Qantas debt pile rises by the day

Friday 27th April 2001

Editorial page 21

The collapse of Qantas New Zealand has left a trail of debt wreckage. NICHOLAS BRYANT tallies the cost

Creditors and airline industry sources said yesterday Tasman Pacific Airlines owed at least $57 million, excluding cast-iron 10-year airline leases with Air New Zealand.

Those leases are believed to be worth $62 million alone and are understood to be the "black holes" which led to Qantas Airways' decision not to buy the ailing carrier.

Significant long-term leases are also held with Canadian aircraft manufacturer Bombardier for four Dash 8 aircraft, British Aerospace for three Jetstreams and local company Air National for another two Jetstreams.

Receiver Ferrier Hodgson is still struggling to quantify the damage as fallout from the liquidation of Tasman Pacific's Qantas New Zealand franchise spreads.

The big money issues for Ferrier Hodgson's Grant Graham and Michael Stiassny are fuel, catering, staff and airports.

Of those it is understood Tasman Pacific owes Mobil $7.8 million for two months' unpaid fuel, Pacific Flight Catering $1.2 million, staff $11.6 million and Auckland, Wellington and Christchurch Airports a combined sum of $3.3 million.

Sources said Tasman Pacific settled debts with most of the smaller airports it dealt with before it went into liquidation, though Marlborough Airport is owed at least $30,000 and Queenstown mayor Warren Cooper believes his local airport will be joining the list of creditors.

Also hit are a number of small airline-related contractors who are either out of pocket or considering shutting down.

Among them are baggage and freight handling companies G & C Aviation Support of Nelson, Airline Ground Services in Queenstown, Flightline Aviation in Dunedin and the Invercargill branch of the more widely hit Logistix Services.

Those four businesses have laid off 24 staff, while Logistix has laid off 70.

Holding up the delivery of an official dollar figure of what Qantas owes creditors is when the liquidation fell - last Saturday, April 20. Because this is so close to the middle of the month, no accounts had been closed off.

Mr Graham said his team was still working to ascertain what the airline owed, as well as what little was owed to it. "It's a bit more difficult being mid-month as company systems aren't geared to push a button and produce a debtor's ledger."

The abrupt nature of the liquidation was also causing difficulties.

"Only a week ago Mobil were putting fuel in planes throughout the day at 11 sites ... for the same reason we haven't identified the extent of our debtors, we haven't got our creditors. No one has printed their numbers yet," he added.

But the liquidation itself came as no surprise to many creditors.

Sources said Qantas New Zealand had been operating with major creditors on a cash-only basis for at least two months, a sign that lines of credit had been exhausted.

Pacific Flight Catering chief executive Terry Hay said, as an outsider looking in, he had been dismayed at the board and management's decision to keep trading so long.

"These guys knew they were in a world of trouble in December ... they were heavily looking for money in January and should have pulled the plug then," he said.

'Cut the lies and do it right'

Memo to Qantas Australia: Cut the marketing "crap" and advertising "lies" and just run a decent domestic airline - one that does not fold in six months. That's the advice from top advertising creatives yesterday to the airline expected to step in to the gaping hole left following the collapse of Qantas New Zealand.

They say there is no need for a new name - Qantas NZ will do nicely - and don't bother with flashy television commercials or brand campaigns.

Aviation analysts have said Qantas would need to spend about $10 million in advertising in its first year to succeed but advertising experts disagree. "They just need to have the chief executive stand up and say we have come here and we are going to do our best and we want your support," Marco Marinkovich, head of advertising agency Creative Bank, said.

Advertising icon Roy Meares of Meares and Taine agreed, saying service and performance were what would attract passengers rather than traditional brand advertising. "Everybody wants competition. They have to come in and say we are here and we are the competition and we aren't going to vanish in six months.

"Service will win the day. The product has got to live up to a good standard and efficiency and they should be OK."

Mr Marinkovich said the airline did not need creative advertising like the commercials promoting Qantas NZ where staff repaired torn trousers, returned car keys and found lost luggage.

"It needs to be a no-bullshit airline," Mr Marinkovich said. "People sewing pants up and crap ... it's bullshit. That campaign where the guy lost his bag - great ads but it doesn't happen in reality; it's all lies. Consumers look at that and know it's not real. [Qantas] just needs to deliver [a decent passenger service]."

Mr Meares said that ironically the media coverage of the disaster meant a name change was not necessary.

Most sensible people would realise it was a different Qantas, Mr Meares said, and this time there would be real cachet in having an international giant flying New Zealand domestic routes.

"I really hope they do [enter the market] because I don't think we need any more here-today, gone-tomorrow [airlines]. It's great to have competition." - Nick Smith

CRASH FALLOUT

Saturday:

Tasman Pacific trading as Qantas New Zealand was placed in receivership at 3.25am, putting 1100 staff at the airline out of a job. Its planes were grounded.

Sunday:

Air New Zealand shifted thousands of stranded passengers on the last day of the school holidays, putting on more than 50 extra flights.

Monday:

Qantas Airways met politicians and indicated it would set up in this market on its own account.

Tuesday:

The cost of the crash was being counted by contractors, such as caterer Pacific Flight Catering, which laid off 70 workers.

Wednesday:

Qantas Airways started operating Boeing 737 flights on main trunk routes.
Transport Minister Mark Gosche was given an undertaking by Qantas to let him know the airline's long-term plans by today.
Discount airline Virgin Blue put out a statement saying it hoped to be operating here by the end of the year.

Thursday:

A row between Auckland Chamber of Commerce head Michael Barnett and the Employers and Manufacturers Federation head Alasdair Thompson erupted over whether Tasman Pacific's individual investors should pay the company's debts.

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