Mischievous slant to Anzac spirit

By GILES PARKINSON

Sydney View


New Zealanders are entitled to know the name of the game being played by Qantas chief executive James Strong when he says the airline wants to buy Brierley's stake in Air New Zealand.

Could it be the historic attachment to the airline, which began when the Australian and New Zealand Governments shared ownership of Tasman Empire Airways Ltd (Teal) in the 1940s and continued when Qantas took a 19.9 per cent stake in Air New Zealand in 1989?

Could it be a genuine desire to forge a regional axis powerful enough to compete with the biggest airline groups in the world.?

Or is it simply mischief-making?

Mr Strong has spent much time trying to convince journalists of the merits of the deal, but from this side of the Tasman the move stinks of opportunism.

Qantas' biggest problems stem from two possibilities: the arrival of Virgin in its domestic market and a recapitalised Ansett eating away at its market share.

So what better way to confuse than to throw a possible investment by Qantas into the equation?

It is doubtful that Qantas, even if it won the agreement of BIL, could ever convince the Australian authorities or, more particularly, the Air NZ board of the merits of the deal.

But in doing this, Qantas is also making a point to its own Government, which it believes has undercut the airline by allowing Virgin and other foreign operators the opportunity to set up shop in its own market. If you want to give away the baby with the bath water, Mr Strong is arguing, then you should be prepared to let us form a regional axis to provide strength against foreign competition.

And, what's more, he is telling the NZ Government that Qantas would be a lot nicer to the Kiwis than the Singaporeans would. Good old Qantas. In 1989 it kept out the British, now it is prepared to dig in for its Anzac mates to keep out the Singaporeans.

It seems improbable that the Qantas proposition will go very far at all. But if it succeeds in throwing doubt over the plans of Virgin to establish its own domestic market and delays the re-equipping of Ansett, then it is possibly a worthwhile endeavour.

Qantas can only gain from confusion among its rivals. The strategy is neat, if not particularly constructive. And it will give time for Mr Strong to get used to the idea that he will have a new de facto boss, with Rod Eddington, a bitter rival at Cathay Pacific and more recently at Ansett, poised to be named chief executive of British Airways.

* * *

In the world of e-commerce, you either have it or you haven't. Kerry Packer, surprise, surprise, has got it; but Dennis Eck, the chief executive of Coles Myer, apparently does not.

Mr Packer made about $180 million last week doing very little.

He said he had an idea, and that was to transform FXF Trust, the vehicle he created to hold his stake in John Fairfax Holdings, into a company that would share in some of the Packer family's private investments.

But what a good idea! Investors leaped into FXF and the units more than doubled before Mr Packer announced he had translated his idea into half a plan.

The trust would raise $670 million in a 1:1 rights issue and would probably look at internet investments, particularly the trendy business-to-business sector.

What a good plan! FXF shares jumped even further before someone realised that entitlements for the rights issue, struck at $1 a unit, had already closed.

At its peak, the trust was worth twice as much as the market value of its only asset. It is still trading at a 40 per cent premium.

As one analyst noted, people are tripping over one another to be part of the action and couldn't care less there was little detail about what exactly Mr Packer was planning.

That was not quite the case over at Coles Myer, where Mr Eck was brandishing the new e-commerce strategy of Australia's biggest retailer, hinting that a float of its internet sales business could be on the cards, a business that some analysts say could be worth $10 billion.

It was a meticulous presentation. Mr Eck said Coles would launch most of its brands and some new ones on a new portal, which would include an on-line travel business, software tools and on-line education.

It would have revenues of more than $250 million, would break even within two years and would see off many fledgling e-tailers.

So what did the shares do? They went down. And the reason? Analysts said it lacked detail.

* Giles Parkinson is deputy editor of the Australian Financial Review