Air New Zealand (ANZ) has taken over Ansett Australia after agreeing to buy the 50% of Ansett Holdings it did not already own from News Corporation for A$580 million ($365 million).

The combined entity will be 85% the size of Australian flag carrier Qantas, with annual revenues of over A$5.8 billion and gross assets of A$6.7 billion. It will employ 24,000 people and operate 110 passenger jets and a large turboprop fleet to more than 100 airports.

With Qantas expected to strengthen its own position through the launch of a low-cost arm and a possible foray into the domestic New Zealand market, the ANZ move means planned start-up Virgin Australia will face tough competition when it launches in June. Parent Virgin Atlantic is part-owned by Singapore Airlines, which saw a bid for the News Corp stake in Ansett blocked by Star Alliance partner ANZ last year.

ANZ chairman Sir Selwyn Cushing says Ansett Australia and Air New Zealand will continue to operate under their own brands in their own markets, but Ansett executive chairman Rod Eddington will be invited to join an expanded board. ANZ managing director Jim McCrea remains group chief executive and managing director.

The New Zealand carrier will make a further payment to News Corp in two-to-four years' time, equal to 10.5% of shares or cash and with a possible discount, which would give it a worth of A$100 million at current market values.

The takeover, backed by ANZ's 47% shareholder Brierly Investments, is subject to regulatory approval, but does not include a 51% stake in Ansett International held by Australian investors, News Corp's interest in Ansett Worldwide Aviation Services, or its 100% ownership of Ansett New Zealand.

The latter has been linked to a takeover bid by investment group Clavell Capital, which may involve Qantas, which is under pressure to secure a New Zealand network. Chief executive James Strong has spoken of announcements due before the end of June, hinting that the establishment of a low-cost carrier is also on the cards.

Complicating the picture, regional carrier Impulse Airlines, which plans to establish low-cost operations, using Boeing 717s, has postponed a launch announcement for unspecified reasons. Australia's other proposed start-up, Spirit Airlines, has made no comment on last week's events.

The stepping up of competition in the Australasian market comes as ANZ and Qantas enjoy strong profitability.

ANZ has announced a 54% increase in half-year after-taxprofits, to NZ$127 million ($63 million), with Qantas reporting a 52% improvement to a record A$338 million and Strong declaring it "battle fit" to take on all comers. Foreign exchange losses and fuel prices have been blamed for a 28% drop in Ansett's operating profit, to A$80.6 million.

Source: Flight International