Air NZ talking with Qantas but no deal yet

1.20pm

Air New Zealand said today it has held talks with Qantas about the Australian airline taking a stake in the national carrier, but no agreement had been reached.

"Discussions have been ongoing between the two airlines since May last year. The parties continue to discuss options but nothing has been agreed," Air NZ chairman John Palmer said in a statement to the Stock Exchange.

Mr Palmer's short statement said nothing else.

Qantas Chief Executive Officer Geoff Dixon also confirmed the discussions, which he said were on a wide range of business issues, including a minority Qantas shareholding in Air New Zealand.

His comments follow reports in The Dominion newspaper today which speculated Qantas had been in secret talks to buy a big stake -- possibly up to half -- of Air NZ.

Air NZ is 82 per cent-owned by the Government following an $892 million bailout late last year. The Government said today it wasn't party to any discussions with Qantas.

The unsourced Dominion report said Air NZ and Qantas had hired merchant banks on both sides of the Tasman to work on the deal, which would inject hundreds of millions of dollars into the airline.

The newspaper reported that Qantas would take management control of Air NZ, with the Government keeping about 65 per cent of the airline.

A spokeswoman for Finance Minister Michael Cullen said today the Government had always said, since becoming the majority shareholder, that it was interested in selling a cornerstone shareholding to a company with expertise in aviation.

Dr Cullen has also said the Government would retail a majority holding.

His spokeswoman said Qantas had been upfront about wanting control of Air NZ.

"The procedure would be that whoever was interested would negotiate with the Air NZ board and the board would come to the Government with a proposal. There is no proposal before the Government at this stage."

Air NZ shares, which yesterday hit 72 cents -- one third higher than last Thursday -- were steady at 68 cents today.

National Radio reported this afternoon that Air NZ was negotiating with Qantas to feed into its Australian domestic services.

Under the deal, Qantas would pick up passengers from smaller Australian cities and fly them to Sydney, Melbourne, or Brisbane, where they would transfer to Air NZ flights to cross the Tasman, National Radio said.

- NZPA