Full speed ahead - on a smaller scale - for transport industry

The transport industry is hoping for a considerably smoother ride after a year of upheaval, writes DANIEL RIORDAN.

Looking for a common theme in the diverse transport industry? Try downsizing.

On the roads, the call from the trucking industry was for bigger but fewer units.

On the tracks, Tranz Rail continued to strip its services.

In the air, Qantas NZ downsized completely. Air New Zealand would have followed suit but for Government intervention.

Tranz Rail chugged steadily through its restructuring while its biggest shareholders, Fay Richwhite and Canadian National (formerly Wisconsin Central) spent a fruitless year trying to find buyers for their stakes.

The company, is focussing on freight and inter-island operations, and sold its profitable Tranz Scenic passenger services to Australian investors.

It closed unprofitable services amid public wailing and a union-organised Take Back The Tracks campaign that made nary a dent.

It sold its access to the Auckland rail corridor for $81 million, but will continue to run Auckland's commuter services until June next year when local government takes over.

Wellington's commuter services are also to return to public ownership by the middle of this year in a joint venture with a private rail partner.

Deals worth $358 million over seven years were signed, giving contractors the job of looking after Tranz Rail's tracks, locomotives and forklifts.

The company ended the year with its trains and trucks operating close to capacity and suffering little impact from the global economic slowdown. But restructuring costs kept its bottom line in the red.

Managing director Michael Beard had a running debate with the trucking industry, accusing road transport firms of lacking the commercial focus of rail and shipping.

Truckers criticised Tranz Rail for running down its rail network in preference to road.

Listed trucking firms (or "logistics companies" as they prefer to be known) had eventful years.

The Owens Group in October welcomed new chief executive David Ritchie, after Ian Newman resigned in January.

It ended the year unsurprisingly warning that its fortunes would depend on how the Australian and New Zealand economies held up in the global downturn.

Mainfreight, bruised and battered by its expansion into Australia, fought its way back to profitability. Freightways Express' parent, Melbourne-based Ausdoc, is looking to sell its subsidiary after a boardroom battle for control.

Port companies enjoyed a solid year. Auckland ($132 million) and Tauranga ($67 million) announced plans to return capital to their shareholders.

In March, the Government-instigated Shipping Industry Review recommended that the Commerce Commission investigate alleged monopoly pricing by the port companies.

Eight months later, the Government responded by asking a consultant to prepare a report, the Review of Ports' Market Power, to determine what action to take.

Port companies say they have nothing to fear and that they operate in a fully competitive environment.

The Government says it is still considering other issues raised by the Shipping Industry Review, including taxpayer help for the industry.

Auckland Airport won approval to build a second runway, and seemed to weather the post-September 11 tremors in global aviation better than most of its international peers.

Its battle with airlines over landing charges was settled in a compromise.

Last month, Singapore Changi Airport Enterprises, a 7.1 per cent shareholder in Auckland Airport, sold its stake to local and overseas institutions.

The airport's biggest shareholder, the Auckland City Council, decided it was also a seller under the new leadership of Mayor John Banks.

The real transport action, and the year's biggest business stories, were with the airport's biggest users.

In April, Tasman Pacific Airlines, which flew as Qantas NZ, nosedived into receivership and later liquidation, dumping 1100 staff and owing creditors $130 million.

The group of high-profile businessmen who bought the company 13 months earlier had little to say as angry staff and stranded travellers demanded explanations.

Hampered by inefficient aircraft, Tasman Pacific struggled to make money on most of its routes, took big hits from higher fuel prices and the exchange rate, and was battered by a bigger, more entrenched competitor in Air New Zealand.

The Companies Office took seven past and present directors to court under the Financial Reporting Act for failing to prepare financial accounts.

Charges against two were dropped but the other five are due in court in the middle of this year.

Qantas Airways stepped in to fill the gap left by its Kiwi franchise, at least on main routes out of Auckland. Nelson-based Origin Pacific expanded its regional network and code-shared with Qantas.

A week before Christmas, Qantas said it would boost its local presence, tackling Air NZ head-on, ensuring turbulent skies ahead for the national carrier.

Air New Zealand started last year with a new senior management team, largely ex-Qantas, and high hopes with 100 per cent ownership of Ansett.

Already fighting rising fuel prices, a slumping exchange rate and a global economic slowdown hurting most airlines, the promised golden apple of Ansett turned out to be worm-riddled.

Engineering problems grounded much of the fleet for the peak travelling Easter holidays.

Deficiencies in the airline's operating procedures and record-keeping were discovered as Qantas and discount carriers Impulse and Virgin Blue ate into Ansett's market share.

While Ansett struggled, its parent engaged in an increasingly desperate search for the extra money it needed to rejuvenate its problem child.

Air NZ's preferred option was for shareholder Singapore Airlines to almost double its stake to just under 50 per cent.

But the Government, wooed by a spoiler proposal from Qantas, delayed giving its approval and Singapore eventually backed away.

At the same time, Air NZ's overtures to Virgin Blue were finally rejected, putting paid to what the airline regarded as Ansett's best business plan.

Air NZ was forced to write off its investment in Ansett, report a loss for the June year of $1.3 billion, and send its subsidiary into voluntary administration.

The backlash from Australia temporarily stranded Prime Minister Helen Clark, brought death threats for Air NZ chief executive Gary Toomey and rivalled the underarm cricket debacle for its level of transtasman vitriol, this time flowing the other way.

Needing to protect the airline for the sake of tourism, the Government reluctantly came to the party, chipping in $885 million for 82 per cent of the national carrier with another $150 million as backup.

Many of the 800 staff (from a total of 10,000) targeted for redundancy had left, former Kiwifruit boss John Palmer was chairing a slimmed down board and the search for a new chief executive was nearing an end.

Air NZ will be relieved to leave 2001 behind, but there will be no respite this year.

International aviation markets, already shrinking before September 11, remain shaky. In New Zealand, Qantas is poised to swoop and Virgin Blue is also in line.

Air NZ shareholders know there is a long way to go before it is worth taking their share certificates from the bottom of their sock drawers.