Editorial: Silver lining to the cloud over Air NZ

If crumbs of comfort are to be found in the virtual renationalisation of Air New Zealand, they lie in the apparent recognition of lessons learned. The commitment of $885 million of taxpayers' money to buy about 83 per cent of the national carrier could have been the opportunity to score political points. Perhaps that temptation was tempered by the fact that many of the leading figures in the Government had not demurred when an earlier Labour administration sold the airline in 1989. Whatever the reason, their statements during yesterday's bailout announcement augured well for Air New Zealand's recovery.

The Minister of Finance, for example, was adamant that there would be no political "sticky fingers" in the running of the airline. The reconstituted Air New Zealand board must, of course, be accountable for the airline's performance. But, equally, it must be able to move quickly and dexterously. The terrorist attacks in the United States have created such uncertainty in the airline industry that the added burden of political interference is unthinkable.

Equally significantly, Michael Cullen indicated the importance of an airline taking a cornerstone shareholding in Air New Zealand. If nothing else, that was an admission of the inherent error in the 1989 sale to a consortium including Brierley Investments, Qantas, Japan Airlines and American Airlines. Brierley knew nothing of the airline industry and Qantas, the dominant shareholding airline, was frozen out of the boardroom because of a perceived conflict of interest.

Air New Zealand suffered grievously from the lack of an influential airline shareholder. And from 1997, when Qantas became the last of the trio of foreign airlines to sell out, the absence of guidance was total.

The turbulence confronting the airline industry means a new cornerstone airline shareholder will not appear overnight. That is a medium-term proposition as the fortunes of Air New Zealand and the world industry recover. Regrettably, Singapore Airlines will almost certainly bide its time. To the Singaporeans, the most adroit of airline operators, Air New Zealand was always an entree to the Australian domestic market. Its 25 per cent stake in the airline was a consolation prize after Air New Zealand thwarted its bid to take control of Ansett. Now, having jibbed at investing further money in Air New Zealand, its stake will shrink to around 4.3 per cent.

Most pertinently, it has been invited by Ansett's administrator to be involved in plans to revive the Australian carrier. With that opportunity, its short-term interest in Air New Zealand is likely to be restricted to a watching brief. A small shareholding and one seat on an eight-strong board cater for that role.

Assuming none of the numerous potential snags in the bailout conditions bite, the immediate interest in Air New Zealand lies in its current financial performance. The international operations of all airlines are suffering in an extremely harsh environment. Even the rich pickings from Air New Zealand's domestic routes will diminish as tourist numbers drop.

The "clear strategic direction" demanded of the airline's board by Dr Cullen will require a difficult balancing act. It would be tempting to reduce international services and rely more on the inherent profitability of the domestic routes. Yet the international operations are the reason the Government rescued the airline. Air New Zealand is an indispensable cog in the tourism industry, and will play a crucial role in campaigns depicting New Zealand as a safe destination.

The skies are undoubtedly brighter for the mum and dad shareholders implored so recently by Helen Clark to hold on to their shares. Crucially, the rescue package includes a payment of $185 million as a final settlement with the administrators of Ansett. That effectively negates further repercussions from the Ansett debacle.

Air New Zealand's share price is unlikely to recover rapidly. The world airline outlook over the next year or two is far too difficult for that. But a gradual improvement is possible, especially with a clear and concise strategy.

But for the events of September 11, New Zealanders would have looked askance at the sum involved in the bailout of their airline. Now, it is evident the Government had no option - and that other Governments are being, and will be, called upon to take similar action.

But never again must past failings be allowed to take flight.