Friday’s soon to be formally accepted offer by Virgin Australia to buy 40 per cent of Tigerair for $1 isn’t the first time such a gold coin has been the price for all or part an Australian domestic airline.
On 4 September 2001, Singapore Airlines declined an offer by the acting chairman of Air New Zealand, Jim Farmer to buy all of its doomed Australian subsidiary Ansett for $1.
On 5 September 2001, Qantas was offered all of Ansett for the same $1 amount.
Qantas however didn’t rush to refuse. The then Minister responsible for transport in the Howard Government, John Anderson had publicly put Qantas on notice to explore means by which it could keep the embattled Ansett flying after Virgin Blue founder Richard Branson had earlier on 4 September staged a cheque ripping up stunt by way of rejecting Singapore Airlines’ offer to buy out the then tiny but potent new Australian airline for $250 million to protect its investment as the owner of one quarter of the combined Air NZ/Ansett carriers.
Included in the $1 offer to Singapore Airlines and Qantas was a business with certain obligations and liabilities that Air New Zealand would rather not continue to hold, and an Ansett that had been gutted to a shell.
Qantas sent a team to go through the Air NZ books, with a deadline of 12 September for a decision, the day before the much delayed annual results announcement for the company that owned all of Ansett had to be made to the New Zealand Stock Exchange.
However by Friday 7 September of 2001 the then Qantas CEO Geoff Dixon knew from his auditing team in Auckland what was in the Air New Zealand accounts in relation to the offer to sell Ansett for $1.
He was told that Ansett was stuffed, irretrievably stuffed, and would almost certainly be abandoned by the New Zealand airline in order to save its own skin. (As proved to be the case).
The $1 deal offers of 2001 did not become public knowledge until a number of post Ansett collapse interviews were published in the months following.
However the abrupt closure of Ansett on 12 September was driven off the front pages of the Australian media and the top of TV bulletins by the 11 September terrorism atrocities in the US, with the fall of the twin towers of the World Trade Center and the murder of almost 3000 people obscuring the collapse of Australia’s second largest airline.
The Virgin Australia $1 Tiger deal, and the simultaneous swoop by Singapore Airlines on the Singapore listed Tiger Airways holding for a sum that could exceed $300 million only have a symbolic gold coin in common with the events of the Ansett collapse and Air NZ’s own near death experience.
Virgin Australia gets to do what the Qantas group never really succeeded in doing with its acquisition of Impulse Airlines earlier in 2001, and the eventual morphing of that division into Jetstar. That is, it gets to radically reduce its overall costs of doing business.
And it can do whatever it likes with Tigerair, with abundant signs it will never let it expand as a second brand the way Jetstar expanded within Qantas, with the serious consequences that have become apparent for the flying kangaroo in recent years.
Tiger Airways new CEO Lee Lik Hsin has already told the Singaporean media that its misfortunes to date have been due to joint ventures that went wrong.
Which is what has also gone wrong with the Jetstar JVs in Asia, except that Qantas doesn’t get it, and regards the destruction of the capital it has invested in them as ‘progress’.
This is a dollar deal which should drive substantial cost efficiencies in Virgin Australia, while clearing the decks for Singapore Airlines to regroup its low cost airlines activities into a simpler and stronger division where a large part of its growth ambitions are the customers that currently fly Jetstar Asia.