Qantas prepares bankroll for Air NZ as relations thaw

SYDNEY - Qantas yesterday announced plans to raise A$800 million ($940 million) for new aircraft and investment opportunities, including helping to fund the possible purchase of a stake in Air New Zealand.

Qantas chief executive Geoff Dixon was in buoyant mood after revealing the Australian airline was one of the few of the world's major airlines to have increased profits this year.

However, he said any decision on a deal concerning Air NZ was still some way away.

"No decision has been made and no decision is pending within the next few days or the next few weeks," he said.

He added that the Australian carrier remained convinced that a strong relationship between the two airlines was strategically beneficial to both.

Air New Zealand yesterday made a statement that it had conditionally agreed a strategic alliance with Qantas would be of value to both airlines.

It said it had consented to a brief statement being included in Qantas' rights issue prospectus.

But the statement stresses that no deal had been struck or was certain.

However, yesterday's statement reverses thaws what had been a frosty face shown to Qantas in the past.

Mr Dixon said there was a range of issues to work through and neither party would be hurried.

"It's a very big decision for Qantas and a very big decision for Air NZ, and I don't think either of us should rush into it," he told a news conference in Sydney.

"Qantas has been going for 82 years and a few more months of discussion with Air NZ is not going to change our financial or operational position at all."

Mr Dixon said he didn't want to express confidence one way or the other about how the discussions with Air NZ, which is 82 per cent Government-owned, would go.

Asked if the size of the stake Qantas might have, or the price it would pay, were stumbling blocks, he said the negotiations were complex and did not hinge on just one issue.

Any proposal to the New Zealand Government and to regulatory authorities would be subject to "very huge scrutiny" in terms of the benefits to consumers, he said.

"So don't think we're sitting there haggling over price or anything like that," he said.

"We're sitting there saying, 'Is this a good idea, will this fly with the regulators? If it does, how do we construct a proper case and a compelling case to get it going?'."

Qantas has previously had a holding in Air NZ, after the latter was privatised in 1988.

But Mr Dixon said Qantas' involvement then was on a "semi-hostile" basis, and "personalities have changed".

He said the view of the senior management of both airlines this time around was that any relationship would occur only if both wanted it.

The $800 million equity raising would be through an entitlement offer to existing shareholders.

Most of the funds raised would got towards new aircraft, which would be both for growth and to replace ageing planes.

But "if indeed there was an opportunity for us to invest in Air NZ, it would come out of this capital raising and the money that we have", Mr Dixon said.

Earlier today, Qantas announced a net profit of A$428 million for the year ended June 30, up 3 per cent on the A$415 million for the previous year.

The result was at the higher end of analysts' forecasts and chairwoman Margaret Jackson said it was pleasing given the extraordinary trading conditions over the 12 months.

These included the failure of two Australian domestic airlines, Ansett and Impulse, and the "meltdown" in international aviation after the September 11 terrorist attacks.

Qantas said it expected the recovery trend to continue, but "there are a number of factors which could impact future results".

Trading in its shares was halted yesterday pending the equity raising announcement and will resume on Friday. The shares last traded at A$4.69.

Air New Zealand shares closed two cents stronger at 63 cents.

- NZPA