Ansett New Zealand's owner News Corporation is considering a float of its entire holding in the carrier after scaring off Qantas with the asking price.
Efforts by Qantas to secure a permanent toehold in New Zealand's domestic market by buying Ansett NZ appear to have foundered on a price tag in excess of US$75 million. Sources indicate the Australian carrier had a figure of less than half that in mind.
They suggest News, which is keen to offload its 100 percent stake in the Kiwi domestic, is now turning its mind to the possibility of a float. That would still leave the door open for Qantas to gain control of Ansett NZ but financial advisers close to the carrier say this is unlikely.
They point out the Sydney-based carrier has only recently sold its 20 per cent share in Air New Zealand, an investment which was designed to give it a measure of control in the Auckland flag. That proved unsuccessful and Air NZ eventually linked up with Qantas' major domestic rival Ansett Australia through a buy-out of News' 50 per cent share in the latter. In return News was forced to increase its holding in sister carrier Ansett NZ - now Air NZ's only domestic competitor - to 100 per cent to gain approval from the New Zealand regulator for the Ansett-Air NZ deal.
While Qantas refuses to comment on its efforts to enter the New Zealand domestic market it is known to have been considering several alternatives, including the purchase of Ansett NZ. But privately Qantas managers say the airline is not desperate to enter the market. They do not consider it viable to invest a large amount of cash to enter what is an extremely small market, with a total population of only about 3 million.
'The issue of New Zealand domestic entry is low priority for us right now, particularly at a time we are intensifying efforts to trim expenditure and maintain profitability,' says one source at Qantas. He points to the recent financial results, which herald another year of cost-cutting and limited earnings growth at Qantas. In the year to 30 June, the carrier saw net profit climb a modest 2.6 per cent to US$187 million, even though it slashed $417 million from costs, $99 million more than targeted.
Qantas' rival Ansett Australia has also had a tough year as it attempts a turnaround under the leadership of new executive chairman Rod Eddington. No official results had been released at presstime, but Eddington told staff in a pre-announcement bulletin that the group made an operating profit of only US$6 million. This is an improvement on the loss of nearly US$14 million in 1995/6 but still only represents a profit margin of 0.23 per cent. Eddington is aiming for a 10 per cent margin, equating to profits of US$222 million. The domestic operation made a profit of US$10.4 million in 1996/7 but the international business suffered a loss of US$34 million.
Tom Ballantyne
Source: Airline Business
