Between the lines: Nothing to fear from Singapore cash

By JIM EAGLES

The fact that the future of Air New Zealand now lies with the Government is a bit of a worry.

Unfortunately, this Government's decisions on business matters have tended to be based on political expediency and neo-socialist instincts rather than on what might be best for the economy or for the country.

And there are already worrying signs that the same unproductive path may be followed when it comes to Air New Zealand.

Prime Minister Helen Clark, Finance Minister Michael Cullen, Alliance leader and Deputy Prime Minister Jim Anderton and Greens co-leader Rod Donald have all to varying degrees displayed a lack of enthusiasm for the proposal to lift Singapore Airlines' stake in the national carrier above its present 25 per cent.

Yet the reality remains that Air NZ needs an injection of capital and the SIA proposal - while it may not be everything the country might dream of for Air NZ - is by far the best of those on the table.

Labour's concerns, as articulated by Dr Cullen, are about airline competition, tourism development and international landing rights. If those really are the only problems then there is nothing to stop the deal going ahead.

Airline competition, domestically and internationally, will certainly not be reduced. Indeed, as Qantas' furious opposition indicates, the involvement of a strong and successful operator such as SIA is likely to make Air NZ a much tougher opponent for the Australian flag carrier.

There are plenty of precedents to show that even if SIA took its stake to 49 per cent it would not affect international landing rights. Close to home we have Ansett International owned 49 per cent by Air NZ and Air Pacific owned 46 per cent by Qantas. Further afield, any number of national airlines, including Belgium's Sabena, Air Egypt, Lan Peru and Air Estonia are 49 per cent owned by foreign carriers.

Strengthening the link with SIA - already a partner in the successful Star Alliance - would increase the ability of Air NZ to promote New Zealand as a tourist destination. In particular, by allowing Air NZ to retain ownership of Ansett Australia, the airline could pursue its strategy of developing into a strong regional carrier, able to develop the New Zealand brand over a significant part of the world, rather than being condemned to little more than a transtasman role.

Unfortunately, the suspicion is that the Government's real concern, as articulated by Mr Anderton and Mr Donald, is the populist issue of local ownership.

Mr Donald has effectively summed up that view with his recent call for Brierley Investments' 35 per cent stake in Air NZ to be sold to New Zealanders rather than any of it going to SIA.

The only problem is that not too many New Zealanders have a few hundred million dollars to invest in a company which, far from producing much of a return in the immediate future, will soon be requiring its shareholders to put in more money through a rights issue.

That, no doubt, is why efforts to create a consortium of New Zealanders to buy a strategic stake in Air NZ have so far come to nothing.

If the Government is able to identify a group of New Zealand investors willing and able to fund Air NZ, and preferably also able to add some expertise in running airlines, that will be a marvellous solution.

Failing that, however, it should display a bit of political backbone, lead the way instead of blindly following the latest opinion polls, and do what it knows to be right for Air NZ.

The alternative will be to watch our national carrier sink deeper into the financial mire, forced to abandon its ambition to become a serious regional player and condemned to be little more than a feeder to an airline such as Qantas. Is that really in the best interests of the country?