Ansett talks merger with rival Virgin

It has been confirmed that Lindsay Fox and Solomon Lew’s Tesna consortium, Ansett’s prospective new owners, has held merger talks with Virgin’s Sir Richard Branson in London, only six months after Branson rejected a $250m takeover bid from Ansett’s then-owner, Air New Zealand.

A merger between Ansett and Virgin would return the Australian aviation marketplace to a duopoly, with the new entity likely to be in a strong position to compete with Qantas. Analysts have already commented that Australia’s small market could not sustain three domestic airlines, while the profitable Virgin has been looking for a local equity partner for some time.

This week will see some major decisions on Ansett, including a Federal Court judgment on administrators Mark Mentha’s and Mark Korda’s bid to be indemnified for their decision to keep the airline operating. Mentha and Korda are trying to stem the airline’s losses, which have been reported to be nearing $12 million a week. Flights between Melbourne and Sydney will be cut by eight, and between Sydney and Brisbane by 10.

The Australian, 11/2/02, p1.