Airlines' talks on link-up near end

By CATHY ARONSON and REUTERS

The long-drawn-out negotiations between Air New Zealand and Qantas are close to completion, chief executive Ralph Norris indicated yesterday.

Norris said the airlines were finalising the case to put forward to competition authorities in Australia and New Zealand.

The airline had been obliged to rigorously analyse all options but discussions with Qantas "make a lot of sense", he said.

"We are down to the nitty-gritty.

"We are at a stage where we have to resolve these issues in a relatively short time."

Competition peaked yesterday when Qantas matched the cheap deals of Air NZ's new one-class Express fares, which are between 20 and 60 per cent cheaper than previous fares.

Norris introduced the new service to customers on a full flight from Auckland yesterday morning. Chief operating officer Andrew Miller handed out lollies.

Air NZ this week forecast core earnings for the current June year at around $200 million, double earlier estimates, but Norris said that did not remove a necessary call on shareholders to pump in capital.

Estimates of a $200 million rights issue were still broadly correct, he said.

"Our retained earnings are going to be higher than anticipated so that's going to have a positive impact on our gearing," he said.

"Nevertheless we still will need to do a rights issue," he said, adding that cash was needed to upgrade the airline's long-haul aircraft.

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