Forum Archive Index - December 2002

["Capitalist" <capitalist@paradise.net.nz>]

Hi Snoopy,

 

Thanks for your comments. You are probably aware that Gareth is a proponent of classical liberalism (libertarianism), as am I, so no surprise that I agree with him :-).

 

It is my opinion that AIR should have been left to go belly up.Gareth actually isn't saying in his essay  that someone would have rescued AIR. AIR would almost certainly have ceased to exist. In the absence of  coercive monopoly and regulation a bail-out would not have been necessary - with the excess airline capacity worldwide another airline could merely have taken over the routes. It is the absence of deregulation that has made the current situation what it is.

 

Here is another link to an old article of Gareth's that may be of interest if you want to check his premises, so to speak :-).

 

 http://nbr.infometrics.co.nz/column.php?id=183

 

 

 

Regards,

Ruth

 

<<Thanks for that.   My memory of the 'Air Ansett affair' is slightly
different to the version that fits into Gareth's late 1980s
economantra.

The NZ government bail out was to save our export industries who
relied on air freight and tourism.  I am sure that Gareth is right
and that if Air NZ had been allowed to collapse a new carrier would
have come in - eventually. 

But the 'eventually' would have ruined many fresh seafood and flower
exporters in the meantime, and damaged NZs reputation in the process.
It is much easier to keep your customers than have to fight to get
them back.  Faced with this. a $1bn 'bail out' was actually pretty
cheap.  Particularly so when the value of the governments stake on
the market is double what they paid.  No private investor would have
been able to get away with putting in so little capital!

The Singapore Airlines offer to boost their shareholding to 49% was
always subject to due diligence.  Even if the government had fast
tracked their approval for SIA to buy up, they couldn't make the SIA
cash appear.  IMO it would not have come.

The reason that the government stepped in was that there was no
private sector bail out option.  Gareth seems to think that some
overseas white knight airline would come to our rescue.  But,
Singapore Airlines, an Arabian Airline and Qantas excepted, all the
white knghts satin outfits were stained with red ink at the end of
2001.   A white knight suffering a deep lance wound to the chest is
not going to be thinking about rescuing any damsel in distress on the
other side of the ocean at the bottom of the South Pacific.

Qantas, the world's most successful airline could not get their year
2002 cash issue away to fund future substantial cash initiatives.  So
if the world's most successful airline can't raise the cash from
the savvy public, just who does Morgan think this white knight will
be?   I don't think the argument 'theoretically someone will come'
stacks up.

SNOOPY