Sharp shooting vital to woo SIA

Sir Selwyn Cushing has pulled off some complex coups in his career to date but they pale in comparison with the challenge he faces at Air New Zealand.

He has twin tasks as chairman of the airline and Brierley Investments, its 47 per cent shareholder. He has to help the airline secure its long-term future; and he has to ensure Brierley can exit in whole or in part if it wants to.

The first piece of the puzzle clicked into place last week when Air New Zealand finally bought the other half of Ansett Australia. But even before the ink was dry Sir Selwyn was signalling to Singapore Airlines that he wanted to talk about bringing it into Air New Zealand as a shareholder.

Trouble is, Sir Selwyn's manoeuvring over nearly a year to achieve part one - land Ansett - has seriously undermined the groundwork for part two - landing Singapore.

Tensions between Sir Selwyn and his counterpart at Singapore, Dr Cheong, are believed to have been running high after two aborted negotiations last year.

First, Singapore negotiated with News Corp to buy its 50 per cent holding in Ansett. After agreeing a price of $A500 million it then required Air New Zealand to waive its pre-emptive rights.

However, Air New Zealand was never going to share Ansett with anyone else. Having bought in three years ago, the end game was always to own 100 per cent.

Second, discussions later reignited, centring around Singapore buying into Air New Zealand. In the midst of negotiations Brierley spent $101 million lifting its holding in Air New Zealand by five percentage points. The idea was Singapore would provide an opportunity for Brierley to offload some of its shares.

It would provide the bulk of the 25 per cent holding which, under existing aviation rules, is the limit a foreign airline can own although foreigners in total can hold 49 per cent.

But Sir Selwyn overplayed his hand not to mention overpaying for shares which have nearly halved in value since. Singapore was interested but would only do a deal on its own terms, which were unacceptable to Sir Selwyn.

Among them are understood to be a significant level of influence at Air New Zealand, the airline's chair and the appointment of Ansett's chief executive Rod Eddington as chief executive.

It is unlikely that Singapore will have changed its position since then. Indeed, its position might have hardened now that it has an alternative via Sir Richard Branson who plans to set up a cut-price airline in Australia. Singapore has a month to decide whether it will join forces with Branson.

If Singapore and Branson unite, Sir Selwyn's Singapore option could die. So he's going to have to talk fast and persuasively over the next month.