Buying Ansett was right option, says deal-maker

By DANIEL RIORDAN aviation writer

The man who drove Air New Zealand's purchase of Ansett Australia has defended the deal, saying it would have proved successful had the airline responded better to a changing Australian marketplace.

Former Air NZ managing director Jim McCrea says it wasn't a lack of due diligence on Ansett that tripped up the national carrier.

Mr McCrea spent nine years in the top job and steered the airline to full ownership of its now ailing Australian subsidiary. That deal was clinched in June, a month before Mr McCrea's sudden resignation after an apparent dispute with the board over the renewal of his million-dollar contract.

Since then, Mr McCrea has been working as a director of Hawkes Bay meat company Richmond and, since his restraint of trade conditions with Air NZ expired in July, providing advice to a couple of airlines "in a small way".

Speaking before last night's news on a possible sale to Qantas, Mr McCrea told the Business Herald that the Ansett acquisition, completed last year after the first 50 per cent had been bought in 1996, "was a sound strategy" and necessary for Air NZ.

"That's why I think we have to actually see how [the current situation] unfolds. Because the question is, without Ansett where does it leave Air NZ? I know there have been quite a few comments about how Air NZ should settle for being smaller, and quite frankly that simply wasn't a viable option."

What about suggestions that rather than Air NZ not being able to afford not to buy Ansett, it couldn't afford to buy Ansett?

"It definitely could afford to buy Ansett. Unquestionably. I have no compunction in defending that statement.

"Clearly it could afford it, and it did, and it was then a question of what to do with it from then on, and what the environment was from that point on."

Mr McCrea said synergy benefits identified before the purchase had not been realised.

"They were there, and they are still there. The market is more dynamic now with the advent of the budget airlines. So, therefore, one had to devise more strategies to compensate for that.

"I'm not going to comment just what that would have been or how it would have been done, because it's a little unfair at the moment.

"It's no good me saying it should have been done. The issue is it wasn't done, and I think it's up to the board to explain why it wasn't done."

What about the suggestion that Air NZ didn't do due diligence properly on Ansett? "That's a very interesting question. The question isn't the due diligence on Ansett. The question is due diligence on the market.

"The issue wasn't what was inside Ansett. It was what was going to happen in the marketplace and then how you would respond to that.

"Every business has got to find ways to respond to market forces and as they change, you have to change. That's the issue. These things are not that complicated in terms of what the issue is.

"What is complicated is then how to deal with that issue. And that obviously has proven to be difficult for them.

"If Ansett is losing $1.3 million a day, it would be challenging for them to pick up ... but if some package could be put together, there's no doubt work could be done on Ansett to allow it to adequately compete.

"The question is what is that package and how is it done? It would be a tragedy if Ansett was just left to be liquidated. It deserves better than that.

"The question is, though, who's available to do what, in terms of a rescue package? So it's a problem all around, and there's no easy answer.

"It's not an easy question for Singapore. One couldn't necessarily expect them to keep doing things.

"When you move from regulated markets to open markets you do get these impacts. But none of us should complain about that. You just have to learn to live with it."

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