Bus Éireann can’t continue in its current form without one of three things happening.
First, the unions could accept pay cuts and productivity increases, which in this context are also pay cuts, somewhere in the region of 30 per cent at their most extreme. Who reading this could take a 30 per cent pay cut and not feel it?
The unions could capitulate to this but, in my view, they shouldn’t. To do so would undermine the very concept of a trade union.
Either the union fights for its members in solidarity, or it doesn’t. The fundamental responsibility for letting things get so bad is with the management of the company, who should resign en masse if they believe the situation they have found themselves in is that dire.
A look at the company’s books over the last 16 years convinces me that during the good times, when revenues were rising, management allowed the payroll to increase far in advance of revenues and when the crisis hit, payroll didn’t fall as revenues fell.
The result was a financial black hole once austerity ended and competition began again in earnest.
Unions and management can, of course, come to an understanding – a week is a long time in industrial relations, as UCD Smurfit School professor Bill Roche reminds us.
But a unilateral imposition just can’t be countenanced without seeing the management on the dole queue first.
Second, the government could inject money to compensate Bus Éireann for losing some of its revenues to private bus companies and bring its subvention levels to the European average, or above it. The current level of subvention of about €40 million is far below the European average.
It is about 35 to 40 per cent of revenue in Ireland, where in France it can be as high as 80 per cent.
It is hard to compare like with like internationally because the service models are quite different, so take these comparisons with a grain of salt. But across countries like Belgium, Netherlands, Sweden and Switzerland, the subvention from the public to its bus service varies between around 35 per cent and around 70 per cent.
To bring Bus Éireann to the European average would cost roughly €30 million more per year, every year.
Let’s not forget the company also gets paid for the free travel scheme, gets rebates from the Taxsaver scheme, and enjoyed state funding for the purchase of new buses.
There’s no doubt more taxpayer’s money would solve the immediate funding problem for the company, if not its long-term productivity issues.
Third, the company could enter examinership and perhaps have pieces of itself restructured, broken off and sold. This third option is looking more and more likely. Bus Éireann is really three businesses.
The commercial routes are there to make a profit; think the Dublin to Galway route, or the Cork to Dublin route.
The company runs a school bus service, and finally the company runs loss-making pubic service obligation routes for which it is compensated by the state.
Bus Éireann about breaks even on the school bus and PSO routes. The company is losing money on routes where it competes with private sector companies who pay their drivers less, who drive buses that cost less, and who have far fewer support staff. Last year, it lost an estimated €9 million, mostly on these commercial routes.
Thinking about Bus Éireann as three businesses makes it clear what needs to happen.
The parts of the company that are effectively the state, its school bus service and the routes it runs at a loss to help connect rural Ireland, need to be absorbed into the departments of transport and education, respectively.
These services break even and can even be expanded should the government decide it is in the strategic interests of the country to do so. It will also remove this state-level aspect of the service.
Private companies can negotiate with the government to run different services, and taking free travel passes should be part of any licensing for buses of any kind into the future, perhaps at off-peak times.
The school bus service that transports over 110,000 children a day is actually contracted out to around 1,300 private, local operators already and just administered by Bus Éireann, so here the transition back to the state would be comparatively easy.
The PSO routes can be serviced by a mixture of private buses and Bus Éireann buses. It is vital rural Ireland maintains its transport links.
As someone who lives in rural Ireland, I’m more than aware of how tenuous those links are. Post-Brexit, rural Ireland will need connectivity to thrive and public transport is one important element of this.
People need buses to connect rural Ireland. They needn’t be Bus Éireann buses.
The commercial part of the business is where things will get hairy, because this part, with relatively expensive drivers driving relatively expensive buses with large administrative overheads, is the part in trouble.
Apply the following test, route by route. Where the private sector maintains a service at a quality and frequency acceptable to the regulator, remove the loss-making Bus Éireann service. The ‘market failure’ Bus Éireann is designed to correct no longer applies by definition.
Apply the Competition Authority to ensure private companies don’t price gouge if no one is left to compete with.
Where the test is inconclusive, scale back the Bus Éireann service route by route until it breaks even. This will unfortunately result in redundancies and in the sale of some of the rolling stock, perhaps to Irish private operators, perhaps abroad.
Either way, the state will lose money paying for redundancies and writing down losses on capital in the short term. It will also result in hardship for many families. However, the economy is growing and so other work can be found, and more importantly the state will not have to continue to pay for a service the market seems happy to provide at a lower price.
Where the test is positive – probably because Bus Éireann is the only game in town – keep the service, obviously. Reapply the test every five years. If the population remains the same size, the result should be a progressively smaller Bus Éireann, but a larger private sector bus service. If the population is growing, then the service may well need to expand.
Bus Éireann is a good example of Ireland trying to answer the question of whether the state should intervene, and it partially provides the answer.
The state should intervene to bring our kids to school, because access to school is vital. The state should intervene to safeguard our connections to rural Ireland.
The state should pay for our pensioners to travel the country they helped build for free. The state shouldn’t intervene to save a company that can’t survive competition.