If you’ve ever wanted to understand the Ansett in its full historical and contemporary context then read on as you won’t get a better wrap than this.

Read the history of the airline and you begin to realise just how much of a loss its collapse has been. Since 1936 Ansett’s operation had been notable for its drive, determination and innovation. It was knocked about in the early days by then Victorian Attorney General Robert Menzies, with his introduction of the Transport Regulations Act (designed to stop road carriers competing with the railways Reg Ansett’s first business). But after taking to the air it went on to benefit from the two airline policy for many years, so it wasn’t all hard knocks. Still, regardless of how you view it, the approach by Ansett to things as diverse as in flight service and computerisation was often marked by a singular determination to succeed with something new.

What happened in the last few years of Sir Reginald’s stewardship was not a new thing however. That was to lose focus. In 1976, after having built up a conglomerate of interlinked businesses he purchased Associated Securities. Its collapse two years later placed enormous financial stress on Ansett and gave opportunity for Robert Holmes a Court’s Bell Group, Ampol, TNT and News Corp to fight it out for control. 1979 saw TNT and News Corp emerge as victors with a 50% stake each. Sir Reginald moved to the position of Chairman and Peter Abeles and Rupert Murdoch became joint Managing Directors.

Rupert was keen to extract media holdings, including television operations, out of Ansett. Which he did. Peter apparently just wanted to run an airline. Which he didn’t. Poor fleet purchase decisions were compounded by no route yield management, inadequate internal reporting systems and poor board level management. Coupled with entrenched union demands and work practices which were not sustainable the whole thing was headed for disaster. And of course the owners were going to milk it for cash in the meantime. Failure to reinvest or recapitalise ultimately put the skids under the whole thing.

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The savior in many respects, for both TNT and News Corp, was the deregulation of the Trans Tasman market and the perceived necessity by Air New Zealand to buy into Ansett (lest it be marginalised as a small regional carrier which, ironically, it now is). In 1996 Air New Zealand purchased TNT’s share of Ansett. News Corp was still holding a half share but clearly made a decision that its own focus on media was more important in the long run. And in reality the airline sector was just too risky given circumstances.

Enter Rod Eddington. It’s not clear what his exact brief must have been but perhaps it was along the lines of “Here you go Rod. You’ve got a chance to turn it around make it a great airline and a great business. And if you don’t think that can be done, get it ready so we can flog it off”.

And he did. Taking over in 1997 there were numerous restructurings, reviews and positionings. But at some stage the option to sell became the driver and, by divesting remaining non-core assets, he drove a profit in 1999 of $140.8 million. Clearly it looked good to Air New Zealand and, in February of 2000, it announced it would purchase News Corp’s half share. Eddington departed Ansett in April of 2000 to take up a position at the helm of British Airways (, 05itself now in trouble, currently worth a half billion less than it was last year and more recent losses announced. Seems to be a pattern with Rod Cathay, Ansett, BA. The joke now is how do you develop a great small airline? Give a big one to Rod Eddington). Air New Zealand moved in and Gary Toomey took up the reins, officially, in December of 2000.

It was not to be a happy time. In retrospect it is clear the Air New Zealand Board did not undertake competent due diligence in its purchase of the balance of the airline. Or perhaps they were just compounding an incompetent review when they invested in 1996. Either way, given that it was a shareholder since 1996 it just means that every board member of Air New Zealand were out and out incompetents. That applies to the SIA (Singapore Airlines) people as well. They certainly run a great airline in SIA but their investments in Ansett, Air New Zealand and Virgin Atlantic have been disastrous.

You’d have to ask about old Charlie Goode as well, or Sir Charles Goode as he likes to be known. Chairman of ANZ Bank, well known Liberal Party supporter and recipient of a very nice departing directors payout, he was one of many on the board responsible for the collapse of Ansett and the massive write down in Air New Zealand’s value. Certainly since the collapse precious little has been heard from Goode, Cushing, Farmer or other former board members.

