DAVID KNIBB SEATTLE Foreign ownership in Air New Zealand (ANZ) and Qantas Airways has become a hot topic following the signing of two new liberal bilaterals.

New Zealand is a party to both the multilateral open skies agreements signed at the recent APEC meeting and a new open skies bilateral with Australia. Both effectively remove foreign ownership limits, although control of an airline must remain with its own nationals. Both are intended to allow passive foreign investment beyond the normal 49% ownership cap.

Signing these agreements prompted speculation that New Zealand may revisit ANZ'S foreign ownership cap. This became an issue last year when Singapore Airlines (SIA) asked New Zealand to raise its two caps on ANZ ownership. The government refused.

One cap restricts any foreign airline to 25%; the other limits all foreign ownership to 49%. SIA holds the 25% maximum. Sir Selwyn Cushing, ANZ'S chairman, fuelled the recent speculation by saying he was delighted at the possibility that New Zealand's review of the issue would enable SIA to raise its stake. But Mark Gosche, New Zealand's transport minister, quickly quashed such talk, issuing a statement that no such review was under way or planned. The two air service agreements may relax foreign ownership, said Gosche, but New Zealand still has 18 others that do not.

That would seem to end the discussion about ANZ, except that Qantas is beating the drum again for a change in its ownership cap, and that could influence what happens on both sides of the Tasman Sea.

The huge A$8.7 billion ($4.7 billion) aircraft order just placed by Qantas will force it to raise capital to help protect its debt-equity ratio. Yet, under legislation passed when it was privatised, Qantas faces the same caps on foreign ownership as ANZ.

Qantas chairperson Margaret Jackson recently complained on Australian television that "because we have a 25% investment by British Airways, it means there is only 24% available for a foreign institution". Jackson says Qantas wants to be added to the Morgan Stanley Capital Index, which is used as a global guide for institutional investors. "As we go forward and look at our fleet plans, we lack the flexibility of placement of equity offshore."

Jackson and other Qantas officials are also quick to add that Canberra allows ANZ to own 49% of Ansett International and has abandoned all foreign ownership controls on other domestic airlines except Qantas. As a result, two of its three local rivals, Ansett Australian and Virgin Blue, are 100% foreign owned. If Qantas convinces Canberra to lift its foreign limits, Wellington will be hard pressed not to follow suit.

Source: Airline Business