Qantas prepares to grab a 25% holding in embattled Air NZ

By Graeme Kennedy

Friday 26th July 2002

A $400 million deal in which Qantas would acquire a strategic 25% stake in Air New Zealand could be announced within weeks.

While Air New Zealand chairman John Palmer said there was no "done deal" between the parties, Australian sources said Qantas would pay about 60c a share for its stake - about 5c below that carrier's trading price this week.

Qantas shares jumped 10c to $A4.62 on the Australian Stock Exchange in anticipation of an announcement although Mr Palmer strongly denied a claim by National finance spokesman David Carter that the board had already agreed to the offer.

Mr Palmer said Mr Carter's claim was "factually wrong" and that any strategically significant decision would be immediately announced to the New Zealand and Australian exchanges.

Finance Minister Michael Cullen, representing the government's 82% ownership of the airline, Qantas and Air New Zealand itself have all confirmed discussions on an Australian stake have been taking place.

Dr Cullen said no laws would be changed to make way for a deal and that it would have to be approved by the Commerce Commission.

Australian domestic carrier Virgin Blue's commercial manager David Huttner met the commission this week to express concerns about industry and competitive changes which could occur with a Qantas-Air New Zealand partnership.

Qantas has twice been a shareholder in the national carrier - as Teal and Air New Zealand - but widespread resistance to a third investment has been increasing as the public and travel industry fear it would lead to less competition and higher fares.

A Qantas holding could lever the door to the New Zealand domestic market open to allow Virgin Blue to operate here and maintain competitive levels but industry sources were unsure if Sir Richard Branson's carrier would be prepared to operate in a relatively small market against the combined might of Australasia's two biggest airlines.

Qantas CEO Geoff Dixon said recently Air New Zealand would not be treated as a junior partner by the much larger carrier in any deal.

"A partnership would be one of equals - and I stress equals - as part of creating a stronger basis for global growth," Mr Dixon said. "No major carrier can afford to ignore the needs for serious alliance relationships strengthened by equity," he said.

Meanwhile, Mr Carter yesterday urged Dr Cullen to "come clean" on Air New Zealand's future before the general election tomorrow.

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