Treasury disputed airline savings

Press, 15 July 1983, Page 4

Treasury disputed airline savings

PA Wellington Treasury officials disputed the savings projected before the 1978 Air New Zealand-National Airways Corporation merger, reports released yesterday show.

N.A.C. also said the savings would not be as great as suggested by either the Ministry of Transport or Air New Zealand, according to a Cabinet paper made public under the new Official Information Act. The Minister of Transport, Mr Gair, circulated the paper — presented to Cabinet by the then Minister, Mr McLachlan — and a report written by the late Secretary of Transport, Mr Bert Edwards.

News media representatives had requested copies of the reports which preceded the merger. The Cabinet paper said

the Treasury considered there was potential for significant benefits to be achieved with or without amalgamation, “but it does not have the same confidence as the (Transport) Ministry that they can be adequately quantified.” Mr McLachlan added: “Many of the expected savings are in technical areas where the Treasuiy does not have the expertise necessary to judge independently the potential for savings and economies.” N.A.C. had said the savings were not as great as suggested by either the Ministry or Air New Zealand. The Minister said, “Despite this, however, it is considered that all the indications are that the advantages of merging significantly outweigh the disadvantages. “The full benefits of a

merger will be achieved only over a period of years.” Mr Edwards’s report said Air New Zealand estimated the annual financial benefit of amalgamation as $12.9 million a year in the longer term.

It also recommended that the new airline be named “New Zealand Airlines.”

The 1977 report and paper recommended Cabinet approval for the merger. Mr Edwards told Mr McLachlan that on the merger question there were “many management inhibitions, particularly at a senior level in National Airways. “It was clear at the outset of this investigation that the two airlines approached the question from opposing stands. “Air New Zealand favoured a full merger result-

ing in a new single airline. National Airways opposed any formal merger. “Air New Zealand’s approach to the exercise was therefore positive, an approach that was not matched throughout by National Airways. These entrenched attitudes made agreement on most issues unlikely.” Mr Edwards said the total staff of the combined organisation would be about 8000.

Air New Zealand’s management estimated that savings to the order of 10 per cent of the total staff should be achievable in the longer term.

“However, to establish a conservative base and with some acknowledged limitation on detail of all the factors involved a saving of 350 staff has been established by Air New Zealand.”