N.A.C.-Air N.Z. merger rumour denied

Press, 1 September 1977, Page 6

N.A.C.-Air N.Z. merger rumour denied

Aviation reporter * While Air New Zealand re- - ports that its profit has more - than doubled, rumours of a ‘ possible merger with N.A.C. I at board level have met with an official “no comment.” The Minister of Civil Avia- • ’.on (Mr McLachlan) declined , to speak tn “The Press" yes-J terday about suggestions! (hat the idea is being seri-i' juslv studied bv the Govern-' ment. A member of his staff said Mr McLachlan knew of "no firm proposal” regarding administrative amalgamation. I - would be correct to say that he was interested in the idea, however. It is asserted that the! scheme under consideration b; the Government provides' '■•r a ioint board of directors: “sunra-board." This propo«a) harks back, to the situation which ex-! jsted shortK after T.E.A.L.i "•as renamed Air New Zealand, in 1965.

After the Australian Goy-| ernment’s shareholding in T.E.A.L. was bought by New Zealand, a joint board was appointed to supervise it and j N.A.C. ! The accountancy firm of j Barr. Burgess and Stewart j was commissioned to investigate whether further coi ordination or even amalgamation was desirable. It not only advised against amalgamation, but recom-; mended that separate boardsbe estaL shed. In 1973, a joint committee was set up between Air New Zealand and N.A.C. to study how’ they could collaborate to reduce duplication of administration, plant, and staff. It found that although there were some areas in which the two could cooperate. these would not iustifv full amalgamation In spite of N.A.C.’s record profit of 53.2 M last financial year, the airline has been in•’reasinglv forced to cut back on provincial air services.

(Several of those that it still] ! operates are disproportion- j ately expensive. N.A.C.’s chairman of direc- i (tors (Mr C. W. Mace), in his I annual report tabled in Pariliament last week, called for; •la reappraisal of the Govemi ment’s long-term financial I I policy towards N.A.C., saying ' it was necessary to overcome an uncertain future. The report states that the; (cost of running Friendships] ''on some of the provincial: !routes served by N.A.C. is so] “'high that they can no longer: 'jbe supported by profitable! /trunk services. Advantages seen in the] • I rumoured proposal to link; t N.A.C. with Air New Zealand' ! could include the subsidy of ‘ uneconomic short-haul routes ■ with the profits from long-1 /distance overseas flights. Aircraft replacements, and; 1! additions to the corporation’s! I (fleet, are expected—with in- 1 ■ (flation— to cost SIOOM m the : next seven years. J N.A.C.’s annual report also,

]observed that two fare in-1' [Creases within the last ; (eighteen months had changed (passenger demand, and inhii bited the airline’s growth. I As a member of the In- | ternational Air Transport Association, however, Air I New Zealand is committed to : maintaining air fares at a ' level agreed with other members. This means that any ‘ ' alteration in fares is likely to : jbe more gradual. Increasingly sophisticated ' I promotion overseas of New '; Zealand tourism, includes, /selling N.A.C. to prospective] J travellers. N.A.C.’s share ofj 'this promotion could be II borne in past by Air New]■Zealand, which maintains’ . similar marketing exercises ] ]. in various parts of the world. ] N.A.C.’s general manager' 11 (Mr D. A. Patterson), said! /yesterday afternoon that he! .[knew of no proposal to form ■ one board. Air New Zealand’s general >, manager (Mr M. R. Davis),i'

was similarly unaware ofj any Government study of al single board. “It is something that has] been discussed from time to] time,” he said. Regarding the suggestion I that Air New Zealand’s] profitable long-haul flights could subsidise N.A.C.’s uneconomic short-hauls, Mr Davis said he didn’t know whether Air New Zealand was making sufficient profit to absorb anything. “It’s only an adequate profit — six cents in the dollar is not a lot of money.” Air New Zealand’s net profit for the year ended March 31 was $11,674,983,] compared with $5,568,816 the year before, says the annual; report tabled in Parliament! yesterday. Included in the profit figure is approximately S2M, for the sale of two DCB air-j craft. The company’s chairman: (Mr C. J. Keppel) said the

i performance was in line with I the better performances I achieved generally by the I international commercial : aviation industry last year. I The company’s earnings [exceeded S2OOM for the first ] time — the total of $207.8M I being 26 per cent higher than the previous year. Mr Keppel commented that the significant improvement in trading conditions in the company’s overseas markets was partly offset by reduced growth on the New Zealand scene. Of the company’s total earnings 63 per cent was in foreign exchange, an achievejtnent Mr Keppel described as [“most gratifying.” I But he said: “The company remains acutely aware of [the fact that its continuing [welfare and development I depends to a very large exItent on its strength in the 'New Zealand market.”