Brierley halts talks on sale of Air NZ

By GEOFF SENESCALL

Brierley Investments suspended sale talks of its Air New Zealand shareholding yesterday amidst news that Qantas Airways was also an interested buyer.

After failing to reach an agreement with Singapore Airlines earlier this month, Brierley has put any further discussions on hold until Air New Zealand completes its purchase of Ansett Australia.

Air New Zealand is scheduled to conclude its $A680 million purchase of the remaining 50 per cent shareholding in Ansett from Rupert Murdoch's News Corp by the end of April.

This decision to put talks on hold was made at a Brierley board meeting in Singapore.

But in the latest twist, Qantas chief executive James Strong has issued a statement confirming reports of its interest in Air New Zealand.

Qantas, Australia's largest airline, said it had had discussions with Brierley over its 47 per cent stake.

A partnership with Air New Zealand would establish a major regional airline with the "size and capital base to compete aggressively in a rapidly changing international market."

However, any purchase would be dependent on the sale by Air New Zealand of Ansett.

Singapore Airlines chief executive Dr Cheong Choong Kong - who was in Sydney to announce its expansion of services there - declined to comment on the Qantas move.

However, analysts suggested that Singapore might not be upset by the development, given its preferred option had always been to buy into Ansett directly. Air New Zealand, however, declined to waive its pre-emptive rights over the News stake in June last year. This forced Singapore to start negotiating with Brierley over its holding in Air New Zealand.

Peter Harbison, the managing director at the Centre for Asia Pacific Aviation, said: "It's quite a good tactical move by Qantas to become involved and try to perhaps divert the course of things."

But he added both regulatory and the commercial difficulties were so hard to overcome that it would have to be an "outside prospect if they succeed."

A Qantas and Air New Zealand alliance, even without Ansett, is unlikely to get Government regulatory approval, because of the two carriers' dominance on various routes in the region particularly the Australian-New Zealand path, Mr Harbison said.

The Australian antitrust authorities are already signalling a keen interest in any proposal by Qantas to buy Ansett because combined they will control 100 per cent of Australia's $A7 billion aviation market.

The timing of Qantas' signal of interest comes as Singapore must decide whether it will join Sir Richard Branson's Virgin airline operation in Australia.

Qantas' share price has been hit hard since Sir Richard announced he was planning to start a low-fare service by September.

Unless there has been further slippage in the timetable, Singapore has until the end of this month to make up its mind on joining Virgin's Australian operation. Singapore recently purchased 49 per cent of Sir Richard's Virgin Atlantic Airways.

Qantas' decision to revisit Air New Zealand comes several years after it sold a 19.9 per cent stake.

Because the airlines were fierce competitors, the relationship was always tetchy.

But this time around it appears that Qantas is interested in owning a larger stake in Air New Zealand. Under existing regulations, a foreign airline cannot own more than 25 per cent and foreign holders no more than 49 per cent. Singapore-based Brierley is able to own the restricted class Air New Zealand shares through an entity called BIL NZ Assets. Whether this could be replicated is likely to be tested.