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Cullen And The Press Gallery 10.30 am 18 Sep 2001

Cullen And The Press Gallery 10.30 am 18 September 2001

We had a discussion with Mr Farmer last night. There's been no change in share price and we are going through the process of due diligence.

Is it an option for the government to become an equity share holder if the loan that your proposing isn't enough?

That's what I said yesterday.

Was that discussed with Air New Zealand last night?

At the press conference, you might remember I said that if the capital structure of the business wasn’t able to support a $550 loan which is why there is no more money…
Then we might look at ways in which some of that was convertible and therefore convertible into equity but lets go through that process of due diligence before we start [going there].

I don't want to sound sort of tetchy but we do always seem to be asked the question next but three. When we are working through a process of due diligence, lets and try and do the process before we determine the outcomes.

BIL & Singapore – thought they didn't want government having equity?

Well they might want to change their mind given the alternative.

Have you suggested that to them?

No, not at this stage – we are going through a process of due diligence. I am a bit surprised at what you think might be going on.

In meeting with Mr Farmer……?

I am not prepared to comment about what Mr Farmer said last night.

Are you prepared to speed up the due diligence process?

I am not sure what that question means. If we are capable of doing it quickly we will do it as quickly as we can. But clearly we have to do that process properly.

Do you think the airline can survive another 4 to 6 weeks of uncertainty.

I think the airline is capable of surviving. I think you've got to sort out some different questions here. I mean the airline faces some short term decisions in common with every other airline in the world. Which is extraordinarily untimely – arising out of the tragic events of last week…. The question is what is its medium to longer term position. You have a strong domestic airline you have strong engineering workshops you have an international airline which on average has performed well by international airline standards. It is a very risky and difficult business. None of that has changed. INAUDIBLE

What's happened is they've taken a huge hit from the Ansett investment and we faced a lot of rather silly nonsense on the other side of the Tasman which has added to their woes and then of course we have this awful situation internationally which couldn't be worse for an airline which is struggling. But those are reasons for taking a longer term view rather than a short term view.

Do you think people can buy tickets through Air New Zealand with confidence that they will be honoured?

Well of course they should.

Would the government guarantee that?

We don't guarantee people buying anything whether its apples or airline tickets.

But people who have bought tickets through Ansett have lost their money.

That’s a different issue. There's an issue there we are trying to get a handle on whereby people who have bought tickets through Ansett are having those dishonoured even though they are Air New Zealand tickets.

That is a matter for Air New Zealand that’s not a matter for the NZ government. The NZ government is not going to take on all of the commercial risks that apply to Air New Zealand. That would be totally improper and I am surprised you suggest it.

Well I know we are seeing the strange death of laizer faire New Zealand with last week now calling for equity holding in Air New Zealand and Act calling for shareholders to divest themselves of their shares, but let's not get too carried away in this respect.

Dr Farmer????

The meeting was at his request and I am not going to comment on what we talked about.

Are you expecting to have more frequent updates from him?

I get updates probably 2 or 3 times a day about the Air New Zealand situation basically through our negotiator who is our prime source of contact. So I don't expect to get frequent direct updates.

But I do get updates several times a day and I expect to get another one later this morning.

But there seems to be some sensitivity last night about this meeting with Mr Farmer?

I know it's terribly disappointing for the media but we are not going to play out every detail of discussions and what might be talked about and what might happen blow by blow to the delectation and delight of the average New Zealand television audience.

I suppose that's fair enough but when your own office denies its taking place when its actually taking place it does tend to convey some sense of crisis.

Maybe not for the first time my office didn’t know where I was but I am not quite sure why they denied that.

Ownership package – the cap? Some inaudible

Its 35% or whatever is required to implement that agreement. That is what the agreement says.


So the cap is actually 49% in a sense?

Well, I think shares would have to be basically zero before it gets to 49% if you work through the sums. Don't forget that you’ve got Singapore and BIL putting $150 million each so they are 50/50 on that. So that if everything else dropped to zero then in theory they would be 50% but how do you convert $150 million into a number of shares if the price of the shares is zero? My math tells me that that’s an infinite number of shares that needs to be issued to make that possible. So there is no point speculating on things that are mathmatically impossible.

Is there anything positive that you can look at in terms of this saga in terms of the future of Air New Zealand?

You mean is there a golden or a silver lining to this rather large cloud – long white as it may be? No, its been an extraordinary bad experience for the airline and it's not been a good experience for New Zealand. I am sure there are some commercial lessons in there that all sorts of people could learn.

How optimistic are you feeling about the whole situation?

I have no doubt that at the end of the day there will be an Air New Zealand but the government has to act in a way that ensures that will happen without simply becoming the protector of the major shareholders in the company. Its not the public interest simply to make sure that they're protected. Our interest is to make sure that AN Air New Zealand operates.

There will always be an Air New Zealand.

Has it caused you any sleepless nights?

Yes.

Would you have done anything different, in hindsight?

It depends what hindsight is. If hindsight is knowing what we know now then no doubt things would have been very very different. But we wouldn't have known what we know now. If we'd known what we know now there wouldn't have been a proposal to recapitalise at $850 million. So again, it’s a bit kind of pointless really.

The question really is do you take any blame?

No.

Are you concerned that there has to be a quick resolution to the issues of whether Air New Zealand owes Ansett employees half a billion dollars or not or whether this will just hang over the airline's head indefinitely?

I think the airline wants to get some legal certainty about that.

Did Mr Farmer come to see you as a board or a [indistinct]

I'm not sure I can make the distinction.

Well did he come to see you as the Board chairman or independent director?

I prefer not to comment on that.

Ends

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