Qantas' plans for Air New Zealand hit turbulence

Qantas Airways’ proposal to take a stake in Air New Zealand, its regional rival, ran into turbulence on Friday when Singapore Airlines sketched out an alternative plan to increase its stake in the New Zealand carrier.

“The Qantas proposal is not SIA’s preferred option,” Cheong Choong Kong, SIA chief executive, said.

Mr Cheong said SIA would prefer to buy a large, direct stake in Ansett and maintain or enlarge its 25 per cent shareholding in Air NZ. Denying suggestions that SIA was interested in selling its Air NZ share, he said SIA did not invest in airlines lightly but rather for the longer term.

SIA was seeking a meeting with the New Zealand government next week where such options would be discussed. Air NZ’s board is scheduled to meet on Monday to discuss the airline’s financing and restructuring options in Auckland.

Gary Toomey, Air NZ chief executive, said on Friday that the carrier was evaluating all options on the table for a radical restructuring, but hoped a deal would be hammered out as quickly as possible.

SIA, which is in the Star Alliance group with Air NZ and Ansett, is clearly keen to ward off the advances of Qantas, a member of the rival Oneworld grouping, led by British Airways and American Airlines.

Some reports suggest that fellow Star partner, United Airlines of the US, described as “speculation” reports from New Zealand that it was considering taking a stake in Air NZ to help recapitalise the group and block Qantas’ bid

Qantas envisaged purchasing most of the stake held by Air NZ’s two major shareholders – SIA with 25 per cent and Brierley Investments with 30 per cent – to take up to 49 per cent of Air NZ. Qantas proposed that as part of the transaction, SIA would then take full control of Ansett

The Qantas proposal has also met with fierce political opposition from the New Zealand government with Helen Clark, prime minister, saying she does not want to see the New Zealand carrier controlled by the Australian airline.

Government approval would be required before either the Qantas or new SIA proposals could go ahead because New Zealand policy restrictsforeign ownership to 25 per cent of Air NZ.

Air NZ, which is expected to report a loss for the year to June of about NZ$170m ($71m), needs capital to inject into its troubled Ansett group. Ansett needs a NZ$5bn fleet upgrade.