Brierley $47m out of pocket

By DANIEL RIORDAN

Escalating jet fuel costs and Ansett Australia's desultory performance will cost Brierley Investments $47 million - but save Singapore Airlines the same amount.

When Singapore Airlines lifted its stake in Ansett Air NZ to 25 per cent last April, paying Brierley $3 a share for a 16.7 per cent stake, it agreed to pay Brierley another 50c a share if Air NZ increased June 2001-year earnings before interest, tax, depreciation, amortisation and aircraft rentals by 30 per cent, from $1.27 billion to $1.65 billion.

The bonus would be worth $47 million to Brierley. Singapore agreed to pay Brierley a further 50c a share if Air NZ lifted these gross earnings by 65 per cent, to $2.1 billion, by June 2002.

But Singapore can keep its hand in its bonus pocket this year, partly offsetting the pain of losing $130 million on the market value of the shares it bought from Brierley.

Although Air NZ and Brierley chairman Sir Selwyn Cushing was optimistic of reaching the initial earnings target when Air NZ released its annual result last August, he confirmed to the Business Herald what analysts had first predicted last year - that Air NZ is unlikely to meet the $1.65 billion target, although more than two months of the financial year remain.

"The chances don't look great."

He blamed rising fuel costs, particularly in the latter months of last year, for the failure.

Although analysts continue to believe the 2002 target will be similarly out of reach, a chipper Sir Selwyn maintained the benefits of fleet rationalisation would gradually outweigh the pain of higher fuel costs and allow the airline to reach the target.

"If interest rates continue falling and economies pick up, you never know."