Air NZ bailout: Cullen's 10 issues

By DANIEL RIORDAN

The Government decided to provide its $885 million rescue package for Air New Zealand after taking 10 issues into consideration, Finance Minister Michael Cullen has told Act MP Rodney Hide.

Responding to a question for written answer from Mr Hide asking him to identify the risks, costs and benefits of the decision, Dr Cullen said that the following issues were considered:

* Viability of Air NZ as a national flag carrier.

* Impact on the Crown's financial position.

* Position of shareholders and creditors.

* International market reaction.

* Australian reaction.

* Impact on competition.

* Impact on consumer confidence.

* Impact on air traffic rights.

* Ownership risks.

* Governance of Air NZ.

In response to another question from Mr Hide about how the rescue package would affect the Government's accounts, Dr Cullen said the rescue package would cost about $60 million a year in interest.

The first part of the package, a $300 million loan, was advanced this week.

Dr Cullen said it will be recorded as an advance in the current assets section of the Crown balance sheet.

The remaining $585 million - assuming it is confirmed in due diligence - will be recorded as an "other investment" in the balance sheet as a forecast investment.

The initial loan is being funded by existing cash.

The impact on the Government's accounts of the remainder of the package - conversion of the loan into preferred equity and subscription for ordinary shares - depends on the funding option selected, said Dr Cullen.

The total impact of the package on the borrowing account will be $885 million.

The Australian Stock Exchange, which had suspended Air NZ shares on September 13, said it would allow the shares to trade from today.


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