Merger with Air N.Z. ruled out by Qantas

Press, 27 September 1988, Page 6

Merger with Air N.Z. ruled out by Qantas

By

LES BLOXHAM,

travel editor

Qantas has firmly dismissed claims that its bid for a stake in Air New Zealand would lead to a merger of the two airlines with the chairman of the Australian airline, Mr Jim Leslie, telling a press conference in Wellington yesterday that Qantas’s proposed minority shareholding would help Air New Zealand “grow to New Zealand’s and our advantage.”

The real value of both airlines was in their status as national carriers, he said. "To even suggest a merger of their separate identities would destroy the very aim we are trying to achieve — more tourism for New Zealand and Australia and more competition for the bigger world carriers,” he said. Mr Leslie led a top management team to Wellington including his chief executive, Mr John Menadue, the general manager finance, Mr Larry Olsen, and the director of public and corporate affairs, Mr Jim Eames. They called on the

Treasury, but Mr Leslie denied that an agreement had been finalised. He emphasised that the Government has said all bids would remain open until October 14. It appears, however, that Qantas originally submitted several options for varying share parcels ranging from 25 to 35 per cent. Mr Menadue said that while Qantas would be happy to have a 35 per cent holding, the New Zealand Government had to be conscious of the effect that could have on its air treaties with other nations. A foreign country might, for instance, argue that Air New Zealand was

no longer owned by New Zealand and that the Government-to-Govern-ment agreement on landing rights was, therefore, invalid. This effectively could stop Air New Zealand from flying there. Mr Menadue said that under United States law any American-registered airline had to be 75 per cent controlled by American citizens. That had become the rough, but as yet untested, guideline for bilateral agreements. “No country is likely to sell more than 25 per cent although I personally don’t see much difference between the two percentages,” he said. Pressed for a prefer-

ence, Mr Menadue said Qantas would still be “very happy” to get a 35 per cent stake in Air New Zealand. But Mr Leslie said he believed the airline would probably have to settle for 25 per cent. “But we don’t know that for certain yet,” he said. Both Messrs Leslie and Menadue denied reports that Qantas had been asked by the Government to increase the price of its bid. They would not be drawn on the price they have offered or the conditions. Mr Menadue said he would expect any Qantas representation on Air New Zealand’s board to

reflect its equity in the company. The airline had been upset by some reports in New Zealand that it was facing a debt crisis, said Mr Leslie. He blamed this on confusion over the airline’s plan to spend $7.6 billion on new equipment over the next five years. “We will generate half that from internal sources, which is a very healthy way to be,” he said. “We can comfortably afford to borrow the balance.” Mr Leslie said Qantas was in its most profitable growth phase. Its after-tax profit last year was $166 million and the airline is forecasting another record profit this year.