By announcing that it has been approached to "consider" acquiring an equity stake in Air New Zealand (ANZ), Qantas seems to be signaling its willingness to provide a solution to a problem.
The difficulty, in the face of scant information from the Australian flag-carrier, is working out exactly what that problem is, whose problem it is and what Qantas thinks it can achieve for itself by solving it.
No-one is denying that ANZ is in trouble, and that its heavily loss-making subsidiary Ansett is largely responsible. However, the parent company insists that it has the financial resources to turn the situation around and see through a much needed fleet renewal at the Australian carrier, despite its admission that it is considering approaching the New Zealand Government for a bail out.
So what prompted Qantas to go public on 29 May with its claim that it had been approached by a mysterious third party and urged to pursue an equity stake in its antipodean rival? Rumours that such a deal was in the works had been circulating in the industry for several weeks but it remains unclear exactly when the idea was put to Qantas, when Singapore Airlines (SIA) was brought into the discussions and indeed what the unnamed party has to gain from suggesting it.
Could the "problem" that Qantas is aiming to solve from its perspective be a need to strengthen the presence of Oneworld in Australasia, by poaching ANZ from the rival Star Alliance? This seems unlikely to be reason enough in itself given that fact that Qantas is already the dominant carrier in the region.
A more plausible scenario is that Qantas thinks it is seizing an opportunity to jump ahead of the game and make a pre-emptive swoop for ANZ's allegiance. The prospect of attempting another tie-up with ANZ now may be too tempting for Qantas to resist given the apparent willingness of SIA to give up its 25% stake in ANZ and fulfill its long-standing ambition of owning Ansett outright.
And under Australia's unusually liberal ownership rules SIA is allowed to own 100% of the Ansett domestic operation, but only 49% of Ansett's International division to safeguard the latter's overseas landing rights.
While it certainly would be a brave move on SIA's part to voluntarily take on the task of nursing Ansett back to health, few of the world's airlines face the Singapore carrier's problem of having too much cash and not enough opportunities to invest it. Nobody, including Qantas, knows when SIA's enthusiasm towards Ansett will begin to wane.
Another factor in the timing of the announcement is that 30% ANZ shareholder Brierley Investments, according to analysts, wants to get out of the airline business.
Also key to the Qantas move may be the fact that ANZ finds itself struggling in the wake of a fundamental liberalisation of the Australia-New Zealand air market, and the Australian carrier may sniff an opportunity to leverage the lingering momentum from that process to ease itself through the remaining regulatory barriers to an ANZ deal.
It is hard to see why Qantas would be satisfied with a large minority stake in ANZ, let alone the mere 25% it is currently allowed to hold under New Zealand law.
Historical precedent implies that Qantas should be gunning for a majority stake, at least in the longer term. It bought 20% of ANZ in 1989 but sold the stake in 1997 because it had been unable to generate any operational synergies between the two airlines.
The assertion by Qantas that a simple equity relationship between the pair could this time generate meaningful savings and spur significant growth is hard to accept without assuming that the Australian airline thinks it can get more out of this deal than it is letting on.
Source: Flight International
