Air NZ-Ansett 'still too small'

By YOKE HAR LEE

Air New Zealand on its own does not have the capability to extract maximum value out of Ansett Australia when the two companies come under a single ownership, says an aviation expert.

"It is quite clear that together Air New Zealand and Ansett Australia do not have the critical mass, route capability nor capital to create the route synergies," said Peter Harbison, managing director of the Sydney-based Centre for Asia Pacific Aviation Studies.

He believed Singapore Airlines was the obvious fit and might eventually come to the table.

Air New Zealand chairman Sir Selwyn Cushing said on Tuesday that the imminent deal with Ansett Australia did not include SIA.

Mr Harbison told the Business Herald: "They [Air New Zealand-Ansett] on their own would still not be sufficiently competitive in the Australian market, given Qantas and BA together are a pretty heavy-duty competitor."

Qantas and BA had in the last two years been steadily increasingly their power in the market in relation to Ansett, he said.

"So obviously, there needs to be new capital infusion there, even with the synergies there ... There are already synergies in terms of cost reductions, in terms of cooperation between Ansett and Air New Zealand.

"But as a single airline, whatever it is that is going to be established, it falls short of the clout that Qantas has got."

Mr Harbison said that while Air New Zealand needed help to compete in Australia, it would need a lot more to compete globally.

"Air New Zealand has got good route network in the Pacific, fairly good routes in Asia, no presence whatsoever in the Kangaroo routes, and really needs a whole lot more bulk internationally to and from Australia."

It would also need more Australian domestic routes.

He said of a third-party involvement in the Air New Zealand-Ansett equation: "It is inevitable, although not necessarily straight away. That's just a step on the way to getting to the ultimate product."

On whether any party other than SIA would fit the match, Mr Harbison said: "There will be a number of airlines potentially interested but SIA, assuming it can get over the acrimony last year, does actually fit like a glove.

"That's not to say that the others don't fit very well. Everybody knows each other."

In a report just issued, the centre says: "The process of resolving the ownership issue will probably also provoke a change of ownership of Ansett New Zealand," giving Air New Zealand a new domestic competitor.