Staff's plan throws a lifeline to Ansett

By FRAN O'SULLIVAN, DANIEL RIORDAN and JOHN ROUGHAN

Air New Zealand last night put Ansett Australia into voluntary administration after a group of Ansett employees proposed a deal to save it.

The group is working with insolvency experts on a deal involving a big international airline and European banks.

Air New Zealand and the group have asked the Australian Government to financially back the deal but it was not know last night if it had agreed.

The employee proposal, led by the Engineers and Pilots Association, calls for a 28-day voluntary administration of the airline, with the Australian Government footing a bill of up to $45 million to cover the airlines' operating costs.

Advised by New York management buyout experts Keilin & Co, the group is looking for an airline shareholder and talking to European banks.

Air New Zealand will today report its annual result - expected to be a loss of about $300 million.

It is also expected to unveil a bailout plan from its major shareholders - Singapore Airlines and Brierley Investments - and the New Zealand Government, who have been negotiating solidly to get an agreement before the airline's reporting date.

The national flag carrier has lost a huge amount of money through its loss-making Australian airline.

It will have to take savage writedowns when it reports its results today.

The employee group is prepared to take staff and pay cuts in return for shares in the company, with a view to a share float in 12 months. Ansett has 16,000 staff.

The plan, unveiled at 8.30 pm, came after another day's intense negotiations at Air New Zealand's Auckland headquarters.

Acting chairman Jim Farmer emerged at 5 pm to reveal that the company was making one last attempt to get support from Prime Minister John Howard's Government to keep Australia's second largest airline flying.

Air New Zealand's desperate moves came as global aviation shares went into a tailspin and fuel prices rose sharply after of the terrorist attacks which devastated the United States and grounded all aircraft flying to, from or over America.

The afternoon of cruel letdowns began when Australia's largest airline, Qantas Airways, said at 3.30 pm that it would not come to Air New Zealand's aid by taking over Ansett.

Qantas chiefs said Ansett's problems were far too great for Qantas to take on.

Chief executive Geoff Dixon said: "Both the Government and the ACCC [Australian Competition and Consumer Commission] were supportive, but in the end we felt such an acquisition would be a negative for Qantas."

Qantas chairwoman Margaret Jackson said Qantas's board had met three times in the past three days to consider the proposal.

"While we would have liked to have assisted in keeping Ansett flying in some form, the implications for our own balance sheet and future profitability must come first," she said.

At 3.45 pm Air New Zealand said it had just asked the Australian Government to underwrite Ansett while an attempt was made to restructure the airline.

Under that proposal, Air New Zealand would have liquidated Ansett and formed a new discount airline - Ansett 2 - with a similar cost base to Virgin Blue, but with a much broader network across Australia.

But Acting Prime Minister John Anderson rejected the proposal.

When Dr Farmer read out his 5 pm statement - timed to capture Australian television headlines - it revealed that expressions of interest in Ansett from other potential buyers had arisen and Air New Zealand had submitted a new request.

In Parliament yesterday afternoon, Finance Minister Michael Cullen said the Government - just one day before Air New Zealand's financial results were due - still did not have a finalised funding proposal from Air New Zealand.

Dr Cullen strongly defended the Government against repeated claims that it had contributed to the crisis. "Only a couple of days were spent in negotiation with Qantas," he said.

"That has not significantly affected the process.

"At every point it has been the Crown negotiators who were forcing Air New Zealand to come to a clear realisation of the state of the company.

"If the Government had agreed to the terms of the original recapitalisation proposal the problems of Air New Zealand simply would not have been dealt with.

Air New Zealand would have been back on the Government's doorstep within a short period."

Act leader Richard Prebble accused the Government of leaving Air New Zealand out of its original dealings with Mr Anderson, who is also Australia's Transport Minister.

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