DAVID KNIBB WELLINGTON
The future of Hazelton Airlines, Australia's largest independent regional, turns on whether Ansett Australia can convince the country's competition watchdog to drop objections to a takeover.
If the Australian Competition and Consumer Commission (ACCC) cannot be convinced, then Hazelton faces either a struggle to survive on its own or an unwelcome merger with low-fare carrier Impulse Airlines. The ACCC seems less worried about the possible demise of Hazelton than with the effect on competition if one of Australia's majors acquires the regional and its slots.
Hazelton serves a network of over 25 destinations in three states, but the key competitive fact is its holding of 455 critical slots at capacity-restricted Sydney Airport - 120 of them at peak hours. That makes it the third largest holder of slots at Sydney after Qantas, which has 1,300 slots, and Ansett, which has 1,200. Hazelton's slots alone would give an acquiring airline a huge advantage, especially if it were able to transfer them to its own operations.
The bidding for Hazelton started last July when Impulse proposed to merge its regional operations with the airline. In a move to protect its seven-year alliance with Hazelton, Ansett responded by offering to buy 20% of Hazelton's shares.
By November, Hazelton was seen as a takeover target and Qantas decided to make its own bid. That sparked a spirited bidding war between Qantas and Ansett that lasted two months and pushed up Hazelton's value from A$15 million ($8 million) to A$27 million.
Some saw this as a test of wills between Geoff Dixon, chief executive-designate at Qantas, and his former colleague, Gary Toomey, who has taken the helm at Air New Zealand, Ansett Australia's parent.
At this point the Australian Government stepped in. The ACCC raised concerns about the competitive effect of transferring Hazelton's peak-hour slots to either Qantas or Ansett. John Anderson, transport minister, then restricted slot transfers from a regional to a national carrier. But that did not go far enough to satisfy the ACCC. In its final ruling, the ACCC says: "Approximately 24% of Hazelton slots [roughly 120 a week] could still be moved." Given the high barriers to entry at Sydney due to slot restrictions, the ACCC declared that neither the Qantas nor Ansett bids were acceptable.
With that, Qantas threw in the towel, but not without a final blast at the ACCC. "The ACCC's apparent view that a multiplicity of competitors be available in all sectors of the Australian market, regardless of financial viability, is disturbing," Dixon warns, and it could relegate Australian airlines "to 'cottage industry' status".
Ansett, still optimistic that it can turn the ACCC around, is submitting a new proposal. It may be forced, however, to relinquish Sydney slots or guarantee that it will not transfer Hazelton slots to itself before the ACCC budges.
Meanwhile, low-cost start-up Impulse hopes to leapfrog its rivals and merge with Hazelton, even though Hazelton's owners are cool to the idea. But Hazelton may be running out of options. Chairman Stan Quinlivan warns that, without an "essential" link to a larger partner, his airline faces "the danger of long-term damage".
Source: Airline Business
