The shutdown of Australia's second carrier leaves 30 destinations without air services and unions on strike

Ansett's total domestic, regional and international operations were shut down at midnight on 13 September, only 12 hours after owner Air New Zealand (ANZ) reported a NZ$1.42 billion ($603 million) full year loss.

A last-minute bid to keep the carrier flying under Australian Government guarantees failed when administrators PricewaterhouseCoopers (PWC) revealed it would cost up to A$170 million ($88million) to keep Ansett operating until the weekend.

The shutdown, affecting about 16,000 employees, includes wholly owned Ansett subsidiaries Aeropelican, Hazelton Airlines, Kendell Airlines and Skywest Airlines, leaving about 30 regional destinations without air services.

The Ansett collapse came only days after Singapore Airlines (SIA) withdrew its NZ$1.31 per share offer for ANZ, but that was provisional on SIA being allowed to increase its stake in the New Zealand flag carrier beyond the 25% cap set by Wellington.

Qantas had considered a possible takeover of Ansett, but the former's chief executive Geoff Dixon rejected that offer on 10 September.

ANZ delayed announcing its results by a week to 13 September while it negotiated a bail-out package for the parent company with the New Zealand Government.It had placed Ansett in voluntary administration the previous night.

Following the ANZ results, the administrators said they had "no other option" but to suspend immediately all Ansett flights.

The excision of the loss-making carrier after writing off NZ$1.3 billion (almost its full value), had been a condition of an NZ$850 million rescue package to save parent company ANZ from following Ansett into insolvency.

The New Zealand Government will provide ANZ with a NZ$550 million standby credit facility including NZ$200 million revolving credit. Major share-holders Singapore Airlines and Brierley Investments will provide an equity injection of NZ$150 million each.

The New Zealand Government has now agreed to an increase in the foreign ownership cap to allow SIA to boost its stake to 35%. SIA, which holds 25% of ANZ, had been pushing for up to 49% as a condition of a capital injection to rescue the carrier. However, ANZ says that after the equity injection Brierley Investments will own 37% of the airline and Singapore Airlines will hold 34%.

The government will also remove the two-class share structure, eliminating the distinction between A-class shares, limited to New Zealand residents and B-class shares, which can be foreign owned.

Ansett reported a loss of A$165.4 million before interest and tax; while Ansett International (49% owned by Air New Zealand) lost A$22.8 million on the same basis.

Apart from unusual items including the Ansett write down, ANZposted a net after-tax loss of NZ$173 million, slightly lower than market analysts' expectations of a $200 million loss. The carrier reported positive domestic earnings before tax and interest of A$149.3 million - a 25% increase on the previous year.

ANZ chief executive Gary Toomey says the carrier's strategy post-Ansett includes an Australian presence, which was being scrutinised by the government and the airline's major share-holders, but he would not discuss it further. Meanwhile, angry Ansett workers were blockading ANZ aircraft at Sydney and Melbourne airports.

Peter Hedge of PWC says: "I must stress that we remain in discussions with a number of interested parties regarding future operations for Ansett Airlines and other parts of the group." These are believed to include the Ansett Pilots Association and Virgin Blue which wants part of Ansett's business. Unconfirmed reports suggest that SIA and Dubai-based Emirates are also possible buyers.

The Australian Securities and Investment Commission (ASIC)has launched an investigation into Ansett's demise. ASICchairman David Knott says that its too early to say whether the airline was trading while insolvent and that ASIC's New Zealand equivalent has also been asked to conduct inquiries.

ANZ's unrestricted B shares last traded up 4 cents at NZ$0.75 while the airline's A shares last traded up 14 cents at NZ$0.71.

Source: Flight International