British offer to reflect fall in profit

Press, 27 July 1988, Page 8

British offer to reflect fall in profit

By

LES BLOXHAM

travel editor British Airways’ enthusiasm for a stake in Air New Zealand has not been dampened by the airline’s big drop in profits announced yesterday. i But Sir Colin Marshall, British Airways’ chief executive, said his company’s offer would reflect Air New Zealand’s performance over the year and its prospects for the future.

Asked how he viewed those prospects, Sir Colin predicted that the trends of the last year would probably continue into the immediate future before there would be any chance of an improvement.

“Considering everything that has been happening, Air New Zealand is probably at a relatively low point right now,” he said.

Nevertheless, he reconfirmed that British Airways was still “very interested” in gaining at least a 25 per cent shareholding in New Zealand’s national airline. “I believe there are strong strategic benefits for both British Airways and Air New Zealand in our taking a minority shareholding,” he said.

“The two businesses are highly complementary. There are minimal overlaps of our route networks and with our seasons at different times of the year we would be able to optimise the use of aircraft and other resources.

“Our very strong marketing presence in the United States and Europe would allow us to inject considerable energy into promoting tourism to New Zealand,” Sir Colin said.

British Airways’ executives were preparing its bid, he said, and this would be submitted to the New Zealand Government before the August 5 deadline. Sir Colin made it clear at his press conference in Wellington yesterday that he would be unhappy to be part of any airline with a Government as the majority shareholder.

“But our understanding is that the New Zealand

Government is prepared to move into a minority position, or sell out of the airline altogether,” he said. “That encourages us to go for the minority stake. Our philosophy is pretty well known — we don’t believe in Government ownership of airlines.”

Sir Colin said an airline which had to compete internationally often could not afford to delay decisions while public servants pondered over any risk factors involved.

British Airways would have been prepared to seek a bigger stake in Air New Zealand, but will limit it to a 25 per cent holding to avoid a possible backlash from countries with bilateral air-service agreements with New Zealand. Under the terms of the various Government-to-Government agreements, “control” of Air New Zealand must be retained within New Zealand.

“The problem is that there is no precedent in international law to determine what consitutes ‘control,’” said Sir Colin. British Airways had looked into the matter in great depth at the time of its privatisation. The general consensus then was that any foreign holding of even 35 per cent could be inviting trouble.

Asked if he would consult British Gas for tips on how to deal with the New Zealand Government, Sir Colin replied amid laughter that he would not.