At the time of the collapse all sorts of rumours flew around. Air New Zealand had purchased fuel on Ansett’s account internationally; simulators, parts and engines had been repatriated days prior to the collapse; management had exited Australia hurriedly and so on and so forth. But no evidence has yet come to light suggesting this to be the case. It appears that, in reality, Air New Zealand’s board and executive group simply engaged in what was appallingly bad management making a series of incredibly bad decisions. (Interestingly this does not include Toomey, who was stifled in almost all respects. More of that later).

They were certainly unable to integrate the full operation. This extended to logistical management, in terms of support structures throughout the organisation, which were inappropriate. Admittedly they inherited an airline which had been badly run under News and TNT. Those two organisations lacked the ability, or desire, to reinvest adequately in the business – or to put the right people in the right places. But Air NZ compounded this. They wasted huge amounts of money through inappropriate resource placement. Though in this they were not helped by lack of strong feedback from key people in Australia – always happy to bitch about the problems to anyone prepared to listen – but never in possession of enough moxie (Ed – it’s a word. First I’d heard of it but the dictionary says ‘courage’. Will be a useful one for Scrabble) to front the Air NZ board and actually say it how it was. C’est la vie.

Big companies go under every day. Witness Enron and HIH. So when they do it makes a splash. But where you might have looked for something odd going on a la Skase, Pyramid, or Enron – in this case (Ansett) it was just out and out bad management. Which must make ANZ Bank shareholders nervous.

The ASIC investigation, and action by the administrators, may eventually uncover something not quite right. But even if they do, the payment on behalf of Air New Zealand by the NZ government has resulted in a release of claim against those directors by the administrators. And with jurisdictional issues and pragmatic governments on both sides of the Tasman it is unlikely any further action will be taken. (At the time it was felt that, even though the investigation was not complete and Mark Mentha felt uneasy about signing such a release, the ability to secure $150 million was a case of “one in the hand is better than…” This also enabled Ansett Kick Start to operate supposedly helping to retain value in the assets).

No, the collapse will make for interesting business school case studies – and no doubt someone, somewhere, will try and craft a cheap PhD out of it or worse, make a living in some third rate business school by writing a book on it – but it is everything else which has gone on before, during and after that is really interesting.

The issue of recapitalisation was not just one for News Corp and TNT when they were about the place. It rapidly became an issue for Air NZ as well. There were two attempts to secure funds, in both instances from SIA. But the first was problematic for major shareholder Brierley Investments. At the time Air NZ shares were trading around $1 but the carrying value of their holding was around the $2 mark. Obviously selling to SIA at that stage would have resulted in a loss. Investment by recapitalisation would have seen restructuring and a likely increase in share value. Hence the refusal to allow SIA to get the sale.

Round 2 sees Gary Toomey fly to Singapore and get a signed MOU from SIA enabling investment of $1 billion. And unofficial Foreign Investment Review Board approval had been given for the Ansett purchase. The bureaucrats in NZ were also giving the deal the nod. But it turns out that political imperative prevails in New Zealand as it does everywhere else.

Jim Anderton, Deputy Prime Minister, put his foot down on his desire to see anything and everything renationalised. Rail and banking had been, so now it was time for the aviation sector. Failure of Helen Clark to approve the move would have meant the end of the cosy coalition. So at the expense of close on $1 billion, market uncertainty about New Zealand as a place in which to invest and a direct loss of 17,000 Ansett jobs (and some at Air NZ) Clark and Anderton denied opportunity for SIA to increase its holding and effectively scuttled any real chance of recapitalisation.

Bad management had put Air NZ and Ansett in the proverbial. But it was political dogma that prevailed to hang 17,000 Australian workers out and charge the rest to the New Zealand taxpayer.

It is worth repeating. Bad (senior) management led to a very serious situation. However, politically expedient decision making prevented private capital being used to reposition a company with a consequent cost of $1 billion to the NZ taxpayer and 17,000 direct jobs in Ansett.

