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Australian History

On this day (Australia): In 2001, Ansett airlines collapsed


Ansett Airlines

On 13 September 2001, Ansett airlines collapsed.

The company was founded by Reginald “Reg” Ansett in 1935 as Ansett Airways Pty Ltd. This was an offshoot of his road transport business, which had become so successful it was threatening the freight and passenger revenue of Victorian Railways.

This led the state government to legislate to put private road transport operators out of business. Reg Ansett countered by establishing an airline, as aviation was under control of the federal government and beyond the reach of the state government.

Ansett’s first route between Hamilton and Melbourne operated by a Fokker Universal monoplane commenced on 17 February 1936. The rapid success of the airline led Ansett to float the business in 1937. As the route network expanded, Ansett Airways imported Lockheed Electra aircraft.

During World War II, Ansett opted to suspend all scheduled services, except the Hamilton service, in favour of more lucrative work for the United States Army Air Forces. After the war, Ansett battled to re-establish his domestic routes using war-surplus Douglas DC-3s, converted from C-47s and the remaining L-10s.

At this time, the Australian domestic airline travel sector was dominated by Australian National Airways (ANA), established in 1936 by a consortium of British-financed Australian shipowners. The Chifley federal government was determined to establish a state-owned airline to operate all domestic and international services.

It was eventually thwarted in this aim by the High Court of Australia, so it established Trans-Australia Airlines (TAA) to operate in competition with ANA.

Ansett Airways remained a big player as ANA and TAA battled for supremacy in the 1940s and 1950s. Ansett operated around the big two, maintaining budget-fare interstate operations with DC-3s and later Convair CV-340s previously operated by Braniff International Airways in the United States. The airline was backed up by extensive road transport operations, including Ansett Freight Express and Ansett Pioneer Coaches, as well as the Ansair coach-building operation.

The Menzies government, while supporting TAA, because of the excellent dividends it paid to the government, wanted to avoid TAA having a monopoly on domestic services if ANA collapsed, as seemed likely. The only alternative, as it transpired, was for Ansett to buy the ANA operation.

Ansett’s bid had a number of financial supporters, most prominent of these being the Shell Oil Company. Douglas Aircraft Company was also concerned about ANA’s demise, as TAA had ceased to be a customer for their aircraft. The ANA directors fiercely resisted this initially, but in October 1957, succumbed to Ansett’s offer of £3.3 million for their airline. The new entity was called Ansett-ANA, the name it retained until 1 November 1968, when it became Ansett Airlines of Australia.

Ansett-ANA’s excellent profit record was, at least in part, courtesy of the Menzies government’s Two Airlines Policy. The policy effectively blocked any other domestic interstate operators by way of a ban on importation of aircraft without a government licence.

From 1957 until the 1980s, under the strict rules set down by the Two Airlines Policy, Ansett and TAA operated as virtual carbon copies of each other, operating the same aircraft at the same times, to the same destinations, at fares, which were identical (under strict federal government policy). If either airline wished to change its fares, they had to obtain federal government approval.

Reg Ansett then set out to ensure no other competitors could rise up to challenge his airline. He took control of Adelaide-based Guinea Airways (renamed Airlines of South Australia) and Sydney-based Butler Air Transport (renamed Airlines of New South Wales). The takeover of Butler was achieved with covert support from the Menzies government and by Ansett engineering his employees’ purchases of Butler shares (in a similar way as had just been attempted by Butler). He then flew the employees to a general meeting in Sydney and forced a vote in favour of selling out to Ansett.

Following the takeover of ANA, Reg Ansett lobbied the government to block TAA’s purchase of Sud Aviation Caravelle jet aircraft. He was concerned about his airline’s ability to finance equivalent jet aircraft, and the major engineering leap required to go from an all-piston fleet direct to pure jet aircraft, TAA had been operating prop-jet Vickers Viscounts since 1954, so had expertise in jet technology.

Ansett was successful in convincing the government to authorise the importation of more Viscounts and the new Lockheed L-188 Electra, marketed as the “Golden Jet” as with other turboprop airliners of the day. This action delayed the introduction of pure jet aircraft to Australian domestic airlines until 1964, when the Boeing 727-100 “Fan Jet” began flying.

