Compass Airlines (Australia)
Encyclopedia
Compass Airlines operated in Australia
for two brief periods in the early 1990s. The two incarnations of the airline
were quite separate with different management and aircraft.
had operated under the 'Two Airlines Policy
', which was in fact a legal barrier to new entrants to the Australian aviation market. It restricted intercapital services to the two major domestic carriers. This anti-competitive arrangement ensured that they carried approximately the same number of passengers, charged the same fares and had similar fleet sizes and equipment.
East-West Airlines
.
East-West had earlier attempted to break the duopoly of Ansett and Australian Airlines by offering cheap fares but in the regulated environment of the time was not allowed to operate directly between major cities so was forced to detour via regional centres. East-West was ultimately acquired by Ansett.
At its peak Compass Mark I operated four leased Airbus A300
(VH-YMA, VH-YMB, VH-YMJ, VH-YMK) and a single A310
aircraft (VH-YMI). Three further Airbus A300
aircraft on order in 1990 (VH-YMC, VH-YMD, VH-YME) were not taken up as a result of the failure of finance negotiations. Alternatively VH-YMJ and VH-YMK aircraft were leased from British charter carrier Monarch Airlines
.
Compass Mk I collapsed little more than a year after its first flight, with the reasons being portrayed as undercapitalisation and sustained fare discounting by the three competitors.
However as the attached documents detail, there was clearly more to the collapse than undercapitalisation. The Federal Government had made it extremely difficult for the new airline to succeed, as evidenced by the lack of suitable facilities provided to Compass. In the major cities, the fledgling carrier was forced to accept what were the least accessible aircraft parking bays inside the terminal of one of their competitors, an impediment to successful trade also noted by the governments' own subsequent ACCC study.
Compass Airlines initial operations were also significantly disrupted by what appeared to be a computer attack on their reservations system.
It is also important to assess the method by which the airline was shut down. As the official findings of the Australian Tax Office detail, the Federal Government set in place legal proceedings that inevitably led to the repossession of the leased aircraft and the effective grounding of the airline, with the subsequent direct and indirect loss of thousands of jobs.
The Government and Compass had been in dispute for many months over the amount paid for the provision of Civil Aviation services provided by a governmental authority. Although this dispute had been ongoing, the Government chose to act just before the peak 1991 Christmas traveling period. At 9 pm on 20 December 1991, Compass 1 was grounded. Such were the complexities of this case that the matter remained unresolved until a final High Court of Australia hearing in 1999. Certainly, had the airline have been allowed to continue trading over the Christmas period it would have had more chance of meeting its disputed financial obligations than being shut down on 20 December.
It commenced operations in 1992 with three McDonnell Douglas MD82 and two McDonnell Douglas MD83 aircraft. It collapsed less than a year later in 1993. Two further MD83 aircraft on order were not delivered following the final demise of the Compass brand. Southern Cross chairman Douglas Reid was convicted in 1997 of theft and false accounting amounting to $10 million in relation to the collapse. He received a record 10 year jail sentence.
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
for two brief periods in the early 1990s. The two incarnations of the airline
Airline
An airline provides air transport services for traveling passengers and freight. Airlines lease or own their aircraft with which to supply these services and may form partnerships or alliances with other airlines for mutual benefit...
were quite separate with different management and aircraft.
History
Compass I was Australia's first low cost airline. It was established following deregulation of the Australian airline industry in 1990. Previously Ansett and the government owned Australian AirlinesTrans Australia Airlines
Trans Australia Airlines or TAA, was one of the two major Australian domestic airlines between its inception in 1946 and its sale to Qantas in May 1996. During that period TAA played a major part in the development of the Australian air transport industry...
had operated under the 'Two Airlines Policy
Two Airlines Policy
The Australian Two Airlines Policy was a policy of Australian Federal Governments from the late 1940s to the 1990s. Under the policy, only two airlines were allowed to operate flights between state capital city and major regional city airports...
', which was in fact a legal barrier to new entrants to the Australian aviation market. It restricted intercapital services to the two major domestic carriers. This anti-competitive arrangement ensured that they carried approximately the same number of passengers, charged the same fares and had similar fleet sizes and equipment.
Compass Mk I
Compass Mk I, as it later became known, was established by Bryan Grey, who had previously run regional airlineRegional airline
Regional airlines are airlines that operate regional aircraft to provide passenger air service to communities without sufficient demand to attract mainline service...
East-West Airlines
East-West Airlines (Australia)
East-West Airlines was an Australian regional airline founded in Tamworth, New South Wales in 1947. It operated to major regional city-centres and connected these centres to various provincial capitals. It was purchased from its original founders in a share buy-out by Bryan Grey and Duke Minks...
