Herald on Air NZ sale

November 19th, 2013 at 2:00 pm by David Farrar

The editorial:

According to the Labour Party leader, David Cunliffe, the timing of the Government’s selldown of shares in is arrogant. Describing it as astute would have been far closer to the mark. Shares in the airline have been trading at a five-year high and investment advisers have voiced their enthusiasm for them. What better time could there be for the Government to reduce its holding in the national carrier from 73 per cent to 53 per cent?

That is a good question. Unless you believe that 73% is the exact right amount of shares for the Government to hold. Which is like believing in astrology.

One can make a principled case for 100% or for 51% (or for 0%) but to insist it must be 73% is daft.

The selldown has been criticised because it is being done just before a referendum on the part-sale of state assets. That complaint is misplaced. The focus of the Government’s mixed-ownership model strategy and, therefore, the referendum has always been the part-sale of the state’s three power companies, not an airline that the government acquired essentially by accident. Air New Zealand is very much an ancillary part of that strategy.

The referendum question also includes Solid Energy. It is a very badly worded question. Because if you think the Government should sell off the power companies and Air NZ, but should not sell off Solid Energy (because we won’t get 10 cents for it) then you should vote no I guess. Likewise if you think the Govt should sell more than 49% of any of the five companies, then again you arguably should vote no.

Green co-leader Russel Norman has gone so far as to suggest the selldown could lead to reduced regional services or higher fares.

I wish there was a competition for the most financially illiterate comment of the year, so I could nominate it.

Tags: , , ,

49 Responses to “Herald on Air NZ sale”

  1. Samuel Smith (276 comments) says:

    Anybody else just get the propaganda e-mail from Air NZ?

    Read the fine print – Less airpoints for travelling between Auckland/Christchurch/Wellington, the Pacific and Australia.

    Neolibs – time to reconsider your Koru memberships?

    Vote: Thumb up 1 Thumb down 22 You need to be logged in to vote
  2. alloytoo (582 comments) says:

    @dpf “I wish there was a competition for the most financially illiterate comment of the year, so I could nominate it.”

    Sadly Russel would always win it.

    Vote: Thumb up 14 Thumb down 1 You need to be logged in to vote
  3. Pete George (23,830 comments) says:

    The competition between Labour and Greens seems to have changed from who can be the best leader of the opposition to who can be the best bleeder of credibility.

    Vote: Thumb up 13 Thumb down 1 You need to be logged in to vote
  4. Samuel Smith (276 comments) says:

    Pete George – stones, glasshouse.

    Vote: Thumb up 2 Thumb down 21 You need to be logged in to vote
  5. srylands (438 comments) says:

    “Anybody else just get the propaganda e-mail from Air NZ?

    Read the fine print – Less airpoints for travelling between Auckland/Christchurch/Wellington, the Pacific and Australia.

    Neolibs – time to reconsider your Koru memberships?”
    >>>>>>>>>

    I wish there was a competition for the most annoying commentator on Kiwiblog.

    Vote: Thumb up 15 Thumb down 0 You need to be logged in to vote
  6. Samuel Smith (276 comments) says:

    @srylands – why doesn’t Air NZ just be honest? “We are announcing reduced benefits for our Airpoints members”.

    Vote: Thumb up 1 Thumb down 13 You need to be logged in to vote
  7. kiwi in america (2,314 comments) says:

    Samuel Smith
    Typical lefty tool – jumping to negative conclusions. Have you actually read the full text of Air New Zealand’s changes to AirPoints http://www.airnewzealand.co.nz/airpoints-news-programme-changes because if you’d bothered you’d find that they’ve made adjustments that mostly favour Airpoints customers.

    Cunliffe’s failure to break through in the polls is leading to a series of populist statements and announcements that have not been thought through. Opposition to this modest sale of shares is one of them. I’m waiting for the buy back to 73% (or 100%) announcement – it won’t ever come because it’ll be like the Yeah Na way he handled Sky City – demagogue the sell down in Parliament, tell the unions he’ll do the right thing and whisper to the markets “we won’t change a thing”.

    Vote: Thumb up 18 Thumb down 0 You need to be logged in to vote
  8. PaulL (5,449 comments) says:

    @srylands: I’m glad there’s not a competition. One is enough, without a bunch of others competing for that crown.

    Vote: Thumb up 2 Thumb down 0 You need to be logged in to vote
  9. Manolo (14,173 comments) says:

    Sell the bloody lot: 0% to be owned by the government, 100% by private investors.

    Vote: Thumb up 11 Thumb down 0 You need to be logged in to vote
  10. Pete George (23,830 comments) says:

    Cunliffe’s failure to break through in the polls is leading to a series of populist statements and announcements that have not been thought through.

    Labour switched from someone who many people said was nice but he couldn’t lead to someone who many people said was not nice but at least he could lead.

    Shearer couldn’t lead or express anything well, he was like a possum in headlights.
    Cunliffe seems to be leading and expressing the worst of Labour, like a possum hissing and scratching.

    The result may be the same – roadkill.

    Vote: Thumb up 11 Thumb down 1 You need to be logged in to vote
  11. Colville (2,318 comments) says:

    Maybe we should award a prize to Wussel for dumbest ever comment, god knows he has won nothing else in his time in parliment, forever the bridesmaid. He might need cheering up :-)

    Vote: Thumb up 8 Thumb down 0 You need to be logged in to vote
  12. kiwi in america (2,314 comments) says:

    Peter George
    I totally agree. Shearer had a few minor advantages over Cunliffe – he was pragmatic and ideologically relatively neutral and thus initially above Labour’s factional friction and he did not have the burden of any harder left promises needed to win the more informal and gentle ‘primary’ he faced. Shearer’s fundamental honesty and common sense meant he couldn’t promote Labour’s increasingly leftist policies with conviction and this helped reinforce the impression that he was indecisive and lacked communication skills.

    Cunliffe believes the stuff he said on the primary campaign trail because it fits his ideological home but he know middle NZ cares little for the issues that light up his more left wing base. He is forced into two faced Yeah Na pronouncements because of that conundrum but in his case, his duplicity is compounded by his nastiness and narcissism.

    Vote: Thumb up 15 Thumb down 0 You need to be logged in to vote
  13. wikiriwhis business (4,200 comments) says:

    ‘Shearer had a few minor advantages over Cunliffe’

    Shearer was never a serious contender as Labour leader. This was markedly observed with his naievity towards modern communications and even the time tested ones – like TV. He simply kept away from camera’s. what kind of leader does that these days.

    As with American John McCain, Shearer was simply a stand in for Cunniliffe by Labour till closer to the election when they could foist a fresh, media sophisticated candidate for their campaign.

    A ploy that actually goes right back to the Kenndy/Nixon debates in the younger days of TV when Kennedy used the medium to his advantage.

    Vote: Thumb up 1 Thumb down 5 You need to be logged in to vote
  14. Sean (290 comments) says:

    In order for Air New Zealand to maintain its designation under the many government-to-government air services agreements that permit Air New Zealand to operate international air services, it must be ‘substantially owned’ and ‘effectively controlled’ by the New Zealand government or nationals of New Zealand. Generally, given the difficulty in tracking a share registry in real time, this means that to be safe, the Government should hold 50.1% of the shares on issue.

    Vote: Thumb up 1 Thumb down 0 You need to be logged in to vote
  15. PaulL (5,449 comments) says:

    @Sean: except it was 100% privately owned before, with two classes of share. That’s not hard.

    Vote: Thumb up 3 Thumb down 0 You need to be logged in to vote
  16. igm (1,413 comments) says:

    S. Smith: Be careful, Cunliffe would run out of money quickly if elected, then you may need to work, your benefit would become untenable. Cunliffe and Norman are not only losers, they are fiscally dyslexic. Take a look at their personal histories, apart from the trumped up CV of “Tojo’s”, they have achieved nothing.

    Vote: Thumb up 11 Thumb down 0 You need to be logged in to vote
  17. queenstfarmer (782 comments) says:

    Barring a natural disaster, Russell Norman is the biggest danger to NZ’s economy.

    Vote: Thumb up 11 Thumb down 0 You need to be logged in to vote
  18. MT_Tinman (3,322 comments) says:

    I wish there was a competition for the most financially illiterate comment of the year, so I could nominate it.

    Sadly I doubt that would be in the top five of Norman and the Luddites (What a great name for a band rehashing 1970s flip-side singles) recent utterances.

    Vote: Thumb up 3 Thumb down 0 You need to be logged in to vote
  19. MT_Tinman (3,322 comments) says:

    igm (75) Says:
    November 19th, 2013 at 3:41 pm
    S. Smith: Be careful, Cunliffe would run out of money quickly if elected, then you may need to work, your benefit would become untenable.

    So you think there might be an upside to election of reds then?

    Vote: Thumb up 4 Thumb down 0 You need to be logged in to vote
  20. Cunningham (846 comments) says:

    And to think these guys are competing to run this country. It is such an important job yet they are coming out with statements that make them look like complete amatuers. The stakes are huge and this sort of shit is the best they can come up with? Pretty lame opposition we have in NZ.

    Vote: Thumb up 10 Thumb down 0 You need to be logged in to vote
  21. Longknives (4,962 comments) says:

    “S. Smith: Be careful, Cunliffe would run out of money quickly if elected, then you may need to work, your benefit would become untenable.”

    Can’t we just print some more cash??

    Vote: Thumb up 8 Thumb down 0 You need to be logged in to vote
  22. Goon (13 comments) says:

    Would be better to sell Solid Energy for 10 cents than the taxpayer having to fork out for the $750 million or so in unfunded liabilities for site restoration etc it currently carries. This is the estimated figure to put everything back the way it is required under RMA, Conservation Act etc if the company was to pull the pin on current mining operations (quoted from a SE employee), including stuff like managing Pike, controlling fires at Strongman, acid mine drainage, ecological restoration etc. Unfortunately, even if it was put on the block, it means any serious investors would run a mile if they did due diligence

    Vote: Thumb up 1 Thumb down 0 You need to be logged in to vote
  23. PaulL (5,449 comments) says:

    @Goon: even if it were sold, it’s likely that the new owner would cash strip and then default on their obligations, at which point they’d revert back to the govt. Kind of like Clive Palmer is doing with his nickel operation in Australia.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  24. Nigel Kearney (1,097 comments) says:

    When Labour bought the railways National opposed that, but then held on to it when they became government. John Key uttered some nonsense about how we couldn’t sell it because we would lose too much money. That is surely the most financially illiterate comment by a politician since Muldoon.

    Vote: Thumb up 1 Thumb down 11 You need to be logged in to vote
  25. All_on_Red (1,744 comments) says:

    Cunliffe is just the Unions poodle bitch. He’s down on his knees and they are giving it to him while he pants and licks their hand.
    Yes master he says. I will do whatever the Union says.
    They must be delighted to have a leader bought and paid for. And oh so obedient

    Vote: Thumb up 9 Thumb down 1 You need to be logged in to vote
  26. igm (1,413 comments) says:

    Kearney: What the hell do you know about fiscal matters, are you not a radical unionist, only au fait with leeching?

    Vote: Thumb up 9 Thumb down 0 You need to be logged in to vote
  27. wikiriwhis business (4,200 comments) says:

    ‘They must be delighted to have a leader bought and paid for. And oh so obedient’

    Don’t think any Labour leader denies they unionist.

    But be interesting to see if Labour resurges student unions again.

    How did unions fare under Helen Clark. They still nowhere near as strong as they used to be. Even under Labour.

    Vote: Thumb up 0 Thumb down 2 You need to be logged in to vote
  28. All_on_Red (1,744 comments) says:

    IIRC Treasury valued Kiwirail at $263 mio which would mean a loss of over $600 mio. Your statement about Key is just fucking dumb. His experience and personal wealth makes a mockery of you. Together with the way National has steered us back from the financial abyss Labour left us hanging over.
    You’re a moron Kearney

    Vote: Thumb up 7 Thumb down 0 You need to be logged in to vote
  29. davidp (3,585 comments) says:

    I’m surprised that Cunliffe hasn’t commented about the shocking government arrogance displayed in a CRI putting a shut-down research center on to the market yesterday…

    http://www.stuff.co.nz/business/farming/agribusiness/9412638/Upper-Hutt-farm-begins-AgResearch-sell-offs

    How can the government even contemplate selling a derelict farm when the public are overwhelmingly opposed to asset sales? And they’ll probably sell it to Chinese people, when everyone knows that Chinese people shouldn’t be allowed to own NZ land. Cunliffe and Norman need to announce that if elected they’ll buy back the Wallaceville land and leave it derelict again.

    Vote: Thumb up 4 Thumb down 0 You need to be logged in to vote
  30. kiwi in america (2,314 comments) says:

    Nigel Kearney
    Your comment shows your abject financial illiteracy. Labour paid so far over the odds for Kiwirail that it could be a generation before its worth more than Labour paid for it. So for Key to say we’d lose too much if we sold it was the 100% truth.

    When Labour recapitalized Air New Zealand it paid 0.25c a share and it’s selling for $1.60. That’s a financially literate thing to do but of course to Russell Norman, an airline still controlled by the government but just a little less so will cause it to tell its independent board answerable to its many private shareholders and the NZ Stock Exchange to authorize its management to increase fares and decrease services! What Norman knows about finance you could write on the back of a stamp and still leave room for the Lord’s prayer!

    Vote: Thumb up 9 Thumb down 0 You need to be logged in to vote
  31. PaulL (5,449 comments) says:

    @KIA, @All_On_Red: I don’t like to agree with Nigel, but I think he’s right in this instance.

    The loss was made the day that Kiwirail was purchased. On that day we paid over the odds – can’t recall the numbers, but arguably $900M for an asset with a book value of $300M. On that day we made a paper loss of $600M. It’s silly of Key to say we’d make a loss if we sold it – we’d crystalise the loss, yes, but the loss was made when we bought it.

    I think Key knew that, what he said was political code for “we’re not dumb enough to crystalise that loss and get opprobrium for it, even though we know that it means we’ll be propping the damn thing up for ever after. This is a political decision not a financial one, because by any financial metric it’s dumb”.

    Vote: Thumb up 0 Thumb down 1 You need to be logged in to vote
  32. All_on_Red (1,744 comments) says:

    Paul
    I think you will find the book value was changed later. Since it was owned by Toll before the sale how could we know their book value?
    But agree its dumb to take the loss now which makes Key right.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  33. RF (1,490 comments) says:

    Dear God. How low does the Labour scum sink.

    Vote: Thumb up 3 Thumb down 0 You need to be logged in to vote
  34. PaulL (5,449 comments) says:

    @All_on_Red: the fact that we failed to actually write down the book value on the day we bought it doesn’t change that the loss was made on that day. You’re probably right that it would have been loaded into the books at sale price, then subsequently revalued, because it’d be pretty blatant to put it into the accounts at a value less than you paid for it (notwithstanding that the accounting standards probably required that). Presumably that became part of the deficit that National then had to take in the following year.

    But I disagree that selling it means “taking the loss now”. The principal of accrual accounting is that we already have the loss. Sure, it’s publicly visible if you sell it, but that doesn’t change whether we have a loss or not. The only relevant question in a financial sense is whether it makes more sense to keep it than to sell it – i.e. will the value of Kiwirail in the future, plus the accumulated dividends and investments until that date, outweigh what we could it for today. Whilst the sale price today would be very low, it seems unlikely that it will ever return a dividend, it’ll definitely need investments, and I struggle to see how it will be more valuable in the future than it is today. So on basic financial logic, I suspect it’d make sense to sell it. It’s political logic that dictates it be kept.

    Vote: Thumb up 1 Thumb down 0 You need to be logged in to vote
  35. Jack5 (5,281 comments) says:

    The Left is distorting the picture of the Air NZ share selldown.

    On TV1 news tonight, the woman announcer talked of Air NZ as “our national airline”, and the reporter said it was part of the privatisation programme.

    “Our” airline? It was and is the shareholders’ airline.

    Privatisation? The Government bailed out the airline by pumping in capital in return for shares, and has never run the airline. It is just selling down it’s stake, and should sell the whole lot while the market is high.

    You can’t privatise what wasn’t nationalised.

    However, in the interests of democracy and unbiased news coverage, perhaps TVNZ should be privatised.

    Vote: Thumb up 9 Thumb down 0 You need to be logged in to vote
  36. Johnboy (17,051 comments) says:

    Poor stupid Russell would prefer that ANZ flights (not that he catches them of course! :) ) should be powered by rubber bands rather than fossil fuels. I suspect that next time he flashes the MP credit card at the airport the folk should run about in obvious alarm screaming. “Where’s me rubber band, where’s me rubber band”. :)

    Vote: Thumb up 4 Thumb down 0 You need to be logged in to vote
  37. flash2846 (289 comments) says:

    All the greens/labour morons do when they scaremonger about buying shares in SOEs is put doubt in the minds of novice share buyers for the benefit of the experienced in the share market who understandably lap up the opportunity.

    Vote: Thumb up 6 Thumb down 0 You need to be logged in to vote
  38. PaulL (5,449 comments) says:

    Not sure I’d be keen to have shares in Air NZ. Not my cup of tea, airlines have notoriously variable profits. Particularly airlines with a majority govt owner when that govt might be about to change. Maybe they’ll become like Tongan Airways and the king can just commandeer the plane (leaving passengers stranded) when he feels like it? (Maybe that’s an urban myth, but certainly Cunliffe wouldn’t be above doing it)

    Vote: Thumb up 2 Thumb down 0 You need to be logged in to vote
  39. Viking2 (11,680 comments) says:

    About solid energy.

    all the govt. needs to do is wait.

    http://dailycaller.com/2013/11/15/germany-opens-first-coal-fired-power-plant-in-eight-years/

    http://www.whaleoil.co.nz/2013/11/krauts-learn-fast/

    Vote: Thumb up 2 Thumb down 0 You need to be logged in to vote
  40. Johnboy (17,051 comments) says:

    He has already said that he will call the CEO’s of NZOG, ACC, and the Cullen fund in to lean on them PaulL…..Once he is boss of course!

    You all know what to do voters…. to rid your lives of a Turtle Necked Meglamanic.. don’t you……? :)

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  41. Johnboy (17,051 comments) says:

    Don’t forget that the Japs have shut all their nukes and given the finger to global warmist’s V2! They’ll be begging for coal in a year or so! :)

    Vote: Thumb up 1 Thumb down 0 You need to be logged in to vote
  42. OneTrack (3,372 comments) says:

    Viking – “About solid energy. – all the govt. needs to do is wait.”

    And the Greens will be happy to see Germany get out of nuclear. I guess it means global warming isnt that bad. Yay.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  43. Bottlerboy (10 comments) says:

    My vote for one of the more stupid comments is EPMU’s Bill Newson on one news last night
    http://tvnz.co.nz/one-news/s2013-epmonday-video-5714696
    check it out at 5.25 minutes in

    Vote: Thumb up 1 Thumb down 0 You need to be logged in to vote
  44. KiwiGreg (3,278 comments) says:

    If someone would pay 10 cents for Solid Energy I’d sell it.

    Vote: Thumb up 2 Thumb down 0 You need to be logged in to vote
  45. Jeff83 (747 comments) says:

    Airlines have made absolutely horrible investments over the last 15 years, and the only reason NZ owns so much is because it went bust. NZ requires an airline as one of our largest earners is tourism, but 51% ensures this as much as 73%.

    I have a bigger issue with selling off generator capacity. Surely it would make more sense to have the capital flows going to investing in new capacity. Otherwise you are going to have a situation similar to Britain which is all private, but no real competition (electricity at consumer is relatively inelastic) as such year on year price rises of up to 10% are happening.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  46. Jim (358 comments) says:

    Headline “Air NZ sale: Govt raises $365 million”

    That covers Vote Welfare expense for 5 days, 15 hours, 29 minutes. (based on 2013 budget: $23.6 billion)

    weaksauce

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  47. Bogusnews (414 comments) says:

    I think part of the desperation being shown by Cunliffe and dare I say Norman, is with the continuing good news coming from all quarters on the economy.

    As we all know, Governments usually lose elections rather than the opposition winning them. Keys government is showing they are pretty sure footed and not leaving many things for Labour and the Greens to bitch about (rational things anyway.) As a result they are coming up with statements that tend to look like they are “manufacturing” complaints out of nothing.

    Hopefully the public will be financially literate enough to see this in 2014.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  48. Scott1 (592 comments) says:

    Cunliffe has to stay in the news to get his recognition up – it is just part of politics.

    And if you are waiting for the NZ public to decide based on a serious analysis of the costing’s of policies I think you should probably give up. In the end it will come down to which leader/party looks like you could trust them, which leader/party is able to not say too many dumb things, and which leader has good name recognition.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  49. PaulL (5,449 comments) says:

    @Jeff83: NZ needs to be serviced by an airline to have tourism. We don’t need to own an airline. Emirates seem to serve NZ and aren’t owned by us, as do Qantas and others.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote