2001 aviation industry overview
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2001 aviation industry overview
Sat "WestAustralian"
Blood in Australian skies as airlines vie for survival
By Geoffrey Thomas
YEARS of management neglect and incompetence, combined with the ravages of a deregulated environment, finally caught up with the Australian aviation industry this year.
Four major airlines - Ansett Holdings, Hazelton Airlines, Impulse Airlines and Flight West - collapsed or were merged, and Air New Zealand recorded the biggest loss in New Zealand corporate history when it wrote off Ansett on September 12.
As the year closes, Qantas Airways is again eyeing a stake in Air NZ, which is now in government hands, Ansett is back on the runway supported by a mixture of business and union interests, Virgin Blue will double in size next year, while Singapore Airlines ponders its next move.
The year started disastrously for Ansett with its nine 211-seat Boeing 767s grounded after a critical maintenance oversight. Air NZ-Ansett's new chief executive Gary Toomey was in immediate damage control trying to shore up vital corporate customers that threatened to flee into the waiting arms of Qantas.
At the same time, the travelling public was taking to the air in record numbers as fares hit all-time lows, with new players Virgin Blue and Impulse Airlines slugging it out.
Flying overhead was Air NZ's 25 per cent stakeholder Singapore Airlines (SIA), looking to swoop on a bigger stake of the NZ airline or to take Ansett.
For Ansett was not travelling well. The airline had lost $119 million to December 31, 2000, which caused Air NZ to suffer a 94 per cent slump in profit to $3.08 million, and even that was boosted by a tax credit of $29.5 million.
Help was needed and fast, but SIA's previous attempts to increase its stake above 24.9 per cent had met a cold shoulder from the NZ Government.
The Government has a 25 per cent limit on ownership by any one foreign airline for their international flag carriers, and 35 per cent by any combination of airlines. Another 15 per cent can be owned by non-airline foreigners.
And as losses at Ansett increased to $18 million a week, the airline's 767s were grounded at Easter over yet another service bulletin oversight. The Civil Aviation Safety Authority kept the 767s grounded for weeks as reports from Ansett's pilots - made public in The West Australian - told of an airline in chaos.
Events then started to move rapidly. In May, Impulse Airlines which was losing $1 million a week, collapsed into the arms of a very willing Qantas, while SIA made another unsuccessful bid to get the NZ Government to lift its ownership limits. Qantas entered the battle in late May, making a bid for SIA's stake in Air NZ, with Ansett to be sold off to the Singapore-based airline, but SIA would not play the game.
Ansett was now haemorrhaging millions.
Its yield dropped 16 per cent and a tipped loss of $400 million for the year to June 30 was scoffed at by Mr Toomey.
Just three months later, Air NZ's board wrote off Ansett completely.
And while Mr Toomey and Air NZ's new acting chairman, Dr Jim Farmer. were publicly saying the airline group was in good shape, they were pleading with Australian Transport Minister John Anderson for support for SIA's bid to increase its stake in Air NZ. But this was a NZ Government matter. As expected, the Air NZ board endorsed the SIA proposal, subject to due diligence. But that due diligence was Ansett's undoing, not the Australian Government's push to have the Qantas plan adopted.
SIA executives were horrified at what they found at Ansett, the Air NZ board was deeply divided and the airline's shares were being devastated almost daily.
Virgin Blue owner Sir Richard Branson wasn't playing ball either. He had apparently signed a memorandum of understanding on the deal to sell to Ansett in May but Air NZ was haggling over the price.
By the time Air NZ agreed to the amount of $250 million, positive profit numbers were coming in for Sir Richard's fledgling operation and he publicly rejected the offer on September 4 - by tearing up a bogus check from Ansett.
Within hours, Dr Farmer had Ansett up for sale to Qantas for just $NZ1 (82¢) as SIA, which had once agreed to buy half of Ansett for $500 million, didn't want the entire airline for nothing.
The outcome was savage and swift. On September 12, Air NZ abandoned Ansett and its 16,000 staff by placing it in administration and announcing a recapitalisation plan.
Ansett Holdings and its subsidiaries had amassed a staggering $NZ1.32 billion in operating losses and write-downs before interest for the year, causing parent Air NZ to report a net loss after tax of $NZ1.43 billion. In contrast, Qantas reported a profit of $415.4 million for the 12 months to June 30.
The collapse of Ansett, a day after the September 11 tragedy, caused chaos for travellers. And Qantas swung 747s off terrorist attacks-devastated international routes to scoop up the shortfall.
