Compass Collapse Analysis

So, what went wrong?

Essentially the airline did not run at a profit and in business, no matter what you do, you must make a profit. If your product costs more than you sell it for then you will go broke. Simple as that.

In Compass’s case it also made a number of fatal mistakes that most aviation observers had queried well before the first Compass Airbus left the runway back in December 1990.

Firstly, it chose aircraft far too large. The Airbus A300-600R is an excellent airliner, but like any aircraft it is only economically viable if you can generate a satisfactory load factor at fares that will return you a profit. A 280 seat class jetliner can be a financial nightmare in a limited market of 17 million people where at deep discount fares you have to sell the vast majority of those seats on each and every flight just to stay financially airborne. In its dying months Compass was recording load factors of 73% on average, well above its prospectus breakeven of just 60% and yet was still losing more than a million dollars a week.

What happens of course with a big aircraft is that management run the risk of overselling gimmicks to try and fill the plane. Rather than the plane catering for the market it becomes more the market catering for the plane. Management then will launch ridiculously low fare initiatives just to get ‘bums on seats’ (as the old fashioned industry parlance runs) on the theory that there is nothing with a shorter use-by date as an empty airlinerseat once the aircraft has left the jetway. This of course is correct except that you shouldn’t be doing it in the first place and would not need to if a smaller aircraft was in operation. Bryan Grey’s 288 seat A300s may have made sense at peak times but for the rest of the day they were scratching for full fare traffic and offering seats at fares that merely devalued what was otherwise an excellent product.

Instances of this grew worse by the month as passengers were offered two for one deals and finally even a three for one deal in addition to discounts that became lower and lower as the pressure to generate cashflow increased. As an example, around September Bryan Grey stated in a media interview that he could support a $85 one way Sydney/Melbourne fare if the aircraft ran at a very high load factor. A few weeks later Compass was offering $100 returns on that and similar sectors. Again, the idea was to simply fill the plane rather than fly empty seats, the exact opposite to what a well thought out business plan would

have had the airline doing in a time of losing revenue. So why did Compass opt for such large aircraft?

Initially the airline did try to acquire Boeing 767-200s with servicing and technical support being provided by Qantas. As time went by however, aircraft were not available in the timeframe demanded by Compass whilst Qantas at that time were also unable to raise much enthusiasm for undertaking a new entrant’s maintenance when they couldn’t perform their own and were having to send many of their own aircraft offshore.

Compass then looked atA310s but again few were available in the timeframe required and the price differential at that stage led Grey to consider that the larger A300-600R would offer better long term value by way of the lowest seat costs of any domestic jet in Australia. Again this theory was absolutely correct, though it is only viable ifyou can fill the aircraft in the first place.

Compass was also happy to fly with the biggest on the basis that ultimately with the lack of terminal access they would still be able to achieve a significant impact on market share whilst having only a six unit fleet. In theory this was correct but again the market must be there in the first place to fill that available capacity for it to be translated into profit at the end of the day. Again a policy of going all out for quantity at the expense of quality.

An ideal situation would have been (in our humble opinion and reflecting previously stated sentiments published in this magazine over the past two years), to have taken advantage of the numerous opportunities that existed through 1989/90 and have acquired secondhand (ex Eastern?) Boeing 757s or Valsan equipped 727-200s. The 757s are raved about by every operator who flies them and a comfortable 200 seat all economy configuration would have been ideal for meeting Compass’s mission objectives. Instead of having to give away free seats, or large numbers of seats at ridiculously low (loss making) fares, Compass could have instead concentrated on sensibly discounting 20-50% below the competition on their published standard fares flying aircraft that would have cost less than half as much to own and operate each year. Sure the costs per seat kilometre might be slightly higher than the A300, but what does it matter when you have to give away seats to fill the larger aircraft?

