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Flight of fancy

THE drama surrounding Ansett Airlines is something that should have been predictible.

Australia has a poor record of sustaining more than two airlines servicing the national market.

Remember the fiascos of Compass I and II.

In those days, Ansett had the firepower to see off challenges from two-bit competitors.

But underneath it all, the airline knew it had serious problems.

Deep within the Melbourne headquarters of Ansett, a special group of financial boffins dubbed the Business Recovery Unit has worked for about three years to prune costs in what is regarded as something of a dinosaur-like structure.

But inflexibility in areas such as air crew, where a strike can badly damage an airline’s credibility, left few areas where real gains could made.

One area appears to have been maintenance, given the debacle at Christmas when some planes were grounded.

Unbelievably, this damaging scenario was repeated at Easter.

This was at a time when Richard Branson’s Virgin Blue was gaining a strong foothold in the Australian market, urged on by all and sundry as the saviour of air passengers.

Branson has much deeper pockets than any previous challenger.

Perhaps Ansett, and its parent Air New Zealand, deserve what they get for failing to plan for the future.

Too many businesses reap the profits of regulated business environments without saving for a day when competition might hit them.

But then again, why did everyone welcome a foreign carrier with such open arms when history tells us that only two airlines will survive.

Whether the survivor is a newcomer or the incumbent, you can be sure prices will only go in one direction – up.

Budget blues



WITHOUT knowing the details due to be delivered in today’s State Budget it is still possible to flag concerns about raising the tax burden on business. There is a very simple assumption being used by any government that raises taxes on one sector of the community – that those being slugged can afford it.

In case of business, though, that assumption is wrong, and the reason lies at the heart of the very same issues prompting the Government to consider raising taxes in the first place.

Consider this: one of the clear messages coming out of government lately is the rising costs of technology across so many departments.

Be it health or crime, it seems new problems require vast sums to be spent on equipment and software.

Add to this the cost of bigger wages for specialists, whose skills are often worth far more in the private sector.

As an example, two of the Federal policemen who trailled Alan Bond’s millions to Switzerland now earn two or three times their government pay working as forensic accountants. While few could argue that governments need more money to continue providing the services they do, politicians and their advisers must remember that business faces the same problems.

Business competes for staff against jurisdictions with higher salaries and lower taxes.

And the capital cost of technology required to compete is enormous for the private sector too.

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