Airline Economics at Dublin Airport

David McWilliams has observed, both in the Indo and in his new book, that Dublin airport is remarkable that it is a place where all classes mix. Rich and poor, both are there sharing the same endless queue. In fact, this phenomenon is typical of airports in all developed countries. The more interesting question is why is this the case? Why has the air transport market not adapted to customer preferences for varying quality levels at different prices?

Some might argue that in fact that this has already happened. There are business class seats and airport lounges for those who pay more. But for short routes many airlines, such as Aer Lingus, have dropped business class entirely. The success of low cost airlines has pushed the likes of Aer Lingus to streamline and mimic their rivals. Why then has the low cost, no frills option been so successful?

Is the air travel market mostly made up of individuals whose primary concern is price? Clearly this is not the case. Mr McWilliams talks of rich and poor at the airport. The wealthier travellers are what economists might call infra-marginal consumers, who would be prepared to pay a higher price than the current market price if they could be guaranteed a higher quality of service.

For short trips, however, the key component of higher quality of service is not a free meal but a service which avoids painful delays at the airport. The trouble is that the level of service would have to be guaranteed, not sporadic. Many of the factors which cause delay -- bad weather, air traffic control, busy runways, badly run airports -- are outside the control of the airline.

Worse still, the spillover effects from other less punctual airlines can hurt an airline which tries to do better. Another factor is that the higher load rates and higher aircraft utilisation, pushed to the limit by low cost operators, mean there is less availability in the system to 'borrow' a plane when one of your own fails. All of these mean that an airline would need to bloat its costs significantly to attempt to provide a better service.

An airline which differentiates itself on punctuality would have to market itself as such, but owing to factors outside its control, it couldn't really guarantee a better service. The market will not tolerate a high end product unless it is consistent. In the end, therefore, the Airlines revert to the no frills model and everyone is bunched together. Hence the extraordinary diversity on view at Dublin airport.

"Sonnano Kankeinei" arsa Bertie-san

Sonnano Kankeinei is a Japanese term I came across in a New York Times article about the Japanese prime minister who has resigned amid allegations of financial misdeeds. It means "so what? I don't care". It struck me as perfectly apt for the attitude of certain other premier who was asked about the money he admits taking from businessmen in the 90s. Far from acknowledging the damage done to his democracy by cash flowing from business to ministers, the PM in question, said if he'd known it would cause him so much grief he'd have preffered a few season tickets to his beloved Man U. No hint that he saw what was wrong in principle, he went on to ask, what was a few tens of thousands to a finance minister anyway? His way of saying Sonnano Kankeinei.

Pleaaaase Wrap up these 'kin Tribunals

For a long time I was a fan of the Tribunals. I was in the camp which claims that, though costly, these fora are purging our democracy of the vile blight of corruption. But as the Mahon Tribunal gears up to celebrate its 10th anniversary on 7th November, the twin burden of fatigue and disillusionment has gotten the better of me.

First it was beef. Goodman. Burke. O'Malley. Reynolds. Export Credit Insurance. Tax payers money effectively flowing into Goodman's Pockets. Then it was planning. Then it was communications. Later it was the Gardaí. Then it was planning again. McCracken, Mahon, Barr, Moriarty. Dunne, Haughey. Remember all that?

And it went on and on and on. Meanwhile the lawyers laughed their way in and out of Dublin Castle daily, heaping one fortune upon the next. Thousands per day, even when they aren't around to do anything. And one Tribunal spawned another like some horrid bacteria. And still the Lawyers came, and spoke in stern tones, and laughed their way to even more extraordinary wealth than before.

The cost of these inane circuses is clear enough, it is huge. But the benefits amount to little or nothing. The political class, wounded for a while, has recovered its utter contempt for accountability and transparency. The initially reasonable Freedom of Information Act was gutted once confidence returned. Party funding went on the agenda then quietly slipped away. And the likes of Flynn and Lowry powered home to massive majorities. Bertie and his FF cronies have neither an ounce of humility between them nor a shred of integrity. And sadly, Tribunalled out, the public have given up and want nothing more of government than their taxes cut. So low was the public appetite for discourse around integrity that opposition parties looked away when the Taoiseach's money bags crashed out of the wardrobe a fornight before the general election. And now he's back dithering and forgetting and hesitating.

