Air merger expected to bring soaring profits

Air New Zealand's merger with Ansett Australia and Qantas' new franchise operation in the New Zealand domestic market promise substantial benefits for the airlines, airports and air travellers, says the Centre for Asia Pacific Aviation.

In its publication Aviation Analyst-Asia Pacific, the centre says that Air New Zealand in particular has the chance to secure even greater financial gains from the establishment of an integrated, cross-border operation than the $332 million lift estimated in annual profits management.

Through the Ansett merger, the group can create a seamless Australasian network, significantly improve yield and further rationalise costs.

"The Air NZ group is set for a radical restructure that will substantially accelerate earnings growth and strengthen regional market share by 2003," the report says.

"Played properly, the merger of the two international-domestic businesses could become a model for future cross-border airline partnerships."

Qantas also stands to reap significant benefits, once existing restrictions are lifted. The two new start-up Australian carriers, Impulse Airlines and Virgin Blue, could also benefit from a single aviation market agreement by introducing services across the Tasman to complement their east coast operations.

A single aviation market offers a combined market of 35 million passengers annually.

The advantages include innovative route structures and higher aircraft utilisation.

However, the centre says that for the full advantages to be realised, the New Zealand and Australian Governments must harmonise aircraft certification, agree on the use of domestic terminals for transtasman operation and resolve customs, aviation safety, immigration and quarantine issues.

In a report in the same publication on the potential for regional tourism, the centre says airlines and tourism authorities have overlooked significant opportunities offered under the Australia-New Zealand single aviation market for the development of regional services.

It cites the short-lived Kiwi International as an example of how aggressive pricing and use of secondary airports can build the market. The Hamilton-based airline's entry in 1996 sparked strong traffic increases, particularly on the Sydney route, which grew by 8.3 per cent that year.

In Australia, where the vast majority of passenger traffic still passes through the three ports of Sydney, Melbourne and Brisbane, regional potential was not being exploited, in contrast to high take-up rates in New Zealand.