Ansett reform package key to survival

A grounded Ansett 767

In this story: No policy change Drain on profit Physical inspections have begun RELATED SITES

MELBOURNE, Australia (CNN) -- Beleaguered airline Ansett Australia will present a package of reforms to Australian safety authorities Wednesday in a bid to stave off closure.

Last Thursday, CASA grounded 10 of Ansett's 767 planes citing safety and maintenance concerns.

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Those reforms will likely include an extensive fleet upgrade, but quite how Ansett, Australia's second largest airline, finances this is a crucial sticking point.

Ansett is fully owned by Air New Zealand, which is itself 25 percent owned by Singapore Airlines. Singapore Airlines was keen to buy a 50 percent stake in Ansett Airlines from former owner News Corporation, but then half-owner Air New Zealand enforced its pre-emptive rights on the stake, blocking the Singapore move.

Singapore was then subsequently restricted by the New Zealand Government from lifting its stake in Air New Zealand beyond the 25 percent level.

Air New Zealand wants the New Zealand Government to lift this restriction to enable Singapore Airlines to inject fresh capital into the airline to help fund the fleet improvements. Some of the grounded 767s are up to 16 years old, and the fleet upgrade could cost up to $2.5 billion ($NZ 6 billion).

No policy change

A spokesperson for the New Zealand Government's Minister of Transport, Mark Gosche, said the minister would be happy to have a meeting with Ansett chief executive Gary Toomey on the ownership issue, but said the Government's policy on the stake had not changed.

The New Zealand Government is committed to ensuring that Air New Zealand remains controlled by New Zealand nationals.

The Ansett operations are proving a drain on Air New Zealand's resources, following airline deregulation and the introduction of two new competitors in the Australian marketplace and cut-throat price competition.

Drain on profit

CASA safety boss Mick Toller

Air New Zealand made a paltry profit of just $1.6 million ($NZ3.8 million) last year, compared with $127.2 million the year previously, with the Ansett operation the main cause of the downturn.

Ansett said Tuesday that if the reform proposals are considered satisfactory, Australia's Civil Aviation Safety Authority (CASA) will no longer issue a notice Friday giving Ansett 14 days to show cause why it should not have its operating certificates withdrawn.

However a CASA spokesman, Peter Gibson, was quoted in The Australian Financial Review newspaper Wednesday as saying no deal had been struck to stop the issuing of the notice, despite what Ansett was saying.

Ansett described talks it held with CASA on Tuesday as "constructive and positive".

Toomey is meeting Australia's Transport Minister John Anderson Wednesday to discuss the groundings. Anderson met the head of safety for CASA Mick Toller Tuesday evening to discuss how the groundings could have been avoided.

Physical inspections have begun

CASA's physical inspection process has now begun but it is still not known when any of the planes might be back flying again. CASA engineers had been examining maintenance history documents from Ansett before beginning a thorough physical inspection of the planes.

CASA headquarters in Canberra, Australia

To assist in this process, Singapore Airlines has now said it would provide the airline with technical help in compiling the data required by CASA's inspection process.

In the meantime, 10 of Ansett's fleet of 63 planes remain on the tarmac as the airline's profitability rapidly dwindles. It is estimated the current grounding could be costing up to $2 million a day to cover for the lost aircraft.

The cost of the damage to Ansett's reputation, however, is inestimable.

Air New Zealand
Ansett Australia
Civil Aviation Authority of Australia

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