Virgin merger just talk for now

Air New Zealand chairman John Palmer doesn't believe all airlines will be swallowed by larger competitors. Photo / Brett Phibbs

Air New Zealand's chairman John Palmer says the airline is mindful of expansion opportunities in the Australasian aviation market but has no immediate plans.

Australian analysts and commentators have speculated in the past year that Air New Zealand could be a potential buyer into Virgin Blue or a merger target itself.

Speaking after Air New Zealand delivered its annual result last week, Palmer said he was aware of constant speculation.

"We have no current plans to do anything but we are constantly looking at the same time for opportunities and saying 'are there things that we should be doing, are there things that we should be considering given the changing landscape'."

Given the continued aggressive growth of Qantas subsidiary Jetstar, other operators across the Tasman such as Tiger and Virgin Blue are under pressure.

"We don't know what the outcome of this [will be] but we don't think that the current situation is stable. We have absolutely no plans," Palmer said.

However, he said he would not rule out future changes in the way the industry is structured in this part of the world.

"We have to constantly look at the landscape and the opportunities and the position of the opposition is a big part of that."

Macquarie analysts earlier this year said a possible buy-in to Virgin could mean equity raising by Air New Zealand, diluting the New Zealand Government's 75 per cent stake. A merger with a large carrier, such as Qantas or Singapore Airlines, has also been touted.

Palmer said there were no signs of this happening.

"I don't sense any appetite from the Crown other than to retain a majority position in Air New Zealand. We certainly welcome that."

Since being bailed out for $800 million in 2001, the airline has returned more than $340 million in dividends.

Palmer said he did not share the view that all airlines should be swallowed by larger competitors.

"Smaller, agile regional competitors will be part of the long-haul business even though there is likely to be amalgamation of mega carriers."