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PM And Michael Cullen Press Conference Transcript

Press conference with Prime Minister Helen Clark and Finance Minister Michael Cullen
17 September 2001

On the subject of what is happening across the Tasman I have expressed my deep concern at the anti NZ feeling triggered by the collapse of Ansett Australia. I feel it is absurd for the whole country to bear the blame of decisions of one board of directors – a board, I might say which has 3 Australian directors on it.

Unfortunately it is the electoral silly season in Australia and it seems that almost anything goes. I repeat what I have been saying over the weekend that for calls to boycott to come from trade union sources in Australia is really counter productive.

If people are to pursue any legal claims they think they have against Air New Zealand it would make rather more sense to see it as a viable and flying airline.

But I want to repeat today that Australia and New Zealand have many reasons to work closely together and we do, we have not had any argument with the Australian government on this matter at all. We are two countries that share common values and interests across many critical issues and we work very closely together and we have made an absolute commitment in our government to work extremely hard at the government to government relationship whoever may be in government in Australia at any given time. It has traditionally been a strong relationship and I feel rather concerned that we have become a whipping boy as a country with quite unfair, wrong and untrue things written about us by reputable papers and it is perhaps a signal to New Zealand companies that unfortunately our country will be judged on the way they behave.

The rescue plan is part of the solution. The rescue plan was drawn up in the full knowledge that there were contingent liablities and the plan needed to be sufficient to cover any reasonable estimate of contngent liabliblies that’s why I have at pains to say to our Australian comrades that we are part of the solution not part of the problem. That’s why I somewhat object to having my freedom of movement obstructed through an Australian airport by them.

Dr Cullen has been the closest through the negotiations – I pass over to him.

Dr Cullen – It's really primarily a matter of Air New Zealand board to make that decision [statutory management] rather than for anybody else at this stage to make that decision. So I prefer to leave it at that stage for them. They will have to judge that in the context of whether they believe that they can trade their way out of the position that they are in.

There are very serious downsides to statutory management – not least the fact that, to put it as simply as I can – the assets could be nabbed while they are overseas. It is the nature of airlines that your assets do tend to move overseas.

Q Tax payer money at risk?
The money is not at risk at this stage. No money has been put into Air New Zealand. No money can be put into Air New Zealand before the process of due diligence and that will take some four to six weeks.

Q. If things continue to erode….

That’s what the process of due diligence will be all about and if the situation changes that will change the nature of the conclusion which emerge out of the process of due diligence. I think if there is one thing which has been learned from the Air New Zealand situation from an earlier stage is that is a good idea to do due diligence before you put your money in rather than after it.

Q. Would you offer a longer loan?

Not even considering that possiblity.


At the end of the day it is still a matter for the Air New Zealand board to make a decision and others might make a decision as well.

Q. National interest

And that might influence its decision

Q. Direct shareholding ruled out?

Singapore ruled out us taking a direct shareholding in Air New Zealand. It’s the nature of the Air New Zealand constitution that the other major shareholders have to agree before others could take a direct shareholding.

During negotiations last week a number of options were canvassed of which some form of convertible…uh support was discussed. I think its fair to say that both Singapore and BIL, certainly Singapore were completely opposed to the government taking any form of equity shareholding.

Q. Any irony in the situation/ did you anticipate Australia reaction

I think there is a lot of irony in the situation. I don't think we will know about that for a little while longer obviously. There's a number of factors come into play. The ongoing impact of the US situation as well as the Australian situation.

I don't think anybody could have anticipated that the Australians would go quite so off the end of the universe. When I heard someone from the ACTU basically saying that they would contemplate putting Air New Zealand out of business its hard to see what the purpose of that would be from their perspective if they are trying to get money for their workers.


But other things may change. We've also got the issue of whether Virgin Blue and Qantas may take over some Ansett routes and some Ansett staff. Qantas have talked in terms of something like 7000 Ansett staff being taken on. And one doubts if this particular situation in respect to Air New Zealand and Australia is going to continue indefinitely.

Q. Other offers/options for government?

I think it’s a bit premature to start recasting the package at this point.

Q. Capital restructure- convertible instrument.

It was part of the agreement that if the capital structure was not sufficiently robust to bear a debt instrument of that size but never the less it was considered that due diligence showed the airline could trade its way out that other options could be looked at. And that could have raised the issue of some sort of convertible instrument.

I do recollect seeing some sums that suggested that Singapore could approach the getting close to the 49% mark but if you work it out you can't really go beyond that because you started off with Singapore at 25 and BIL at 30. Those ratios remain true therefore presumably Singapore can't get above 50%.

