Leaders to thrash out Air NZ's fate

By CNN's Grant Holloway

SYDNEY, Australia (CNN) -- The Australian and New Zealand governments will meet over the weekend to discuss the future of struggling airline Air New Zealand and its Australian-based subsidiary Ansett.

This follows a meeting Friday between Singapore Airlines chief executive Dr Cheong Choong Kong and Australian Prime Minister John Howard as part of weeks of lobbying efforts by Asia Pacific-based airlines to restructure the region's aviation industry.

Singapore Airlines is keen to raise its stake in Air New Zealand above the current government-enforced limit of 25 percent, a move that would provide much-needed capital to upgrade the airline's ageing fleet, particularly the Ansett-branded planes.

"Everyone knows Ansett needs capital. Lots of it, and time is not on its side," Cheong told the Australian Broadcasting Corporation Friday, following the Howard meeting.

"Now we would like to help and we could inject much-needed capital," he said.

Opposition growing to Singapore influence

However opposition is growing in some quarters of Australia to Singapore's increasing corporate interest in Australia.

A proposal by Australia's biggest airline Qantas to take a controlling stake in Air New Zealand and sell-off Ansett to Singapore Airlines has fallen on stony ground, with Qantas now lobbying hard to prevent Singapore gaining ascendancy in the region.

And prominent television network chief Kerry Stokes said Thursday Australians should be wary of allowing the Singapore Government too much influence in domestic corporate affairs, warning the way Singapore did business "would not be acceptable to the majority of Australians".

Singapore Telecom, majority owned by the Singapore government, is currently in the process of taking over Australia's number two telecommunications company Cable & Wireless Optus.

Control fears may be unfounded

Air NZ subsidiary Ansett's woes are creating pressure for a quick resolution

In an interview with The Australian newspaper, Stokes said the Singapore government, which also controls Singapore Airlines, was "both traditionally intrusive and overseeing" in its approach to governing.

Singapore's ministry of finance responded by saying: "The Singapore government does not interfere in the decisions of SingTel and Singapore Airlines."

Stokes's comments come at a time when the Howard government is negotiating a bilateral free trade agreement with Singapore and political relations between the two countries are flourishing.

Australia's interest in the Singapore bid centers on ensuring both Ansett and Qantas remain viable competitors in the Australian and trans-Tasman air markets.

The fears of Singapore Airlines gaining control of Air New Zealand and Ansett may be unfounded however as any proposal still has to broach the considerable political opposition to any such move from the left-leaning New Zealand coalition government.

Earlier proposal knocked back

New Zealand finance minister Michael Cullen told BBC radio Thursday his government was "very reluctant indeed" to raise the cap on a single foreign airline investment in Air New Zealand.

"We will take a lot of convincing," Cullen said.

The New Zealand government has already knocked back an earlier proposal by Singapore Airlines to lift its stake in Air New Zealand to 40 percent.

Cullen said a decision on the ownership cap would take some time, more likely weeks rather than days.

Air New Zealand has a fleet of nearly 200 aircraft, but it is estimated it needs more than $2 billion to upgrade its planes, particularly the Ansett aircraft which have been grounded three times in recent months due to safety issues.