Big loss digs deeper hole for Air NZ

By FRAN O'SULLIVAN AND DANIEL RIORDAN

Pressure is mounting on the Australian and New Zealand Governments to bail out Air New Zealand amid fears that its subsidiary, Ansett Australia, is days from a collapse that could take its parent with it.

The Air New Zealand board finally admitted yesterday that Ansett is losing $1.5 million a day - close to $550 million a year - after a savage run on the share price caused the Stock Exchange to demand answers from the airline.

The Air New Zealand statement, issued at 5.50 pm after another day's haemorrhaging on the Stock Exchange, confirmed that Singapore Airlines had withdrawn its rescue offer to provide extra capital at $1.31 a share.

The A shares closed last night at 70c and the B shares at 81c.

Singapore Airlines held its own board meeting yesterday to discuss the Air New Zealand problems.

It has confirmed to Air New Zealand that it is still interested in supporting the rescue package, if it can be put together on a sound basis.

The mounting problems at Air New Zealand caused rating agency Standard & Poor's to cut the company's credit rating from BB+ to B+.

Prime Minister Helen Clark said last night that the Government was "incredibly reluctant" to have New Zealand taxpayers carry the can, but she could not rule anything out.

Finance Minister Michael Cullen and his Australian counterpart, Peter Costello, will today discuss options for Ansett - including a taxpayer-funded rescue package - when they meet at the Apec Finance Ministers Conference in Shanghai.

Australian Prime Minister John Howard is not keen for his Government to invest in private companies but he wants Ansett to survive.

Air New Zealand's board, which has been holding crisis meetings this week after Sir Richard Branson's Virgin Blue pulled the plug on a rescue package, hopes to have a proposal ready by Monday that will enable the Government to decide the airline's future.

But a decision may not be ready before the airline delivers its June-year results on Thursday, the day after Dr Cullen returns from China.

Ansett needs more than $1 billion to meet its immediate capital needs.

Directors yesterday confirmed that Ansett was losing $A1.3 million ($1.5 million) a day in earnings before interest and tax.

Singapore Airlines, aided by Sir Richard Branson, has been taking a tough line to negotiate a better price for its increased stake in Air New Zealand.

But it is dismayed at the worsening state of Ansett's finances since negotiations began, and at the time the Government has taken to decide whether Singapore can lift its shareholding above 25 per cent.

A spokesman for Australian Transport Minister John Anderson said two decisions needed to be made before the Australian Government became involved.

"The Air New Zealand board needs to work out exactly what it wants, and the New Zealand Government then needs to make a decision on that."

Sir Richard Branson continued to stir the pot, promoting his own deal, under which Singapore would sell its stake in Air New Zealand to Virgin Blue, Singapore would buy Ansett from Air New Zealand, and Air New Zealand would use the proceeds to buy 50 per cent of Virgin Blue.

Analysts rated the deal's chances of success as slim to zero, particularly as Singapore says it has no desire to own Ansett separate from Air New Zealand.

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