Of course Howard, Anderson and Dixon didn’t help. Despite Howard and Anderson being well aware of the problems facing Ansett and the steps required to provide a solution, they buckled to the lobbying of Qantas chief Geoff Dixon in seeking to prevent a threat to his airline. To be fair, Ansett was a foreign owned subsidiary operating in a competitive market. But the lack of spine from Howard and Anderson ran contrary to their stated concerns of employment for Ansett workers.

That being the case there is now no rationale either could offer to allow Mitsubishi, for example, to be subsidised again. SA state election or not. Mitsubishi management suggest they have a “business plan” – but so did Ansett. So, for that matter, did Air NZ under Toomey. No, the rationalisation for support of Mitsubishi went out the window with Ansett. That will make for an interesting decision when it comes.

With Ansett, neither Howard nor Anderson, nor any of their advisers, actually did the analysis to see where it may become problematic. What they needed to do was not put money into Ansett but to lobby. They were right that it was a company operating in a competitive market. But not to lobby the NZ government in the most vigorous way possible was inexcusable. They were happy to subsidise Qantas by omission.

For some while it had been a matter of conjecture about who would fold first, Ansett or Qantas. Ansett had its share of trouble but so did Qantas. A bloated operation, it had never really operated a very profitable domestic service since being given Australian (formerly TAA) and being absolved of a $700 million debt. The foreign routes were competitive and profitable, so they could continue to cross subsidise domestic operations, but with the advent of Compass I and II, Impulse, Virgin and the possibility of a revamped Ansett the threat was clear. And, again, the cost of operation inherent in a full service air line, together with the massive advertising budget, salaries and entrenched union positions on conditions and practices meant they were struggling. It was luck that kicked in. Had Ansett not gone under on September 14th and the terrorist attacks had still happened, Qantas would have found things very tight indeed. But they were saved from the massive overseas downturn by Ansett’s failure and the subsequent ability to price gouge anyone forced to fly with them. Still, you can’t blame Dixon for doing what he did. He was trying to secure his outfit and fair enough.

His approach was mediated by old Max the Axe, Max Moore-Wilton, the head of the Prime Minister’s department. And Max just loves Qantas. In flipping Howard over we ended up seeing messenger boy Anderson sign off on New Zealand’s reluctance to allow SIA in. Not known for his intellectual gifts “messenger boy” is really the appropriate role for him. And of course he was not going to stand up to Max or the PM. Especially Max. Anderson was, and continues to be, in the way. It is frightening to think of him having anything to do with aviation policy. And Max is welcome on the flying kangaroo anytime.

And Gary Toomey? Sure he wanted to be a CEO but the Qantas board chose Dixon over him. He was already leaving the flying kangaroo when Farmer, Cushing and others approached to see if he wanted to run things. His assessment was that things were rough badly so. But recoverable nonetheless if recapitalisation became available. SIA were the logical choice and he secured that.

But surely ego took over. He must have been confident that he could roll the dice and succeed, even if he had no control over the NZ political agenda. Which of course he didn’t. But he gave it a go at a time when the Clark government was feeling especially sensitive and xenophobic (even racist). No, it was a good shot but fell short of the mark.

In reality Toomey and his team did achieve the targets set by the board when he was brought in. Hence he, and others, (including new Tesna/Ansett Mk II CFO Adam Moroney) earned their bonuses. He did identify huge savings to be made in work practices, had negotiated with unions and drove Ansett into profitability in the three months prior to the collapse. Looking to re-launch in March of 2002 he would have succeeded had he not been stymied by Clark, Anderton and Cullen. He is a convenient scapegoat – and arguably did not handle the crisis well by retreating to New Zealand. Had he come out in public and explained the situation to the media he would have been cleared in no time flat. But he made a rod for his own back in staying quiet. And despite claims that he misled staff and customers that was not the case. Sure, Air NZ had a billion dollars in the bank, but ratios on the borrowing covenants would have been breached if they had drawn down any more of that line of finance. The banks would have foreclosed on them (including Charlie Goode’s ANZ). The critical element for Toomey was the investment of $1 billion by SIA and that was set to go. And blocked. The union boys at Tullamarine probably did the right thing when Clark was held up. They had the right target but probably for reasons they were not aware of.

