ONE of the headlines that caught my attention this week was one that read, “How do you make a small NZ airline? – Give them a large Australian one!”
The one thing that seems to have come out of the Ansett collapse is the role of the disgraced and disgraceful management of Air New Zealand. It was only a few months ago that the opportunity to sell Ansett to Singapore Airlines was declined by this same shortsighted management team. This is the same management team that paid $325 million for half the airline in 1996. They then injected a further $150 million into the airline. Already, there was some suggestion that this was an unprofitable concern. Ignoring the principle of not throwing good money after bad, in June last year Air NZ paid a further $580 million to News Corp for the remainder of Ansett. It knew that it had to inject some more money into the organisation to make it profitable.
In August last year, Singapore Airlines increased its stake in Air NZ to 25 per cent. As part of a refinancing plan, Singapore Airlines was contracted on certain terms to up its stake in Air NZ to 34 per cent. At this point, the New Zealand government stepped in to prevent SIA from its proposal to boost its stake. At the time the price of the shares in Air NZ was three times what it is today. In many ways, the NZ Government threw SIA a lifeline by displaying a jingoistic fervour to deny them the opportunity to raise their stake in their national airline.
There are a host of issues that come out of this whole sorry saga. Firstly, did the management of Air NZ keep the market informed of the deplorable condition of Ansett’s position? Secondly, if they were aware of the position of the airline as a loss-making operation, why did they pay $580 million to News Corp to buy out a half share that they themselves had paid $325 million for just a few years earlier? Thirdly, if the position of the airline was already poor, why did the management not come clean with shareholders and the market alike earlier than they did? Fourthly, was the Government of NZ up front about this arrangement?
The ASIC already has announced an investigation into the directors’ role in this failed airline. What we need to see is some serious investigation of the role of the NZ Government as well.
Of all the failures in recent times, I believe that this airline failure will make all the others pale into insignificance.
HIH and One Tel were major disasters, but neither of those has had
the wide-ranging impact
of the Ansett failure.
The impact on tourism of this failure is far-reaching. We need to ensure that this type of disaster will never be repeated ever again in Australia.
It is up to regulators such as ASIC and others to ensure that they bring the full weight of the laws enacted here in Australia to bear on the perpetrators. Gary Toomey has indicated that he is scared to come back into Australia because of death threats that have been made against him.
In my view, the actions of the regulators need to be feared just as much.
Every effort has to be made to bring Mr Toomey to task to account for his total inaction and deception in regard to this failure.
