Report queries Qantas scheme

By DANIEL RIORDAN aviation writer

Air New Zealand would have a $800 million drop in asset value if it sold subsidiary Ansett to Singapore Airlines, says sharebroking firm JP Morgan.

In a report "Qantas coming to the rescue," the firm says it does not believe that the Qantas buy-in deal as presented can take place.

JP Morgan suspects the deal has political overtones to force the Government to relax its foreign ownership controls on Air NZ.

The report assumes that the cost of Air NZ buying Ansett was $1.3 billion.

If Air NZ sold Ansett to Singapore, the price would be a lot lower.

Assuming a sale price of $500 million, Air NZ's net debt would drop from $2.9 billion to $1.8 billion and its shareholders' funds from $1.9 billion to $1.1 billion.

The airline's net profit for the June year would be $90 million (excluding a capital loss of $757 million) instead of a projected loss of $143 million (and a predicted operating loss of more than $200 million).

Net tangible assets would fall from $2.53 a share to $1.47 a share.

The airline would return to profitability in 2003, although the report says that improvement would also take place with ownership of Ansett.

JP Morgan says the key question in the proposed deal is whether Qantas would be given management control of Air NZ if it was restricted to 25 per cent ownership.

Meanwhile, Air NZ has denied a Reuters report from London that it has deferred its fleet renewal plans pending resolution of the Qantas approach.

The report said the airline had decided to hold off on orders until it knew whether it would retain ownership of Ansett.

But Air NZ spokesman Mark Champion said nothing had changed. "There has been no deferral of our renewal plans," he said.

"Nothing has changed from the situation before the proposal from Qantas came through."

But one industry executive said: "The discussions about the Air New Zealand order are at a stand-still."

And another aviation source said Air NZ's loss of interest in talks with aircraft manufacturers Boeing and Airbus had been apparent for at least two weeks.

"Two weeks ago, it [the negotiations for planes] was going nowhere, but before that Air NZ had been very serious," the source said.

Air NZ carries more than 21 million customers a year on a fleet of nearly 200 aircraft.

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