Unfortunately, it may be far too close to an election for Australian taxpayers to come out unscathed from the Ansett debacle.
The crisis has been triggered by two major factors. First, Ansett itself is losing more than $1.3 million a day, largely due to past poor management, in particular an inability to update its fleet. Secondly, its parent, Air New Zealand is also in strife. Air New Zealand’s strife has continued because Singapore Airlines withdrew from an earlier proposal to increase its stake from 25 per cent to 49 per cent. This increase in the capital would have flowed through to Ansett.
Ansett’s position has been made worse after comments from Air New Zealand’s acting chairman, Jim Farmer, that the future of Ansett was essentially in the hands of the Australian Government. That statement was at odds with the commercial reality that Ansett is the subsidiary of a New Zealand company.
In the past couple of days, activity in New Zealand for a rescue package for Air New Zealand itself has not included Ansett. Those efforts involving the New Zealand Government and Brierley Investments appear to be heavily coloured by the fact that Air New Zealand is seen as the national carrier and that New Zealand, as a matter of national pride, must have a national airline. If that it requires the cutting away all of the Australian- based Ansett, then at the so be it. If that happens it would have been an appalling investment for Air New Zealand which paid $1 billion for Ansett, in a deal with Rupert Murdoch’s News Corp completed in the second half of last year.
There will be huge pressure on the Australian Government in the face of New Zealand apathy about at the fate of Ansett. Ansett has 16,000 employees in Australia, 40 per cent of domestic aviation market, contracts with firms employing a further 45,000 employees, 2.5 million frequent flyers and, of special political importance, 62 per cent of the NSW regional and rural market.
With an election perhaps two months away, the pressure on the Australian Government to intervene or maybe too much to bear. But it should resist. It is not saving a national carrier. The Government has made much of its new willingness to listen to rural and regional concerns and concerns about the affect of globalisation in the wake of major electoral defeats in the West Australian and Queensland state elections. In the past six months it has watered-down its dry economic policy (to mix some metaphors). Often the changes have been a ridiculous waste of government money, exemplified by the funding of the Alice Springs-to-Darwin railway and the appalling decision to bail-out the HIH insurance group with an appropriation of $640 million of taxpayers’ money.
To date, however, with respect to Ansett, government ministers have been making it the right noises. The Minister for Transport and Acting Prime Minister, John Anderson, has said that the board and management of Air New Zealand were responsible for Ansett. The Treasurer, Peter Costello, has framed his comments around commercial possibilities by saying that the Government would welcome a new investor in Ansett. And Prime Minister John Howard, before leaving for the United States made it clear that the Government was not interested in being an equity partner in an airline.
However, none of those things rule out a cash injection, a tax holiday, or other form of subsidy. With the election on the horizon, the government is less likely to look at long-term considerations. This is unfortunate because despite an inevitable hiatus, there is enough air transport demand in Australia for Ansett’s infrastructure, aircraft and staff to be fully utilised by a future buyer, whether that buyer takes the whole lot as a going concern or whether Ansett is broken into parts.
Despite the short-term trauma, it would be a better to wait for that to play out rather than have an instantaneous government prop up that would cost taxpayers dearly in the long term.