View Full Version : Air NZ / Qantas Deal a done thing?

30th Oct 2002, 19:33
Deal with Qantas 'nutted out'
31 October 2002

Air New Zealand and Qantas are negotiating with competition watchdogs over a partnership deal, the fine details of which have been nutted out, according to a source close to the proposal.

But New Zealand Commerce Commission chairman John Belgrave said last night no proposition had been received. The commission had talked to Air New Zealand "a little while ago". If a proposal was received, it would be considered under the Commerce Act.

The Australian Competition and Consumer Commission said it had discussions on the partnership but would neither confirm nor deny last night that it was presently talking to the airlines.

Under the proposal, Qantas is expected to take a stake of up to 25 per cent in Air New Zealand, which is 82 per cent owned by the Government.

Air New Zealand would not discuss the topic at Tuesday's annual meeting.

"Negotiations" with the regulators could be expected to take the form of the airlines being asked to give undertakings such as not to increase fares, the source said.

Undertakings sometimes became obsolete when market conditions changed, and if Singapore Airlines moved into Australia's domestic market as was generally expected within 12 months, then undertaking parties could be expected to go back to regulators and suggest the rules no longer applied.

The benefits to both airlines of a partnership were substantial. Negotiations, which had been going on for more than six months, had reached the fine detail and the autonomy of Air New Zealand's management and board was assured. Qantas would "dominate" the partnership by its size, but would not control Air New Zealand.

Analysts believed Qantas could increase earnings by $120 million to $300 million a year. It did not have to spend time protecting itself against Air New Zealand, it could make savings rationalising trans-Tasman and international flight schedules (Qantas raised its profit by A$60 million a year through rationalising its European schedules in alliance with British Airways) and it was 40 per cent cheaper to service aircraft in New Zealand than Australia.

For Air New Zealand, the partnership would mean enhanced profits, cost savings and efficiencies and freeing up capacity for profitable routes.

While Air New Zealand said other options were being "rigorously" examined, one senior analyst believed its options were limited.

The only other possible partner, Singapore Airlines, "had clearly moved on, especially after the insults from the Government and Michael Cullen," last year.

Small shareholder and public opposition to Qantas getting a share of the national carrier could be overcome "depending on the way Air New Zealand sells it".

"Image-driven" Air New Zealand had clearly shifted its gameplan with its annual meeting statement that negotiations with Qantas had not been spurred by a need for capital.

Managing director Ralph Norris said in Australia six months ago that the national carrier was undercapitalised and was considering a $179 million rights issue.

Now it was saying the alliance was being sought to improve its strategic competitive position, the analyst said.

It needed more equity, but now it was back on track to profit, it could just as easily raise $200 million from issuing shares to the public. But it also urgently had to secure a place in a "super airline group" to survive.

The analyst said that within 10 years there would be only five airline groups in the world two in the United States, one in Asia, and two in Europe.

Boeing Belly
31st Oct 2002, 03:57
These AirNZ clowns are morons. Sell shares to the public at 31c.......yeh right. They're just crapping around like they always have, beating their chests, trying to look like they're calling the shots just to justify their own positions on the board. Qantas should just drop another half dozen 737s in the NZ domestic market and lower the fares for 6 months. That would give the Sheepboys knackers a squeeze and snap them out of their delusions of grandeur. Better still, put them totally out of business and have it all to themselves. Who needs the clowns!!

31st Oct 2002, 04:29
Did I read correctly that Qantas would " dominate the partnership by it's size but not control it " ?
My god , fancy buying 25% of that operation and letting that bunch of incompetent sheep shaggers lose with it.
Let's face it , without this Q.F deal Air N.Z's future would be bleak.

Can we believe what Air N.Z are saying or is this just another 'orchestrated litany of lies'

I agree with boeing belly go and bury this mob before they actually start to believe that they know how to run an airline.

31st Oct 2002, 07:06
Wed "New Zealand Herald"

Air NZ tries new Qantas spin
By CHRIS DANIELS aviation writer

A strong whiff of anti-Qantas attitude was already in the air when Air New Zealand told shareholders yesterday that it was "rigorously exploring other alternatives" to the Australian carrier as a minority shareholder.

