Air chess: a game designed to baffle

By ROD ORAM

Between the lines

Qantas' desire for a stake in Air New Zealand raises so many issues for nine players involved, it makes three-dimensional chess look a doddle. Winners, losers and fishhooks abound. Here's the first cut at how they might shakeout if the long-odds deal went ahead.

1) Qantas: With a minority stake, Qantas would in effect control Air NZ. It would benefit greatly by cutting duplication and competition between them in the transtasman, Australian and trans-Pacific markets. The deal would scupper a powerful competing alliance which might form between Singapore Airlines, Air NZ, Ansett Australia and perhaps Virgin.

2) Air NZ: Under Qantas, Air NZ would lose its independence and its international identity. It is inconceivable Qantas would let it expand in the three key markets or to play an international role which detracted from Qantas as the Australasian flag carrier. Air NZ could be relegated to a domestic carrier feeding Qantas' international network.

3) Air NZ minority shareholders: It is hard to see any upside for them as their company stagnated. They would lose $A220 million a year of financial benefits identified from buying Ansett Australia. Qantas, happy with cheap control through a small stake, would be unlikely to buy them out.

4) Singapore Airlines: It could buy 100 per cent of Ansett Australia when Air NZ is forced to sell for competition reasons. This would give it an Australian base, probably in a profitable duopoly with Qantas. But it would lose New Zealand and international synergies from an Air NZ deal.

5) Ansett Australia: Whether owned by Air NZ or Singapore, it will be integrated into its new parent but likely retain its identity.

6) Ansett New Zealand: For competition reasons, Qantas would have to stop feeding passengers to and from Ansett NZ. However, Ansett Australia/Singapore could make a good substitute but the disruption would be unhelpful to Ansett NZ's new owners.

7) Virgin: Its Australian ambitions look less likely which ever way this works out. But it will still benefit internationally from being owned 49 per cent by Singapore.

8) Brierley Investments: Ideally, Qantas would relieve BIL of its 47 per cent Air NZ stake. If not, BIL could be left with a rump of diminishing value. Thus, there is a potential conflict of interest. What is best for BIL might not be for other Air NZ shareholders.

9) The New Zealand Government: On its decisions the deal will fly or crash. Lost competition across the Tasman and Pacific is the key issue. That could be reinvigorated by others, most likely Ansett Australia/Singapore. As the kiwi shareholder with veto powers the Government has to weigh up whether Qantas or Singapore offers Air NZ the best long-term future.

So if Qantas is a serious bidder, this could turn into a fight of epic proportions.