Singapore Airlines is poised to take a direct shareholding in Ansett Australia from owner Air New Zealand, because of that airline's stretched financial position after paying $580 million last year to News Ltd for the Australian airline.
Airline analysts in Singapore say Singapore Airlines, which acquired 25 per cent of Air New Zealand last year, had wanted to raise that stake to 45 per cent but was capped by the New Zealand Government, thus limiting its influence on the airline company.
Similarly, in 1999, Singapore Airlines was thwarted from taking 50 per cent of Ansett from News after Air New Zealand exercised its pre-emptive rights.
Singapore analysts see a direct purchase by Singapore Airlines of equity in Ansett as the only possible way to give the Australian airline the balance-sheet strength to underwrite a major fleet acquisition program which is long overdue.
The Singapore move has gained momentum as Ansett's market share continues to take a battering, with its fleet of Boeing 767 aircraft grounded over Christmas and again last month.
"Public confidence is fading in Ansett and something must be done urgently," said one analyst. "Only substantial funding is going to rectify the problems of Ansett and only Singapore Airlines has the cash."
Analysts say Singapore Airlines is expected to post a net profit for the year to March 31 of more than $1.5 billion.
Air New Zealand's new chief executive, former Qantas deputy Mr Gary Toomey, last week flagged that the airline required a stronger balance sheet to proceed with a re-equipment program, according to securities analysts. He also confirmed that the airline was talking to Boeing and Airbus about purchases.
But Air New Zealand's major shareholder, Brierley Investments, which has 30 per cent of its capital, is in no position to put more funds into the carrier.
Last October, analysts made a savage profit revision for Air New Zealand after it was revealed that Ansett was trading at a loss and that its market share had dropped to a low of 41.5 per cent. Since then, Mr Peter Harbison of the Centre for Asian Pacific Aviation, said Ansett's market share had slumped below 40 per cent.
JB Were & Son cut its Air New Zealand profit forecast from $NZ146 million ($110 million) to just $NZ67 million late last year.
In the year to last June 30, Air NZ booked a one-off abnormal tax charge of $NZ768 million, resulting in a $NZ600.1 million loss. Its operating profit was $NZ177.9 million on revenue of $NZ3.72 billion.
Air New Zealand chairman Sir Selwyn Cushing warned investors in October that fuel costs, a weak dollar and new competition in Australia would again drive down profits.
At that time, he said that if oil prices were sustained at the levels seen then, the group's fuel costs would be more than $200 million over budgeted fuel costs.
Ansett suffered a $38.8 million drop in operating profit to $101.6 million for the year to June 30, while arch-rival Qantas posted a record $517.3 million.