The Valsan equipped 727 is also a full Stage 3 aircraft with 164 seats with sufficient range to fly anywhere in Australia with one stop. Though the lease rates have varied slightly this past half year a comparison is most interesting. Whilst a new A300-600R leases for around $900,000 a month, you can have a fully refurbished Valsan 727-200 for closer to $150,000 a month. You don’ t have to be a Harvard graduate to see who will be the winner at the end of the day. After all, who do you want to fly for, a bank or your shareholders?

All this of course is not new as we are quoting broadly from our Reece editorial in the September 1990 edition of AA and whilst one new entrant seems to have understood these numbers the others seem hell bent on repeating Compass’s more glaring mistakes (refer box).

So much for aircraft.

At the time of the collapse, much was made by Compass CEO Bryan Grey that the airline’s demise was caused largely through the Government not providing adequate terminal facilities. In effect, it had deregulated the airways but not so the airports.

To a large extent his gripes were justified though for the wrong reasons. The sad fact is that if Compass had had relatively unlimited access to terminals it would have probably gone broke sooner based on the ‘growth at any cost’ mentality of its management team.

Not wishing to be a specialist, profit making niche operator serving the mass market between the major cities, a totally liberated Compass would have increased frequencies and services to a plethora of new ports just to further annoy Ansett and Australian. 737/A320 class for serving secondary ports such as Darwin, Alice Springs, Hobart and Canberra amongst others. If it had done this it would have gone broke even sooner as once again it began to fly wildly away from its initial business plan in the sole pursuit of market share at any cost. Another airline a world away named America West has for almost a decade now taken this exact same approach and the consequences are that it has twice almost gone bankrupt, pulling back through sheer good luck (a then booming economy) and now flies in Chapter 11, a product of low yield and expansion into markets where it shouldn’t have economically been.

Bryan Grey and his team knew full well that they would have to operate from either Australian’s or Ansett’s terminals in all the major cities other than Brisbane. The 20 year leases hurriedly worked out and signed just prior to the FAC’s formation on January 1, 1988 did unfairly treat any new entrant in that they allowed both incumbents lease rights over not only the existing terminals but also adjoining real estate. From the other side of the coin though it is hardly surprising considering the half a billion dollars of their own money that both carriers would be investing between 1988 and 1995 in terminal construction. Would they have been prepared to invest those types of dollars ifthey didn’t have long term leases? Of course not.

The alternative was thus for Compass, and any new entrant, to build their own terminal with their own money. As you can imagine, the FAC is reluctant to build massive common user terminals at its expense for operators who are perceived as being undercapitalised and likely to go broke at any time.

So were the existing terminal arrangements a real factor in the downfall of Compass, as was strongly suggested by Bryan Grey time and again? Personally we think not. The facilities in both Sydney and Melbourne appeared to work well from our experience. They were not as grand as perhaps Ansett or Australian in some instances but that was to be accepted as after all Compass was supposed to be a low fare no frills economy class airline. AA had used the now famous Adelaide hangar and even this wasn’t too bad despite torrential rain and freezing conditions at the time. Furthermore, none of our business travelling companions seemed to mind the austere facilities that much in view of the affordable ticket that we were travelling on.

In Perth, Compass operated from excellent facilities in the overseas terminal. While that terminal is isolated from the domestics one would imagine that unlike some other ports there is little oncarriage there for Compass and so this was not really seen as a problem. Australian in fact made the point that for the past year their own terminal has been vastly inadequate due to rebuilding that won’t be completed till around May.

So were the terminals really a major problem -you be the judge. And so to discounting.

From the start AA was often amazed in dealing with senior Compass executives that they did not seem to appreciate that once they dropped their fares that Ansett and Australian would follow suit. It appeared that Compass honestly believed that they could offer a deep discount fare and that would be it. Battalions of travellers would throng to their ticket counters leaving the established carriers with half full planes charging ‘yesterdays’ fare.

