'Virgin deal 'could have saved Ansett' say's Toomey
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'Virgin deal 'could have saved Ansett' say's Toomey
Sat "Weekend Australian" 7/9/02
'Virgin deal 'could have saved Ansett'
By Aviation writer Steve Creedy
September 07, 2002
FORMER Air New Zealand chief executive Gary Toomey believes Ansett would still be flying if an audacious plan to buy Virgin Blue for $US120 million ($220 million) had succeeded.
Now living in Auckland, Mr Toomey said yesterday he had planned to run Virgin as a low-cost operation in a strategy that would have seen Ansett halve its costs on some routes and boost its market share overnight from 41 to 49 per cent.
The plan proposed keeping Virgin Blue as a separate brand and using it to replace Ansett's troublesome BAe 146 aircraft on secondary routes.
Breaking a long silence a year after Ansett went down, Mr Toomey said: "I'm not saying we would have been giving a 50 per cent return on equity, but we would have turned around.
"We would have migrated Virgin Blue and it would have become a much greater piece of Ansett. Ansett would have gone back to operating the premium . . . end of the market on the main trunk routes with a new product."
Mr Toomey set up the Virgin deal with Richard Branson in April of last year and agreed on the $US120 million price, about half that paid by Chris Corrigan for a 50 per cent share in Virgin Blue last March. But a disagreement with Air NZ shareholder Singapore Airlines about the purchase price delayed the deal for four months.
By that time, Virgin had moved into the black and the deal famously collapsed during a press conference at Melbourne airport in which Sir Richard ripped up a check for $250,000. Mr Toomey believes the failure of the Virgin deal was a major factor in Ansett's collapse. "Basically, Ansett without Virgin was pretty much not a goer in its own right," he said.
"It couldn't exist in its current form, even with more capital."
The failure of the Virgin deal left Air NZ looking at the so-called Qantas strategy – where Qantas bought into Air New Zealand and Singapore took on Ansett – or simply selling Ansett to Singapore.
In the end, both options proved untenable, as did an attempt to sell the airline to Qantas for $1.
While conceding his short reign at Air NZ was not perfect, Mr Toomey believes history is giving the airline's management and board a rough deal.
"The way it appears in the epitaph is that it was a total stuff-up, but when you look at it at it there was a lot of work by a lot of people in difficult circumstances," he says.
Mr Toomey is frustrated with claims he had not made inroads into Ansett's high-cost structure, saying he identified $100 million of savings found in 2000-01 and a further $450 million last financial year.
He said he held extensive discussions with unions to restructure enterprise bargaining agreements largely due for renewal at the end of 2001. Mr Toomey also remains frustrated with claims that it was a lack of cash that prompted Air NZ to cast Ansett adrift.
"The company had the cash, it was the absence of a funding strategy and the need for a capital injection that was the problem" he said. "The directors had to make a judgment call about the carrying value of the investment and it was that decision to write down the carrying value . . . that prompted the loan covenants to be breached."
"Once Air New Zealand's debt became payable, it had no choice but to put Ansett into administration."
'Virgin deal 'could have saved Ansett'
By Aviation writer Steve Creedy
September 07, 2002
FORMER Air New Zealand chief executive Gary Toomey believes Ansett would still be flying if an audacious plan to buy Virgin Blue for $US120 million ($220 million) had succeeded.
Now living in Auckland, Mr Toomey said yesterday he had planned to run Virgin as a low-cost operation in a strategy that would have seen Ansett halve its costs on some routes and boost its market share overnight from 41 to 49 per cent.
The plan proposed keeping Virgin Blue as a separate brand and using it to replace Ansett's troublesome BAe 146 aircraft on secondary routes.
Breaking a long silence a year after Ansett went down, Mr Toomey said: "I'm not saying we would have been giving a 50 per cent return on equity, but we would have turned around.
"We would have migrated Virgin Blue and it would have become a much greater piece of Ansett. Ansett would have gone back to operating the premium . . . end of the market on the main trunk routes with a new product."
Mr Toomey set up the Virgin deal with Richard Branson in April of last year and agreed on the $US120 million price, about half that paid by Chris Corrigan for a 50 per cent share in Virgin Blue last March. But a disagreement with Air NZ shareholder Singapore Airlines about the purchase price delayed the deal for four months.
By that time, Virgin had moved into the black and the deal famously collapsed during a press conference at Melbourne airport in which Sir Richard ripped up a check for $250,000. Mr Toomey believes the failure of the Virgin deal was a major factor in Ansett's collapse. "Basically, Ansett without Virgin was pretty much not a goer in its own right," he said.
"It couldn't exist in its current form, even with more capital."
The failure of the Virgin deal left Air NZ looking at the so-called Qantas strategy – where Qantas bought into Air New Zealand and Singapore took on Ansett – or simply selling Ansett to Singapore.
In the end, both options proved untenable, as did an attempt to sell the airline to Qantas for $1.
While conceding his short reign at Air NZ was not perfect, Mr Toomey believes history is giving the airline's management and board a rough deal.
"The way it appears in the epitaph is that it was a total stuff-up, but when you look at it at it there was a lot of work by a lot of people in difficult circumstances," he says.
Mr Toomey is frustrated with claims he had not made inroads into Ansett's high-cost structure, saying he identified $100 million of savings found in 2000-01 and a further $450 million last financial year.
He said he held extensive discussions with unions to restructure enterprise bargaining agreements largely due for renewal at the end of 2001. Mr Toomey also remains frustrated with claims that it was a lack of cash that prompted Air NZ to cast Ansett adrift.
