Clark: Air NZ didn't tell us all

By FRAN O'SULLIVAN assistant editor

The Prime Minister has attacked the credibility of Air New Zealand's directors, claiming that the extent of the airline's plight was not known until the Government sent in negotiator Rob Cameron to investigate.

Helen Clark's claims yesterday, during the final rounds of negotiations on the Air New Zealand bailout, caused concern that the airline's major shareholder, Singapore Airlines, could walk away from the deal.

Air New Zealand needs $1 billion to keep running, analysts say.

Some directors were threatening to call their lawyers for advice after they came under fire during yesterday's parliamentary debate.

At a joint press conference with Finance Minister Michael Cullen at Auckland Airport before she left for Europe, the Prime Minister said the airline's original recapitalisation proposal - under which Singapore Airlines would have taken a 49 per cent stake and led a capital-raising exercise - would not have "remotely solved" Air New Zealand's problems.

This might not have had "full appreciation" at board level, she said.

"We have to assume that is the case, because when our negotiator, who is pretty sharp, went in it didn't take terribly long to draw some different conclusions."

Helen Clark said there was nothing her Government could have done to avoid the crisis.

"Absolutely not. Indeed, the judgment of our negotiator is if we had acted precipitously in agreeing to the package, we could have been in a worse position today."

The Herald has confirmed that the Air New Zealand proposal, sent to the Government on July 12, made it clear that Ansett Australia had lost $327 million in the year to June, and its position was deteriorating.

Acting Air New Zealand chairman Jim Farmer said the Australian and New Zealand governments were aware of the level of losses at "a very early stage".

Dr Farmer defended the airline's board. He said that while it was fair to say that the amount of capital that Air New Zealand required did increase during the negotiations, the initial amount indicated by the company was not far off the mark - "certainly not a doubling or trebling, anything like that".

"The Government was saying to us, 'We want to be absolutely sure you will not come back for more'."

Dr Farmer last night said he wanted to concentrate on Air New Zealand's major task, cementing a draft agreement with Qantas Airways by 5 pm today to sell it the $1.6 million-a-day loss-making Ansett Australia to avoid a large-scale receivership.

Negotiations over the separate bailout package for Air New Zealand - involving the Government and major shareholders Singapore Airlines and Brierley Investments - also have to be complete by 5 pm, when the board meets in Auckland.

It has to approve its own refinancing before the company's annual result is released in Auckland tomorrow.

Air New Zealand is expected to need up to $1 billion to restore its shareholders' funds after writedowns of its $1.25 billion investment in Ansett Australia.

Dr Farmer was optimistic that Qantas Airways would move quickly to indicate it was prepared to take over Ansett.

Yesterday, the Australian Government was exerting enormous pressure on Qantas to come to the party as unions accused the Government of placing their jobs in jeopardy by dithering.

The Deputy Prime Minister and Transport Minister, John Anderson, said he expected the decision would come through in time.

"Our objective is to keep Ansett flying as long as possible, to get as many options as possible given the grave situation we suddenly find ourselves in."

Dr Farmer rejected suggestions that Air New Zealand was prepared to give Qantas all its Ansett businesses for $1 and the debt.

Ansett was being sold as a "going concern".

If the Qantas deal does not go ahead, Air NZ will press the Australian Government for support.

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