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COVER STORY: Canberra to blame for Ansett's demise
by Peter Westmore
News Weekly, September 22, 2001
The sudden collapse of Ansett Airlines has been followed by the inevitable recriminations against Air New Zealand, Singapore Airlines, the NZ Government, and anyone else who had a hand in the company's fall.
The real blame lies closer to home: with successive Australian governments which have approved foreign takeovers of companies like Ansett; and which - in pursuit of competition policy - permitted new low-cost airlines to "pick the eyes" out of the most profitable capital city routes, leaving older airlines to provide services on uneconomic routes, particularly in rural and regional areas.
The Ansett fiasco highlights the danger of allowing foreign ownership of key national assets - a consequence of the virtual abandonment of controls on foreign ownership, first by the Hawke and Keating Labor Governments, and now by the Coalition.
An inevitable consequences of the globalised economy - so loudly trumpeted by the Federal Treasurer, Peter Costello, and his Labor counterpart, Simon Crean - is that decisions affecting Australia, its industries, economy and employment, are increasingly being made in the boardrooms of foreign corporations - in Tokyo, New York, London and Auckland.
The decision of Air New Zealand to walk away from Ansett could never have happened if Ansett had remained an Australian company.
A very similar scenario could well have arisen recently with Mitsubishi Motors, whose Adelaide operations were only kept open after John Howard went cap-in-hand to the Japanese parent company in Tokyo, to prevent the plants' closure.
For Ansett, an airline which has existed since 1936, when Reg Ansett flew a single-engined, six-seater Fokker Universal from Hamilton to Melbourne, the collapse has been both sudden and traumatic.
With some 16,000 employees around Australia and overseas, Ansett carries around 40 per cent of Australia's air travellers, and provides vital services to many rural and regional areas.
The collapse of the company has undoubtedly been influenced by bad management decisions years ago in relation to Ansett's fleet of aircraft, and the changes of ownership which arose in the 1980s, when Ansett fell under the control of News Limited and TNT.
But what is obvious in hindsight was not apparent at the time.
In fact, Ansett won the coveted National Travel Industry Award for Best Airline every year from 1994 to 1997, when it had already established a close partnership with Air New Zealand, providing it with access to the much larger Australian business and tourist markets.
Air New Zealand, a government airline privatised in 1989, gained the Howard Government's approval to buy a 50 per cent share in Ansett in 1997. In June last year, Australia's Foreign Investment Review Board approved Air New Zealand's full takeover of Ansett.
Ansett was adversely affected by the Asian economic downturn in 1997, suspending services to Seoul, Kuala Lumpur and Jakarta.
More recently, it haemorrhaged due to the introduction of two low-cost "no frills" airlines, Impulse and Virgin Blue, on the highly profitable capital city routes around Australia.
Impulse, launched in April 2000, did not survive, and was sold to Qantas in May this year.
(Qantas was not immune to these problems. Its Australian operations have been adversely affected by the low-cost competition, and the company which operated Qantas' New Zealand franchise went into receivership in April.)
Ansett's troubles attracted major attention earlier this year when its fleet of ageing Boeing 737s was grounded, pending checks on the company's maintenance records. This forced Ansett to announce plans for a complete refurbishment of its fleet.
The immediate cause of Ansett's collapse was the decision of the New Zealand Government not to permit Singapore Airlines, which owns 25 per cent of Air New Zealand, to inject cash into Air New Zealand (and Ansett) by increasing its shareholding up to 49 per cent, despite the unanimous endorsement of the plan by the Air New Zealand board last month.
Singapore Airlines, fully owned by the Singapore Government, and with a net profit for the year to March 31 of more than $1.5 billion, may well be the ultimate beneficiary of Ansett's demise.
A Government whose Acting Prime Minister, John Anderson, has ruled out any direct intervention to avert the Ansett collapse is unlikely to think in terms of ways of averting similar disasters in future.
If Australia is to have economic sovereignty, it must act to rebuild Australian ownership of strategic companies like Ansett.
A way forward would be for the Australian Government to follow Singapore's example, and set up a fund which can buy into key national enterprises, such as Ansett and Qantas.
The capital base for such a fund could come from the compulsory superannuation contributions currently paid by Australia's nine million employees, billions of which currently end up off-shore, in foreign investments.
- Peter Westmore is President of the National Civic Council