Cullen says door to Air NZ deal not open or shut

By VERNON SMALL deputy political editor

Finance Minister Michael Cullen has warned Air New Zealand not to assume its planned deal with Singapore Airlines will gain approval.

"We certainly haven't indicated to Air New Zealand that the door is shut, but we have indicated it will require a lot of pushing to get it open any further," he told the BBC.

" ... We are very reluctant to raise the cap on a single foreign airline investment in Air New Zealand."

Airline representatives this week briefed ministers and began talks aimed at allowing Singapore Airlines to increase its 25 per cent stake in Air New Zealand.

Government rules prevent a single airline holding more than 25 per cent and restrict total airline ownership to 35 per cent. Foreign ownership is limited to 49 per cent.

A spokeswoman for Dr Cullen said yesterday that very good reasons in New Zealand's interests would be needed to change the share rules. "Just because it is in Air New Zealand's interests doesn't necessarily mean it is in the country's interests."


It is understood Alliance leader Jim Anderton, who was briefed by Singapore Airlines and Air New Zealand, will be the hardest to convince of the need for greater foreign ownership.

Dr Cullen said a lot of work was still to be done on whether the ownership cap could be changed if conditions were imposed.

But key issues were domestic competition, ensuring Air New Zealand would be more than a restricted regional airline, and safeguarding the position of Air New Zealand in important tourist markets.

"An Air New Zealand which shrank to being simply a South Pacific island operation flying from New Zealand to Western Samoa, Fiji, etcetera, would not fulfil the kind of role we see as essential for Air New Zealand, given the enormously growing importance of tourism to New Zealand."

Direct flights from the United States West Coast, Tokyo, Korea and Hong Kong had to be retained.

"If those flights ended up routing through Sydney, it would make tourism to New Zealand much less attractive and it is one of our most strongly growing large export earners."

He said a rival offer from Qantas, which would see Singapore Airlines buy Air New Zealand's subsidiary Ansett Australia, was still on the table, but Singapore Airlines' refusal to sell its stake to Qantas made that "rather difficult."

A Government decision on Air New Zealand's plan was two or three weeks away.

Meanwhile, in a parallel move, Qantas has asked the Australian Government to ease its cap on foreign ownership of the airline. Qantas faces the same ownership restrictions as Air New Zealand.

Qantas is 25 per cent owned by British Airways but wants to attract more foreign investment to counter competition from Singapore Airlines.