Even if Bertie Ahern did nothing wrong, and even if he was merely going along with the culture of the time, he could at least be expected to stand up and say, well, I did nothing wrong but I affirm my belief that integrity is central to high office and transparency is the lifeblood of democracy. As we move forward we will see to it that safeguards are put in place to prevent the kind of rot that has dogged our body politic in the past.

But the effectiveness of the Tribunals can be guaged by this: can you imagine those words being spoken by the man we have just elected as Taoiseach for the Third time? (yes I know we don't select Taoiseach but he was party leader).

In the final analysis, the real beneficiaries of the Tribunal were the lawmen, the media, and, more tragically corruption itself. For it will blossom now among a politcal class who knows that the Tribunals have defeated our embryonic attempts at pouring domestos into the political system. From here on, the scum can thrive.

Bank Crisis in UK

I just heard on the radio this morning that the UK bank Northern Rock has been hit by the credit crunch in the financial markets. My instant reaction was, phew, thank fuck I moved my few pound to another bank. I used to have a small savings account with NR, but when an Irish bank offered a higher rate I immediately jumped ship.

I used to be one of those suckers who stayed with the same bank through thick and thin, just sighing at bad rates and service and procrastinating about changing. Then I went to get a mortgage and I discovered that if you take them at face value they will screw you. I was told by a certain high street bank that they lend me X at Y% at best. I had banked with them for years. They said before they'd approve the loan I'd need to answer if any of my relatives had accounts with them in the past. What the? So if my old man had defaulted on a loan I wouldn't get mine approved? Pile of shite. So I shopped around and found a far better deal. I was offered more money and at a lower rate and no questions about my family's credit history. Then I rang back the first bank. Oh, they humed and hawed, and I need to talk to Dublin and I'll ring you back immediately. They rang back - we'll match the other deal. Right, so can you better it? No but we'll match it. Ok thanks bye. And ever since I change banks like I change my socks.

Anyway, back to NR. I thanked God I had jumped. But then I heared that the B of England are bailing them out. And the trio of BoE's gov Mervyn King, the chancellor, Alistair Darling, and the Financial Services Authority, have appealed for NR customers to remain calm. The message to savers - your money is safe. It will be interesting to see if savers take their word. Of course the interesting psychology here is that if customers start to think their money isn't safe, then it won't be. They'll start withdrawing producing a run on the bank and basically everyone won't get their money cos a huge percentage of it is locked up in non-liquid assets. But we'll see.

Two other things struck me about this bizarre intervention. First, like the ECB and Fed interventions earlier, it is bound to produce the condition of moral hazard. In other words, commercial and merchant banks are supposed to be best placed to assess their own risks and should run their businesses safely with the right risks and reserve ratios so that they are not over-exposed to shocks. But if they know when the shit hits the fan the central bank will bail them out then, in the cut-throat competitive market that they operate, they will be more likely to step over the red line to pull in bigger revenues. The only way to teach them not to is to refuse to bail them out by letting them fail. Of course the trouble is that the central banks and governments fear that this could spark a chain reaction that would crush the so-called real economy - ie. where people buy money not to relend it, but to build factories or roads or whatever. But perhaps the moral hazard case is overstated. NR's share price fell 20% and commentators are saying they are likely to be taken over now. In other words, by having the wrong business model and giving too many 125% loans to house buyers, they will fail. So despite the bail out, the lesson is plain for other banks.

But the second issue here relates to the independence of the Bank of England. One of the first things Gordon brown did on becoming chancellor in 1997 was to grant the B of E full independence from government. The idea was that political interference just screws things up because he political leaders have their own agendas (such as survival) which may not be in the interests of the economy. But according to the Guardian the B of E's intervention was agreed with the chancellor Alistair Darling. Agreed with the Chancellor. So much for political independence.

All this illustrates a few things. First, despite all the rhetoric about free markets, when the shit hits the fan for banks, the market begs for help from government. And second, it usually gets it.

Lack of Trust in Government is Killing Labour

From hospitals, to schools, to trains, to childcare. None of this stuff works even close to people's expectations. More money is needed but we simply aren't prepared to pay, and therefore Labour's dream of social democracy is doomed. So we better get used to the crap (actually we probably already have). Labour might wonder why are we not prepared to pay?

