Way clear for Government to move on Air NZ

By VERNON SMALL deputy political editor

The Government will press ahead with its $885 million investment in Air New Zealand, after chief negotiator Rob Cameron completed due diligence and reported his recommendations yesterday.

A spokeswoman for Finance Minister Michael Cullen said there was always a small chance due diligence would uncover something that would cause the Government to back away. But that risk had now passed.

"If the Government accepts those recommendations made by Cameron & Co as the basis for their negotiations [with Air New Zealand], then they'll start next week," she said.

Dr Cullen and Associate Finance Minister Trevor Mallard had the power to act on the matter.

The Government last month agreed to inject $885 million into the company, giving it a controlling stake that is likely to represent about 83 per cent of the company.

The first tranche of $300 million was a loan that switches to convertible preference shares.

Negotiations with the company would determine the price of shares to be acquired through the second tranche, of $585 million.

Meanwhile, Dr Cullen's spokeswoman said she could not confirm reports that senior management from Qantas had recently visited Wellington for preliminary talks on acquiring a cornerstone shareholding in Air New Zealand.

The Government has said it would probably try to sell some of its holding to a key airline stakeholder.

The spokeswoman said Dr Cullen had no meetings scheduled with representatives of the Australian airline.

The Government is due to take control of Air New Zealand in January, subject to shareholder approval at a meeting on December 19.

David Huttner, deputy chief executive of Richard Branson's Australian-based budget airline Virgin Blue, is to hold talks with Transport Minister Mark Gosche soon.

A spokeswoman for Mr Gosche said a meeting had been agreed on, but no time had been set.

She understood it was a courtesy call.

Virgin Blue has been keen to win regulatory approval to compete with Air New Zealand and Qantas on transtasman routes, possibly feeding into main trunk destinations here.