Ansett Australia's 767s grounded for Easter

9.00 am

CANBERRA - Australia's air safety watchdog last night ordered the country's second-largest domestic airline, Air New Zealand-owned Ansett Australia, to ground 10 Boeing 767 aircraft, on the busiest travel day in its history.

The action added to a string of groundings that have plagued Ansett's fleet of nine 767-200s and one 767-300 since some planes were ordered out of the skies over the busy Christmas period.

The Civil Aviation Safety Authority (CASA) said the indefinite grounding would take effect from midnight last night (NZ time), at the start of the four-day Easter holiday.

It gave the airline, already suffering rising fuel prices and at war with low-cost poachers, 14 days to prove it could operate safely.

"Safety problems with the 767 fleet keep appearing," Mick Toller, director of aviation safety at CASA said in a statement.

"This latest problem involved the incorrect storing of emergency slides on a 767 last weekend. The aircraft operated for more than a day without any of its slides in the operating position. Clearly this was another threat to safety," he said.

Ansett's latest woes followed the voluntary grounding on Monday of seven Boeing 767-200s after hairline cracks were found in the engine mountings of several of the ageing aircraft. Most of the jets were flying again on Tuesday.

Last Christmas, CASA forced Ansett to ground its 767s after it found that routine maintenance checks had fallen behind.

That action caused chaos for thousands of holiday makers.

Yesterday, Australians poured into airports to start Easter vacations and with 50,000 passengers booked, spokesman Geoff Lynch said it was "the busiest day in our history."

But Ansett said it was confident it would be able to fill all gaps in its flights after borrowing two 767s from Air New Zealand and putting one of its own 747s on domestic routes.

"We have a recovery team working round the clock tonight. They'll be looking at all the options possible -- moving customers to other airlines, leasing aircraft from other airlines -- whatever it takes," Lynch said last night.

Air New Zealand's unrestricted B shares closed earlier in the day unchanged at A$1.45 in a market down 0.2 per cent, while its New Zealand resident-only A shares closed unchanged at A$1.01.

Macquarie Equities analyst Ian Myles said the immediate impact on earnings would probably be quite low.

"The real impact is associated with the Ansett brand name. No longer can people sit there being comfortable that Ansett's going to be flying because there's this worry that its fleet is going to be grounded," he told Australian Broadcasting Corp radio.

Air NZ has warned it expects a substantial operating loss for the year because of stiff competition in the Australian market, where it and main rival Qantas are being challenged by upstarts Impulse Airlines and Richard Branson's Virgin Blue.

Ansett's troubles helped give Qantas a boost, its shares closing up six per cent at A$2.73 in a market up 0.53 per cent.

CASA said Ansett would have to show that urgent changes could be quickly implemented to its management structure and personnel.

Ansett said it would deal with the issues.

"We'll be working with CASA to satisfy all their concerns. At the end of the process we want to emerge from this acknowledged as the safest airline in the world," Lynch said.

Air NZ is 25 per cent owned by Singapore Airlines Ltd.

Ansett's fleet consists of the nine 767-200s, the 767-300, two 747-400s, 20 Airbus 320-200s, 22 Boeing 737s, three BAe 146-300s and seven BAe 146-200s.

- REUTERS