Air NZ rescue puts Government back at controls

By VERNON SMALL and GREG ANSLEY

Twelve years after it was privatised, Air New Zealand will return, temporarily, to state control under a Government-led bailout.

Finance Minister Michael Cullen is due this morning to unveil a rescue package that will pump up to $850 million into the national carrier in return for about an 80 per cent Government stake.

Speaking in Parliament yesterday, Dr Cullen confirmed that the Government planned to take "effective control" of the airline by injecting an unspecified amount of taxpayers' money "in the national interest".

But the Government would not be in for the long haul.

He said one of the problems Air NZ had faced for some time was the lack of clear strategic direction and strong leadership.

"Any investment by the Government in Air NZ will ensure there is effective control for a period of time. But it will be subject to a clear message that the Government does not see itself the longterm shareholder."

That was seen as a hint of a sale of the Government's holding, possibly through a public float, once the airline has stabilised.

The rescue package was to be revealed early yesterday afternoon, to coincide with an Air NZ board meeting in Auckland that was expected to give final approval.

But a hitch, which political sources blamed on attempts by keystone shareholder Brierley Investments to "re-litigate something" and final talks on a settlement package with the administrators of failed subsidiary Ansett Australia, forced a postponement to 9 am today.

Air NZ is also expected this morning to give Ansett administrators a plan to finally shed the crippled Australian airline.

The proposal will include a cap on Air NZ's liability that will calm its shareholders and the Government, and help to put a slimmer version of Ansett back in the sky.

Australian reports predict this will amount to a $NZ250 million payout, leaving Air NZ free to sort out its own problems.

In Parliament yesterday, Dr Cullen said the Government would not buy shares from existing Air NZ shareholders, scotching reports that it may pick up Brierley's stake.

Brierley owns 30 per cent and Singapore Airlines 25 per cent of the national carrier, but both are likely to have their holdings diluted under the rescue package.

It is understood the majority Government stake would be achieved either by subscribing to new shares or via a combination of new shares and underwriting an offer of new shares to other shareholders.

Under an earlier rescue package, each of the two big shareholders would have put $150 million into the airline, backed by a $550 million loan from the Government.

But the September 11 terrorist attacks on the US and the airline's urgent need for even more money scuppered that plan.

Meanwhile, Prime Minister Helen Clark said a newspaper article claiming that her advice to small shareholders to hang on to their shares had cost taxpayers $135 million was "a piece of Act fiction".

She said her comments had not led Singapore Airlines and Brierley to renegotiate the rescue deal, costing the taxpayer money.

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