Qantas NZ takeover an option to boost Aussies' share

By SIMON HENDERY

Buying the local franchised operation that bears its name is a logical way for Australia's Qantas Airways to secure market share in its battle with transtasman rival Air New Zealand, analysts say.

"It's important for Qantas to have a presence in New Zealand to give it at least equal standing with Air New Zealand in the total Australasian market," the Centre for Asia Pacific Aviation managing director, Peter Harbison, said yesterday.

"Financially, it's also important for [Qantas Airways] to have access to the main routes which Qantas New Zealand operates."

DF Mainland analyst Bruce McKay said New Zealand provided Qantas with an important pool of high-yielding business customers, and the Australian airline had the capital backing to competitively tackle Air New Zealand on domestic routes in this country.

Qantas and Air New Zealand which owns Ansett Australia both issued profit warnings last week.

They blamed, among other factors, increased competition on Australian domestic routes, where budget operators Virgin Blue and Impulse Airlines have been cutting prices on popular routes.

Mr Harbison said that if Qantas Airways agreed to buy Qantas New Zealand, it would be picking up a company with a sizeable debt.

But the Australian company was not short of cash and would have a reasonable knowledge of what it was buying, having done due diligence on the New Zealand operation before the franchise deal was finalised last year.

Forsyth Barr research manager Rob Mercer said globally airlines were under financial pressure, but Qantas Airways' management team was world-class and had the ability to turn a profit in New Zealand.

"It's a difficult environment if your market share is below your positioned capacity." he said.

High fixed costs were hurting Qantas New Zealand, and it had not been able to claw back the market share it lost during the pilot strikes.

But New Zealand travellers will not necessarily get cheaper flights if Qantas Airways steps into the domestic market.

Mr Mercer said a logical strategy for Qantas, in its bid to regain market share from Air New Zealand, would involve selling itself on service rather than launching a discount fare war.

"Discounting is not the way to counter this."