New man seen as airline saviour

By DANIEL RIORDAN

Unhappy Air New Zealand shareholders are eager for chief executive-elect Gary Toomey to take up the reins after last week's profit downgrades.

Analysts on both sides of the Tasman say question-marks over the underperformance of Air NZ subsidiary Ansett Australia make the arrival next month of the former Qantas deputy chief executive more important than ever.

Mr Toomey's expertise, guidance and focus on integrating Ansett were much needed, said one analyst.

Fiona Green, of UBS Warburg, in a note to the broking firm's clients, said Mr Toomey's arrival would be crucial in carrying out much-needed reform at Air NZ and Ansett.

But she had a "lingering concern" about whether there would be a clearing of the decks in the months after he took over.

Salomon Smith Barney analyst Jason Smith, in a report headed "Bring on Toomey," argued that his arrival would provide a much needed credibility boost.

Meanwhile, Peter Harbison, founder of the Centre for Asia-Pacific Aviation in Sydney, said 25 per cent shareholder Singapore Airlines was better placed than ever to increase its control over the airline group.

Singapore is blocked by Government regulation from lifting its stake in Air NZ above its present level, but Mr Harbison said it had a great opportunity to increase its influence without raising its equity.

He cited Singapore's ability to guarantee loans and lease aircraft at attractive rates. Singapore might also want to increase its code-sharing arrangements with Ansett and Air NZ.

However, airline analysts at broking firms said Singapore was already exerting considerable influence.

While news reports in Australia suggested that Air NZ's worsening financial position might prompt the Government to relax its foreign ownership restrictions and allow Singapore to go above 25 per cent, analysts thought that unlikely.

A spokeswoman for Transport Minister Mark Gosche said the issue was not being considered.

Despite last week's savage downgrades, most analysts remain cautiously positive about Air NZ's medium-term outlook, saying there are real cost savings possible from the Ansett deal which have yet to be realised.

The Business Herald understands that shareholders who agreed to take up their entitlements to Air NZ's rights issue before the profit bombshell sent the airline's share price plummeting were able to renounce their entitlements before the issue closed.