This is the 4th and final extract from an Ansett dossier in a series of articles about the 10th anniversary of the collapse of the airline on 14 September 2001
Article 1 is The Twin disasters of September 2001
Article 3 is The Ansett Diary: Pacific Star or Australian Star?
Late on Tuesday 11 September 2001 Australian time David Huttner makes his usual call from Sydney to Will Whitehorne, the Virgin Group’s world wide spokesman based in London, to keep him up to date on Branson’s small but potent adventure in airlines down under.
Huttner starts a rundown on Ansett developments, the Anderson communication, and the fact that Australia’s second largest airline is likely to be history by week’s end.
Whitehorne tells him to turn on the TV because ‘a 737 has hit a building in New York’. (It was in fact American Airlines flight AA11, a 767, which was flown into the World Trade Center North Tower).
In the Qantas executive offices in George Street, Sydney, Geoff Dixon has been working late on the multitude of issues and opportunities arising from the impending Ansett collapse.
“A security man range me,” Dixon says. “He said ‘Mr Dixon, turn on your TV, any channel’. A few minutes later I saw the second jet fly into the other tower.”
On the morning of Wednesday 12 September while Australia watches the re-runs and aftermath of the 9/11 atrocities in New York City and Washington DC and a field in Pennsylvania, Qantas announces a decision already conveyed to Air New Zealand and John Anderson to reject the offer to buy Ansett.
Dixon says Ansett’s problems are so large they are beyond the capacity of Qantas to solve.
Dr Farmer amazes and infuriates the famously imperturbable John Anderson by calling him and asking for over $100 million in Australian government cash to keep Ansett going so that it can be turned into a budget carrier in the hands of a potential new buyer that is ‘emerging’.
Anderson tells Farmer to shove his request into a place never reached by daylight. While the gullible sections of the media take the potential buyer bait (and continue to take similar baits over the coming months) even the Minister’s office knows there is absolutely no potential buyer for Ansett.
Late in the morning of the same day, at around 11 am, a mechanical rake chugs into place in front of the beaming face of Gary Absolutely Toomey on the Ansett billboard above the road entrance to the domestic terminals at Sydney Airport.
With one long downward arc, it shreds Toomey’s visage into hundreds of parallel strips of paper.
As the breeze finds the thin gashes in the giant portrait it seems to come alive and quiver. The strips flutter into increasing disarray, until, after a few seconds they start to fall to the ground.
The face of Ansett ceases to be a face, and turns into a heap of waste paper.
Identical images and slogans of outrageous deception are being torn down all around the country. Even the most sanguine of Ansett supporters begin to think something might go wrong and start calling radio stations.
Yet there is only one question that stands out above all others as the public gives the talk back jocks eyewitness accounts of an event that is elevated to something akin to the demolition of the Berlin Wall.
“What’s going to happen to my points?” Not what’s going to happen to air services, or employees, or fares, or the tourism industry, but what’s going to happen to the currency of airline marketing world wide, the frequent flyer point.
The same day Peter Hedge of PriceWaterhouseCoopers is appointed voluntary administrator of Ansett by Air New Zealand following the failure of the token sale of its liabilities and remaining assets to Qantas.
Virgin Blue learns that Gate Gourmet, the caterer which supplied its ‘for sale’ food as well as Ansett meals, is to cease trading. Staff scramble around the country to cobble together deals with the likes of Hungry Jacks to supply hundreds of snacks at short notice, since selling food to passengers is an important part of the Virgin Blue service.
It is clear on Thursday morning 13 September that Ansett is about to collapse.
The final mechanism is an announcement in Auckland that Air New Zealand is cutting Ansett loose, to save itself.
It is one of the most shameful statements to come from any listed Australian or New Zealand company in corporate history.
But the awful bulletins from the carnage in lower Manhattan blotted out the magnitude of the incompetence and betrayal in Auckland and Canberra.
Mass murder becomes the implausible cover under which Ansett lurched into its final hours as a subsidiary of a New Zealand flag carrier.
On the morning of Friday 14 September 2001 two sets of images confronted Australia on breakfast TV.
