Air NZ's survival now on the line
Mr Toomey...no assurances.
By Sarah Crichton in Auckland
Air New Zealand's future was in doubt last night, with analysts predicting the next two weeks would prove critical to whether the Kiwi carrier would continue in its current form.
Analysts said the airline's position appeared precarious for several reasons and did not rule out receivership as a stepping stone before the airline returned to profitability sometime later.
"Effectively, Air NZ is surviving on the goodwill of the banks and the funding package from the New Zealand Government," one analyst said.
But with Air NZ having breached its banking covenants, it is understood that National Australia Bank and Bank of New Zealand are reconsidering their exposure.
Air NZ chief executive Mr Gary Toomey yesterday declined to give assurances there would not be redundancies at the airline. But analysts say his resignation from all Ansett directorships on August 24, informing the market and Ansett staff just last week, sent a further negative signal to the market.
Air NZ's large debt means it needs urgent recapitalisation. However, a proposed part-government, part key shareholder-funded $NZ850 million rescue package is at least six weeks from being finalised.
Mounting uncertainty about Air NZ's legal liability toward Ansett is intensifying market concerns and the company's cash flow position would be further affected by the American terrorist attacks, with costs increasing and passenger demand down globally.
Australia's pending election and the fact that Air NZ has been threatened with industrial action in Australia would also affect it, analysts said.
"It is still very highly geared and operating in an environment which is difficult for all airlines - particularly Australasian ones due to foreign currency and competitive market conditions," said Mr Peter Sigley, an analyst with JB Were in Auckland.
"The whole situation is still very messy. Nobody seems certain where the liabilities will fall in the wake of the Ansett fallout, and the fact it has become a political football in Australia has seen investors shunning the stock and likely to continue to do so.
"It throws the whole recapitalisation into doubt."
The New Zealand Government's part of the rescue package is limited to a $NZ550 loan facility and, with Air NZ's share price plummeting a further 30 per cent on Friday, there are now questions about the level of commitment by major shareholders, Brierley's Investments Limited and Singapore Airlines.