`Constructive' talks between Qantas and Air NZ continuing

By NZPA

Wednesday 25th September 2002

Talks over the purchase of a stake in Air New Zealand are continuing in a cordial and constructive manner, Qantas Airways said today.

But chief executive Geoff Dixon, addressing a business lunch in Sydney, gave no indication how far the negotiations between the two airlines had progressed.

"We've made it very plain that we would like to establish a partnership of equals with Air NZ and those discussions are still continuing," he said.

"They are very cordial and very constructive. Obviously, if the boards and the senior management of both airlines agree that there is a path for us to go forward, we will, but we are still talking about it."

Qantas is understood to be seeking a similar-sized parcel to the 25 percent it tried to acquire last year.

Mr Dixon said the global aviation situation was a serious one, with a question mark over the structural sustainability of the whole industry.

He believed a strong Australasian airline grouping -- which included, but not necessarily included only, Qantas and Air NZ -- would be of benefit to the region.

He said Qantas was on the lookout for equity partnerships and offshore investments.

"Although we will always remain a principally Australian airline, we are going to need to undertake investments overseas, and most likely forge new equity partnerships," he said.

Later, he declined to comment to journalists about the $A200 million ($NZ234.16 million) retail component of Qantas' capital raising, which is due to close on Friday.

The offer is pitched at $A4.20, but Qantas shares have fallen in recent weeks on speculation that Singapore Airlines is about to enter the Australian domestic market and possible military action against Iraq.

The share price closed down 17c today to $A3.67.

The company has already raised $A600 million from institutions as part of plans to raise $A800 million for new aircraft and investment opportunities, including helping to fund the possible purchase of a stake in Air NZ.

Meanwhile, Mr Dixon said there was a constant threat of a third player entering Australia's open domestic market.

The demise last year of Air NZ-owned Ansett and of Impulse, which was taken over by Qantas, has left just Qantas and Virgin Blue as the main players.

"There is absolutely nothing to stop a new player entering the market at any time," Mr Dixon said.

"Cherry-picking the most lucrative routes is an obvious starting point for any entrant. This places constant pressure on incumbents."

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