Future 'mega-carriers' could hurt Air NZ

The possibility of Qantas merging with another major airline in the next few years could leave Air New Zealand in a vulnerable position - too small to compete against a regional "mega-carrier".

The Australian airline's merger was raised by its chief, Geoff Dixon, who said at the weekend that despite the possibility it might occur in the next five to 10 years he did not think Australia would allow Qantas to disappear as a brand.

Air New Zealand, whose own alliance with Qantas was knocked back by competition regulators, is still trying to stitch up a deal with the Australian airline - albeit one that will not attract the ire of the Commerce Commission.

The airline did not want to comment yesterday on Dixon's remarks but outgoing chief executive Ralph Norris has often spoken of the world's airlines combining into a small number of "mega-carriers" - flying big aircraft between main hub cities such as Los Angeles, London, Singapore and Hong Kong.

Air New Zealand would be one of the smaller, feeder airlines operating below these big carriers, based primarily around servicing the New Zealand tourism market.

Asked if Singapore Airlines was a natural partner, Dixon said he did not think there was such a thing.

"I mean you need fits in many particular ways. I think I've always said I believe Singapore Airlines are a wonderful carrier, have a tremendous brand, tremendous track record, yes they would be a lovely partner, but so would British Airways, so would Cathay Pacific, so would a lot of carriers out there, so would Air New Zealand, which was literally taken away from us."

That comment refers to the commission's refusal in 2003 to allow Qantas to buy a 22.5 per cent stake in Air New Zealand and to set up a price- and schedule-fixing deal between the two airlines.

Dixon has often complained about the unfairness of competing with Government-backed airlines that do not have the same competitive pressures as Qantas faces.

The airline has enjoyed the support and protection of the Australian Government, which refuses to allow rivals - particularly Singapore Airlines - to fly routes precious to Qantas, such as the Pacific route to the United States.

Dixon said the Air New Zealand case showed how hard it was for airlines to "exit the industry".

"Air New Zealand is a wonderful carrier but, in a normal market situation, it would have been out of business two-and-a-half years ago," he said.

That was when the Ansett debacle almost grounded the New Zealand carrier permanently.

It survived only because of a $1 billion lifeline from the Government.

Aviation future

* "Mega-carriers" would fly big aircraft between major world hub cities.
* Air New Zealand would be one of the smaller, feeder airlines operating below the big carriers.