The Herald editorial:
Air New Zealand’s soaring fortunes were confirmed last week when it flagged that its annual earnings would more than double this year. Normalised pre-tax earnings would be between $235 million and $260 million if current market conditions and the trading environment persisted, it said. Air New Zealand’s share price immediately shot up 8c to $1.52, signifying a 10 per cent rise this year. …
As it is, Air New Zealand may well hold more appeal, especially for the mum-and-dad investors the Government aims to attract. The airline industry has always had an allure despite the vast sums of money that have been lost in it, and the national flag carrier has a special place in the hearts of New Zealanders.
It has faced a multitude of problems in the past few years, including high fuel prices, landing fee increases, earthquakes in Christchurch and Japan, and discount competition. Yet it has managed to not only survive but to achieve a profitability more commonly associated with budget operators while maintaining a high standard of customer service.
A strong management team, headed by new chief executive Christopher Luxton, provides reason for confidence in the future, including a strong response to the challenge that will arise from the transtasman alliance between Qantas and Emirates, which awaits only the Transport Minister’s go-ahead. Jetstar is also talking of expanding its domestic network to regional centres, flying routes that it says are a “big profit play” by Air New Zealand. Balancing these threats to some extent is the benefit that the national carrier will undoubtedly gain from the Government’s $158 million boost for promoting tourism.
There are also practical reasons to encourage the Government to promote Air New Zealand. It is already listed on the stock exchange, so a prospectus will not be required. The selldown of the Government’s 73.4 per cent stake to 51 per cent will be more straightforward than those of the power companies. There will be no repeat of the late rewriting of Mighty River’s documentation.
If ever there is a time to sell shares in Air New Zealand, this appears to be it. Investors wary of the unpredictability of the airline industry may not touch it, but there is considerable appeal for mum-and-dad investors. It could offer succour as the Government licks its wounds.
I agree. The Government doesn’t even have to do it in one go. They can just release parcels of shares when the price is high.
I look forward to hearing intelligent arguments from opponents as to why the Government should own exactly 73.4% of Air New Zealand – not a share less or a share more. Tell us why it should not be 51% or why it shouldn’t be 95%?