View Full Version : Air NZ pleads for alliance

22nd Mar 2003, 11:35
Sat "Herald Sun"

Air NZ pleads for alliance

A GLOOMY account of Air New Zealand's operations, describing the carrier as inferior and at risk financially, has been handed to the New Zealand Government.

The NZ Treasury report says the Kiwi carrier admitted that its international flights were "relatively inferior to that of major competitors".
The report also points out that the airline's gearing position could deteriorate quickly if adverse drivers, such as higher fuel prices, eventuated.

The 103-page study was prepared for the NZ Government by economic analysts, First NZ Capital.

The document was among a large parcel of papers the NZ Government released yesterday involving the proposed alliance between Air NZ and Qantas.

Among the released papers were the detailed submissions both airlines presented to the Australian Competition and Consumer Commission and to NZ's Commerce Commission seeking approval for Qantas to take a 22.5 per cent stake in its troubled rival from across the Tasman.

Qantas, itself, acknowledges in its ACCC application that Air NZ will suffer serious consequences if the proposed alliance does not go ahead.

The Australian airline told the ACCC that without the merger Air NZ would terminate unprofitable services, release aircraft from its fleet, and retrench to core domestic and international services.

"The commercial reality is that if Air NZ reduced capacity on these sectors, competitors would replace the capacity," Qantas says.

"Air NZ would be caught in a vicious cycle where the remaining profitable sectors would be weakened: a death spiral," says Qantas.

Air NZ chairman John Palmer separately told the NZ Government that his board "unanimously concluded" that an alliance with Qantas "was the only sustainable opportunity available to Air NZ".

Mr Palmer said the alliance was the only way for the airline to avoid the debilitating and inefficient costs of a battle (with Qantas) which Air NZ had little chance of winning without substantial financial support from shareholders.

"If approved, the alliance offers the opportunity to improve the long-term certainty of a committed NZ-based, international airline serving the air transport and related tourism requirements of NZ."

The First NZ Capital report to the NZ Treasury argues that Singapore Airlines, United Airlines and Qantas offer better products to travellers.

"Major differentiating factors include Air NZ's lack of sleeper beds in first class and business class and the absence of in-flight entertainment systems in economy class.

"The uncompetitive offering restricts Air NZ's ability to charge premium yields," the First NZ Capital report says, adding that most of the carrier's wide-bodied, long-haul aircraft employ 1980s technology.

The report adds that the carrier's ability to fund debt and acquire new aircraft would be constrained under the existing stand alone scenario.

By standing alone, the carrier would also remain exposed to "exogenous" variables which would further weaken its financial position.

Qantas shares rose 10 cents yesterday to $3.45 while Air New Zealand was up 2 cents to 48.5 cents.

22nd Mar 2003, 23:17
A few years ago Air New Zealand blocked a sale of Ansett and exercised its pre-emptive rights. They paid an additional 80M for this. Also subsequently admitted that they did not do a due diligence check.

We know what has subsequently happened. They cut the Australian operation lose owing Australians mny millions of dollars. They have thumbed their noses at the Australians and now want the Australians to save their airline.

If they pay ALL there debts here in Australia and not hide behind the companies act, I would feel far more sympathetic.

Air New Zealand made a decision well before the demise of Ansett to cut it off.

Am I still angry with Air New Zealand YES

23rd Mar 2003, 03:34
Pontous, would you please stop calling the actions of one man, Selwyn Cushing, the actions of an entire airline. So you want money do you, well sorry, but if it hasn't turned up now it's never going to.
Me, I would like to see all my mates who were working for the Qantas NZ feeder get flying jobs again. They had no say in what union action NZ ALPA and the mainline Qantas pilots did and for many when it folded ended up back in GA or doing crap short term contracts elsewhere.
Qantas could have easily stepped in for little capital outlay but elected to sh*t on a lot of people instead.
Air NZ ain't much but Qantas doesn't appear much better.

23rd Mar 2003, 06:00
Isn't it ironic how QF will end up being the saviour of ANZ.
Some might say it was a carefully orchestrated strategy.

It all started with the bad press about safety at AN. That was the beginning of the end. Who put out the info just before Easter, the best time of the year for airlines?. Who has benefitted the most from what has happened?. Who will be laughing with the alliance? Who helped stop the resurrection of AN by pinching the Chief Pilot, or was this all incredible luck or good business tactics.

