David Knibb BRISBANE

Air New Zealand (ANZ) is seeking ways to raise capital for a major fleet order needed for its subsidiary, Ansett Australian. Singapore Airlines (SIA), which already owns 25% of ANZ, could provide the answer.

Ansett suffered the embarrassment and expense of a second grounding of its Boeing 767 fleet over the busy Easter holidays. Australia's Civil Aviation Safety Authority (CASA) ordered the grounding, the second in five months, over safety concerns.

Ansett and ANZ have since provided a "mountain" of documents and a plan to restructure its engineering operation with the hope of avoiding a "show cause order". CASA threatens to issue such an order, which would give Ansett 14 days to show that it has improved safety procedures enough to avoid suspension of its operating license.

ANZ has promised to accelerate plans for a major fleet order that would allow Ansett to retire its troublesome 767s. The size of that order has not been decided, but ANZ chairman Sir Selwyn Cushing foresees spending NZ$5-6 billion ($2-2.4 billion) over the next four years on Ansett's fleet and upgrading.

ANZ is pondering how to fund such an order. Over the short term it could lease the aircraft, but chief executive Gary Toomey admits ANZ's balance sheet cannot carry that much debt over the long term without more equity. This has fuelled speculation that ANZ might sell part of Ansett to SIA to raise capital.

ANZ dismisses that prospect, but Toomey plans to meet with New Zealand's government, which could lead to talk about easing the 25% foreign ownership cap. Cushing, who chairs both ANZ and its biggest shareholder, Brierley Investments, notes that Wellington is "well aware of our desire to raise more capital".

New Zealand's Prime Minister Helen Clark says her government will consider any proposal SIA makes to increase its ANZ stake.

Source: Airline Business