$200m profit forecast fails to soothe Air NZ investors

By DITA DE BONI

Favourable tailwinds may have lifted profits, Air New Zealand shareholders heard yesterday, but an alliance between the airline and Australian rival Qantas is still up in the air.

Despite a barrage of comment and questioning and a quip about becoming "Dingo Airlines", Air New Zealand directors at the annual meeting refused to tell shareholders whether the airline would allow Qantas to take a place at its board table.

Airline executives said shareholders had to wait until a deal - if struck - was sorted out and brought back to them for approval, possibly before the end of the year.

However, the influence of mum-and-dad shareholders might be even more negligible than usual if the company's largest shareholder, the New Zealand Government with an 82 per cent holding, agrees to any alliance between the carrier and its longtime foe.

Air New Zealand trumpeted a $200 million profit forecast by June 2003 - before taxes and any other unusual items - and treated the largely senior shareholding crowd to an eardrum-splitting series of the company's finest promotional videos.

But the patriotic display could not quell the anxieties of shareholders over a possible Qantas deal.

That the Air New Zealand board has been in negotiations with the Australian aviation giant since May, and that many of the airline's directors openly believe the carrier must look abroad to survive, seemed to verify suspicions.

Deputy chairman Roger France repeatedly rejected reports that a deal for Qantas to take a 25 per cent holding in Air New Zealand at a cost of $500 million was imminent, and said that even if it was, it was not about the local airline trying to raise money but an attempt to build better strategic alliances.

Managing director Ralph Norris said it was "not about Air New Zealand, in any shape or form, giving away its autonomy".

But Shareholders Association chairman Bruce Sheppard was one of many who was not convinced. He loudly objected to the reappointment of directors including Sir Ron Carter, Ken Douglas and Warren Larsen because they would not disclose what they thought of a possible Qantas deal.

His feelings were very clear. "To build a strategic alliance with your competitor and your vicious enemy ... which just a year ago was blamed for your demise, is outrageous."

Mr Sheppard was also critical of the board's composition, saying accountants outweighed engineers.