Keith Rankin: The Australian view of New Zealand

Thursday, 18 October 2001, 1:18 pm
Column: Keith Rankin

I think that most New Zealanders were genuinely puzzled by the attitudes revealed by Australians - or at least the Australian media - in the wake of the Ansett Airlines insolvency. Some of us even went along with the Australians' scathing criticism of our airline, but generally only those whose predisposition is to see businesspeople as simultaneously wicked and incompetent. And even those critics were uncomfortable with the underlying view expressed in New Zealand's Near West - that business incompetence is a cultural or racial trait of New Zealanders.

It's always easy to criticise business decisions with hindsight. But few critics of business give any confidence that they would have made better decisions had they been in the shoes of the persons they are criticising. It is also necessary to note that businesses that fail are often well-managed while businesses that don't fail are sometimes poorly managed. A risk properly worth taking will in many cases not prove fruitful. And a risk that should never be taken does on some occasions pay off. Some companies are successful not because they are well managed but because they are monopolies or otherwise protected from competition.

I read that Ansett's losses were reduced by 1.3 million in just 2 months this winter (June to August). That is the equivalent of a profit increase of 1.3 million. Can that be bad management? Yes it can. The improvement in the bottom line may have been despite management, not because of management's decisions.

The Australian Press is not letting up, as time passes. Just last Saturday, the Sydney Morning Herald published a piece comparing the 2001 Ansett debacle with the 1979 Mt Erebus crash. The article is seeking to establish that New Zealanders are more susceptible than most to "denial". The implication, as I read it, is that Air New Zealand's almost complete culpability is self-evident, and that any attempt by any New Zealander - and especially a New Zealander connected to Air New Zealand - to suggest that there was a bigger picture is simple labelled as playing the "blame game".

Before looking at the Australian case against Air New Zealand, we might contrast Australians' attitudes to New Zealand with Americans' attitudes to Canada. My impression is that, while Americans are probably as starved of Canadian news as Australians are of New Zealand news, nevertheless the USA holds a respect for Canada that is quite different to the discomfort disguised as contempt that characterises the Australian view of New Zealand.

(I suspect that the USA is more secure about its place in the world than Australia is. The USA is interesting however for a different reason: their emotional identification with the "freedom aspirations" of certain groups of people important to their past - as in the way they bought Mel Gibson's Braveheart story - combined with a lack of empathy for the self- determination aspirations of non-Americans today.)

The dominant line of Australian criticism of Air New Zealand seems to have been the thesis that Air New Zealand was in trouble in the late 1990s, and chose to revive itself by playing parasite (or cannibal !). Hence all the talk about the "asset stripping" of Ansett and the performance bonuses paid to Air New Zealand management in the weeks before Ansett was "cut loose".

The problem here is that no evidence has been presented that Air New Zealand was in a state of poverty at the time it bought either the first or the second half of Ansett Australia. Further no evidence has been presented that indeed Air New Zealand did get richer as Ansett got poorer. There is one implicit retort to this last objection to the parasite thesis, however. Air New Zealand might have been a failed parasite; not only were its motives objectionable, but it was too incompetent to screw Ansett effectively.

The parasite story - as is true of many if not most stories - actually tells more about the subject (Australia) than the object (Air New Zealand). Australia has a protectionist culture. New Zealand, I believe, does not. Australians do not favour a "level playing field". New Zealanders do.

While protectionist policies can be justified, in various circumstances, from both nationalist and globalist perspectives, a people with a protectionist culture tend to see the world in zero-sum terms. Parasite theories come easily to people who feel threatened. The yappy terrier to the south-east of Australia is, in its own low-cost way, as much a threat as are the "teaming masses" to the north with whom Australia shares an uneasy interdependence.

The other main line of attack is that Air New Zealand was at fault for having bought Ansett. The point here is that the Ansett workers wanted Singapore Airlines (SIA) to become their new owner. The reason they preferred SIA appears to have been that it had deeper pockets than Air New Zealand. In other words, Ansett could have made losses for a much longer period without becoming insolvent, if SIA has been its principal. Whether SIA would have allowed such extended losses is of course another matter. I have not heard any considered arguments about how SIA as 50% or 100% owners of Ansett would have managed the crises of 2001 differently from how it was managed by Air New Zealand. There are no guarantees that Ansett would not have failed had it not been bought by Air New Zealand.

There are two more important management issues though. One, barely raised in September, was about the failure of Air New Zealand to facilitate the fleet renewal of Ansett in 1997 when Air New Zealand was half owner. It is not good enough for Air New Zealand to keep saying they didn't know that the Ansett fleet was not being maintained properly.

It is a charge that Australians have taken their time to make. We need to hear all parties' versions of this story before a judgement can be made. I just wonder why more was not made of this issue earlier. Certainly the parasite scenario and the SIA as patron scenario were more attractive to Ansett staff who have themselves seemed unwilling to take any responsibility for the fate of their airline.

The final issue I would like to raise concerns the plan to acquire Virgin Blue. This is where New Zealanders sympathy for Air New Zealand runs out. It is not the New Zealand way to buy off the new entrants into the market. Rather the New Zealand way is to out-compete the opposition, ruthlessly if necessary.

My reading is that it was the Virgin issue that created much division between the board and management of Air New Zealand. So I think it's pertinent to note that the management of Air New Zealand in 2001 was largely Australian. It wasn't only the former Ansett management team who was sacked when Air New Zealand became the full owners of Ansett. In 2001, Air New Zealand was being managed by mainly ex-Qantas employees, including Gary Twomey. Indeed it was these recently hired Australian managers of Air New Zealand Ansett who insisted on being paid their performance bonuses.

These managers were managing one airline - Air New Zealand Ansett - not two. So it was meaningless to interpret their decisions as being part of an Air New Zealand parasitism of Ansett.

The plan to buy Virgin, however, shows that Air New Zealand Ansett had adopted the protectionist culture that seems to come naturally to Australian managers. The deal sought, by eliminating Virgin, was a return to the cosy duopoly that Australian airline culture had been built around. To us, in New Zealand, the abortive Virgin deal seemed absurd, indeed embarrassing.

Yes, Air New Zealand made some bad mistakes. But the Australian finger has not been pointing at the mistakes relating to aircraft renewal and attempts to buy off the competition. Those mistakes were not a result of a uniquely incompetent style of doing business on the New Zealand side of the Tasman Sea. Rather they were mistakes made by what was for practical purposes an Australian airline; an Australian airline with Australian, New Zealand and Singaporean principals.

The real tragedy of the insolvency of Ansett lay in its timing. An earlier demise, when the global demand for air travel was still buoyant, would have enabled most Ansett workers to be snapped up by other Australian or overseas employers. It was the September 11 attacks on New York and Washington that ended the careers of many of the Ansett workers, by decimating the market for air travel.

New Zealand and Australia are very different countries. New Zealand has to make its own way in the world. Australia is a neighbour; that's all.

© Scoop Media

Keith Rankin

Political Economist, Scoop Columnist

Keith Rankin taught economics at Unitec in Mt Albert since 1999. An economic historian by training, his research has included an analysis of labour supply in the Great Depression of the 1930s, and has included estimates of New Zealand's GNP going back to the 1850s.

Keith believes that many of the economic issues that beguile us cannot be understood by relying on the orthodox interpretations of our social science disciplines. Keith favours a critical approach that emphasises new perspectives rather than simply opposing those practices and policies that we don't like.

Keith retired in 2020 and lives with his family in Glen Eden, Auckland.

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