The aftermath of the terrorist attacks in the wreckage of the World Trade Center and a corner of the Pentagon leads the bulletins.
Live crosses quickly follow to images of Ansett’s last passengers on the midnight horror from Perth picking their way around the locked doors of its Sydney terminal, trying to get inside the building from under the aerobridges.
In the weeks after the terrorist attacks and the Ansett collapse the 9/11 aftermath keeps what was one of the biggest Australian corporate failures off the front pages.
The temporary detention of New Zealand Prime Minister, Helen Clark, in an Air New Zealand 737 blockaded by angry Ansett staff at Melbourne Airport on 14 September was a bigger story than the pursuit of the truth about how the Kiwi carrier could have been so incompetent, and dishonest, for such a long period of time.
Ms Clark said being trapped in the jet “wasn’t going to help the Ansett cause.” True but pointless. She was given the honor of a hot extraction by a Victorian police helicopter that took her to a hastily arranged Hercules transport waiting at a rural airport north of Melbourne.
No New Zealand PM has ever been removed from Australia under such embarrassing or farcical circumstances.
While Clark was being packed off the Australian authorities agreed in principle to the Air New Zealand board purchase legal indemnity from the administrators for the consequences of their actions in relation to Ansett for $150 million, as well as waiving the $160 million they claimed Ansett still owed the Kiwi carrier.
This was later portrayed by Air New Zealand acting chairman Dr Jim Farmer as a ‘cash injection of $310 million in Ansett.’
The important developments of the following weeks and month included the first signals from Chris Corrigan at Lang Corp (as Patrick Corp was then called) that he was interested in part of the post Ansett action, an interest that ultimately lead to his doing a deal to buy half of Virgin Blue off Richard Branson for $250 million, the same price that had been aggressively offered by Singapore Airlines for the entire airline early in September.
Crucially for Virgin Blue and Qantas, the Federal Government ruled out any sort of financial rescue or support package to keep Ansett flying.
In a rare coincidence of interest, both surviving carriers lobbied hard in Canberra to point out that this would be ruinous for the public purse, not to mention theirs.
There could be no fair competition if Ansett was kept alive with the necessary massive transfusion of taxpayer funds.
Had the Federal Government not been sailing toward the impossible-to-lose Federal election of 10 November because of the Tampa/boat people/terrorism issues, a different call could have resulted in all three airlines facing financial ruin because Ansett would have been subsidised to undercut the other two.
The government would have been forced to massively intervene in the air travel market to keep Ansett aloft, and the temptation to fix fares and squeeze out the low fare mass transport revolution would inevitably have arisen, meaning the growth in total airline employment that occurred post Ansett would have been substantially delayed.
Qantas was in a unique position. Unlike other international carriers the abrupt decline in its overseas business after 9/11 coincided with an opportunity to bring the big jets back to Australia to fly large numbers of former Ansett customers around the country.
This observer of the times takes strong issue with the mythology that says the Ansett collapse ‘saved’ Virgin Blue. It ‘saved’ Qantas from idling most of its long haul fleet for months in the post 9-11 downturn in international travel both inbound and outbound
By 26 September Qantas had redirected a first tranche of 12 long haul jets to the domestic networks where overnight according to an interview Dixon gave me for the AFR, Qantas had gone from 2001 to where it expected to be in 6 or 7 years time through growth, and with Ansett exactly where Qantas had already put it, trapped as the junior partner in the domestic duopoly, taking its fare and product leads from Qantas as a follower not competitor.
Qantas had also within days taken over leases on eight Ansett jets, including two ex Air Canada 767-300s that were to be the poster children for Australian Star or Pacific Star or whatever Ansett was to have been rebranded. Those leases alone exceeded the total seats available in the Virgin Blue fleet of 9 Boeing 737s.
Although it is for another day, the dossier from those times follows the massive windfall deal 9-11 soon brought to Qantas in the form of taking over a deeply discounted order by American Airlines for more than 60 Boeing 737-800s with early delivery guaranteed.
In short, while the demise of Ansett certainly helped clear the way for Virgin Blue to grow, it left it just as vulnerable to being steamrolled by Qantas as it had been when it only had two borrowed 737-400s a year earlier.