The other option for Toomey had been the purchase of Virgin Blue. At one time struggling, it would have provided an immediate boost of market share from 41% to 48% – with a payback in something around a year. It would have been difficult for Qantas to counter that. But Virgin recovered before Toomey could get that through and have been sitting well ever since. Now with 12% of the market (vs. Ansett’s current 6% and Qantas with 82%) they are going from strength to strength. They are running profitably at around 7.5 cents per passenger kilometer and calling on 100 staff per aircraft operational. Qantas are running at about 18 c per passenger kilometer with 180 staff per aircraft operational. No wonder Dixon is pushing to get the unions to agree to work practice changes. And he will continue to do so. The unions are on the back foot in this whole affair but they won’t say that publicly.

No, it was a sad state of affairs that led to Ansett’s demise. And what an interesting set of events followed it. With the World Trade Centre attacks making what would have been Australia’s most prominent corporate collapse a side show, that first weekend was an interesting one.

Price Waterhouse Coopers had been called in to administer the company. That was on Wednesday. By Monday they had resigned. Supposedly on the pretext that they had a conflict of interest in advising the Air New Zealand Board. But of course they had advised them. They were called in to provide advice on how a foreign subsidiary in a foreign jurisdiction under a foreign corporations act should be handled in administration. It’s like talking with the plumber about a problem and then getting him to fix it. They advised and were given the task.

The Corporations Act is an interesting one. A lot of it does not deal with a company in administration but the bit that does says basically that a company has three options. It can be sold as is (liquidated), the administrators can be removed by creditors or the whole thing can continue to trade in an attempt to move out of strife. And the Act also requires that once an administrator is appointed they need to do a few things very clearly. Make an assessment, make recommendations, ensure that a meeting of creditors is called on day 5 after their appointment, operate independently and maintain their absolute priority – which is to ensure creditors interests are placed first and foremost.

Which, from all reports is exactly what PwC did. In fact a buyer was in Australia over that weekend and willing, subject to a few provisos, to purchase Ansett and operate with a staffing level of 10,000. A point worth repeating. A buyer was is Australia that weekend talking with PwC and willing to purchase, likely before December 1st, and restructure at a staff level of about 10,000. That option was scuttled when other interests came to the fore (see below).

But the Act is really written for small companies. It’s easy if Fred’s Engineering goes through the hoop. The fifteen or twenty local creditors, 8 staff and the administrator can sit around the lunch table and thrash it out. And they can do that, physically, on day 5 and on the subsequent meeting required approximately 3 weeks later. It’s a bit difficult to do that with 17,000 staff dispersed over a country the size of Australia, with no or little communication, several hundred major creditors (secured and unsecured), 3 million smaller creditors and assets which are a mixture of fixed, leased and other.

Ansett’s demise has revealed a series of major flaws in the way the Corporations Act operates, or doesn’t, in the event that a large organisation falls over. It certainly does not deal with one that is a major entity, a foreign owned subsidiary with a geographic distribution of staff, operations and assets. Hence the regular appearances before the Federal Court where Justice Goldberg has been presiding.

He’s been presented with a number of difficult situations which have required pragmatic and timely decisions. Some of which have been understandable and, at the time, reasonable given information to hand. But in some instances, although the Corporations Act is loose and open to wide interpretation, many have seen the decisions as being law made on the run and to the detriment (read sense of fairness and natural justice) of many small creditors. Most notably in regards the fairness and representation of all employee interests.

(The union has conveniently forgotten middle management staff, many of whom have been with the company for 10, 20 or 30 years sometimes more, have been members of the union for as long, had nothing to do with Air NZ decisions and in many cases were opposed to them. It seems the old perception of class war still exists in some quarters. If that’s the case why do they accept management staff membership dues? Could it be that the union business is just that, a business (a bit like the health funds “not for profit” but we’ll take big packages all the same if you don’t mind)).

