Government rescues Air New Zealand

The Wellington Government is to take a major stake in ailing national carrier Air New Zealand.

It will pump NZ$885m into the airline in two stages.

Finance Minister Michael Cullen said the rescue package - a loan and a share buy-in - was designed "to ensure the future viability of Air New Zealand".

The Labour-led Government's holding in the carrier will be a maximum of 83%, diluting the shareholdings of the airline's current major investors Singapore Airlines, which has 25%, and Brierley Investments, which has 30%.

Under the rescue plan, Singapore Airline's stake will be slashed to 4.3% and Brierley's to 5.2%.

"This is a package in which the Government is taking the lead in rescuing the national airline," Mr Cullen said.

"The majority ownership by the Government will be ongoing for the immediate future and will give clear strategic direction to Air New Zealand for some time."

The rescue package includes provisions of NZ$185m to meet Air New Zealand's commitments to pay salaries and bonuses for staff at its failed subsidiary Ansett Australia.

Ansett was placed in voluntary administration by Air New Zealand last month. The carrier's move to eliminate 16,000 jobs sparked claims that Air New Zealand was liable for up to NZ$675m of employee entitlements.