I blogged about Air New Zealand on 1 February. My main point was that although Air New Zealand has been innovative operationally, it is not meeting its cost of capital (and it did not do so in at least some earlier years) and is hence a drag on the economy (GDP and GDP/head).
The Treasury has recently posted an interesting short paper on Air New Zealand on its website.
It is dated but nevertheless still relevant. The author, experienced former Treasury official John Wilson, suggests the following lessons from the Air New Zealand experience:
It was private investors, rather than the government, who lost money as a result of Air New Zealand’s financial failure.
The Ansett purchase was a major strategic failure. It does not disprove the general principle that private ownership is more commercially adept than government ownership. But it reminds us it is a general principle rather than an iron law.
A New Zealand government is likely to find itself the only potential source of new capital in the event of financial failure of a New Zealand-based international airline.
One comment on my earlier post was that (some) other airlines are not making money either. This is true. John Wilson comments that “the record of airlines as investments is poor”. Noted investor Warren Buffett once said that if someone had shot down The Flyer when the Wright brothers put it into the air at Kitty Hawk they would have done investors a favour. The moral of the story is that governments should be wary of committing taxpayers’ money to such investments.