Rattle the sabre, Ralph, here comes Qantas

Friday 8th March 2002

NBR flashback - March 2001

March 2002

Question: Why on earth did Ralph Norris take on the top job at Air New Zealand? The airline is in no better shape now than it was a year ago when Gary Toomey took the hot seat.

Already in a weak position, it's under sustained attack from arch-rival Qantas, with the apparent tacit backing of the Australian government.

The repercussions of last year's Ansett collapse are still taking up a big chunk of directors' and management time. And with the government sitting at 82% on the share register, Norris is effectively the chief executive of a state-owned enterprise.

Norris and his chairman, John Palmer, don't seem to see the government's role in quite the same way.

Announcing four new directors last week, including former union boss Ken Douglas, Palmer said bluntly the board must be allowed to get on with its job free of political meddling.

"If the (major) shareholder seeks to manage the company," he told reporters, "I won't be chairman."

But in an interview last Friday with The Australian Norris appeared to show the better understanding of the realpolitik of the situation.

"I've got a job to do and the government will be assessing me, as a shareholder, from my performance," he said.

Douglas' board appointment may be suggestive of political influence but the markets have focused on the board's total lack of airline experience at a time the airline is fighting for survival. Norris is putting a brave face on this, saying inexperience has its advantages.

"You come in questioning everything and not accepting things because they're things that have been done in the past," he told The Australian.

The reality is that it's not aircrew leave entitlements or the temperature of in-flight meals that have brought Air New Zealand to its present pass. Nor it is just an unlucky cocktail of high fuel prices, a weak dollar and the September terrorist attacks.

Underlying the Ansett collapse and the frustration of Air New Zealand's entire "grow or die" strategy have been years of manipulation by Qantas and by its champion, the Australian government. The two have always wanted Air New Zealand to accept a position as the subservient member of, to give the concept its most polite expression, a transtasman partnership.

The contribution to Ansett's collapse of Canberra's delivery of a succession of underarm balls is now well understood by those who can bring themselves to take these things aboard.

They don't include the Australian public or aviation unions. Those others who see Canberra's hand behind the latest twist in the investigation of Ansett by the Australian Securities and Investments Commission (Asic) can't easily be accused of paranoia.

Abandoning its search for evidence to support a charge against Ansett's directors of insolvent trading, Asic last week announced its attention was now focused on the adequacy of Air New Zealand's disclosure of its financial position prior to September 12 last year.

At first glance this seems odd. As a company listed on the Australian Stock Exchange as "foreign exempt" Air New Zealand had only to comply with the disclosure rules of its home exchange, the NZSE.

An NZSE panel has already cleared Air New Zealand of breaches in a painstaking and exhaustive report which, ASIC says, it has "carefully considered." How is Asic to uncover breaches of the NZSE rules that the NZSE itself hasn't found?

Asic's stated objective is to discover whether a case may be brought against Air New Zealand under section 50 of the Asic Act, which allows it to seek, on behalf of Ansett or any other aggrieved party, the recovery of damages for "fraud, negligence, default, breach of duty, or other misconduct."

As it notes, there are considerable complexities it must address before deciding whether to bring an action.

All this will no doubt take up further generous amounts of Air New Zealand management and board time.

The suspicion, baldly put, is that the true aim of Asic's investigation is, by keeping the airline off balance when its position is already critical, to help Qantas to push Air New Zealand into a junior- partnership arrangement.

Conspiracy theorists can take it from there. Is it mere coincidence, for example, that Air New Zealand's hope of re-establishing a crucial Australian "feeder" relationship with a revived Ansett have been dashed by the collapse of the Tesna rescue plan?

Air New Zealand is fighting back as best it can, accusing Qantas of attempting to grab New Zealand domestic market share through predatory pricing - that is, selling flights at below cost.

It says it's considering legal action under the anti-competitive practices provisions of the Commerce Act. Shoeshine's legal mates suspect this is mere sabre-rattling unbacked by any legal substance.

Notwithstanding Norris' description of his rival as "an 800-lb gorilla," Qantas has only 20% of the local market, hardly enough to allow it to exercise the "substantial degree of market power" necessary for a section 36 prosecution.

Nor does a section 27 "substantial lessening of competition" case look promising.

Those expecting Norris to pull off a miracle rescue of our national carrier might draw some comfort from the latest crop of news.

While world commodity prices - dairy prices in particular - are softening, export volumes aren't likely to be much affected.

Visitor numbers, as reported by the likes of Auckland Airport, which doesn't have to blame Osama bin Laden for poor profits, are recovering. And the dollar is picked to rise, by a couple of cents at least, by the end of the year.

If Norris doesn't pull it off he will at least avoid becoming Australia's most popular punch bag, as poor old Gary Toomey did.

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