$60m 'poison pill' awaits if Air NZ quits group

By FRAN O'SULLIVAN assistant editor

A Qantas-controlled Air New Zealand will be stung with a $US25 million ($59.8 million) exit fee if it breaks away from the global Star Alliance to join the rival Oneworld grouping.

The $60 million "poison pill" is one of a number of penalties Star Alliance recently put in place to protect its business if members quit following ownership changes.

Air New Zealand would be stung with quarterly cash contributions towards Star Alliance for a two-year period after giving notice. Air New Zealand customers would also be prevented from transferring their Star Points across to fly on Qantas linkups. Their flights on Air New Zealand would continue to be accrued as Star Points during the notice period.

The $60 million poison pill is just one of a number of obstacles which has emerged since the Qantas plan to wrest control of Air New Zealand and dominate the Australasian aviation market was unveiled on Tuesday.

Prime Minister Helen Clark and her deputy, Jim Anderton, have each raised serious concerns over the Qantas-led plan under which the Australian airline would buy stakes held by Singapore Airlines and Brierley Investments to emerge with a 55 per cent holding in Air New Zealand.

Helen Clark said there were obviously "very significant obstacles in the way of such a concept."

Helen Clark emphasised that while Qantas had held discussions with Finance Minister Michael Cullen and Transport Minister Mark Gosche, "There is no proposal before the Government."

The Prime Minister identified three key obstacles to the concept:

* It posed "great risks" to the national flag carrier's bilateral international landing rights which are dependent on it being substantially owned and managed by New Zealand;

* There was a risk to competition within Australia and New Zealand, on the transtasman route and internationally to Los Angeles and other Pacific destinations;

* The promotion of New Zealand as a tourist destination would also be at risk if Air New Zealand was seen as a Qantas subsidiary.

Air New Zealand's independent directors yesterday played down the Qantas overture. It was just one of a number of options in front of the airline and in the meantime it was business as usual, they said.

Acting chairman Jim Farmer, QC - who leads the board's subcommittee studying the Qantas proposal - said Air New Zealand was not under any pressure to assess the proposal.

"This is simply one more proposal to add to the range of options available to Air New Zealand,"said Dr Farmer. "We do not intend to be distracted in any way from maintaining the fundamental health of the company while we deal with it."

President and CEO Gary Toomey said the merger between Air New Zealand and Ansett Australia would press ahead.

"We have a broader range of choice than ever before - and that in itself has a way of opening up even more options."

Air New Zealand representatives are expected to raise ownership issues with Mr Gosche next week.

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