By FRAN O'SULLIVAN and DANIEL RIORDAN
Singapore Airlines is poised to lift its stake in Air New Zealand after edging out Qantas Airways in a sharp battle for control of the national flag carrier.
Under the proposed deal announced last night - which requires Government approval - Singapore Airlines will increase
its 25 per cent stake in Air NZ through a share placement.
The size of Singapore Airlines' stake will not be determined until negotiations are held with the Government, which will have to lift the cap on foreign ownership preventing a single carrier holding more than 25 per cent of Air NZ.
However, Singapore Airlines failed to gain a direct stake in Ansett Australia, Air NZ's Australian subsidiary. Air NZ will retain its 100 per cent ownership.
The Air NZ board unanimously approved the Singapore deal after two days of hard negotiations.
It is a victory for the independent directors led by deputy chairman Jim Farmer, who wanted to keep Air NZ-Ansett as an integrated Australasian airline instead of selling 80 per cent of Ansett Australia to Singapore Airlines as the foreign carrier proposed.
Air NZ will make a placement of shares to Singapore Airlines fixed at $1.31 a share.
Singapore Airlines has also guaranteed that it will support a future capital-raising operation for Air NZ. Brierley Investments' 30 per cent stake in Air NZ will diminish after the Singapore Airlines placement.
Singapore Airlines' chief executive, Dr Cheong Choong Kong, discussed the proposal with Government ministers Michael Cullen, Mark Gosche and Jim Anderton at the Beehive last night.
He reiterated that his company had not been interested in selling its 25 per cent Air NZ holding to Qantas.
He flew direct from Air NZ's board meeting in Auckland for the 40-minute meeting.
"I wanted to reaffirm our long-term commitment to Air NZ. I want to make it clear that we don't take our investment in airlines lightly. We decided to invest in Air NZ and we're in there for the long term and we're not going to sell our stake, either as part of the Qantas proposal or as part of any proposal."
Dr Cheong would not disclose any further details, saying only: "The ministers were very kind and good listeners, as I have been these past two weeks."
Under the failed Qantas proposal, Singapore and Brierley Investments would have sold their Air NZ holdings to Qantas.
In return, Singapore would have bought Ansett Australia to form the basis of a third Australasian carrier.
Qantas chief executive Geoff Dixon said last night that Singapore Airlines was attempting to gain an unprecedented level of influence over the competitiveness and structure of the aviation industry on both sides of the Tasman.
"This is a move to control Ansett by the back door, which would not have been the intention of the Australian authorities when they allowed the sale of Ansett to Air NZ."
It was inconceivable that Singapore Airlines should be allowed major influence over Ansett International as it competed with Qantas for valuable bilateral rights out of Australia.
Last night, Dr Cullen's office issued a brief statement on behalf of the three ministers.
They said Dr Cheong had briefed them on the Air NZ board meeting, and the Government was now awaiting a formal, written proposal from Air NZ.
"It would be unhelpful to make any further comment."
One of the Government's key concerns will be the effect an increased Singapore Airlines stake would have on Air NZ's foreign landing rights.
Prime Minister Helen Clark emphasised on Monday that the Government was happy with the existing restrictions capping an individual foreign airline's stake in Air NZ at 25 per cent.
The Government is expected to extract cast-iron assurances from Singapore Airlines that it will retain and expand Air NZ's international operations in return for any easing of the cap.
Air NZ was forced to make its proposal to the Government because of the problems of its wholly owned subsidiary Ansett Australia - which carries almost twice as many passengers as the rump Air NZ but is a lot less profitable.
Air NZ gained full ownership of the debt-ridden, poorly performing Ansett Australia little more than a year ago, saying it needed to own Ansett if it was to become anything more than a small regional player.
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By FRAN O'SULLIVAN and DANIEL RIORDAN
Singapore Airlines is poised to lift its stake in Air New Zealand after edging out Qantas Airways in a sharp battle for control of the national flag carrier.
Under the proposed deal announced last night - which requires Government approval - Singapore Airlines will increase
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