New Zealand Aviation NEWS: Air New Zealand picks up sizeable stake in Virgin Blue

Air New Zealand has notified the Australian Stock Exchange and New Zealand Stock Exchange that it has become a substantial shareholder in Virgin Blue, as part of a planned acquisition of a shareholding between 10% and 14.99%, announced the firm Friday.

Air New Zealand shares fell after the company made the A$145 million investment in a minority stake in new trans-Tasman partner Virgin Blue.

Rob Fyfe, Air New Zealand Chief Executive Officer, said however that there were no plans to make a takeover bid for Virgin Blue.

Air New Zealand obtained Australian Foreign Investment Review Board approval to purchase up the 14.99% percent of Virgin Blue; a shareholding which it believes will keep the total foreign ownership of Virgin Blue within the statutory limit of 49%. Virgin Group based in the UK has a 26% shareholding.

According to Mr. Fyfe, the investment in Virgin Blue is part of Air New Zealand's strategy to develop scale and reach in the region. The Tasman alliance with Virgin Blue was the first step in this strategy, he said, adding that the investment cements the emerging relationship between Air New Zealand and Virgin Blue and demonstrates the confidence Air New Zealand has in Virgin Blue both as an entity and as a partner for Air New Zealand.

Confirming that Air New Zealand had no intention to go over 14.99%, Fyfe noted that the investment was merely a move that reinforces Air New Zealand's strategy to grow its business in Australasia which, according to him, is continually evolving as a single aviation market. The Tasman alliance with Virgin Blue was a key step in this strategy.

For Fyfe, the investment provides Air New Zealand with an interest in the number two airline in Australia and, through this, access to the opportunities in the growing Australian domestic market.

Air New Zealand last month won approval to cooperate with the Brisbane-based carrier on flights across the Tasman Sea as it competes with Qantas Airways Ltd and Emirates Airline. It bought more shares in Virgin Blue off-market overnight, according to the statement.

The stake purchase was made from existing cash resources. The investment marks a return to Australia for Air New Zealand, which previously controlled Ansett Holdings Ltd. The failure of Ansett in 2001 eventually forced the New Zealand government to buy a controlling stake in Air New Zealand to save its flag carrier from collapse.

NEHA JAIN

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