Monday, July 05, 2004

The Problem Child

Aer Lingus paper towel
That Familiar Lemon Smell

Perhaps the most pathetic of Irish social stereotypes is the hopeless bachelor, ever dependent on his Mammy - even when he's 68 years old - to butter his bread and tie his shoelaces for him. The worst example of this must be Ireland's unloved state airline, Aer Lingus. Trust me, you don't want to go their website. I had to buy a new ticket from the bastards last Christmas because they told me that they - they, not me - had printed it on the wrong paper. Next time I'll get it tattooed on my forehead for their convenience.

Cunning Aer Lingus (Stop that! This is a family blog!) management are apparently trying to launch a management buy-out of the company. With fuel prices soaring and a looming bloodbath in the low-cost market, why would they think this is a good idea?

Given the power of the unions and the jobs it accounts for in key Dublin marginals, I doubt that the airline will be allowed to go under, so in case of bankruptcy, they would be bailed out by the long suffering taxpayer. On the other hand, should the new management shareholders make out like bandits, they get to keep the profits: All reward, no risk.

Irish nationalised industry, meet moral hazard. Or to put it in financial terms of Black-Scholes, management are about to buy a put option written by the Oireachteas and given to them for free.