Air New Zealand Limited (NZE:AIR) is now the largest shareholder in Virgin Australia Holdings Ltd (ASX:VAH) after announcing Thursday that it will raise its ownership stake from 20 to 23 percent.
The move, which will cost the carrier roughly 37 million Australian dollars ($35 million USD), will strengthen Air New Zealand's market share against Australia's Qantas Airways Limited (ASX:QAN).
Air New Zealand said in a statement that it didn't intend to gain full control of Virgin Australia but said it plans to own 26 percent. Australia's corporate laws prevent companies from acquiring more than three percent in shares every six months unless they're making a full takeover bid. Three of Virgin Australia's international partners have comparably large equity stakes in the company, which makes it difficult for any one of them to take full control.
Virgin Australia, which has been run by former Qantas executive John Borghetti for the past four years, has targeted Quantas' dominance of Australia's travel market by partnering with international carriers to expand its overseas reach. Partners include Singapore Airlines Ltd. (SGX:C6L), which owns close to 20 percent, Etihad Airways, which owns about 10 percent, and Delta Air Lines, Inc. (NYSE:DAL).
Borghetti told reporters in Perth that Air New Zealand's new stake wouldn't affect anything with its other partners.
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"Nothing changes for us," Borghetti said. "We work well with Air New Zealand as we do with Singapore Airlines, Etihad, Delta and others."
To offer more domestic destinations, Virgin Australia recently acquired a controlling stake in budget carrier Tiger Australia, giving direct competition to Qantas's low-cost Jetstar line.