Air NZ stake talks on track says Qantas

SYDNEY - Talks over buying a stake in Air New Zealand are continuing in a cordial and constructive manner, says Qantas.

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

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

"They are very cordial and very constructive. Obviously, if the boards and 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 per cent it tried to acquire last year.

Dixon said a question mark hung over the structural sustainability of the entire aviation industry.

He believed a strong Australasian airline grouping would benefit the region.

Qantas was on the lookout for equity partnerships and overseas investments, he said.

"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," Dixon said.

Later, he declined to comment about the A$200 million ($231 million) retail component of Qantas' capital raising, which closes tomorrow.

The offer is pitched at A$4.20, but Qantas shares have fallen recently on speculation that Singapore Airlines is about to enter the Australian domestic market, and possible war against Iraq. The share price fell 17Ac yesterday to A$3.67.

The company has already raised A$600 million from institutions as part of an A$800 million package for new aircraft and investment opportunities, including helping to pay for a possible stake in Air NZ.

Qantas may spend up to A$25 billion on new planes and services over 10 years.

- NZPA