Competitive Air NZ not an issue
New Zealand finance minister Bill English has rejected accusations by Qantas Airways chief executive Alan Joyce that majority government-owned Air New Zealand is not interested in profiting from its investment in Virgin Australia Holdings.
Air NZ is the largest shareholder in Virgin and a key backer of a A$350 million (NZ$388.8m) capital raising to help bolster the Australian carrier's balance sheet.
The Australian Takeovers Panel on Tuesday ruled the raising could proceed as planned, despite an objection from shareholder activist Stephen Mayne.
Joyce has argued Virgin is leaning on foreign government-backed airlines to help it undercut Qantas on profitable domestic routes until Qantas can no longer support its international division.
But English said the airline industry in Australasia had always been "very competitive" and different airlines had pushed hard at different times.
"Air NZ is not behaving any differently," he told The Australian Financial Review.
"Qantas has flown our main trunk routes at different times. There is a competitive market and we like a competitive market.
"Governments do not interfere in that process and Air NZ needs to be self-sustaining as a commercially driven airline."
English was NZ's opposition leader in 2002 when Qantas attempted to buy a 25 per cent stake in the Kiwi carrier after it was financially weakened by the collapse of Ansett.
At the time, English spoke out against the deal, which was eventually rejected by competition regulators.
He was concerned Qantas's longer-term interests were not aligned with those of New Zealanders.
Air NZ is now more profitable than Qantas or Virgin. The NZ government last month sold down a 20 per cent stake in the airline but maintains control of 53 per cent.
"One of the keys to its success has been its ability to operate on a fully commercial basis," English said.
"It is a significant problem if businesses become politically driven or if the government regards itself as a political patron.
"If Air New Zealand had relied on government support, it would have been much less successful and much more vulnerable as a small regional airline."
Air NZ now controls a 23.04 per cent in Virgin, followed by Etihad, with a 20 per cent stake, and Singapore Airlines, with 19.9 per cent. But those figures could rise slightly depending on the take-up of the A$68.6 million retail component of the capital raising due to close on Monday.
Combined, Air NZ, Singapore Airlines and Etihad owned 62.6 per cent of Virgin before the capital raising was launched.
Due to the strong institutional take-up, even assuming no retail investors took up shares, their maximum interest in the airline would climb to a combined 68.2 per cent.