Email artillery flies in anti-Qantas campaign

By RACHEL BODDY

Opposition is mounting in the financial community to the prospect of Australian carrier Qantas taking a cornerstone stake in Air New Zealand.

"Of all the privatisations that have taken place in the past 20 years, I can think of no other asset sale that would hand such unmitigated monopoly power to a foreign buyer," said Simon Botherway, head of fund manager Brook Asset Management, in an email to Wellington investment banker Lloyd Morrison.

"A deal of this nature is effectively securitising New Zealand consumers' future air-travel revenue and selling it off to a monopolist. This would have serious adverse implications for New Zealand's long-term competitiveness."

Morrison began campaigning against the deal this week, emailing about 300 sharebrokers and warning of the consequences of relinquishing control of Air New Zealand to its dominant transtasman rival.

He said Air New Zealand's desire to boost its profitability short-term by reducing competition would ultimately raise the cost of airline travel and hurt the country.

His company, Morrison & Co, manages utilities investor Infratil - 66 per cent owner of Wellington International Airport - and would stand to lose money if Air New Zealand and Qantas worked together.

National Party leader Bill English this week joined the cause, saying the deal would be a disaster for New Zealand consumers.

Botherway said proponents of the deal would probably argue that Australian discount carrier Virgin could cross the Tasman and break the monopoly of a merged Air New Zealand-Qantas.

That was unrealistic, he said.

"The combined might of Qantas/Air NZ will ensure that Virgin are only ever a bit-part player in the domestic New Zealand market and on the transtasman."

Botherway said the deal could shift some Qantas engineering operations to New Zealand, but that may have occurred anyway as Qantas had always "coveted" Air New Zealand's lower cost base.

"The [deal's] proponents will argue that the Government is not in a position to provide the capital that Air New Zealand requires to restructure its balance sheet. This could be an effective argument in coalition negotiations.

"However, the Government knew Air New Zealand's financial position at the time it acquired the stake and the requirements have, if anything, declined in the interim period," Botherway said.

Morrison has called on Air New Zealand to look to fellow Star Alliance partners United Airlines or Lufthansa as potential cornerstone shareholders.

The Government is distancing itself from any negotiations.

A spokesman for Finance Minister Michael Cullen said any offer to buy part of Air New Zealand must be made via the airline's board. The board had not yet made a formal offer to the Government.

- NZPA

nzherald.co.nz/aviation

nzherald.co.nz/travel