To help Ansett? Or not to help?

Should the Government help Ansett get back on its feet? The national secretary of the AWU Bill Shorten argues that assistance is essential to avoiding an aviation monopoly.

Should Australia have a virtual monopoly in aviation? Clearly the Howard Government thinks so, otherwise why would they give 100 per cent of their custom to Qantas, yet wave goodbye to 50,000 jobs by turning their backs on Qantas' only real competitor, Ansett.

When Ansett stopped flying Australians were facing a catastrophic situation - the loss of the nation's second largest airline and the only serious competition to Qantas. We faced 16,000 direct job losses, and up to 40,000 indirect job losses in related aviation and tourism industries.

But the consequences of Ansett's collapse were more far-reaching when you consider the economic fate, if Ansett remained grounded, for the 32 rural communities where Ansett or affiliated regional airlines were the sole carriers. For these towns, Ansett is a lifeline.

Then there are the inefficiencies that come with delivering Qantas a domestic monopoly - the inevitable increase in ticket prices.

Further, there is the damage to our tourism industry, which has already suffered after the tragic September 11 terrorist attacks on A merica, if we lost our second major full-service airline.

The multiplier effect of all those events equals tens of thousands of job losses and a subsequent loss of tax revenue for the Federal Government.

In contrast, a simple Government package to save Ansett - by regulating Qantas' market share from its current level of 91 per cent to a more reasonable 65 per cent, and subordinating the government's position as a priority creditor - is vastly cheaper than paying thousands of unemployment benefits.

While it is generally agreed that governments should not be in the business of propping up companies, Ansett is a compelling case of the exception that proves the rule. The precedent for helping Australia's difficult aviation industry was set long before the Ansett collapse. The Queensland Government threw $60 million at Virgin to base its local carrier in the northern state. Virgin got another $7.5 million from the Federal Government when it agreed to fly to Cairns, and millions more when it included Tasmania in its routes. It's a similar story for Qantas. It received a $400 million head start on Ansett in the early 1990s when the Federal Government forgave debt owed by Australian Airlines. Qantas also picked up new-route subsidies, and lobbied for accelerated depreciation allowances.

And let's not forget John Howard's generous assistance to other industries. I am thinking of the textiles industry and the Prime Minister's willingness to step in and help his brother Stan by paying millions in workers' entitlements after the company, of which Stan Howard was a director, went bust.

Even Lang Corp boss and an Ansett bidder, Chris Corrigan, was the beneficiary of Government assistance in his shared vision with the Government to de-unionise the waterfront in Australia's biggest industrial dispute in the last decade.
But back to Ansett.

The Ansett administrators were given the charter of keeping Ansett flying, and if that proved impossible, maximizing the return to all creditors. The administrators and unions have recognised from the outset that Ansett is a viable business; it has considerable assets, but lacks cash flow. While they knew Ansett could not survive in its pre-collapse form, a scaled-down version directly employing 4000 employees and a further 2,500 in the regional affiliates was achievable. They just had to find a buyer.

The Federal Government's commitment to loan $195 million to partially fund employees' entitlements in an initial round of redundancies was important if Ansett was to keep flying while the administrators found that buyer. But rather than facilitate the selling process, the Prime Minister and his deputy John Anderson added conditions to the $195 million that jeopardized the airline's permanent return to the skies and made the sale of the airline less attractive. The absurdity was that the conditions were an unnecessary safeguard.

Taxpayers would not be burdened because the Government had already passed legislation to put a $10-a-ticket levy on all airline travelers to recoup the $195 million. That tax raises about $96 million a year and is capped at $500 million - about five years.

The ticket tax alone will repay the $195 million within two years. Instead, the Government has made the administrators' task of selling the airline all the more difficult by insisting the government takes its place at the front of the queue as a priority creditor. That means revenue raised from any assets that are sold are handed to the Government rather than used to pay out some of Ansett's millions of creditors, and restore the airline's goodwill and position as the country's second major fully-serviced airline.

Once a credible buyer was found, in the form of the Lindsay Fox and Solomon Lew consortium, requests for assistance from them were not excessive or unreasonable. They sought legislative changes so that Qantas' market share is capped at no more than 70 per cent - which is good for all Australian travelers - and that the Government waived its right as a priority creditor on the $195 million issue.

They also sought for Ansett Mark II to get a set share of the government's air business from its $300 million travel budget, which is not unreasonable given Ansett last year had a $112 million share. It would be a return to the status quo.

By snubbing Fox and Lew, John Howard and John Anderson have shown their disregard for real competition and for Australian workers. Any first year economics student knows that that monopolies breed inefficiencies and rent taking by the monopolist. So why does the Howard Government, which alleges to promote choice, abandon Ansett and deliver Qantas a monopoly?