PwC were faced with an enormous task, a massive investigation over several jurisdictions and a pressing necessity to attempt a salvage and get things running as quickly as possible before people just bailed. Perhaps they may have been able to do that within the period of some 8 12 weeks huge task that it was. Perhaps not. We won’t find out.

Unbeknownst to many the game of company administration is a competitive one. When it comes to Fred’s Engineering it will often be the case that a set of small company receivers will lobby and compete for the business. By approaching each creditor and arguing how they might get the best return for them they set up the chance on day 5 of being appointed in place of the administrator already there. But at the big end of town that is not how it is played. Or was until Ansett happened. Up until that time there was a gentleman’s agreement that basically saw each of the Big 5 back off once an administrator was appointed. Not in this case.

Enter Solly, his lawyer mate and the ACTU

Enter Arnold Bloch Liebler, the Melbourne law firm. Mark Liebler is a close buddy of Solomon Lew’s and, with little Bill Kelty on Lindsay’s payroll, you could always suppose that Mark calls his mates and says “have we got an opportunity for you!” But that might be a bit uncharitable. Anyway, the scenario goes something like this…

The ACTU eventually wake up to the fact that their position of influence in the aviation sector is under severe threat. Even more so if all positions at Ansett are put on contract. (What the buyer at 10,000 staff wanted to do). That would open the way for Qantas to do the same and it would be goodbye hold on the aviation sector. What do they do? Well, they needed a friendly administrator and ABL just happened to recommend Andersens.

You can imagine the call from Leon Zwier at ABL to Greg Combet at ACTU headquarters. The concern would have been noticeable. Although in this instance it appears that the concern would have been for that of the position of the union hierarchy, not for any of the members. (From all accounts it took a fair number of explanations to get those bright sparks at ACTU headquarters to realise their own predicament). The pretext is developed of conflict of interest and the call is put through to Peter Hedge at PwC from Combet that, sorry Peter, you’re doing a great job but we can’t co-operate with you anymore. So of course he has no choice but to resign and does so in tears of frustration. It wasn’t just the fees that he was losing it was the opportunity of having a significant number of Ansett staff back at work very quickly. Albeit all on contract.

That concept being too much for the ACTU the spill was completed with a visit to the Federal Court and Justice Goldberg. Who proceeded to allow Andersens onboard provided approval was given at the day 5 creditors meeting the next morning. Interestingly, he also gave approval for the ACTU to represent, by proxy, all members in the Ansett staff, despite no authorisation being given to the ACTU by individual staff. The rationale was that, because of physical limits and the rapidity of events, in order to comply with the day 5 creditors requirement of the Corporations Act, basic rights and representation (informed or otherwise) would have to be discarded. And Goldberg also figured that because the Unions had represented most Ansett staff in previous pay negotiations they automatically had a right to be the proxy voice for all in this instance. How democratic.

Should Goldberg have delayed the creditors meeting?

Sure, it was a difficult set of circumstances that were operating, but Goldberg seems to have placed all importance on the actual timing of the day 5 creditors meeting. No thought, apparently, to the notion of simply suspending the day 5 meeting for a month or so in order to secure appropriate, democratic and informed representation at the creditors meeting on behalf of all creditors. (Interestingly Goldberg has had no problem delaying the second creditors meeting. Why he figures the first to be writ in stone and the second not is anyone’s guess? It was pragmatism through and through, and although there were difficult circumstances applying, the results and decisions from the court are, in many ways, deeply disturbing. But with the usual apathy applying in Australia no bastard will challenge the decision. (You could just imaging little Johnny Howard saying something like “it’s un-Australian” if that happened).

To date not all proxy forms have been gathered. That appears to have just been glossed over, like so many issues in this whole business. Yes, it’s amazing just how pragmatic the courts can be when it suits them. Due process appears to be having more and more lip service paid to it.

