Recce

Flying the Dollar Further

What a relief it was to see Bryan Grey’s Compass Airlines float literally take off amidst a sea of doubt from the sceptics. Compass sold all of their available shares within a fortnight of launch and no doubt could have traded double that number if they had only realised the extent to which Mr and Mrs Australia were prepared to go to actually own a piece of an airline. Certainly this was high noon for Compass as it was clear from the outset that if the initial funding could not be guaranteed, then none of the new airlines would even get off the ground and deregulation to a large extent would be a national fizzer.

Considering that Australia is not ready to invest heavily in new carriers, that the economy is shaky and that the terminal arrangements at key ports are inadequate, Capitol Airlines have put their plans on hold while Southern Cross are biding their time till the above factors are clearer. Compass required ‘only’ $50m in launch funding and ended up with something closer to $65m. Capitol meanwhile talk of $100m as a minimum whilst the more conservative Southern Cross list $500m as what they need to make the runway. Big in a high risk industry that even in the boom times is lucky to return a 5% margin.

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