Qantas won't tolerate Singapore stake in Air NZ

SYDNEY - Qantas Airways, scouting for regional ties to boost its shrinking profits, said today it would rather turn its back on Air New Zealand than take a stake alongside Singapore Airlines.

Air New Zealand, desperate for a capital injection to fund a fleet replacement and to counter losses from troubled subsidiary Ansett Australia, is at the centre of a power play between Singapore Airlines, Qantas, and the New Zealand and Australian governments.

"Certainly, Singapore is not going to go away, and the relationship and our association with Air New Zealand cannot go ahead if Singapore remains a 25 per cent shareholder," Qantas chief executive Geoff Dixon told the Business Sunday television programme in Australia.

"If that's the case, we get on with our lives and look for other strategic options, but we do believe this is a very, very good one for the region," he said.

Air New Zealand has asked the New Zealand government to relax current limits on foreign investment to allow Singapore Airlines to raise its quarter stake to 49 per cent, while Qantas has proposed taking a 25 per cent stake in Air NZ.

"We're only asking for 25 per cent, any rate, if someone offered us 35 per cent, we'd obviously take that," said Qantas' Dixon.

"We can't be totally confident, of course, this is a situation where we're trying to get a shareholding that's held by another airline and they've indicated up to now that they don't want to sell it," he said.

Shares in Qantas took another tumble on Friday after analysts downgraded the stock following a sharp drop in 2000/01 profits and warnings that its outlook remained bleak.

Australia's flagship carrier slumped 15 cents or five per cent to A$2.88, bringing its share price losses for the past two days to around 14 per cent, but the stock still remains well above the A$2.36 low touched in March.

Hit by domestic discount price wars and high oil prices, Qantas, which is 25 per cent owned by British Airways -- Singapore Airlines' arch-rival -- booked a 20 per cent drop in annual net profit on Thursday to A$415.4 million.

- REUTERS

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