Andersens and ABL appointed as buyer flys the coop

Following the appointment Andersens, the administrators appointed, guess who, ABL, as legal advisors. So it was jobs for the boys, a bit or work well chased down and won and we get to packet some nice fees. But that’s the competitive marketplace. After the Federal court appointment of Andersen’s the “mystery” buyers flew out of Australia, commenting as they departed that “it had all become too political now”. If you’ve been unemployed since you may want to consider what may have been.

Nevertheless, regardless of how they came on board, Andersens in their own right have been undertaking a huge job. It’s not just an accounting exercise but one of massive logistics, negotiation, retaining market confidence, risk management, politics, trouble shooting and wheeling and dealing. If creditors come out of this with anything it might be thanks to the team under Korda and Mentha. We’ll see. Or perhaps it will be in spite of them. But whether Andersens will be around themselves after Enron is anyone’s guess. Maybe PwC will do the liquidation.

The Marks should never have started flying again

In hindsight it would have been better for the Administrators to simply have grounded the whole thing and applied all their resources to driving the sale forward. Nobody now believes that any real value has been retained in Ansett by its continued flying operations. With all staff to the pumps and not having to worry about day to day operations the sale could have been completed by the end of December – with a new years launch. That may not happen at all now, at least with Fox and Lew, although they haven’t given up yet. But Sydney Airport is still proving to be a big sticking point. In fact many of the airports are a sticking point. Clearly the administrators and Fox/Lew assumed the airports would just roll over and wag their tails. Interestingly they forgot completely (or just didn’t care) about competition or advantage for the consumer. No, old Lindsay and Solly were quite happy to stick as little of their own money into the venture in an effort to stick it to the consumer. So maybe the various airports will be seen as champions of the consumer. Not through any real concern for the flying public but simply by virtue of circumstances coinciding.

The real problem at the moment is that Mentha and Korda are losing over $5 million a week in operating costs (they can’t stop because of forward bookings taken). Money out of the $150 million from NZ that could have been used to pay out entitlements and creditors. To date about $90 million has been chewed up in operating losses. Add to that another $45 million or so in fees and Ansett has a couple of weeks to go. Just enough time to secure the paperwork! Maybe.

The previous notion (in hindsight) of grounding, and an earlier sale consequently, is looking like it was the better strategy. Interestingly the one put forward by PwC. This is not to champion PwC (given any of the “big 5” are on the nose anyway) just that Hedge’s proposals now seem sound (contrary to Mentha’s comments who, in meetings with staff at the airports late last year, was all very scathing about the notion of grounding. And who, interestingly, stated categorically that Sydney Terminal would be retained for at least 12 months for separate sale to a buyer later in 2002, preferentially Singapore).

No mind, for the two Marks it was on with trying to secure the business and rights of the creditors. The ANstaff bid was doomed as soon as they headed overseas to seek funding. A great business plan from all accounts but no real backing. It was soon apparent that Fox/Lew were the go. Originally opening a data room for due diligence the current Lang Corp/Virgin bid is annoyed that (they say) they didn’t really get a fair chance to look things over. Whether that bid will go ahead now is still unsure but there were some put out people on that one. Of course Fox/Lew made it pretty clear that they did not want any counter bid reviewing the books, or they would walk, or sue the administrators, or both. Lang/Virgin were willing to take a legal approach too but this gave Andersens an out in that they could throw it before Justice Goldberg. Whichever way it went would be down to the court and not their fault. How ironic that Fox and Lew are now reportedly in London talking to Richard Branson as a last gasp saviour of their bid.

As it stands at the moment secured creditors (ie: employees, union and non-union (yes there are quite a few)) are likely to get all entitlements. Unsecured creditors are likely to get around 5 cents in the dollar. Still a sad state of affairs (for what might have been) given that Ansett, although badly run under previous senior management (ie: board and managing directors) managed to turn a profit on occasion. Had Toomey been able to complete his restructuring and launch in March this year it’s likely that it would have ended up a very healthy airline.

