Ansett set for $1.8B revival deal


Lew, left and Fox have emerged as the likely new owners of Ansett

By CNN's Geoff Hiscock
Asia business editor

SYDNEY, Australia (CNN) -- Australian business tycoons Lindsay Fox and Solomon Lew emerged Thursday as the likely new owners of a revamped Ansett Airlines in a deal worth about $1.8 billion (Aust. $3.6 billion).

Ansett was Australia's second largest airline behind Qantas until it was grounded on September 14.

Part of the deal includes Ansett getting 29 new Airbus A320 aircraft under a $1.27 billion (A$2.5 billion) leasing arrangement.

About 4,000 Ansett staff will have jobs with the new, scaled-down version of the airline.

While that is only a quarter of the 16,000 employed by Ansett before its September collapse, the breakthrough deal could boost the federal government's chances in the national election it faces on Saturday.

Unemployment has been one of the key election issues, with the jobless rate hitting a 30-month high of 7.1 percent in figures released Thursday.

Fox, a transport magnate, and Lew, a major force in retailing, are two of Australia's richest men.

They entered the bidding for Ansett on October 19 and look to have beaten off alternative rescue proposals from Ansett staff and another consortium headed by stevedoring group Lang Corp.

Cut adrift by Air New Zealand

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Ansett's grounding in September came after it was cut adrift by its parent, Air New Zealand, because of the airline's own survival problems.

That left thousands of passengers stranded and put 16,000 staff out of work.

The airline's administrators, Mark Mentha and Mark Korda of accounting firm Andersen, have been operating Ansett in a much-reduced form since September 29.

Korda said Thursday the Fox/Lew deal, which is for the "mainline assets", would guarantee jobs for 4000 Ansett employees, with the new operation taking over the main trunk routes such as Sydney-Melbourne.

Ansett's international operations are not part of the arrangement.

Deal is conditional on creditors, court

The deal is conditional, with full terms not to be revealed until a meeting of the Ansett creditors committee next week, ahead of a full creditors meeting in December.

It needs approval of creditors and the Federal Court of Australia.

Fox and Lew are also seeking special assistance from the federal government and from the Victorian state government, where Ansett is headquartered.

Korda said he hoped to finish the transfer of the business by January 31 next year.

He said Fox and Lew would inject $560 million (A$1.1 billion), made up of cash and the assumption of liabilities related to the 4,000 staff.

Korda said Fox and Lew had negotiated a $1.27 billion (A$2.5 billion) deal to lease 29 new Airbus aircraft originally destined for United Airlines. These would enter service at the rate of three a month.

This will overcome one of the old Ansett's biggest problems -- the age and complexity of its fleet, which saw its Boeing 767s grounded earlier this year over safety concerns.

Qantas remains formidable leader

A relaunched Ansett will clearly be a much leaner airline than the previous one, using just a quarter of the 16,000 staff and operating primarily on the key trunk routes.

About 8,000 jobs look likely to be lost, with the remainder reassigned to regional airlines or transferred as part of the sale the administrators of non-core Ansett businesses.

A new Ansett will still be a long way behind the formidable Qantas, which has used the past two months to move to an even more dominant position in the Australian domestic aviation market.

It now has about 85 percent of the market, up from 55 percent at the time of Ansett's collapse. It has been using leased aircraft to meet the extra passenger demand.

On October 18, Qantas said it would spend about $765 million ($A1.5 billion) on 17 new aircraft to lift its capacity to about 65-70 percent. Fifteen of these will be Boeing 737-800s originally ordered by its alliance partner, American Airlines.