Qantas hunts other options to Air NZ

By SOPHIE HARES

SYDNEY - Qantas, Australia's biggest airline, is set to reluctantly trudge back to the drawing board after regulators slammed the door on its planned tie-up with Air New Zealand.

With the chance of overturning rulings by watchdogs on both sides of the Tasman looking remote, some analysts are speculating the airline could turn to the United States, Europe or Asia to look for other investments.

Others say the airline could try to squeeze a diluted version of its $550 million deal to buy 22.5 per cent of Air NZ past regulators, or instead ramp up competition against its would-be partner that has warned its future was in jeopardy if the deal were not to happen.

"Qantas has expressed interest in the US," said Ian Thomas, analyst at the Centre for Asia Pacific Aviation.

"American Airlines is the most obvious target."

Qantas, which said it would continue to discuss the future of the deal with Air NZ, faces stiff competition from aggressive competitors such as Singapore Airlines and is keen to tighten its grip on regional aviation.

Last week, it announced it would set up a domestic low-cost airline to try to fend off competition from Richard Branson's Virgin Blue, which now claims 30 per cent of the Australian market.

The company might even look again at buying an equity stake in Malaysian Airline System, and shift its Asian hub from Singapore to Kuala Lumpur, said Anthony Srom, analyst at Goldman Sachs JB Were.

A stake in Taiwan's China Airlines, which is expected to be sold by the end of the year, was also an option, alongside Thai Airways, others said.

Analysts speculated that Qantas would renew competition with a vengeance against the troubled Air New Zealand by boosting capacity and slashing prices.

Shares in Qantas traded up 0.6 per cent at A$3.50 ($4.02).