By Edward James/Singapore

SINGAPORE (February 22, 2000) - Speculation is mounting at Asian Aerospace 2000 about Singapore Airlines' (SIA) next move after an offer to take at 25% of Air New Zealand. This comes after Air NZ acquired all of Ansett Australia last week.

Air NZ finally gained full control of Ansett Holdings after agreeing to pay $680 million to buy co-owner News Limited's 50% stake.

The Auckland-based airline will pay a mixture of $580 million cash and shares to the value of about $100 million, which also may be taken in cash or shares in 2-4 years.

Air NZ chairman Sir Selwyn Cushing said the agreement was the first step towards the creation of a globally competitive Australasian airline group which would rank at number 19 in size among the world's airlines in terms of revenue and passenger carrying capacity.

However, that ranking does not reflect cash reserves or profitability, which pale in comparison with 17th-ranked SIA.

SIA made an unsuccessful $500 million bid to buy Ansett last year but was thwarted by Air NZ which would not give up its rights to the shares. Now, the New Zealand airline is holding out an olive branch to its alliance partner SIA, hoping one of the world's richest airlines will put aside the strained relationship over the battle for Ansett and take equity in Air NZ.

SIA is currently considering an offer, which expires February 28, to join its new equity partner Virgin Airlines in a new low cost airline in Australia.

Analysts in Singapore suggest that without SIA equity, Air NZ will struggle to make Ansett a viable competitor to Qantas.

And the markets agreed, dumping the airline's stock, wiping off another 10% of its value. Air NZ's stock has now lost over 50% in the past 12 months - the most since Richard Branson announced his plan to enter the Australian market.

Ansett executive chairman Rod Eddington, who has presided over a major three-year restructuring to return the carrier to profitability, described the merger as "very much the right move at the right time."

But Eddington is not expected to be part of the new Ansett and may move on to higher duties at News.