Qantas Plans to Buy 22.5% Stake in Air New Zealand

Qantas, Australia’s national airline, said it would buy a 22.5% stake in Air New Zealand to form a regional airline alliance, the two companies said today.

The deal, which would face tough scrutiny by regulators in both countries, would see Qantas injecting up to $272 million into the New Zealand airline, currently 82% owned by the government after a bailout last year.

It also would allow the two airlines to streamline their operations and international services and “establish a major airline grouping in the region,” said Air New Zealand Chairman John Palmer.

Air New Zealand would maintain its independence and continue to provide domestic and international services, he said.

Under the proposed deal, Air New Zealand would combine with and manage those parts of Qantas that operate to, from or within New Zealand.

Qantas would take two seats on the Air New Zealand board and Air New Zealand would take one seat on the Qantas board.

Qantas Chief Executive Geoff Dixon said the partnership would help both airlines retain their independence, protect job security for staff and boost tourism between the two countries at a difficult time for the industry.

The two airlines had been talking about a closer relationship all year after the New Zealand government injected $495 million into the carrier last December.

Analysts believe winning approval from market and competition regulators could be the biggest hurdle to the plan. The carriers dominate their domestic markets and the routes between the two neighboring countries.

Australia’s competition regulator said the proposal appeared anti-competitive and would take at least four months to assess.

Rival Australian budget airline Virgin Blue said that a Qantas stake in Air New Zealand would offer no benefits to consumers. The company said it already had raised its concerns with competition regulators in both countries.