.
East-West had earlier attempted to break the duopoly of Ansett and Australian Airlines by offering cheap fares but in the regulated environment of the time was not allowed to operate directly between major cities so was forced to detour via regional centres. East-West was ultimately acquired by Ansett.
At its peak Compass Mark I operated four leased Airbus A300
Airbus A300
The Airbus A300 is a short- to medium-range widebody jet airliner. Launched in 1972 as the world's first twin-engined widebody, it was the first product of Airbus Industrie, a consortium of European aerospace companies, wholly owned today by EADS...
(VH-YMA, VH-YMB, VH-YMJ, VH-YMK) and a single A310
Airbus A310
The Airbus A310 is a medium- to long-range twin-engine widebody jet airliner. Launched in July 1978, it was the second aircraft created by Airbus Industrie,a consortium of European aerospace companies, Airbus is now fully owned by EADS and since 2001 has been known as Airbus SAS. the consortium of...
aircraft (VH-YMI). Three further Airbus A300
Airbus A300
The Airbus A300 is a short- to medium-range widebody jet airliner. Launched in 1972 as the world's first twin-engined widebody, it was the first product of Airbus Industrie, a consortium of European aerospace companies, wholly owned today by EADS...
aircraft on order in 1990 (VH-YMC, VH-YMD, VH-YME) were not taken up as a result of the failure of finance negotiations. Alternatively VH-YMJ and VH-YMK aircraft were leased from British charter carrier Monarch Airlines
Monarch Airlines
Monarch Airlines, often shortened to and trading as Monarch, is a British charter and scheduled airline based at London Luton Airport in Luton. It is one of the United Kingdom's largest charter airlines, operating to Europe, the United States, the Caribbean, India and Africa, serving mainly leisure...
.
Compass Mk I collapsed little more than a year after its first flight, with the reasons being portrayed as undercapitalisation and sustained fare discounting by the three competitors.
However as the attached documents detail, there was clearly more to the collapse than undercapitalisation. The Federal Government had made it extremely difficult for the new airline to succeed, as evidenced by the lack of suitable facilities provided to Compass. In the major cities, the fledgling carrier was forced to accept what were the least accessible aircraft parking bays inside the terminal of one of their competitors, an impediment to successful trade also noted by the governments' own subsequent ACCC study.
Compass Airlines initial operations were also significantly disrupted by what appeared to be a computer attack on their reservations system.
It is also important to assess the method by which the airline was shut down. As the official findings of the Australian Tax Office detail, the Federal Government set in place legal proceedings that inevitably led to the repossession of the leased aircraft and the effective grounding of the airline, with the subsequent direct and indirect loss of thousands of jobs.
The Government and Compass had been in dispute for many months over the amount paid for the provision of Civil Aviation services provided by a governmental authority. Although this dispute had been ongoing, the Government chose to act just before the peak 1991 Christmas traveling period. At 9 pm on 20 December 1991, Compass 1 was grounded. Such were the complexities of this case that the matter remained unresolved until a final High Court of Australia hearing in 1999. Certainly, had the airline have been allowed to continue trading over the Christmas period it would have had more chance of meeting its disputed financial obligations than being shut down on 20 December.
Compass Mk II
Compass Mk II was originally conceived as Southern Cross Airlines but chose to trade under the Compass brand, which seemed to have popular support. This may have been a commercial error as many suppliers insisted that Compass Mk II purchased items and paid up front, rather than lease the same items as would normally be the case.It commenced operations in 1992 with three McDonnell Douglas MD82 and two McDonnell Douglas MD83 aircraft. It collapsed less than a year later in 1993. Two further MD83 aircraft on order were not delivered following the final demise of the Compass brand. Southern Cross chairman Douglas Reid was convicted in 1997 of theft and false accounting amounting to $10 million in relation to the collapse. He received a record 10 year jail sentence.
Historical Fleet
- 3 - McDonnell Douglas MD-82
- 2 - McDonnell Douglas MD-83
- 4 - Airbus A300B4-605RAirbus A300The Airbus A300 is a short- to medium-range widebody jet airliner. Launched in 1972 as the world's first twin-engined widebody, it was the first product of Airbus Industrie, a consortium of European aerospace companies, wholly owned today by EADS...
- 1 - Airbus A310-304Airbus A310The Airbus A310 is a medium- to long-range twin-engine widebody jet airliner. Launched in July 1978, it was the second aircraft created by Airbus Industrie,a consortium of European aerospace companies, Airbus is now fully owned by EADS and since 2001 has been known as Airbus SAS. the consortium of...