Air NZ takes stake in Virgin Blue

Air NZ's alliance with Virgin Blue will allow the two airlines to co-ordinate a range of flight issues. Photo / Brett Phibbs

Air New Zealand is taking its relationship with Virgin Blue up a notch, saying it has become a substantial shareholder in the Australian-based airline it is forming a transtasman alliance with.

Air New Zealand has notified the ASX and NZX that it has become a substantial shareholder in Virgin Blue, and plans to build its holding to between 10 per cent and 14.99 per cent. Companies are considered to be substantial shareholders when they hold 5 per cent or more of a company.

Virgin Group, the United Kingdom-based company founded by Sir Richard Branson, has a 26 per cent shareholding in Virgin Blue.

Air New Zealand chief executive Rob Fyfe said his airline had no intention of making a takeover bid for Virgin Blue. He told Virgin Blue's chief executive, John Borghetti, this in a telephone call today.

"The investment in Virgin Blue is part of Air New Zealand's strategy to develop scale and reach in this region. The Tasman alliance with Virgin Blue was the first step in this strategy.

"This investment cements the emerging relationship between our two airlines and demonstrates the confidence we have in Virgin Blue both as an entity and as a partner for Air New Zealand," said Mr Fyfe.

Last year Air New Zealand and Virgin Blue won approval from Transport Minister Steven Joyce to co-operate on routes across the Tasman Sea. The decision followed approval from Australia's antitrust regulator, which reversed its preliminary view, after the two airlines gave guarantees on growth in capacity.

Air New Zealand is majority owned by the New Zealand Government.

The airline said today that it has obtained Australian Foreign Investment Review Board approval to purchase up to 14.99 per cent of Virgin Blue, a shareholding which would keep the total foreign ownership of Virgin Blue within the statutory limit of 49 per cent.

Air NZ did not comment on how it funded the purchase.

Air New Zealand intends to make a further announcement about the shareholding to the NZX and ASX before the commencement of market trading tomorrow.

- NZPA