Reece

So where does this leave us today? A good question and one that in real terms cannot honestly be answered by anyone in the industry for probably another year or more.

The combined Qantas/Australian would, next to JAL, be the biggest airline in the SE Asia/Pacific market. It would operate a fleet at year end of nearly 100 jets, two thirds of which would be wide bodies. The new Qantas will operate one of the youngest and most modern fleets in the world comprising 30 737, 20 767 twinjets and 32 747s, more than half of which would be the latest generation -400s. For 1992/93 it would be looking at logging well in excess of 4 4 million revenue passenger kilometres. At last Qantas would have a total coverage domestic feed ranging from third level Jet. streams and Dash 8s through to a massive fleet of twirtjet Boeings to feed the long haul 747s and 767s.

The key to the entire long term feasibility of the operation though still lies squarely with recapitalising the new airline. ,Just how much the sale will bring is difficult to say in these depressed times. It is hoped that the year end results of both carriers will reflect better times than was experienced in the 1990/91 financial year. Australian must have benefited in the second half of the current year by the demise of Compass, a more sustainable increase in yield and load factors that hover around the 80% mark Qantas meanwhile would have enjoyed some of the benefits of its dramatic restructuring last year in which 3,000 jobs went virtually overnight.

Though it is not known just how much Qantas traffic has increased, it is certainly a good deal better than it was a year ago and recent disruptions in California and Thailand only serve to boost Qantas’ inbound revenue as our potential tourists look to Australia with renewed interest as a safe and enjoyable holiday destination.

The new Qantas will also be a predominant player in what is the future growth area for air transport. Asia/Pacific currently constitutes a third of the total world air travel market with this conservatively expected to increase to 40% hy year 2000 and to 50% by 2010. Indeed, the new Qantas could not fly in more promising skies.

With this in mind, it is fair to say that the new airline would need of at least $1bn in recapitalisation in order to be a viable investment in the first place. After all, there isn’t much point in anyone, anywhere investing in what are presently two of the world’s most impoverished airlines. By wiping out the majority of the new carrier’s debt it would not be unreasonable to expect that by 1993/9 4 Qantas could turn an operating profit well in excess of $600rn. An airline capable of this would haw to be worth between $2bn and $2. 5bn, the only problem being that by early next year, when the float will launch, will the investment community be able to support such a large-scale float. We can only wait and see.

The bottom line is, however, that the Federal Government immediately into the new airline. If it cannot do this and just wants to sell off our national treasure for short term political gain, then we strongly suggest that you put your money (and political allegiance) elsewhere. As we have stated for years in this magazine, it would be a national tragedy if this was allowed to occur, this is indeed something that should rightly be abhorred by every fair minded Australian.

So much for Australian and the ‘old’ Qantas but where does this leave Ansett?

For ATI there are a number of positives and negatives in this, the fourth major upheaval in aviation policy in barely a year. The positive point for Ansettis obviously that after decades of trying it can now fly internationally.

Big deal you say! Well you are probably right, as unfortunately that basically sums up the positive side of the ledger for ATI. The negatives are that firstly, the existing ATI is grossly undercapitalised, probably in real terms worse off than its government owned competitors. Secondly, that the airline won’t really have access to any truly viable international routes for at least five years and thirdly, that the routes that it can operate to as early as this November are so fiscally doubtful that one must ask why the battling domestic carrier would bother pioneering such routes in the first place. Linking Australia with second-rate ports in Asia and the Pacific is nothing to get excited about. Particulary so when ATI would have to acquire new modern generation long haul equipment equal to its competitors to do so. Can ATI afford to take on this additional cost burden when its management still publicly claim that even with consistently high load factors, it is not expecting an operating profit this year?

The one ray of hope for ATI is that it might be able to make some inroads into the secondary trans-Tasman market, linking, for instance , the NZ cities with marketable destinations in Australia such as Tasmania, Canberra, Coffs Harbour, Coolangatta, the Sunshine Coast, Hamilton Island, etc. These though would take considerable marketing, and of course, concentrate almost solely upon low yield holiday packages where Ansett’s 737s and A320s would still have to compete with Qantas and Air New Zealand 747s and 767s which presently operate in what is traditionally a minimal yield market.

I am personally glad that I am not presently a member of the ATI management team. They are being forced, for better or for worse, to transit uncharted waters without the massive cash reserves that the organisation enjoyed just a few short years ago. One would think perhaps that it would be more prudent to get ‘their act together’ at home before flying off to such enthralling destinations as Manilla, Nadi or Bali. We can only wait and see.

The past half year will go down in Australian aviation history as the mosttumultuous ever recorded. The pre Christmas collapse of Compass, the One Nation statement, promising everything but actually delivering little more than confusion and now a total rethink on what should have occurred years ago becoming stated government policy.

A lot of water has to flow under the bridge before we really know where it all will lead, though it is clear that the new Qantas now probably faces a far brighter future than at any time in its long and proud history. Providing of course that it finally gets that vital recapitalisation!

An in-depth analysis of the Qantas/Australian merger in addition to a question and answer interview with Southern Cross chairman Doug Reid will appear in our next issue.