Slow fuse to crisis as Tasman Pacific's board floundered

By DANIEL RIORDAN

Tasman Pacific Airlines' liquidation committee has been told the company's directors knew in May last year that the airline was in jeopardy, but did not come up with a credible rescue plan.

The nine-member committee, representing unsecured creditors owed almost $130 million, met for the first time yesterday.

The airline, which flew as Qantas NZ, went into receivership in April and into liquidation in June.

The Business Herald understands liquidators Arron Heath and Jeff Meltzer of Meltzer Mason Heath told the committee that one of the directors' plans involved raising airfares by 20 per cent over 18 months, a proposal which had little chance of success in a domestic aviation market dominated by Air NZ.

Another plan, explored at the end of last year, was to bring in new investors. But the owners were not prepared to sell shares for less than they paid for them, even though the airline's debts had increased greatly since the purchase.

The transtasman consortium of businessmen that bought the airline in March last year is believed to have paid around $36 million.

The final rescue plan was to sell to Qantas Airways. Directors told Qantas the airline's debts were no more than $20 million, but Qantas walked away from the deal when it realised the true figure was at least three times that amount.

The committee was told the airline had negative net worth of about $200,000 from its first day of trading and was losing more than $1 million a week towards the end.

Mr Heath would not comment on the meeting or the liquidators' progress.

The liquidators said that although they had yet to form a judgment on the directors' actions, the company had followed proper accounting procedures and maintained accurate cashflow models. They believed directors were fully apprised of the airline's financial situation.

The committee has asked the liquidators to continue their investigations and find out when the company went insolvent and why directors kept it flying as long as they did.

It was also told receivers Grant Graham and Michael Stiassny of Ferrier Hodgson had been paid more than $1 million for their work on behalf of debenture holder the Bank of New Zealand, which had been owed $9.9 million.

Mr Stiassny told a creditors' meeting in August that between $9.5 million and $11 million should be available to unsecured creditors.

The liquidators said at the same meeting that it could be months before their investigation revealed the extent of the directors' role in the airline's demise and the extent of their responsibility. Mr Meltzer refused then to rule out continuing into next year.

The committee, formed immediately after the creditors' meeting, comprises Martin Angel (Pratt & Whitney), Neil Carr (Mobil Oil), Terry Hay (Pacific Flight Catering), Susan Jackman (First Direct Taxis), Andrew Jones (Qantas Airways), Richard McCabe (Airline Pilots' Association), Mike Sang (Airways Corp), Ashvin Sood (a former employee representing himself) and Tony Wilton (Engineers Union).

In a related matter, seven past and present directors of the failed airline, including chief executive Kevin Doddrell and former chairman Ken Cowley, each face three charges relating to their alleged failure to prepare signed accounts.

They say they are not guilty and next face a status hearing in the Auckland District Court on December 4.

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