Air NZ tries new Qantas spin

By CHRIS DANIELS aviation writer

A strong whiff of anti-Qantas attitude was already in the air when Air New Zealand told shareholders yesterday that it was "rigorously exploring other alternatives" to the Australian carrier as a minority shareholder.

The 400 or so shareholders at the airline's annual meeting at Ellerslie appeared to be united in their opposition to any Qantas deal.

There was no actual mention of the underarm bowling incident, but not a single shareholder stood to support the idea of Qantas buying into New Zealand's national carrier, which is 82 per cent Crown-owned.

Many of the questions put to directors queried the wisdom of accepting the Australian airline as a major shareholder since its true agenda would always be Australia first, with New Zealand's national interests a long way behind.

Predictions of an imminent Qantas-Air New Zealand deal announcement have swept through the business and financial community every few weeks for six months.

Details of the deal, while not being confirmed by either party, remain consistent - Qantas will take up to a 25 per cent stake in Air New Zealand, accompanied by two seats on its board of directors.

Air New Zealand will, in turn, earn a seat on the Qantas board.

Yesterday's meeting was notable for the directors' attempt to put a different spin on the deal - often portrayed as driven by an urgent Air New Zealand need to raise money.

"At the outset, I must say these discussions are not driven by the desire to raise additional equity," said acting chairman Roger France, who read a speech on behalf of chairman John Palmer, who was at a funeral.

"Air New Zealand is involved because of the much broader strategic imperative to improve our competitive positioning in the international airline market."

A lack of any sense of desperation in the directors' language about the Qantas talks could be explained by the increasingly healthy position Air New Zealand finds itself in.

Unaudited results for the first quarter show a $30.4 million profit before unusuals and tax, compared with a $51.8 million loss for the same period the year before.

France said the airline was on track to achieving an end-of-year result "significantly higher" than its forecast $100 million.

It is also expecting a $200 million profit before unusuals and tax for the next financial year.

And, it appears, there is a Plan B. Or C.

France and managing director Ralph Norris referred several times to "other options" being pursued by Air New Zealand.

Asked if these "other options" were capital-raising discussions or talks with other airlines, Norris said only that Air New Zealand was "looking at other strategies".

He did say, however, that Air NZ was not waiting for the Qantas talks to finish and was talking to other parties in a parallel process.

Shareholders Association chairman Bruce Sheppard asked director Sir Ron Carter, who was standing for re-election, whether he favoured an alliance with Qantas.

Sir Ron did not answer because chairman France said no one should be asked that question until a deal was finalised and ready to be presented for a decision.

After the meeting, journalists asked Norris when a deal with Qantas could be completed.

"We'd like to see it by the end of this year, but there are a lot of complicated issues in this whole process and we have been evaluating other options, so we haven't come to the conclusion at this point as to which of these options is the one that we recommend, because we haven't finished the negotiations with Qantas.

"This deal has to ensure that Air New Zealand retains its autonomy, it is managed by its own management, it is controlled by its own board and it will be very much a minority position that Qantas has in this company."

Qantas' previous shareholding in Air New Zealand had been a hostile action that had not worked.

Asked if the lengthy negotiations signalled the deal was in trouble, Norris said he would "rather do the work upfront than have something that was not well thought out and well constructed".

France, asked whether Air New Zealand needed new capital, said: "I wasn't saying the capital is perfect. The point we were trying to make is that there have been some perceptions and misperceptions that the discussions with Qantas have been predicated by the need for equity, and the simple point I was trying to make was that is not the starting point for discussions at all."

It was the board's duty to bring the best business case to shareholders for their decision, he said.