Monday, March 13, 2006

Foolhardy airline entrepreneur #236


or something like that.
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Paul Stoddart has, once again, proven that the airline industry attracts fools like flies to decaying meat. The closure of his airline – Ozjet – is a classic example of ego and excitement over reason and hard headed investment. In New Zealand, the example of Tasman Pacific airways (which used the Qantas New Zealand franchise before going into receivership and then liquidation) was our most recent example of wealthy businessmen setting fire to dollar bills, but that didn't deter Mike Perot pouring plenty of his personal fortune into Origin Pacific Airways and seeing it disappear in barely visible plumes of exhaust behind the planes.
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Ozjet failed because Stoddart got the market badly wrong. He didn't like tight airline seats on domestic flights and poor service, so he thought far more people would pay loads to go business class on a 1.5 hour flight if it was REALLY swish, in fact a whole plane load. He forgot that most business people don't fly business class, a wealthy minority do, others use frequent flyer points for upgrades, and most have contract rates with Qantas. He forgot that with airlines, networks are very important, he only flew Melbourne-Sydney. He couldn't afford new planes, so got four old Boeing 737-200 series, gas guzzlers (Air NZ replaced its ones in the late 1990s) - as the price of aviation fuel soured. He certainly had comfortable planes, wide seats, plenty of legroom, meals - but no lounges to relax in before the flight - instead you hunted around the terminal looking for somewhere to perch. Leisure travellers wouldn't pay high fares, business travellers usually didn't either and those that did were tied to Qantas -so it was very very dumb, but it WAS his money. Stupid, but his and his investors' loss - not your money, which is the difference. Oh and no doubt unions will be upset about the staff without jobs, and not the entrepreneur who lost millions of dollars in creating those jobs, for the time the airline lasted. The employees walk away with salaries, CV entries - the entrepreneur with burnt fingers and less money. Capitalism is SO unfair isn't it?
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However, there is something bizarre about the airline industry that attracts mavericks willing to piss money down the drain, because planes are exciting and prestigious and sexy. They never seem to notice the graveyard of airlines that failed due to lack of capital, or sheer stupid management. Sir Richard Branson hasn't done a bad job, but then don't forget Virgin Atlantic Airways is 49% owned by Singapore Airlines (sacre bleu - why didn't the Brits stop that - fortunately Aunty Helen and Dr Cullen stopped Air NZ being tainted by such a failure of an airline).
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Oh well, there will be another fool willing to put his money in the engine of a jet, there always is and they are always men.

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