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    Air NZ sell off: Aussies in secret talks
    30 May 2002

    By ROELAND van den BERGH
    Qantas and the Government are in secret negotiations for the Australians to buy a big part of Air New Zealand – perhaps as much as half, sources say.

    The Government stands to make about $200 million profit if it sells part of its holding in Air New Zealand to Qantas, but it would keep about half of the airline's shares.

    Air New Zealand and Qantas have hired merchant banks on both sides of the Tasman to work on the deal, which would inject hundreds of millions of dollars into Air New Zealand.

    Qantas reiterated this week that it was in acquisition mode and last week boss Geoff Dixon said he was still interested in a deal with Air New Zealand.

    Air New Zealand's share price has risen in spectacular fashion in recent days. The company is now valued at $2.8 billion.

    The shares rose another six cents to close at 68c yesterday, but traded as high as 72c, which market observers said showed that a deal was afoot. Air New Zealand's unveiling of its new-look domestic service was not enough to boost the shares so high, they said.

    One scenario could be for Qantas to pump in about $300 million to buy 20 per cent of Air New Zealand through the issue of new shares. That would mean the Government would not have to put more taxpayer money into the airline after its $885 million bailout last year.

    In return, Qantas would take management control of Air New Zealand, but the Government would still hold about 65 per cent of the airline.

    Qantas would also pull out of the New Zealand domestic market. It would then move to buy up to 50 per cent of Air New Zealand through the purchase of 15 per cent of the Government's holding and the rest from other shareholders. The deal would give the Government an opportunity in an election year to make a $196 million profit.

    Qantas, which plans to spend billions of dollars on new aircraft during the next 10 years, could rationalise its fleet and schedules if Air New Zealand was included.

    Engineering could be done at Air New Zealand's world-class Christchurch maintenance base, taking advantage of lower wage costs.

    Qantas awarded Air New Zealand a contract this month worth up to $16 million to refit up to 15 Boeing 747-400s.

    Air New Zealand spokesman David Beatson said the airline was in talks with Qantas over feeder traffic in Australia, but he was unaware of any other discussions. Analysts considered those talks bizarre, given that Qantas was Air New Zealand's main competitor and a member of a rival airline alliance.

    A spokeswoman for Finance Minister Michael Cullen said: "The (Air New Zealand) board has put no proposal to the Government, at this stage."

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