View Full Version : Qantas awaits clearance on Air NZ equity deal (Geoff Thomas)

8th Oct 2002, 19:24
Wed "Melbourne Age" 9/10/02

Qantas awaits clearance on Air NZ equity deal
October 09 2002
By Geoffrey Thomas

Qantas and Air New Zealand are on the verge of forming an equity partnership, with the deal expected to be announced at the New Zealand airline's annual meeting on October 29.

Both airlines remained tight-lipped on progress yesterday, but airline sources in Auckland confirmed they had held discussions with competition regulators in Australia and New Zealand on the procedures to be followed once the deal was approved at board level.

The Qantas board meets in Perth next Wednesday with the annual meeting the next day, but no details of the New Zealand deal are expected to be announced.

Analysts in Melbourne, Auckland, Hong Kong and New York said they expected the equity deal to be agreed later this month with Qantas taking a 20-25 per cent stake in Air NZ with the issue of new shares.

Qantas would receive two seats on the board, and Air NZ's chairman, John Palmer, would be offered a seat at Qantas.

Both airlines are said to have agreed a broad framework for an agreement and only decisions relating to concerns of competition regulators are to be agreed.

Competition regulators' concerns focus on the possible elimination of competition in the New Zealand domestic market and on trans-Tasman services.

Analysts pointed out these concerns could be allayed if Virgin Blue were to enter both markets, which is its stated intention.

Observers suggest that the result of negotiations with regulators may be Qantas and Air NZ giving up some key airport landing slots at Sydney and Auckland to facilitate Virgin Blue flying the Tasman.

The NZ Government controls Air NZ through its 82 per cent stake so it has told the airline's board to do all the negotiations with the government competition regulator, the New Zealand Commerce Commission. Analysts had expected a proposal being agreed after the return of Helen Clark's government on July 27, but problems relating to competition regulators and what each airline is prepared to give up have taken longer then expected.

Since that date, Qantas shares have slumped from $4.85 to close yesterday at $3.40 while Air NZ's Australian-listed shares slumped from 58 cents to 42 cents on fears of a US strike against Iraq.

Analysts said that although Qantas would have two board seats it would have no management input in the NZ airline. Qantas had also made significant commitments to the deal relating to feeding tourist traffic into New Zealand from European markets, an area Air NZ does not serve directly.

Talks relating to route planning and integration of services and operating systems are essentially completed, say insiders, with cost savings to Qantas from the deal estimated to be as high as $150 million a year.

- West Australian

Going Boeing
9th Oct 2002, 11:16
The Qantas share price will rise sharply as soon as this deal is signed, and then IMHO SQ will have to start up a domestic operation in Aust to give Star Alliance a presence in the region.

9th Oct 2002, 11:23
I think ANZ are already in the Star Alliance but not sure how this would be affected by QF buying a lump of them.

Boeing Belly
9th Oct 2002, 12:13
I don't know why a quality airline like QF would want to takeover a lemon like AirNZ anyway. There is a safety cloud over their maintenance and most people in Australia hate them. QF would be better off waiting 6 months until AirNZ have drained the coffers of the NZ Treasuery, then they could have it all for nothing.

Buster Hyman
9th Oct 2002, 14:00
although Qantas would have two board seats it would have no management input in the NZ airline

ARE THEY INSANE???? :eek: :eek: :eek: :eek:

9th Oct 2002, 23:54
Could it be part of QF's back door entrance into Star Alliance:D .

Going Boeing
10th Oct 2002, 01:13
There has been a lot of speculation about the possibility of QF becoming a member of Star Alliance through SQ buying the BA parcel of QF shares. Although, this has some potential in the business sense the logistics of dis-entangling QF from its One World partners would be enormous. QF is operating from BA's Terminal 4 in LHR and is about to move into AA's terminal in LAX which has been extensively renovated. The JSA with BA has been in service for a number of years now so there are joint facilities such as Sales Offices, Terminal Lounges etc all around the world. Computer systems have also been developed jointly and thus are "entwined". To extract an airline from this situation would be very expensive (and commercially disadvantageous as it would take staff expertise away from the core tasks - as happened when TN was integrated into QF)

As Air NZ has been in Star Alliance for a shorter time than QF has been in One World (founding member), then I believe that Air NZ has not yet spent as much on joint facilities as QF has and is less "entwined". Therefore, I believe that BA will retain its shareholding in QF and, if QF does take a significant stake in Air NZ, then Air NZ will move to the One World alliance

10th Oct 2002, 03:14
Boeing Belly, you spelt "Treasury"incorrectly, no sheep jokes though - well done. Now, if you can just be a bit more open about your feelings and tell us what you really think about Air NZ.....don't be afraid, let it out.

Boeing Belly
10th Oct 2002, 03:24
Did you hear the one about the New Zealander and the sheep?........;)

10th Oct 2002, 14:06
Ummm...... how would SQ pay for 25% of QF? They don't have that sort of cash lying around. "%5 of Qf would be about A$1.5bn; as of March this year, SQ had about Sing$560mn in cash on their balance sheet. So they'd need to stump up for a big capital raising which in the current environment, might be tough and having gone to market to raise cash once to buy a bit of QF, they would have a hard time going back again to raise more cash for any sort of capital expenditure.

10th Oct 2002, 23:25
Taildragger - I think you will find that the SQ balance sheet is a contrived document designed to keep the shareholders happy!

As SQ has no debt raising money would not be a problem for them. Last I read they had about S$3bn in 'reserves'.