Qantas moves to take out Air NZ

By VERNON SMALL and DARREN GOODSIR

Qantas plans an aggressive push on New Zealand domestic and transtasman routes "to put Air New Zealand out of business", say reports of an internal speech by the airline's chief executive.

Geoff Dixon was reported in the Sydney Morning Herald as telling 70 managers: "Qantas believes that the airline [Air NZ] will not survive."

He was quoted as saying the New Zealand Government eventually wanted Qantas to buy in to the national airline.

"Qantas, however, intends to aggressively compete in the New Zealand market by beginning a major domestic operation."

Mr Dixon was recorded by one of those at the management forum as saying of competition with Air NZ: "Qantas will be very aggressive in this regard." He did not elaborate.

Mr Dixon has since said the report was not accurate. But audience members said it was balanced and fairly reflected his speech last month.

The report has clearly clouded relations between Qantas and the New Zealand Government, which owns 82 per cent of Air NZ.

Finance Minister Michael Cullen said the tenor of the report was not in tune with his meetings with Mr Dixon.

"The Government is not about to be selling off any part of Air NZ. I've said we will be looking at a cornerstone shareholding further down the track.

"That's certainly some way off, and I wouldn't even think there's any prospect of that coming up this year for the very least."

Dr Cullen said it was not true that the Government wanted Qantas to eventually buy in to Air NZ.

"If Qantas' strategic intentions are as indicated in the report, then Qantas would be very well down the list of any preferred partner.

"We're not interested in an airline that is about to try and destroy Air NZ or reduce its scope.

"If the comments were as reported, then they don't exactly put Qantas in a very good light, I would say, from the New Zealand Government's perspective."

Dr Cullen said that in their meetings Mr Dixon had given the impression there were advantages in some sort of strategic alliance "which would include the potential for expansion for Air NZ".

Air NZ has been hit by the collapse of its Ansett subsidiary in Australia. Last year, Air NZ lost a record $1.3 billion and had to be bailed out by the taxpayer. In October, it said it was looking to cut the equivalent of 800 jobs, half in management.

With weak international traffic, Air NZ is deriving much of its returns from domestic travel.

Mr Dixon attacked the report as inaccurate, saying: "At no stage have I ever mentioned that I want to put Air NZ out of business. That would be stupid.

"Qantas has reiterated to the New Zealand Government its position that it is still interested in a proposal to buy in to the airline.

"I have told them we intend to expand our domestic operations there and we will be competing aggressively. But these notes of the meeting are full of factual errors, and our aim has never been about putting anybody out of business."

In the past few months Qantas has boosted services in New Zealand, with 10 return flights between Auckland and Wellington and eight between Christchurch and Auckland. It is also adding flights to several provincial cities, helped by provincial airline Origin Pacific.

Significantly, Qantas last month announced the appointment of Grant Lilly - who previously managed all Air NZ's domestic services - to a senior post to help supervise the expansion.

The managing director of the Centre for Asia Pacific Aviation, Peter Harbison, said Qantas' extra presence definitely threatened Air NZ and could result in its demise. "They are extremely fragile right now and everyone knows it."

But Qantas is battling worsening industrial strife, with 300 workers stood down in the past few days after banning overtime - something Dr Cullen was quick to point out.

"Like all major airlines they are having trouble on the international side of their business. I don't think anybody's in a position to point bones in the airline industry."

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