The pro-Labour history around this is simple:
- Air NZ made a bad investment in Ansett Australia;
- Air NZ needed a capital injection to save Ansett and expand its business;
- Two airlines offered this, Singapore Airlines and Qantas;
- As the government was considering both deals, the airline went into crisis;
- This was exacerbated by 9/11 and the global drop in air travel;
- Had Labour let things go, Air NZ would have gone into receivership, damaging tourism and resulting in the end of long haul flights with a NZ brand on them, hurting tourism further. There wouldn't have been flights to many centres in NZ;
- Dr Cullen bravely saved the airline, but required it dump the Australian liability Ansett;
- Then Dr Cullen wisely sought an international partner for the airline in the form of Qantas, because it "makes sense" to have a single South Pacific dominant carrier against the "world".
In other words, the private sector cocked up, and while the government was considering bids for investing in the airline, it was going to fold, and Dr Cullen saved the day. Much of that is nonsense.
That version of history misses out a few facts, facts that demonstrate that the whole situation came about because first the Australian then the New Zealand government stuffed up:
- Air NZ invested in Ansett Australia because the Australian government reneged on a deal for an "open skies agreement" between Australia and NZ. Air NZ originally wanted to set up its own Australian domestic operation in competition with Ansett and the then Australian Airlines. The Australian government reneged on the deal (the famous fax from Laurie Brereton to Maurice Williamson) because it feared it would reduce the price it would get for selling Qantas (which was subsequently to merge with Australian Airlines);
- The Australian government made it clear that it would far prefer Air NZ invest in an established airline - but it was not allowed to invest in Qantas. So Air NZ bought 50% of Ansett in 1996, but was not permitted managerial control at that level of investment and Ansett was required to provide various "social services" (unprofitable routes);
- Increasing frustration with the management of Ansett saw Air NZ finally decide to buy the whole thing out. However it paid too much, it outbid Singapore Airlines as it had aspirations to grow to the size of Qantas. What it found with Ansett was an airline in desperate need of restructuring and new capital;
- Singapore Airlines, which already owned 25% of Air NZ sought to increase its investment to 49% of the airline group, as a capital injection in June 2001. This was unanimously supported by the Air NZ board, but needed support from the Kiwi shareholder - the Crown. Official advice was that issues from such foreign ownership were manageable and that it appeared this was the best option, but the government needed to act promptly.
- Qantas lobbied the New Zealand and Australian governments to oppose Singapore Airlines increasing its investment in Air NZ. Obvious of course that it was seeking to kneecap its biggest competitor. Official advice in June 2001 was against the proposal on competition grounds. The Air NZ board rejected the proposal and Singapore Airlines refused to sell its shareholding, effectively making the proposal academic. Qantas continued to lobby for it;
- In July Cabinet REJECTED the option preferred by Air NZ and officials, preferring either a part state/part Singapore Airlines shareholding or a Qantas takeover;
- Air NZ wrote to Dr Cullen saying that "it would seem that the Government has embarked on a high risk and speculative course that has the danger of putting the Air New Zealand group at risk". The then Acting Chairman warned of the "grave financial risk faced by Air New Zealand Ltd as a result of the current uncertainties;
- Dr Cullen tried to pursue a half and half option allowing some Singapore Airlines investment along with some Crown investment, which was bypassed as the Crown bought out the airline.
Oh and as a side note, the economic geniuses at the Greens believed Air NZ was NOT in a dire financial straight and opposed any new foreign investment, but promoted taxpayer shareholding.
Dr Cullen helped bankrupt Air NZ, because of his peculiar pursuit of the Qantas deal, and the delays in approving the Singapore Airlines investment proposal. You might ask yourself why Dr Cullen didn't like money from Singapore, but liked it from Australia. Not xenophobia surely?
While it is all a bit more complicated than that, the truth is that the slow progress of Dr Cullen and the interference of Qantas has cost the NZ taxpayer dearly, as well as Air NZ. The Greens didn't help either. Air NZ warned that the government's approach created grave risks, and it was right.
So when Dr Cullen steps down, it is worth remembering part of his legacy - the legacy of the lecturer who couldn't make a critical business decision, and surrendered a major strategic opportunity for Air NZ to be a significant airline.
and of course don't forget the Kiwirail deal of the century!