Each week I read The Independent, and each week some articles in it make me mad. This week I’m writing about it. Sadly none of the articles are online yet.
Air New Zealand and the Commerce Commisson
The Commerce Commission is bringing criminal charges against Air New Zealand for price fixing. It all started with a raid on Air New Zealand in 2006, and a case in 2008. and the new news is that some information was released in a recent judgement by Justice Judith Potter.
What made me mad
Air NZ CEO Rob Fyfe has a great point – the ComCom has “always refused to provide Air New Zealand with details of the charges.” That’s shonky – to be accused of something without evidence being presented, especially for that long. Meanwhile Air New Zealand’s internal investigations turned up nothing, and they have been dragged through the press. The good news is that Justice Potter has ordered the ComCom to give that detailed information to Air New Zealand by February 9th. In the meantime this sordid exercise has dragged on for years, and Air New Zealand is not bothering to provision for any liability relating to the case. A good article by Denise McNabb.
Power Companies and their margins
Power companies are “redoubling efforts to recoup lost margins.” Whatever
What made me mad
Contact’s year on year tariffs dropped 0.5% in 2009-10 financial year writer Pattrick Smellie found. (Good – remember that electricity company tariffs have been increasing sharply for years.) However “the additional costs of defending its customer base from competitors has added costs equivalent to 1.5 to 2% drop in average net retail tariffs”
It’s unclear whether those costs of defending the customer base were increased sales activities or discounts or bonuses applied to retain customers. I can say that I’ve heard many stories about people being offered incredibly sweet deals, and that the best way to get a retention phone call is to switch to Powershop. (You can do so and get $20 of free power by clicking on the flower above.)
But what makes me upset is that the 1.5 to 2% could have been used to drop tariffs, rather than on marketing activities. People are switching because they can get a better deal elsewhere – so why not offer them the best deal in the first place? If a business can afford to offer these sorts of incentives to stay, then clearly they are making fat margins, and customers are right to switch.
Auckland International Airport bought stakes in 2 other airports
AIA purchased 25% of NQA – operators of Cairns and Mackay airports in Queensland, spending $166m to do so.
What made me mad
The pointlessness of this purchase – there is no synergy between the airports and a lack of control means that this is a financial investment not a strategic one. Airlines chose to fly to particular airports for the customers not the airport ownership. The AIA board would be far better off giving the money back to the shareholders and letting them make their own investment decisions. This smacks of agency cost – where the people that run AIA want to expand their empire for no worthy reason. So if you own AIA shares then sell them, they are not making good decisions.
Is it any surprise that the chap running AIA was the COO of Telecom when they made ill advised investments in Sky and INL in 2001? A well spotted coincidence by writer Jenny Ruth.