Air New Zealand has bought at least a five per cent stake in new alliance partner Virgin Blue, as part of plans to buy a 15 per cent stake in Australia’s number 2 airline.
“The investment in Virgin Blue is part of Air New Zealand’s strategy to develop scale and reach in this region,” said Air New Zealand CEO Rob Fyfe on January 20. “The Tasman alliance with Virgin Blue was the first step in this strategy.”
Air New Zealand announced its buy-in plan after reaching the five per cent major shareholder threshold, revealing it has received Foreign Investment Review Board approval to take a 14.9 per cent stake in Virgin Blue. The New Zealand government majority owned airline says it has no plans to make a full takeover offer.
Australian law allows domestic airlines to be 100 per cent foreign owned, but Australian international airlines must be 51 per cent Australian owned. Sir Richard Branson’s Virgin Group remains Virgin Blue’s largest shareholder with a 26 per cent stake.
The news of Air New Zealand’s actions and intentions sent Virgin Blue’s shares 10 per cent higher on January 20, valuing the airline at around $950 million.
The two airlines recently received regulatory approval for their trans Tasman codesharing and revenue sharing alliance.
The move is Air New Zealand’s first Australian airline share investment since its buy into and subsequent acquisition of Ansett a decade ago.
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