Qantas NZ investors set to take multimillion dollar hit

Friday 6th April 2001

KANGAROO TO THE RESCUE: Aussies to bail out our airline

By Graeme Kennedy

Qantas New Zealand investors were last night in frantic talks to claw back some of their $86 million as they finalised details of the rescue sale to the airline's franchisor, Qantas Australia.

The new owners are to take over next Thursday with their own management from across the Tasman.

Insolvency firm Ferrier Hodgson, led by specialist Michael Stiassny, was called in to examine the company's financial situation last weekend, apparently by Qantas' banker, BNZ, aghast as the airline continued to haemorrhage money.

One source said the airline was losing more than $100,000 a month but others said that was conservative.

"It is obviously in deep trouble," a source said.

In a short statement Qantas New Zealand said it would continue to operate as normal and all the carrier's tickets would be honoured.

Investment bank Clavell Capital executive chairman David Belcher, who pulled the consortium together to buy Ansett New Zealand from News a year ago, would not answer telephone calls.

Mr Belcher approached old friends and clients to form the group which paid a reported $86.5 million for the carrier, re-named the company Tasman Pacific Airlines of New Zealand, and later gained the first franchise to Qantas' branding and name.

However, sources said yesterday Qantas Australia - which in the late 1990s dropped plans to buy Ansett New Zealand from News due to the high price being asked - would acquire the airline at a bargain basement rate this time. Qantas is also expected to pick up the New Zealand carrier's considerable debts, leaving investors with multimillion-dollar losses.

These investors include Mr Belcher, who is executive deputy chairman, Australian executive chairman Ken Cowley the airline's chairman under News ownership and 10 others, most of whom appear in the NBR Rich List.

They are Ian Hendry and Chris and Richard Coon of Sovereign Insurance, Alan Gibbs' and Trevor Farmer's Tappenden Holdings, Dunedin-based Skeggs Group, former Pacific Retail shareholder and managing director Greg Lancaster and Clavell partners Carl Petersen and Trevor Kerr.

The board includes Mr Cowley, Mr Belcher, CEO Kevin Doddrell, Mr Farmer, David Skeggs and KPMG chairman Fred Watson.

The franchise arrangement with Qantas was hoped to lift the airline's fortunes by using one of the world's most recognisable brands, expanding an existing commercial agreement to increase reciprocal passenger feeds and gain benefits from Qantas' membership of the Oneworld global alliance.

But the carrier, which made small profits in only three years and lost more than $200 million since it began in 1987, took a crippling blow with the two-month pilot lockout in late 1999 and the subsequent four months of restricted services.

The pilots refused to accept new employment contracts as part of Mr Doddrell's 18-month programme of cost-cutting, restructuring and productivity increases which saved $28 million a year.

With services reduced, thousands of loyal customers flocked to rival Air New Zealand and many never came back. Like all other carriers, Qantas New Zealand has also been hit badly by high fuel prices and the sagging New Zealand dollar a situation that led to Mr Stiassny moving in and helping engineer the Qantas Australia lifesaver.

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