Think about it. As for ANZ, if you don't like them because of what happened in the past don't fly them. Maybe the list should include another airline. :confused:

23rd Mar 2003, 12:22
I know it doesn't add anything, but when is curtain up on the fat lady? Song must be getting a bit familiar by now though haw haw haw http://www.stopstart.freeserve.co.uk/smilie/lolup.gif

What sort of deal do you think it could be? hehehe http://www.stopstart.freeserve.co.uk/smilie/deal.gif


31st Mar 2003, 17:12
Cut em lose & see what happens.

Not that I would relish the opportunity to sit on the sideline and pretend to be objective whilst throwing provocative insensitivities.

Maybe we could even get the PM to call it (ANZ) a lemon.....

1st Apr 2003, 09:15
What's happened to Cushing? Loaded to the hilt no doubt whilst ex AN staff still suffer.

4th Apr 2003, 15:36
Anyone who has ever been a member of the U.A.P.C. (Unemployed Airline Pilots Club),unfortunately a club with an expanding membership ,would not want to wish it on anyone. If QF are allowed to buy into AirNZ and save the jobs for a lot of people that would be a good outcome. What it does highlight though is that the management of AirNZ are incompetent and that the NZ governments assertion that Ansett was a "limon" makes them look a bit foolish. Ansett needed a good management team and a large injection of money neither of which Air NZ was capable of providing.

5th Apr 2003, 17:34
no doubt , without Q.F Air N.Z are well and truly rooooooted!

Even as an ex ansett staff member , I can say that this would be a sad thing for the WORKERS involved. I would not wish what I have been through ( and am still going through ) on anyone.

The trouble is that , as my Kiwi mates in Aus tell me , the land of the long white cloud is about 25 years behind the rest of the world in it's way of thinking.

They have to realise that if they don't allow a merger with Q.F , they have no chance of competing in a market that is weak as p--s and getting worse. Their Government cant keep pouring millions of dollars into it without bankrupting the country.

They don't deserve to survive , but q.f is their only hope.

Sly'n Smiley
6th Apr 2003, 07:47
Yeah, bring on the merger. But put Air NZ pilots at the bottom of a seniority list; that's what they wanted to do at Ansett. It is inevitable that the sell of of Air NZ was going to happen anyway, it's been on the cards for years. The thing is, Air NZ should have been sold to SQ 18 months ago AND 16,000 OZ JOBS SAVED. Now PM Clark (Ha, PM , get it??) must now do what was obvious to all in Sept. 2001 and sell. It is my hope that the electoral backlash will consume her and cost her her job( actually, I'd rather see her slip into a pool filled with pirahna), but I'm not holding my breath that these disgusting pollies will ever have one iota of regret for the damage that they doand have done.

6th Apr 2003, 14:05

Seems to me that ANZ is doing OK with their new low cost structure and new management and have returned the airline to an operational profit. Want to re-think about them being incompetent.

After getting dicked by The Lizard and Brereton, Air New Zealand owes you nothing. If ANZ was such a p-ss poor airline, why didn't they allow them to compete in OZ and honour the agreement that allowed Ansett to fly in NZ.

Ansett was a sc-b ridden airline full of pilots on bloated salaries who unashamedly stabbed their colleagues in "89 and now wanted some mug outfit to come along with bags of cash and keep them in the manner to which they had becomed accustomed.

Ansett was time expired and Quantarse is heading that way. It will be run over by Virgin and one other and end up being a millstone around ANZ's neck.

8th Apr 2003, 20:23
Mr 'Roota-I thought about it for a nano second and I still consider AirNZ management to be incompetent. By their own admission they spent $600 million buying a company where they didn't even check the books! Then they left the whole shebang rudderless without a CEO during a time of intense competition and rising fuel prices. Their recent profit comes on the back of an $850 million bailout by the NZ government. A recent report to the NZ government stated that AirNZ has the worst inflight service of any airline flying in the Pacific area. Don't hold your breath waiting for AirNZ and Virgin to grind Qantas into the ground - it's just not going to happen.

On Track
9th Apr 2003, 11:46
Not really on the topic, but with respect to the last post...

I have flown with NZ a bit recently (internationally) and have found the service to be consistently good.

As a QF passenger over the years I have found the service varies considerably - some cabin crews very good and others couldn't give a toss.

