The New Zealand Government has renationalised Air New Zealand (ANZ) and is set to gain a controlling stake in the flag carrier as part of a NZ$885 million ($370 million) rescue and recapitalisation plan.

This represents ANZ's second bailout within a month. In early September shareholders Singapore Airlines (SIA) and Brierley Investment agreed, along with a NZ$550 million government loan, to inject NZ$150 million each into the carrier.

Following the 11 September attacks on the USA and Ansett's collapse, however, ANZ share prices have plunged amid fears of large Ansett liabilities and reports that SIA and Brierley might renege on their investments.

The New Zealand Government has decided to step in to end uncertainty over the airline's future, lending ANZ an immediate NZ$300 million, convertible into preference shares. NZ$180 million of this has been used to settle all Ansett claims. In December or January the government will inject up to NZ$585 million of equity, giving it a stake of 83%. SIA and Brierley will invest nothing, their shares being reduced to 4.3% and 5.2% respectively.

ANZ's board has been cut from 13 to eight directors, with most being replaced. Chairman Sir Selwyn Cushing has left.

Finance minister Michael Cullen insists that the government does not intend to remain the long-term owner, but he thinks ANZ needs a period of stability after the recent uncertainty.

The emphasis is on downsizing, as ANZ shrinks to its pre-Ansett size. Without the feed that Ansett provided, ANZ's Australian presence is reduced. It is cutting trans-Tasman and Sydney-Los Angeles flights. Analysts estimate initial cuts of 800 jobs.

Departing chief executive Gary Toomey has insisted since he came to ANZ in January that he was only interested in the job if the airline grew. Integrating Ansett into ANZ was his goal, a goal in which he failed. When Toomey announced his resignation on 9 October, acting chairman Jim Farmer said he was sad but not surprised: "He has encountered a set of problems that were not of his making and has worked relentlessly to find answers to them." Auckland accountant Roger France has become interim executive director.

Source: Airline Business