Ansett Australia deal hangs in the balance

SYDNEY - Pressure mounted on the planned buyers of failed airline Ansett Australia yesterday, after a crucial merger deal with Richard Branson's Virgin Blue fell through just days before the final sale deadline.

Sources close to the Tesna consortium of Melbourne millionaires Solomon Lew and Lindsay Fox insisted that its rescue bid was on track.

But analysts doubt the deal will be inked by Thursday because of questions over finance and a lack of vital operating agreements.

Ansett's administrators have been totting up losses of $A6 million ($7.36 million) a week in a bid to sell the airline as a going concern. They will pull the plug if Tesna fails to take the helm by Thursday, the cut-off date agreed by creditors.

"We are going forward, it will be Thursday," said a source close to Tesna, which plans to employ 3000 of the 16,000 staff who worked at Ansett before its collapse last September.

"Stumbling blocks are the logistical bits and pieces, all the paperwork to deal with seven aircraft lessors and five airport owners, but we'll be there," he said.

A federal court hearing to approve the sale was adjourned yesterday after administrators said finalising the deal was proving difficult.

Virgin Blue, which grabbed second place in the domestic airline market behind Qantas Airways after Ansett was abandoned by former owner Air New Zealand, said at the weekend that it would go it alone after failing to hammer out a deal with Mr Fox and Mr Lew.

Despite initiating talks with Mr Branson, Tesna's principals said the Virgin Blue deal was just a side issue and would have no impact on its negotiations with Ansett's administrators.

Tesna sources said backer Air Partners, headed by Ryanair chairman David Bonderman and former America West chief Bill Franke, were firmly committed and denied wrangling over the buying price.

But one analyst said: "Funding is probably their primary hurdle. We haven't seen any proof at this stage that's in place."

Owed almost $A2 billion, Ansett's creditors approved the Tesna deal in January. Mr Fox and Mr Lew would pay $A270 million in cash, assume liabilities of up to $A244 million for employee entitlements and buy 30 Airbus planes.

Analysts say Tesna could stall and wait for Ansett to be liquidated before trying to cherry-pick assets, but would risk being knocked out by rivals such as Virgin Blue.

Seeking 25 per cent of market capacity, Tesna is looking to target the corporate market and lure customers who switched to Qantas after Ansett was placed in administration.

With just two days to the cutoff, Tesna still has to secure the transfer of the essential air operator's certificate from Ansett's administrators, without which it cannot operate.

The Civil Aviation Safety Authority froze the transfer after the Ansett sale was postponed in January.

The authority said it needed a couple of days to complete inspections of Tesna's aircraft and facilities.

Sydney Airport has reached a deal in principle to transfer Ansett's 17-year terminal lease to Tesna, but the final agreement cannot be signed until the airline's sale is completed.

Even if Tesna seals the deal, it faces formidable competition from Qantas, which has a 77 per cent market share, and Virgin Blue, which has 13 per cent of the $A10 billion domestic market.

- REUTERS

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