9th Apr 2003, 12:57
A recent report to the NZ government stated that AirNZ has the worst inflight service of any airline flying in the Pacific area
Could you point me in the direction of this report you mention? As neither I nor anyone I have asked have heard of it. Im not saying it dosnt exist, but if your making a statement like that, you should quote where its from.

9th Apr 2003, 15:32
permFO and other Ansett whingers

Just answer this simple question for me.

If ANZ were/are so incompetent, why did The Lizard not allow them to go head to head with Ansett and Qantas as per the " Agreement" (or so we naively thought).

Pole Vaulter
9th Apr 2003, 16:13

If you read the first post in this thread it will answer your questions.
It says it was a 103 page report to the NZ Treasurey by economic analyst "First NZ Capital" As you can see it was not a figment of someones imagination and it was not an Australian assessment.
The actual comment was "relative inferior to that of major competitors" By saying that he may be referring to the fact that the inflight entertainment on the A/C came from a previous century and not be having a go at the staff or quality of the meals. All competitors have seat back entertainment for instance. Even the airline that ANZ management destroyed had seat back entertainment units on the B747's

10th Apr 2003, 12:35
Mr 'Roota- Back in those days everyone thought that NZ was an economic powerhouse and how wrong were we about that! Besides everyone in Oz knew you couldn't trust Keating and Bereton to keep their word in just the same way you can't expect to come off a winner in a deal with Murdoch, but apparantly AirNZ management thought they could. Which comes back to my original assertion that the management of AirNZ(not the staff) were, is and always will be incompetent. As for being an "Ansett whinger" well its probably something we learnt from AirNZ!

10th Apr 2003, 12:53
Mr Roota, Do not hold your breath waiting for ANZ/QF to run over QF. It will be ironic that ANZ will be dependant on QF for mere survival. I can understand so many of the ex AN folk hoping the whole thing goes down taking Helen with it. Your generalisation of AN pilots was very shallow, maybe in time some of the ANZ staff will understand the bitterness towards ANZ management if faced with the same fate.

12th Apr 2003, 10:08
OK guys, another question.

If Qantas is such a well managed powerhouse of an airline, what the hell does it want 25% of Air New Zealand for?

Qantas has a dominant position in Australia domestic, is the premier international airline in Australia and has an unencumbered domestic operation in New Zealand. By unencumbered I mean that it wasn't rorted by the New Zealand government before it was allowed to start operations domestically.

So it couldn't be sitting prettier could it? The only opposition it has in NZ at present is the national carrier which is "incompetent", "badly managed", "has worst inflight service.....", "have no chance of competing..." etc etc.

Why not just keep on operating in their present exemplary manner and slowly roll ANZ into the ground?

13th Apr 2003, 11:23

Alliance or bust says Air NZ boss
13 April 2003

Air New Zealand will pursue an alliance with Qantas or it will not survive the "new order of aviation", Air New Zealand managing director, Ralph Norris, said yesterday.

Norris made a blunt statement after a scathing initial response from the Commerce Commission over the airlines' plans to form an alliance.

Norris dismissed the commission's optimism about Air New Zealand's financial position as "aggressively over confident".

"To infer that there may be other alliance partners waiting in the wings or that the government or other benefactors will put additional capital into Air New Zealand on request is unrealistic," he said.

"Regrettably, fairy godmothers do not exist in business. There are, however, many predators who would like to control Air New Zealand, or see it weakened."

Norris said traditional airlines were suffering as budget providers offered cheap deals on popular routes.

"The expectations of passengers have changed and budget airlines are providing point to point travel on cherry picked routes and in doing so undermine traditional airlines which provide comprehensive, geographical networks."

He attacked Virgin Blue's insistence that Air New Zealand sell its budget arm Freedom Air before an alliance was approved.

Norris said Virgin Blue was "cynically posturing" and "demanding competition watchdogs give it a free monopoly on the budget airline business across the Tasman and domestically in New Zealand".

He said without the alliance, Qantas would "move aggressively to protect its position" in New Zealand and in trans-Tasman markets.

"Without the alliance, Qantas simply cannot afford to live in its status quo position in local markets and Air New Zealand cannot afford to respond. The "war of attrition" is not an economic theory - it is commercial reality."

13th Apr 2003, 15:50
April 13, 2003

AIR New Zealand is going back to the drawing board after its planned alliance with Australia's Qantas Airways Ltd was rejected by the competition watchdogs of the two countries.

