Air N.Z. sees no early Qantas deal


Air New Zealand says there is no deal yet with Australian carrier Qantas

Geoff Hiscock
CNN Asia Business Editor

SYDNEY, Australia (CNN) -- Air New Zealand has played down the chances of an early equity deal with Australian carrier, Qantas Airways, saying it did not expect to conclude any "significant strategic agreements" in the next few weeks.

Speculation that Qantas was poised to take a minority stake in the New Zealand airline intensified Tuesday after Qantas requested a trading halt in its shares.

Air New Zealand issued a statement to the Australian and New Zealand stock exchanges on Tuesday afternoon, confirming that its negotiations with Qantas were continuing, but adding that no "relevant agreement or commitment" had been reached.

Qantas is due to report its full year earnings Wednesday morning, with analysts predicting it will lift net profit 10 percent to about Aust. $420 million ($229 million).

Profitable airline


Qantas has more than 80 percent of the Australian market following the demise of rival Ansett earlier this year

That would make it one of the most profitable airlines in the world, at a time when the aviation industry continues to be rattled by the post-September 11 downturn in travel.

There is also talk in the market that Qantas is about to raise A$1 billion ($543 million) in fresh capital. Last week the Australian government rejected an appeal by Qantas that it be allowed to relax restrictions on overseas ownership of the airline.(Full Story)

The ownership cap is set at 49 percent for total offshore equity and 25 percent for any single overseas airline. British Airways now holds almost 22 percent of Qantas.

Qantas has been keen to forge an agreement with Air New Zealand for more than a year, and confirmed in May that it was talking to the New Zealand carrier about a minority stake.

Government rescue

Air New Zealand had to be rescued by the New Zealand government via a $366 million NZ$885 million) recapitalization last October, in part because of troubles with its subsidiary, the now-defunct Australian carrier Ansett.

Last month, the Australian corporate regulator, ASIC, decided to take no action against Air New Zealand over Ansett's collapse, despite what it says was the possibility of "misleading and deceptive" disclosures. (Full Story)

The New Zealand government owns 83 percent of Air New Zealand, but there is a widespread view that this is about to change, with Qantas taking 25 percent or more.

Any decision on approving a stake was on hold until after the July 27 New Zealand national elections, which saw the return of the Clark government.

Air New Zealand's two big shareholders before the October 2001 rescue, BIL and Singapore Airlines, have seen their stakes reduced from 30 percent and 25 percent to 5.4 percent and 4.5 percent respectively.

Qantas shares last traded at A$4.69 Tuesday, before it requested a halt. That was a gain of 0.86 percent on the previous day's close. The broader market, measured by the S&P/ASX200, is up 0.88 percent.

Air New Zealand is up 3.92 percent to A$0.53 on the Australian share market, and closed 1.7 percent higher in New Zealand at NZ$0.61.

Since the demise of its major competitor Ansett earlier this year, Qantas has moved to control about 80 to 85 percent of the Australian market, with Sir Richard Branson's discount newcomer Virgin Blue now the No.2 carrier.