The Lang/Virgin bid is still on the table and active. Now, with Toll/Lang consolidating across the intermodal logistics structure this bid may be increased. Which would annoy Lindsay (and his budding entrepreneur son) and Solly who have spent about $40 million in costs to date. They may walk or they may up it again themselves. It will be interesting to see. So far the front cost to Chris Corrigan has been a single A4 sheet of paper containing his bid to Mentha and Korda. (Who from all accounts felt it was a little beneath them. Corrigan is probably holding the whip hand at the moment and able to put pressure on the administrators by upping bids and working the government controlled Sydney terminal element to his advantage).

The Fox/Lew sale currently puts in about $270 million cash and assumes about $244 million in transferred employee entitlements, although this figure has now fallen with only 3000 workers getting gigs with Tesna. What the entire sale will end up being valued at is open to debate at this time.

Unions have cost 7000 jobs so far

Of course the ACTU would not like to see a “Patricks” branded terminal at Sydney or anywhere else – so the vested interest of the union hierarchy may well come right to the fore. White, Combet, Shorten and others of the ever shrinking union movement continue to manoeuvre. It is worth remembering that the ACTU has already cost 6000 jobs through self interest. And now a further 1000 have gone, something Greg Combet is hoping everyone will overlook. And still the whole thing may go to liquidation. In which case everyone ends up with about 5c in the dollar. Not a pretty state of affairs. The ASU has other reasons to be a little miffed (and indeed its members might rightly take to the leadership with an axe after this) in that the previous call centres have been right royally screwed with the news coming in that a new call centre may be set up in Canberra! Linda White negotiated that well. And the ASU seemed so sure of itself when it told staff it had secured the best outcome at the aforementioned call centres. In the meantime Geoff Dixon continues to hammer the ACTU so Little Johnny must be rubbing his hands with glee.

With all the wheeling and dealing it is difficult to see how many motivated people (union and non-union) will remain on staff. Of course Tesna, and Lang, still need people.

Far too little information provided

Now an issue in its own right. The administrators, Tesna and KPMG have been guilty of providing too little by way of accurate information regarding employment. Start dates have been moved, cancelled or simply suspended. And the tone of many letters to staff has been intimidating at least (implied threats abound – see below).

The suggestion is that this whole thing is just a real estate deal anyway. The Financial Review’s Alan Kohler thinks this is not so but consider this. Holding companies, not just Queenscross, the first in a series of mechanisms to separate assets and lower risk profile, have been established. (That outfit is the one actually employing Ansett people). The scenario may be that, by hiving off terminal and other real estate into a separate holding company, the airline operation can be driven. If it makes a profit, great that pays for our real estate say the boys. If it looks problematic, well, we just fold it up. The nice thing is that cash can be extracted (a la News Corp and Ansett) across to the property holding company.

The interesting aspect on the entitlements (transferred or not – and under award or contract – from Ansett) is that KPMG and Clayton Utz (now referred to in certain circles as Clayton Putz) have put together employment contracts for staff that have a very nice “out” clause and sufficient ambiguity and terminology references which are not defined (if you’d put a contract together like that in law school you’d have been kicked out) that effectively remove entitlements liability. Yes, it seems as if Tesna is giving itself an option to fire staff in the event of a necessary downsize or fold, without the need to provide cause or entitlements. That’s a nice saving for them. Not terribly just, but then what has been in this affair? At least Lindsay and Solly will come out with some nice freehold real estate. They could call it the Yannon terminal.

James Hogan recreates the bureaucracy

But never mind. It may well all be just pissing in the wind. With the appointment of wunderkind James Hogan (who repeated year 12 in 1975 at Crikey’s old school of Ivanhoe Grammar in Melbourne) the questions are starting in earnest. Ousted from British Midland following a request from the board to reduce costs and responding by increasing them dramatically (just what Tesna needs against a lean and mean Virgin Blue). He’s already paid himself and his friends a nice salary and, of greater concern, has brought back in all those organisational levels that were finally thrown out just a few short years ago. The airline industry cannot be that small that they continue to recruit people with no ability to learn from history or the experience of their own company. Well, perhaps it is.

