Air NZ says scope remains for trans-tasman alliance

There remains some scope for a trans-Tasman alliance despite the setbacks in the New Zealand courts and indications from Qantas that it has moved on, Air New Zealand's chief executive says.

Speaking on the sidelines of the Star Alliance chief executive's meeting in Bangkok, Ralph Norris told AAP that talks with Qantas remain "productive".

"There are other areas of cooperation outside the scope of the alliance - and we haven't seen the full determination from the ACT (Australian competition tribunal) - that don't impact upon competition," he said.

"We're in a situation where we want to see a black letter decision. We have some ideas but they're only formative at this stage."

Mr Norris said there was no pressure on Qantas to convert its holding of convertible notes stake in Air New Zealand into equity - the issuing of which is at the discretion of Air NZ - despite Singapore Airlines selling up its stake in the NZ carrier recently.

"The reason Singapore (Airlines) sold is that 6.0 per cent (stake) to them meant nothing and the relationships we have through the Alliance (supplanted) any glue we had with equity," he said.

"So they took the view it was non core and they should sell it down. From our perspective it has been helpful in that it has increased the liquidity of Air New Zealand shares."

Mr Norris said it was unlikely fuel surcharges would come down in the near future, despite oil prices dropping to their lowest levels in five months. He said airlines had to put in place hedges at higher prices and until the cost of jet fuel dropped below US$40 ($57) a barrel for a sustained period of several weeks then they would be reviewed.

"We're not in a position of taking surcharges off yet. If fuel prices stay below US$40 for jet fuel I think you'll start to see (surcharge reduction)," he said.

Air New Zealand last raised its fuel surcharge back in October with the cost now sitting at $10 for domestic flights, $15 for trans-Tasman flights and up to $40 for fares to London.

He said as Air New Zealand had improved its domestic operations and bottom line it was now time to improve its long-haul operations. This includes fleet and network expansions.

"We're making good returns on our domestic business. We've reduced our cost base by 20 per cent. At the moment the company is in pretty good shape and our balance sheet is the strongest in a decade," he said.

Mr Norris said Air NZ had no plans for expansion into Australia.

"We've looked at that opportunity and the fact of the matter is we don't think that three airlines works domestically in Australia," he said.

Star Alliance was established in 1997 as a global airline alliance and its members include Air Canada, Air New Zealand, ANA, Asiana Airlines, Austrian, BMI, LOT Polish Airlines, Lufthansa, Scandinavian Airlines, Singapore Airlines, Spanair, Thai Airways, United, US Airways and Varig Brazilian Airlines.

Star Alliance has 25.4 per cent of the revenue passenger kilometre - RPK - rate in 2003 which generated 28.4 per cent of its operating revenue in that year.

- AAP