PAUL PHELAN / CAIRNS
Ansett's demise has left former parent Air New Zealand on the brink of collapse and reshaped the industry in Australia and New Zealand
The collapse of Australia's Ansett has changed the face of aviation in Australia and New Zealand forever. The challenge for all stakeholders is to build a system that restores competition, credibility and stability - inevitably to be built on foundations already largely occupied by Qantas.
Air New Zealand's (ANZ) immediate concern is its survival. Inevitably the flag carrier will fly in a reduced format which is still being defined, under the yoke of government restraints and controls, as the financial mess that is being laid at the feet of its former major shareholders is unravelled. The New Zealand Government tried to boost the airline's prospects with an NZ$885 million ($365 million) government bail-out, but a Salomon Smith Barney market analyst estimates this is only half ANZ's immediate needs.
Filling the gaps
Ansett's fate is even less certain. Its sudden shutdown on 13 September, two days after the terrorist attacks in the USA, was largely overshadowed by that calamity. With creditors' cautious consent, Ansett's voluntary administrators have adopted the strategy of reinstating and maintaining a skeleton airline in the hope of retaining accessible core infrastructure, key staff and a transferable operating certificate.
Unlike almost any other airline, Qantas has not suffered since 11 September, its domestic market share surging to about 90% with low-cost rival Virgin Blue also reaping benefits from the windfall. Like most carriers, Qantas' international operations have been curtailed, but that has allowed it almost immediately to begin filling the gaps created by the instant loss of some 40% of Australia's seat capacity. Twelve aircraft - some diverted from international operations, some wet leased and some dry leased - will plug most of the remainder and Qantas chief executive Geoff Dixon's follow-up fleet strategy announced last week will strengthen the carrier's position further.
Dixon expects that, when the dust settles, a well entrenched Qantas will hold some 65-70% of the domestic market and has put in place a series of initiatives he hopes will make that position unassailable. In the short term, he says: "We've already taken up to 50% of the passenger numbers that Ansett would have had. We've got 12 aircraft coming in - three Boeing 747s, six Boeing 767s and three Boeing 737s." In January, Qantas will begin adding new 737-800s and restructuring its fleet to meet the twin challenges of an expansionist Virgin Blue and whatever competitor rises from Ansett's ashes. Fifteen new -800s will be delivered by next July as the airline takes aircraft from a recently deferred American Airlines order
In New Zealand's domestic market also, uncertainties over the nartional flag carriers future are expected to strengthen Qantas, already well-established on the country's trunk domestic routes. What is now concerning travellers, Star Alliance carriers, politicians and tourism bodies on both sides of the Tasman is whether a meaningful competitor will emerge to fill the vacuum.
An Ansett Mk II insider says only two bids for major Ansett assets remain on the table as the patience of creditors (including displaced Ansett workers) wears thin and Qantas' position strengthens daily. Two Melbourne businessmen - road haulage operator Lindsay Fox and retailer Solomon Lew - want to acquire 29 new Airbus A320s and to fly on all trunk routes; while an "ANstaff" bid, led by Ansett pilots, seeks to re-establish a scaled-down version of the former carrier's trunk route network. ANstaff's business plan is based on putting into service 35 to 40 of the former carrier's existing Airbus A320s, and 737s and 767s, flying a comprehensive route structure around Australia, targeting the business market primarily and employing 6,000-7,000 former Ansett staff from the outset.
"The Lew/Fox bid would create another Virgin Blue, which is unlikely to return the money the creditors need and wouldn't have the credentials to qualify it for the Star Alliance, which desperately needs to regain a foothold in the region. To rise to a critical mass in this market, you need about 45 aircraft. Another Virgin Blue wouldn't fit the requirement," says the Ansett Mk II source.
SIA has agreed to take up a consultancy role and appointed former Qantas deputy chief executive Peter Stainlay to work with the administrators on developing a business plan for a new Ansett.
The source believes SIA is now likely to team up with AN staff in a management role, with about 7.5% equity. As such, Stainlay would probably become Ansett Mk II's new chief executive. Early confirmation of SIA's involvement in the staff scheme is expected.
Any Qantas competitor will face daunting challenges. Besides digging in on trunk routes, the well-capitalised carrier has launched new fleet and fare strategies, hired hundreds of key Ansett staff, moved in on the routes of several battered Ansett regionals and captured the bulk of a market which will be difficult to win back.
Unfinished business
Fighting off accusations of load dumping from Virgin Blue and of profiteering from a discount-starved travelling public, as well as government subsidies to stimulate competition from its commercial competitors, Qantas also has unfinished business. Dixon is warning unions not to seek unrealistic gains from the airline's near monopoly: "As we go forward, two key issues will continue to dominate for Qantas in operational terms - the management of costs and the efficient use of capital."
Dixon has held meetings with all unions, says Qantas chairwoman Margaret Jackson. "Obviously his message is that the cost structure we have going forward has to be one that can meet competition and matches our competitors' rates."
Dixon's defence against excessive union demands is Qantas' low-cost international start-up carrier Australian Airlines, targeted at reinstating a group presence in regional markets from which Qantas has been forced by its cost structure. Nothing in the Australian Airlines plan would prevent the new carrier from taking up some or all of the domestic fleet now being shaped. In fact, many of the new aircraft configurations are designed for it.
Source: Flight International
