Norris lashes fat-cat airports

By CHRIS DANIELS

Ralph Norris, chief executive and managing director of Air New Zealand, has come out swinging against airport companies earning fat profits while airlines lose billions.

In a speech delivered in Auckland this week to an annual meeting of airline representatives, Norris said the industry was "swimming in red ink" with global losses of US$5.7 billion last year and a further US$2.7 billion loss forecast for this year.

In the past two years, he said, three significant Australasian airlines had collapsed: Impulse, Qantas New Zealand Mark 1, and Ansett. Without last year's Government recapitalisation of Air New Zealand, the death toll would have been four.

"The strange thing is that the survivors are getting thin and many of our suppliers are looking pretty plump," said Norris.

He cited British research comparing 2000 operating profit margins of airport companies with those of airlines.

Johannesburg airport topped the list, with an operating profit margin of 161 per cent, and Auckland Airport weighed in at number three with an operating profit margin of 128 per cent.

Brisbane, Adelaide and Melbourne all generated profit margins of more than 70 per cent.

Airlines performed poorly in comparison, with the best profit margin of 19 per cent earned by Thai Air, and Qantas earning 9.6 per cent and Air New Zealand, 3.3 per cent.

The airline industry as a whole was a surprisingly poor performer, said Norris, as air traffic had grown dramatically while yields had dropped even faster.

Airlines had "chased profitless growth", giving away all the benefits of technology, productivity, and input prices.

"And we did some dumb deals with suppliers, some of whom are very shrewd monopolists."

Passenger traffic was starting to rise again, but it was only happening because seats were being filled at bargain prices. He said fares in the United States had dropped more than 13 per cent on the previous year's levels.

Referring to the recent move away from paying travel agents commission for selling domestic airline tickets, Norris said the airline needed to start looking at "the rest of the value chain that's been built on our passengers' spending".

Both the Australian and New Zealand travel industries had been "comparatively sheltered from the winds of change" on matters such as the move away from airline-paid commissions from airlines to service fees from their customers.

"Air New Zealand's small step to eliminate base commissions on our domestic tickets sold in New Zealand provoked howls of outrage from the travel trade."

The travel trade had a continuing role in satisfying demand for airline services, but Air New Zealand could not resist the demands of those consumers who dealt directly with the airline, managed their own bookings and travelled at the lowest possible cost.

* A campaign launched by a Wellington stockbroker to gauge support from New Zealand investors for investing in Air New Zealand is reported as attracting a lot of interest.

Andrew McDouall of McDouall Stuart Securities said that although he did not yet have exact numbers, the site was gathering support from investors and brokers alike.

"There has been enormous interest and expressions of support from businesses and the broking community.

"We have had a good number of hits, but some of the market participants are looking at aggregating their own interests.

"What we hope is that by the beginning of September we will release some numbers.

"McDouall Securities and most of the brokers in the market are concerned to make sure that the existing minority shareholders in Air New Zealand and the investing public are given first chance to provide any additional capital that Air New Zealand may require."

Having New Zealanders investing in the airline would be good for the local investment market and encourage savings, he said.

"It will be good for Air New Zealand too - because the investing public are their customers."

nzherald.co.nz/travel