Singapore Airlines Implicated in Ousting of Air NZ Chief

World Airline News, July 14, 2000

Uncertainty shadows the future of Air New Zealand's (Air NZ) control of its new Antipodean empire following the sudden departure of long-serving chief executive James McCrea July 7.

The influence of Air New Zealand's newest, and most aggressive shareholder Singapore Airlines and troubled majority shareholder Brierley Investments is believed to have played a major role in the unexpected resignation of McCrea after nine years at the helm. His decision comes less than a month after McCrea completed the takeover of Australian airline group Ansett Holdings Limited, the pinnacle of the Kiwi carrier's 60-year history.

McCrea's resignation - to pursue "new challenges" - has renewed regional governmental and public concerns that SIA has taken hold of the reins of two patriotic brands, and will dictate expansion of the newly merged AirNZ/Ansett for its own benefit. Abject denials and outward dismissal of these concerns has only fueled the anti-Singaporean rhetoric. McCrea's immediate removal from the airline's board, and the assumption of his position by chairman Sir Selwyn Cushing - who also heads Brierley - further added to the speculation of a power struggle among the carrier's board members.

The official line for McCrea's resignation is that the 61-year-old executive is leaving to guarantee Air NZ a smooth transition from a small provincial carrier to a potential top 20 international contender. "It's time for me to look for a fresh new challenge and to let whoever succeeds me have the opportunity to shape the new executive team to lead the group through the next phase of its development," said McCrea in a July 7 statement.

But McCrea's resignation statement does not rest well with some. Brierley executives in private have repeatedly criticized the former airline engineer's strategic philosophy, and it is understood that SIA was unhappy with McCrea's successful attempts to destroy the Singaporean's bid to purchase News Corporation's 50 percent holding in Ansett late last year. This was the same 50 percent AirNZ purchased to take full control of Australia's second airline. McCrea has been unavailable for comment since his resignation, but one source said that McCrea was talking of long-terms plans at the airline only three weeks ago.

These arguments, although outwardly valid, are an unfair representation of McCrea's tenure at AirNZ, according to Centre for Asia Pacific Aviation's Sydney-based Managing Director Peter Harbison. "It's obvious he was pushed, but for what reasons we will never truly know," he said. "However, McCrea has left an impressive legacy behind him, for which he should be recognized. He has done the virtually impossible - not only has he kept a small airline alive through very difficult times, he also joined Star Alliance and has led Air New Zealand on the path to the big leagues. He has also had to deal with Brierley, a shareholder not known for its passive nature, and a company that has had quite a few hard years recently."

McCrea's departure leaves an enviable position open at Air NZ. As group CEO, McCrea's former seat offers control of two international airlines and a domestic carrier - Ansett Australia - readying for a potentially lucrative battle at home with Qantas and start-ups Impulse and Sir Richard Branson's Virgin Blue.

However, the new incumbent - expected to be a U.S. native - may find the new job a poison chalice. A successor to McCrea is not expected for two or three months, but Air NZ is only weeks from announcing a new management structure for the umbrella organization that will lead the Ansett and Air NZ "business units". SIA's hand is also expected to reach further than its 8.4 percent holding in the merged Air NZ - giving it three board positions out of 13 - and its close relationship with Brierley's, which sold SIA its holding, but still retains a 30 percent stake, should give the Singapore Airline control of about half the board. This influence can only grow as SIA increases it holding in Air NZ to a government sanctioned 25 percent, and the airline continues it quest for a 40 percent stake.

Profile of the Antipode's Newest Airline

As at September 1999
                   Air New Zealand  Ansett Australia
Passengers         6.5 million      13.5 million
Countries served   15               6
Destinations       48               152
Daily departures   470              504
Aircraft           76               102
Employees          9,177            14,876
Operating revenue  US$1.8 billion   US$2.3 billion
Source: Air New Zealand