Reece

Through all this one may have lost interest, to some extent, in the fate of the other major player in Australasian aviation – Ansett.

The Ansett group was of course given the opportunity to at last spread their wings internationally with last year’s One Nation statement. However, when you are mired in debt, losing money on a daily basis and in the midst of a seemingly never ending recession it is difficult to get excited about pioneering new routes that (a) are well outside your traditional areas of expertise, (b) you don’t have the equipment available to viably operate, and (c) these gems of new international status are dubious money earners anyway.

Certainly a year ago Ansett Transport Industries (ATI) looked pretty sick. There have been some positive changes though and the airline in recent months is confidently said to be now turning an operating profit on a week to week basis.

Like the Qantas of old Ansett has one big problem – debt.

Analysts generally rate the total ATI debt burden at around $2. 2bn, a crippling amount to serve via depreciating dollars in what is now more than ever a lacklustre market. What ATI needs thus is to be able to get its debt burden down considerably and it can do this in two ways. Firstly it has to earn more from its operations. It will do this as hopefully the economy improves and the full fare business market returns to the airways. The other way is via a cash injection and that will only come from the introduction of a crucial third strategic partner, something that Ansett has been very seriously searching for this past half year.

A number of likely suitors have come and gone in this courtship as the airline has discreetly pursued a suitable partner. Cathay, ANA, Singapore and most recently even BA looked like admirable company for the crew from Swanston Street though for different reasons none have progressed past the holding hands stage.

However there is one airline that fits the bill perfectly as a major player in company with Ansett. And that airline is Air New Zealand.

Like Ansett, ANZ has a major problem. That problem is not debt but rather that to all intents and purposes the amalgamation of Qantas with Australian has changed greatly its position within the important Australasian market. ANZ will soon have even more competition on the Tasman than it currently has to contend with. Furthermore, Ansett Australia will shortly be able to feed direct into its Auckland, Wellington and Christchurch hubs to theoretically give its perennially ailing Ansett New Zealand network a boost. The mere presence of Ansett NZ is almost a guarantee that ANZ will never again make (real) money on its domestic operations. They run the wrong aircraft, brought a decade ago for all the wrong reasons and are now paying the price as annual RPKs are now about a third less than they werejust five years ago before a cheeky competitor came on the scene. For its part Ansett must surely find its NZ operation something akin to having terminal cancer. The airline recently made the ‘surprise’ announcement when it reported its 1991/92 loss of $25m that accumulated losses since the airline commenced operation in the mid eighties exceed $150m. This writer remembers being assured by senior Ansett NZ executives back in 1988 that the airline was about to enter profitability. That has never come and quite frankly even the world’s greatest optimist would doubt that it ever will for a number of obvious reasons.

For its part, Air New Zealand can soon fly domestically within Australia. It can legally do this from the end of this year but naturally isn’t rushing out to buy an additional dozen 737s to serve a market that despite enjoying the world’s highest load factors still finds profit an elusive goal. Like Qantas, ANZ really needs to buy into the action, not to mortgage the farm tojoin an already crowded market.

To this end, ANZ, boosted by tidy profits last year (like Qantas, one of the few internationals to do so) and even better prospects this year, could do a lot worse than to take a strategic stake in Ansett Transport Industries.

The benefits to both carriers are many. ANZ for instance immediately inherits the largest domestic network in Australia. It also gains front line access to the largest retail travel agency network in the region. Overnight it turns a potentially fierce rival and competitor into a powerful ally. Both airlines can also benefit from each others practical ‘real world’ operational experience, particularly Ansett whichcould use a little physical assistance in venturing northwards. Indeed Ansett could even lease some surplus ANZ 767ER and 7 4 7 equipment which on the short NZ and regional Pacific ANZ routes could be replaced by existing Ansett A320s and 767s. Similarly Ansett A320s can be used widely on the trans Tasman linking both countries major and secondary ports (Canberra, Hamilton Island, Cairns, Townsville, Coolangatta, etc) instead of everything funnelling through both nations capital cities.

Probably the biggest benefit to both airlines though is the obvious disbandment of Ansett New Zealand. As reported in this issue’s New Zealand News (p64)Ansett NZ released details of the company’s incredible plight after years of talking up the operation. Why did they do this? Well, you don’t have to be psychic to figure out that this is really little more than a positioning strategy to lay the groundwork for the inevitable.

ANZ has seen its domestic market drop from 2. 9m pax in 87/88 tojust 1. 9m in 91/92 while load factor fell from an already gloomy 61% to a pathetic 52%. One reason for this is that the wrong size jets are being used, though even Ansett NZ with smaller aircraft cannot make money as the NZ market is simply not big enough for two operators with planes much larger than F28s. With Ansett NZ gone, ANZ would again see its annual passenger uplift increase to the 3. 5m pax regime and even be able to use quiet Ansett. 737-300s in place of fuel-guzzling hush-kitted 737-200s. The airline might even sell off the noisy Boeings and take some of Ansett’s fleet of 146s to get the level of frequency/capacity and load factor to where it should be. Either way the outcome (providing your job is not on the line) is a major positive for both carriers as neither can continue bleeding to death for the mere sake of market presence.

Ansett will go through considerably more upheaval this year – it will have to in order to survive in the longer term. That survival plan certainly includes the addition of a cashed up high profile international carrier and Air New Zealand fits the bill perfectly.

It will indeed be interesting to see what eventuates!