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Airways Fails In Uk Bid - Early exit shocks SOE

The NZReport Exclusive

AIRWAYS FAILS IN UK BID - Early exit shocks SOE

By Samantha Shot

Reports from London confirm that the consortium formed by Airways and Lockheed Martin has failed in its bid for the partial privatisation of the UK National Air Traffic Services (NATS). Airways had lodged a bid together with Lockheed Martin Corporation and others. The Airways/Lockheed Consortium was eliminated from the final short list prepared by the British Goverment.

The British Government will now choose a preferred bidder from two other consortiums: The Airline Group (formed by British Airways, and seven other airlines, plus British Telecom and the Irish Air Traffic Authority) and the Serco Group. The Guardian (of London) has also confirmed that Airways was unsuccessful. A copy of the article is attached at the bottom of this release for the benefit of our subscribers.

This brings to an end the controversial participation of the State Owned Enterprise in the partial privatisation of NATS. It was a rocky path for the SOE. Last year, allegations of corruption were made against Chief Executive Craig Sinclair, Chairman John Maasland, and Financial Controller John Bole in relation to their participation in Airways Bid.

Explicit findings against Maasland, and Sinclair were made in a subsequent report issued by the Auditor General of New Zealand. The findings in the Report were, publicly, not taken seriously by the Government. However, Chairman Maasland immediately announced he was stepping down from his position almost 2 years before the end of his term. Beehive sources conceded then that there were political and commercial considerations affecting the Airways bid which made it impractical for the Government to stamp on Airways executives' practices. Allegations of cover up followed shortly. Last year the Minister of Transport Mark Goesche is said to have privately acknowledged to a meeting of the Board of Airline Representatives of New Zealand (BARNZ) that the Government "covered up for them this time, but not next time". An official speaking on behalf of Minister Goesche said he did not wish to comment on the matter.

Requests for the release of the information concerning the corruption allegations have been resisted by both the Government and Airways on the grounds of "commercial confidentiality". With the early elimination of the Airways' bid, Government sources have acknowledged that the Government may be releasing the information soon. A spokesperson from SOE Minister Mark Burton's office said: "If this (the Airways' exit) is confirmed, the Minister will consider releasing all the information in his possession". The elmination of the Airways' bid puts an end to a series of expensive frustrated ventures undertaken by Airways under Sinclair's leadership. Despite millions of dollars in expenditure, hundreds of thousands in overseas travel, Airways has not secured a single material international contract ever. Airways' overseas expenditure is said to be well over $4 million per annum.

Sinclair has been living in London, with his family, as well as two other Airways executives for about the last 2 years, working solely on the now failed NATS Bid. It is unclear how much all this has cost taxpayers, but it is rumoured that their expenses alone would be in order of $120,000 per month.

Sources close to the Airways Board has said that Sinclair's tenure as Airways CEO appears shaky. "This is failure with a big F" said a board member who did not wish to be identified. "Despite our worst suspicious, and perhaps against our best judgment, we gave Craig (Sinclair) the benefit of the doubt. We did not want to hurt Airways' chances in the NATS privatisation, but after this... Failure to make the final short list is a big, big disappointment to the Board."

Although UK officials refuse to make any public comment, privately they concede that they were very concerned about the allegations of corruption involving Mr Sinclair, who was rumoured to be the next CEO of the company had the bid been successful. "Last year, the New Zealand Government gave us a high level assurance that all was above board. But we had our own people on the ground, and also reviewed the information available to us. We were not convinced. It was not the only factor behind our decision. But it did not help."

Airways' international expenditure have been raising eyebrows on The Terrace for some time. Airways is said to have expended over $2 millions of dollars in many projects which went nowhere. The early disqualification from the NATS Bid adds at least $3 million dollars to an already large pool of wasted taxpayers dollars.

Another issue which is still troubling Airways is the award, without a tender, of its radarisation contract to Lockheed Martin. Airways approved the contract in controversial circumstances last May benefiting Lockheed, at the same time, Lockheed members are said to have been asked to approve Airways' executives management incentives in the UK. Allegation of mutual backscratching were widespread then, and still remain. French company, Thomson CSF, partially owned by the Government of France complained bitterly about Airways, and are now said to be suing the SOE for millions of dollars in a French Court.

Airways' abrupt ending to their ambitious foray in the U.K. may signal that changes in the SOE will be swift. Privately, another board member speaking on condition of anonimity said: "I think it is time to clean up the place, hire an outsider as CEO, and rethink the strategy. International expansion looked good on paper. But it's been a absolute fiasco, and has cost us millions." Ends

Delays knock Lockheed out of air traffic race The Guardian - United Kingdom; Feb 17, 2001 BY KEITH HARPER TRANSPORT EDITOR

Ministers are expected to eliminate Lockheed Martin, the American computer systems manufacturer, from the bidding process for the controversial partial privatisation of Britain's national air traffic control service (Nats).

City sources said yesterday that the process would be reduced to two bidders next week, the airline consortium, including British Airways and Virgin Atlantic, and a bidding team led by Serco, which operates 80 air traffic centres worldwide.

Lockheed has been eliminated partly because it has encountered serious problems trying to install the computer software system at the pounds 625m air traffic centre at Swanwick in Hampshire for the past four years.

Ministers feel that the company must take some of the blame for the delays that have added almost pounds 150m to the project. They are also concerned about handing over the control of Britain's air safety to an American company.

One industry source said last night: 'It is a politically sensitive issue. With an election coming up, the government cannot be seen to endorse such a move."

Ministers privately admit that none of the three bidders has outstanding credentials. Serco has acquired a reputation for radically changing management and has pulled out of several projects including running air traffic control at Liverpool airport.

The airline consortium is said to be too close to the industry, but it has promised to run the business as a non-profit making enterprise.

The unions will reluctantly back the airlines group next week and oppose Serco's move on safety grounds.

But they remain strenuously opposed to the partial privatisation and have called on Lord Macdonald, transport minister, to call it off even at this late stage.

Senior Nats managers said yesterday that the successful bidder, due to be announced early next month, would take over responsibility on April 1.

Colin Chisholm, Nats' chief executive, warned yesterday that the handover to Swanwick from the centre at West Drayton, near Heathrow, could increase delays to passengers this summer. Controllers need to be trained up for Swanwick.


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