Air NZ To Shed Non-Essential Services.
TOP STORY
SUNDAY, 25 NOVEMBER 2001
T O P S T O R Y
Air NZ to sell top ski fields
25 November 2001
By MIRIYANA ALEXANDER
Cash-strapped Air New Zealand is to begin shedding non-essential services - including some tourism jewels - in a bid to nurse itself back to financial health.
The "For Sale" signs go up tomorrow on the troubled airline's South Island ski field operation, NZSki.com, which runs the popular Coronet Peak and Remarkables fields in Queenstown and the Mt Hutt field in Canterbury.
The airline is also reviewing its engineering operations, its terminal services and other parts of its business.
The move comes as part of the government shake-up of the airline. Final details of the government's $885 million bail-out are to be released tomorrow.
The government has made it clear it will not bail out Air New Zealand and then walk away, instead instructing the airline to take a hard look at its operations. It has been told to identify risks and how to handle them and to review all non-essential services.
Air New Zealand undoubtedly needs money, with the market speculating the $885 million bail-out is not enough to keep the airline flying.
NZSki.com is part of the Mt Cook Airlines group, which Air New Zealand took 100 percent control of in 1991 (it bought a 47 percent stake in 1985).
Air New Zealand spokesman Mark Champion confirmed the plans.
It is not known how much Air New Zealand would get for the ski business but the company is expected to attract major international and national interest.
NZSki.com is New Zealand's biggest ski field operator, with around 40 percent market share. This year's New Zealand snow sport revenue was expected to be $50 million, giving NZSki.com a share of around $20 million. This season half a million people skied the fields, half from overseas, and the business is a significant foreign exchange earner. It employs 34 permanent staff with winter seasonal staff totalling 850.
Air New Zealand's joint engineering business with international giant Pratt and Whitney was launched in May when Pratt and Whitney paid Air New Zealand $57 million for a 51 percent share of the business. It employs 350 staff and before September 11 planned to increase that to more than 600.
However, recent reports said staff lay-offs were on the cards with the post-September 11 aviation downturn.
Analysts were surprised Air New Zealand had moved so quickly but said it made sense. "They needed the money so they didn't have much choice. Unfortunately it expanded its engineering business before September 11 so that hit them but it has a fantastic international reputation and it's also highly profitable so there should be no shortage of interest in it and the ski fields," said an analyst.
Another analyst said Air New Zealand needed to return to its air operations because that's what the government wanted.
NZSki.com had apparently expected the move and sources said it would benefit from a new owner prepared to invest in the business.
NZSki.com general manager Duncan Smith said the company was strong and successful with a good track record. "There's strong opportunity for growth so it's an exciting opportunity," he said.
As part of the bail-out, the government has already lent Air New Zealand $300 million which will switch to convertible preference shares, while share prices the government pays for the remaining $585 million will be announced tomorrow.
It is tipped to pay around 30c a share, up from the 24c originally indicated, giving it an 80 percent stake in the airline.