ANZ and QF Deal
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ANZ and QF Deal
Samuel quells Qantas hopes
By Steve Creedy
July 19, 2003
QANTAS said yesterday it was disappointed by comments from Australia's new competition tsar that his organisation was unlikely to approve the alliance with Air New Zealand.
New Australian Competition and Consumer Commission chairman Graeme Samuel said he did not want to pre-empt the final determination but he did not believe it would differ from a draft ruling issued under his predecessor, Allan Fels.
"As at the present time, on the information currently to hand, I don't think it would be any different from the draft determination that was provided by the commission under Allan's chairmanship," he said.
A Qantas spokesman said the airline found the comments disappointing but it would wait to see the final determination, expected in late September, before deciding on its next move. Draft decisions by the ACCC and the New Zealand Commerce Commission both rejected as anti-competitive the Qantas bid to buy 22.5 per cent of Air NZ and combine some operations.
Qantas has since said it is prepared to cap prices on some routes and ramp up concessions relating to capacity, facilities and services in an attempt to sway the decision.
Qantas chief executive Geoff Dixon has indicated the airline is likely to appeal if the decision goes against it.
Mr Samuel was less certain about the outcome of its investigation into AGL's proposed acquisition of Victoria's giant Loy Yang power station. "We are seeking more information from AGL and other parties in relation to that transaction," Mr Samuel said.
"But there is nothing to hand at this point in time that would change from the views of the commission in the week or so before I took office."
A consortium backed by AGL, Australia's biggest energy retailer, agreed to pay $3.5 billion for Loy Yang Power earlier this month.
The ACCC is opposed to the deal because it would allow a power retailer to become an owner of a power generator.
AGL and the Tokyo Electric Power Company will each emerge with 35 per cent of Loy Yang Power under the sale agreement, with the remainder to be owned by investors led by the Commonwealth Bank.
AGL has said it expects all regulatory issues about its joint purchase of Loy Yang to be resolved by the deal's September 2 financial close.
Meanwhile, Garuda Indonesia has reported it was filling more seats on flights to Bali.
The new head of the competition regulator, Graeme Samuel, indicated that he was unlikely to support the controversial $520 million alliance between Qantas and Air Zealand, dealing a blow to Qantas's hopes that he might give the deal a more sympathetic hearing than his predecessor.
Mr Samuel reportedly told a lunch in Melbourne that he did not think there would be any change in the Australian Competition and Consumer Commission's draft ruling in April that a proposed link between the airlines should be rejected.
His comments came as Treasurer Peter Costello confirmed Mr Samuel as chairman of the ACCC for a five-year term, after the South Australian Government earlier this week dropped its opposition.
A Qantas spokesman said that if Mr Samuel's comments were correct, they were disappointing. "The final decision seems to have been made pre-emptively," he said.
Under the proposal, Qantas would take a 22.5 per cent stake in Air NZ and the carriers would combine their trans-Tasman services, while also allowing other airlines to join the market. But both NZ and Australian competition regulators remain staunchly opposed.
Mr Samuel said: "As at the present time, on the information currently to hand, I don't think it would be any different from the draft determination that was provided by the commission under [former chairman Allan Fels'] chairmanship."
Analysts had estimated the Air NZ alliance would be worth another 50c to the Qantas share price. The airlines claimed the deal was likely to produce combined savings of around $NZ450 million in its third year. One observer suggested that it was unlikely that Mr Samuel, at least in his early days at the ACCC, would deviate greatly from the views of his predecessor.
It is expected the carriers will appeal any adverse decision when the ACCC and New Zealand's Commerce Commission make their final rulings later this year.
The financially weak Air NZ has consistently warned that it faces a bleak future on its own. Managing director Ralph Norris has previously said there was a "high probability" the airline would have to cease international services if the alliance was scuttled.
Analysts were wary that Qantas might become caught in a bloody price war with Air NZ, which in 2001 required a government bail-out after the collapse of its subsidiary, Ansett. "The problem with Air New Zealand is that it's a mangy dog that just won't die," said one analyst, who declined to be named.
Qantas shares have struggled amid renewed rumours that Singapore Airlines would enter the domestic market and amid greater competition on key international routes.
ABN Amro Asset Management's George Clapham said that although there were signs of a tourism recovery out of Asia and Qantas shares were at historically low levels, the carrier had a number of structural issues to confront. He was neutral on the stock's prospects.
On Friday, shares in Qantas eased 1c to $3.20 and Air NZ shares closed 1.5c higher at 45c.
