Clearing way for Qantas

By FRAN O'SULLIVAN

The Air New Zealand board is discussing with Qantas Airways a proposed shareholders' agreement that could mitigate national interest objections.

The deal would lead to synergies in the way the airlines do business.

The proposal for Qantas to acquire a stake in Air New Zealand has faced stiff opposition from some political parties.

National leader Bill English is opposed and Greens co-leader Rod Donald has said his party opposes any foreign airline holding in the national carrier.

The deal also faces regulatory hurdles at the Commerce Commission and Takeovers Code levels. Wellington International Airport has commissioned a report, which may be used to challenge a Qantas buy-in on anti-competitive grounds.

National interest considerations include satisfying the commission that any deal would not lead to price gouging on key routes such as the transtasman.

Under the takeovers code, Qantas would be restricted to a 19.9 per cent holding unless Air New Zealand shareholders not aligned with Qantas gave their majority approval to a deal.

Earlier this year, Air NZ chief executive Ralph Norris said the airline would consider raising additional capital of up to $200 million through a rights issue.

The Government had made a commitment to inject up to another $150 million by the middle of next year if required.

Air New Zealand is 82 per cent owned by the Government after an $885 million rescue package.

The airline has said it expects to break even on an operating basis this financial year.

* Any Qantas purchase of Air New Zealand could be beneficial because of the potential for new jobs, says the secretary of the country's biggest union.

But Andrew Little, from the Engineering, Printing and Manufacturing Union, says its stake must not go above 25 per cent or control issues would arise and our national carrier's character and identity may suffer.

"It has the potential to have some benefits for us, certainly on the engineering side because it will mean a much greater prospect of more work."

Qantas already put work through the union's engineering sites, because of the quality and speed at which it was done, and a couple of years ago had talked of putting an engineering base in Auckland.

"I think they would see a relationship built across both airlines and rationalise their engineering facilities so that all 767s and 737s would be done over here and 747s and probably airbuses would be done in Australia."

The downside for the travelling public would be the lack of real competition and "monopolistic behaviour" such as price hikes.

He believes both airlines see benefits in a relationship that would allow them to achieve economic benefits.

- additional reporting Catherine Masters

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