Flying Kangaroo fighting back

THESE are testing times for Qantas, the kangaroo-emblazoned carrier in which British Airways holds a 17% stake, as it faces rising competition from discount rivals, battles with regulators and the lingering effects of the killer Sars virus.

But the Australian airline today gave two reasons for optimism.

First, it said forward bookings were improving even as it restored capacity. The shares, which slumped to a low of A$2.84 in April during the Sars scare, pepped up three cents or 1% to A$3.25.

Second, the company confirmed it was still fighting to get its proposed alliance with Air New Zealand (Air NZ) off the ground. It plans to appeal an early thumbsdown from Canberra regulators on Monday.

Qantas wants to buy a 22.5% stake in Air NZ for NZ$550m(£197m) to underpin a alliance on routes to, from and within New Zealand. It is these international sectors that will face pressure from Sir Richard Branson's local offshoot, Virgin Blue.

The Australian Competition and Consumer Commission shot down the tie-up in its first overview, triggering the appeal. New Zealand regulators, also poring over the deal, have said they will not deliver a verdict until next month.

Qantas has also been in the news this week as the Australian and Singapore governments signed a more-liberal bilateral airservices agreement.

Critically for Qantas, the new framework stopped short of a full open-skies deal. And that means, for the time being at least, Qantas gets to keep Singapore Airlines (SIA) off its lucrative trans-Pacific routes between Sydney and the US West Coast.

Analysts reckon that the US routes, contested only by United Airlines, may eventually account for as much as a third of Qantas's net earnings.

Brambles Industries, the troubled international logistics business, failed to get a lift from news that chief executive CK Chow had abruptly jumped ship to a post in Hong Kong. The shares, which receive the occasional boost from stale takeover talk, dropped eight cents, or 1.7%, to A$4.70. David Turner, the financial director, will take Sir CK's place.

Peter Lehmann Wines, at the centre of a tussle between Allied Domecq and Switzerland's Hess Group, traded up seven cents or 1.8% at A$4.02. That is two cents better than Allied's latest offer, the highest on the table.

Despite Wall Street's wobble overnight, the All Ordinaries index was 8.5 points higher at 3181.3, a 0.3% gain.

Tokyo initially had a softer bias, led by Japan's top pharmaceuticals company, Takeda Chemical-Industries. News that it was halting development of a diabetes drug, and an attendant slew of downgrades, pushed it down 180 yen, or 4.2%, to 4080.

A paradoxical helping hand came in the form of an earthquake that shook the north of the country. The tremors weakened the resurgent yen, aiding carmakers. Nissan was up 31 yen at 1227, a gain of 2.6%. That helped lift up the Nikkei 225 Average by 8.4 points, or 0.1%, to 10,318.44.

South Korean shares were lower, bruised by Kookmin Bank, which gave up 2000 won, or 5%, to 37,700. Kookmin is under investigation over share-dealing practices. The Kospi index fell 16.12 points, or 2.3%, to 697.40.