What happens in a deregulated free market environment of course, and particularly in aviation, is that your competitor will match, or even exceed, your discount. Simple as that. As Compass mostly led the fare discounting initiatives (amidst much thanks from the consumer) it can only blame itself when its competitors follow suit with gusto. Again, it is up to airline management to look carefully at each week’s operating performance and assess where they are going wrong. Most airlines do this nowadays on an almost daily basis and it is called yield management.

Compass executives should have been fully aware of precisely what was occurring and should have moved from the beginning to increase yield. They could have done this by (a) limiting the number of deep discount seats rather than throwing more and more at the market; (b) by making more use of the A300s excellent underfloor cargo capability, something that could have boosted revenue by a quarter or more, and (c) by getting serious about damaging their two competitors where it would hurt most -in the business market.

In the final half of 1991, Compass had gained around 9% of the total business (full fare) market with something like a third of its uplift being ‘suits’. As we pointed out in our December issue deregulation analysis (p. 38), if Compass had provided a segregated zone for business travellers it would have done much better at attracting these valuable full fare customers. In its dying days it did in fact launch a Corporate Class in Zone A though this was little more than an area reserved purely for ‘suits’ and nothing more.

What would have been far better would have been to install first class seats in Zone A, 24 in all, and sell this as a business class but at a firm 33% discount on the cost of the same product from the big two. That would have taken much more traffic away from the existing business classes of Ansett and Australian and would have also seduced many full fare economy passengers across to Compass. Catering could have been kept simple while the extra space and privacy of such a configuration would have gone a long way to giving Compass the corporate credibility that it only began to appreciate it needed too late in its brief life.

The primary area where Compass got it wrong though was simply in underestimating its capital base. The airline was launched in June 1990 in what was one of the most successful floats in Australian Stock Exchange history. The share offer raised $65m in just two days with over-subscriptions having to be returned to keen investors. Taking up the 130 million 50c shares were a total of 11,192 individual investors, about 17% of which were classed as ‘mums and dads’, though large institutions such as BT Australia, Perpetual Trustees, Sarich Corp and Prudential Assurance were also major shareholders. Bryan Grey, personally and through his family company, Keymaze, are also major shareholders and stand to lose an estimated $8m if Compass cannot be reborn and made profitable. In hindsight, the amount required should have been closer to $200m. Sadly, and an example of how naive the prospectus was, the airline’s existence was based on a capital base of just $50m, so in effect Compass went operational with a significant boost to its assets base and still went bust.

The prospectus in fact boasted a financial performance that in reflection turned out to be more akin to Alice in Wonderland than real world accounting. For instance, the 1990/91 financial year projected revenue of $154. 2m for an operating profit of $20. 2m. What actually occurred was a loss of $16. 5m on a revenue base of just $?Om. Year two was to achieve an operating profit of a dreamlike $104. 4m on revenues of $378. 2m. Figures released by receiver, Ian Ferrier, indicate that Compass had lost a further $26. 2m in the final five months of its life, hardly a precursor to great things ahead in 1992. What justifiably riles many people is that right up till the very end senior Compass executives were claiming how well the airline was operating. In November, Compass even won two major awards, one from a leading business magazine for its outstanding contribution to Australia. The one thousand now unemployed Compass staffers and the eleven thousand plus investors may well have other sentiments. The airline was actually beginning to get into trouble with the CA A for late payment of airways fees as early as February with ongoing dramas with virtually all of its suppliers within just months of its becoming operational.

At the time of closure it had accrued debts of $151m and if the airline ceases altogether (refer Stop Press for last minute update) its debts will exceed its assets by a massive $171. 2m. A major disaster for Australian aviation and certainly the aspirations for any new entrants wanting to gain sufficient capitalisation in the future.

