Air New Zealand (ANZ) would have to reduce its 14.9% stake in Virgin Blue, after a report found that ANZ's recent share acquisition in the carrier would lead to a breach of Australia's foreign ownership restrictions on airlines.
Virgin Blue had commissioned Orient Capital to prepare a foreign ownership report after ANZ's acquisition of a 14.9% stake in the airline in January for A$145 million ($147 million).
The report, received by Virgin Blue on 18 February, found that foreign shareholders now hold 49.78% of the airline. Under Australian law, foreign ownership in the country's international airlines is capped at 49%.
"Air New Zealand has been advised of the current foreign ownership levels and has given a commitment to reduce its holding over a reasonable period of time to the extent required to take the foreign ownership below 49%," says Virgin Blue.
It adds that it plans to seek shareholders' approval to amend its constitution, to give Virgin Blue's directors the power to suspend voting and require the selling of shares when foreign ownership in the airline exceeds 49%.
The airline's directors will be able to exercise these powers in the case of ANZ's recent share acquisition and in future cases, adds Virgin Blue. The airline will put forth the amendments to its shareholders at a meeting on a date yet to be decided, it says.