Qantas in talks to buy stake in Vietnam's Pacific

Wed Jan 24, 2007 4:40am EST

HANOI Jan 24 (Reuters) - Qantas Airways Ltd. (QAN.AX) is negotiating to buy a stake in Vietnam's Pacific Airlines, sources with Pacific said on Wednesday, a day after the Australian carrier said it planned an investment in an Asian airline. "We are holding talks with Qantas but we have not reached any result yet," said an official of the Ho Chi Minh City-based Pacific Airlines, Vietnam's second-largest airline.

An official from the State Capital Investment Corporation, which manages the state's stake in unlisted Pacific Airlines, confirmed the talks but declined to provide further details.

On Tuesday, Qantas chief financial officer Peter Gregg said the carrier plans to invest a double-digit million dollar sum in an Asian carrier, which he did not identify.

"It's not a majority stake due to ownership restrictions," Gregg told reporters on the sidelines of an event in Singapore.

Communist-run Vietnam limits foreign ownership in non-bank listed companies at 49 percent and many other enterprises at 30 percent.

The carrier, which was valued at $167 million last year, said this week it would start operating as a budget airline from March as it struggles to compete with flag-carrier Vietnam Airlines. In 2005, the then-indebted company was put on sale but the government failed to reach a deal with Singapore investment firm Temasek Holdings [TEM.UL], which was interested in a 30-percent stake.

The deal fell through over differences in the time of the purchase. Hanoi had wanted to sell the stake quickly and early, finance ministry officials said.

The carrier has since taken a series of steps to cut operating costs, including dropping several regional and domestic flights.

((Reporting by Nguyen Nhat Lam, editing by Michael Urquhart; Reuters Messaging: nhatlam.nguyen.reuters.com@reuters.net; +84 4 825 9623)) Keywords: QANTAS INVESTMENT/VIETNAM

(C) Reuters 2007. All rights reserved. Republication or redistribution ofReuters content, including by caching, framing or similar means, is expresslyprohibited without the prior written consent of Reuters. Reuters and the Reuterssphere logo are registered trademarks and trademarks of the Reuters group ofcompanies around the world.nHAN148080