As the MPs gather, market raises flaps for Singapore deal

By DANIEL RIORDAN

Singapore Airlines appears to have won the market's approval before this morning's cabinet committee meeting to discuss Air New Zealand's future ownership.

Prime Minister Helen Clark has said the Government will decide on Air NZ before Finance Minister Michael Cullen leaves for the Asia Pacific Economic Co-operation Forum ministerial meeting tomorrow.

However, an announcement about the final deal may still not be made until September 12, the day before Air NZ's result announcement.

The airline is expected to post a loss of around $200 million for the June year, assuming it does not write down its investment in troubled subsidiary Ansett Australia, reportedly losing a million dollars a day and still competing with discount airline Virgin Blue.

Ending several days of speculation, Virgin Blue boss Sir Richard Branson said yesterday that he had rejected a $A250 million ($302 million) buyout offer for his discount airline from Ansett.

"It wasn't a question of price. Whatever was offered we would have rejected. Our feeling is we have something very special with Virgin Blue," he told a Melbourne media briefing.

"I think it would be a sin to sell out, so we are not going to sell out."

Sir Richard has admitted that Singapore Airlines was applying pressure by using its position as 49 per cent shareholder in his major airline, Virgin Atlantic, to block Virgin Blue's attempts to expand its services across the Tasman, but says he is determined to fly here nevertheless.

Ending several days of tailspin, Air NZ A shares - available only to New Zealand nationals - closed 2 cents higher at 92 cents, while the unrestricted B shares were unchanged at $1.06, just a cent above their all-time low.

But the narrowing in the gap between the two prices over the past few days is being read by some as an indication that investors expect the two share classes to be abolished.

Such a move is included in Singapore Airlines' proposal, backed by Air NZ's board, to boost its stake in the national carrier from 25 per cent to 49 per cent.

Macquarie Equities senior investment adviser Arthur Lim said the market believed a Singapore-structured deal was more likely than an offer from Qantas.

But he also considered it more likely that Singapore would be forced to settle for only 40 per cent, raising $248 million for Air NZ rather than the $466 million a 49 per cent stake would bring.

* Act list MP Stephen Franks, who opposes New Zealand's losing any more ownership of Air NZ, says he will stand for the airline's board to ensure there is a contested election at the annual meeting on October 30.

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