PAUL PHELAN / CAIRNS

Troubles mount for New Zealand's flag carrier as chief executive quits and subsidiary is placed in voluntary administration

Time is running out for the revival of Australian carrier Ansett and the survival of former parent Air New Zealand (ANZ), as legal, regulatory and industrial pressures mount.

ANZ was left leaderless last week by the sudden "mutually agreed" departure of former president and chief executive Gary Toomey, who said: "The board's decision to place Ansett in voluntary administration means ANZ must set its sights on different goals from those that drew me to the company."

The NZ$885 ($366 million) million state bail-out of ANZ now hinges on satisfying government concerns over the carrier's exposure to Ansett-related claims.

The Australian Federal Court has approved a memorandum of understanding (MoU) between ANZ and Ansett, clearing the way for the recapitalisation plan, providing Ansett Mk II with A$150 million ($75 million), and releasing ANZ and its directors from further Ansett-related claims unless there is evidence of insolvent trading, reckless management, or failure to act in good faith. Ansett Mk II is a limited service restarted using the rump of Ansett's A320 fleet.

Roger France, Toomey's replacement, had cautioned that if administrators pressed for more cash, ANZ would collapse into statutory management, cutting off the flow of any money between the two airlines, including the A$150 million.

Major investment banks have expressed caution on ANZ recapitalisation. Sydney-based Salomon Smith Barney aviation analyst Jason Smith says that NZ$885million was only half what the airline needed.

Meanwhile the proposed settlement under the MoU is in doubt, after warnings from Australian transport minister John Anderson that the government expects the administrator to use the cash to pay displaced Ansett workers.

The money is needed to shore up Ansett Mk II until a buyer is found for still-operational assets, but the minister says that if the company is not wound up, all assets except those necessary to run the reduced operations would have to be realised to pay workers' entitlements before drawing on government funds.

Administrator Mark Mentha told the Australian Federal Court on8 October, that, without the cash injection Ansett would be sold at a "fire-sale" price.

He said the administrators were concerned that, without access to the funds, the confidence and support of aircraft lessors, airlines, government and employees would quickly vanish.

Five groups including the Ansett pilots, Singapore Airlines (SIA), Australian businessmen Lindsay Fox and Solomon Lew, and West Australian mining magnate Kerry Stokes are preparing to bid for various assets.

The pilot group's proposal, which could involve management contracts with SIA and a later buy-in by the Singapore carrier, would see a full-service airline flying 30 to 40 jets on major trunk routes.

Qantas holds about 90% of the domestic market and is adding leased Boeing 767 capacity, while Virgin Blue has appointed Goldman Sachs to evaluate funding opportunities with a view to an initial public offering in 2002.

Source: Flight International