The airline industry is a competitive industry with many winners and losers over the years. Air New Zealand has had to be rescued twice by the government and effectively nationalised.
The government established Air NZ as a national airline in 1965 and it was privatised by the Labour Government in 1989. Greed and ambition led to a failed merger attempt with Ansett Australia in 2001 and the government had to rescue the company by taking majority government ownership. Under the law, however, it simply operated as a profit-seeking airline with no consideration for the impact of its growth on New Zealand’s overall climate change emissions. It also helped enrich the shareholders, by share buyback schemes like many private companies were doing without regard to longer-term considerations, like what to do when a major recession or pandemic or both were to happen.
The government is also obliged to treat it the same way. That is why this time when it had to give the company a $900 million loan it charged an extortionate 8% interest like any commercial lender. In all likelihood, this loan will have to be transferred into new equity which will give the government a 100% shareholding again.
Air New Zealand, meanwhile, is acting like any other capitalist business when the going gets tough and is sacking as much of the workforce as it can in as short a period as it can. Like Rob Campbell, the SkyCity board chairperson, they will no doubt say it is their “fiduciary duty” to do so.
There is the possibility of an alternative way of doing things. Air NZ could become a state-owned enterprise and the laws changed so that profit seeking was not the only imperative. New Zealand needs a national airline, but longer-term maybe only half its current size. It will also need to have a clear plan to transition to electric-powered craft. The oldest and least efficient plans would be mothballed or sold.
The company could look at repurposing their workshops to produce materials for the health sector or solar power industry or whatever the creativity and imagination of the workers could devise. Workers would also be given the chance to retrain for different jobs at Air NZ or for other sectors where growth will be needed.
A new board with 50% representation of the workers on it would be established to come up with a plan to give to the government that maximised jobs and protected the accumulated skills and expertise in the company for a radically different future than what was being planned for under the old for-profit regime.
Burger King is another company that has failed because the private-equity-owned model always fails when the going gets tough because it is based on debt leverage.
Burger King NZ was bought in 2011 by companies belonging to the Blackstone Group – a massive US-based private-equity group whose chief executive is the highest-paid one on the globe – earning $500 to $700 million a year in recent years.
The company was bought almost entirely with debt. So debt equalled assets. Some of this will be bank loans, and the rest will most likely be loans from associated entities of the private-equity group.
This means the company spends a lot of its money servicing the debt. This also means it usually “loses” money so it never has to pay tax. Some years Burger King received a tax credit from the government. That is correct. We paid them to rip us off.
In this sort of setup, it needs a bit of digging to find out exactly how the owners enriched themselves over the years since 2011. This is a job a good financial journalist should be doing. Instead, there are almost no reports on the financial position of the company. One report, however, noted that in 2016 the company claimed net debt went from $149 million to $79 million. That would be worth looking at.
What we know is that Burger King was among the worst of the fast food companies in resisting any form of wage above the minimum wage. Almost no one was permitted to train for a higher rate. Managers were almost all migrants on visas and often earned less than the minimum wage.
The current crisis will have meant that the Blackstone Group had ensured there were no reserves to service current debt obligations and a four-week suspension of sales pushed the company into insolvency after taking the wage subsidy from the government. A receiver has been appointed.
Unite hope the company finds a buyer so the 2600 workers can keep their jobs. That may be possible. In 2008, for whatever reason, sales from fast food outlets increased during the recession. Who knows what will happen this time.
The receiver has to talk to Unite Union as one of the interested parties. We will try and use this process to find out the truth behind these corporate thieves to at least expose their criminal behaviour.
Too true about Air NZ – their business model seems to be “privatize the profits, socialize the losses”. When they’re doing OK, they don’t feel any obligation to provide affordable flights to provincial centres – or even any flights at all if a route is deemed unprofitable. But when they’re in trouble apparently they’re too “important” to fail. Why do we put up with this?
Where is the personal responsibility for business to stay afloat. Whether it’s Burger King ,Air N.Z., Mediaworks. Why the plea for the government to bailout?
Beneficiaries get labeled for not taking personal responsibility and improving their lives by neoliberals. They are told to “try harder”. The moment they have increased support, the government are lambasted. Well I say to the business community, stand on your own feet and “work harder” to stay afloat. If 4 weeks sends you under, you probably weren’t viable in the first place.
Indeed, Bert. Wasn’t that the mantra when neo-liberalism was introduced (like a ideological virus spreading to NZ) here in the 1980s?
Now they go running to the State (ie, us taxpayers) for a bailout. *pffft!*
Next time ACT goes on about “state handouts” and welfare, this will be thrown at them every single damned time.