Certainly Compass endured unexpected probiems in its first six months that were not alluded to in the prospectus. Unfortunately it is not a perfect world, any start up venture runs into headwinds not of its own making and cost increases often beyond the realms of prediction. Compass was certainly no exception. Major problems that dragged it down from the start werea significant reservations system problem in thefirst weeks of operation, where management had simply (by Grey’s own admission) totally underestimated demand for seats with the result that Compass reservations phone numbers were jammed to the point where few travellers could actually make a booking. The farcical situation thus arose through December and January where many Compass aircraft were leaving with just a few dozen seats filled. A disaster for the airline both in fiscal and morale terms, as the eyes of the aviation world were well and truly upon it. It has often been alleged that deliberate computer hacking and electronic interference was involved in creating this situation, though Compass at no stage made official complaints via the Department of Transport & Communications’ (DoTC) security division as to this happening and the airline itself has stated that the problem was one caused by unexpected demand rather than hacking. When the reservations capacity was hurriedly expanded and a “13” Telecom number installed the problem was generally resolved, though from this writer’s experience gaining access to any airline’s reservation system nowadays is something that has to be approached with a fair degree of patience.

Another problem was the effects of the Gulf War, obviously this did increase fuel prices, though this did not really affect Compass much as it had just two aircraft operating for barely seven weeks when the prices were at their peak. Domestic traffic was of course not affected in real terms by the events in the Persian Gulf as is evidenced by the massive, indeed record, month on month traffic growth recorded by the DoTC for the period. There was some slowdown in business traffic, but in hindsight this was more attributable to the looming recession and as Compass in those early days was targeting purely the leisure market it hardly had any real effect on their revenue generation capabilities.

Probably a more serious problem was the late arrival of Airbus aircraft. A defuelling problem with one of the airline’s A300s in Hamburg meant that it was unable to be delivered in time for the Easter rush, with the result that two Canadian Airlines A310s had to be hurriedly leased to fill the gap. The first did not arrive till June, leaving Compass with a capacity shortfall and thus an inability to expand some of its key routes as soon as it would have liked.

However, this is all forgetting the fact that in reality it didn’t really matter anyway as, sad as it is, the airline had virtually run

itself into a loss making situation from day one. So, what did Compass neeti to survive?

Obviously it needed smaller aircraft. Preferably these aircraft would have been of around 200 seats maximum and most definitely secondhand. This would have allowed sufficient capacity to cater for its perceived leisure/business market without having to literally give seats away in addition to also offering viable commissions to travel agents, instead of the ridiculous (up to 20% towards the end) payments being made just to snare business to again fill overly large aircraft.

The airline should also have had two to three times the capitalisation it had to ensure that it could always pay its bills on time and remain liquid through the recession and start up period.

Compass should have also, from day one, been active in the freight market. It operated an excellent freight aircraft, having chosen to go that way, it was ludicrous that it didn’t take freight seriously from well before the airline became operational. Finally Compass should have initially seated its business passengers in a discreet section on their own and as soon as possible should have introduced the previously mentioned business class. This would have done much damage to the established carriers and would have also taken much of the gloss off their newly launched frequent flyer programmes.

But history will record that Compass did none of these things and history will also sadly record that on its 385th day it operated its last flight. As this is written there of course still remains the hope that a saviour will be found to revitalise the airline with an immediate cash injection of around $35m. However, this is assuming that most creditors will be content with accepting stock in place of debt (an extremely doubtful scenario) and completely overlooks the fact that either way the ‘new’ Compass will have to be recapitalised to the tune of at least $100m.

At the time of the collapse it wasindeed difficult to get anything other than extremely emotional comments from anybody involved with the airline. Tens of thousands of passengers had been stranded, thousands more had lost their money on prepaid fares and the looming spectre of more than a hun

Waiting in the Wings?

Whilst Compass put its words into action quite a few other potential new entrants entered the fray with varying degrees of credibility. We herewith give an updated account of the existing new entrants with a no holds barred commentary on their strengths and weaknesses. Though we expect to gain few friends with this exercise in reality, it will perhaps be worth looking back on this ‘form guide’ two or three years hence.

