Air NZ placed on credit watch

Continuing deterioration in subsidiary Ansett has hurt Air New Zealand's credit ratings.

Rating agency Standard and Poor's placed Air New Zealand's BB-plus/B-ratings on credit watch with negative implications yesterday.

"Although earnings from Air NZ's domestic New Zealand and international operations are expected to remain satisfactory, this performance will be more than offset by losses at Ansett in fiscal 2001," S&P said.

"To resolve the credit watch, Standard & Poor's will continue to monitor the company's operating performance and Air NZ's ability to respond to competitive pressures from its key rival Qantas, and from new discount airlines Impulse Airlines and Virgin Blue.

"Although two discount airlines are unlikely to survive in the Australian market, the long-term success of a discount airline and the undermining of the industry's stable yield structure are a threat to Ansett's business risk profile."

S&P said it would also take into account Air NZ's strategic review, due to be finalised in the next few months, and the company's developing relationship with 25 per cent owner Singapore Airlines.

- NZPA