Government knew Air NZ's plight says report

By FRAN O'SULLIVAN assistant editor

A confidential report which reveals the Government was warned last July that Air New Zealand was on a financial knife-edge has been released after pressure from former chairman Sir Selwyn Cushing.

Sir Selwyn and former airline chief executive Gary Toomey headed a list of former Air New Zealand directors angry that the report's absence from documents released two weeks ago had provoked suggestions they did not know that the airline faced a dire predicament until close to its $885 million bailout.

The report - conveyed to the Government on July 12 last year - showed the airline faced an appalling result for the June 2001 year.

Group operating losses were put at $360 million - $640 million worse than the 2000 result; it was under pressure from its bankers; it was selling assets to relieve short-term liquidity, and while it had cash to withstand immediate solvency questions, a recapitalisation decision by the release of the 2001 results "was critical".

The July 12 paper makes a mockery of claims by Cabinet ministers that former directors and management were not aware of Air New Zealand's predicament until Government advisers investigated during negotiations over the airline's future.

Air New Zealand vice-president David Beatson said yesterday that the airline had put a confidentiality order on the July 12 paper, because of commercial sensitivity. It was still in place on April 10.

But after Sir Selwyn's approach and further consideration, the airline decided the paper's commercial contents were outdated.

The report had previously been leaked to the Independent Business Weekly. Its most salient aspect was justifying the value of Ansett Australia to Air New Zealand, later supported by Government adviser PA Consulting, but opposed by officials.

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