NZ delays airline decision

Upgrading the Ansett fleet is a pressing issue for Air New Zealand

By CNN's Grant Holloway

WELLINGTON, New Zealand -- Air New Zealand's ownership saga will now drag on until mid September after the NZ Government delayed its decision on the struggling airline's fate.

The NZ Government will not now announce its decision on how the airline will be recapitalised until September 12, at the earliest, a decision which has forced Air New Zealand to put back its annual results statement until after that date.

Rival regional carriers Australia's Qantas Airways and Singapore Airlines have competing plans for the Kiwi carrier on the table.

Qantas wants to take control of Air New Zealand and sell off the ailing Australian subsidiary Ansett.

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Singapore Airlines, which already owns a 25 percent stake in Air New Zealand, wants to lift its stake to 49 percent of the company.

The NZ Government is under political pressure domestically not to cede control of the Kiwi flag carrier but is equally reluctant to stump up the $2 billion plus (NZ$5 billion) needed to upgrade the airline's ageing fleet.

Another possibility is the NZ Government underwriting a rights issue to provide extra funds.

However this would require the co-operation and participation of the airline's largest shareholder, Brierley Investments.

That support is by no means assured and adds another complicating factor into the negotiating mix.

The airline is expected to announce losses of around $80 million (NZ$200 million) when it finally reports, much of this stemming from the trouble-prone Ansett operation.

Shares plunge

Shares in Air New Zealand have plunged in response to the delay falling Aust. 4c to Aust. 96c on the Australian Stock Exchange by noon on Friday -- an all time low.

In New Zealand, the company's A shares - -reserved for NZ residents only -- fell NZ2c to NZ94c, while the non-resident B shares shed NZ5c to NZ$1.15.

Both the NZ Government and Air New Zealand indicated Thursday that more negotiating time was needed to conclude an agreement that was satisfactory to all parties.

NZ Government sources told the New Zealand Herald Thursday it was not certain whether an acceptable proposal would be ready by September 12 either.