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n e w sBy Tom BallantyneThe convoluted corporate battlebetween Qantas Airways, Air NewZealand (Air NZ) and Singapore Airlines(SIA) to decide who will end up controllingwho in Australasia’s skies, appeared tobe approaching its pivotal point in earlySeptember. But no one is betting the farm ona speedy conclusion.The New Zealand Government wasexpected to decide whether to raise foreignownership limits in Air NZ following a September4 cabinet meeting in Auckland. Dependingon the outcome of that decision either SIA orQantas could take virtual control of the Kiwicarrier.At stake is market position for the bigplayers and the future of wholly-owned AirNZ subsidiary, Ansett Australia. Both Qantasand SIA (it already owns 25% of Air NZ, theexisting investment cap for a single foreignairline) want the limitation eased to allow oneof them to take up to 49% of Air NZ.If Qantas succeeds it wants to buy SIA’s25% stake and sell all of Ansett to the Singaporeflag carrier. But Air NZ’s board has alreadyendorsed the SIA proposal, which would injectfurther capital into the airline in return for a49% holding.The New Zealand Government has had aspecial negotiating group, led by an independentmerchant banker, working to assess bothairline bids and make a recommendation to thenational government. The problem is that evenif New Zealand clears the way for increasedforeign ownership in Air NZ, the interestedparties are locked in a psychological battle thatcould see a final decision delayed.SIA deputy chairman and chief executive,Dr Cheong Choong Kong, stated categoricallyin August that his airline would not sell its25% stake in Air NZ, no matter what the NewZealand Government decided.New Zealand prime minister, Helen Clark,has had to quash media reports she favouredSIA, but she and finance minister, MichaelCullen, have consistently said it would be“very difficult” for them to raise the 25% cap.Air NZ chief executive, Gary Toomey, has toldthem in no uncertain terms that if the limit isnot raised, the national flag carrier could be inserious financial trouble.During an August speech in Brisbane,Toomey said: “We just need someone to say‘yes’ so we can go to the bank and put theATM card in and call up a billion bucks andoff we go. We announce our results in earlySeptember and obviously the market alreadyanticipates it won’t be a good result becauseMuch at stakein battle fortroubled Air NZAir New Zealand: The “meat in the sandwich” as Qantas and Singapore Airlines battle formajor stakewe’re in a re-building phase. But we really needto be able to have our strategy enunciated tothe market at that time.“It’s fairly unusual in an industry to gooff and find someone who’s prepared to putin over a billion dollars and re-capitalise thebusiness and then you have to get two governmentsin two different countries to decidewhether they like that person or someoneelse.” The delay was “annoying”, he said,“whether it be the Qantas proposal or the SIAproposal, what we need is a decision”.Toomey desperately needs a cash injectionto begin a major re-fleeting exercise, particularlyat Ansett. The continuing uncertainty ofthe situation has forced analysts to increasetheir projections for Air NZ Ansett group lossesduring the past year, with some pushing thefigure close to US$200 million.It is Ansett which has become the primaryvictim of the acquisition battle as the players attemptto negotiate its fate. Having experiencedseveral years of ownership and leadershipdoubt, staff morale has hit rock bottom as theyagain ponder their future.If it wins, SIA has said its immediate prioritywill be “‘to nurse Ansett back to health”.Dr Cheong said SIA will need “‘the people ofAnsett behind us” after an immediate injectionof cash in order to turn the Australian carrieraround from its “precarious condition”.He added the “people in Ansett are totallydemoralised” and it would be a “huge undertaking”to close the gap now existing betweenAnsett and Qantas.Meanwhile, Qantas’s chief executive, GeoffDixon, has been intensifying his campaignto convince the New Zealand Government aQantas-Air NZ tie-up is the best solution to thedilemma. But he also has been launching verbalbroadsides, clearly aimed at the AustralianGovernment, about foreign ownership rulesapplying to Qantas.Like Air NZ, a foreign carrier can own upto 25% of Qantas, a stake currently held byBritish Airways. Dixon wants that cap lifted tobetter access foreign equity markets. He hasgone as far as warning that if the airline failedto receive the go-ahead for a partnership withAir NZ and remained bound by foreign equityrules in Australia, it would increasingly shift itsoperations offshore.He was speaking after announcing Qantas’sfinancial results for the year to March31– a 19.7% drop in after-tax profit to A$415.4million (US$217.3 million) – after six years ofrecord profits.Dixon said if SIA gets its way it wouldmean all Qantas’s competitors in Australasiawill be controlled by foreign interests and haveaccess to capital and other benefits denied tothe local carrier.24 | <strong>Orient</strong> <strong>Aviation</strong> | September 2001