Aust. watchdog closes Air New Zealand case


Ansett collapsed in March, and ASIC says it interviewed more than 350 parties claiming damage from the collapse

By Geoff Hiscock
Asia business editor

SYDNEY, Australia (CNN) -- Australia's corporate watchdog has decided to take no action against Air New Zealand over the collapse of its Australian carrier, Ansett.

That's despite what it says is the possibility of "misleading and deceptive" disclosures.

Ansett's demise rocked the Australian aviation market last year. Coming after other high-profile business failures such as telecom One.Tel and insurer HIH, it prompted calls for increased scrutiny by corporate regulators.

But the Australian Securities and Investments Commission (ASIC) said Thursday it has closed the investigation, after legal advice that it would not be possible for it to pursue creditors' claims by way of a single group proceeding or class action.

More than $1 billion in debts

Ansett was put into administration last September after parent Air New Zealand cut it adrift to concentrate on its own survival.

Ansett had debts of more than $1 billion at the time, and was looking to upgrade its aging fleet of B767 aircraft.


Qantas has confirmed it is interested in taking a minority stake in Air New Zealand

Before its collapse, Ansett was the No. 2 carrier in Australia, behind Qantas Airways. It continued to operate in a reduced form while the administrators tried to put together a rescue package.

But it was eventually forced to close in March (full story). Thousands of Ansett employees lost their jobs and creditor losses ran into hundreds of millions of dollars.

On March 1, ASIC said it would take no action against Ansett or its former directors, but would consider a representative action for damages against Air New Zealand over its level of financial disclosure during 2001.

An exhaustive investigation

ASIC said Thursday it had conducted an exhaustive investigation that included interviewing more than 350 parties who said they suffered financial loss as a result of Ansett's failure.

The regulator said it was "unable to dismiss the possibility" that Air New Zealand's level of disclosure about its own forecast losses and those of its subsidiary Ansett for the 2001-02 financial year may have been at certain times "misleading and deceptive within the meaning of the Trade Practices Act".

But it said its legal advisers concluded only a minority of those who bought shares in Air New Zealand were likely to be able to prove they relied directly on the New Zealand carrier's conduct and suffered financial loss.

ASIC said no class action was possible, meaning it would have to bring each claim separately, or at best, through a number of different groups of plaintiffs.

Public interest not served by court action

As a result, it concluded Thursday that the public interest would not be served by incurring the cost and risk of taking action against Air New Zealand.

Earlier this month, Air New Zealand embarked on a major fleet upgrade, announcing a deal to buy or lease 15 new Airbus A320 aircraft and take options on another 20 (full story).

It will spend $400 million on the first 10 aircraft as part of a purchase and lease package with Airbus, with the other five leased separately.

Air New Zealand had to be rescued by the New Zealand government via a $366 million (NZ$885 million) recapitalization last October, in part because of its troubles with Ansett.

The government now owns 83 percent of the airline, but that could change in the near future.

Air New Zealand's Australian rival Qantas confirmed in May that it was talking to the carrier about taking a minority stake (full story).

There is speculation Qantas could win approval to buy 25 percent after the New Zealand election is held on July 27.

Air New Zealand's two big shareholders before the October 2001 rescue, BIL and Singapore Airlines, have seen their stakes reduced from 30 percent and 25 percent to 5.4 percent and 4.5 percent. respectively.