Those who were flying domestically in the aftermath of the Ansett collapse found themselves mostly inside Qantas terminals packed to the rafters, using full jets to a timetable in chaos to an extent that was reminiscent for a few months to the charter jet airlifts that characterised much of the 1989 domestic pilot dispute.
It was also the failure of Qantas to crush Virgin Blue throughout 2002 and into 2003 that lead it to the ‘solution’ of forming Jetstar, which was announced as an unnamed project at the annual financial results conference in August 2003.
These large scale consequences of the collapse of Ansett (and the failure of efforts to revive the carrier) were largely ignored by or written out of popular post Ansett revisions of airline history in Australia.
However in the days immediately after 14 September 2001 Federal Transport Minister John Anderson gave interviews saying he favored some sort of financial intervention to save Ansett, until, as usual, he was rolled by cabinet.
Having failed to save anything in his political career, but notably the dairy and fruit growing industries and rural enterprise in general from economic ‘reform’, the chances of the leader of the National Party saving Ansett were close to zero anyhow. It might seem unkind but it is fair to summarise Anderson’s role in federal politics as that of making farmers cop whatever the senior partner in the coalition decided was in the best interests of city based big business.
Ansett’s two rural subsidiaries, Hazelton and Kendell, were given cash assistance pending their ultimate purchase by a Singapore led consortium that consolidated them into REX or Regional Express.
Ansett’s first administrator Peter Hedge lasted 5 days until September 17 before being ousted by the opposition to his appointment by the ACTU.
Hedge only had what he claimed was one potential buyer of substance for Ansett, which was identified in some quarters as the Preussag Group in Germany, which owned Britannia Airways.
Britannia was a regular visitor to Australian airports flying holiday charters from the UK, and had been actively considering options for domestic expansion either on a seasonal or semi-permanent basis.
Rather than contemplating becoming a scheduled domestic carrier, the Britannia model had before 2001 seen Australia as a place where jets that could be idle in the northern winter could be gainfully employed in the southern summer.
There was never much chance this was going to happen, and among those to whom Preussag had been mentioned, it seemed daft or lacking in credibility.
However the dangers of an early but painful success in finding a new Ansett owner at closing down sale prices was totally unacceptable to the union movement. Put together with Hedge’s decision to ground Ansett on Friday, 14 September, the ACTU had the numbers on behalf of Ansett employees to roll him, and he jumped before he was pushed.
Hedge’s team was replaced by Mark Mentha and Mark Korda ‘the two Marks’ of Arthur Anderson, a firm which was also destined to disappear in the coming months, causing them to form the Korda Mentha insolvency practice to continue their administration of Ansett’s affairs.
The two Marks put a token fleet of Ansett A320s back into the air a few weeks later on the basis that an airline —Ansett Mark II—that was a going concern was more saleable than one that was grounded, while the alternative, of a ruinous liquidation, was unacceptable to the unions.
The value of jets and other aviation equipment was already in free fall in the aftermath of the terrorist attacks. The ‘Two Marks’ became folk heroes, as well as incredibly rich, as they earned millions of dollars in fees from their struggle to dispose of the wreckage.
This included trying to collect money from Ansett terminal retailers who suddenly had no customers, and those travel retailers who had received payments for flights by Ansett that it would never operate.
The money that was eventually raised by the Ansett ticket levy of $10 per sector was taken out of the travelling public’s pockets and put into the government’s in the first instance, and only then grudgingly given back to workers robbed of their entitlements.
But together with the orderly disposal of assets, the two Marks were able to find well over 90% of the money owed to former Ansett employees, a process only recently completed.
Ansett Mark II became known as the fresh water airline because that was all it offered on board. It had a simple fare structure comprising a conditional discount fare and unconditional full fare.
Unless you were recognised as a VIP or friend of Ansett the former business class seats were distributed to passengers on a first come best seated basis
Ansett Mark II’s yield management was unsophisticated, and its web site clunky and misleading, yet the two Marks did a better job at being competitive than the dead Ansett.