Their ideology of the “self sufficient free market” has been exposed as a fraud.
Here here Frank, here here!
It’s actually “hear hear” Bert
I hear you on here Mike thank you. Auto spell no excuse
And David Seymours moral compass has created a submission for all party ministers to take a 20% pay cut.
How strong is your moral compass David, strong enough to live on the Governments wage subsidy of $585.80 a week gross?
The government needs to tax profits leaving NZ!
They need to make company individuals pay big bonds so if their company goes under and they have sponsored in workers, the burden to repatriate the migrant worker should be made using bond money taken when the visa was given out from the employer, pay compensation to the migrant for the breach of contract, and not have the huge mess of deportation and support falling on the NZ taxpayers.
Likewise there needs to be a lot more money help in bonds for businesses to pay their workers compensation when they go under. Directors should have to stand down for 5 years on being a director for any company they run that goes under to stop the poor directors aka Jenny Shipley types essentially going around and keeping multiple directorships when they screw up.
The fast food/retain industry have been visa and franchise ponzi’s for some time in NZ so of course they will all go under or just pay themselves to pretend to be profitable until they claim residency. There are too many fast food outlets for a start and the quality is low and not even at the standard they used to be, while the prices of the food is very high in relation to people’s incomes in NZ.
Fast food and Liquor stores are popping up everywhere and full of migrant workers to the tune of hundreds of thousands of temp workers who have been flooding into NZ each year. Often these small businesses are not even profitable, but have become a way for people trafficking someone with few skills to get into NZ. Saw a sushi bar with something like 15 migrant workers working there… now no doubt all being paid $550 for Covid.
Small white collar and large white collar fraud really pays in NZ!
Oh for god’s sake!
Burger King isn’t a failure of capitalism, its a failure because the people running it are usless.
Most of the businesses that will fail however are failing because of the government’s response to corona virus.
Where is the government’s culpability in this?
Nice try, but that’s another fail coming from the cheap seats. Word of advice.. Failing utterly to understand even the most basic, and obvious points of what is yet another blatant example of gangs of corporate whores encouraged in their despicable behavior by an utterly bought and paid for government under the thief Key. The people skimming the profits from exploitation aren’t “useless”, as they succeeded brilliantly in draining hundreds of millions from our pockets, and giving to wealthy investors overseas. Understand this. Your hero John Key led the biggest raid on the nz economy in our history. The truth is coming UT more and more now. Give up your crush, and get with the reality that this government has got the job, yet again, of fixing the almighty clusterfuck that his government, in their venality, and incompetence, left behind..
Well if we need to keep bailiing out all these formerly state owned assets we need to take them out of SOE status and make them public services again as they used to be.
Take the ‘NZ Insurance Company’ that used to be our state owned insurance company, provide secure insurance poicies to us all.
It was beetter than the robbing private owned ‘AIG State Insurance’ is now, as Christchurch foks know how corrupt they are now.
The New Zealand Insurance Company (NZI) was founded in Auckland in 1859.
https://teara.govt.nz/en/insurance/page-2
NZ Insurance was a good insurer we know as my sister worked there in 1960;s and they covered everything no questions.
The holy trinity of aviation is engine, fuel, and lift. Patent anyone one of those and it will sustain New Zealand’s aviation research indefinitely.
Many of the writers on this forum complain about the high wages paid to CEO and I would agree that they have got out of hand but a good CEO can make or break a company . I worked as a manager for KFC just as McDonald’s started to grow . We lost business big time but a new CEO visited every branch and listened to the ideas of the managers and soon the business started growing again. Burger King was badly managed and has been on the market since last year. They were terrible to their staff and it showed in their attitude to clients let’s hope a local buyer can be found as the bones of a good business is there and takeaways will be the main market for some time as restaurants will be so hard to manage profitably
nz and the world should sue china ccp for releasing this bioweapon from the wuhan lab accidentally or not covering the globe over.
ccp withheld information with transmission between people to people.
world health organisation condemned countries for closing their boarders early
while prasing ccp actions (puppet).
ccp been covering there tracks by
way of mass disinformation blitzkrieg around the world and deletion of research information from wuhan china while closing chinese institutes that informs the scientific world with there data. i dont want to mention the doctor that 1st warned the world
and many good people who tried to say something in china that has fallen silent
god bless them
ccp showing the world it’s TRUE form
we have been warned
FOS looks like you did a copy and paste and are following the narrative like a good soldier.. you can fool some people some of the time if you say it often enough..chill out please..
Outrageous of air nz
Comments are closed.