Qantas awaits clearance on Air NZ equity deal (Geoff Thomas)
Wed "Melbourne Age" 9/10/02
Qantas awaits clearance on Air NZ equity deal
October 09 2002
By Geoffrey Thomas
Qantas and Air New Zealand are on the verge of forming an equity partnership, with the deal expected to be announced at the New Zealand airline's annual meeting on October 29.
Both airlines remained tight-lipped on progress yesterday, but airline sources in Auckland confirmed they had held discussions with competition regulators in Australia and New Zealand on the procedures to be followed once the deal was approved at board level.
The Qantas board meets in Perth next Wednesday with the annual meeting the next day, but no details of the New Zealand deal are expected to be announced.
Analysts in Melbourne, Auckland, Hong Kong and New York said they expected the equity deal to be agreed later this month with Qantas taking a 20-25 per cent stake in Air NZ with the issue of new shares.
Qantas would receive two seats on the board, and Air NZ's chairman, John Palmer, would be offered a seat at Qantas.
Both airlines are said to have agreed a broad framework for an agreement and only decisions relating to concerns of competition regulators are to be agreed.
Competition regulators' concerns focus on the possible elimination of competition in the New Zealand domestic market and on trans-Tasman services.
Analysts pointed out these concerns could be allayed if Virgin Blue were to enter both markets, which is its stated intention.
Observers suggest that the result of negotiations with regulators may be Qantas and Air NZ giving up some key airport landing slots at Sydney and Auckland to facilitate Virgin Blue flying the Tasman.
The NZ Government controls Air NZ through its 82 per cent stake so it has told the airline's board to do all the negotiations with the government competition regulator, the New Zealand Commerce Commission. Analysts had expected a proposal being agreed after the return of Helen Clark's government on July 27, but problems relating to competition regulators and what each airline is prepared to give up have taken longer then expected.
Since that date, Qantas shares have slumped from $4.85 to close yesterday at $3.40 while Air NZ's Australian-listed shares slumped from 58 cents to 42 cents on fears of a US strike against Iraq.
Analysts said that although Qantas would have two board seats it would have no management input in the NZ airline. Qantas had also made significant commitments to the deal relating to feeding tourist traffic into New Zealand from European markets, an area Air NZ does not serve directly.
Talks relating to route planning and integration of services and operating systems are essentially completed, say insiders, with cost savings to Qantas from the deal estimated to be as high as $150 million a year.
- West Australian