The 400 or so shareholders at the airline's annual meeting at Ellerslie appeared to be united in their opposition to any Qantas deal.

There was no actual mention of the underarm bowling incident, but not a single shareholder stood to support the idea of Qantas buying into New Zealand's national carrier, which is 82 per cent Crown-owned.

Many of the questions put to directors queried the wisdom of accepting the Australian airline as a major shareholder since its true agenda would always be Australia first, with New Zealand's national interests a long way behind.

Predictions of an imminent Qantas-Air New Zealand deal announcement have swept through the business and financial community every few weeks for six months.

Details of the deal, while not being confirmed by either party, remain consistent - Qantas will take up to a 25 per cent stake in Air New Zealand, accompanied by two seats on its board of directors.

Air New Zealand will, in turn, earn a seat on the Qantas board.

Yesterday's meeting was notable for the directors' attempt to put a different spin on the deal - often portrayed as driven by an urgent Air New Zealand need to raise money.

"At the outset, I must say these discussions are not driven by the desire to raise additional equity," said acting chairman Roger France, who read a speech on behalf of chairman John Palmer, who was at a funeral.

"Air New Zealand is involved because of the much broader strategic imperative to improve our competitive positioning in the international airline market."

A lack of any sense of desperation in the directors' language about the Qantas talks could be explained by the increasingly healthy position Air New Zealand finds itself in.

Unaudited results for the first quarter show a $30.4 million profit before unusuals and tax, compared with a $51.8 million loss for the same period the year before.

France said the airline was on track to achieving an end-of-year result "significantly higher" than its forecast $100 million.

It is also expecting a $200 million profit before unusuals and tax for the next financial year.

And, it appears, there is a Plan B. Or C.

France and managing director Ralph Norris referred several times to "other options" being pursued by Air New Zealand.

Asked if these "other options" were capital-raising discussions or talks with other airlines, Norris said only that Air New Zealand was "looking at other strategies".

He did say, however, that Air NZ was not waiting for the Qantas talks to finish and was talking to other parties in a parallel process.

Shareholders Association chairman Bruce Sheppard asked director Sir Ron Carter, who was standing for re-election, whether he favoured an alliance with Qantas.

Sir Ron did not answer because chairman France said no one should be asked that question until a deal was finalised and ready to be presented for a decision.

After the meeting, journalists asked Norris when a deal with Qantas could be completed.

"We'd like to see it by the end of this year, but there are a lot of complicated issues in this whole process and we have been evaluating other options, so we haven't come to the conclusion at this point as to which of these options is the one that we recommend, because we haven't finished the negotiations with Qantas.

"This deal has to ensure that Air New Zealand retains its autonomy, it is managed by its own management, it is controlled by its own board and it will be very much a minority position that Qantas has in this company."

Qantas' previous shareholding in Air New Zealand had been a hostile action that had not worked.

Asked if the lengthy negotiations signalled the deal was in trouble, Norris said he would "rather do the work upfront than have something that was not well thought out and well constructed".

France, asked whether Air New Zealand needed new capital, said: "I wasn't saying the capital is perfect. The point we were trying to make is that there have been some perceptions and misperceptions that the discussions with Qantas have been predicated by the need for equity, and the simple point I was trying to make was that is not the starting point for discussions at all."

It was the board's duty to bring the best business case to shareholders for their decision, he said.

31st Oct 2002, 08:03
..... and this to add further speculation that something is really going on.
I would have thought that people would have learnt from the past, especially when it comes to the info that Qantas will get by being on the board of Air NZ.

Could it be that perhaps Air NZ likes getting it from behind???
- as that is all that will happen if they continue down this track.

Commission denies Air NZ-Qantas discussions
31 October 2002

The Commerce Commission denied today media reports that it had talked with any of the parties involved in the proposed Air New Zealand-Qantas partnership.

Papers on both sides of the Tasman said the airlines plus Australian discounter Virgin Blue had been in discussions with competition watchdogs but at least on this side of the Tasman, the commission is denying it.

The Australian Competition and Consumer Commission (ACCC) was not commenting one way or the other.

The Australian Financial Review reported today Virgin Blue had informally briefed competition regulators on both sides of the Tasman on a range of concerns it wants addressed if Qantas and Air New Zealand strike an equity partnership.