Southern Crossairlines ltd

This airline has been waiting in the wings for some years now and has from the outset been content to get its timing right before launching into what is a highly competitive low profit market.

However, Southern Cross was hit for six by the Compass collapse as it directly coincided with the launch of the company’s prospectus. CEO, Sam Coates under the guidance of Australia’s leading underwriter, J B Were were about to go to the market and have wisely withdrawn their prospectus to await sunnier skies.

Southern Cross were planning a float of 120 million 50c shares with a provision for over-subscriptions of $10m. This would have given them slightly more capitalisation than Compass. Their fiscal projections were also significantly more conservative (realistic?) than were Compass’ with a first year operating loss of $7. 4m on revenues of $147m. For its second year (which was to be 1993/94) it forecast $223m in revenue for an after tax profit of $9. 9m.

Southern Cross has two strengths in its campaign that are worth noting. Firstly, its CEO is Sam Coates who was formerly vice president of Southwest Airlines in the US. Southwest (refer p. 56 Oct 91 AA) is an incredibly successful airline, having turned a profit in 18 of its 20 years and so successful in its market that even the likes of Delta, American and United steer clear of head on confrontations with this gutsy little niche operator.

The second asset is that Southern Cross have chosen the MD-83 as their preferred type, albeit new aircraft rather than second hand depreciated examples. For some unknown reason this extremely efficient and cost effective aircraft has consistently been shunned by local operators, and probably, like the 757, for all the wrong reasons. The MD-83 offers Southern Cross transcontinental range, 140 seats with a four abreast business and five abreast economy configuration using seats one inch wider than those typically found in a single aisle Boeing. Economy passengers also have a 50% less chance of being assigned the centre seat in a row of three, one of aviations least pleasant experiences at the best of times. The airline was initially planning to start operations with six MD-83s later this year serving the major cities with discounted services on a high frequency timetable.

For the time being Southern Cross have decided to await the outcome of the Compass collapse and will probably now go to the market later this year. Their timing will thus probably run head on into the launch of Australian and Qantas. This is bad news.

In view of the abovementioned problems it may be that Southern Cross has left its run too late, as not too many investors would now rush new entrant stock, or they will have to go to ground for up to two years to await better times and an eventual outcome regarding the sale of Australian and Qantas. The bogeyman here though for all the new entrants is that by mid decade Qantas and possibly Air New Zealand will most probably have domestic rights (it is Coalition policy) with all that that implies.

Transcontinental Airlines

Transcontinental has been around now for almost two years and has delayed its stated launch as the reality of the enormity of the operation in getting a ‘real’ airline to the jetway takes over from what for many people is merely wishful thinking.

At presstime the airline was still confident of a May 1992 launch with its half dozen 737-500 aircraft serving the West Australian market in direct head to head competition with Ansett WA. No details of the financial arrangements re Transcontinental are available, nor ever have been.

Whilst some realistic competition in WA is long overdue, we seriously wonder if this airline will be the bearer of same. For starters, it is using a very expensive aircraft to perform a task with just 90 seats in a two class configuration against the lower cost 75 seat jets of Ansett WA. At 90 pax we feel the Transcontinental aircraft is already too large to be economically viable in what will (from day two) become a deep discount market. However, what makes it worse is that this is really a 120 pax twinjet with a most inefficient use of space as a 90 seater.

Downsizing in airliners rarely works and in building the 737-500, Boeing optimised the aircraft for the dozens of large airlines already operating established 737 fleets where the benefits of commonality pay off and subsidises the additional fuel burn and relatively high seat kilometre costs of the smallest of the 737s. McDonnell Douglas’s MD-87 is in the same boat as will the eventual Airbus A319. These aircraft only really make sense in commonality terms as stablemates of their larger brothers in a big airline environment, not as single types in a small high cost operation.