Air NZ chief executive Ralph Norris said the airline is not prepared to give up after analysing the draft determinations of the Australian Competition and Consumer Commission and New Zealand's Commerce Commission.

"There are a number of misunderstandings or clarifications that need to be made because certainly the assumptions that we have used have been pretty much dismissed and I think the validity of the arguments have not been well understood," he said.

ACCC chairman Professor Allan Fels said last week the effect of the $500 million alliance would be to remove competition on the trans-Tasman route and be likely to raise prices and reduce service.

Mr Norris told Channel Nine's Business Sunday that he will up the ante to make sure that the benefits flowing from Qantas taking a 22.5 per cent stake in the New Zealand airline is fully understood.

He said Air NZ looked at a number of options about its future and the alliance with Qantas was head and shoulders above the others.

Mr Norris conceded that Air NZ could pull out of international travel if the Qantas alliance continues to be barred.

"We will review our position once we obviously have finality as to whether or not this alliance is going to be approved or not," he said.

He said while there is a further $150 million on the table from the NZ government, the airline could return to shareholders for more capital.

"That will have to be based on a realistic business plan and a view that the company is capable of giving a reasonable return to its investors on that capital," he said.

He also ruled out turning to Air NZ stakeholder Singapore Airlines for capital.

"Singapore has its own issues and own interests and I would be very surprised if Singapore was a source of capital for the airline," Mr Norris said.

On the same program Prof Fels said if Air NZ and Qantas appealed it was the duty of the regulator to look at the arguments carefully.

But he said the harm an alliance would do to competition on the trans Tasman route is very substantial with not much benefit.

"We can see right through what Qantas and Air New Zealand are trying to do," he said.

"It is to reduce competition on the Australia-New Zealand route which will put up prices, which will make it a one airline route, not a two airline route."

And he said he would want to hear all the facts surrounding and threat by Air NZ to withdraw from internal flights.

"You can't just go on a TV program and say well, maybe we'll run that arguments and see what happens," he said.

"It does sound a pretty interesting proposition from an airline with a major share of the market to say they'll withdraw because they fear some competition."


Pole Vaulter
13th Apr 2003, 18:40
Dear Mr Roota,
Seems you should read the comments made by the chief of ANZ re the chances of its survival without QF. Seems Kiwi pride alone will not be enough for its survival as we all really know but some are not willing to accept. Sadly it is reaching the stage where Australia and NZ are simply not a big enough market to keep 2 high cost airlines operating. If it does not happen soon we will still most likely end up with only 1 airline anyhow and you can bet your last kiwi dollar it will not be ANZ.

13th Apr 2003, 19:32

Looking at the equation from a QF side.

Without a merger/alliance, QF face a war of attrition against what is really a state owned airline with the state being socialist in nature.

They have already shown a willingness to throw NZ taxpayers money into the bottomless pit that is the airline business.

A non-aligned Air NZ will not be allowed to wither and die.

It will continue to be proped up by the NZ government at the expense of the NZ taxpayer.

Sure, Air NZ is showing some signs of life. But the patient is not yet out of intensive care. New Equipment has to be paid for some how.

An aligned Air NZ is the better option for QF & for the NZ government. Quite possibly, the pollies in 'Helensgrad' have secretly sweetened the deal as well.

The Pacific airline passener will be the big loser.

Even if Freedom Air becomes the sacrificial lamb (after all - who would buy it??) and DJ plies the Tasman with a discount service. I can see ticket prices to the USA skyrocketing (remember, no more United to NZ).

Ralph the Bong
13th Apr 2003, 20:33
Really, given that a AN/NZ/SQ vs. QF would have given both the Oz and NZ public a reasonable and sustainable level of competition, the current situation is a joke. Helen must be able to see quite plainly that AirNZ must get foreign capital. By refusing SQ investment in AirNZ/Ansett 15 months ago she only postponed the inevitable. So as not to be seen to be selling off NZ national assets, she sunk 16,000 Oz jobs including mine. The Oz govt. must also wear its share of blame as our govt. hoped that the death of AN would lead to downward pressure on airline wages and conditions. Not to mention the lobbying that went on to make sure that ANs demise would give more bonuses to QF managers. So now where are we? Helen is once again stuck with a airline in need of money, QF and AirNZ managers bleating for a solution that gives them more bonuses and the traveling public once again worse off. In short, airline policy in both Oz and NZ is a failure.