The Air New Zealand board and the Australian banks that control the business have no shame in cutting Ansett loose and attempting to blackmail the Federal government into bailing it out.
And even the decision to appoint Pricewaterhousecoopers is questionable because they have been long term advisers to Air New Zealand. My bet is they’ll go soft on the board, which includes ANZ Bank chairman Charles Goode.
The amazing scenes at airports around Australia on Friday and the cascading effect of the collapse through the economy and the community will ensure that dramatic action is taken.
Air New Zealand will never recover as a consumer brand in Australia as you can expect a major consumer boycott against them for their reprehensible behaviour.
The decision by the Howard government to bail out the workers with a ticket levy is pretty crude but it just goes to show how desperate they are to win the election and how precarious the budget must be after Tampa, the deferral of the Sydney airport sale and the HIH bail out.
Qantas CEO Geoff Dixon was using his cash for comment customer John Laws to get the message out on Friday. His words of sympathy and solidarity rang very hollow with Crikey as it was Qantas that really turned the price war atomic and should have been clobbered by the ACCC for predatory pricing and swamping the market with excess capacity.
And Howard went too far agreeing to give the Ansett workers 8 weeks redundancy pay. One of the reasons Ansett went broke was because the excessive union power and restrictive work practices were so entrenched you could never buy your way out of trouble. Seeking the 4000 redundancies needed to get them up to world’s best practice on staff ratios and the like would have cost several hundred millions and sent them broke. This is the major reason why Air New Zealand have cut and run. The only way to survive is to dramatically reduce the cost base without paying the workers for the privilege.
Now that the government is doing that, someone can come in and buy the planes. The obvious buyer is Singapore but they have already damaged their brand name and corporate reputation significantly by endorsing the cut and run strategy just to protect their existing 25 per cent stake in Air New Zealand.
Singapore would have been smarter to let the whole combined Air New Zealand/Ansett business go into receivership and then bought the operations (minus the debt and a few thousand staff) from the administrator.
Crikey flew with Ansett to Adelaide on Thursday ahead of the Australia Talks program in Port Augusta but was left stranded by the decision to stop flying and had to drive the hire car all the way from Port Augusta to Melbourne after Qantas said it would be three days before I could get a flight. Still, given what has happened in the US, we shouldn’t whinge about trivialities such as a long drive.
Now, this is some earlier material we published on Ansett before the administator was called in:
What about the News Corp legacy?
Rupert’s News Ltd newspapers are also being ridiculously soft on the company about Ansett. The fact of the matter is that Rod Eddington, a current director of Qantas and the chief executive of its major shareholder British Airway, was in charge of Ansett for 3 years when Rupert still held his 50 per cent stake.
And Rod still sits on the News Corp main board to this day and is helping call on the shots on this ridiculous notion of Qantas buying Ansett. News Corp allowed Ansett’s fleet to become the world’s second oldest and also tolerated the Noah’s Ark lunacy of Rupert’s mate Sir Peter Abeles in buying two of every different type of plane.
With PMP and Ansett both going up in flames, the lesson from all this is to never buy a business from Rupert.
UNIONS NEED TO WAKE UP TOO
The Ansett collapse is a classic case of balancing the interests in Australia between shareholders, workers and customers.
The cosy duopoly permitted union feather-bedding at Qantas and Ansett for years and customers paid through the nose as a result.
You always get more concentrated industries when you don’t have flexible labour markets because smaller competitors invariably fall over and get snapped up. Now we’ve got Qantas looking at buying Ansett for $1 which would be an absolute disaster for consumers.
The fact of the matter is that Ansett’s staff ratios are poor by international standards. Even Singapore’s staff costs are 30 per cent lower than Qantas and this, together with Singapore’s great gateway location, has enabled it to become the world’s most profitable airline.
Air New Zealand has been unable to achieve the staff savings it envisaged with the full Ansett takeover and is now in the hands of its bankers, which are largely Australian.
