Air New Zealand buys Virgin Blue stake, cementing partnership

Auckland: Air New Zealand Ltd bought a "substantial shareholding" in Richard Branson-backed Virgin Blue Holdings Ltd. to bolster ties with Australia's second- biggest carrier.

The airline intends to buy as much as 14.99 per cent, it said in a statement yesterday. That would cost about Australian $146 million (Dh532.6 million) based on the last traded price. It has no plans for a takeover, it said without elaborating on how much of Virgin Blue it now owns.

Virgin Blue surged 10 per cent in Sydney trading before yesterday's statement. Air NZ last month won approval to co-operate with the Brisbane-based carrier on flights across the Tasman Sea as it competes with Qantas Airways Ltd. and Emirates airline.

A stake will "strengthen the alliance", said Will Seddon, who helps manage about $350 million at White Funds Management Pty in Sydney. "It gives them a level of control over Virgin."

Air NZ has won approval from the Australian Foreign Investment Review Board to buy as much as 14.99 per cent, the carrier said. That should keep foreign ownership of Virgin Blue within the statutory limit of 49 per cent, Air NZ said. Branson's Virgin Group owns 26 per cent of Virgin Blue, according to the statement.

"This investment cements the emerging relationship between our two airlines," Air NZ Chief Executive Officer Rob Fyfe said in the statement. It "demonstrates the confidence we have in Virgin Blue both as an entity and as a partner".

Virgin Blue has been told by Air NZ about its approval from the Investment Review Board, it said in a statement.

Brisbane-based Virgin Blue closed at 44 Australian cents, giving it a market value of A$972 million, according to Bloomberg data. It has slumped 30 per cent in 12 months. Auckland-based Air NZ, New Zealand's biggest airline, rose 0.7 per cent to NZ$1.44 in Wellington. It announced the stake purchase after markets closed.