Court adds pressure to Ansett sale


The sale of Ansett is being held up by disputes over terminal leases

CNN's Grant Holloway

MELBOURNE, Australia (CNN) -- Pressure has increased on the administrators of failed Australian airline Ansett to resolve its fate after the Federal Court refused to indemnify their decision to keep the carrier running at a loss.

The administrators had hoped to have sold Ansett by the end of January to a consortium called Tesna, led by prominent Australian businessmen Solomon Lew and Lindsay Fox.

But a dispute over terminal leasing arrangements for the revived carrier has stalled the sale, prompting the administrators to ask the Federal Court to back their decision to keep the airline running until the end of February, 2002.

Ansett, formerly Australia's second biggest airline, collapsed into receivership in September last year.

A favorable court decision would have given some legal protection to Andersen's Mark Korda and Mark Mentha from Ansett creditors who might oppose the continued operating of the carrier while it is losing upwards of $3 million (Aust. $6 million) a week.

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But Justice Alan Goldberg said Tuesday it was not appropriate for the court to support the application because the administrators' right to take this action was not in dispute.

"As a matter of principle, it is not appropriate for a court to give a direction approving a business decision made by administrators where no issue of power or the propriety or reasonableness of the decision or issue requiring the court to make a judgment on a legal issue arises for consideration," the judge said.

Goldberg said the administrators had decided to keep the airline running because they believe that it is in the interests of the creditors of the Ansett group that this decision be made.

In statement released Tuesday, Korda said the decision did not preclude the administrators' right to continue flying the airline at a loss.

"As the judge pointed out, the creditors have given their overwhelming support for our decision to continue and he believes that to be sufficient endorsement," Korda said.

Merger talks

"It was and remains our firm conviction that keeping the airline flying during this period prior to the sale agreement with Tesna being finalized provides the only prospect of a possible return to all creditors."

He said that as soon as key third parties provided their consents to the Tesna sale, it would be finalized quickly.

On Monday it was revealed that U.K. businessman Sir Richard Branson's Virgin Group was negotiating a possible merger between his Australian arm, Virgin Blue, and a Tesna-owned Ansett.

Ansett is currently running a skeleton service of flights between the main centers in Australia.

Australia's largest airline, Qantas, now commands 85 percent of the domestic market while Virgin Blue has about 12 percent