The lack of information on financing also makes one wonder just what is the true strength of the airline. At presstime the airline also did not have anAir Operators Certificate nor was near getting one, so how it can be operational this May is anyone’s guess. A terminal at Perth has also still to be resolved. As Transcontinental eventually wishes to expand eastwards as a primary force airline it will have to have at least $200m in the kitty before it even launches services in the West. If the airline disagrees with this then fine, but I am glad that it’s not my money that’s riding the line.

Australia nor the West

This operator has a chance if it can gain full approval as a code sharer with Australian. TN has for years wanted a presence in the West to fend off rival Ansett and was never able to do so due to not having the right type of aircraft. It has consequently been negotiating for more than a year with Richard Goldsmith’s proposed Australia Northwest which is looking to fly four new Fokker 100 twinjets in a two class 90 pax configuration head to head with Ansett WA. Again, financials seem to be a deeply kept secret so the best we can say is that a nod from Australian might just see this operator becoming reality, though don’t hold your breath.

We might also add that if both Australia Northwest and TransContinental succeed in launching in the West then it is virtually fait accompli that one or more will fail. The WA market is simply not big enough to support three jet operators, particularly when one is operating totally unsuitable equipment. Whoever survives this absurdity will simply be the operator with the deepest pockets, hardly the way to run a business.

The other mystery is why Australian hasn’t taken on Ansett WA via its own Australian Airlink operation and instead is discussing linking with basically an unknown quantity with no real world experience in the airline environment. Airlink has the correct size aircraft and has been performing nicely since its launch last August. Though when you mention this to Australian all we get are looks of surprise – maybe its all too logical!

AAA (Triple A)

Of all the new entrants, AAA is about the closest to launch.

The airline has wisely chosen secondhand hush kitted DC-9-30s, ironically two of which are ex Ansett aircraft while another is ex Australian and the two remaining 9s are from KLM. They will be configured in a 105 pax all economy arrangement offering a generous 33in seat pitch.

The genre of AAA will be a high frequency shuttle linking Sydney with Melbourne and Brisbane. Additional flights will venture to Cairns and possibly Townsville, Darwin and Alice Springs on special tourism orientated services. Fares will be discounted and with a relatively low capital requirement and small aircraft, it is conceivable that this Southwest style airline may well become a big hit as a definite niche operator. Few financial details are available except that the initial plan to largely attract launch funds from its pilots has been quietly shelved in favour of funding from traditional sources. Even though AAA is a low budget operation it is felt that it will need at lea:ot $50m in capitalisation as it will in reality take at least six months to get such a shuttle fully effective.

However, the day AAA begins to hatch grandiose plans and go big, they will take on all the encumbrances of their majors without any of the support infrastructure and will most probably fail. Our tip

– stay small and be the best in a small but profitable niche market.

AAA is planning its own terminals in Sydney and Melbourne, possibly using the Melbourne Jet Base at Tullamarine (with a new FAC lease) and the old Eastwest hangar at Sydney alongside Flight Facilities. AAA hope to commence services by mid year dred million dollars in accumulated losses was simply too much to envisage during those dark days of Christmas 1991.

A thousand staff had been made redundant overnight, though one of the few bright spots in the entire fiasco was, or is, the loyalty and fighting spirit displayed by all Compass staff in their valiant attempts to get the airline flying again. A “Save Compass” fighting fund was quickly organised and at presstime had raised more than $5m, most of which will go to charity if it cannot be used for its intended purpose.

That Australians should rally to the battler image of Bryan Grey is not unexpected. Compass gave Australia the opportunity to fly, the only problem was that it was at a price that would ultimately bankrupt the airline in the process.

