Singapore and Qantas in dogfight for stake in Air New Zealand

Singapore International Airlines (SIA) and Australia’s Qantas Airways LTD engaged in a dogfight for a key stake in Air New Zealand after the controlling shareholder pulled the “For Sale” sign down.

In mid-March SIA nearly sealed a deal to buy Brierley Investment LTD’s (BIL) 47 per cent stake in the New Zealand airline, but in an announcement a week later BIL said it was pulling the stocks off the sale counter.

At issue is not Air New Zealand itself, but dominance in the Australian domestic market where Air New Zealand has just completed buying Qantas’ main local rival, Ansett Holdings Ltd.

Adding to a complicated weaving of contrails are the ambitions of cut-price operator Virgin Airlines to join with SIA to run a discount domestic carrier in Australia.

But if SIA gets the Air New Zealand shares it would be expected to pull out of Virgin arrangements.

BIL owns 47 per cent of Air New Zealand, including 17 per cent of the B shares which are the only ones that can be owned by foreigners.

BIL was once headquartered in Wellington but is now registered in the Cayman Islands and was due to list on the Singapore Stock Exchange.

A week before it seemed BIL was going to sell a 25 per cent stake to SIA for around 400 million NZ dollars (197 million US), but the details were never made public nor was the future of BlL’s remaining shareholding explained.

SIA chief executive Cheong Choong Keong was in New Zealand to sign the deal which faltered when Prime Minister Helen Clark made it clear her government would not change ownership rules.

Under existing regulations, no one foreign airline can own more than 25 per cent and total foreign ownership is limited to 49 per cent.

Negotiations continued but then Qantas entered the frame by saying it wanted a piece of Air New Zealand. Any Qantas deal would, however, appear to require Air New Zealand to off-load Ansett Australia.

Air New Zealand was scheduled to conclude its 844.4 million NZ dollars (412.2 million US) purchase of the remaining 50 percent shareholding in Ansett Australia from Rupert Murdoch’s News Corp by the end of last month.

Qantas sold a 19.9 percent stake it had in Air New Zealand in 1997, frustrated both by an inability to wring operational synergy from the investment and the hostile attitude of the Air New Zealand board.

BIL said it had suspended sale talks after interest from SIA, Qantas and other

unspecified parties.

“BIL considers that the first priority is to ensure that Air New Zealand successfully moves to full ownership of Ansett Holdings Ltd,” company secretary Mark Horton said in a statement.

“BIL is also of the view that ultimately Air New Zealand would benefit from having a strategic relationship with another airline through its share register, but in the meantime, it has withdrawn its stake from sale.”

Qantas said 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.”

Analysts seriously doubt that Qantas would be able to jump regulatory, political and corporate culture hurdles to buy Air New Zealand. Both airlines compete fiercely on the trans-Tasman and trans pacific routes while Air New Zealand competes against Qantas inside Australia through Ansett.

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

But he added that regulatory and commercial difficulties made success an “outside prospect.” ■