KordaMentha KordaMentha is an Australian advisory and investment firm that provides specialist forensic, real estate, turnaround / restructuring and investment management services. The business was formed in April 2002 by Mark Korda and Mark Mentha. Located at
Level 24, 333 Collins Street, Victoria, Australia.
Phone: +61 3 8623 3333

The battle to save Ansett

KordaMentha Executive Director Sebastian Hams discusses the administration of The Ansett Group - the largest and most complex administration in Australian corporate history. Over ten years, KordaMentha tackled the adversity of the collapse with determined commitment to a long-term strategy that would achieve the best possible financial outcome for all stakeholders.


Ansett


‘When it was placed into administration on 12 September 2001, The Ansett Group was Australia’s second biggest airline. It carried more than 14 million passengers per year, had more than 15,000 employees, an annual turnover in excess of $3 billion, a fleet of 133 aircraft and more than 350 premises. Ansett also operated many discrete businesses including regional airlines, Skywest, Kendell and Aeropelican, and major travel agencies, Traveland and Showgroup. Its operational costs were over $200 million per month. Yet it had no cash, no credit and no means to buy fuel.

The collapse happened when the global aviation industry was experiencing one of its lowest ebbs, during the immediate aftermath of the September 11 terrorist attacks. All operations were suspended prior to KordaMentha’s appointment and the majority of the 15,000 staff members were stood down when the aircraft were grounded.

Rather than administering a short-term solution through the fire sale of assets, we focused on a long-term strategy that would maximise benefits for all stakeholders. We immediately identified the importance of recommencing the mainline airline operations so that it could be sold as a going concern. We negotiated $150 million settlement from Air New Zealand to help keep planes in the air, thus preserving the value of many of the assets.

Recommencement of the mainline airline involved restructuring of many operational aspects including:

  • streamlining management, operations and systems
  • analysis of route profitability
  • implementation of a new marketing plan and interline agreements
  • management of a redundancy program
  • renegotiation of terms with aircraft financiers and lessors
  • consolidation of operations
  • negotiation and liaison with a wide variety of stakeholders to support restarted operations and the management of day-to-day issues.

While a conditional sale of the airline to Tesna was announced in November 2001, the sale did not eventuate and by February 2002 the aircraft were permanently grounded. Subsequently, KordaMentha initiated an alternative process, which involved the sale of various assets and businesses of the group.

An orderly and patient assets sale program was deployed, under which millions of assets - ranging from nuts and bolts to Boeing 767s and airport terminals - were sold.

The largest individual aircraft transaction was the sale of six Boeing 767-200 aircraft and four CF6-80A engines for US$45 million. This was the largest global transaction for this aircraft type since September 11 and it included provision of approximately 35,000 man-hours of service to the planes and the progressive delivery of the aircraft over twelve months. The remaining aircraft were redelivered to financiers and lessors, formed part of the sale of smaller businesses or sold on the open market as operational aircraft or for spare parts.

KordaMentha enhanced value and maximised profits on real estate assets including the Garden Drive properties, which were subdivided to form the Melbourne Gateway Business Park. Each purpose-built facility was marketed to interested parties, rather than developers determined to pay land value only. This subdivision raised the estimated single property value of $10–$13 million to $18– $22 million after subdivision costs.

One of the most satisfying outcomes was the sale of several Ansett businesses as going concerns, which saved the jobs of many employees. These businesses included the restructured regional airlines Skywest Airlines, Rex Airlines and Aeropelican, as well as the Ansett simulator business, Ansett Engineering and the Ansett jet engines business.

The final asset sold as a going concern was the spare parts business, Ansett Spares and Service. We grew this business from a highest offer of $10 million in 2003, to a net contribution of $60 million to the Administration in 2010.

We implemented a debt collection team of ex-Ansett employees to manage the debt collection and litigation for the administration. The total collections exceeded $150 million from over 10,000 separate debtor accounts and over 1,100 BSP travel agents who sold pre-administration flight tickets on behalf of Ansett. The strategy proved highly successful and culminated in the Global Rewards litigation in which Ansett was paid approximately $19 million including costs.

A number of distribution challenges were resolved during the administration. The 41 entities that made up the Ansett Group of companies and trusts were pooled into Ansett Australia Limited (subject to Deed of Company Arrangement). Formulation of an agreement between the Federal Government, the ACTU and Ansett Administrators to settle with the Trustees of the Ansett Ground Staff Superannuation fund following court proceedings. This agreement was approved by the Federal Court of Australia.

Our methodical approach to the Ansett administration gained important support from employees, the Federal Government, the ACTU and many other parties. In the early weeks of the administration, KordaMentha negotiated an Australian Government guarantee for Ansett tickets, as well as a Federal Government scheme (SEESA - Special Employee Entitlements Scheme for Ansett) under which some employee entitlements could be advanced. The scheme advanced $382.4 million to Ansett and at the conclusion of the administration in September 2011, a total of $363 million had been reimbursed.

After a decade of commitment, we effectively completed the administration on 2 September 2011. As the assets of the Ansett group were realised, employees shared $727.5 million in 14 separate dividends. The final dividend paid to former Ansett employees achieved an overall average return of 96 cents in the dollar - a result that surpassed initial stakeholder expectations during the time of the collapse.

The Ansett administration was instrumental in the independent restructuring of KordaMentha as a professional services firm. The engagement embodied the values that shape everything we do - developing focused strategy despite daunting challenges and delivering effective results with empathy, care and complete dedication. The KordaMentha team is proud to have worked tirelessly and with utmost professionalism to achieve the best possible result, and closure for those most deeply affected.’


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