Fire sale plan to stave off ruin

By FRAN O'SULLIVAN, DANIEL RIORDAN and JOHN ROUGHAN

Air New Zealand wants to avert disaster by selling its loss-making Ansett subsidiary to rival Qantas.

After six days of crisis talks, Air New Zealand chief executive Gary Toomey emerged at 7.51 pm last night with a fire sale plan to unload Ansett Australia and its 49 per cent stake in Ansett International.

If the deal goes ahead, Qantas would take over Ansett's debt.

Ansett is losing $1.6 million a day, threatening to bury Air New Zealand, which is itself struggling to raise new capital.

Qantas has started talks, but chief executive Geoff Dixon said last night that he would not guarantee a deal - despite a plea from Prime Minister John Howard's Government to avert a total collapse of Australia's second-largest airline.

If a deal proceeds, Qantas will take on Ansett debt. The amount will depend on how many of Ansett's assets it acquires.

The Australian Deputy Prime Minister, John Anderson, said last night that the deal offered the best way forward for an airline facing grave uncertainty.

Prime Minister Helen Clark welcomed the offer last night.

"On the face of it, it puts Qantas in fundamentally the same position Air New Zealand is in the New Zealand market at the moment.

"But it has to be taken seriously."

The Government has been anxious to avert the political disaster of a collapse of an Air New Zealand weighed down by Ansett debt.

Mr Howard - facing an election in two months - has been strenuously lobbied by labour unions and his political opposition to eliminate any regulatory opposition to a Qantas takeover of Ansett.

Yesterday, Ansett's head office in Melbourne was besieged by demonstrators demanding action to save the airline and its 16,000 jobs.

Australia's competition watchdog, Professor Allan Fels, says that he is not in principle opposed to Qantas opening talks with Air New Zealand.

Ansett will continue normal operations as Air New Zealand tries to cement an agreement in principle with Qantas before the New Zealand flag carrier reports its annual result on Thursday.

Mr Toomey's statement came after another board meeting at the airline's Auckland headquarters.

The Ansett rescue proposal was announced after a sixth day of top-level brinkmanship involving the Australian and New Zealand Governments and their national flag carriers.

Mr Toomey telephoned Mr Howard in Washington yesterday morning to seek Australian Government endorsement for the Qantas option.

Earlier talks on this option were terminated after the Australian Competition and Consumer Commission made "adverse comments".

At a post-cabinet press conference, Helen Clark spoke only of the interests of Air New Zealand, not of its problem child, Ansett Australia.

She said: "There is no doubt Air New Zealand has been, is, can be, a profitable airline."

Herald inquiries suggest Ansett Australia has only a 39 per cent share of the highly competitive Australian domestic market and ticket sales are slow.

Qantas does not expect to acquire all of Ansett's subsidiaries. Fledgling Australasian airline Virgin Blue has signalled its interest in an Ansett carve-up.

Helen Clark was to leave last night for meetings in Europe but put off her departure by 24 hours, to meet Finance Minister Michael Cullen, who will be back from an Asia-Pacific Economic Cooperation ministers' meeting in China.

The two will discuss the airline crisis at Auckland Airport today.

The Prime Minister said yesterday that it was Sir Richard Branson who upset a rescue plan last week when he refused to sell his Australian budget carrier, Virgin Blue, to Air New Zealand.

Virgin Blue has eaten into Ansett market share in Australia.

She denied that Dr Cullen had caused a slide in Air New Zealand's share price late last week when he said the airline was in a worse condition than anyone had suspected.

"Dr Cullen simply stated the obvious, and anybody who has followed it would have drawn a similar conclusion," she said.

She also denied that the problem could have been averted if the Government had raised the foreign-ownership cap in July when Singapore Airlines was offering $1.31 a share.

"The proposal the Air New Zealand board and Singapore Airlines put to us at that time would not have solved the problem," she said.

It is understood the Government was advised that the recapitalisation problem would have landed back on the Government's desk even if it had quickly allowed Singapore to raise its stake to 49 per cent.

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