It said that preliminary discussions with the ACCC and Commerce Commission on the discount carrier's concerns had taken place.

However, the commission's takeovers manager Geoff Thorn told NZPA the commission had had no contact with Virgin for five months when the fledgling airline had aired some of its concerns.

AFR said Virgin wanted assurances competitors would have access to ground handling and other services at competitive rates and that adequate terminal facilities be available at Auckland Airport.

It has also raised the idea that Air New Zealand be forced to divest Freedom Air, its no-frills subsidiary, which Virgin would be interested in buying.

Air New Zealand has re-launched the low cost Freedom on leisure-based trans-Tasman routes, particularly to Queensland, in a move viewed as a pre-emptive strike against Virgin. It has withdrawn from the domestic market.

Air NZ deputy chairman Roger France said after the annual meeting on Tuesday that he did not wish to comment on the prospect of selling Freedom to Virgin.

"For us to be in anything other than to neither confirm nor deny on something as significant as that would not be good policy," he said, adding that Freedom was a significant business for Air New Zealand that was running very well.

AFR said Virgin was also likely to press for undertakings that would restrict Qantas and Air New Zealand's ability to add capacity and discount prices to eliminate rivals.

Meanwhile, The Dominion Post said Air New Zealand and Qantas were negotiating with competition watchdogs over their proposed partnership deal which Mr Thorn again denied.

The commission had only had talks about process and he was not expecting the commission to be approached on the substance of competition concerns until after a commercial deal had been publicly announced.

The Dominion Post said the Qantas-Air New Zealand deal had essentially been nutted out.

The ACCC said it had discussions on the partnership but would neither confirm nor deny last night that it was talking to the airlines.

The Dominion Post said negotiations, lasting over six months, had reached the fine detail and the autonomy of Air New Zealand's management and board was assured.

Qantas, expected to take a quarter stake, would dominate the partnership by its size, but would not control Air New Zealand, analysts said.

Air New Zealand's stronger profit outlook announced on Tuesday, with it now forecasting a raw profit of $200 million this year, had improved its negotiating position.

Mr France made it clear on Tuesday that Air New Zealand expects a seat on the Qantas board to "put some glue in the relationship" as part of the deal.

Analysts said Qantas would gain considerable savings by not having to protect itself from Air New Zealand and would achieve savings by servicing its aircraft and engines in New Zealand.

Air New Zealand shares were unchanged today at 53 cents.

1st Nov 2002, 01:04
Let's be blatantly honest people.

The only reason that Air NZ is even existing today is because the NZ govt re-nationalised it and has been footing the bill for the past 12 odd months.

The government doesnt want to keep doing so, the airline may be supposedly profitable (although I would say they may have learnt from the Ansett accountants or the kiwi that reackoned that Sir Selwyn Cushing actually did due diligence on AN!!).

They will be requiring a new capital injection which the NZ economy just cant afford, Singapore has had their fingers burnt in a major way and the yanks are in severe financial strife.
Forget the euros investing as they have no real need let alone desire.

I dare say that if a merger will boost the Air NZ flagging share price then all the chest beating and anti-aussie sentiment may evaporate and besides guys, its only a 20-25 % shareholding.
Isnt it?????

The alternative will be regretful to all Air NZ employees if it is left wallowing aimlessly and becomes an under-capitalised and marginalised regional operator.
The alternative is increased taxes which the Helen Clark govt will not tolerate.

I would say it just may be a done deal unless the true interested parties will show their cards and to date this just hasnt happened.

1st Nov 2002, 05:39
Qantas seeks closer Air NZ ties
November 01, 2002

QANTAS Airways chief executive Geoff Dixon renewed his call today for trans-Tasman consolidation.

Mr Dixon said an alliance with Air New Zealand would be partnership of equals, enabling both airlines to provide better service standards, better fares and a better customer proposition.

He said such an alliance would also provide a certain amount of sustainability into the future.

"The logic of further consolidation of the aviation industry in the current environment is compelling," Mr Dixon said.

Addressing the American Chamber of Commerce, Mr Dixon said both airlines would remain totally autonomous but would be able to provide a better level of service.

