Airlines oppose Oz tax proposal

By DANIEL RIORDAN aviation writer

Air New Zealand says proposed changes to Australian tax rules would have a major impact on its already troubled subsidiary Ansett.

The Australian Tax Office (ATO) is looking at slashing depreciation rates on new aircraft, extending the life of new commercial passenger jets for depreciation purposes from eight to 20 years.

The change would increase the effective cost of airlines' fleets and affect companies' profit and loss accounts. The shorter the period of depreciation, the greater the effective tax break for the purchase of new aircraft and the bigger the tax refunds on airline cashflows in the aircraft's early years.

Arch-rival Qantas could lose $1.8 billion over the next decade.

Ansett spokesman Geoff Lynch said the size of the impact would depend on what fleet upgrade programme his airline adopted - something that is on hold pending funding decisions involving Singapore Airlines.

The changes would not affect depreciation rates on aircraft already owned but could influence what mix of ownership and leases the airline chose.

"It would certainly diminish the benefits of owning assets in Australia," said Mr Lynch.

"So for that reason we are going back to the Tax Office with our views on the proposal."

Mr Lynch said it was premature to discuss the possibility of owning assets overseas.

"We have to make decisions that are commercially sound. Ideally, though, we would prefer not to operate in an environment where there is that disincentive to own assets in Australia."

Qantas has told Australian Treasurer Peter Costello that the changes would put the airline at a competitive disadvantage and hurt the national interest. Air NZ/Ansett has also made its feelings known.

Analysts said the changes could cost Qantas $A1.4 billion ($1.8 billion) over the next decade, based on the airline's planned $A10 billion, 31-aircraft fleet upgrade.

Local analysts said it was too early to measure the potential impact on Air NZ/Ansett, because the company was still deciding on its fleet renewal plans.

"But it's yet another chip in its mountain of troubles," said one.

The ATO says consultation will continue for several months.

Meanwhile, the Air NZ/Ansett group hopes to release its monthly operating statistics for April and May this week. Qantas released its May data several weeks ago.

Air NZ spokeswoman Rosie Flay said the delay was an internal hiccup relating to problems with a new revenue accounting system.

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