Time for cards to be shown in Air NZ negotiations

By FRAN O'SULLIVAN assistant editor

When Singapore Airlines chief executive Cheong Choong Kong parked himself in Wellington early this week, it was a sure sign that negotiations over Air New Zealand's rescue package had reached a climax.

Prime Minister Helen Clark is in the pole position as the two hardball players work through the tradeoffs with negotiator Rob Cameron to reach a shareholders' agreement to rescue the airline.

In the wings is the Air New Zealand board, still waiting for a resolution after five months of brinksmanship which is wearying the nerves of even senior managers.

Acting chairman Jim Farmer is "on call" as Mr Cameron seeks extra information, tests possible board reaction to proposals - and extracts concessions.

New Zealand's once proud national flag carrier is bleeding red ink.

It faces a loss of about $200 million for its last financial year and cannot pay for a $5 billion fleet replacement programme for its 'jewel" - Ansett Australia - without a big injection of new capital.

Dr Cheong has that capital - dollops of Singaporean savings to invest in our airline's future. Clark also has cash, courtesy of the New Zealand taxpayer. But her Government is loath to put taxpayers' dollars into bailing out the airline.

Air New Zealand's independent directors, Singapore Airlines, the Government, Mr Cameron and a raft of officials from all sides, are working to finalise a recapitalisation deal before September 13.

That is when the airline's directors will have to unveil the loss for the last financial year.

Yesterday, Parliament was in uproar as MPs struggled to come to terms with the possibility that the Government might indeed give financial backing to a recapitalisation plan despite its public equivocation on the issue.

Asked for an assurance that the Government would not contribute taxpayers' money to the bailout, Finance Minister Michael Cullen had "difficulty giving an answer which is consistent with the public interest".

"Let me simply repeat what the Prime Minister said on Monday - it is certainly not the Government's preference to be involved in terms of investment within Air New Zealand," he obfuscated.

"The Government has made no decision with respect to Air New Zealand, and will not be in a position to do so until the company is clear about its business plan for future operations and the nature of its re-capitalisation requirements."

If that is the only element stopping the Government making up its mind, Dr Cullen need wait no longer.

Air New Zealand's audit committee - headed by former chairman Sir Selwyn Cushing and director Ralph Norris - was yesterday finalising the airline's future capital requirements.

The full board is expected to endorse the business plan, which CEO Gary Toomey's management team has brought together, when directors meet at the airline's Auckland headquarters today.

The ball then goes back to Mr Cameron, who must use all his persuasive abilities to get Dr Cheong and Helen Clark's ministerial team to shape the deal which the Prime Minister will take to next Monday's cabinet meeting.

Then it will go back to the Air New Zealand board for final approval. Singapore Airlines' board will also have to approve the terms which Dr Cheong negotiates.

Financing will be arranged and public relations merchants set to work.

Good card player that he is, Dr Cullen was yesterday keeping rival Qantas Airlines in the wings in case the Government cannot strike a deal with Dr Cheong.

The Government's official position is that both Singapore and Qantas are still contenders.

But Qantas chief executive Geoff Dixon knows he is simply the fallback option.

Also on the sidelines is Australian Prime Minister John Howard, concerned that Dr Cheong is both a saviour and a predator in the tough Australasian aviation market.

To keep transtasman relations sweet, Helen Clark and Dr Cullen have been lobbied hard to restrain Singapore Airlines' influence and stop it getting 49 per cent of Air New Zealand.

Watching the play is Brierley's deputy chairman, Quek Leng Chan. The BIL nominees to Air New Zealand's board will be under no illusion where Mr Quek stands.

But BIL's refusal to provide cash for the bailout has angered Act MP Stephen Franks, who yesterday said that instead of "bailing out" Air New Zealand, the Government should leave it to left to fend for itself.

"An inexperienced Government is being suckered by foreign airline spin merchants - but most of all Asian-controlled Brierley Investments," he spat.

"The solution lies within. The company can and should live within the rules the shareholders all bought in under."

Unfortunately for Mr Franks, he does not have a seat at the table where the deal will be done.

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