Airline resale sparks opposition

By GEOFF SENESCALL

Air New Zealand's largest local shareholder, AMP, would oppose any move which might lead the airline to on-sell Ansett Australia.

The possibility of Ansett being sold before the ink is dry on the deal to buy the remaining 50 per cent shareholding in the Australian airline was raised after Qantas confirmed its interest in buying into Air New Zealand.

Qantas said it had held talks with Brierley Investments, which owns a 47 per cent slice of the local carrier.

But it acknowledged that any purchase would require Ansett to be sold.

"I can't imagine how that would be in Air New Zealand shareholders' interests," said Stephen Walker, head of equities for AMP, which holds just over 5 per cent of Air New Zealand shares.

Furthermore, he did not expect Air New Zealand directors would approve any such sale, especially as gaining full control of Ansett has been such a key focus for the airline.

Annual synergy gains of around $A220 million ($271 million) have been identified from the purchase of 100 per cent of Ansett.

Air New Zealand directors have recommended that shareholders accept the acquisition of Ansett. A special meeting is to be held on April 4 to ratify the buy.

"I can see how there would be synergies between Qantas and Air New Zealand. But not with a 25 per cent shareholding."

Mr Walker said few synergy benefits arose out of the initial tie-up between Ansett and Air New Zealand. Air New Zealand had a 50 per cent holding.

Under existing regulations, which protect international landing rights, a foreign airline cannot own more than 25 per cent of a local airline.

Because of the huge difficulties involved in overcoming government, regulatory and competition issues, analysts view the Qantas move as a spoiling exercise.

Analysts believed that Qantas' motives might be aimed at stopping Singapore from joining Virgin in Australia. A Singapore-Virgin alliance would be a very serious threat to the cosy duopoly enjoyed in the Australian market by Qantas and Ansett.

If Qantas can offer the carrot of delivering 100 per cent of Ansett to Singapore it might desist from talks with Virgin. Singapore's preferred entry into Australia is through Ansett.

Another angle is that by showing interest in Air New Zealand, Qantas might force Singapore back to the negotiating table with Brierley.

However, Brierley has subsequently halted sale talks with any parties until Air New Zealand has completed its purchase of the remaining shareholding in Ansett.

Meanwhile, Air New Zealand is expected to appoint a broker to handle its $285 million rights issue within a week. It is believed that one price will be struck for both the A and B shares.