AIR NEW ZEALAND (ANZ) has finally concluded an agreement to take over TNT's 50% stake in the Ansett airline group, ending a round of negotiations which has dragged on for nearly 12 months.
ANZ will pay A$325 million ($257 million) for the stake, although the deal is still subject to clearance under Australia's foreign investment rules. ANZ's shareholders will also have to approve the deal at a meeting on 27 September, but indications are that they will give the go-ahead.
The deal effectively gives ANZ an equal share of Ansett Australia's domestic operations alongside the group's existing joint owner, News Corporation. ANZ appears to have lost a last-minute bid to make a new appointment to head Ansett, however. Instead, Ken Cowley retains his position, giving News Corporation sway in the boardroom for another five years.
To resolve concerns raised by New Zealand's competition watchdog, the Commerce Commission, Ansett New Zealand is not included in the deal. News Corporation will acquire all of the shares in this business.
A controlling 51% stake in Ansett's international airline business will also be sold to a group of Australian institutional investors. The move is required to maintain overall Australian ownership and effective control of the airline, so that there is no impact made on bilateral air-service rights with third countries.
ANZ has also agreed to inject a further A$150 million into Ansett as part of a recapitalisation of the group, which has been making losses. News Corporation will provide a further A$50 million.
ANZ says that it will help to pay for the acquisition costs by calling on NZ$190 million ($130 million) of debt and raising another NZ$240 million from its shareholders through a rights issue. Qantas has not indicated whether it is prepared to invest the further A$48 million necessary to maintain its 19.9% holding in the New Zealand carrier.
At the same time as the announcement of the Ansett deal, ANZ also released its 1995/6 financial results for the year to the end of June. As forecast at the half-year stage, the group failed to repeat the record performance of the year before, seeing net profits come in at NZ$225 million, down from NZ$260 million.
Chairman Bob Matthew says that the group will struggle again this year to stop the slide in earnings, given a climate of slow growth and intense competition. As a result, the carrier has targeted another NZ$100 million in cost savings.
Matthew says that domestic New Zealand markets are likely to show "modest, if any, expansion". He adds that there is more buoyancy in the Australian market, which is assuming greater importance following the Ansett investment and the expected restoration of the Australian/New Zealand open-skies market. Matthew warns, however, that competition will remain intense.
He also signals a period of slower growth after ANZ's rapid expansion, especially on international routes, over the past five years. During the last year, international capacity grew again by more than 16%, while traffic trailed a couple of points behind. Load factors and yields both fell. Matthew says that there will be no further fleet expansion this year.
Meanwhile, in a move to help progress towards trans-Tasman "open skies", New Zealand has lifted the foreign-ownership threshold in its carriers from 35% to 49%. A limit of 25%, remains for any foreign airline, along with a restriction of 35% on any grouping of foreign carriers.
Source: Flight International