Singapore freezes Air New Zealand deal

By GEOFF SENESCALL

Singapore Airlines put its plans to buy in to Air New Zealand on hold last night, after negotiations with Brierley Investments hit a snag at the 11th hour.

An announcement had been timed for late yesterday, which would have seen Brierley deliver Singapore a 25 per cent stake in the national flag carrier at a price believed to be around $400 million.

A deal in principle had been agreed to between Singapore's chief executive, Dr Cheong Choong Keong, and Brierley's Singapore-based boss, Greg Terry.

Both parties were in Wellington yesterday to sign the final agreement, but could not be contacted for comment.
The deal now hangs in the balance, with one aviation source giving it a 50-50 chance of going ahead.

A further stumbling block for the deal's going ahead was comments to the Herald by Prime Minister Helen Clark that her Government would not allow Singapore to increase its holding above 25 per cent

Representatives of Singapore, including Dr Cheong, sought to meet Helen Clark last night to sound out the Government on lifting its stake.

Helen Clark said: "I may well see them, but I wouldn't hold out hopes for 40 per cent."

Asked if she was favourably disposed to changing the rules so the airline could buy more than 25 per cent of Air New Zealand, she said: "No."

"They are obviously interested to know whether the New Zealand Government is predisposed to the investment they are making.

"But at the present time the rules prevent them going above 25 per cent," Helen Clark said.

Under existing regulations which govern international landing rights, a foreign airline cannot own more than 25 per cent of Air New Zealand.

But the Government, through its "Kiwi" shareholding in the airline, can allow that level to be raised.

Air New Zealand is seeking a similar concession from the Australian Government as part of its purchase last month of the remaining 50 per cent stake in Ansett Australia from Rupert Murdoch's News Corp.

The prospect of the global heavyweight Singapore Airlines buying into Air New Zealand sent the share price of the local carrier soaring.

Its B shares (which can be owned by foreigners) rose 14c to 249c and its A shares (which can be owned only by New Zealanders) closed up 8c at 202c.

The Air New Zealand share price had been moribund under the weight of a pending rights issue to help finance its $A580 million ($725 million) purchase of Ansett.

Across the Tasman, Qantas shares were up nearly 10 per cent as questions were raised about the expansion plans of Sir Richard Branson's Virgin airline operation into Australia.

A tie-up between Singapore and Air New Zealand meant Singapore was unlikely to link with Virgin in Australia as it had been expected to.

* On October 13, the Business Herald carried an apology to Sir Selwyn Cushing for suggesting he had attempted to intervene in the negotiations and had sought to change some aspects of the agreement. This allegation is not to be repeated.