Tuesday September 21, 10:59 AM
Air New Zealand, QANTAS Face Stiff Competition From Asian Rivals
SYDNEY, Sept 21 Asia Pulse - Air New Zealand Ltd and Qantas Airways Ltd face the prospect of intensifying competition on its trans-Tasman route from other airlines now that a proposed alliance between the pair has been blocked, according to analysts.
Air NZ and Qantas were disappointed yesterday when the New Zealand High Court blocked their proposed A$500 million (US$349 million) alliance, under which Qantas would have taken a 22.5 per cent stake in its rival.
Qantas and Air New Zealand have said they would pursue other avenues of cooperation that would not draw the ire of competition regulators.
"Despite Qantas and Air NZ signalling an ongoing intention to examine further opportunities, we expect competition will continue to intensify on the tran-Tasman, as Asian carriers target further market share gains," Credit Suisse First Boston analyst Greg Ward said.
Air NZ's share of trans-Tasman traffic has fallen in the past two years to 32 per cent, from 43 per cent, following the entry of Emirates and Virgin's Pacific Blue, which launched in January.
Qantas has maintained its market share at 39 per cent.
Qantas and Air NZ could form agreements to cooperate on maintenance and back office functions on the route, which is loss-making for both carriers.
"A close relationship with Qantas is a major factor in Air NZ's future as it minimizes the threat from its single most significant competitor," Goldman Sachs JBWere analyst Peter Sigley said.
But it was also highly likely that Qantas would turn its energies to Asia and seek an alliance with an Asian carrier, Mr Ward said.
While analysts made no changes to their valuations on either airline, they noted that a consequence of yesterday's decision was the likely conversion of redeemable preference shares held by Qantas into 4.99 per cent of Air NZ ordinary stock.
They also expect Air NZ to announce that it will proceed with a $NZ200m rights issue, $NZ150 million underwritten by the New Zealand Government, following its annual general meeting on October 27.
Goldman Sachs JBWere has assigned Air NZ a short term outperform rating with a target share price of $NZ1.87.
Credit Suisse First Boston rates Ar NZ at outperform, and Qantas at marketweight with 12-month share price targets of $NZ2.40 and $3.41, respectively.
Air NZ and Qantas are expected to await the outcome of their appeal to the Australian Competition Tribunal before moving forward.
The pair are appealing the rejection of any alliance by the Australian Competition and Consumer Commission last year.
ASIA PULSE
Here are some photos from Down Under posted at HKADB :
Air New Zealand, QANTAS Face Stiff Competition From Asian Rivals
SYDNEY, Sept 21 Asia Pulse - Air New Zealand Ltd and Qantas Airways Ltd face the prospect of intensifying competition on its trans-Tasman route from other airlines now that a proposed alliance between the pair has been blocked, according to analysts.
Air NZ and Qantas were disappointed yesterday when the New Zealand High Court blocked their proposed A$500 million (US$349 million) alliance, under which Qantas would have taken a 22.5 per cent stake in its rival.
Qantas and Air New Zealand have said they would pursue other avenues of cooperation that would not draw the ire of competition regulators.
"Despite Qantas and Air NZ signalling an ongoing intention to examine further opportunities, we expect competition will continue to intensify on the tran-Tasman, as Asian carriers target further market share gains," Credit Suisse First Boston analyst Greg Ward said.
Air NZ's share of trans-Tasman traffic has fallen in the past two years to 32 per cent, from 43 per cent, following the entry of Emirates and Virgin's Pacific Blue, which launched in January.
Qantas has maintained its market share at 39 per cent.
Qantas and Air NZ could form agreements to cooperate on maintenance and back office functions on the route, which is loss-making for both carriers.
"A close relationship with Qantas is a major factor in Air NZ's future as it minimizes the threat from its single most significant competitor," Goldman Sachs JBWere analyst Peter Sigley said.
But it was also highly likely that Qantas would turn its energies to Asia and seek an alliance with an Asian carrier, Mr Ward said.
While analysts made no changes to their valuations on either airline, they noted that a consequence of yesterday's decision was the likely conversion of redeemable preference shares held by Qantas into 4.99 per cent of Air NZ ordinary stock.
They also expect Air NZ to announce that it will proceed with a $NZ200m rights issue, $NZ150 million underwritten by the New Zealand Government, following its annual general meeting on October 27.
Goldman Sachs JBWere has assigned Air NZ a short term outperform rating with a target share price of $NZ1.87.
Credit Suisse First Boston rates Ar NZ at outperform, and Qantas at marketweight with 12-month share price targets of $NZ2.40 and $3.41, respectively.
Air NZ and Qantas are expected to await the outcome of their appeal to the Australian Competition Tribunal before moving forward.
The pair are appealing the rejection of any alliance by the Australian Competition and Consumer Commission last year.
ASIA PULSE
Here are some photos from Down Under posted at HKADB :
維珍仔 Thomas said: