Herald says good time to sell Air NZ shares

April 29th, 2013 at 3:00 pm by David Farrar

The Herald editorial:

’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. ’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%?

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19 Responses to “Herald says good time to sell Air NZ shares”

  1. kowtow (7,653 comments) says:

    Why does the govt (taxpayer) own 73% of an airline?

    I thought it was to subsidise lettuce and orchid exports to Asia.

    Isn’t that what most of government activity is these days,subsidies to one group or other,at the expense of others?

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  2. Kleva Kiwi (281 comments) says:

    You lost all the greenies/liabours when you required intelligent arguments…

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  3. MajorBloodnok (361 comments) says:

    Why shouldn’t the govt own 0.0% of Air NZ?

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  4. Manolo (13,396 comments) says:

    Why does the govt (taxpayer) own 73% of an airline?

    Because comrade Clark and Sir Michael Cullen decided so, and their dictum is eternal.

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  5. wreck1080 (3,735 comments) says:

    No point , Labour will change the law to become the only buyer of seats and resell to the public.

    This will bomb any sale.

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  6. berend (1,634 comments) says:

    As the airline will be bailed out by the government, we should own it. As long as we live in a pseudo-capitalist society, the government should own everything it is going to bail out anyway.

    I really don’t want to privatise the gains, and socialise the losses, but that’s how National is running the economy. So first draw up a list of companies that will be bailed out, and then own them.

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  7. double d (225 comments) says:

    Why does the govt (taxpayer) own 73% of an airline?
    I am sure there have been extensive studies in Finland/Norway/Sweden (insert depending on which current Scandinavian country is flavour of the month with lefties) demonstrating that the range of 72.9% to 74.62% is the ideal mix

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  8. ZenTiger (425 comments) says:

    Berend has got to the nub of the matter.

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  9. Allyson (41 comments) says:

    Big fail for our Govt was their failure to break up and sell TVNZ before its value fell. TV stations fortunes are heading south with kiwi taxpayers to be left holding the baby. This is not a good long term investment and Govt should recognise this and get out

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  10. liarbors a joke (1,069 comments) says:

    Personally I would never invest in an airline. As for suggesting Mums and Dads throw some money at it…nah they are better off in utilities..not as sexy as an airline but a whole lot safer.

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  11. MT_Tinman (2,995 comments) says:

    If the gummint can sell shares of AirNZ good on ‘em. Selling the lot would be better.

    I won’t be buying but I’m sure some idiots will.

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  12. PaulL (5,875 comments) says:

    Should have sold it to Singapore Airlines when they wanted it.

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  13. OneTrack (2,621 comments) says:

    “nah they are better off in utilities..not as sexy as an airline but a whole lot safer.”

    Unless there is a Green/Labour coalition promising to trash any value out of the utilities when they come to power. Maybe mum and dad should stick to property – 1987 was bad enough, but 2014 will leave it for dead.

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  14. dime (9,472 comments) says:

    we should keep it because they pay a huge dividend… umm right?

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  15. HC (152 comments) says:

    Hah, was that trick not tried once before, to sell Air NZ to private operators? Do I remember wrong, or am I erring, that the NZ government had to buy it back, to save it and keep it in NZ hands?

    Well many here must have ulterior motives, yet again.

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  16. HC (152 comments) says:

    This 51 per cent ownership argument is nonsense, as it is too risky. Statoil, Norways large energy company, is clearly dominantly owned by the state, well above 51 per cent, so are most strategic investments by Tamasek of Singapore. Similar arrangements are common all over the world, but the present NZ government believes, that tiny majority will ensure it will keep control. That sadly is not necessarily the case, looking at share ownership and detailed voting rights proposed. Also the prospect of Kiwi shareholders being unrestricted to on-sell, will pose a huge risk, that overseas, probably large, buyers, will take over the still nationally owned airline.

    Some will never learn, want to repeat past risks and mistakes, but for the quick gain, some have no bloody scruples, right?!

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  17. PaulL (5,875 comments) says:

    @HC: no, the NZ govt never needed to buy AirNZ, nor did it need saving or to remain in NZ hands. What happened was a commercially inept govt nationalised an airline that they had driven bankrupt by refusing to let Singapore Airlines buy it (scared of all those asians running an airline). But they were happy to let another foreign airline – Qantas – operate in NZ. What’s the difference? We’d have a good airline today if owned by Singapore Airlines.

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  18. virtualmark (1,475 comments) says:

    PaulL, that’s not 100% true. When the pressure went on SIAL they blinked.

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  19. Sean (299 comments) says:

    Under international aviation treaties, for Air New Zealand to be designated to operate international routes it must be ‘substantially owned’ and ‘effectively controlled’ by the designating party the New Zealand government or its nationals. The two elements are generally considered to be completely satisfied by a government or its nationals or both owning at least 50.1%. Given that some other shareholders are quite likely to be nationals of the designating party, a government itself can probably sell safely down to a lesser amount. The issue becomes important when a party in receipt of the designation of Air New Zealand (i.e., some state to which Air New Zealand operates) requires proof that Air New Zealand meets its designation requirements. All airlines that are publicly listed, either in total or in part, need to keep track of the nationality of shareholders for this purpose. Singapore Airlines meets the criteria since Temasek Holdings owns around 54% of it. There are a small group of airlines (Cathay Pacific is one) that are able to avoid the rule because their international treaties specify that to be designated, Cathay only needs to have its ‘principal place of business’ in Hong Kong. This gets around the fact that it is not substantially owned by the Hong Kong government or nationals of Hong Kong. Aviation treaties are slowly moving to this standard of designation but there are many such treaties to be amended and not every country wants to make the change.

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