Summary report

This report concerns the proposed involvement of Airways Corporation of New Zealand Limited (“Airways”) in a consortium formed to bid for a portion of the National Air Traffic Services (“NATS”) organisation based in the United Kingdom.

The consortium transaction has a number of unusual characteristics – perhaps the most significant being that it gave rise to potential conflicts of interest on the part of three senior executives of Airways who were closely involved in negotiating it on behalf of the Board. Moreover, the Board’s management of the potential conflicts of interest became the subject of serious allegations of impropriety.

Airways’ Shareholding Ministers sought advice from me about:

• the nature of the potential conflicts of interest;
• how the Board of Airways had handled the potential conflicts; and
• whether a payment made by Airways to its former General Counsel, under a severance agreement, was made solely or substantially with a view to keeping him from disclosing concerns which he had expressed to the Airways’ Board about the potential conflicts.

I agreed terms of reference with the Shareholding Ministers that confined me to conducting an inquiry as to the adequacy and appropriateness of the controls and procedures used by Airways when it negotiated and concluded the consortium agreement and the severance agreement. The reasons why I agreed to relatively narrow terms of reference relate to the Audit Office’s limited mandate in the audit of State-owned Enterprises, which is set out in paragraphs 108-111.

I am aware that the NATS project has been the subject of extensive public and parliamentary comment. My Office’s limited mandate means that some of the public expectations of our involvement cannot be met.

Because of the unusual circumstances surrounding this review, I think it necessary to make some further preliminary comments to set the scene for our report.

The full text of this report is available in PDF format (450kB).