Local group reported seeking BIL's stake in Air NZ

10.00 am

A group of New Zealand investors is putting together a consortium to buy Brierley Investments Ltd's 30 per cent stake in national carrier Air New Zealand, Radio New Zealand reported this morning.

The investors were not named by Radio NZ in the unsourced report, which said the group planned to formalise the offer in the next two weeks.

It said a sale of Brierley's (BIL) stake would open the way for a NZ$500 million rights issue to help fund Air NZ's hefty fleet replacement programme.

BIL owns its stake through Air NZ's New Zealand resident-only A shares, which make up 51 per cent of the share register.

BIL's 229.5 million Air NZ shares would be worth $250 million at the current A share price of $1.09, but BIL said last week it was not a seller at the current share price around $1.00.

Air NZ's unrestricted B shares closed on Tuesday at $1.46.

Air NZ last week revealed a proposal for Qantas to purchase a stake in the airline from 25 per cent shareholder Singapore Airlines and Brierley.

The government has shown reluctance to support a Qantas move into Air NZ with Prime Minister Helen Clark rating it "somewhat less" than a 50:50 chance of proceeding, particularly as the government has just tightened competition law. Qantas competes with Air NZ in the Australian and New Zealand domestic markets as well as on international routes between the two countries and around the Pacific region.

The Qantas offer would include the sale of Air NZ's Australian unit Ansett and Qantas' NZ operations to Singapore Airlines.

Radio NZ also reported on Wednesday that independent directors of Air NZ met the New Zealand Ministers of Finance and Transport for what it called a brief and formal meeting yesterday to update the government on progress in resolving the airline's future.

Under the privatisation of the airline in 1988, the government holds a golden share in Air NZ that holds powers including the control of offshore airline ownership.

At present the limit for total offshore airline interests in Air NZ is 35 per cent, with no single carrier allowed more than 25 per cent.

Radio NZ reported that the government was "firmly opposed" to a tie-up between Qantas and Air NZ.

The Dominion newspaper reported today that Air NZ chief executive Gary Toomey may have unveiled the Qantas proposal last week after he became aware of a secret deal between Qantas and BIL for the sale of much of BIL's stake to Qantas.

"Air New Zealand became aware that Qantas and Brierley Investments were working on the proposal and leaked it to pre-empt them from progressing too far...before allowing the proposal to go ahead," the newspaper quoted an unnamed analyst as saying.

Air NZ, which owns Australian airline Ansett Holdings, carries more than 21 million customers a year with a fleet of nearly 200 aircraft and in excess of 1,000 flights a day.

- REUTERS

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