Ansett Increases Market Share with East-West Purchase

At his Sydney press conference, Sir Peter stated that he would be keeping East-West as an operating entity in its own right. EWA would continue to fly as a specialist discount no-frills carrier that would allow the ATI Group to use its vast expertise and diversified resources to cater for the rapid expansion in tourism and low fare travel within Australia. At time of closing for press, there was no confirmation of who would make up the senior strata of EWA management though it was intimated by Sir Peter that he was relatively happy with the present structure.

East-West and Ansett will certainly make for odd bedfellows.

From the moment that EWA began to expand from being a recluse regional during the early eighties under the entrepreneurial management of Brian Grey, Ansett set out to stymie its progress as Australia’s third airline. EWA’s attitude was that Ansett was a professional litigant and consequently the two frequently met in courtrooms across Australia with the smaller carrier usually being victorious. Prior to the purchase, EWA was still challenging the Two Airline System in both the Federal and High Courts in addition to lodging a challenge against Ansett’s importation of new Fokker 50 aircraft claiming that ATl’s existing overcapacity already comfortably dwarfed that of the entire EWA fleet.

For EWA, which had reportedly been accumulating losses approaching $40m over three years, the move signals a hoped for era of stability and enhanced economics. EWA will now be able to cut its operating costs by as much as a fifth owing to the amalgamation of its computer reservation system, engineering, maintenance, catering, training and terminals with that of the Ansett Group. Additionally, EWA will now be able to enjoy additional passenger uplift through its affiliation with Australia’s largest airline group.

Additional capacity can also now be transferred to EWA via either Boeing 737s or additional F28s. However, Sir Peter was not certain as to the future of EWA’s lease of ILFC-owned Fokker 1oo twinjets and these could well become a casualty of the sale. On the other hand, it is likely that EWA will in time inherit a new turboprop fleet of Fokker 50s with which to replace its technically old-fashioned F27s. Handled correctly on the balance sheet, the sale of these assets could boost the airline’s revenue base somewhat. Additionally, the Fokker 50 is around 25% more fuel efficient on a given sector with the bonus of a higher cruise speed, something that over the course of a year will substantially reduce operating costs and enhance fleet productivity.

For its part, Ansett is looking to acquire additional BAe146 airliners, might pass the depreciated F28s across to EWA and even introduce a combi version of the 146 which would seat 50 pax and uplift 4 tonnes of freight. In view of the 146s very low noise footprint, this type could prove a money earner in a fully liberalised airline environment offering discount night-time services.

East-West and its staff are not new to takeovers. The carrier was initially acquired by Mr Brian Grey after a long share battle in 1982 from the original shareholders who commenced the airline in 1947. Perth millionaire, Mr Ric Stowe then moved to purchase the airline from Grey in December, 1984. Fortunately, the latest sales saga appears to be the last for a while, though Skywest faces an uncertain future as via a Trade Practices Commission ruling it will have to be divested owing to its conflict with existing Ansett assets in WA.

The international strengths of the vast Ansett/News Corp empire are indeed immense. Ansett is already a major air transport operator while now TNT is also actively entering this market. It is, for instance, little appreciated that TNT is one of the world’s largest and most diversified transport companies. In Europe alone, it employs over 6000 people while the total ATI/TNT empire now exceeds some 50,000 employees.

Ansett also operates several aircraft leasing divisions in addition to managing and providing airlines for a number of small nations unable to afford their own dedicated flag carriers. Its recent acquisition of a 20% shareholding in America West Airlines, one of the be:,t managed of the US domestics, is just another example of its power projection. Closer to home, TNT has acquired a majority shareholding in Kendell Airlines, arguably Australia’s best-managed region and intends to do likewise with Lloyd Aviation.

With some 55% of the total Australian capacity at its fingertips versus a mere 40% for Australian Airlines, it is easy to see that Ansett doesn’t have to wait for deregulation to gain control of the domestic air transport system, it has already achieved its longterm goal with relative ease through the speedy acquisition of East-West.