Reece

And so, within two weeks, diminutive East-West has again changed hands. During early July, Ric Stowe’s Griffin Group had surprisingly scrubbed its proposed public float and sold the airline to Perth millionaire Mr Stan Perron. Better known as Mr Ten Percent, Stan Perron then immediately entered into negotiations with Sir Peter Abeles and so in the dying hours of July, Sir Peter had himself another airline. So quick was the train of negotiation that Mr Perron never even officially controlled EWA as legally his purchase agreement with Griffin was not to take effect till August 1 (full report on p111)!

So after years of battling fiercely against East-West in courtrooms across the land, the Ansett Group (masquerading in this case as a joint TNT/News Corp venture similar to Ansett Transport Industries) now control not only EWA but literally all of Australia’s first and second level carriers except tor Australian Airlines. Ansett now has near total control of the intrastate networks in Western Australia, South Australia, Victoria, NSW, Queensland and the NT. Additionally, TNT earlier this year moved to acquire a controlling interest in Australia’s most respected third-level airline, Kendells and looks set to do likewise with Lloyd Aviation, effectively giving it carte blanche carriage through Adelaide. In statistical terms, this gives the ATI group some 55% of capacity against Australia’s mere 40%. TNT Managing Director, Sir Peter Abeles has stated that EWA will be retained in its present form as a discount no-frills operation specialising in the vastly expanding tourist and low tare market.

This makes eminent sense as it then leaves Ansett to promote itself as the upmarket business style carrier that it rightly is.

The move to EWA will also hopefully bring an era of stability and confidence to the carrier as it is considered unlikely that TNT would divest its interest in the carrier once it had already gone to so much trouble acquiring it. EWA will now also be able to look forward to reducing its fixed overheads by as much as 25% as it integrates its management base, engineering facilities, computer reservations sections, training and fleet with the burgeoning Ansett Group.

And so with Ansett virtually having a stranglehold on the entire Australian airline environment-where does this leave Australian Airlines?

Poorly, it we may say it. Australian is now in a less competitive position than it has ever been in, in its 41 year history. It has lost virtually all of its important on carriage in every port and is up against a competitor that can swamp it completely with a diversified mix of different aircraft types. As we pointed out in our November issue last year (p122) Australian Airlines HAD to purchase EWA to ensure its long-term profitability. It naturally wasn’t able to because of the limitations caused by its Government ownership, and so, as in 1957 when it had the opportunity to purchase ailing ANA, it didn’t and gave Ansett, its arch-rival another massive head start. Australia MUST now be privatised. It’s as simple as that. This airline cannot be expected to suffer under the inbuilt inefficiency of its present public service working environment. Only with privatisation will it be able to make speedy on the spot decisions, to alter tactics as and when required, to generate external funding to its advantage and to openly enter into commercial agreements with other businesses that serve to enhance its capability. There is no need tor the so-called Australian people in this day and age to ‘own’ a large domestic airline. Over the last decade, government ownership of Australian Airlines has done little to its ability to compete equally with its private enterprise rival in the marketplace. It has merely had the effect of tying its hand behind its back. After all, what do you, or what do I, get out of this supposed ownership?

Naturally, purchase of Australia’s shareholding must come with strict TPC provisions, employees must be actively encouraged to invest and most importantly the $400/500m raised should go directly towards reducing the airline’s debt burden and not into consolidated revenue. Like Qantas, Australia operates under the mantle of a very high debt/equity ratio which makes it difficult tor the airline to make a consistently strong profit. Australian could reduce its interest burden by tens of millions of dollars annually, it it had this substantial cash injection that its share sale would raise. On the other hand, it Canberra gets greedy and simply transfers the newfound cash flow into consolidated revenue, then all it will be selling is a fiscal cripple.

The money MUST be returned to the airline to allow it to get on a competitive financial tooting with Ansett MegaAir. In 1983, the Government injected an extra $115m into reducing Australian’s debt burden, something that saved it $17. Sm alone during the next fiscal year. An injection of several hundred million would increase its operating profit (and ultimately taxable income) by tens of millions of dollars annually. This in turn would also serve to increase its initial capital value.

Our intel leads us to feel that much of this will be resolved in the coming session (Sept/Dec) of Parliament including a speedy resolution to the problems of the FAC, CAC and what will actually follow the demise of the Two Airline Policy come January 1990. In this setting, it is also possible that the Budget Night speech will hold the key to TN’s future, after all, in the mass of routine Budget reporting the muted baying of Labor’s Left could be well and truly lost.

Hitting a Raw Nerve

Our July issue Reece editorial dealing with the fiscally dubious pleasure of government aviation contracts certainly hit a few raw nerves.

Not surprisingly there was an avalanche of support from an industry that for a long time has been quietly complaining about the often unrealistic and illogical approach taken to the awarding of many government contracts. It was also nice to see the media take up the tale with AA duly being contacted by 60 Minutes, ABC radio, National Nine News and 4 Corners during the period.

It, like us, you feel frustrated and angry about this subject then turn to page 28 and read our story on the Hercules saga. It truly makes the Coastwatch and Fleet Support stories look like child’s play!