In those dark days many questioned whether or not the Federal Government should support a rescue package. As has already been widely reported, Grey and his senior advisers met with the relevant ministers just two days prior to the issue going public in the hope of winning a $30m cash injection into the airline largely by way of prepaid tickets. It was something that the Government claimed it didn’t need and was doubtful that even this amount would save the airline. In retrospect they were correct as the level of indebtedness by that stage would have meant that $30m would simply have been good money after bad. Bitter Compass employees, and Australians at large though did rightly ask why it had been good enough for the then Prime Minister, Bob Hawke, to approve a $40m rescue package of US owned Kodak when Australia’s own Compass was considered not worth saving. Without getting political, it is worth noting that the Kodak factory resides in the federal seat of Wills, the then PMs very own electorate!

So much for Compass, but what are the implications for the rest of the industry?

Obviously the demise of an airline that in its brief run had successfully captured 12% of the total Australia wide passenger market, a massive 24% on its competitive routes and around 9% of the business market will be good news for Ansett, Eastwest and Australian. All three have been running record load factors using even chartered aircraft through January at a time when normally traffic is on the wane.

Eastwest’s acquisition from January 18 of a 164 pax Boeing 727-200 from Ansett (refer Traffic) was particularly fortuitous and it is now likely that ATI will expand Eastwest substantially to take up the unique opportunity given it by the demise of Compass.

Ansett late last year was tipping a small loss for 1991/92 despite average load factors in the high seventies. Though much of this had been cynically attributed to the deliberate talking down of the industry at a time when several new entrants were still looking for capital, it can be assumed that both Ansett and Australian were not looking at a bright year despite their cost cutting activities of 1991. With effectively a 12% boost to their theoretical traffic base overnight, split say 40:40 between both with the remaining 20% going to Eastwest, it is conceivable that all three will enjoy a tidy profit this year. If they don’t, given the circumstances, their management should be summarily dismissed as few airlines anywhere in the world enjoy the load factors being achieved in Australia.

So will the deep discounts promoted so aggressively by Compass persist? Obviously not (in real terms) though both Ansett and Australian will offer many fares that tantalise, how many of these will truly be available when you go to book has yet to be seen. As an example of what we mean, it is worth recounting that A A recently booked a lunchtime flight with Eastern from Sydney to Canberra on a Saturday. Despite the booking being made six weeks prior to travel in what we confidently thought was not a ‘peak’ time, we were unable to get a discount seat and had to pay full fare. Just for the record the aircraft was less than two thirds full. If the airlines are going to publicly claim that they are sincere about the discounts they advertise with such fanfare, then they are going to have to be a bit more fair dinkum than this!

This type of stupidity (where cheap fares are advertised but not widely available) would certainly not have occurred on any sector served by Compass and it is for this very reason that so many within the industry are sceptical of the cheap fares currently being advertised by the majors. In early January all three airlines issued statements with bargain basement fares being the order of the day to allay public suspicion that Australia’s air transport industry was reverting to the bad old days of a cosy duopoly. Fares such as Melb/Syd return $156, normally $468, Syd/Adel $212, normally $636, Syd/Cns $312, normally $934 were offered, though how many on each flight is another story. What Compass did was to offer these deep discounts en masse, unfortunately though discounting itself out of the market in the process.

Hopefully the ‘affordable airfares’ pioneered by Compass will exist for those who can book ahead and perhaps fly at oft peak times. If they don’t then there is certainly plenty of scrutiny at both media, government and public levels to ensure that something good comes out of the Compass collapse.

Already there is an expanded Do TC report underway, while the Australian Securities Commission, The Australian Stock Exchange and the Trade Practices Commission are all presently working on an analysis of events that will unearth a plethora of data on alleged predatory pricing and unfair practices by the established airlines in addition to revealing in greater detail the fiscal mess that had quickly enveloped Compass.

December 20, 1991 will forever remain a tragic day in the annals of Australian aviation for it was the day that our first airline to take on the ‘heavenly twins’ died. From its ashes hopefully new carriers will emerge and that they will look carefully at the reality of what went wrong with Compass and learn by its mistakes. We can only hope.