Keith Rankin: An Ansettling Experience

Thursday, 20 September 2001, 9:25 am
Column: Keith Rankin

The demise of Air New Zealand Ansett last week has brought home to New Zealanders just how one-sided the relationship between Australia and New Zealand is, and probably has always been.

New Zealand was one of seven self-governing Australasian colonies in the 19th century, and, at that time, fully acknowledged as such by the burghers of Melbourne and Sydney. But when we failed to join their 'Commonwealth' in 1901, we fell off their map, and out of their history books.

There was still a lot of contact. Throughout the 20th century - ie despite New Zealand's invisibility in Australia - Kiwis could live in Australia as if Australian, and vice versa. The labour movements of both countries retained a sense of togetherness at least until World War I. Australia's first Labor Prime Minister (John Watson, for a few months in 1904) was a New Zealander. New Zealand experienced a substantial influx of Australian men in the early 1900s including Labour leaders Harry Holland and Mickey Savage. (The immense contribution of Savage to New Zealand remains a matter of ignorance to 99.999% of Australians.)

The ANZAC myth represents a parallel history, not a shared history. Australia thinks it owns the word.

We (New Zealanders) have generally felt warmly towards Australia however, although we did blame Australia for the unemployment problem that emerged in 1927/28 just a few years before the Great Depression of (in New Zealand) 1931-34. We felt good about the cricketing exploits of Don Bradman, despite the fact that the Poms would play us while the Aussies would not.

Attempts at economic integration began in the 1960s with Nafta - New Zealand Australia Free Trade Agreement. That Nafta was superseded by CER - "Closer Economic Relations" - in 1982.

So we got to sell a few fridges in Wagga Wagga. (Not too much butter though; and not many apples. Australia remained as protectionist as ever, when it suited Australia to be so.) And we bought subsidised tugboats from Australia, allowing our own small but efficient tugboat industry to become insolvent.

New Zealanders, when they were acknowledged at all, have been seen as country bumpkins. For all the Aussies knew, New Zealanders all had the surname "Farmer".

In the 1980s, Australian attitudes deteriorated. It started with Malcolm Fraser's falling out with Robert Muldoon. Then there was the underarm bowling incident, which Greg Chappell cleverly used to deflect attention away from an a particularly controversial unawarded catch earlier in that match. Matters got much worse after David Lange and Roger Douglas obliged Australia to acknowledge us. We were no longer just country bumpkins. We were economic rationalist country bumpkins. We were still invisible 98% of the time. The rest of the time we were beyond the pale.

That image - of New Zealanders as economic rationalist country bumpkins - blighted the relationship between Ansett and Air New Zealand. Ansett workers prejudged the intentions of Air New Zealand, and continued to only see the relationship in light of their prior misgivings.

David Lange might well have - perhaps should have - said that Ansett Australia was managed like a Polish shipyard. But with Ansett operating in New Zealand from 1987 - and making losses cross-subsidised by its Australian operations - he saved his iron curtain rhetoric for New Zealand targets.

So why did Air New Zealand want to buy Ansett Australia when New Zealand was so unacknowledged - and so unloved - by Australians?

Australian domestic aviation, after World War II, quickly evolved into a cosy highly protected duopoly. The system was a cost-plus rort, funded by Australian air travellers. The two domestic airlines (known as TAA and Ansett in the early 1960s) only economised in one area; they shared the same timetable. There was nothing like the improved service that emerged in New Zealand once Ansett's New Zealand subsidiary started flying here in 1987.

Air transport became a test case for CER. Air New Zealand - lean, mean and well managed by Australian standards - wanted access to the Australian domestic market, in large part to provide feeder services to its international services. The CER "open skies" agreement was abandoned unilaterally, and rudely, at the last minute by the Keating government in 1994. Air New Zealand would have had a similar impact then to what Virgin Blue has had this year. Australia had to find a way to deal with the New Zealand threat to its high cost airlines.

Air New Zealand was told by the Australian authorities that the only way it would get into the Australian aviation market was to buy into Ansett. This was actually a clever ruse by the Australians. They knew that the cosy duopoly could not last in the more competitive business environments that were becoming the norm in western and Asian economies.

The Australian government's priority was now to create a true national airline by merging Australian Airlines (the former TAA) with Qantas; a merger not unlike that in 1977 between NAC and Air New Zealand. Qantas had to be unassailable in the deregulated environment. That meant Ansett would become expendable. TNT and Newscorp, Ansett's then owners, realised that Ansett could not be a cash cow forever. Ansett, with its high cost structure and 1970s' union culture, could not survive the next lean period in the aviation market. From the Australian Government's point of view, either its culture would have to change or some outsider would have to be brought in to preside over its demise.

