More Ansett woes as lease deal fails

CANBERRA - Qantas plans to boost its capacity in Australia by leasing aircraft from collapsed carrier Ansett have failed.

Transport Minister John Anderson broke the news to the Australian Parliament. "It is my understanding that negotiations between Qantas and the [Ansett] administrator over attempts to build extra capacity based on the use of Ansett planes have come to an end," he said.

Ansett, Australia's second-largest carrier, collapsed 12 days ago after it was cut loose by debt-ridden parent company Air New Zealand.

In a joint statement, Qantas and the Ansett administrator said the deal to lease the A320 aircraft was "simply too difficult to finalise".

Qantas chief executive Geoff Dixon and Ansett administrator Mark Mentha said the negotiations had been conducted in "what was undoubtedly a difficult environment for the world aviation industry".

Talks on leasing the aircraft have dragged over the past week as Qantas and the administrator squabbled over issues including pricing and insurance cover.

Some analysts have speculated that Qantas' commitment to leasing the Ansett planes faded as global airline woes grew, freeing huge amounts of capacity.

Mr Mentha said talks continued with the Government exploring how to get aircraft back into the air.

Ansett isn't seeking cash from the Government but help with solving operational issues such as customer relations to help persuade travellers that the airline can resume operations for the long haul, Mentha said.

The talks remain focused on taking "Ansett forward on a long term viable future".

Andersen says it has interest from five bidders for Ansett as it seeks to recover some A$2 billion owed to creditors.

While the A320s look set to remain grounded, the South Australian Government provided a $A3.5 million ($4.2 million) loan to ensure that Kendell Airlines, a regional service, is back in the air tomorrow.

South Australian Premier John Olsen said the loan would be repaid once a buyer had been found for Kendell, and the sale process was expected to start immediately.

The federal Government has flatly refused to bail out Ansett but has provided some financial assistance to regional airlines to ensure that services continue to remote areas.

A $A3.5 million commercial bridging loan has been provided for Skywest in Western Australia and $A3 million has been lent to Hazelton in New South Wales.

Meanwhile, the Australian dollar rose for a second day on speculation that an overseas company may be snapping up the currency to buy the assets of Ansett Holdings.

The currency also rose to the highest in more than a week against the Singapore dollar on speculation, denied by the company, that Singapore Airlines may want to buy some assets.

There were fewer sellers of the Aussie after the currency's 7.7 per cent decline in the past month.

Jo Masters, currency strategist at Macquarie Bank, said Australia's currency was also being supported by expectations that the American economic slowdown might not be as bad as previously thought.

- REUTERS

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