Reece

The long held dream of the late Sir Reginald Ansett for his airline to be able to fly beyond our shores is now sanctioned, as is the ability of each of the Australian majors to buy into each other at will; while Qantas and Air New Zealand will ultimately be able to fly domestically, if they so choose.

Amazing changes to an aviation environment that up till late 1990 was amongst the most stringently regulated in the world. However, what they truly mean in the cold light of day has yet to be fully appreciated. In fact, at presstime, few senior airline executives really knew what would ultimately occur from such a sweeping package of reforms.

Certainly there will be winners and losers; though specifically determining who will come out ahead, and why, is something that honestly won’t be known till events physically unfold beyond mid decade. For instance, will Qantas choose to invest its meagre cash reserves in Australian or will it go instead for Ansett. While officially the latter is not for sale, we are certain that a third partner might easily be accommodated if it (a) injected revenue into a debt laden ATI and, (b) if it stopped rival Australian acquiring a strategic link with Qantas – a nightmare for any ATI executive.

Likewise, what will the domestics get by flying the Tasman? For Ansett it could be a windfall. The airline already has a major presence in New Zealand which might well eventually become profitable if ‘big brother’ can link it with Australia and vice versa. Australian on the other hand has no identity in NZ, certainly no feed, and one wouldimagine that ANZ would be more interested in feeding passengers onto its own flights (or even Qantas) rather than Australian. What will happen here is anyone’s guess though the bottom line is whether or not the routes will be profitable. If they aren’t, then why fly them in the first place?

Worthy of further analysis though is that both Ansett and Australian, and to a lesser extent ANZ, have 120/140 seat jets that could nicely link up Australia’s many east coast leisure destinations (Gotts Harbour, Coolangatta, Sunshine Coast, Townsville, Hamilton Is, etc) directly with NZ destinations rather than having to feed passengers via the primary international gateways of Sydney, Brisbane and Cairns as they currently do. This is an eventuality that the tourism authorities of these regions should justifiably be quite excited about.

The third conundrum concerns the viability of Qantas and ANZ having full domestic rights and does this extend to NZ itself? It is envisaged that by early 1993, when Ansett and Australian are able to fly the Tasman, that both internationals will be able to sell capacity domestically on their domestic sectors. In reality this is no big deal, as the number of presently empty seats equates to only about 3% of the domestic market. Furthermore, the nowadays extensive range of 767 international services has greatly eliminated much of the 7 4 7 hubbing out of Sydney and Melbourne that was a hallmark of Qantas operations of a decade ago with consequently a resultant reduction in unsold seats on domestic sectors.

The plan then is to allow Qantas and ANZ to operate dedicated domestic services by1994, when the domestics are flying internationally. However, whether or not any of these carriers will want to accept this option has yet to be seen. The cost of Qantas and ANZ acquiring a fleet of at least a dozen 150 seat class jets each and accompanying infrastructure is not something that either carrier would be joyful about at a time of invisible profits and crippling debt to equity ratios.

What Qantas would prefer to do is to acquire a strategic stake in Australian (or Ansett) where it has seats on the board and some measure of influence that goes beyond the realm of a mere marketing agreement. Conversely, the spectre of Australian and Ansett acquiring international class aircraft to rival the competitions’ 747s is hardly something that either carrier must relish. The. best they could currently do is to fly their existing A 300s and 767s into some regional SE Asian ports, though the yield here is so low that one has to simply ask “what’s the point”?

Confused? Well you’re not alone.

The storyline reveals that over the coming months a plethora of meetings between the various players will begin to make this incredible blancmange of options into something equating to a workable policy. Let’s hope so as the wrong move now could do significant damage to all involved. While the moves themselves are generally for the good (particularly the initiative to build common user terminals), it has to be seriously questioned whether many of the opportunities available will simply be worth taking up given the high cost of providing aviation services and the low

yield such services return in the long term. Only time will tell.

Will Compass Fly Again?

Elsewhere in this issue we appraise the offer by Southern Cross Airlines to take over the remnants of failed Compass.

This is an interesting move that would largely capitalise on the splendid public image of the original airline mixed with some real world logic. Using more appropriately sized aircraft, believing in yield before market share and concentrating on the primary routes with a high frequency multi class service certainly takes the prospective new Compass well away from the excesses of its original namesake.

However, the hard part will be in raising the necessary dollars via a $?Om float at a time when an understandably wary marketplace is being offered both Australian and Qantas. Additionally, the spectre of both Qantas and Air New Zealand flying domestically must also be a worry for any new entrant. Certainly if it isn’t, then it truly should be!

Australia needs that third major domestic, we certainly wish Compass II the best in its brave endeavour to make the jetway.