Aussie airline rescue fails

Ansett is sidelined as the airlines go separate ways

Australia's second largest airline, Ansett, has been put into voluntary administration as its owner, Air New Zealand, is trying to buy time to consider an approach by a "white knight" bidder.

Chairman Jim Farmer tells journalists that talks with a new potential buyer have begun

The move came after Qantas Airline and the Australian government both rejected the terms of a proposed rescue package for the indebted carrier.

"Ansett Holdings and a number of its subsidiary businesses, including airlines, have resolved to move into voluntary administration," Air New Zealand's acting chairman Jim Farmer said.

A takeover by Qantas, which would have given the already dominant carrier a 90% market share in Australia, had been widely anticipated.

Under normal circumstances, the anti-monopoly watchdogs would have opposed such an alliance, but in order to save jobs they reluctantly gave the negotiations their blessings.

Too tough

However, after considering the acquisition proposal carefully, Qantas decided against trying to tackle Ansett's mounting problems.

Ansett's problems were too big to tackle

The carrier has been whacked by tough price competition, a weak currency and excessive costs that have been fuelled by high energy prices.

In addition, Ansett's old planes are in dire need of immediate maintenance which would need to be followed up with a 4bn Australian dollars (US$2bn, £1.42bn) cash injection to upgrade the fleet.

Qantas' decision to drop the deal is bad news for Air New Zealand which had hoped to rid itself of the troubled Australian subsidiary before getting on with a much needed restructuring of its New Zealand operations.

Qantas initially stepped in after the Australian government asked it to show an interest, following an announcement on Monday that Air New Zealand was considering dumping Ansett.