"It seems like a sensible thing but if people in their wisdom decide otherwise, Qantas will get on with its life," Mr Dixon said.

Mr Dixon criticised the Federal Government's stance barring any further sale of Qantas.

"I was very critical of the government in refusing to change the Qantas sale act to allow Qantas to be more than 50 per cent owned," Mr Dixon said.

"We just wanted to be able to access more cheaper capital markets of the world and get money at the same rate as Singapore Airlines, but the Government said no."

Mr Dixon said although Qantas would always remain principally an Australian airline, it was actively looking to secure its future and grow outside Australia.

"We cannot afford to simply sit in Australia and risk being picked off in an increasingly liberal regulatory regime, to become an irrelevant regional player," Mr Dixon said.

From NZ Herald Newspaper.

Are Air New Zealand's directors complete twits?

The jury is still out, but on a first count it looks as though it will be a hung jury, necessitating a retrial.

The company's annual meeting was dominated by discussion from the floor on the possibility of the board proposing to shareholders an involvement with Qantas, rumoured to be as much as a 25 per cent stake in Air NZ for Qantas and including an exchange of directors between the two companies.

It was unfortunate that the board could not announce one way or the other the outcome of these negotiations as the issue overshadowed the meeting and dimmed the positive news of a substantial profit turnaround delivered under the stewardship of Ralph Norris and a clearly competent board.

Along with many others, I presented the case for the proposition that doing a deal with Qantas on any terms was unacceptable or downright dumb. The key points were as follows:

* That less than one year ago when the airline was on its knees, the then acting chairman of the company blamed Qantas for Ansett's demise and the resulting consequences to Air New Zealand.

* At the time, the current CEO of Qantas was on record as saying that he would push Air New Zealand out of business, or words to that effect, and has been accused of predatory pricing by market commentators since.

* Qantas has previously been a shareholder of Air New Zealand and it is widely known that boardroom issues in Air New Zealand at the time provided Qantas with a competitive edge which it is rumoured to have exploited.

* Qantas and Air New Zealand dominate inbound traffic and the prospect of collusion between the two companies to increase prices can only be bad for New Zealand and our number two foreign exchange generator, the tourism industry.

The board on behalf of the company presented a limp case for the need for a strategic partner, but even the directors did not speak out in support of Qantas as that partner.

Yet negotiations are continuing.

At the conclusion of arguments, I asked those members present to stand if they thought that "the board were complete twits for continuing discussions with Qantas".

I was already standing so I had a clear view of the jury's verdict. About one-third of those present stood to give their verdict on the issue.

The acting chairman, Roger France, then commented that he was comforted by those who remained seated.

France and the board should not take the view that a majority of shareholders are therefore in favour of a deal with Qantas.

Several shareholders said to me after the meeting that they would have stood if the proposition had not included the words "complete" or "twits".

Therefore all that can be taken from the jury's verdict is that a third of shareholders present thought that the board were "complete twits" in the circumstances.

The final trial will occur when and if the directors present a proposition to shareholders involving Qantas.

At that time a verdict will be delivered by a majority of the jury, as a unanimous verdict is clearly not possible.

The Government will be the final determining jury member, and how that juror reconciles its conflicts of interest will be very telling on the role of government as a shareholder of listed companies.

What is very clear, however, is that there is a strong groundswell of public opposition to Qantas being given a significant stake in our national carrier, and it is important for an otherwise competent board to be aware of this in planning Air New Zealand's future.

1st Nov 2002, 08:20
Is there such a thing as lanolin poisoning?

These stupid Kiwi shareholders don't seem to reailse that without this deal Q.F will bury them!

They are about 10 years behind the facts regarding airline management in the modern era.

I hope they reject the Q.F offer so that there would be reasonable motivation for the big red rat to go and destroy them.

The N.Z govt. has propped them up for at least the last 12 months. They could not possibly stay profitable in their present form!

But then again , what do you expect from a country that voted Danny la Rue in for P.M ?

1st Nov 2002, 12:13
I dont think ANZ is being given enough credit in all this as we all know they have recently taken out the major domestic airline in Australia and although with significant damage to themselves they still survive to take on another major Australian airline.They have cleaned up AN and SQ and lets see what they can do to QF.Full marks so far I think.