News Corp consolidates profit from Ansett sale

[Wirraway]

ABC
The World Today - Monday, 23 February , 2004 12:21:11
Reporter: Stephen Long

News Corp consolidates profit from Ansett sale

HAMISH ROBERTSON: Rupert Murdoch's News Corporation is being accused of callous greed, after extracting yet more profits from the sale of the failed airline, Ansett.

Air New Zealand paid nearly $600-million to buy Ansett just 18-months before it collapsed, costing 16,000 workers their jobs, and News Corp has been accused of selling it a pup.

Yet on Friday, Air New Zealand announced it was giving News Corp a 2.6 per cent stake in the company in final settlement of the purchase.

Union leaders representing former Ansett workers are outraged, and they're calling on News Corp to donate the profit to the workers.

Here's our Finance Correspondent Stephen Long.

STEPHEN LONG: It's been called one of the biggest hospital passes in Australian corporate history. In February 2000, Air New Zealand paid nearly $600-million to buy News Corp's 50 per cent stake in Ansett. A year-and-a-half later, Ansett went broke, putting 16,000 workers out of a job. Many are still waiting for outstanding retrenchment money and creditors have written off a total debt of $2-billion.

But Rupert Murdoch's News Corp is still cashing in on the sale. On Friday, Air New Zealand announced the Murdoch company, Nationwide News, would receive 78 million shares in Air New Zealand as final payment on the sale of Ansett – that's 2.6 per cent of the stock and ACTU Secretary Greg Combet says that's bizarre.

GREG COMBET: Many people will be scratching their heads wondering how on Earth it could be that Ansett still has some positive value for someone like News Corporation.

I mean, I understand it is a final payment in the sale of News Corp's half share in Ansett from several years ago, but in truth the value of that remaining component of Ansett is negative today and yet News Corp are picking up something to the equivalent of around $40-million. It's quite bizarre.

STEPHEN LONG: Do you think that it's right that News Corp should be looking to enforce this payment when history suggests that when Ansett was sold to Air New Zealand it was already in pretty dire financial straits?

GREG COMBET: Well what was very clear was that Ansett was severely under capitalised and had a whole range of business problems, both in its business processes and how it positioned itself in the market, the fleet that it had put together and News Corp can carry a significant degree of responsibility for that. It was a half owner of Ansett.

STEPHEN LONG: Well do you think that News Corp should be looking to divert some of that money towards employees who are yet to be paid out their full entitlements?

GREG COMBET: Well that's obviously the ideal thing that should happen, if News Corp felt a bit of historical obligation to not only all the creditors of Ansett, but to the employees in particular whom I represent, then if News Corp was going to put its hand out for its final payment for its sale of half share of Ansett, it may feel that it has some obligation and in fact could help out the employees by passing this along, but I doubt that that's about to happen.

STEPHEN LONG: Linda White is an assistant national secretary of the Australian Services Union, which represented thousands of Ansett ground staff. She says News Corp is at least partly to blame for Ansett's fate and it has a moral obligation to the airline's former workers.

LINDA WHITE: I think the Ansett demise is a series of complex things, but a significant part of it was the time that News Corp was in control and its failure to invest significant capital into the fleet of Ansett. It also had significant executives, it controlled the executives of the company and they were the ones that steered it to its ultimate path.

STEPHEN LONG: What do you think that News Corporation should do with the profits it's getting from this final settlement of this sale of Ansett to Air New Zealand?

LINDA WHITE: Well the reality is there are still staff who have got outstanding entitlements. A good corporate citizen would ensure that they got their money first before News Corp got their money.

STEPHEN LONG: News Corp executives weren't available for interview, but a spokesman said in a written statement that Ansett was a "successful, well run" airline when News Corp sold its 50 per cent stake to Air New Zealand.

News Corp claims there is no suggestion it contributed to Ansett's demise and it says all Air New Zealand's done is complete the purchase on a deal done four years ago.

So former Ansett workers hoping for some benevolence from the corporate giant shouldn't hold their breath.

HAMISH ROBERTSON: That report was compiled by our Finance Correspondent Stephen Long.

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[bitter balance]

Its been said a thousand times before on these boards but; how can you possibly argue that Air NZ was sold a pup when they owned 50% of the company and were intimately involved with its operations before the sale.

[fruitloop]

I guess the words "Due Diligance"(spelling) don't mean much....

[CaptCaveman]

Air New Zealand- do the words "caveat emptor" ring a bell, especially as they already owned half of the airline.

The Unions- "a deal's a deal", if I was holding News Corp shares, I'd expect them to take the money/shares and put it in the company, not ex-employees pockets.

[Buster Hyman]

Morals & News Corp should never be used in the same sentence!:mad:

Now, if the sale hadn't been finalised, does that mean that News Corp still retained some legal ownership of Ansett? In which case.........:E

[Traffic]

I hesitate to stick my finger in this cockie cage but there appears to be some amnesia creeping into this thread.

This share allocation is essentially the only way AirNZ can make their deferred payment of the balance of the purchase price delineated in the contract of sale.

What appears, however, to have slipped from the memory radar is the fact that the preferred News option was to sell the News 50% to SQ for a figure of AUD 500m which was over 100m less than the price AirNZ paid.

AirNZ vetoed the sale to SQ and the opportunity to re-capitalise Ansett and reduce the cost base and thereby ensuring the survival of Ansett and its role in the Star Alliance. They did this for two reasons.

1. The higher the price the better as far as AirNZ was concerned because Brierley Investments could not cope with any write down on their initial 50% held through their 36% holding in AirNZ.

2. Cushing thought he (read Brierley) could screw SQ into a minor role in AirNZ/Ansett rather than allow SQ to cut and run with Ansett. He ended up screwing SQ and and AirNZ and costing SQ and the staff of Ansett a lot of money. This will never, ever, be forgotten or forgiven by all involved.

It should be Selwyn Cushing kicking the can as he was chairman of both Brierley and AirNZ. Along with the two other common directors of both companies, they should be the bullseye in the dartboard that represents the subsequent mess.

[whipping boy]

Well said Traffic,for the truth on the Ansett debacle read Traffic's post.
We've heard all the bleating from across the Tasman about the Aussie Gov. not allowing them to play in our back yard and them being sold a pup.However,we didn't want to sell it to them,they wanted it!
My Selwyn Cushing effigy won't burn!

[Traffic]

Well that went quiet all of a sudden. I guess the Virgin/Jetsar PR circus is an excuse for serious journalism to take an extended holiday.

Geoff Thomas...has anyone ever asked Sir Selwyn about his role in all of this?

Where are you and the other journos who are all over a lollipop stories but disappear when there is a real journalistic coup around but legwork involved.

I'll even do the title for you..Silence of the Lambs. For more seriosu info, you will have to PM me.