Issue 118: June 1996

To complicate matters though, the New Zealand government quite rightly pointed out that if ANZ and Ansett Australia were in the same camp then it would theoretically destroy the competitive instincts of Ansett New Zealand.

The NZ Commerce Commission has already rejected the initial plan to ‘ring fence’ Ansett New Zealand from the obvious influence of ANZ. Plan B is for News to actually acquire the now profitable Ansett New Zealand and to run it as an entirely separate stand alone business unit from the rest of Ansett and ANZ. To some this sounds benevolently optimistic, to others realistic and workable. It all depends on what side of the fence you’re standing. This has not been lost on the Commerce Commission which was due to either sanction or reject the proposal as we went to press.

The third option, and one that could well occur if the News acquisition of Ansett NZ is rejected by the Commerce Commission, is to simply close down the airline. This would result in a real loss of competition and cost over 1000 jobs. It could also be perverse for us to point out that this would give Air New Zealand a massive domestic boost. It would also be true. Therefore the Commerce Commission, if it lives in the real world, will indeed have a difficult time killing off the last great opportunity to ensure that a healthy Ansett New Zealand continues in operation.

However, there is another solution to the problem, one that to date has not really become a player.

Qantas presently owns 19.9% of Air New Zealand. This odd shareholding is a leftover of the early nineties era of geopolitics when the NZ government was doing everything possible to fend off an aggressive ANZ share acquisition by British Airways. Ironically, ANZ at the time wanted to hitch their offshore horse to the BA wagon but the government of the day instead opted for Qantas at a time when the Closer Economic Relationship program was high on the political agenda. The odd thing about CER though is that whilst it is embraced with passion in New Zealand it is almost unheard of in Australia.

Obviously if and when the ANZ/Ansett wedding takes place, Qantas will look to divest itself of its ANZ shareholding. This is only right and logical and also would return Qantas some valuable cash flow with which to retire debt, etc. However, this would then leave Qantas with no domestic feed in New Zealand and while it is not a massive market it certainly is too large to simply walk away from.

With this being the case would it not be opportune for Qantas to buy out Ansett New Zealand and hand over its operation to National Jet which has done an excellent job with Qantas Airlink in recent years? This would give New Zealand a truly independent second domestic carrier. It would give Qantas all the internal NZ domestic market clout that it needs and it also gives Ansett some extra cash flow and allows the ANZ/Ansett marriage to proceed beyond the altar.

The downside of this of course is that Qantas would wish to do nothing that aided, either tactically or financially, its arch foe. Fair enough, but sometimes a controversial short term move will pay a larger long term dividend. We certainly believe that in a decade this would be viewed as a smart move as ultimately Qantas will need every weapon in its inventory to fend off what will truly be a significant player in the new Ansett/ANZ combine.

And why is this so?

You would be naive to believe that the merging of the corporate interests of ANZ and Ansett will stop there. Already there has been serious talk of an extremely comprehensive joint marketing agreement between Ansett, Air New Zealand, Singapore Airlines, Lufthansa and United. Singapore is one of the world’s largest and consistently profitable airlines, United is the largest and Lufthansa is not only the second largest in Europe but also has a world network of great renown. There is not a part of the world left untouched by such a combine and this is something that must rightly strike fear into the heart of even a giant like the Qantas/BA combine.

Ansett, in winning the lucrative Sydney Olympics official airline bid against Qantas, has already shown that this mega teaming can be a winner. If it comes to be, which it surely will, then the travelling public will indeed find a very attractive alternative to the Qantas/BA combine. And of course this is yet another reason why ANZ cannot afford to miss out on acquiring a significant interest in Ansett. If it doesn’t then Ansett itself in six or seven years will rival ANZ to the point where the Kiwi airline faces the prospect of merely becoming a bit player in its own backyard.

ANZ Chief Executive Jim McCrae recently stated conclusively to AA that the deal would be done and in place by June 30. The operational aspects of the acquisition have actually been agreed and on hold for several months. All that has to be done now is to sign off on the paperwork and to finally resolve the Ansett New Zealand dilemma and clarify Australia’s FIRB situation.

With that done Australasia will see the emergence of a whole new airline marketing alliance that ultimately will be for the good of all concerned.