Qantas NZ's owners confident of success where others failed

By DANIEL RIORDAN

It's a bird, it's a plane, it's a flying kangaroo that doesn't cross the Tasman.

But the real marvel about Ansett New Zealand - which yesterday became Qantas New Zealand - is it's still airborne.

Only three of its 13 years have been profitable, and it has lost a variety of owners more than $230 million.

Yet Qantas NZ's new owners - a transtasman consortium of businessmen - believe they have the keys to turn losses to profits.

Analysts say the airline will need a capital injection - nearly 100 per cent of its existing capital is redeemable preference shares - but it is in a much stronger position to take on fierce rival Air New Zealand than ever before.

Although it lost crucial market share during last year's industrial strife with pilots and enough money to almost certainly ensure it reports a loss for the year to June, fewer pilots and a reduced schedule are expected to help return the airline to profitability in the current year.

Those expectations are based on the past 12 months' cost-cutting, including renegotiating pilot contracts, revamping engineering and selling a plane.

Now the airline has changed its name and livery under a seven-year renewable deal with Qantas, negotiated by its new owners who bought the local airline in March from Rupert Murdoch's News Corp.

Qantas will help with economic advice and management systems, provide access to the oneworld global airline alliance and offer smoother international travel connections for Qantas NZ passengers and greater buying clout for airline inputs ranging from fuel to uniforms and cutlery.

Stitched together by David Belcher of Auckland merchant bank Clavell Capital, the consortium includes New Zealand businessmen Sir Clifford Skeggs, Alan Gibbs, Trevor Farmer, Chris Coon, Ian Hendry and Greg Lancaster, and Australians Ken Cowley (through his company RM Williams) and Kerry Stokes.

Mr Cowley owns 12.5 per cent and Mr Stokes 10 per cent. Other shareholdings have not been disclosed. The group is believed to have paid News Corp between $30 million and $35 million.

Ansett arrived in New Zealand in July 1987, introducing competition to the domestic skies, trimming prices and enhancing passenger services overnight.

This was wonderful for consumers but less so for the new airline's shareholders, Ansett Transport Industries (50 per cent), Brierley Investments (27.5) and Nelson-based Newmans Group (22.5).

But with losses bigger than expected, impatient Brierley and Newmans wanted out within the year.

Ansett Transport bought them out, but only after receiving dispensation from the Government concerned at 100 per cent foreign ownership.

As part of the deal Ansett agreed to sell its newly acquired 50 per cent to local investors within two years. Brierley ended up losing $16 million on the sale.

While all this was happening, the whole aviation industry was becoming far more complicated than Ansett had envisaged.

The Lange Government decided to sell Air New Zealand. Who should fly on to the share register but Brierley and the three airlines that had been feeding Ansett NZ their international arrivals: Qantas, Japan Airlines and American Airlines.

The three airlines have since sold out of Air NZ, but their investment decisions at a time when Ansett was struggling to establish its brand here clearly shocked "Mr Ansett," Sir Peter Abeles.

He threatened to shut Ansett NZ if it was not granted bilateral rights to fly the Tasman and create a link with Ansett Australia that would compensate for the loss of traffic from the three international airlines.

After heated and protracted negotiations the Government made two concessions.

It promised to try to persuade Qantas to extend is on-carriage arrangements with Ansett NZ. And it said Ansett NZ could apply for bilateral rights when it became "substantially owned and effectively controlled" by New Zealand interests.

The story took another twist in 1996 when Air NZ bought 50 per cent of Ansett Holdings, which owns 100 per cent of Ansett's Australian domestic operation and 49 per cent of Ansett International. Ansett NZ was not part of the deal. Air NZ last month upped its stake in Ansett Holdings to 100 per cent.

While service has undoubtedly improved since Ansett NZ flew in, are overall airfares still lower? Certainly the airline and Air NZ have tended to match each other very closely with their fare movements in recent years. .

That game of follow-the-leader was bucked only in July when Air NZ chose to hold off following Ansett's 5 per cent fare increases for a month, then upped most of its fares by 7 per cent.

As of yesterday, Qantas NZ's full-priced one-way economy fares on five major domestic routes out of Auckland (Wellington, Christchurch, Queenstown, Rotorua and Palmerston North) were each 7 per cent lower than Air NZ's.