Qantas goes for Air New Zealand's jugular

By Chris Hutching

Friday 19th April 2002

Air wars Kiwi style

Qantas lifts presence in south and
more transtasman flights
Air New Zealand chairman warns
Qantas about predatory pricing
Southern travel expert gives advice
nzski.com sale rumours
Air New Zealand sells Jetset

Jim Farmer QC

Warnings made last week to Air New Zealand senior executives about losing market share were borne out this week as Qantas announced new weekly transtasman flights using wide bodied 767s favoured by passengers and freight exporters.

Canterbury business leaders were delighted at the Qantas move, which exceeded their expectations, although it represents a major threat to Air New Zealand.

The warnings about Qantas inroads came last week from Canterbury Employers' Chamber of Commerce chief executive Peter Townsend. He was talking with Air New Zealand managing director Ralph Norris and chairman Jim Farmer QC at a special briefing they arranged to assuage business clients in Canterbury who have been unhappy about disruption to freight services from the South Island.

Air New Zealand scrapped services using bodied Boeing 767 airplanes that can take containerised goods in favour of Boeing 733s (a variant of the 737), which must be hand loaded. Manufacturers have been forced to re-route export goods via Auckland at 10-20% extra cost.

Dr Farmer told The National Business Review if Qantas engaged in predatory pricing then Air New Zealand would be quick to call on the Commerce Commission to ensure fair play.

Qantas said it would add six Christchurch transtasman flights and another nine services between Christchurch, Auckland, Melbourne and Sydney after July 1.

Air New Zealand believes Qantas will lose $40-50 million in discounted fares in New Zealand as it seeks market share.

Darryl Park, chief executive of Christchurch and Canterbury Marketing and a former South Island manager for Air New Zealand, said Air New Zealand had an enormous challenge ahead to optimise yields. It would be better to increase services to Sydney and Melbourne and Pacific rim countries, leaving the London route to its alliance partners. Internal regional routes within New Zealand might be better served by discounter Freedom Air.

"Direct flights into the South Island to serve the tourist market are more important now. There's been a huge swing in tourist behaviour. Tourists are predominantly coming to the South Island compared to previous times when the emphasis might have been on Auckland, Taupo and Rotorua," Mr Park said.

Air New Zealand was recently bailed out to the tune of $885 million by the Government but may yet need another capital injection.

One of the restructuring moves includes the sale of subsidiary nzski.com and its three South Island ski field businesses at Coronet Peak, The Remarkables, and Mt Hutt. According to latest rumours there may be a management buyout offer but nzski.com general manager Duncan Smith was unable to comment.

Other bidders identified by Queenstown sources include Skyline Enterprises and a south Australian ski field operator.

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