Wirraway
24th Oct 2003, 00:56
Fri "Sydney Morning Herald"
Flying Kangaroo drops the nice-guy act
By Elizabeth Knight
October 24, 2003
A couple of months ago, before the Australian Competition and Consumer Commission delivered its final decision against an alliance between Air New Zealand and Qantas, both airlines were arguing their long term viability was at risk in a landscape of international airline consolidation.
The claims were so big, bolshie and over the top that most commentators discounted them. At Qantas, the company's wily chief executive, Geoff Dixon, was doing a fabulous job of convincing various parts of the Federal Government, including the Transport Minister, John Anderson, that the sky would fall in for Qantas if it could not effect this de facto takeover of Air New Zealand.
It's amazing how the rhetoric has changed in just a few weeks - at least on this side of the Tasman.
When the ACCC announced its decision both airlines said they would appeal to the Competition Tribunal.
But the news that the New Zealand Competition Commission has also ruled against the merger sealed the fate of this deal. It can't beresurrected in the short to medium term and regardless of what Air New Zealand says about sitting down soon with Qantas, the deal is dead.
Qantas won't say much right now because it is not politic to do so but there is no doubt that it will drop any appeal.
And it won't mount any appeal in New Zealand, regardless of any discussions with Air New Zealand.
Qantas and Air New Zealand recognise that undertaking an appeal in New Zealand is far more difficult than in Australia.
In the world of commerce there are no true friends - only marriages (or in this case engagements) of convenience.
It's no longer convenient for Qantas to wait around for a year or so and put any part of its financial future in the hands of competition regulators.
In the next week or so the two airlines will discuss the regulators' decisions but the outcome will be to drop ideas of an alliance. Air New Zealand may not like it but without Qantas's support it will have no choice.
And the biggest pill Air New Zealand will need to swallow is that Qantas will stop being a compliant competitor in domestic New Zealand and the Tasman and Pacific routes and become a terrier of a competitor.
The fight has already started and we can only expect it to become more fierce. Virgin has yet to start a service but it's not far away and Emirates has its service over the Tasman.
It cannot be other than a blow to Virgin, which had entered into an agreement with Air New Zealand for terminal access and ground handling facilities.
It will also see fare competition increase - a move that will eat into the margins of all operators on this route.
There is no doubt that losing this deal will be a blow to Qantas.
It will now play down its importance because option one was to transact the alliance.
The truth undoubtedly lies somewhere between "the sky is falling" and a marginal impact. But Qantas has put little hope in the deal coming off and has already begun moving on.
In terms of available seat kilometres (the airline term for capacity) New Zealand represents only 10 per cent of Qantas's business but sensible pricing across this route can have a much bigger impact on profitability.
There will be more blood lost on the Tasman route but because the discounting is already in full swing it won't get much worse.
The real task for Qantas is to get its New Zealand domestic carrier, Jet Connect, into shape. To date it has not taken on Air New Zealand on its home turf but the New Zealand regulators' decision will herald the beginning of real competition in this domestic market.
Qantas can no longer afford to sit on its hands in that market, where it is making nothing like an acceptable return. As far as Air New Zealand is concerned, this will be a major problem.
It recently released a very good quarterly result but forecast the full year would be flat. It could be a negotiating position or a prediction based on an impending battle with Qantas.
The sharemarket is certainly of the view that the outlook for Air New Zealand is grim. It pushed its shares down 7.69 per cent yesterday, whereas Qantas fell just under 2 per cent - not far out of line with the general market.
For Qantas this was always a cheeky try-on - a free bet. But one that it could afford to lose. Dixon is ready to move on.
=========================================
Fri "The New Zealand Herald"
Jim Eagles: Now, let's get back down to Earth
24.10.2003
COMMENT
What else did anyone expect?
Of course an alliance between Air New Zealand and Qantas would be anti-competitive. It would control around 90 per cent of our domestic, transtasman, Pacific and North American aviation markets.
So the Commerce Commission, like Australia's Competition and Consumer Commission, had to turn it down.
It gets stroppy about mergers involving 40 per cent of a market, let alone 90 per cent.
The only surprise is that anyone ever believed there was the slightest chance of getting approval.
I've thought for some time that Air NZ knew there wasn't a hope, but went along with the farce to get more time to prepare for war.
On the other hand, I suspect Qantas is so used to bullying its Government into getting its own way that it genuinely expected to wangle an approval - and, if it were entirely up to the Australian authorities that might still have been the eventual outcome.
Anyway, now the inevitable has occurred, what happens next?
Hopefully the Government will recognise the folly of its stance that the only way to protect its foolish investment in the airline is to guarantee it monopoly profits.
Hopefully, too, Qantas and Air NZ will give up the whole crazy idea of a transtasman alliance and go back to competing.
That will be good news for air travellers, tourist operators and exporters.
But it need not be bad news for Air NZ.
It has wisely used the breathing space to come up with a smart new strategy, a leaner cost structure and lower fares, leaving it well-placed to compete against the bigger but flabbier Qantas in the short term.
The long term is impossible to predict in an industry as volatile as aviation, but ultimate survival may indeed require an alliance with another airline.
There's nothing wrong with that, as long as it isn't one which would create a near monopoly in our aviation market.
In the end, though, if Air NZ does not survive the shake-out in the aviation industry it is not the worst thing that could happen.
The Commerce Commission recognises, even if the Government does not, that a competitive aviation market offering the lowest possible air prices and the widest possible choice is far more important to our economy than the continued existence of Air NZ.
