Government ‘Did All It Could For S.P.A.N.Z.’

Press, Volume CIV, Issue 30937, 18 December 1965, Page 1

Government ‘Did All It Could For S.P.A.N.Z.’

(,Veu> Zealand Press Association) WELLINGTON, December 17. ~ The Prime Minister (Mr Holyoake) said tonight that the Government had done “all it could reasonably do” to assist South Pacific Airlines of New Zealand.

Earlier today Mr Holyoake had said that S.PA.N.Z. had asked the Government for assistance and had put forward proposals for the continuation of its air service. He said then that the Government Caucus would make a decision when it met this afternoon.

No decision was announced, but the Prime Minister reviewed the S.P.A.N.Z. situation.

Mr Holyoake said tonight that S.P.A.N.Z. had failed to operate successfully as a commercial venture in spite of ••the large amount of support it had from the Government, •nd not because of any lack of Government sympathy.” S.P.A.N.Z.’s expectation of making a profit—originally £21.775-—had proved “far too optimistic," mainly because its traffic estimates for secondary air routes had also been “too optimistic,” Mr Holyoake said. Actions “Consistent” The Government's action and assistance had at all times been consistent with his party’s adherence to the principle of private enterprise. Mr Holyoake said. Any private enterprise was subject to the risk of failure, and S.P.A.N.Z. had reached the point where the Government was “not justified in further backing it with large amounts of the taxpayers' money.” Mr Holyoake said the S.P.A.N.Z. directors themselves when they last saw him had said they were “very worried" they might find themselves open to a court action for continuing to spend and lose money when they knew they could not pay their liabilities. They were not only in debt to large institutions but also owed money to smaller business people who had provided goods and services for S.P.A.N.Z.

Mr Holyoake said it was regrettable that public discussion on the present situa-

tion of the company had “tended to obscure three important facts.” “Not Forced” First, the Government had done nothing to force the company into receivership, even though it owed the Government £lOO,OOO. The chairman of S.P.A.N.Z. had said publicly that at the request of S.P.A.N.Z. a receiver had been appointed under the Companies Act by major creditors.

“The Government was not one of those creditors," said Mr Holyoake. In terms of the Companies Act. S.P.A.N.Z. was required to supply the receiver with a statement of its affairs in a prescribed form. That statement, with the receiver’s comments, was in due course sent to the Registrar of Companies, to the Court, and to the debenture holders who appointed the receiver. The future of the company was not in the hands of the Government, said Mr Holyoake. Contract For Mail Second, said Mr Holyoake, directors of the airline had frequently emphasised to him how much they appreciated the Government's interest and co-operation. The Government had not exerted any pressure for settlement of the debt of £lOO,OOO, and quite recently S.P.A.N.Z, had been granted a contract of £4OO a month for the carriage of mail—a contract taken away from the National Airways Corporation by Government decision. Third, if after investigation by the receiver the company went into liquidation, N.A.C. would itself provide or make other arrangements for the

provision of air services to almost all of the small centres at present served by S.P.A.N.Z., he said. “As it will be necessary to investigate the feasibility of each such service no firm assurance can be given at this time. “Nevertheless there will be no serious loss over-all of existing air transport links.” Wrong Impression Mr Holyoake said there “seemed to be an impression abroad” that whenever S.P.A.N.Z. had pioneered a profitable route, N.A.C. had moved in on it. He had been informed this was not so, Mr Holyoake said. When the Government directed N.A.C. to withdraw from the Nelson-Christchurch route, S.P.A.N.Z. still had operated at a loss on the route.

“It is most regrettable that S.P.A.N.Z. has been unable to operate its services in an economic manner,” said the Prime Minister.

One of S.P.A.N.Z.’s last proposals for further Government support had been a request that thb Government underwrite £600,000 for the purchase of new aircraft and provide an annual subsidy of £60,000. Commercial Risk “The Government could not justifiably lend hundreds of thousand of pounds of the taxpayers’ money when financial institutions would not accept the commercial risk,” Mr Holyoake said. Five years ago, when S.P.A.N.Z. was formed, it had applied to the Air Services Licensing Authority for extensive rights in New Zealand.

Mr Holyoake said the Government had not interfered with the decisions of the licensing authority, an independent body functioning under its own statute in public hearings where evidence from the public and all interested parties was heard. S.P.A.N.Z. Warned “It was a fact that in those early days S.P.A.N.Z. had been warned by N.A.C. and the Department of Civil Avia-

tion that their estimates appeared optimistic,” said Mr Holyoake. “But the licensing authority granted them substantially all the rights they were seeking.” On many occasions since then the company had sought amendments to its licences. As far as he was aware those had been granted almost without excention, Mr Holyoake said. “The Government had consistently sunoorted S.P.A.N.Z., in fact in the face of strong and continuous opposition from the Labour Party,” Mr Hoivoake said. When S.P.A.N.Z. first got into financial difficulties the Government lent it £20,000. In addition, S.P.A.N.Z. was granted deferment of collection of airways duties. Debt To Govt. It now owed altogether about £lOO,OOO to the Government. Mr Holyoake said the Minister of Civil Aviation (Mr McAinine) had instructed N.A.C. to withdraw for one year from the Nelson-Christ-church route to give S.P.A.N.Z. further opportunities.

“These measures of assistance to S.P.A.N.Z. were given by the Government in good faith in order to give the company _ a further chance of establishing itself successfully in the role it had chosen to perform.” Help By N.A.C. On several occasions when S.P.A.N.Z. had faced mechanical difficulties or large engineering commitments Mr McAlpine had instructed N.A.C. to help.

Finally, earlier this year, the Minister instructed the Department of Civil Aviation to make its services fully available to S.P.A.N.Z. "in attempting to work out some way in which they could operate profitably and provide for the future.” Traffic statistics and forecasts and other information and advice had been made available “over a period of many months” and a scheme produced involving sole rights at certain points including Rotorua, Taupo and on the Nelson-Christchurch route,” said Mr Holyoake.

S.P.A.N.Z. had then submitted that scheme to the Air Services Licensing Authority. Authority’s Ruling Mr Holyoake said the authority had expressed doubt about its power to grant the application. But it had added: “we are of the opinion that the exclusion of N.A.C. from Rotorua would not be in the public interest; and for the same reason exclusive rights cannot be granted to S.P-A.N.Z. for Taupo and on the Hamilton-New Plymouth-Nelson-Christchurch route.” The Prime Minister said that the authority “was obviously influenced partly by the company’s presentation of its economic situation and very strongly by local body representatives from Rotorua and Nelson, who rejected the whole idea of sole rights for S.P.A.N.Z. “The case was heard publicly and decided in the light of public interest; and it was decided not by the Government but by the Licensing Authority. “S.PA.N.Z. shareholders suggest that the Government’s whole aviation policy should have been changed to provide a living for S.PA.NJJ., but apart from that the Air Services Licensing Authority would have to agree with any such change as being in the public interest,” Mr Holyoake said.