Singaporean carrier has reshuffled its corporate plans, dropping a bid for Air India and reconsidering ANZ deal

Singapore Airlines (SIA) has withdrawn its offer to acquire up to 49% of Air New Zealand (ANZ), following admissions by the Auckland-based carrier that its Australian subsidiary Ansett is losing A$1.3 million ($670,000) a day.

The Asian carrier says the agreed price is too high and will have to be renegotiated. The move came just days after SIA pulled out of a bid to acquire a stake in Air India.

In July, ANZ and SIA set NZ$1.31(57 US cents) as the indicative price for the shares the Singapore flag-carrier would buy. Since then investors have lost confidence, sending the price crashing to just NZ$0.69 on 7 September.

ANZ's annual results, due on 13 September, are expected to show a loss of around NZ$200 million.

Low cost carrier Australian newcomer Virgin Blue has also entered the fray. Having rejected a A$250 million takeover offer from ANZ earlier in the week, company boss Richard Branson then offered to match an earlier Qantas offer to buy SIA's stake in ANZ in exchange for handing Ansett to the Singapore carrier.

The Australian and New Zealand governments have been exploring a joint rescue package for the embattled group, including the possibility of them jointly underwriting a rights issue for ANZ.

Possible rescue deals for ANZ and Ansett were stalled last week when the New Zealand Government backed away from key decisions affecting the future of the competing SIA and Qantas bids.

The government has told ANZ's board it must present a credible business plan before it makes a decision, while the airline's message is that it must have a clear government policy definition to do so. New Zealand Prime Minister Helen Clark bluntly said: "ANZ's problems are entirely of its own making."

The shadow over Ansett's future was deepened by Branson's rejection of the takeover offer, which would have removed much of the competitive pressure on the ANZ group. SIA may now shift its focus to pursuing a deal with Virgin Blue. Branson's UK-based airline Virgin Atlantic is already 49% owned by SIA. Branson's advice was that if he were running Ansett he would "shut it down and start afresh".

Shareholders had expected New Zealand's regulated foreign equity cap to be increased to some-where between 35-49%. The government's options were to approve the new 49% cap sought by SIA, or to raise the limit to between 35-40% and underwrite a rights issue.

If SIA withdrew its interest and refused to sell its shares in ANZ to Qantas, Ansett would go into receivership, also putting its parent under financial stress as it confronts strengthened domestic competition from Qantas, and the possibility of Virgin Blue entering the Transtasman and New Zealand domestic markets.

Competition has already taken its toll on Australia's Impulse Airlines and FlightWest in recent months.

Meanwhile, SIA's decision to withdraw from the joint bid with the Tata Group for a 40% stake in state-owned Air India has thrown the New Delhi Government's privatisation plans into chaos.

The Tata-led consortium was the only bidder and SIA says it withdrew in the face of intense opposition from politicians, trade unions and the media.

Pradip Baijal, the secretary of the government's department of disinvestment, said if Tata was unable to find another partner, the privatisation process will have to be cancelled. Air India will not be sold at an inadequate price, he said.

Additional reporting by Radhakrishna Rao / Bangalore.

Source: Flight International