RTÉ AND THE DAA have not been covering themselves in glory this past week. The two semi-state companies have been putting on a show highlighting all that can (and usually does) go wrong when you marry the public and private sector, and get the worst of both.
They have also been providing a timely reminder that the state would be well advised to get rid of many of these ‘companies’ to save itself financial complications, market distortions and embarrassment.
The trouble in RTÉ of late is well flagged. The organisation is losing €50 million a year and adding to its deficit by way of record libel compensation bills. The DAA has been shown up by the European Commission for failing to run a secure ship, and the organisation is carrying €1.2 billion in debts run up on white elephant projects.
The two are fine examples of the high flying hubris of our semi-state sector. Tumultuous organisations that are financially incontinent yet persist in spending over the odds on everything from presenters to infrastructure. They proceed through life in the single-minded assurance that, as state-owned enterprises, they are above the petty concerns of mere mortals.
RTÉ uses its position as recipient of the license fee to prop up its commercial businesses. The rates that the company can command are above what most commercial competitors can claim because RTÉ gets to sell the whole package. For a business to be successful it needs scale: The more programming you have, the more channels and kudos in your possession is linked to your ability to compete.
In RTÉ they simply have to wake up in the morning and the license fee has provided a solid foundation, no questions asked. This is a market distortion that props up the business, yet they still manage to bleed money thanks to a dysfunctional and inefficient public sector way of doing things.
‘The DAA won the competition because nobody else was stupid enough to take up the task’
Where Ryanair and low cost flights felled Aer Lingus’ monopoly on air travel in and out of Ireland, the DAA continues to enjoy the protection of the Department of Transport in its ongoing grandiosity. It was Government support that pushed through Terminal 2, which I find extremely pleasant to travel through thanks to its very short queues at nearly all times, despite cheaper (and free) options being on the table for building of a low cost terminal.
The DAA won the competition to run T2 because, well, nobody else was stupid enough to take up the task in a free falling market. The organisation is stuffed with directors who trace their patronage back to political parties and is in an ongoing war with one of its chief customers, Ryanair, over its management and costs. Say what you like about Ryanair and its PR style, they do run a profitable business without crippling debts and their concerns are worth listening to.
Aer Lingus had to fight a battle and a half to break free from its publicly owned legacy after privatisation. The current CEO, the no-nonsense Christoph Mueller, has been having success with a hard nosed approach to all the public sector hangovers that have no place in a business struggling to be profitable.
If you read the 2010 annual reports for the DAA and RTÉ (it’s May 2012, but no 2011 reports are yet forthcoming – Aer Lingus has its out, though) it’s striking how they both bleat about the falloff in government supported funding.
‘The semi-states tend to be afflicted by delusions of grandeur’
The DAA want the regulator to allow it to have fees analogous to gold-plated international hub airports like Frankfurt, Amsterdam and Paris CDG despite the fact that even the flag national carrier is a low cost airline that needs low cost facilities. RTÉ bemoans the fall-off in government funding as compounding the fact that the private sector can’t reach to pay its stiff commercial rates.
The semi-states tend to be afflicted by delusions of grandeur, backed up by their ability to run up huge debt bills on the assumption that the state will always bail them out. Not alone content to build T2, in 2008 the DAA outlined plans for a €4 billion investment in “Dublin Airport City,” featuring 600,000 square meters of office space and 40,000 square meters of retail and hotel space.
Any successful enterprise will tell you that one of the keys to long term profitability is to focus on your core business. The DAA (one of the A’s stands for ‘airport’) was essentially pitching itself to become a massive property developer. Even had the boom had continued to get boomier, an airport authority has no business in property speculation and even less capacity to pull it off successfully.
Our semi-state companies are spoiled little brats who expect to be allowed to compete in and distort private sector markets without having the same responsibilities or handicaps of normal organisations. They run themselves in a dysfunctional fashion, failing in their core missions regarding things like editorial control or terminal security, let alone profitability.
They are quick to go back crying to government when they need a hand up, a hand out or a hand to slap their competitors with. They can also be a huge embarrassment to government, sucking up political oxygen at a time when we have better things to worry about.
‘The only reason to keep them is so the relevant ministers have somewhere to send their cronies’
The state should offload the DAA and RTÉ. The only reason to keep them is so the relevant ministers have somewhere to send their cronies. Government has no business in producing Fair City or running a shopping centre with stringent security. The two bodies should be cast to the market and raise some funds for something useful, with government retaining its interest in the key infrastructures like landing rights and radio spectrums.
RTÉ could be gotten rid of with a few rules put in place beforehand in relation to the concentration of media ownership, which are overdue anyway. The key output of RTÉ that people worry about is the current affairs and news programming, which could be supported by tendering a government grant for programs like Prime Time to more than just RTÉ.
Take the funding out of RTÉ and offer it up competitively for others to produce the high quality programming, and let them run competent organisations and decide if they really want to pay €500,000 a year to the presenter.
The DAA debt bills make privatising it more difficult, but worries the country would be cut off if it were privatised are silly. Indeed, the Irish government in the past has been plenty injurious to access in its support of the Aer Lingus ticket monopoly. Allowing a bloated public sector organisation to heap costs onto flying hardly helps either. Owning the DAA doesn’t keep our skies open so long as there are aircraft with passengers looking to come to Ireland.
The only alternative is to try and reform the bodies ourselves, something government is singularly not good at doing. And with potential buyers out there, why bother? Government should stick to its core business and get on with providing education and healthcare and the like.
Aaron McKenna is a businessman and a columnist for The Journal. You can find out more about him at aaronmckenna.com or follow him on Twitter @aaronmckenna.
Just click Like.
Comments (77 Comments)