Why Ansett Airlines Failed and How to Prevent It Happening Again

Ansett Airlines, Australia's second largest, ceased operations in September 2001. With debts of $A3 billion it was placed in administration on behalf of creditors. The immediate consequences included 16,000 employees out of work and, on the day flights ceased, an estimated 47,000 passengers with tickets in hand but no planes to board. Anger and annoyance triggered a search for somebody to blame and many reports in the media, along with ministers in the Australian Government, blamed the airline's management. An analysis of the case leads to a different conclusion. While Ansett's management might have been deficient, a factor that seems to have triggered the failure, a deeper issue is its principal cause. It is the policy of competitive markets imposed on Australia's domestic airlines by successive governments. In a country where the resident population and the tourist destinations are dispersed over great distances, there is high dependence on airline services. Simultaneously the small population combined with the geography of major air routes and the economics of airlines means that air travel markets cannot sustain a highly competitive airline industry of the sort seen in the USA in recent decades and introduced in Australia in the 1990s. Australia needs intelligent airline regulation, a co-operative and sustainable industrial framework within which competition is tolerated, but only in a limited scope.