Forum Archive Index - October 2001

["Bruce Harris" <bruce99@freemessage.com>]

Intuitively I would resist the government having any involvement in Air NZ- 
especially a government whose natural instincts are not business oriented. 
However it is not obvious that the alternatives are palatable to any of the 
stakeholders, be they shareholders, staff, provincial passengers, tourist 
oriented businesses, or even citizens of the country who just feel better about 
having an Air New Zealand.
Brierley and SIA’s interest in adding money had clearly gone- even if they did 
the pound of flesh in terms of increased shareholding would not have been 
acceptable I believe either to the other shareholders; or just as importantly 
to all the other stakeholders above. Would there have been other international 
investors to come up to the plate and look after the interests of the 
stakeholders? In the current environment- with SwissAir falling over and other 
airlines in desperate straits, noone else would have touched it and given any 
kind of commitment to NZ’s wider interests. Would there have been other local 
investors ready with a $billion? Doesn’t even need asking. 

To let Air NZ into statutory management – if the sole objective was to protect 
creditors and maximise value- would have left NZ at best with a bare bones 
airline, and without sounding too dramatic, third world status just around the 
corner, and a huge hit for the tourist industry as well as the psyche of the 
country. 

Still I hope that any deal limits paying Brierleys or SIA any kind of excessive 
premium for their stakes- they really have to take a lot of responsibility for 
getting Air NZ to where it is. Also hopefully any government funds have limited 
exposure to Ansett debts- the more the saga unfolds, the clearer it is that 
Australian unions and the Aust government were at least partly culpable for the 
Ansett demise.

As well the future airline governance system will need to be absolutely 
commercial- this will present challenges, but I suspect the government can 
manage that- if they don’t they also will have to make those tradeoffs like do 
we do extra operations at the local hospital, or keep staff or routes we don’t 
need at Air NZ.  

It will also be interesting to see what is in store for the minor shareholders 
(I am one, for the record) - are they offered or expected to front up for a 
rights issue. Either way you could not make a good call without knowing details 
of debt in total and exposure to Ansett. On these matters Air NZ seems to 
remain very silent.

As a related matter I note that Air NZ have taken offense at media suggestion 
that Mr Toomey’s days are numbered. This to me is a stupid denial by Air NZ, 
and hurts their credibility. The whole world can work out that Mr Toomey can 
sensibly have no place as Air NZ’s CEO in the future; unless he’s willing to be 
say the CFO at say a sixth of his salary, then he has to go. I sympathise with 
the fact that he’s had a tough year, but one or two of his calls have been 
extraordinarily bad. I still cannot fathom why the Ansett costs, staff levels, 
routes were not dramatically cut to fit their revenues. I understand 
considerable union resistance and Aust Govt resistance, but the option was not 
even addressed until the week before the whole plug was pulled. Reports suggest 
this was Toomey’s call against the advice of some of his colleagues. If they 
were not his call, then I have some sympathy, but he’s still the man in charge. 


Regards, Bruce


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