Bus Eireann is 5 weeks away from meltdown
Insiders fear legal consequences if they continue trading while insolvent
BUS Éireann is in imminent danger of trading while insolvent and could run out of cash within weeks – far earlier than previously thought, insiders have warned.
Amid continuing consternation at the hands-off approach of Transport Minister Shane Ross, negotiations between unions and management broke down on Tuesday making a strike almost certain if threatened pay cuts get the go-ahead.
A D-Day meeting with the Bus Éireann board is set to take place tomorrow. Last night, informed insiders within Bus Éireann confirmed that finances were so perilous that the board is fearful of the legal consequences of trading while insolvent – a reality now understood to be as early as the end of March in the event of a strike.
Losses are now mounting up by as much as €2,000 an hour and have risen by more than €3m recently. Strike action will add to that at a rate of €500,000 a day.
‘The losses continue on a weekly basis,’ a top level source told the MoS. ‘The Bus Éireann board will be faced with a position where the company is in a situation of insolvent trading by the end of March.’
Bus Éireann CEO Ray Hernan had previously said funds would run out in May, but in response to questions from the MoS last night, a Bus Éireann spokeswoman confirmed that the firm would become insolvent earlier if strike action proceeded. ‘The company could be insolvent earlier as a result of that,’ she said.
Because trading while insolvent can have serious criminal and civil consequences for company directors, the MoS understands that management are particularly surprised at the continued failure of the Government to act despite knowing about Bus Éireann’s financial plight more than a year ago.
Some informed sources say new CEO Ray Hernon has been frustrated at the lack of political backing he has received, particularly because no one on any side of this dispute believes it can be resolved without Government intervention.
Ironically, unions also share that frustration this week, accusing Minister Ross and the Government of alarming ignorance.
Meanwhile, the MoS understands morale among junior ranks at Bus Éireann has resulted in a sharp spike in absentee rates – something that exacerbates the already dire financial situation at the company.
Last month, the MoS published internal documents that revealed more than 100 Bus Éireann employees were on sick leave each day throughout 2016; this rate is now climbing even further. A spokesperson confirmed that Bus Éireann’s sick leave bill increased by 25% between 2015 and 2016 and that absenteeism in January this year, was up 24% year on year. Meanwhile, the MoS has confirmed that two further senior executives at the firm have departed bringing to half a dozen the number of senior managers who have left in recent months.
Chief Engineering Officer Joe Neiland and Chief Operations Officer Sam Simpson have now followed in the footsteps of former CEO Martin Nolan, HR manager Joe Kenny and a number of finance staff who departed last year.
Bus Éireann has kept the severance packages of departing executives secret, citing confidentiality clauses in contracts.
It is therefore impossible to say how much of the sudden and unexpected €3m increase in losses recently announced, is attributable to any such payouts.
But last night the company confirmed that as part of costsaving measures it is to cancel its €17k annual subscription to the International Association of Public Transport (UITP).
This is despite spending tens of thousands on recently departed executive Joe Kenny’s travel to UITP events around the globe – including an event in Moscow days before he left Bus Éireann.
Other confidential files made available by this newspaper last month showed that Bus Éireann had been warning the Government of the imminent danger of trading while insolvent for more than a year – to no apparent effect. Now previously unseen internal correspondence confirms that Leo Varadkar’s Department of Social Protection took three months to respond to a plea for help from Bus Éireann, and then rejected the approach in full.
The correspondence – obtained under the Freedom of Information Act by the MoS – includes an October 26, 2016 letter from Bus Éireann’s then CEO Martin Nolan to Department of Social Protection Secretary General, Niamh O’Donoghue. Mr Nolan wrote that the funding being received by Bus Éireann for free transport customers had not been increased since 2009 and was not sustainable at a time when the firm was facing ‘the most significant challenge the company has faced in its history’.
Three months later – and after strike action had been called – Secretary General O’Donoghue wrote back on January 25th, 2017.
‘Minister Varadkar attaches huge importance to the free travel scheme,’ she wrote. ‘But within his portfolio it will be appreciated that there are many competing demands for funding. I can confirm that my department has been in discussion with CIE and the National Transport Authority regarding the overall funding for the scheme. These discussions will continue in the context of preparations for Budget 2018,’ she concluded.
‘Losses continue on a weekly basis’
Frustrated by the lack of political backing