Moody’s Investors Service stated Air New Zealand’s recent acquisition of a 14.9% stake in Virgin Blue is a “further sign of Virgin’s growing competitive challenge to Qantas in the airline’s home turf” and expects the move to put pressure on Qantas’ margin (BusinessDesk, 25-Jan-2011). Moody’s stated the stake gives Air New Zealand exposure to the Australian domestic market without actually operating in it. The ratings agency said Air New Zealand’s stake slightly weakens its credit profile as it used cash reserves to fund the purchase.
Moody’s Investors Service: “This development increases competition for Qantas, as it brings Virgin Blue’s range of offerings closer to that of Qantas for international travel and will require Qantas to reduce prices to keep load factors at acceptable levels … It may, however, be a tough fight. Qantas, with its dual-brand strategy and entrenched, leading position in Australia, has shown in the past that it knows how to counter competitive challenges.” Company Statement, Source: BusinessDesk, 25-Jan-2011.