Between the lines: Out of the garden and into a really tough dig

Here's the good news, Gary Toomey.

Things can't get much worse - but of course you knew that anyway.

Three months of gardening leave since resigning as Qantas finance head has given Air New Zealand's new chief executive plenty of time to ponder the challenges ahead.

He faces a share price that's fallen 40 per cent in 18 months, a credit rating that's slipped below investment grade, profit downgrades amid rising fuel prices and poor hedging policies, and concerns - particularly from the Australian investment community - that Air New Zealand lacks the management nous and capital to integrate its recent acquisition, Ansett Australia.

Although he's moved from Sydney to Auckland for the job, Mr Toomey will be spending a lot of time in Melbourne, headquarters of Ansett Australia, the enlarged airline group's problem child.

As much as Ansett polished its act pre-merger, the cracks continue to show.

The highly public grounding of six of its jets just before Christmas for missing routine maintenance checks was just one more black mark against an operation whose market share in Australia has fallen to a 30-year low of about 41 per cent.

Ansett's profit contribution to parent Air New Zealand was almost halved last year, and this year's returns aren't looking flash.

But short of poaching Qantas boss James Strong, Air New Zealand couldn't have picked a leader with better credentials.

Mr Toomey was a key figure in Qantas' successful cost-reduction drive over the past seven years and had a major influence on the airline's strategy.

He knows all about Ansett from his seven years at its arch-rival, and his five years before that at Australian Airlines, which Qantas bought.

He is also no stranger to Air New Zealand, having sat as an alternate on the board when Qantas had a shareholding. Local analysts and fund managers rate him highly.

None of that stops comparisons between Ansett and Qantas - comparisons that until recently were music to Mr Toomey's ears, but which take on a completely different meaning in 2001.

Qantas' fleet is one of the most modern in the world, but it is still embarking on a $5 billion upgrade.

Ansett would like to keep up, but is hamstrung by its parent's $4 billion debt burden.

Qantas' fleet is also more flexible, carries a higher percentage of higher-yielding business passengers, and beats Ansett comfortably on the load factors that determine flight profitability.

Labour productivity at Qantas is also higher. To achieve Qantas' level of labour productivity - expressed as revenue-per-employee - Air NZ/Ansett needs to increase revenue by $2 billion or lose 2000 employees.

Hence its decision last month to canvas its 23,000 employees asking if any might be interested in voluntary redundancy.

So good luck, Mr Toomey.

If it's a challenge you're looking for, you've found it.