"The company had the cash, it was the absence of a funding strategy and the need for a capital injection that was the problem" he said. "The directors had to make a judgment call about the carrying value of the investment and it was that decision to write down the carrying value . . . that prompted the loan covenants to be breached."
"Once Air New Zealand's debt became payable, it had no choice but to put Ansett into administration."
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As I ahve said before,
Branson has a lot of gall expecting Sydney Airport to honour hansdhake deals when he rips his up in flamboyant public displays.
Maybe Maquarie have just outsmarted him at his own game...
Branson has a lot of gall expecting Sydney Airport to honour hansdhake deals when he rips his up in flamboyant public displays.
Maybe Maquarie have just outsmarted him at his own game...
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If you read the article again you will read SQ objected for
4 months against this deal and during that time DJ went
from red into the black, of course Branson was not selling
for the price done months before.
4 months against this deal and during that time DJ went
from red into the black, of course Branson was not selling
for the price done months before.
Whispering "T" Jet
What a shame Mr Toomey didn't share these plans with the general public.
It appeared to me, at the time, that the purchase of Virgin Blue was to get it out of the competition similiar to that of the Qantas / Impulse deal.
It appeared to me, at the time, that the purchase of Virgin Blue was to get it out of the competition similiar to that of the Qantas / Impulse deal.
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Of course Mr Toomey sounds like a whiter than white A1 manager too. Whether he likes it or not, his absolute inept leadership & managerial skills, not to mention those of his peers, were the real reason for AN's failure.......
From what I have been told AN started to go downhill when Eddington took over and Toomey finished it off.
Apparently the New Zealanders did not have a clue. Large numbers of AN people were paid out and either replaced by incompetents or not replaced at all.
The mess at Engineering and the groundings of the B767's was just the tip of the iceberg. AN were doing heavy maintenance on A320's for a Chinese carrier and sending their own A320's to Canada for heavy maintenance.
The show cause notice issued by CASA caused problems in the market place with some high yield passengers leaving AN for QF.
The NZ Reservation System was a heap of junk, the AN system one of the best with self serve check in units and a good DCS system. NZ decided they would replace both systems with Amadeus.
Rumour has it that IBM has purchased the Ansett System and are going to offer it to other airlines. Apparently some leading airlines are very interested !. Watch this space
I just find it hard to believe what ex President Toomey said. It just shows he did not have a clue. He was surrounded by incompetent people.
If Geoff Dixon had stayed at AN and Toomey was successful for the top job at QF I am sure the AN and QF outcome would have been different.
Apparently the New Zealanders did not have a clue. Large numbers of AN people were paid out and either replaced by incompetents or not replaced at all.
The mess at Engineering and the groundings of the B767's was just the tip of the iceberg. AN were doing heavy maintenance on A320's for a Chinese carrier and sending their own A320's to Canada for heavy maintenance.
The show cause notice issued by CASA caused problems in the market place with some high yield passengers leaving AN for QF.
The NZ Reservation System was a heap of junk, the AN system one of the best with self serve check in units and a good DCS system. NZ decided they would replace both systems with Amadeus.
Rumour has it that IBM has purchased the Ansett System and are going to offer it to other airlines. Apparently some leading airlines are very interested !. Watch this space
I just find it hard to believe what ex President Toomey said. It just shows he did not have a clue. He was surrounded by incompetent people.
If Geoff Dixon had stayed at AN and Toomey was successful for the top job at QF I am sure the AN and QF outcome would have been different.
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AN were doing heavy maintenance on A320's for a Chinese carrier and sending their own A320's to Canada for heavy maintenance.
As an aside, the Sichuan contract was very lucrative and feedback from the Chinese was that they were very impressd with the work done at AN to the extent that they had booked the rest of their A320 fleet in for checks prior to the collapse and even contemplated sending them to the Engineering company post TESNA but the spectre of being in administration was ultimately too much of a risk.
Evertonian
Rumour has it that IBM has purchased the Ansett System and are going to offer it to other airlines. Apparently some leading airlines are very interested
The Amadeus system was totally incompatible with AN's "product" & work practices. It cost an arm & a leg & was going to cost even more to implement. Worked fine at ANZ, but, I guess they just didn't know AN at all.
Toomey's golden handshake
From SMH 5/9/02:
"Toomey's golden handshake
With thousands of displaced Ansett workers awaiting entitlements, it emerged yesterday that their former boss, Gary Toomey, received $NZ4.2 million ($3.59 million) in a departure clause agreed by Air New Zealand in the weeks after the airline's collapse."
"Toomey's golden handshake
With thousands of displaced Ansett workers awaiting entitlements, it emerged yesterday that their former boss, Gary Toomey, received $NZ4.2 million ($3.59 million) in a departure clause agreed by Air New Zealand in the weeks after the airline's collapse."
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Captn Secure: Here, Here!!! All it's doing is eating up those of us who wont let it go. Do they think that the managment or administrators give a flying t*ss about pilots, handlers, hosties or anyone else for that matter!
Barleyhi: Move on, for goodness sake..... if you were Toomey, would you turn it down? I think not.
Take it from someone whos been there before:
Lifes tough. Get on with it, get over it, and move on!
Barleyhi: Move on, for goodness sake..... if you were Toomey, would you turn it down? I think not.
Take it from someone whos been there before:
Lifes tough. Get on with it, get over it, and move on!