Market worshippers, turn away now. The required fixes are going to have to come, for the most part, from state intervention. The market I'm afraid has its limits and is not going to fix our services any time soon. Perhaps in the future it might, if we learn how to better harness it to our needs, and I have no objection to introducing market measures so long as certain societal objectives such as fairness can be preserved. But for the moment, if we want better schools and trains which everyone can afford, we are going to have to do two things: reform the public service, and invest more tax in the delivery of services.

But while we all want better schools and trams, bizarrely we aren't prepared to pay. When it comes to elections, we consider the alternatives very briefly (and I'm not saying they are a pretty set of choices) before diving straight onto the low tax option. Any party that we think can guarantee money in the hand is a shoo in.

Why is it then, that we just don't want to pay for better services?

Basically we don't trust the government with our money. First, as a nation we are still scarred by our recent experience of the horrid 1980s. The Lynch government elected in '77 engaged in what amounts to an obscene act of economic vandalism. They committed a generation to high unemployment, emigration, and punitive taxes. That experience is still fresh in the minds of anyone above 40. For those who bore the brunt of it, talk of government taking their money sends a shiver down their backs.

Incompetence and recklessness were the biggest culprits in the 80s calamity. But we have another reason to hate giving government our money: endemic corruption. In the early 90s the beef tribunal opened it all up. Bribery, corruption, nods, winks and envelopes. Then planning. Then policing. Then phone licences. Then planning again. Right up to this morning, when our Taoiseach was questioned about bags of cash slushing around his constituency office. We have been bombarded day after day with the big black rot at the core of our political system.

Why on earth would we trust this shower of bastards to deliver services with our money?
No, just give us back our money, thanks very much. And so confidence in the state to deliver has bled away with each passing witness at Dublin Castle. And with it, bled away the life blood of social democracy: trust in government.

While no-one is arguing that we need to go back to the punitive taxes of the 80s, neither is it true that our so called prosperity is dependent upon each of the more recent succession of tax cuts. The economy boomed since 1997 when taxes were a good deal higher than they are today.

The trouble is, that great big lump of money that we got back could have build a vast web of infrastructure for us and future generations. When doled back to Joe Soap, it was frittered away on car upgrades, boob jobs, additional weekend breaks, and all manner of luxury goods to spoil ourselves. All very well, that's what life's about, you might say.

But then we look to our schools, our pitiful train service, our capital city and its wretched infrastructure that would shame countries with half our wealth, and we look at our grandas and grannies lying sick on trolleys, and we decry the price of childcare. And we hate the emptiness of our urban centres, where towns half the size in France or Britain would have twice as many pools or libraries, or museums, or concert halls. We see all this, and we wonder why?

But we know. All these wonderful projects need trust in collective spending. And of this we have none. And that is why Labour can never hope to be more than a bit player in Irish politics.

Irish Books II: Leabhair Ghaeilge II

In the previous post I lashed B na LG for failing to stop the disappearance of Irish language books from the shelves. I certainly hope I didn't give the impression that B na LG were solely to blame, for they aren't. There is another body involved: ÁIS. I should have known. How could one body suffice to oversee the wellbeing of the vast publishing realm of Irish language books! Surely, besides schoolbooks and government publications, there must be at least dozens of books passing through their capable hands.

So ÁIS apparently are responsible for distribution. They see to it that shops are aware which books are being published and that they are delivered copies when required. Here's how they do it. They have a team of reps who scour the country, targetting mid to large bookshops with attractive promos and samples. Trouble is - the team is rather small. They have one person. ONE PERSON. For the entire country. ÁIS went to the same school of economics as the Irish offshore Customs who have a single craft to patrol the entire coastline. So I've heard that the ÁIS man or woman gets to visit say Donegal about every 6 months. Lamentable. Now I have no idea what size ÁIS is as an organization in total, probably quite small, but I'm certain they have a board, a manager and so on. They must wreck their heads trying to figure out a route for our friend, the rep, who has to cover all of Ireland with this leabhair Ghaeilge. It is no surprise then when we hear that on those odd occasions when a book shop orders a leabhar, they can wait for weeks and weeks for delivery.

I wondered how could ÁIS be so ill equiped for the job, and yet so happily silent: SSssssh. For faic sake, don't let éinne know that our jobs are based on supporting a single rep. They'd cut the deontas! Dún do bhéal.

