Pilots' strike untimely but impact could be slight

By DANIEL RIORDAN

Air New Zealand needs a pilots' strike like a hole in the fuselage right now, but the immediate impact on its bottom line may be relatively small.

The Airline Pilots Association is threatening to strike for 48 hours, from 4am on Friday, July 19 to 4am the following Sunday in a protest against what it says are possible job losses and lack of career protection.

The strike would affect the airline's main trunk domestic services and its international flights.

JBWere analyst Peter Sigley said the impact was difficult to estimate, but the airline's ability to place passengers on alternative flights with its domestic regional subsidiaries and, internationally, Freedom Air and other Star Alliance carriers, meant the cost might be only $1 million to $2 million.

DF Mainland analyst Bruce McKay said much would depend on what other arrangements the airline might be able to make for its passengers.

Longer term, any disruption to passengers' plans caused by a strike risked damaging the airline's standing in a highly competitive marketplace.

"Certainly strikes are never positive," said McKay.

Air NZ is refusing to talk about how much the strike might cost, saying its efforts are focused on avoiding industrial action.

Spokesman Mark Champion said the impact would be felt most on the main-trunk routes, but the airline had several options to lessen any impact.

Significantly, the pilots' threat comes as the airline tries to negotiate a 12-month wage pause with its workers' unions, including pilots.

Air NZ is not saying how much it expects to save by achieving this, and unions the Business Herald contacted said they were sticking to confidentiality agreements with the airline and would not comment either.

Meanwhile, an Australian analyst has kept the pot boiling on the chances of Qantas moving in on Air NZ.

"We continue to believe Qantas is very interested in buying at least 25 per cent of Air NZ," Salomon Smith Barney analyst Jason Smith said in a note to investors. "With the New Zealand general election now on July 27, Qantas could gain its much-sought-after stake sooner than expected."

A linkup between Qantas and Air NZ could save the airlines at least A$100 million ($117 million) in the first year, rising to $351 million in the third year, Smith said.

Qantas would have to spend $350 million to $400 million to buy a 25 per cent stake in Air NZ, plus $100 million to $200 million for its share of further capital the airline might need, he said.

However, there are a wide range of views on just how beneficial links with Qantas would be for Air NZ. Several local analysts said the Australian analyst had overestimated the benefits and underestimated Air NZ's worth.

Although speculation has centred on Qantas seeking to pay 35c a share for a 25 per cent stake, none of the key parties is commenting,

A spokeswoman for Finance Minister Michael Cullen said on Monday that the Government would consider any approach from Qantas only after Air NZ's board had agreed to consider a firm offer.

The board had made no proposal to the Government.

Air NZ spokesman David Beatson said the two airlines continued to discuss a range of issues, including ownership and alliance options, but Qantas had made no concrete proposal to the Air NZ board.

Qantas chief executive Geoff Dixon is saying only that his airline's negotiations with Air NZ include the possibility of a minority Qantas shareholding.

Air NZ's rights issue is on hold until matters are resolved with Qantas. Air NZ was looking to raise around $200 million, but if deep-pocketed Qantas takes a stake in the company the need for such an issue would vanish.

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