Air NZ, Qantas to announce deal at October AGM: report

9.30am

Qantas and Air New Zealand are expected to announce an agreement on an equity partnership at Air New Zealand's annual meeting on October 29, the West Australian newspaper reported today.

It said unnamed airline sources in Auckland had confirmed the airlines had held talks with competition regulators on 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.

The paper said sharemarket analysts expected the equity deal to be agreed later this month, with Qantas taking a 20 to 25 per cent stake through the issue of new shares.

An Air New Zealand spokesman said the airline "would remain remain tight lipped".

The Government, which owns 82 per cent, was not immediately available to comment.

A spokeswoman for the Commerce Commission said to her knowledge the commission had not had any talks but she would check further.

Qantas would get two seats on the board, while Air NZ chairman John Palmer would be offered a seat on the Qantas board, the paper said.

Despite the two board seats Qantas would have no management say and the Australian airline had also made significant commitments relating to feeding tourist traffic into New Zealand from European markets not directly served by Air New Zealand.

"The two are said to have agreed a broad framework and only decisions relating to competition regulators' concerns remain to be agreed," the paper said.

These focus on the possible elimination of competition in New Zealand's domestic market and on trans-Tasman services.

Analysts said these concerns could be allayed by Virgin Blue entering both markets, which is its stated intention .

The Government is likely to sell the deal through by facilitating Virgin Blue's access to New Zealand and across the Tasman.

Air NZ shares were unchanged today at 49 cents. Qantas shares have slumped from A$4.88 ($5.60) at the end of July to A$3.40 yesterday.

- NZPA