Then I learned that Áis had been taken over by Farce na Gaeilge, I mean Foras na Gaeilge - that infamous sícín gan cheann, that neurotic, catch-all body - back in 1999. If you follow Tuaráscáil in the Irish Times, Pól Ó Múirí will have bashed your ears about this body. The shambles it is. How it is aimless, incompetent, and divisive. On a discussion on the state of Irish Language publishing on R na G this week, the Farce, could not provide a spokesperson. Not for the first time, when questions are asked, the old Farce is as láthair.

But there you have it. Irish language books are like icebergs in the Sahara, melting away in the sun, their waters seeping off irreversibly into the sands of time. But no fear - we have an áis-hole on the job. And a Bord na gCnoc Oighir who will shortly run another 'Feachtas'. You see, if you run enough feachtais (campaigns) surely the punishing rays will relent and our iceberg will safely refreeze.

Irish Books: Leabhair Ghaeilge

If you have any interest in Irish language books you will surely have noticed the quite rapid decline in their availability in Irish bookshops. Over the last few years the Irish language racks have shrunk further and further in the big outlets, to the point where in many cases they have disappeared entirely. Or at best, you can pick up an Ó Dónaill dictionary or a copy of "Teach Yourself Irish". Beyond that, nothing.

That threatened species, the Irish language writer, must be painfully aware of the collapse in their channel to the market. But there's probably little they can do. I know some people will say - oh but the number of Irish language titles being published is growing. Perhaps, but they are not being stocked in bookshops and therefore I assume no-one is reading them. Besides, how many titles are really published - surely it's a minuscule number.

The topic was recently discussed on Raidio na Gaeltachta. Joining in the discussion was the head of Bord na Leabhar Gaeilge, whose name I think is Muireann Ní Mhóráin, though I cannot be certain of her surname for I missed part of the show.

Anyway, Muireann's performance was less than reassuring. In fact, it was the opposite. She made it abundantly clear that, if we are depending on Bord na Gaeilge, we aren't going to see those Leabhair Ghaeilge signs being re-erected any time soon.

First, she gave absolutely no impression that there was a severe problem. Not even a simple outline of the challenges facing the promotion, publication, and distribution of Irish language books. But this is typical for the Irish language movement - deny or ignore the problem in case your area is seen to be in decline and the grants stop.

Second she was asked what B na L. G. are doing to help the growth of Irish language publishing? A 'feachtas' (basically she meant ad campaign) here and a 'feachtas' there. In other words, nothing substantial. Writer Anna Heussaff was also on the program. She seemed reluctant to criticize B na LG (because she receives some sponsorship or backing from them for her own work), but she did say that what was needed was more of a coherent strategy than once-off campaigns. Exactly. But that is precisely the problem: B na LG has no strategy. Or if they have, Muireann didn't make it clear, and worse still, it isn't working.

Or is it working? Well this brings me to the third and final revelation from Muireann of B na LG. Muireann was asked if she knew how many Irish language titles were sold last year. She had no idea. She was asked if she perhaps knew the value of the sales of Irish books last year. Not a clue. This is cretinous. The head of B na LG has absolutely no idea of the most fundamental indicator of whether her organisation is a success or a pitiful failure.

Well, given what I've seen, I suspect the latter. But can you see how sinfully depraved it is that B na LG have no idea of their bottom line? This would be the equivalent of Micheal O'Leary of Ryanair saying he has no idea how many passengers they carried last year and no idea of how much revenue the airline earned. It is simply unthinkable.

The difference of course is that Mr O'Leary has to know. Because he needs to show his owners that he is doing a good job and that the airline is doing what they are set up to do: sell flights. But poor Muireann doesn't need to know, because her owners (us the taxpayers) don't really care. Or not so much they don't care, they don't really know how much of their hard earned notes B na LG is throwing around on a scheme which the Bord clearly cannot know is failing or succeeding.

This madness typifies the movement: no cost benefit analysis, no accountability, and dare you speak out about same. Shame on you for attacking our cultural heritage and those decent souls who devote their genius to it.

And here's the prediction: those shelves will continue to shrink and the readership of Irish language books will wither away. All the while, the tax payer will foot the bill for the "feachtais" and the "deontais". Ach ná h-abair faic!