Pero poised to repeat Origin rescue effort

Mortgage broking millionaire Mike Pero is getting out his chequebook to try to save embattled regional airline Origin Pacific - for the second time.

Pero, who helped Origin to fend off bankruptcy in 2002 by becoming a 25 per cent shareholder and director, is offering to buy the profitable freight division of the Nelson-based airline, which was forced to ground its passenger services this week.

Last night, Pero offered to become the major shareholder and chief executive of the freight business. He told Origin shareholders and management in a letter that he expected to complete due diligence by Tuesday night.

Origin managing director Robert Inglis, who owns 50 per cent of the company, could not be contacted for his reaction to the rescue plan.

Pero stepped down from the board last year, saying he was confident Origin was again a viable business.

The price tag of the freight business is not known but the Herald understands Origin needs a rescue package of about $7 million to compete profitably against state-owned carrier Air New Zealand. Of this, up to $5 million is needed to meet Origin's debts.

The nine-year-old airline suspended passenger operations on Thursday evening after failing to secure new investment to meet aggressive competition from Air NZ and rising fuel costs.

Origin has 260 full and part-time staff. It said it would try to maintain its profitable freight business, employing a "fraction" of those workers.

The Herald understands that after meeting its debt commitments, Origin will need between $2 million and $5 million more to relaunch its passenger services to compete profitably on regional routes Air NZ is targeting.

Inglis declined to discuss Origin's debt or revenues.

Asked if the airline was solvent, he said it had been "challenged" in recent months by loss of revenues on its passenger business. But the airfreight and charter operations were profitable.

He said talks with potential investors were continuing.

Origin carries up to 70 tonnes of freight daily. Most is carried between Auckland and Christchurch and Auckland and Wellington.

The airline markets a Qantas 767 airfreighter for an overnight Christchurch service.

It also uses its smaller, 30-seater regional aircraft for freight and Inglis said he would look at incorporating its redundant passenger aircraft into freight operations.

The 25 per cent of Origin not held by Inglis or Pero belongs to Ledger Holdings, owned principally by a Wellington surgeon.

The airline until this week operated passenger services between Auckland, Hamilton, Tauranga, New Plymouth, Palmerston North, Wanganui, Napier, Wellington, Blenheim, Christchurch and Nelson, using seven turboprop aircraft.

Inglis said he agreed with Auckland aviation commentator Peter Clark that the collapse of Origin's passenger services was the death of airline competition in the regions.

"The state-owned airline ... uses [its] dominant position so aggressively that if any other operator aspired to run regional services, they had better do so in Australia," Inglis said.

Origin started in 1997 as a charter passenger operator. Within two years, it had been approached by Australian national carrier Qantas for a code-share agreement to compete against Air NZ. Origin started air freight services seven years ago.

Its troubles began two years ago when Qantas dumped the code-share agreement during its efforts to amalgamate with Air NZ. That deal was torpedoed by regulators.

Although Inglis said he was reluctant to "enter into recriminations", it is no secret he regards Air NZ's domestic practices against his airline as predatory. But so far, he has not been able to get the Commerce Commission to agree with him.

In June, Origin made its second complaint against Air NZ to the competition watchdog, asking it to investigate after the national airline began new services on two Origin routes - Nelson to Hamilton and Nelson to Palmerston North.