Government being 'suckered' over plan for Air NZ

By VERNON SMALL Deputy political editor

Act wants the Government to scrap a rescue package for Air New Zealand and instead let its existing shareholders, including Brierley Investments, fund the airline's cash needs.

Singapore Airlines and the Government appear close to finalising a package that would see Singapore Airlines lift its 25 per cent stake to at least 35 per cent.

The Government is expected to kick in some cash, either through a share placement, a loan or guaranteeing a major capital-raising exercise.

But Act's commerce spokesman, Stephen Franks, said it was deplorable that the country was being told there were only three options to recapitalise Air New Zealand - the Government, Singapore Airlines or a rival bid by Qantas.

"There is no mention of the first and most simple and obvious choice - existing Air New Zealand shareholders," he said.

"There is no reason why a deeply discounted renounceable rights issue to existing shareholders would not raise the necessary capital."

Last year Air New Zealand tried to raise $285 million through a rights issue but fell 20 per cent short of its target.

Mr Franks said brokers had estimated an issue at 60c a share, against a current market value of just over $1 for the A shares, would raise the $500 million to $800 million he understood the airline needed.

Air New Zealand needs cash to upgrade its fleet and repair the damage caused by losses in its Ansett Australia subsidiary.

But Mr Franks said the Air New Zealand board had presided over one of the most catastrophic foreign excursions of recent years and had diverted attention from its responsibility for the Ansett purchase by suggesting there was no alternative to Singapore Airlines taking control.

An inexperienced Government was being "suckered by foreign airline spin merchants, but most of all Asian-controlled Brierley Investments, into rescuing not Air New Zealand but BIL".

Brierley Investments has a 30 per cent stake in Air New Zealand A shares - which only New Zealanders can own - and is widely seen as reluctant to sink any more money into the airline.

Brierley Investments is Singapore-based but has been able to structure the ownership of the holding to allow it to retain the A shares.

Its holding lifts the shares owned by foreigners from the 49 per cent limit, set by the Government, to 79 per cent.

"It's time the Government told BIL they've done enough damage, stopped turning a blind eye to BIL's foreign control, and used the powers New Zealanders thought they had given the Kiwi share," Mr Franks said.

The company should live within the rules under which all shareholders bought into the company.

Mr Franks helped to set up the Brierley Investments holding structure for its Air New Zealand shares when he was a corporate lawyer before entering Parliament.

"For that reason I have avoided, and will continue to avoid, talking about it," he said.

He said the structure satisfied the Overseas Investment Commission and the Minister of Finance. "But it appears to me that the interests of Air New Zealand now are being driven by the interests of Brierley and I think the structure was established to try to insulate Air New Zealand from that. I am concerned that capital raising is not being tested because of BIL."

Meanwhile, Finance Minister Michael Cullen, who has been irritated by Opposition taunts that the Government is "dithering" over Air New Zealand's future, yesterday confirmed a Herald report that the airline was yet to finalise its business plan and capital requirements.

Dr Cullen said the Government could not make a decision until that was done. He denied the Government was responsible for the delay in the release of Air New Zealand's financial statement until September 13.

The cabinet will finalise its position on the airline next Monday aftera meeting of the Air New Zealand board today.

Speaking in Parliament, Dr Cullen said he could not answer "in the public interest" questions about the Government's involvement in any rescue package.

The Government's interest was to ensure Air New Zealand's survival as a strong and viable airline, promote its brand, preserve competition and safeguard international landing rights.

He repeated Prime Minister Helen Clark's comment that it was not the Government's "preference" to invest in Air New Zealand.

Southern Skies Properties Limited

Air wars - the cast list

www.nzherald.co.nz/travel