KEY POINTS:
So who is in big danger of being made to look an even bigger fool?
Little wonder anger in the Beehive was veering between the livid and the outright apoplectic yesterday.
It is embarrassing enough for Labour to discover Air New Zealand has seemingly been in breach of
Government policy by flying Iraq-bound Australian troops into neighbouring Kuwait.
It is worse that the breach had been made by an airline which Labour saved from collapse and which still has Government shareholding around the 80 per cent mark.
Still worse is that no one told ministers about the two flights and they discovered only a short time before everyone else at Parliament got a press release from Investigate magazine which broke the news.
Perhaps most embarrassing of all, though not surprising given Investigate's strike rate against Labour, is that the news should emerge just as Labour has been relentlessly lashing John Key for his seemingly shifting positions on sending New Zealand troops to Iraq.
All the while Labour has been poking fun at National's leader, Investigate's scoop was sitting like a timebomb in a Baghdad bazaar primed to explode in the Government's face.
It may yet turn into a fizzer. The fuss will quickly subside if it turns out the Air NZ flights to Kuwait carried Australian troops doing humanitarian and reconstruction work in Iraq.
New Zealand sent soldiers to do such work in the southern Iraqi city of Basra in the aftermath of the toppling of Saddam Hussein by the American-led Coalition of the Willing.
But the Government did not last night seem very confident that the Australians were not combat troops.
Defence Minister Phil Goff, who has led the charge against Mr Key, was quick to realise the situation might be about to boomerang on him big time.
While slamming Air New Zealand for not taking account of the Government's avoidance of any combat-related role in Iraq, he also blamed the Ministry of Foreign Affairs for keeping him and other ministers in the dark despite the ministry being told in January that the airline planned to tender for a troop-carrying contract.
In sharp contrast, Foreign Minister Winston Peters was last night waiting until he knew all the facts before pinning responsibility on either his ministry's chief executive, Simon Murdoch, Air New Zealand management, or both.
The puzzle is why Mr Murdoch, one of the country's top public servants and someone with a bloodhound's nose for sniffing potential political trouble, did not alert Mr Peters back in January.
Like Air New Zealand, he has a lot of explaining to do.
But even if it yet turns out Government policy was not breached, there has been a major failure of communication between Air New Zealand and the Ministry of Foreign Affairs.
And there is also now a question mark over just how much the ministry is telling its minister.
What is not in question is that this is a huge setback for Labour's campaign to undermine Mr Key's credibility as a future Prime Minister.