At the end of October 2001 on the Sydney-Melbourne route Ansett Mark II was selling business friendly return fares for $396 including GST, compared to $440 on Qantas (which was a big drop over the highest previous Qantas fare of $660 return.)
Virgin Blue’s most competitive and practicable fare on the route was $261 return.
At regular intervals the two Marks dropped hints of potential buyers but were careful only to target susceptible reporters rather than aviation writers.
The would be buyers included Emirates, Lufthansa, Dragonair, Cathay Pacific, other Chinese interests and United but somehow failed to include Aeroflot or Air Zimbabwe.
These carefully planted stories were utterly false. All of the potential buyers labelled the rumors as rubbish. This writer chased down every single would be buyer for confirmation and typically, had to spend the best part of an hour explaining what Ansett had been, where Australia was, and how it was reported that they would about to pump gazillions of bucks into reviving it. The United rumor was truly brazen, with its stock price and available funds draining away because of the collapse of its business after 9/11.
At the same time a cargo cult like belief in the interest or capacity of Singapore Airlines took root. The theory was that having been burned to the tune of half a billion dollars (whether in Singapore, Australian or New Zealand dollars) the Singaporeans would come enthusiastically back into the fray with a few lazy billions to create an incredibly luxurious yet well priced domestic operation that would occupy all the Ansett terminals and employ all of its staff.
This was never anything but a cruel delusion, foisted on the gullible.
Singapore was indeed keeping its options open, meaning it wasn’t going to say ‘never’, and it did retain Peter Stainlay, a former deputy chief executive at Qantas, to evaluate and advise, and offered to consult for any new airline venture.
Stainlay scoped a new domestic full service carrier that would have a cost base 30 per cent lower than Qantas. However this did not proceed.
But Stainlay’s essential role was to look after Singapore Airline’s interests, and that could be defined as preventing it from entering the domestic Australian market with a third carrier even more than making other people’s dream schemes come true.
He overcame the alleged lack of ‘feed’ to Singapore Airlines flights from regional and tourist destinations by negotiating for a deal for special fares on Qantas for connecting passengers. Those fares were so good that there was absolutely no incentive for Singapore Airlines to risk billions of dollars setting up its own operation to achieve the same result after a year in which in learned first hand never ever again to trust anything an Australian government or opposition member of parliament said.
Qantas could almost be seen in the interline fares deal to be paying Singapore Airlines to stay out of contention, giving it everything it could possibly need to continue to thrive in the Australian market, without the risk and cost of re-inventing Ansett.
The Two Marks exuded hostility in relation to Virgin Blue, although a deal was struck to lease on a power by the hour basis a single 737-300 (registered as VH-CZQ) to the airline as a spare. CZQ, or the Virgin ‘albino’, retained the all white Ansett fuselage in a one off variation of the Virgin Blue paint job, which is of course, mostly crimson.
CZQ was a lemon that proved Virgin Blue was anything but an infallible judge of equipment. Although it was agreed to be the best 737 in the grounded Ansett fleet, it was a one-jet break down act that regularly played havoc with a timetable stretched to the limits by displaced Ansett customers.
Like Qantas, Virgin Blue had early talks with the Two Marks about acquiring jets off Ansett. It was interested in as many as 16 of the 737s. Qantas was keener on the Airbus A320s, and the two newest 767-300s, although the fabulous opportunity to buy up the American Airlines 737-800s was about to wipe Airbus out of contention for immediate lift to cope with the Ansett overflow.
The talks with the Two Marks went nowhere. Their prime role was to find buyers for as much of the old Ansett as possible, other than Qantas or Virgin Blue, because neither was inclined to take on many thousands of the failed airline’s workers who had been thrown out of their jobs, entitlements owing, on 14 September 2001.
There were also real doubts in Qantas and Virgin Blue about the quality and maintenance records of the Ansett fleet, with Virgin Blue’s experiences with CZQ, the flying albino lemon, suggesting these concerns were not misplaced.
The writer met many good Ansett people before and after 9/14. Some found great careers in airlines here and abroad, some never worked in airlines again. Their stories are mainly painful, and private. This is a very sad week.