Keith Rankin: Don't Cry for Air New Zealand

Thursday, 9 August 2001, 8:50 am
Column: Keith Rankin

To understand what is the preferred future for Air New Zealand, we need to think about the nature of the international airline industry and the nature of the home region from which it operates and within which it flies "domestic" services. To understand what is the probable future for Air New Zealand, we must consider the interaction of unenlightened self-interest and myopia that characterises much of what really happens in the real world.

Air New Zealand (ie Air New Zealand - Ansett) is an Australasian airline, and is a member of a global alliance. It is a good airline with the potential to be much better, and to contribute much to the economic wellbeing of both New Zealand and Australia. Air New Zealand has found its most appropriate niche in global aviation. Its position creates balance and healthy rivalry within Australasia and for travel to and from Australasia. The New Zealand and Australian governments should be doing what they can, short of becoming shareholders, to maintain the present balance.

Unfortunately, both governments have other agendas.

The real problem is that most of us - including the Lab-Al government in New Zealand - do not understand the nature of the Australasian region. The even bigger problem is that Australians see New Zealand as a missing appendage of theirs, much as the Argentines see Las Malvinas (the Falkland Islands). [Indeed ex Aussie PM Paul Keating, at last week's Catching the Knowledge Wage conference, certainly seemed to understand closer relations between New Zealand and Australia as meaning New Zealand attaching itself to Australia.]

For some reason that is not clear to me, Australia seems to be able to exert quite a lot of leverage over our government. (We only have to think about the way in which new New Zealand expatriates now have the status of guest workers in Australia. We failed to negotiate any royalties for the costs of the education of those New Zealanders whose efforts create much revenue for the Australian Treasury.)

New Zealand is not a province of Australia, regardless of what John Howard or Paul Keating or Kim Beazley thinks; or how Helen Clark behaves. New Zealand and Australia are separate (but neighbouring) provinces of something bigger; provinces of some inchoate commonwealth which may be the whole world, or may be something less than the whole world.

We can use Southland as a metaphor for New Zealand and Otago as a metaphor for Australia. (We will ignore the fact that "Australia" is Latin for "Southland"!)

Southland and Otago are both rivals and collaborators. Together they form the Highlanders, much as Australia and New Zealand once formed the Anzacs. Southland, though, is always conscious of its larger neighbour. Southlanders are aware that Aucklanders don't really distinguish between Southland and Otago.

The government of Southland did on one occasion become insolvent, forcing Southland to become, for a few years, a part of Otago. (Provincial governments were abolished in 1876.) New Zealand may yet be forced, under comparable circumstances, to become a bit of Australia, another Tasmania. In the meantime New Zealand, like Australia, is an independent province.

Because of their physical closeness and cultural similarities, it would be natural for a Southland transport company to operate in Otago, and vice versa. Maybe, on account of parochial jealousy, the people of Dunedin would prefer not to be reminded that one of the main companies they buy services from has a head office in Invercargill. So the Southland company might trade under a different name in Otago. Even then the Dunedin establishment might place barriers in the way of the Southland company - eg by creating a phony safety scare during the busiest week of the year - in order to protect the true blue Dunedin company from the competition of its upstart Invercargill- based rival.

On account of situations arising from the non-level playing field, the Southland based (and proud of it) company needs to capitalise by raising equity from outside the region; from the "north". What should the city fathers of Invercargill do?

We would expect that the leading interests of Dunedin would try to persuade their counterparts in Invercargill that outside finance would mean outside control, and that the southern region as a whole would have its economic sovereignty compromised. The Dunedin-based company might even offer to buy into the Southland company, to help save its rival from the dastardly northerners.

We, the bemused consumers of the media, would of course understand that these Dunedin interests were not really speaking on behalf of the people of Southland. We would hope that the Southland powers-that-be would be able to see that the Otago interests were speaking with forked tongues; that they were really most interested in eliminating their successful though undercapitalised rival.

But no. The Southland big-wigs prove too susceptible to Dunedin flattery, and to a bit of whining and wining-and-dining. So the Southland company gets kneecapped, and is forced to reject its preferred northern partner and to accept the overtures of its Dunedin rival, and to therefore become nothing more than the Southland appendage of the well-connected Dunedin firm.

The corollary is that the Southland firm's Otago operations are sold in full to the northern interest that might have been able to recapitalise the Southland firm. After a few years this northern company (and now the only serious rival in Otago of the long-established Dunedin firm) agrees to extend its operations to Southland.

Petty parochial politics will have destroyed an excellent southern company and created a much greater northern interest in the southern transport industry than would have been the case if the Southland company had just been allowed to run a good business that was good for the south.

In other words, if the New Zealand government does what I think it's going to do - in five years time there will be two airlines flying the trunk routes within New Zealand. One will be the Australian controlled Qantas New Zealand (ie the remnants of Air New Zealand) and the other will be a new Ansett New Zealand, this time an airline 100% owned by the people of Singapore.

© 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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