If you look at the agreement again it says 35 % or such other level as may be required to implement the agreement in terms of the equity injections.

Q. Air New Zealand going under?

I think they could be regarded as more undesirable options.

Q. How far will government go to save Air New Zealand?

I think there comes a point at which you have to say what are the costs and benefits of one action versus another. If any actions are completely ruled out you've ensured that you have maximised the cost of what ever action you are taking – I would have thought.

Q. Importance of national airline.

Helen Clark – well, tell me how I am going to from Auckland to Wellington every week.

Q. Receivership or liquidation?

Helen Clark – Receivership is rather different from liquidation. What we are looking for is a trading airline and since the collapse of Ansett New Zealand which became Qantas New Zealand we haven't had much choice about how to fly in New Zealand. So the status of the national airline is clearly a prime concern.

Q. Economic effects of last week?

Michael Cullen – classic NZ media – can we write the next story but six rather than the one we are facing at the present time.

Q. What's the strategy now?

Prime Minister – well the strategy is to carry on with due diligence on a package that was put together last week.

The package on the table is being talked through. As long as the airline is flying we are working through a process.

Q. Assets from creditors in the event of statutory management?

Michael Cullen – [I'm not] specifically talking about Ansett workers, any body whose a creditor of Air New Zealand in that situation and has some standing can try to take out an asset –plane – once it lands somewhere else. Basically you just put your sticker on it when you get there. So a statutory manager would need to negotiate advance compromises that would enable operations to continue.

Q. What assurances did government seek from board re liabilities?

MC- Couldn't seek assurances because the Air New Zealand board would not have been in a position to quantify the final amount of any liabilities. No doubt they will end up in court in some form or another, there are some significant uncertainties surrounding the legal elements in relation to those liabilities – I think its fair to say that Air New Zealand indicated that certain liabilities which now seem to become somewhat closer were not likely to be incurred for some six to 12 months down the track. Which certainly made it more feasible to keep trading and dealing with those liabilities. That was the advice Air New Zealand gave our negotiators.

I think its much to early to tell. Despite the fall in the share price today, it depends how long you think the Australian situation is going to go on. Plus of course what the impact of the international situation is on the air travel business in general. I mean Continental has just talked about laying off 12,000 staff and cutting its operations by 20%. This is a bad time for any international airline.

Depending on a range of issues including the timing of working through just what the liabilities were. It's not just a simple matter of people saying this is how much you owe us. There will be a dispute about the amount and a dispute about whether there is legal liability.

The situation has been serious for some time. Some of us have been trying to convey that, when others were writing stories….as if there was nothing absolutely wrong at all with Air New Zealand - and all the government had to do was to approve lifting the cap and all would be well.

I think at least that story has died a sudden death, in the last few days.

Q. What pressure can government put on Air New Zealand?

The airline should meet its legal obligations its not for the NZ government to press the airline into meeting obligations it is not legally obliged to make.

Q. Have you asked OZ government for help?

Helen Clark – no but neither do we hold the Australian government responsible for the hysteria that’s been created. That has been a reaction that’s come from the workforce, which is of course distressed. And we understand that. What we have asked for is some common sense based on the logic that if you want to pursue a legal entitlement you would like to know that if you won it someone would be able to pay it at the end of the day.

I've also pointed out that there are many other benefits accruing to Australians by having Air New Zealand active in the aviation market. Not least of them being that on the Sydney – Los Angeles run provides for much greater competition in airfare prices than you would get if it was simply a duopoly between Qantas and United Airlines. The same applies of course Trans-Tasman and any on routes through Brisbane that Air New Zealand has to points further north.

Q. NZ Council of Trade Unions not done enough???

The NZCTU has done everything that could feasibly have been done to communicate across the Tasman that boycotts are not sensible and I credit them with some backing off on that score today by the ACTU.

Last part of press conference w/ Clark & Cullen 17/9/01

Helen Clark – this incident has triggered the most extraordinary bout of Kiwi bashing seen yet. I have seen outrageous things in reputable paper's editorials about this country which blacken the character of everyone sitting in this room who holds a New Zealand passport.

I certainly do encourage everyone to patronise their national airline – might have the best discount deals going.

Q. liabilities [again]
It would have to be established what its legal liabilities are. You establish legal responsibility through court action or some concession or admission in negotiation.

I don't think we want to get into the details of how and when and by whom Air New Zealand establishes or a court establishes for it what its legal obligations are.

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