Govt. rejects blame for Ansett breakdown


Lindsay Fox, right, said there had been no support from the Australian government for his Ansett takeover bid with friend Solomon Lew, left

CNN's Geoff Hiscock
Asia Business Editor

SYDNEY, Australia (CNN) -- Australia's federal government has rejected claims that it did not do enough to help relaunch the now collapsed airline Ansett.

Ansett, once Australia's second largest airline, will stop flying on Monday night after its potential savior, the Melbourne-based Tesna consortium, suddenly pulled out of a deal to take it over from midnight Thursday.

Tesna's decision has set off a round of finger-pointing, as the various parties seek to assign blame for the debacle.

Melbourne businessman Lindsay Fox, who with his friend Solomon Lew made the Tesna bid in November, said Thursday there had been no support from the Australian government.

But Australian deputy prime minister and transport minister John Anderson told CNN that the government could not have done any more than it did.

'Decks cleared'

"The decks were cleared for this deal to go through," he said Thursday.

Anderson said the government had made sure it was possible for Tesna to get Ansett's key airport and aircraft leases and its landing slots.

"We cleared all the regulatory hurdles," he said.

Fox's partner Lew on Wednesday had blamed third parties for Tesna's decision to back out of the commitment it gave the Ansett administrators on November 8.

He said the issues were related primarily to non-delivery of airports and of aircraft.

But Ansett staff and observers say there have been competing agendas at work, involving Tesna and its financial backers, the airports, aircraft lessors, the federal and state governments, staff unions, competitors such as Qantas and Virgin Blue, and the Ansett administrators.

Readied for sale

Ansett was originally put into voluntary administration by its parent Air New Zealand on September 12 last year.

Its administrators have kept it flying in a much-reduced form while readying it for sale to Tesna. They struck an agreement on November 8 for Tesna to buy the mainline business of Ansett for $267 million in cash and employee entitlements.

Tesna also pledged to bring in new Airbus aircraft to rejuvenate Ansett's aging fleet.

The administrators, Mark Mentha and Mark Korda of accounting firm Andersen, said Wednesday they were "perplexed" by Tesna's sudden pullout, calling it unexpected and a devastating blow for Ansett workers.

The collapse of the Tesna bid means about 3,000 Ansett staff who were hoping to work for the relaunched airline will not have jobs.

Good for Qantas

It also means that the dominant Australian carrier Qantas, which now has 77 percent of the domestic market, and discount newcomer Virgin Blue will cement their respective positions in the Australian industry.

Shares in Qantas, which jumped more than 10 percent Wednesday, eased 2 percent Thursday to A$4.48.

Industry analyst the Center for Asia Pacific Aviation said the Tesna pullout entrenched a two airline market in Australia and made Virgin Blue's future more secure.

It said one positive was that this was likely to prove more commercially sustainable than a three airline market.

"This may be better for travelers than the destructive short-term price war that would have taken place had Tesna entered the market," the center said.

Qantas CEO Geoff Dixon said earlier this week he did not think the Australian market could support three airlines.

Wednesday's shock pullout by Tesna came less than a day after the Sydney Airports Corporation agreed to transfer the lease of the Ansett domestic terminal to the consortium.

The administrators had insisted all along that the Tesna deal would go ahead, in the face of mounting skepticism that it was simply a property play by Fox and Lew.

Corrigan proposal

Korda said the administrators are going back to the unsuccessful bidders to pursue alternatives.

One of those is a joint proposal from Virgin Blue and Chris Corrigan's Patrick Corp (the former Lang Corp) to take over some of the Ansett assets and employ up to 2000 former Ansett staff. But its proposal would mean the end of the Ansett name.

Corrigan said Thursday he was still interested.

His original plan was to inject up to $156 million into Virgin Blue and take a controlling interest in it, if it were to make a successful bid for Ansett.

Another possibility is a role for Singapore Airlines, which has a stake in Air New Zealand and is keen to get a foothold in the Australian market.

But observers say the administrators most likely will have to try to sell the remaining Ansett aircraft, spare parts and maintenance business -- a lengthy process that could take several years.

The administrators say a return to unsecured creditors is now unlikely.