I will tell you why later. I am off to school now. Urrgh
Singapore Inc. leads airline fight
By GEOFF EASDOWN
THE battle for Air New Zealand has broadened into a dogfight between Qantas and the massive reserves of Singapore Inc.
Backing the Singapore Airlines bid for the Kiwi carrier is the nation's $US145 billion ($286 billion) in foreign and corporate investments.
The wealth of Asia's tiger economy is more than double the combined worth of BHP Billiton, National Australia Bank, Qantas and Telstra.
By comparison the market value of Qantas is a mere $4.5 billion ($US2.34 billion).
Singapore Airlines could draw on the value of prestige real estate in Tokyo, New York, London, Paris, Prague, Manila and Beijing.
The Amex Centre in Sydney is owned by the Singapore Government.
Only a handful of votes within the NZ Coalition Cabinet stops SIA from writing the cheque for its desired 49 per cent stake in the nation's carrier.
But the minority National Alliance, hurt that national pride will be dented by any shares sale, stands firm against any increase in SIA's 25 per cent holding.
Qantas, which opened the bidding for the Kiwi carrier four weeks ago, has been outgunned by a wealthier suitor.
The reality is that Air New Zealand is bleeding cash at a rate the country cannot afford. Through its cash-strapped Australian subsidiary Ansett, it is haemorrhaging cash at $4 million a week.
It is desperate for the $NZ466 million SIA has offered for a new 49 per cent involvement.
SIA, the world's fifth-biggest carrier – Qantas ranks 12th – is 56 per cent owned by the Singapore Government.
The government's stake is conveniently hidden within a mysterious entity known as Temasek Holdings. The same organisation oversees the Singapore government's interest in myriad institutions, including 10 large companies listed on the Singapore exchange.
Among them is a 78 per cent stake in Singapore Telecom, which is close to acquiring Australia's second-ranked telco, Optus.
With admitted reserves of $US45 billion, Temasek companies contribute to about 24 per cent of the market capitalisation of the exchange.
Temasek and the Government Investment Corporation, with separate reserves of $US100 billion, form the corporate arms of the Singapore Ministry of Finance.
Together they are an emerging force in international investment. They are Singapore Inc.
The government-controlled investor has interests in shipping lines and has backed massive new port and other infrastructure projects in China.
Temasek owns stakes in power utilities, is involved in the manufacture of semiconductors, and has a 32 per cent stake in the Neptune Orient Lines, Keppel Corporation, and DBS Bank, which has an Asian regional network in 13 countries.
The GIC invests in equities, fixed income and money market instruments, real estate and also in what the organisation terms "special investments".
With branches and big staffs in San Francisco, New York, London, Tokyo, Beijing and Hong Kong, GIC's reach spans 25 countries including 120 real estate landmarks.
These include the AT&T Corporate Centre in Chicago; the Shiodome City Centre in Tokyo; the Seoul Finance Centre in Seoul; Sydney's Amex Centre; the Cityspire, New York; Hotel Intercontinental, Prague; The Exchange, Beijing; Tower Pacific, Paris; and 70 Grosvenor St, London.
Singapore's push to grow government wealth through corporate partnerships was summed up by Temasek chairman S. Dhanabalan late last year.
In the only interview given by any chairman of the organisation in its 25-year history, he said: "In Singapore, the Government has been building up reserves for years.
"For most countries, if there's a crises or war, they could always fall back on what they have.
"Singapore is without land to fall back on and to grow food. We have nothing, we have to buy everything.
"We have only an account in the bank, that's all we have, nothing else."
But the power represented in those bank accounts has caused Qantas executives to tremble. They have lobbied the NZ Government for an airlines-style Anzac partnership, offering to take only a 25 per cent share of the nation's carrier and inject capital into the airline.
But the Australian airline is totally outgunned in the cash department, and it also knows that an SIA share placement with Air New Zealand could see it locked out of new air routes.
Aviation rules permit Air New Zealand's Australian subsidiary, Ansett International, as a start-up airline to have first pick of these markets.
Typical was a recent situation involving a new agreement involving additional landing rights at Tokyo's Narita airport.
The first opportunity in more than a decade for Qantas to get extra flights into Tokyo was blocked, not by Japanese regulators, but by the Australian Department of Transport and Regional Services.
Qantas chief executive Geoff Dixon, in return, has argued that for Qantas to survive there must be total deregulation of the airline's share register.
Such a move would ease restrictions on the numbers of Qantas shares allowed to be held by foreign interests.
Arguing that any change would not make Qantas prey to foreign raiders, Mr Dixon said share sales would be subject to the same screening processes the government used to block Shell's attempted Woodside takeover.
Lifting the overseas share limit above the 49 per cent maximum – and the total airline limit beyond the present 35 per cent threshold – would would give the carrier better access to global capital markets.
Mr Dixon said it would also better assist the $10 billion Qantas was spending on new planes.
As Mr Dixon said, Qantas can't succeed if Australia's liberal approach to aviation policy continued to create opportunities for competitors.
The airline must be given the ability to respond competitively, he added, pointing out that not only SIA, but Malaysia Airlines, Thai Airways and Emirates were aggressively government backed and substantially owned by their own governments.
Most operate from regions where competition policy and industry regulation is virtually unknown, Mr Dixon told a recent meeting of business leaders.
"Unlike some of them, we have to earn a return for shareholders and we can go broke," he said.
Anyone can fly, only the best Soar.