NZX ruling deprives airline's shareholders of vote

Air New Zealand shareholders will not get the chance to vote on a material financial component of the proposed code-share agreement with Qantas after an NZX ruling accepting that the two airlines are not related parties.

NZX Regulation (NZXR) yesterday released its decision on Air NZ's application for a waiver relating to the redemption of convertible notes held by Qantas.

As part of the transtasman code-share, Air NZ has agreed to redeem $98.2 million of convertible notes issued to Qantas as a precursor to a 2002 code-share proposal eventually knocked back by regulators.

Under NZX listing rules, the redemption would be considered a material transaction as it involves value equivalent to more than 5 per cent of Air NZ's market capitalisation.

If Qantas had been deemed a related party of Air NZ, an appraisal report and a shareholder vote would have been required before the transaction could go through.

Opponents of the code share proposal have said it amounts to collusion by the two biggest forces in the market and will substantially lessen competition on the transtasman route.

The 2002 proposal's opponents made an issue of Qantas taking a shareholding in Air NZ, said chief financial officer Rob McDonald. So this move to redeem the convertible notes was just a mechanism to unwind that aspect of the last proposal.

Wellington airport owner Infratil, which opposes the code share, has said the redemption of the notes at their apparent face value is well in excess of their fair value and should be treated as a sizeable cost to Air NZ for its participation in the code share.

McDonald said the notes were just a component of the deal and, while there were pluses and minuses, the deal would ultimately deliver value to Air NZ shareholders.

In reaching its decision the NZXR accepted there was no reason to believe a strategic alliance agreement or the convertible notes gave Qantas "any ability to exert influence" over Air NZ.