Compounding this is his reported attitude of arrogance coupled with a predilection for employing a number of old faces that needed to leave some time ago and did. Don’t mistake them for the talent that left. These people have a track record of not contributing to Ansett. Everyone knows this except KPMG and Hogan it appears. His recruitment of individuals with dubious ability, except in the area of self promotion, raises serious question in regards any level of astuteness that he may have. One major problem is KPMG itself as recruitment adviser. They must have just dug up old files and decided, on the basis of who it knew in the bad old days, to recruit them. The team of 17 executives now surrounding Hogan has a few good people – but few is the operative word. This might sound as if it is just bitchiness but in reality it is an issue causing great concern amongst Ansett staff. The grape vine works quickly and it is affecting morale already before the thing is flying. And it is not sour grapes. It appears staff are genuinely concerned that significant contributors to Ansett’s lack of competitiveness over the years have been recruited. Had KPMG any sense at all they would have done some serious question asking, quietly, of a range of people on a range of people. Too late now.

It’s not all over yet, not by a long shot. And we wish the new Ansett well. But a tough road it will be, with the likelihood that Qantas is going to pull a few tricks out of the hat. With frequent flyers and golden wing members to be shafted the big Q is probably going to offer a deal on points outstanding and, voila!, goodbye loyalty. Fox and Lew are wrestling with that one now. Diners Club already have and are losing ground fast. Despite the full page advertisements suggesting how caring they are, their membership base is collapsing around them as people move to Visa. Diners is too expensive for most merchants in Australia (and abroad) and no longer has any points advantage.

Virgin still runs rings around both Qantas and Tesna in terms of staff motivation, efficiency and economics. They are not full service but they have a good niche and 20% of market share is not an unreasonable target. Chief front man David Huttner figures 12 months tops for Tesna more likely 6 months. With the arrival of new jets for Q, Australian kicking off later and possible capital injection through a float or joint venture for Virgin, Tesna will have to move quickly.

Goodbye to union feather-bedding

In the meantime the ACTU is likely to get a bagging at the hands of Geoff Dixon, so perhaps the stranglehold they have had on aviation for so long will end. And not before time. For years the travelling public has subsidised these guys with exorbitant ticket process just so they can unload the plane in an hour and break the china. Or kick in with a refuellers strike just to annoy you. It will be nice to see that behaviour out of it. Sharan Burrows had been noticeably distant from Combet over this issue and he has backed off with alacrity as well. Too late.

With a bit of luck Ansett Mk II will get there. They’ve re-signed the AFL and there is still huge goodwill towards them. The best thing about Ansett is the people and they really do make it a great outfit. Hopefully it will survive to fly again. We’ll see after the 30 days. At which time the potential for legal action against the administrators and members of the creditors committee will become clearer. Either way there is now a chance we all might be departing from the Patrick Terminal rather than the Yannon Terminal soon. But don’t discount Fox/Lew or their investors/partners. Regardless, Greg Combet is not looking as secure as he once was and this can only contribute to an acceleration of the decline of the ACTU as the truth behind their involvement in the Ansett administration comes out.


Positive feedback

Dear sirs

Please pass my compliments to JF Smith. The article on Ansett is the best analysis I have seen, and makes a lot more sense than the ill-informed comment in the daily and business press. I wish there were a lot more JF Smith quality journalists out there – a bouquet to him/her, and to you for publishing it.

Best wishes, Richard

Expect an attack from the unions

Dear sir,

I await with interest the responses to J F Smith’s analysis of the Ansett debacle. From past experience, I predict a sprinkling of emails from former Ansett workers deploring the attack on the unions and the ACTU. They will all identify ‘inconsistencies’ and will all include a number of similar (or indeed the same) phrases/words. For me, this implies a degree of planned response to any intellectual criticism of the union movement.

Throughout the last 6 months, the unionists have sought to portray Ansett workers as downtrodden and victimised. According to them, Canberra and Helen Clark are solely responsible for Ansett’s demise. The J F Smith article indicates otherwise. But the union spin media experts are desperate to fight back.

regards, Michael