Deregulation and Compass
At its peak Compass Mark I operated four leased Airbus A300 Aircraft, and as result of the difficulty in obtaining airport terminal space and the failure of finance negotiations, Compass (Mk 1) floundered and failed. Compass Mk I collapsed little more than a year after its first flight, with the superficial reasons being portrayed as undercapitalisation and sustained fare discounting by the now three competitors.
There was clearly more to the collapse than undercapitalisation, as the Federal Government had made it near impossible for the new airline to succeed, evidenced by the lack of suitable facilities provided to Compass in the major cities, and the fledgling carrier was forced to accept what were the least accessible aircraft parking bays in the TAA terminals, an impediment to it being successful, and also noted by the governments' own subsequent ACCC study.
Compass Airlines initial operations were also significantly disrupted by a computer attack on their reservations system, by an unknown source.
Although this terminal location dispute had been ongoing, the Government chose to act just before the 1991 Christmas traveling period, and at 9pm on December 20th 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. It was obvious that the government, who controlled the industry, had orchestrated the entire scenario to the demise of the airline.
Certainly the airline, if allowed to continue trading over the Christmas period, would have been able to refute its disputed financial obligations, as it was heavily booked.
In addition Compass were penalised due to alleged non-payment of airways expenses and the Civil Aviation Authority shut down Compass 5 days before the immensely profitable Christmas travel period, and the disposal of Compass aircraft by government instruction saw them expeditiously flown out of the country.
It appeared that it would again be 'a controlled environment as Ansett and TAA/Australian were the sole remaining players. This was in effect, a 'de-facto' two-airline policy, with the government controlling aviation develpment again.