Ansett's demise saved 8000 Qantas jobs, claimed the airline's chief executive Geoff Dixon, but Ansett administrator PricewaterhouseCoopers was not saved when the unions used a conflict-of-interest smokescreen to have Andersen installed. PwC wanted to take Ansett down a low-fare, low-cost route but unions wanted to preserve the $97,000 average salary.
It was soon clear to Andersen that Ansett's staff structure was global worst practice and, initially, only a drastically scaled-back version of the airline and some of its regionals, such as Skywest, were able to get back into the air.
Trucking magnate Lindsay Fox and retailer Solomon Lew's Tesna Holdings emerged as successful bidders for Ansett with a complex $1.1 billion deal.
As the year closed, Qantas sought a wage freeze, which was greeted with a frosty reception from two of the four maintenance unions, flagging protracted travel disruptions into the new year.
At the same time, the Qantas board went on the offensive, ordering 75 new Boeing 737-800s at bargain prices, announcing a domestic low-fare service and developing a low-fare international airline plan.
TESNA made overtures to the Government for aid to get Ansett back in the air. These fell on deaf ears, but Tesna gained some momentum when US-funded Air Partners came on board.
And as Ansett gained financial backing, its parent, Air NZ, reverted to NZ Government control after a $NZ885 million recapitalisation plan was endorsed on December 19, diluting Brierley and SIA controlling stakes, to just 5 per cent and 4 per cent respectively.
Next year looms as yet another watershed for the Australian airline industry, with Qantas taking delivery of new 737s, longer-range 747s and Airbus A330s.
Virgin Blue will get more 737s, while Ansett's first new A320s will arrive from France. Qantas"Australian Airlines takes off, as does the new Skywest Airlines, sold this month to a consortium of 20 West Australians.
Analysts predict more blood in airline boardrooms, while the intentions of SIA remain up in the clouds. The Ansett name will almost certainly disappear as analysts suggest it no longer has any value, being associated with aircraft groundings, bankruptcy and lost frequent-flyer points.
And who knows what surprises Sir Richard, ringing in the new year with $5 one-way flights between eastern States capitals, has in store for 2002.
Geoffrey Thomas was named Australian Aviation Journalist of the Year earlier this month.
© 2001 West Australian Newspapers Limited
Blood in Australian skies as airlines vie for survival
By Geoffrey Thomas
YEARS of management neglect and incompetence, combined with the ravages of a deregulated environment, finally caught up with the Australian aviation industry this year.
Four major airlines - Ansett Holdings, Hazelton Airlines, Impulse Airlines and Flight West - collapsed or were merged, and Air New Zealand recorded the biggest loss in New Zealand corporate history when it wrote off Ansett on September 12.
As the year closes, Qantas Airways is again eyeing a stake in Air NZ, which is now in government hands, Ansett is back on the runway supported by a mixture of business and union interests, Virgin Blue will double in size next year, while Singapore Airlines ponders its next move.
The year started disastrously for Ansett with its nine 211-seat Boeing 767s grounded after a critical maintenance oversight. Air NZ-Ansett's new chief executive Gary Toomey was in immediate damage control trying to shore up vital corporate customers that threatened to flee into the waiting arms of Qantas.
At the same time, the travelling public was taking to the air in record numbers as fares hit all-time lows, with new players Virgin Blue and Impulse Airlines slugging it out.
Flying overhead was Air NZ's 25 per cent stakeholder Singapore Airlines (SIA), looking to swoop on a bigger stake of the NZ airline or to take Ansett.
For Ansett was not travelling well. The airline had lost $119 million to December 31, 2000, which caused Air NZ to suffer a 94 per cent slump in profit to $3.08 million, and even that was boosted by a tax credit of $29.5 million.
Help was needed and fast, but SIA's previous attempts to increase its stake above 24.9 per cent had met a cold shoulder from the NZ Government.
The Government has a 25 per cent limit on ownership by any one foreign airline for their international flag carriers, and 35 per cent by any combination of airlines. Another 15 per cent can be owned by non-airline foreigners.
And as losses at Ansett increased to $18 million a week, the airline's 767s were grounded at Easter over yet another service bulletin oversight. The Civil Aviation Safety Authority kept the 767s grounded for weeks as reports from Ansett's pilots - made public in The West Australian - told of an airline in chaos.