By Steve Creedy
July 19, 2003
QANTAS said yesterday it was disappointed by comments from Australia's new competition tsar that his organisation was unlikely to approve the alliance with Air New Zealand.
New Australian Competition and Consumer Commission chairman Graeme Samuel said he did not want to pre-empt the final determination but he did not believe it would differ from a draft ruling issued under his predecessor, Allan Fels.
"As at the present time, on the information currently to hand, I don't think it would be any different from the draft determination that was provided by the commission under Allan's chairmanship," he said.
A Qantas spokesman said the airline found the comments disappointing but it would wait to see the final determination, expected in late September, before deciding on its next move. Draft decisions by the ACCC and the New Zealand Commerce Commission both rejected as anti-competitive the Qantas bid to buy 22.5 per cent of Air NZ and combine some operations.
Qantas has since said it is prepared to cap prices on some routes and ramp up concessions relating to capacity, facilities and services in an attempt to sway the decision.
Qantas chief executive Geoff Dixon has indicated the airline is likely to appeal if the decision goes against it.
Mr Samuel was less certain about the outcome of its investigation into AGL's proposed acquisition of Victoria's giant Loy Yang power station. "We are seeking more information from AGL and other parties in relation to that transaction," Mr Samuel said.
"But there is nothing to hand at this point in time that would change from the views of the commission in the week or so before I took office."
A consortium backed by AGL, Australia's biggest energy retailer, agreed to pay $3.5 billion for Loy Yang Power earlier this month.
The ACCC is opposed to the deal because it would allow a power retailer to become an owner of a power generator.
AGL and the Tokyo Electric Power Company will each emerge with 35 per cent of Loy Yang Power under the sale agreement, with the remainder to be owned by investors led by the Commonwealth Bank.
AGL has said it expects all regulatory issues about its joint purchase of Loy Yang to be resolved by the deal's September 2 financial close.
Meanwhile, Garuda Indonesia has reported it was filling more seats on flights to Bali.
The new head of the competition regulator, Graeme Samuel, indicated that he was unlikely to support the controversial $520 million alliance between Qantas and Air Zealand, dealing a blow to Qantas's hopes that he might give the deal a more sympathetic hearing than his predecessor.
Mr Samuel reportedly told a lunch in Melbourne that he did not think there would be any change in the Australian Competition and Consumer Commission's draft ruling in April that a proposed link between the airlines should be rejected.
His comments came as Treasurer Peter Costello confirmed Mr Samuel as chairman of the ACCC for a five-year term, after the South Australian Government earlier this week dropped its opposition.
A Qantas spokesman said that if Mr Samuel's comments were correct, they were disappointing. "The final decision seems to have been made pre-emptively," he said.
Under the proposal, Qantas would take a 22.5 per cent stake in Air NZ and the carriers would combine their trans-Tasman services, while also allowing other airlines to join the market. But both NZ and Australian competition regulators remain staunchly opposed.
Mr Samuel said: "As at the present time, on the information currently to hand, I don't think it would be any different from the draft determination that was provided by the commission under [former chairman Allan Fels'] chairmanship."
Analysts had estimated the Air NZ alliance would be worth another 50c to the Qantas share price. The airlines claimed the deal was likely to produce combined savings of around $NZ450 million in its third year. One observer suggested that it was unlikely that Mr Samuel, at least in his early days at the ACCC, would deviate greatly from the views of his predecessor.
It is expected the carriers will appeal any adverse decision when the ACCC and New Zealand's Commerce Commission make their final rulings later this year.
The financially weak Air NZ has consistently warned that it faces a bleak future on its own. Managing director Ralph Norris has previously said there was a "high probability" the airline would have to cease international services if the alliance was scuttled.
Analysts were wary that Qantas might become caught in a bloody price war with Air NZ, which in 2001 required a government bail-out after the collapse of its subsidiary, Ansett. "The problem with Air New Zealand is that it's a mangy dog that just won't die," said one analyst, who declined to be named.
Qantas shares have struggled amid renewed rumours that Singapore Airlines would enter the domestic market and amid greater competition on key international routes.
ABN Amro Asset Management's George Clapham said that although there were signs of a tourism recovery out of Asia and Qantas shares were at historically low levels, the carrier had a number of structural issues to confront. He was neutral on the stock's prospects.
On Friday, shares in Qantas eased 1c to $3.20 and Air NZ shares closed 1.5c higher at 45c.
