Corporate Collapse Down Under

Gary MacLennan g.maclennan at qut.edu.au
Fri Sep 14 01:39:44 MDT 2001


Prime Minister John Howard's just completed Press conference had two
themes: the invoking of the ANZUS treaty to pledge military support for
America's "war" against terrorism and the collapse of Aviation giant Ansett.

It is fairly obvious that the latter event spoilt the party.  Howard looked
ill at ease thruout.  He is two months out from an election and is behind
in the polls.  He desperately needs attention focused on external factors
rather than on the domestic situation.

The Ansett collapse has destroyed that hope.  It is in fact the third major
corporate failure following HIH (Insurance) and One-Tel (Communications)
earlier this year.  It would seem almost certain that Australia is on the
verge of a very deep recession.   Only a piece of pump priming in the form
of a  1 billion dollar grant to first home buyers has kept us from the abyss.

Why though did Ansett fail? Well the answer has to be sought in the
de-regulation of the Air line industry.  The previous situation had been
marked by a division of labor and a strict limitation of competition. There
was a govt owned airline and Ansett that divided the domestic market
between them. The overseas market was under the control of government owned
Quantas.  The government privatised all three airlines and abolished the
division between domestic and international travel.  Other airlines were
encouraged to enter the market and competition including at times price
wars reigned supreme.  However it looked like Ansett and Quantas would be
able to see of competitors, until Ansett was bought by Air New
Zealand.  they allo32wed the Ansett fleet to run down and refused to
re-capitalise.  Ansett got involved in safety scandals.  then virgin
Airlines rung by British entrepreneur entered and renewed price competition.

The result of this price war was predictably enough - the collapse of one
of the competitors in this case Ansett.  The public had been gulled by the
promise of cheaper fares through competition.  They now have a situation
where a government monopoly has been replaced by a private monopoly.  Fares
will of course rise. Once again the market promised freedom of the
consumer, only to deliver the freedom of the capitalist.

Today in the capital cities the workers in the aviation industry rallied
and they were angry and distressed.  In the Australian way they were of
course above all moderate and respectful of property.  But they and their
families also face a frightening and uncertain future.

The Labor Party promises little. That is predictable enough.  The union
movement is fighting for the 17,000 workers entitlements and in a sense
they are doing a good job within the limits of their
consciousness.  However not one union official has articulated a socialist
alternative.  They have been content to attack Howard and the parent
company Air New Zealand.  there have been some anti-New Zealand remarks and
attempts to blockade Air New Zealand planes, but all this will fizzle out.

We are left though with yet another major corporate disaster and a
veritable body blow to national confidence. It looks liked the coming
recession will be a long and very deep one indeed.

regards

Gary

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