===========================================
Flying Kangaroo drops the nice-guy act
By Elizabeth Knight
October 24, 2003
A couple of months ago, before the Australian Competition and Consumer Commission delivered its final decision against an alliance between Air New Zealand and Qantas, both airlines were arguing their long term viability was at risk in a landscape of international airline consolidation.
The claims were so big, bolshie and over the top that most commentators discounted them. At Qantas, the company's wily chief executive, Geoff Dixon, was doing a fabulous job of convincing various parts of the Federal Government, including the Transport Minister, John Anderson, that the sky would fall in for Qantas if it could not effect this de facto takeover of Air New Zealand.
It's amazing how the rhetoric has changed in just a few weeks - at least on this side of the Tasman.
When the ACCC announced its decision both airlines said they would appeal to the Competition Tribunal.
But the news that the New Zealand Competition Commission has also ruled against the merger sealed the fate of this deal. It can't beresurrected in the short to medium term and regardless of what Air New Zealand says about sitting down soon with Qantas, the deal is dead.
Qantas won't say much right now because it is not politic to do so but there is no doubt that it will drop any appeal.
And it won't mount any appeal in New Zealand, regardless of any discussions with Air New Zealand.
Qantas and Air New Zealand recognise that undertaking an appeal in New Zealand is far more difficult than in Australia.
In the world of commerce there are no true friends - only marriages (or in this case engagements) of convenience.
It's no longer convenient for Qantas to wait around for a year or so and put any part of its financial future in the hands of competition regulators.
In the next week or so the two airlines will discuss the regulators' decisions but the outcome will be to drop ideas of an alliance. Air New Zealand may not like it but without Qantas's support it will have no choice.
And the biggest pill Air New Zealand will need to swallow is that Qantas will stop being a compliant competitor in domestic New Zealand and the Tasman and Pacific routes and become a terrier of a competitor.
The fight has already started and we can only expect it to become more fierce. Virgin has yet to start a service but it's not far away and Emirates has its service over the Tasman.
It cannot be other than a blow to Virgin, which had entered into an agreement with Air New Zealand for terminal access and ground handling facilities.
It will also see fare competition increase - a move that will eat into the margins of all operators on this route.
There is no doubt that losing this deal will be a blow to Qantas.
It will now play down its importance because option one was to transact the alliance.
The truth undoubtedly lies somewhere between "the sky is falling" and a marginal impact. But Qantas has put little hope in the deal coming off and has already begun moving on.
In terms of available seat kilometres (the airline term for capacity) New Zealand represents only 10 per cent of Qantas's business but sensible pricing across this route can have a much bigger impact on profitability.
There will be more blood lost on the Tasman route but because the discounting is already in full swing it won't get much worse.
The real task for Qantas is to get its New Zealand domestic carrier, Jet Connect, into shape. To date it has not taken on Air New Zealand on its home turf but the New Zealand regulators' decision will herald the beginning of real competition in this domestic market.
Qantas can no longer afford to sit on its hands in that market, where it is making nothing like an acceptable return. As far as Air New Zealand is concerned, this will be a major problem.
It recently released a very good quarterly result but forecast the full year would be flat. It could be a negotiating position or a prediction based on an impending battle with Qantas.
The sharemarket is certainly of the view that the outlook for Air New Zealand is grim. It pushed its shares down 7.69 per cent yesterday, whereas Qantas fell just under 2 per cent - not far out of line with the general market.
For Qantas this was always a cheeky try-on - a free bet. But one that it could afford to lose. Dixon is ready to move on.
=========================================
Fri "The New Zealand Herald"
Jim Eagles: Now, let's get back down to Earth
24.10.2003
COMMENT
What else did anyone expect?
Of course an alliance between Air New Zealand and Qantas would be anti-competitive. It would control around 90 per cent of our domestic, transtasman, Pacific and North American aviation markets.
So the Commerce Commission, like Australia's Competition and Consumer Commission, had to turn it down.
It gets stroppy about mergers involving 40 per cent of a market, let alone 90 per cent.
The only surprise is that anyone ever believed there was the slightest chance of getting approval.
I've thought for some time that Air NZ knew there wasn't a hope, but went along with the farce to get more time to prepare for war.
On the other hand, I suspect Qantas is so used to bullying its Government into getting its own way that it genuinely expected to wangle an approval - and, if it were entirely up to the Australian authorities that might still have been the eventual outcome.
Anyway, now the inevitable has occurred, what happens next?
Hopefully the Government will recognise the folly of its stance that the only way to protect its foolish investment in the airline is to guarantee it monopoly profits.
Hopefully, too, Qantas and Air NZ will give up the whole crazy idea of a transtasman alliance and go back to competing.
That will be good news for air travellers, tourist operators and exporters.
But it need not be bad news for Air NZ.
It has wisely used the breathing space to come up with a smart new strategy, a leaner cost structure and lower fares, leaving it well-placed to compete against the bigger but flabbier Qantas in the short term.
The long term is impossible to predict in an industry as volatile as aviation, but ultimate survival may indeed require an alliance with another airline.
There's nothing wrong with that, as long as it isn't one which would create a near monopoly in our aviation market.
In the end, though, if Air NZ does not survive the shake-out in the aviation industry it is not the worst thing that could happen.
The Commerce Commission recognises, even if the Government does not, that a competitive aviation market offering the lowest possible air prices and the widest possible choice is far more important to our economy than the continued existence of Air NZ.
===========================================