TNT and Newscorp both wanted to be out of Ansett when the fateful day finally came. Air New Zealand bought in after the 1994 debacle, but had to cede management rights to Newscorp who were managing Ansett with a view to a sale at the best possible price. Rupert Murdoch (of Newscorp) did not make his billions without knowing how and when to buy at the lowest possible price, and to sell at the best possible price.

Murdoch was lucky. The Australian economy grew strongly from 1994 to 2000, ensuring that Ansett's problems could be concealed until the sale to Air New Zealand was completed. Further, he managed to sell Ansett New Zealand - fatally weakened by a pilots' strike moths before the sale - to another hapless group of Kiwis, who traded under franchise as Qantas New Zealand.

For Air New Zealand, the dream was to operate a single airline with a substantial domestic base throughout Australia and New Zealand. This was not a pipedream; it was the logic and intent of CER that Qantas and Air New Zealand should both do that. Air New Zealand had to buy Ansett to complete an 'open skies' process that was only necessary because of the Australian government's desire to support Qantas come what may.

The Australian government had determined that Ansett rather than Qantas would fail when the market could no longer sustain both. Ansett was of no interest to the federal government. In 2001 it was to them just a foreign-bumpkin-owned airline operating in Australian skies. In fact, through CASA (Commonwealth Aviation Safety Authority), the Australian government appeared to be trying to engineer the demise of Ansett well before the federal election. Sure, Ansett's fleet was in need of recapitalisation, having been milked for all it was worth by Newscorp. But to ground Ansett's planes at minimal notice on the busiest flying days of the year could only have been a calculated attempt to shut Ansett down.

To make matters worse, the only way Ansett could be saved as a competitor to Qantas was through an injection of capital by an interested party with deep pockets. Singapore Airlines was the only candidate. The process needed New Zealand government approval. So Qantas upset the process by putting in a nonsense bid for Air New Zealand. The process was further complicated by the Australian government's lobbying of the New Zealand government to support the Qantas bid. If successful, the Qantas bid would have left Australia and New Zealand with only one airline.

It was only Air New Zealand's attempt to realise its 1994 dream that kept Ansett flying for as long as it did. Air New Zealand's attempts to reduce Ansett's costs were met with so much resistance, however, by a workforce who believed they had well-paid jobs for life, regardless of the commercial viability of the company for whom they worked. By June 2001, Air New Zealand, having been bled dry by its other half, realised that the only way it could survive was by returning to the cosy duopoly of the past. Hence, the low cost rival Virgin Blue had to be eliminated, or incorporated into Air New Zealand Ansett.

Air New Zealand did its very best to keep Ansett flying in an environment in which politics had already sealed Ansett's fate. The boorish behaviour of Ansett workers, Australian journalists and politicians towards New Zealand - including the blockade of New Zealand's prime minister - is symptomatic of the contempt for which Australia holds (and has always held) New Zealand. Air New Zealand did its very best to keep Ansett going despite the politics that it was not a party to. Ansett has bled Air New Zealand to the point that Air New Zealand - now New Zealand's only domestic airline - can only continue if rescued.

The only other airline we had - the former Ansett/Qantas New Zealand - was shut down in April. Probably most Australians blaming Air New Zealand for Ansett's demise have no idea just how much more New Zealand has been damaged by this trans-Tasman aviation relationship than has Australia.

Closer Economic Relations is dead. The concept was flawed from the beginning. The relationship between the two countries was too unequal. Australians can not accept New Zealand as an equal sovereign nation.

Australia even snubs New Zealand by refusing to participate meaningfully in the America's Cup. Canada and the USA have a very different attitude. Indeed it is Nafta (North American Free Trade Agreement) to which we (and Australia) should look to, to bring about regional economic integration.

In the meantime, Air New Zealand was in the wrong place at the wrong time. The New Zealand government has done what it can to find solutions for problems that are largely of Australia's making: eg the need to have a domestic airline, the plight of the Tampa refugees, East Timor, Bougainville.

Australia should learn to be more openly supportive of our attempts to contribute to the economic well-being of the Southwest Pacific region. We can do without the ignorance and contempt that far too many Australians continue to show towards us.

© 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.

Contact Keith Rankin

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