Bid for foreign airways work no flight of fancy

Airways Corporation missed out on a British contract but it is pushing ahead with international plans, writes DANIEL RIORDAN.

Jumped-up ex-bureaucrats gone power mad or Kiwi battlers mixing it with the big boys of world air traffic control? Whichever spin you put on it, Airways Corporation is hoping this year will bring better fortune than last.

To recap: a consortium led by Airways' partner, US technology giant Lockheed Martin, made it to a shortlist of three bidders for the 46 per cent of Britain's National Air Traffic Services (Nats) being privatised by Tony Blair's Government.

The bid cost the SOE $2 million, against what it says was a potential gain of $70 million.

Unfortunately for Airways, the contract was awarded to a British/European consortium.

Airways chief executive Craig Sinclair says he was shattered when he got the bad news. He had spent most of last year heading his consortium's bid from London and was confident of winning. He still believes his company had the best offer, but says it was outbid on price.

"Our consortium covered every base - we had the safety and risk management expertise, technology expertise, R&D, commercial and operational expertise."

The setback was financial and emotional.

"It's quite an unreal experience to go through - it gets to the point where it goes 24 hours a day as you approach deadline.

"You have this adrenaline burn. And then when it all stops, that's when people get sick. So from a personal viewpoint, it's very intense, but it's also really challenging and exciting.

"From a family point of view, it's unbelievably demanding, because you're just not around for several months."

Mr Sinclair says Airways took several lessons from its Nats failure.

The SOE's consortium may have been "too innovative" in the way it packaged its offer - tailoring its bid to allow Nats to specify what technology it wanted, rather than offering the technology it thought appropriate as a ready-made part of the consortium package.

That "innovative" partnership with Lockheed was signed just over a year ago. Airways sees it as a perfect fit between American technological grunt and Kiwi ingenuity.

For the $US27 billion ($65 billion) Lockheed Martin, Airways is the future of world air traffic control - leaner, meaner, more efficient, using smart technology and increasingly moving into private or part-private ownership.

But it has been a rocky road politically for the SOE from the start.

The partnership included a deal whereby Airways would buy Lockheed's domestic air traffic control system, SkyLine, for New Zealand use.

NZ First leader Winston Peters castigated Airways for not tendering the contract or releasing its price. At the same time management were accused of standing to benefit personally if successful with the Nats bid.

Last June, the Government summoned Airways executives to a "please explain" meeting, also airing concerns that the SOE might be getting carried away with its expansion plans. An Auditor-General's report soon after cleared the corporation of any wrongdoing.

Mr Sinclair acknowledges the company's political problems at home.

"Because we're Government-owned, there's an assumption we're not as good as the private sector, and people question why we got involved in something like Nats.

"We say we're like any company, and Government ownership has no effect on our ability to do a good job."

The perception is especially difficult to overcome internationally.

"The SOE model is unique to New Zealand - nowhere else does a Government-owned company have that degree of autonomy."

That created a hurdle Airways had to overcome in its Nats negotiations, a hurdle that became higher when politicians back home critical of the corporation turned it into front-page headlines.

"That hurt our credibility. We had to do a lot of damage control demonstrating these were very unusual events and not at all typical of the way we operate."

He says the Government has given its full support for Airways to operate as it does.

Part of Airways' problem, says Mr Sinclair, is its low profile domestically. It is only when things go wrong - politically or operationally - that the public becomes aware of the corporation.

The latest example was in April when traffic at Auckland International Airport stopped for almost half an hour after staff sickness closed the control tower.

Mr Sinclair maintains it is one of the reasons fellow SOE New Zealand Post, which enjoys a high and generally positive domestic profile, has been able to invest in 40 countries without attracting anything near the level of public attention of Airways.

Airways' handful of domestic customers (the airlines and airports) want its services for the least cost, and would object if Airways started spending large sums of money promoting itself to the public.

(Not that NZ Post's expansion has been without difficulties. Last week the South African Government signalled it wanted to end its biggest overseas contract, an undertaking worth $54 million, to revitalise South Africa's post office.)

Mr Sinclair is adamant keeping New Zealand skies safe remains the SOE's core responsibility - "any weaknesses here and we lose our chances overseas."

Airways paid its sole shareholder, the Government, a dividend of $6 million last year from its $8.7 million profit, but believes it can make "tens of millions of dollars" over the next few years selling its technology and expertise to the world, and has quickly put its British reversal behind it.

Two weeks ago another consortium involving Airways and Lockheed clinched a contract to build an air traffic control system for the United States Government, reported to be worth $US200 million ($480 million).

The system is based on technology developed by Airways and used to control traffic in the areas of the Pacific for which New Zealand is responsible under international air traffic control agreements.

Several contractors competed for the Federal Aviation Administration's advanced technologies and oceanic procedures contract.

The system will allow planes on long routes across the Pacific and Atlantic to fly closer together and on preferred tracks and altitudes, yielding fuel savings for airlines and shorter flight times for passengers.

Because radar coverage is not available above oceans, controllers have tended to rely on limited routes and long distances between planes to ensure safety. Aircraft positions have traditionally been determined by pilot reports or inferred from time and speed.

And although it missed out on the Nats, Airways is keen to work with the successful bidder, Airline Group. It also plans to hunt for more European opportunities as technology makes rationalisation of the continent's air space more likely, with Holland and Italy planning to privatise their air traffic control systems.

A Lockheed-led initiative in Africa which Airways had considered joining did not eventuate, but an Asian project is close to being clinched.

Mr Sinclair will say only that the project is an FAA-type opportunity and the work will be done out of the company's software development centre in Christchurch, set up in conjunction with Lockheed.

"We've learned a lot from Nats, and by the end of June, if our timing goes to plan, we'll be delivering some tangible results.

"If there is any more drama, I hope people will ignore it, because we're in delivery mode, and I hope people will stand behind this small New Zealand company, and say, you go for it!"

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