Australian watchdog puts heat on airlines

Australia's Competition and Consumer Commission has demanded a meeting with Virgin Blue and Air New Zealand-Ansett executives over their plans.

This follows reports that the airlines have discussed options ranging from an equity deal to a commercial alliance or code-share arrangement.

Virgin chief executive Brett Godfrey said the Sir Richard Branson-owned airline was also considering options with at least two other airlines.

The commission has written to Virgin and Air New Zealand-Ansett demanding information about their plans.

Any deal between the two could affect decisions such as the reallocation of slots that Qantas may have to give up to enable its proposed takeover of the tottering Impulse Airlines to go ahead.

Mr Godfrey told the Australian Financial Review that Air New Zealand's budget subsidiary, Freedom International, would be a better partner than Ansett because it had expertise in running a low-cost carrier.

Virgin has lodged a formal application with the New Zealand Government to fly transtasman and domestic routes.

Air New Zealand has appealed to the Government for a $700 million capital injection via a notes or convertible share issue to help pay for a $5 billion fleet upgrade for Ansett.

Salomon Smith Barney has been appointed to look at Air New Zealand's financing options.

Air New Zealand chief executive Gary Toomey has said that he would put five options to the board for consideration.

The Government has confirmed that talks were held over a month ago.

But Deputy Prime Minister Jim Anderton said the Government had not received a request from Air NZ nor had the airline given any indication that it was about to make one.

Air NZ chairman Sir Selwyn Cushing has been on holiday in Fiji.

He has not been available to comment further on comments attributed to him about the request to the Government for more capital.

- NZPA

Herald Online feature: Aviation

Air wars - the cast list

Herald Online Travel