Chaos as Australian airline shuts down

Ansett workers rallied in Melbourne to protest the closure

Thousands of air travellers have been left stranded at airports in Australia and New Zealand by the sudden collapse of Australia's second biggest airline, Ansett.

Ansett... has been completely and comprehensively driven into the ground by its New Zealand owners. It is just mind-bogglingly bad and it just can't be resurrected in its current form

John Anderson, Australian deputy prime minister and transport minister

After two days spent trying to put together an emergency rescue package, Ansett's administrators said the airline's huge debts meant it had to be shut down with immediate effect early on Friday morning.

Ansett has been hit hard by tough price competition, a weak currency and excessive costs fuelled by high energy prices.

Ansett's four regional subsidiaries, which offer the only flights to many domestic Australian destinations, were also grounded.

Write-off

"I feel a bit like Old Mother Hubbard," said Peter Hedge of PriceWaterhouseCoopers, the appointed administrator for Ansett during an Australian Broadcasting Corporation radio interview.

"On Wednesday night I went to the cupboard and there was nothing there."

Air New Zealand (ANZ), which owns Ansett, had put the airline into voluntary administration on Wednesday after admitting it was losing A$1.3m (US$670,000; £460,000) a day.

ANZ has now written off all of its NZ$1.3bn (US$550m; £375m) investment in Ansett, which had 40% of Australia's A$10bn (US$5bn; £3.5bn).

The meltdown is being investigated by the Australian Securities and Investments Commission, with a focus on possible breaches of duty by directors.

The commission said it was too early to say whether the airline had been trading while insolvent.

Ansett's old planes are in dire need of immediate maintenance, which would need to be followed up with a A$4bn (US$2bn, £1.42bn) cash injection to upgrade the fleet.

Stranded

The immediate effect of Ansett's closure, which took effect at 0200 local time (1600 GMT on Thursday), was to strand passengers as check-ins were closed.

The action was against an Air New Zealand flight. It's a great big plane with Air New Zealand plastered all over it, and that obviously caused some angst

Spokesman for Helen Clark, New Zealand prime minister

Ansett's larger rival, Qantas, offered free flights home for those caught en route, while newer budget competitor Virgin Blue offered discounts.

Both are expected to pick up parts of Ansett, probably at firesale prices.

Virgin Blue in particular is moving fast to try to pluck planes, crews and routes from Ansett's hulk.

Qantas earlier this week ditched plans to buy the airline, saying its financial troubles were too severe.

Another candidate is Singapore Airlines, which owns 25% of Ansett, although Australian authorities said Singapore was not showing much interest.

Sydney Airport on strike

With Ansett's 16,000 workers now facing redundancy, 4,000 union members at Sydney Airport in Australia called a wildcat strike, shutting down the airport for three hours.

"Qantas refuellers have stopped refuelling the planes, the baggage handlers are walking off the job as we speak, both international and domestic," said a Transport Workers' Union official.

"They are demanding that the prime minister protect 100% of entitlements."

Australia's government blames Air NZ for collapse

And at Melbourne Airport, angry workers used vehicles to blockade the Air NZ aircraft in which New Zealand Prime Minister Helen Clark was travelling.

Ms Clark had to resort to a police helicopter to get out of the airport.

"The action was against an Air New Zealand flight," said a spokesman for Ms Clark.

"It is a great big plane with Air New Zealand plastered all over it, and that obviously caused some angst."

Air NZ suspended check-in for passengers flying to Australia as a result of the strike and the blockade.

Passing the buck

The Australian government said the collapse of "an Australian icon" was nothing to do with their handling of the situation, but the fault of an incompetent Air NZ.

"Ansett's assets will now be put up for sale, but the company itself has been completely and comprehensively driven into the ground by its New Zealand owners," said the Australian deputy prime minister and transport minister, John Anderson.

"It is just mind-bogglingly bad and it just can't be resurrected in its current form."

And News Corp, the previous owners, said they had handed on a healthy enterprise.

"It will not wash to apportion blame to previous owners when it is clear the problems confronting Ansett arose during Air NZ's time at the helm," a spokesman said.