Dragon Air to buy ANSETT AOC(??)
Article reproduced courtesy of Woomerra on Dunnunda
Dragon appear to be one of 3 potential buyers of the Ansett AOC.
SQ seems to be the frontrunner.
What are Dragons plans? Clearly they are trying to break away from Cathay domination. Do they really plan to start a new domestic airline in Oz?
Would be easy for them, just transfer a few 320's and do what they do now into China. Have flown on them twice and they are better than Qantas service in Australia so would give them a run for their money.
Are Dragon planning to fly from China to Australia - surely this would be the only reason to consider a domestic airline in Australia?
............................................................ ..............................
Third airline raises stakes in delicate game of poker.
AUSTRALIAN FINANCIAL REVIEW. 02 June 2002
Just two weeks before its business is sold, the board of Sydney Airports Corporation Ltd met on Wednesday at the epicentre of a fascinating, behind-the-scenes poker game being played out over a new third entrant into Australian aviation - which may happen sooner than anyone thinks.
Having paid a deposit of 10 per cent, or $19.2 million, on Monday to buy the Ansett domestic terminal, SACL management is now negotiating new leases over the terminal with Australia's only national airlines, Virgin Blue and Qantas.
They each want long-term leases for one of the two concourses, and they want them exclusive to make life more difficult for any new third domestic airline most likely Singapore Airlines, but possibly Emirates or Dragon Air.
These three airlines are believed to be negotiating with the Ansett administrators to buy the defunct carrier's operating certificate and other assets needed to start a new domestic operation.
Meanwhile, three consortiums are in the final stages of preparing bids for Sydney Airport. The deadline is June 12. But the bidders have no control over what may happen to the Ansett terminal in the meantime, and don't even have any up-to-date knowledge of what's being discussed. As official bidders, they get to see all significant correspondence, and can put questions in writing to the SACL board which are answered in writing, but the process is infuriatingly slow and formal.
At its meeting on Wednesday the SACL board would have received a presentation on the lease negotiations and apparently agreed to press on as if the company were not being sold as they must as directors. Chairman David Mortimer has not asked the Government or its representatives in the sale process whether that's OK, and the Government, amazingly, hasn't volunteered an opinion.
The bidders, meanwhile, are grinding their teeth in frustration, because one of the major assets they are buying could be stitched up within days of the deadline for final bids, even though they believe a third airline will soon want to rent part of the space.
Virgin Blue and Qantas both want exclusive, long-term leases to help keep the Australian market a duopoly (Virgin Blue especially wants this). SACL, on the other hand, has always said it wanted to buy the terminal so it could be turned into a "common user facility" and not rented exclusively to one or two airlines.
However, stories filtering out suggest that some sort of exclusive arrangements are being contemplated, possibly with some compensation arrangement if a third airline is to be given access to Sydney terminal gates to spoil the Qantas and Virgin duopoly party.
But is there a third player actually on the horizon? Enter Singapore Airlines.
I understand Singapore is the most serious of three parties negotiating with Ansett administrators Mark Korda and Mark Mentha to buy the Ansett airline operating certificate (AOC) and associated assets, which the two Marks have carefully preserved for sale.
This is a delicate business. No AOC has been sold like this before and there is no precedent for valuing it. Mentha and Korda kept it from being cancelled by the aviation authorities because they have retained the Ansett chief pilot on their payroll and kept the engineering facilities in running order.
As a package with the AOC, the administrators are offering for sale the reservation system, leases on 18 Airbus A320 aircraft, engineering facilities and valid enterprise agreements.
They say those agreements, plus the fact that all the fixed assets, such as the terminals and the head office, have now been sold, means that a reborn Ansett (with a different name, of course, and no airport terminals of its own) would have a lower cost base than Virgin Blue. Most of the staff, including pilots and flight crews, are still looking for jobs, by the way, and would be available.
The administrators' sales pitch is that this collection of assets is the best way for anyone to start a new airline in Australia, although buyers need to move fast: the AOC won't last long, the staff will start getting jobs and the planes will have to be given back.
The other thing to remember is that an AOC does not need to be bought. Anyone wanting to start an airline in Australia simply needs to apply for an AOC and meet the safety standards required. It takes between nine months and a year.
This means that anyone who is thinking of paying good money for Ansett's AOC must be in a hurry, otherwise they would take the 12 months and get their own. There are three parties talking to the administrators about buying Ansett's AOC. Singapore Airlines is one, Emirates is believed to be another and a third is based in Hong Kong, believed to be China National Aviation Corporation owner of 35 per cent of Dragon Air.
The key is Singapore. The Star Alliance, of which Singapore is a lead member, is being slaughtered in the Australian marketplace by Qantas and its One World partners. The way these alliances operate is that partners get discount fares on the Australian legs of their international flights into the country, while others pay full economy.
Singapore would do the same if the roles were reversed, but right now the feeder flights to and from the flights in and out of Australia by Singapore and its Star partners are costing a fortune, and the situation can't go on. Singapore must either get Virgin Blue into Star Alliance or start its own domestic operations.
But Virgin is an unlikely starter because joining Star costs tens of millions of dollars, and Virgin doesn't have the systems to handle it anyway. Joining Star would probably involve a fundamental change to the Richard Branson/Chris Corrigan business model.
So despite all Singapore's reluctance to risk an entry into the Australian market as a third start-up airline, reality is intervening.
For Virgin Blue's owners, Corrigan and Branson, Singapore's entry into Australia with a very low-cost base would be a disaster. Instead of looking at an enormously profitable 25 per cent to 30 per cent of a market shared with Qantas, they would be back to 15 per cent and once again struggling to cover costs.
That's why they are keen to tie up the Sydney terminal space through an exclusive arrangement. But even if SACL were prepared to give it to them, which must be unlikely since it would make SACL appear hypocritical as it has promoted the "common user" idea previously, the timing makes it impossible.
With the airport's sale just two weeks away it would be a courageous SACL board indeed that agreed to a 10-year exclusive lease, even though the Government hasn't actually told it not to.
Alan Kohler "Australian Financial Review"