Air NZ shareholders unlikely to be told Qantas news at AGM

3.00pm

Air New Zealand shareholders hoping to hear more at Tuesday's annual meeting of the airline's planned "engagement" with Qantas are likely to be left up in the air.

Air New Zealand has not been jilted yet but the pre-nuptual agreement is proving complex to work through, analysts said.

The company would not say if shareholders could learn more about the progress on the Qantas talks at the meeting.

"We're not in a position to make any comment when the next step, if there is one, will be made public, because essentially those discussions are continuing," airline spokesman Mark Champion said.

Speculation was running high earlier this month after a Perth newspaper ran a story saying the deal, whereby Qantas would buy a 20-25 per cent stake, would be announced at the Auckland meeting.

But Finance Minister Michael Cullen on October 10 hosed down those rumours saying "as far as I am aware no proposal is imminent, and the fevered speculation a deal is being done... have been completely wrong on every occasion they have been uttered".

The West Australian story was given credence because of its details including Qantas getting two board seats and Air New Zealand getting one seat on the Qantas board.

Analysts had expected an announcement by the end of this month and delays to such business deals often spell trouble.

JB Were analyst Peter Sigley said the airlines were having difficulty designing a deal acceptable to competition watchdog, the Commerce Commission, understandably so given that their combined operations comprise virtually all New Zealand's domestic market.

"It's not ready to be announced yet," Mr Sigley said.

"They have been working on it long enough and comments coming out of Qantas suggested that towards the end of this month was when they were expecting it to come out, but Qantas' AGM has come and gone.

"It sounds like it won't come out at Air New Zealand's AGM so it's notice pending."

Air New Zealand being a part of the global Star Alliance and Qantas being a member of the rival oneworld alliance is also complicating issues.

Michael Heffernan, with broking house Terrain Securities in Sydney, does not expect an announcement on Tuesday either.

Qantas would want a number of concessions before it sunk money into the troubled New Zealand carrier, he said.

There was a lot of resistance to Qantas' request for two seats on the Air New Zealand board and Qantas would also be wary of the government veto powers.

Price was another question and Qantas would not want to pay the market rate -- 50 cents per share compared with the 24-27 cents per share paid by the Government for its 82 per cent stake.

Even if Qantas took a 25 per cent share, Air New Zealand would still need a capital injection or an operational accommodation with Qantas to cut its costs.

"Just buying a 25 per cent share from the New Zealand Government doesn't resolve the fact that Air New Zealand has funding problems," Mr Heffernan said.

A strengthened operational agreement to share maintenance and aircrew might be announced as preliminary to any buy-in by Qantas, he said.

An Australian aviation analyst, who did not want to be named, said the airlines were close to reaching an agreement, but if an announcement was made on Tuesday it would be conditional on Commerce Commission and ACCC (Australian Competition and Consumer Commission) approvals.

To get past the watchdogs, Qantas would have to withdraw from the New Zealand domestic market.

"The Commerce Commission in the past has taken a fairly strong stance on the idea of joint ownership of both competitors, if you look back at the Ansett deal."

There were also competition issues about the Tasman and Pacific routes.

Australian airline Virgin Blue is not making it easy for a deal to proceed. While it has said it wants to fly in New Zealand and across the Tasman, it has said it would await the outcome Qantas' talks with Air New Zealand before announcing its next move.

- NZPA