Ansett battles Impulse deal

By GREG ANSLEY

CANBERRA - Ansett Australia will challenge the swallowing of Impulse Airlines by Qantas - including a possible alternative bid for the cut-price carrier - to try to ease mounting pressure on both sides of the Tasman.

The Impulse deal gives Qantas a further 5 per cent of the domestic market - it already holds 50 per cent - releases aircraft for new trunk routes in New Zealand, and offers the airline a fleet of modern aircraft for an aggressive drive on Australian regional routes.

Ansett yesterday began its fightback, announcing a $A30 million ($37 million) campaign on the theme "Fly Ansett? Absolutely" to counter the marketing blow it suffered from the grounding of its Boeing 767 fleet over Easter.

Gary Toomey, chief executive of Ansett parent Air New Zealand, said Ansett would also challenge the Qantas-Impulse deal with the Australian Competition and Consumer Commission, yet to give its approval, and, if necessary, before the courts.

Mr Toomey said Ansett would be interested in pursuing talks with Impulse if the Qantas deal - in which Qantas will lease the Impulse fleet under its livery from May 14 - falls through.

"We're going to fight for the right to grow and compete on more equal terms," he said.

"This is the start of the heavyweight bout."

Impulse was forced into the Qantas deal after less than 12 months of jet services on trunk routes when a $A20 million injection from the Motor Trades Association's superannuation fund fell through and a foreign investor withdrew support.

Although profitable in its first six months, Impulse plunged as fuel prices soared, the dollar dived, and fares on major routes fell to as low as $A33 - less than the cost of taxis to and from airports.

Both Qantas and Ansett were mauled by competition from Impulse and Virgin as capacity soared by 20 per cent and profitability nose-dived.

But Ansett suffered the worst, watching its market share fall to about 35 per cent and facing huge spending on new aircraft.

And while Ansett will gain some breathing space from an expected moderation of the brutal air fare war that ate heavily into its key east coast trunk routes, Virgin Blue has also been strengthened by the removal of Impulse competition.

With a fleet of new aircraft and a strategy that sees the Australian operation as much as a branding exercise for Sir Richard Branson's global empire as an airline in its own right, Virgin is also a potential rival on transtasman and New Zealand routes.

Analysts also believe the survival of Virgin as a counter to Ansett and Qantas has become more politically important and is likely to restrain efforts by the two large carriers to run it out of Australian skies.

Peter Harbison, director of the Centre for Asia-Pacific Aviation, said Qantas was the big winner from the Impulse deal, gaining market share, new regional strength, and the opportunity for a swipe at Ansett and Air New Zealand.

Mr Harbison said the deal was also a big break for Virgin, removing its single biggest threat and giving it a selling point as the saviour of low-priced fares.

Qantas' share price rose a whopping 71Ac on Tuesday when the Impulse deal was announced. Yesterday it fell 26Ac to $A3.14.

Air New Zealand A shares - available only to New Zealand nationals - rose 2c on Tuesday and 4c yesterday, closing at $1.12.

The B shares - available to all comers - rose 1c on Tuesday and 6c yesterday to $1.58.

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