PM loath to bail out Air NZ

By VERNON SMALL

The Government is still contemplating being part of Air New Zealand's rescue package, even though the Prime Minister is reluctant to underwrite a financial bail-out.

Helen Clark said yesterday that the Government "has no desire to be involved in the commercial affairs of Air New Zealand" after reports that a Government loan or agreement to underwrite a share issue was back on the table.

"The kiwi share arrangement is as far as any Government envisaged it would ever go when the airline was privatised more than a decade ago. It is not our wish to go near a shareholding. I'm not making any further comment. I'm making very clear the Government's preference," she said.

But Government sources pointed to her choice of the word "preference" as an indication that Government involvement, while not favoured, was not being ruled out.

The kiwi share gives the Government power to control the size of foreign shareholdings and the make-up of the board.

The cabinet yesterday discussed a report from investment bankers Cameron & Co, which has been negotiating on behalf of the Government with rival bidders Singapore Airlines and Qantas.

The Air New Zealand board has endorsed Singapore Airlines' proposal to lift its 25 per cent stake to 49 per cent to raise cash for a fleet upgrade.

Qantas wants to buy Singapore's stake in Air New Zealand and Brierley Investments' 30 per cent holding and then sell loss-making subsidiary Ansett Australia to Singapore Airlines.

Both proposals would require a change to the Government's rules on foreign airline investments in Air New Zealand.

But Australian media reports yesterday said Canberra had all but written off Qantas' chances of winning the war for control of Air New Zealand.

Helen Clark said next Monday's cabinet meeting would have a final discussion on the issue.

Air New Zealand's board meets in Auckland on Thursday. It wants a decision from the Government before releasing its financial statement next Tuesday.

Helen Clark said the overriding consideration for the Government was a viable New Zealand airline, but Air New Zealand's financial issues were not of the Government's making.

"Obviously the issues raised by the purchase of Ansett give Air New Zealand a few things to work through and Ansett has to track its way back to profitability. But those are commercial issues.

"Air New Zealand in the quite recent past has been a strong airline and our desire is to see it return to that status."

Investment by Singapore Airlines in Air New Zealand would be the choice of many who fly the planes.

The Federation of Air New Zealand Pilots, representing about a quarter of the 650 pilots, said yesterday that an increased Singapore Airlines shareholding would benefit customers and still allow Air New Zealand to compete internationally.

Federation secretary Mike Sommerville said it would also be the best option for the careers of Air New Zealand pilots.

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