Air NZ looking at 'Plan B'

By JOHN ARMSTRONG and AGENCIES

Air New Zealand has revealed a Plan B - selling Ansett Australia to Singapore Airlines - if the Government turns down moves to increase the Singapore stake in the national carrier.

Speaking on Australia's Nine Network Business Sunday television programme, Air New Zealand chief executive Gary Toomey said: "If the Singapore proposal was to not proceed of course the alternative would bethe sale of Ansett to Singapore Airlines.

"Singapore Airlines had previously indicated prior to the board meeting last week that that was another alternative they were prepared to entertain."

The New Zealand and Australian Governments are assessing whether to allow a proposal by Singapore Airlines to increase its 25 per cent stake in Air New Zealand.

Finance Minister Michael Cullen last week warned Air New Zealand not to assume that its planned deal with Singapore Airlines would gain Government approval.

Government rules prevent a single airline holding more than 25 per cent and restrict total airline ownership to 35 per cent.

Foreign ownership is limited to 49 per cent.

Air NZ gained full ownership of the debt-ridden, poorly performing Ansett Australia little more than a year ago, saying it needed to own Ansett if it were to become anything more than a small regional player.

But Ansett has since been beset by falling market share, stiff competition in Australia, higher fuel prices because of weak currencies and losses from groundings because of safety problems with older aircraft.

Air New Zealand announced a week ago that it wanted to allow Singapore to increase its 25 per cent stake in Air NZ through a share placement.

The Air NZ board unanimously approved the Singapore deal after two days of hard negotiations.

Mr Toomey said that if the regulators failed to approve the plan then the sale of Ansett to Singapore Airlines would be one of the "major alternative plans that exists."

"So I think that all parties need to consider the alternative if this proposal does not succeed."

But the chief executive then said that it was not appropriate for Air New Zealand to pressure the New Zealand Government to make a favourable decision.

"I think it is important that we work constructively with them to put the arguments forward which we think are important," he said.

" ... We don't want to put any undue pressure on the Government, we just think it is important that we work through these issues and we will keep doing that."

However, the Greens have voiced their opposition to Singapore Airlines being allowed to increase its 25 per cent stake in Air New Zealand.

The party's leaders met Prime Minister Helen Clark last Thursday and made it clear they did not favour any increase in foreign ownership of the airline.

The move by the Government's allies will have no practical impact as any increase in foreign ownership does not require the Labour-Alliance Coalition to pass legislation.

It will, however, put more pressure on the Alliance, which is also opposed to foreign ownership of key local industries, not to agree to allow Singapore Airlines to lift its stake.

Greens co-leader Rod Donald said last night that Brierley's shareholding should be sold on the New Zealand market to New Zealand businesses or individuals.

The Greens took their stance after discussions with exporters and domestic tourism operators.

"Our sense is that they would not be happy for either Singapore or Qantas to increase their stake."

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