Air New Zealand to Liquidate Ansett; Seeks Temporary Help From Australia
By Margreet Dietz
Sydney, Sept. 12 (Bloomberg) -- Air New Zealand Ltd. has asked the Australian government for financial support for its ailing Ansett unit, giving the carrier time to liquidate the business and start a new low-fare airline in Australia.
The Auckland-based airline, which has spent more than two months seeking New Zealand government help to try to refinance the business, said it has asked for an urgent response from the Australian government.
Air N.Z. Acting Chairman Jim Farmer said in a statement he was seeking the ``Australian government to assume a leadership role not only in saving many jobs, but also to provide the foundation for a reinvigorated, competitive aviation market in Australia.''
New Zealand's national carrier made the decision after competitor Qantas Airways Ltd. said it wasn't interested in buying Ansett, Australia's No.2 airline, which is losing A$1.3 million ($672,000) a day.
Ansett's problems are ``far too great to take on,'' Qantas said in a statement to the Australian Stock Exchange.
Qantas shares, which earlier plunged as much as 14 percent to A$2.95, recently traded at A$3.15. Air New Zealand's Class B shares, which anyone can own, fell 27 percent after the statement to 65 New Zealand cents. They were recently at 73 cents.
``Ansett is an asset under distress and there is a fair amount of debt attached to it,'' said Wayne Nicholls, head of dealing at Invesco. ``There were no compelling reasons for Qantas to buy it.''
Investors said Qantas may be able to buy the assets more cheaply when the airline is carved up and sold than making a bid for the whole business.
``I don't think Singapore Air need to rush in, they can sit back, they are in the same situation as Qantas,'' said Martin Littler, who helps manage A$8 billion of equities at Commonwealth Investment Management.
Tomorrow, Air N.Z. is expected to post a second-half loss of NZ$224 million before charges, most of it because of Ansett's losses. The airline is also expected to write-off most of its A$1.1 billion investment in Ansett.
It needs to quit the business to save its profitable Air New Zealand domestic and international arms, though investors are wary it may have ongoing financial obligations to Ansett.
``The only alternative is to ring-fence Ansett in some form,'' said Tim Preston, managing director of ASB Securities Ltd. ``Before anyone is going to recapitalize Air New Zealand they're going to have to be convinced that the bleeding has stopped within Ansett Australia,'' he said. ``It's very hard to see how they have stopped that bleeding, particularly given events of today,'' he said, referring to the global slide in airline stocks after the New York hi-jacking.