Dubai Bid for N.Z. Airport in Jeopardy

Auckland Airport said in a statement that the Dubai company considers that it has breached its obligations by not using its best efforts to ensure a successful outcome for the 2.6 billion New Zealand dollar ($1.8 billion) takeover.

Dubai Aerospace claims legal action filed by Air New Zealand seeking a judicial review of Auckland Airport's higher landing charges constitutes a "prescribed occurrence" under the Merger Implementation Agreement, or MIA.

"Auckland Airport disputes the existence of a 'prescribed occurrence' and does not consider that DAE has grounds to issue such a notice," the nation's biggest visitor gateway said.

Earlier this month Air New Zealand said it was filing legal action against the airport company for "unjustified" increases in landing charges.

The airport, which proposed hiking landing fees by 2.5 percent a year for the next five years starting Sept. 1, disputed the airline's claims and is contesting the proceedings.

Auckland Airport said a "good faith" consultation period of five days will now commence under the merger deal with Dubai Aerospace.

"If the parties are unable to reach agreement by the end of the consultation period, either party may terminate the MIA," Auckland Airport said.

Dubai Aerospace officials weren't immediately available for comment.

Auckland Airport's shares slumped more than 6 percent on the news, but by 2222 GMT, the stock has recovered somewhat to trade down 3.6 percent at NZ$2.94.

Nigel Scott, an adviser at ABN AMRO Craigs, said Dubai Aerospace might be looking for an escape clause as the chances of the takeover succeeding appeared to be slim.

Since the Dubai company made its bid last month, political pressure has grown against the sale of Auckland Airport to a foreign company, casting doubt on the bid.

Two local councils, which own a combined 22 percent stake in the airport operator, have been noncommittal on the bid.