operators on its most lucrative routes. Expressway has struggled to compete with new market entrants with lower cost bases.

Less than two years ago, the company unveiled 20 new luxury coaches - offering access to 4G wifi, reclining leather seats and charging points for phones and laptops - at a cost of €9.2m in a bid to grow passenger numbers.

The board of Bus Éireann has mandated a subcommittee to work with a management team led by acting CEO Ray Hernan to implement the cuts.

This followed chief executive Martin Nolan's announcement this week that he is resigning.

The consultants have considered four options drawn up by management to turn the company's fortunes around.

Viable

These are doing nothing, exiting Expressway, restructuring Expressway, or revising the company's business plan.

"Faced with a straight choice between option 2 (restructuring Expressway completely) and option 3 (exiting Expressway), we believe option 3 is the most viable option given the relative certainty that comes with an exit," it said.

In relation to the first option of doing nothing, it said "clearly this option is not viable".

It found that in the absence of external funding or shareholder support, the company would face solvency issues within 24 months - as Transport Minister Shane Ross recently warned.

Read more: Transport Minister Shane Ross defends his response to turmoil at Bus Éireann

The report said a restructuring of Expressway would cost €23.4m, mainly due to redundancy payments for over 200 staff, while the annual benefits would be €6.9m.

A total of 90 Expressway drivers would be affected, and 45 were expected to take redundancy. The report said there would be "no other option" for inspectors than voluntary redundancy. It said it was difficult to see how the cost of restructuring could be absorbed by pay cuts, "particularly given the current environment of public transport pay pressure".

The consultants said there were six routes that were unprofitable. Sources said these may include Dublin-Belfast, Dublin-Derry, Dublin-Galway, Dublin-Cork, Dublin-Limerick and Dublin-Waterford.

It said they should be carefully examined to understand the benefit of continuing them. The company is already competing with a joint venture business, GoBé on one of the routes.

The report also revealed that the Department of Transport under previous minister Paschal Donohoe asked Bus Éireann managers to prepare a cost-cutting plan "which avoided large-scale industrial relations unrest" as its financial difficulties worsened.

It said this plan was presented to the department early last year but was rejected due to the cost, and management came up with a new plan.

Bus Éireann had earlier made restructuring plans to reduce its largest cost of payroll in 2014 but options were not progressed "due to concerns of industrial unrest across the wider group".

Irish Independent

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