Events then started to move rapidly. In May, Impulse Airlines which was losing $1 million a week, collapsed into the arms of a very willing Qantas, while SIA made another unsuccessful bid to get the NZ Government to lift its ownership limits. Qantas entered the battle in late May, making a bid for SIA's stake in Air NZ, with Ansett to be sold off to the Singapore-based airline, but SIA would not play the game.
Ansett was now haemorrhaging millions.
Its yield dropped 16 per cent and a tipped loss of $400 million for the year to June 30 was scoffed at by Mr Toomey.
Just three months later, Air NZ's board wrote off Ansett completely.
And while Mr Toomey and Air NZ's new acting chairman, Dr Jim Farmer. were publicly saying the airline group was in good shape, they were pleading with Australian Transport Minister John Anderson for support for SIA's bid to increase its stake in Air NZ. But this was a NZ Government matter. As expected, the Air NZ board endorsed the SIA proposal, subject to due diligence. But that due diligence was Ansett's undoing, not the Australian Government's push to have the Qantas plan adopted.
SIA executives were horrified at what they found at Ansett, the Air NZ board was deeply divided and the airline's shares were being devastated almost daily.
Virgin Blue owner Sir Richard Branson wasn't playing ball either. He had apparently signed a memorandum of understanding on the deal to sell to Ansett in May but Air NZ was haggling over the price.
By the time Air NZ agreed to the amount of $250 million, positive profit numbers were coming in for Sir Richard's fledgling operation and he publicly rejected the offer on September 4 - by tearing up a bogus check from Ansett.
Within hours, Dr Farmer had Ansett up for sale to Qantas for just $NZ1 (82¢) as SIA, which had once agreed to buy half of Ansett for $500 million, didn't want the entire airline for nothing.
The outcome was savage and swift. On September 12, Air NZ abandoned Ansett and its 16,000 staff by placing it in administration and announcing a recapitalisation plan.
Ansett Holdings and its subsidiaries had amassed a staggering $NZ1.32 billion in operating losses and write-downs before interest for the year, causing parent Air NZ to report a net loss after tax of $NZ1.43 billion. In contrast, Qantas reported a profit of $415.4 million for the 12 months to June 30.
The collapse of Ansett, a day after the September 11 tragedy, caused chaos for travellers. And Qantas swung 747s off terrorist attacks-devastated international routes to scoop up the shortfall.
Ansett's demise saved 8000 Qantas jobs, claimed the airline's chief executive Geoff Dixon, but Ansett administrator PricewaterhouseCoopers was not saved when the unions used a conflict-of-interest smokescreen to have Andersen installed. PwC wanted to take Ansett down a low-fare, low-cost route but unions wanted to preserve the $97,000 average salary.
It was soon clear to Andersen that Ansett's staff structure was global worst practice and, initially, only a drastically scaled-back version of the airline and some of its regionals, such as Skywest, were able to get back into the air.
Trucking magnate Lindsay Fox and retailer Solomon Lew's Tesna Holdings emerged as successful bidders for Ansett with a complex $1.1 billion deal.
As the year closed, Qantas sought a wage freeze, which was greeted with a frosty reception from two of the four maintenance unions, flagging protracted travel disruptions into the new year.
At the same time, the Qantas board went on the offensive, ordering 75 new Boeing 737-800s at bargain prices, announcing a domestic low-fare service and developing a low-fare international airline plan.
TESNA made overtures to the Government for aid to get Ansett back in the air. These fell on deaf ears, but Tesna gained some momentum when US-funded Air Partners came on board.
And as Ansett gained financial backing, its parent, Air NZ, reverted to NZ Government control after a $NZ885 million recapitalisation plan was endorsed on December 19, diluting Brierley and SIA controlling stakes, to just 5 per cent and 4 per cent respectively.
Next year looms as yet another watershed for the Australian airline industry, with Qantas taking delivery of new 737s, longer-range 747s and Airbus A330s.
Virgin Blue will get more 737s, while Ansett's first new A320s will arrive from France. Qantas"Australian Airlines takes off, as does the new Skywest Airlines, sold this month to a consortium of 20 West Australians.
Analysts predict more blood in airline boardrooms, while the intentions of SIA remain up in the clouds. The Ansett name will almost certainly disappear as analysts suggest it no longer has any value, being associated with aircraft groundings, bankruptcy and lost frequent-flyer points.
And who knows what surprises Sir Richard, ringing in the new year with $5 one-way flights between eastern States capitals, has in store for 2002.
Geoffrey Thomas was named Australian Aviation Journalist of the Year earlier this month.
© 2001 West Australian Newspapers Limited
