KEY POINTS:
Prime Minister Helen Clark's decision to make political capital out of information provided to her in confidence - over Air New Zealand's charter flight bringing Australian troops home from Honiara - raises questions over her commitment to commercial probity.
She seems to have forgotten, or wilfully ignored, the spirit of a confidentiality deed that was signed on March 4, 2002, between then Air New Zealand director Ralph Norris, the airline's company secretary John Blair and Treasury solicitor Ivan Kwok just months after the Government recapitalised the airline to the tune of $885 million and became its major shareholder.
Clause 2:1 of that agreement states that all confidential information given to the Crown should be and remain the property of Air New Zealand.
When airline chairman John Palmer told Clark about the Honiara exercise during a please-explain round of top flight Beehive briefings on Thursday, August 16, after controversy broke over the two charter flights taking Australian troops to the Middle East, he could reasonably have expected her to keep the information to herself.
But she didn't. Incensed to read (first) in my August 18 Weekend Herald column that Australian Foreign Minister Alexander Downer had issued an order to High Commissioner John Dauth to express Australia's extreme displeasure over the Clark Government's politicking on Air New Zealand's Middle East exercise, she struck back on her regular Monday morning radio and television interviews.
She scoffed at the ban Downer (read the Howard Government) had placed on the Australian Defence Force personnel using Air New Zealand in any circumstances, when the next day the airline ferried ADF personnel to Honiara and advised him to butt out of New Zealand's domestic affairs.
Her tit-for-tat response may have made good domestic politics. But the airline would have good grounds to believe the deed it signed with the Crown in May 2002 should have prevented Clark from using the sensitive information to score points against Downer.
Palmer has written directly to Clark on this score. But the damage may not be contained to the breach in the relationship between the PM and the Air New Zealand chairman.
The airline is concerned that a new requirement for all of its future Australian defence tenders (including its profitable ADF engineering contracts) be referred to the ADF's Head of Procurement, means its tenders will no longer be treated solely on their commercial merits but will now have a political dimension.
This is a huge blow to an airline which has rebuilt itself from the commercial disaster of 2001.
The question Air New Zealand has yet to address is whether it can seek recompense from the Government for the commercial damage it has suffered from becoming a political plaything.
It's worth studying an earlier confidentiality deed between the Clark Government and Air New Zealand so the airline could open its books to the Crown negotiators in the run-up to the bailout. Clause 2.2 of the 2001 deed says the Crown acknowledges that information is communicated to it under terms of strict confidentiality and that Air New Zealand may suffer damage, loss or liability as a result of any part of the information to any unauthorised person.
Under this deed, the Crown agreed it would preserve the confidentiality of any information provided to it and take proper and adequate precautions at all times.
The deed also provides for Air New Zealand to seek equitable relief including an injunction and order for specific performance in the event of any breach of the deed's provisions.
It is unclear if the 2002 deed, which has yet to be publicly released, contains the same provision.
But the NZX should be seeking explanations from Air New Zealand and the Government over just how much protection the 2002 deed gives the company's shareholders from damage incurred to the business as a result of verbal incontinence by Clark and other Cabinet Ministers.
Today's disclosure that Palmer has written directly to Clark over the issue should prompt the stock exchange's regulators into action. But the damage doesn't stop there.
Downer, after all, like his colleague Defence Minister Brendan Nelson, is in the box seat as far as a sizeable slice of Air New Zealand's highly profitable ADF business is concerned.
Publicly Downer says he is surprised over Clark's comments. "I have gone out of my way for 11 1/2 years for both National and Labour Governments to be supportive and friendly."
But Clark's strong condemnation of the charter flights as "appalling" came as a thunderbolt. Downer and Nelson did not even know Air New Zealand had ferried two loads of Australian troops up to the Middle East Area of Operation (MEAO) in May.
They would probably have brushed off Clark's initial comments as a bad hair day. But views hardened once news reports and copies of Hansard, detailing not just Clark's anger but that of Goff who deplored the airline's action, reached Canberra.
A clippings file straight from Australian Prime Minister John Howard's office was sent to the two ministers on their way into their Parliament's debating chamber. Australian sources say the ministers found the New Zealand Government's reaction to carrying their troops deeply offensive, shabby, outrageous and hurtful.
It was seen as implied criticism of Australia's role in Iraq. Regardless of political argy-bargy all Australians support their troops, said a Canberra source.
The troops were going to the Middle East, not into Baghdad. It was not as if they were going to burst out of the plane door shooting.
The Australian Government takes the view that its military work in Iraq is now sanctioned by specific UN resolutions and is not a rogue adventure. Clark's comments casting a pall on Australia's role could play into their Labor opponents' hands.
Downer and Nelson talked it over with Howard before the Foreign Minister was deputed to make a statement that, in light of this controversy, the Australian Defence Force will no longer use Air New Zealand in any circumstances.
Nelson issued an instruction to the Australian Defence Department that the airline is not to be used for sustainment flights carrying Aussie troops to the Middle East. Strategic Aviation in Brisbane, which has the contract for the twice-weekly flights to the Middle East Area of Operations, has been requested to ensure Air New Zealand is not a sub-contractor for such flights.
Canberra sources say the charter ferries were a valuable addition to Air New Zealand - worth potentially some A$10 million ($11.7 million) to the national carrier. The operations to date were worth A$2.7 million, which suggests that A$7 million business has been lost.
This may seem peanuts to the Beehive's top inhabitants, but if Air New Zealand cannot give assurances to future commercial partners that Cabinet ministers will respect confidences, other areas of its business may be affected.
Clark has been down this track before. On September 24, 2001, when the airline was negotiating with the Government leading towards the $885 million recapitalisation, the PM advised shareholders to hang on to their shares "because I am absolutely convinced Air New Zealand has a viable future".
A subsequent Securities Commission investigation concluded that the Prime Minister's statements were not intended to "encourage" but that encouragement was taken from her comments, as reported.
The Prime Minister was at the time an insider of the company. She is an influential figure whose statements are accorded significant weight by the public. Air New Zealand was a publicly listed company, and one in which there were a large number of retail investors.
The commission considered that potentially important statements or comments about any publicly listed company should be disclosed to the market through appropriate channels, for example, the NZSE, and in accordance with appropriate rules or guidelines about the timing of release of information to a market.
Cabinet ministers were advised to treat commercial information with extreme caution. Air New Zealand and other companies would be well advised to treat Cabinet ministers the same way.
