Michael Pascoe writes:

If Qantas and Air New Zealand get their trans-Tasman
code-share deal past the competition regulators, the days of
bargain basement fares to across the ditch might be over, but Qantas’ bottom
line might be as much as $35 million better off.

Goldies JB Were transport analyst Paul Ryan
is telling clients the code-share deal would result in a 9 per cent
reduction
in Qantas’ capacity on the route, higher aircraft utilisation and:
”Earnings: Could drive $35m in benefits for QAN on a route that is
marginally
profitable currently.”

It’s just part of the picture Ryan is
painting as part of his “outperform” recommendation on the Roo.

Slowing capacity growth at rival international
carriers, strong cost reduction track record and a robust domestic consumption
outlook augur well for the re-emergence of strong earnings momentum in
FY07. Recent share price weakness has
created a strong value opportunity on a 3-6 month view.

Ryan has a valuation of $4.15 on Qantas, which is rather at odds with
the present market view of $3.46.

Peter Fray

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