An unusual feature of Ansett’s operations was the flying-boat service from Rose Bay in Sydney to Lord Howe Island. This was operated by Ansett Flying Boat Services using Short Sandringham four-engined aircraft. The service ceased in 1974 when the Lord Howe Island Airport was completed.

Expansion beyond domestic aviation

Ansett lost control of the company to Peter Abeles’ TNT and Rupert Murdoch’s News Corporation in 1979, with Abeles taking operational control of the airline. The airline prospered in the 1980s, but a number of substantial investments performed badly, including a share in the US America West Airlines (which filed for bankruptcy and survived) and its Hamilton Island resort (which went into receivership).

Ansett also paid millions of dollars for the right to be official airline of the Sydney 2000 Olympics, an investment generally regarded as unwise. This destabilised the financial position of the company considerably. In 1984, Ansett was embroiled in controversy after it banned HIV-positive individuals from travelling on their planes to protect their staff. The Australian Flight Attendants Association ultimately rejected the bans.

Ansett expanded into New Zealand in 1987 through its subsidiary Ansett New Zealand after the government of New Zealand opened its skies to the airline. After the government of Australia reneged on an agreement to reciprocate, Air New Zealand tried to acquire a share of Qantas when it was floated in 1995, but was not allowed.

Instead, it bought TNT’s 50% stake in Ansett Australia for A$475 million in 1996, though managerial control remained in the hands of News Corporation. Ansett Australia then had to divest itself of Ansett New Zealand to avoid creating a monopoly.

Ansett commenced international service on 11 September 1993 to Bali, followed by Osaka and Hong Kong in 1994, Jakarta on 12 January 1996, and Shanghai on 8 June 1997. Later, Seoul, Taipei, and Kuala Lumpur flights were inaugurated and soon suspended.

Air New Zealand merger and collapse

On 14 September 2001, the day of Ansett’s closure announcement, thousands of employees met at the State Library of Victoria in Melbourne to protest. Many employees expressed anger at what they believed was Air New Zealand’s culpability in Ansett’s financial collapse.

In February 2000, Air New Zealand acquired full ownership of Ansett, buying out News Corporation’s stake for A$680 million, surpassing Singapore Airlines’s A$500 million bid.

Competition from Qantas and a succession of low-cost airlines (Impulse Airlines and Virgin Blue), top-heavy and substantially overpaid staff, an aging fleet, and grounding of the Boeing 767 fleet due to maintenance irregularities left Ansett seriously short of cash, losing $1.3 million a day.

Air New Zealand attempted to cut Ansett’s costs while expecting to maintain the same level of revenue. This did not work, as the cost cutting hurt Ansett. Additionally, Ansett’s fleet had been allowed to deteriorate, a situation that came to a head with a partial grounding of its Boeing 767 fleet during the Christmas 2000 season and a full grounding in Easter 2001.

Ansett was thus unable to compete with the low-cost carriers and Qantas, which were able to run at a loss on some routes, as they could not maintain revenue while cutting their costs, which included laying off staff.

A deal made in April 2001 for Ansett to purchase Virgin Blue was repudiated by Virgin chief Richard Branson in August, and Singapore Airlines, which was initially blocked from buying Ansett, was also prevented from investing further in Air New Zealand/Ansett by the New Zealand government. It then declined to take up an earlier proposed deal to inject over $500 million into Air New Zealand, and Ansett after talks collapsed.

In early September 2001, as the trouble worsened, the New Zealand government prepared to rescue Air New Zealand (eventually buying 83% of the company for NZ$885 million), but cut Ansett adrift. Despite public pleas, the Australian government refused to bail out Ansett.

Quickly running out of both lines of credit and options, Air New Zealand on 12 September 2001 placed the Ansett group of companies into voluntary administration with PriceWaterhouseCoopers. On 14 September, the administrator determined that Ansett was not viable to continue operations (primarily due to the apparent lack of any funds to cover fuel, catering, or employee wages) and grounded the fleets of Ansett and its subsidiaries Hazelton Airlines, Kendell, Skywest, and Aeropelican.

Flights already in the air at the time the decision was made continued on to their destinations. Customers and almost all employees had no warning of the stoppage in operations. An Ansett Boeing 767-200 operating on behalf of Ansett Airfreight due to depart Melbourne for Launceston, Tasmania, was the first aircraft to be stopped from flying. It was unable to be unloaded until midday the next day, as no paid staff were on duty.

Everyone had been told in the days leading up to 14 September that flights would continue on schedule, and most Ansett employees did not find out until they showed up for work at dawn that day. Thousands of passengers were left stranded and more than 16,000 people found themselves out of a job, making this the largest mass job-loss event in Australian history. 

Widespread protests were held by workers, including the blockade of an Air New Zealand plane about to carry then New Zealand’s Prime Minister Helen Clark home from Melbourne.

The then Ansett administrators alleged that Air New Zealand had engaged in asset stripping of Ansett, and had sustained excessive fuel costs for Ansett due to Air New Zealand’s failure to hedge them, leaving Ansett susceptible to major fluctuations in fuel charges during 2000. 

These claims were denied by Air New Zealand, noting it had funded Ansett’s loss of A$180 million in the last year. Ansett’s administrators later admitted no evidence of any asset stripping was found. Ansett engineers working on Ansett aircraft alleged that Air New Zealand had orchestrated a large number of equipment replacements, such as engine and avionics modules.

Ansett’s administrators, KordaMentha, initially advised creditors that it was unlikely that much more money would be realised, due to the depression of the global aviation industry after the September 11 attacks in New York City and Washington, DC had the effect of reducing the value of aircraft from A$300 million to A$70 million.

In the months following the final flight, the administrators negotiated the sale of the terminal leases back to the airport owners, recouping millions. Auctions were held to sell Ansett’s airport furniture and equipment. Its headquarters at 465/489 and 501 Swanston Street, Melbourne were sold to PDG Corporation. Some aircraft stored in heavy maintenance were broken up, as it was not cost-effective to restore them to an airworthy state.

The disposal of the former fleet did not progress quickly, given the depressed aviation market and the subsequent lack of demand by other carriers around the world whose operations had been crippled by the 9/11 attacks only months before. Following the final flight, nearly all of the A320 fleet was ferried back empty to Melbourne, where they sat at abandoned gates in storage. The Airbus A320 and Boeing 737 fleets ultimately found new owners first, and departed Australia between March 2002 and December 2006 as the banks finally reclaimed them, or as new owners were found.

The two Boeing 747s that were leased from Singapore Airlines were reclaimed within weeks of the collapse and returned to Singapore Airlines, which restored the original colours. They subsequently found new lives and were leased to Fiji’s national carrier Fiji Airways, then known as Air Pacific. The more modern Boeing 767-300, of which Ansett had two, were reclaimed by the lessors in the following months, while two new Boeing 767-300 aircraft which arrived too late to enter service with Ansett, departed soon after.

One aircraft was wet leased on a short-term basis by Qantas to bring additional aircraft to cover the loss of Ansett, but the aircraft retained its Ansett registration while under lease to it. Another new 767-300, which was halfway through its ferry from Canada, never made it to Australia and returned to Canada. The Kendell CRJ-200 jets returned to Canada within twelve months of the initial collapse.

With the newer aircraft gone, most of the older Boeing 767-200 fleet were moved from the Melbourne terminal gates as Virgin Blue moved into the former Ansett Terminal, and were placed into long-term storage at the Ansett Engineering Base until late 2004, when most were sold off to Aeroturbine and flown to the United States to be broken up into spare parts.

Many of the British Aerospace 146 aircraft were also stored but broken up at Melbourne. As of 2008 the remains of one BAe 146 sit derelict at Brisbane Airport, and another BAe 146 remains at Perth Airport, although neither of them are still owned by Ansett or expected to fly again. A lone Boeing 767-200 survived the scrappers cull, was sold and continues to fly in the United States as a charter aircraft.

Source: Wikipedia

About Craig Hill

Teacher and Writer. Writing has been cited in New York Times, BBC, Fox News, Aljazeera, Philippines Star, South China Morning Post, National Interest, news.com.au, Wikipedia and others.

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