Forum Archive Index - September 2001

["Ben Dutton" <bendutton@sharechat.co.nz>]

Snoopy, that's an absolutely brilliant account of the whole crisis - thanks.

I can report from "across the ditch" that anti-Air NZ and indeed anti-NZ
feelings are running high, being fanned by the unions and (to a lesser
extent) the media.

The biggest problem at the moment is that every party has their own agenda
and therefore puts a different spin on the events.

This is probably a case Christopher Byron from the New York Observer would
relish.  On a different note, his latest piece bashing the Compaq-HP merger
is a great read:

It begins...

"There's a scene in Mel Brooks' History of the World: Part I when the
sadistic Torquemada tortures people by plucking out their chest hairs one by
one. These days, Torquemada could have gotten the same result by forcing his
victims to listen, minute after excruciating minute, to the
investor-relations conference call whereby Hewlett-Packard Company's
chairwoman and chief executive, Carly Fiorina, sought to drum up enthusiasm
for her company's $25 billion desperation merger deal with Compaq Computer
Corporation...

For more click here:

http://www.observer.com/pages/envelope.asp

Best Regards

Ben Dutton



----- Original Message -----
From: <tennyson@caverock.net.nz>
To: <sharechat@sharechat.co.nz>
Sent: Friday, September 14, 2001 10:28 PM
Subject: Re: [sharechat] halfwit air


>
> I have been following the near collapse (and make no mistake that is
> what it was) of Air New Zealand over the last year, including the
> Frank Fernandez Stocktake column which appeared of late.
>
> The core of the problem seems to be the whole structure of Ansett.
> This was fine when they held 60% of the Australian market but far
> too high in cost with market share down to 40% and shrinking.   It is
> clear that *none* of the operators in the Australian domestic market
> were making money over the last year.   This includes Virgin Blue.
> The only reason that Virgin Blue made a profit is that they wrote off
> their start up costs.  Qantas scored a coup by being able to take
> over the lower cost structure Compass and integrate it into their
> group.  I think that maybe the Australian government might want to
> have a look at their airline/company regulations (or lack of) which
> allowed such a market to develop.   Perhaps more flexible labour
> regulations are needed?  Perhaps the Australian Government could do
> something like in the Telecommunications sector where potential
> airlines over a certain size must bid for one of only 3 licences
> which allow them to operate?   This 'licence money' could then be
> used to bail out the industry if it got into difficulty, without a
> handout from the tax payer.
>
> I think acting Air New Zealand chairman Jim Farmer has said that
> given what he knows now, Ansett might have responded to their
> discount airfare competitors differently.  Given how the strong
> unions in Australia might have reacted to a 'foreign' owner ripping
> into Ansett workers terms and conditions to get a discount
> operator 'Ansett 2' operation up and running, this might have been a
> little naieve.  Such a strategy also requires good cash flow
> information.  It would seem that Air New Zealand management never got
> to grips with the Ansett accounting systems.
>
> That there was a 'clear out' of Ansett management after the Air
> New Zealand takeover was almost expected.   That Jim McRae, CEO of
> Air New Zealand resigned due to disgreements over his contract,
> without any alternative replacement being in the wings, was a serious
> blunder by the board IMHO.
>
> I have not forgotten that shortly before the purchase of Ansett
> the directors fees were doubled (from $45,000 per year to $90,000 per
> year for 'ordinary ' directors) to bring directors fees in line with
> international rates for such a company.  This would have been fine if
> the directors employed had possessed international quality talent.
> It has since emerged that detailed due diligence was never done on
> Ansett.  IMO, the best business decisions are made when you can line
> up two alternative strategies side by side and then , in detail, go
> through the alternative plans side by side.   "Buy and hope' at any
> price, as appears to have happened with Ansett was not an acceptable
> strategy.
>
> So who to blame?   It is now clear that the interim chief executive
> and chairman of the board, Sir Selwyn Cushing, was out of his depth
> at the helm of Air New Zealand.   This in itself is not a mistake if
> you have the people under you that have the know-how to carry you
> through.  IMO, Sir Selwyn did not, and this is the fault of the board
> and Sir Selwyn, being Chairman of the board, himself.   It was also
> clear to me at the time that to have Sir Selwyn as the Chairman of
> Brierley Investments, who wanted to get money out of of Air New
> Zealand at the same time as Air New Zealand needed capital to expand,
> meant he had two roles with a contradiction of objectives.   He
> should not have had both jobs!   He should have stepped down, or have
> been forced to step down as Chairman of Air New Zealand, when he was
> appointed to head Brierley Investments.   The people who allowed him
> to continue both roles were the independent directors of the time:
> Sir Ronald Carter, Dr James Farmer, Ralph Norris and Sean Wearing.
> All except Dr Farmer have now gone.  Sir Selwyn himself has now
> stepped aside as chariman of both companies, but far too late.
> Given that he brought Air New Zealand to the brink of collapse, and
> so threatened our entire overseas tourism industry, it seems
> incongruous that Sir Selwyn should retain his knighthood.
>
> This all sounds rather negative, so perhaps I should add on a
> positive note that I think new CEO Gary Toomey has done a great job,
> given the baggage he was handed when he came into the hot seat.
>
> Support for Air New Zealand from major shareholders Singapore
> Airlines and Brierley investments has been disappointing.  Offering
> to buy shares to refinance the company at 67c with a downward clause
> in the price to be paid should the Air New Zealand share price fall
> further is hardly a great vote of confidence in the future of the
> business.  Even with this cash injection, Air New Zealand is still
> way undercapitalised.  Now the AIR share price has fallen to 50c it
> seems this scheme is just a good way of transferring wealth from
> existing minority shareholders to Brierley Investments and Singapore
> Airlines.   From what I have heard so far I will be voting against
> this warped rights issue.  We need a 'fair to all parties' rights
> issue and maybe some more asset sales to solve the Air New Zealand
> undercapitalisation problem.
>
> Overall I must disagree with Frank Fernandez on the role of
> private capital in reconstructing Air New Zealand.   It seems that
> private business not only lacks the skills but also the capital to
> develop a small airline at the bottom ends of the earth.  Indeed it
> was only the discipline of the New Zealand government in not changing
> the regulations willy nilly, and holding back on any signing off of
> taxpayer support until the last minute that forced the Air
> New Zealand directors to come up with a credible survival plan.
> It now seems that both Australia and New Zealand will be forced to
> accept that largely monopoly carriers will control their
> respective air spaces.   This is the result of unrestricted hands off
> competition in the Airline industry, and is a result for which
> we, as consumers, will all be the poorer. SNOOPY
>
>
> -----------------------------------------------
> Message posted by Harry Tennyson
>  using Pegasus Mail 2.55
> I have Word 97 to read attachments
> ------------------------------------------------
>
>
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