Air NZ sweetens Singapore deal

The local airline will agree to conditions that may make the deal hard for the Government to refuse, reports VERNON SMALL.

Air New Zealand has asked the cabinet to allow Singapore Airlines to lift its stake to 49 per cent, and will accept a raft of conditions on the deal, making it hard to reject, Government and airline sources confirm.

Airline chief executive Gary Toomey took the formal proposal to the Government on Friday but has refused to confirm the level of shareholding sought.

Singapore Airlines' stake is limited to 25 per cent at present.

But sources said yesterday that Air New Zealand's capital needs, particularly for its struggling Ansett Australia subsidiary, meant it was pressing for the largest possible cash injection from Singapore Airlines.

They said Air New Zealand had offered to agree to all the conditions tested in a public opinion poll it released on Friday.

These include assurances that the brand and koru logo would be retained, most of the board would be New Zealand-based, the headquarters to stay in New Zealand, specified provincial and international routes would be maintained, access to international markets retained and flights staffed mainly by New Zealanders.

The Air NZ-commissioned poll showed 68 per cent would support Singapore Airlines lifting its stake under those conditions.

The stipulations would largely remove Government concerns about the effect of a bigger foreign ownership on bilateral landing rights.

Only Britain, France, Japan and Fiji have the right to withdraw landing privileges unless substantial ownership and effective control is retained in New Zealand.

European countries are keen to liberalise bilateral restrictions, Japan has agreed to allow Ansett International, owned 49 per cent by Air New Zealand, to fly there and Fiji's Air Pacific is already 46 per cent owned by Qantas, suggesting they would be flexible if Singapore Airlines lifted its stake.

Cabinet minister Michael Cullen has said the Government still needs to be convinced the proposal is in the national interest, and does not want to be drawn into a commercial decision about the need for Air New Zealand to retain Ansett.

Air New Zealand is understood to have told the Government the alternative would be a sale of Ansett, with Singapore Airlines the only likely buyer.

A rival Qantas proposal in which it would buy Singapore's 25 per cent stake in Air New Zealand and then sell Ansett to Singapore has been rejected by the Air NZ board and the Asian airline.

The latest proposal is now in the hands of the cabinet, which will meet again next Monday.

Green Party co-leader Rod Donald said yesterday the Government should reject the plan.

"Allowing Singapore Airlines to lift its stake is a lose-lose scenario. We get higher overseas ownership and Air New Zealand retains the 'dog,' Ansett," he said.

National's finance spokesman, Bill English, said he was expecting the Government to make "a more convenient short-term decision" and turn down Singapore's bid, to the detriment of Air New Zealand.

Meanwhile, cut-price operator Virgin Blue says it hopes to start flights in New Zealand and across the Tasman before Christmas, after sending more details of its plans to Canberra and Wellington.

But industry sources said Air New Zealand might yet buy Virgin Blue to balance Qantas' recent takeover of cut-price airline Impulse.


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