CHARLIE GOODE DOES A RAYNER
The role of prominent Liberal Party donor and establishment figure Charles Goode (club memberships include: Melbourne and Australia for lunch and cigars; Kooyong and Royal South Yarra for tennis; Royal Melbourne and Frankston for golf) is very interesting in all of this.
It looks like Charlie is doing a Mark Rayner. Rayner was chairman of NAB and chairman of Pasminco which has gone done in flames with NAB exposed to the tune of $150 million.
You see Charlie is chairman of the ANZ bank which is heavily exposed to Air New Zealand/Ansett like all of the Australian majors. Charlie is also a director of Air New Zealand, representing his mates from the Singapore Government and Singapore Airlines which own 25 per cent of Air New Zealand.
Make no mistake about it, the Australian banking cartel, which makes $10 billion a year in profits and permitted Air New Zealand to buy Ansett, is now trying to socialise the losses they are about to suffer on their collective $2 billion exposure to Air New Zealand/Ansett.
Charlie Goode is an expert at getting his way with the Howard government as was demonstrated by his Woodside Petroleum campaign against Shell. You see he is also chairman of Woodside and didn’t think it would be in the national interest for Shell to move from 34 per cent to 54 per cent.
The poor old Singaporeans look like they’ve paid about $6 billion too much for Optus and are now trying to save something from the wreckage of their $250 million investment in Air New Zealand.
Clearly relations between Branson and Singapore Airlines are pretty ordinary these days after Branson knocked back their $250 million offer last week.
When Branson got into financial strife a couple of years back he sold 49 per cent of Virgin Atlantic to Singapore Airlines for almost $1.5 billion but Virgin Blue is 100 per cent owned and he remains reasonably cashed up.
THE ANZ CONNECTION
The mainstream media is yet to pick up on the ANZ connection in all of this. You see Qantas chairman Margaret Jackson just happens to sit on the board of ANZ and has made more than a $1million from her options and directors fees over the past eight years.
And Air New Zealand chief executive Gary Toomey also sits on the ANZ board so it would be fascinating to know what’s been going on inside the board room. Just how much is ANZ exposed to Air New Zealand.
CAN AIR NEW ZEALAND JUST WALK AWAY?
Air New Zealand claims it has legal advise that there is nothing stopping it cutting Ansett loose, even thought the business is 100 per cent owned. But this again comes back to the question of bank guarantees. The dopey New Zealand PM Helen Clarke can claim that Ansett is Australia’s problem but there are Aussie finger prints all over Air New Zealand, most importantly in the banking syndicate.
The Australian corporate directors club, which is thoroughly represented on the boards of our banks, has decided to try and socialise the losses of Ansett to protect their bank profits. The Air New Zealand CEO is an Australian who sits on the board of one of these banks.
And even the chief executive of key Air New Zealand shareholder Brierley Investments is an Australian called Greg Terry, who was poached from CS First Boston’s Melbourne office in 1999.
Brierley Investments is now based in Singapore and they have behaved just as badly as the Kiwi government in trying to stymie the original move by Singapore Airlines to lift its stake in Air New Zealand from 25 per cent to 49 per cent.
LET THE SHAREHOLDERS AND BANKS FOOT THE BILL
Crikey says that the Air New Zealand equity holders should lose everything and the banks should take a severe haircut before us taxpayers get involved in any bailout. And we should not allow a Qantas takeover that breaches the Trade Practices Act by substantially lessening competition. The Australian banks are collectively worth about $140 billion at the moment so a little $500 million haircut would be like water off a duck’s back.
UNIONS NEED A WAKE UP CALL
And the unions should wake up to themselves and accept that we need dramatic productivity gains in the airline industry to remain globally competitive and to stop serious price rises for consumers. A few thousand jobs at Ansett will have to go no matter what happens.
Bill Shorten and Greg Combet were mouthing the usual platitudes to Ansett workers outside the company’s head office last week.
The Ansett staff should get together and relaunch their mooted management buyout of last year and it is good to hear the pilots are apparently doing this. Whatever happens, several thousand Ansett workers will lose their jobs because the business has been shown up by Virgin Blue as completely unsustainable.