Report outlines airline's demise

Directors of Tasman Pacific (which flew as Qantas NZ) have provided their fullest explanation yet of the airline's demise.

Their action coincides with the release of the liquidators' first report, which estimates that there will be just $3 million available to pay unsecured creditors owed $127.7 million - about 2.3c in the dollar.

In a four-page unsigned statement sent to creditors, the directors said their initial hopes for restoring the airline to profit after they bought it in March 2000 had been dashed by a weaker dollar and higher fuel prices.

Attempts to recoup the cost increases by way of fare increases were only partially effective.

Although market share was rising when the airline entered into its franchise arrangement with Qantas Airways in September last year, directors said they soon realised that the business needed extra capital.

From last September they approached outside parties, including Qantas, and "third-party venture capital investors" made an indicative offer to invest.

By January of this year, the directors believed commercial and financial due diligence had been successfully completed.

The investment would have been part of wider measures that included savings through trimming routes, renegotiating aircraft leases, renegotiating the Qantas franchise and an increased bank facility.

"Overall, the package would have increased liquidity and provided a stable financial platform for the company to go forward into 2001-2," directors said.

But the investment process became drawn out, and the airline encountered liquidity difficulties in late March, prompting directors to go back to Qantas for financial assistance. Qantas began due diligence, and directors expected them to pay all Tasman Pacific's creditors as part of the deal.

As pressure mounted, directors sought and received an undertaking from Qantas that it would meet debts incurred from specified dates.

Directors said they saw those undertakings as a sign of Qantas' good faith negotiations with a view to buying the business. But the talks broke down; a rescue package involving major creditors also failed, and the airline went into receivership on April 21.

That account of the airline's demise has done little to mollify creditors, who will seek detailed explanations when they meet the liquidators and some directors on August 14.

The liquidators, Arron Heath and Jeff Meltzer of Meltzer Mason Heath, say they have yet to form a view on the directors' role in the airline's demise.

Southern Skies Properties Limited