BUSINESS

THURSDAY, 06 SEPTEMBER 2001

B U S I N E S S S T O R Y
Air NZ shares plunge as board meets
06 September 2001

Air New Zealand's shares continued to plunge today as a crisis board meeting that began yesterday resumed this morning.
The freely tradeable B shares fell another 10 percent, or 9 cents, to a new all-time low of 90 cents while the residents-only A shares fell 12 percent, 11 cents, to 78 cents.

The B shares have lost a third of their value in the last fortnight and have plummeted 60 percent this year. The A shares have halved in value this year.

"The realistic chance of a big equity raising is on the cards and possibly the sale of Ansett might come back on the cards as well," said Bryon Burke of ABN Amro Craigs Equities.

He said this was not likely to be popular, given that Air NZ had already raised capital once already this year.

The airline's acting chairman denied to NZPA it was crisis board meeting. However, the board convened for an unscheduled meeting yesterday after Sir Richard Branson's Virgin Blue knocked back takeover overtures from Air NZ.

That plan involved Air NZ's quarter owner Singapore Airlines taking direct ownership of Ansett Australia, the cause of most of Air NZ's problems.

Finance Minister Michael Cullen yesterday told Parliament in answer to a question he was unable to make a final decision on the company's share structure until the airline was able to be precise about its plans.

He also said he expected Air New Zealand to make a substantial 11th hour revision to its business strategy in the wake of the board meeting.

When asked about that comment, the airline's acting chairman Jim Farmer said: "I don't know why he said that."

Dr Farmer said the board had been meeting frequently, as it had expected to since it decided two months ago to approach the Government about changing its share structure to allow a recapitalisation.

Dr Farmer said Virgin Blue's rejection had been "disappointing".

He would not comment if the plan to buy Virgin Blue involved selling Ansett.

He also declined to comment on speculation that Singapore had lowered the price it was prepared to pay for more shares in Air New Zealand to $1 from $1.31.

The Dominion, quoting unnamed sources, today reported that the true state of Ansett's finances had only become apparent in the last few days but again Dr Farmer declined to comment. The newspaper said that Singapore had rejected an offer to buy the airline as it was "too financially and operationally impaired".

Simon Botherway a manager at funds manager Arcus Investment described the situation as a debacle.

"The airline is indeed in serious trouble," he said.

He expects the loss announced next week will be larger than the $200 million flagged by the company.

A $1 billion recapitalisation, including a substantial rights issue, would not cure the airline's ills.

A fleet upgrade for Ansett would not improve its market share, yields or help the competitive environment.

"Regardless of the fleet age or condition, Ansett will continue to lose money."

Air NZ needed a strategy to rationalise the industry in Australia.

If Ansett go,which it looks like they will.
What will happen to the Regionals?

says no indication SIA has changed offer
Sep 6 12:58
NZPA


Air New Zealand said on Thursday it had had no indication that Singapore Airlines had changed from its position to seek up to 49 per cent of the airline and pay $NZ1.31 per share to do so.

"The board has had no indication from Singapore Airlines that it has changed its position in relation to seeking additional equity in the company up to a level of 49 per cent," said acting chairman Jim Farmer.

He made the statement after an unscheduled board meeting that began on Wednesday and continued on Thursday. The statement also followed a sharp slump in the airline's share price in response to a New Zealand newspaper report that SIA had reduced the price it is prepared to pay to lift its stake.

Farmer denied the board meeting was a crisis meeting.

"Discussions with the Government continue in relation to the regulatory approvals required to allow Singapore to increase its stake from 25 per cent," Farmer said.

"There has been no agreement between the company and Singapore Airlines as to the pricing of equity participation other than the publicised price of $NZ1.31 per share contained in a non-binding Memorandum of Understanding between the company and Singapore Airlines."

"As the New Zealand Government has already commented, the situation remains fluid pending a decision by the board on its strategy and then a decision by the company's major shareholders as to the consequent capital requirements of the selected strategy."

He said the board was highly conscious of the need to establish certainty for the market "and a clear path must be reached".

Statement from Air NZ chairman
Sep 6 12:58


In response to speculations surrounding Wednesday's meeting of the Air New Zealand Board, the company's chairman, Dr Jim Farmer, on Thursday issued the following statement, published on the airline's website www.airnz.com.au.

"The Board met yesterday [Wednesday] to discuss and progress the strategies being pursued by the Group in relation to its recapitalisation. Over the past four months, the Board has frequently met on short notice outside its usual schedule of meetings and will meet again late today. The meetings are not in any sense 'crisis' meetings but are an active response by the Board to ensure that its strategy remains appropriate as circumstances change. Shareholders and the market should expect no less than prompt action by the Board in addressing the recapitalisation proposal.

"As has been previously well publicised, the intense competition in the Australian domestic market compounded by fuel prices and foreign exchange have significantly affected Ansett's financial performance. Although those factors remain, current passenger volumes on Ansett services have been significantly increasing in recent weeks in response to new commercial initiatives and forward bookings are particularly strong with many sectors being well ahead of equivalent performance this time last year. The underlying financial issue remains the need to achieve satisfactory yields on revenue and it is the Board's view that this can best be addressed by substantial reinvestment in equipment. It is the need for that reinvestment which drives the requirement for additional capital.

"The inability to reach any agreement involving an acquisition of Virgin Blue is disappointing but simply means that the Board is now placing greater focus on other strategies. The alternatives have different levels of equity requirement. The Board is in the process of discussing among the Company's major shareholders and the New Zealand and Australian Governments, the financial and other measures required to secure positive outcomes from the different strategies now under consideration. "The Board has had no indication from Singapore Airlines that it has changed its position in relation to seeking additional equity in the Company up to a level of 49 per cent. Discussions with the Government continue in relation to the regulatory approvals required to achieve an increase. There has been no agreement between the Company and Singapore Airlines as to the pricing of equity participation other than the publicised price of $NZ1.31 per share contained in a non-binding Memorandum of Understanding between the Company and Singapore Airlines.

"As the New Zealand Government has already commented, the situation remains fluid pending a decision by the Board on its strategy and then a decision by the Company's major shareholders as to the consequent capital requirements of the selected strategy. The Board is highly conscious of the need to establish certainty for the market and that a clear path must be reached."

--------------------------------------------------------------------------------

WELLINGTON (Dow Jones)--The New Zealand government hasn't asked the Australian
government to consider a joint financial bailout for Air New Zealand Ltd.
(A.AIZ), Acting Finance Minister Trevor Mallard said Thursday.
"No such approaches have been made," Mallard told parliament in response to an
opposition lawmaker who asked him if he could confirm a Sydney Morning Herald
newspaper report.
Mallard, speaking on behalf of Finance Minister Michael Cullen, who is
overseas, was asked if he could confirm the newspaper report "that the
government has sounded out the Australian government to have the taxpayers of
both countries bail out Air New Zealand."

MORE) Dow Jones Newswires 06-09-01
0233GMT(AP-DJ-09-06-01 0233GMT)

Mallard was also asked if it were true a New Zealand government official had
been rebuffed Wednesday when he telephoned the Australian Prime Minister's
Department proposing both governments help bail out the airline.
Mallard said the contention "wasn't based on any substance whatsoever."
Earlier in question time, opposition leader Jenny Shipley asked Mallard if the
government wouldn't have done both the national carrier and taxpayers a favor if
it hadn't rejected a March 14, 2000, proposal by Singapore Airlines Ltd. (P.SAL)
to raise its 25% stake in Air New Zealand to 40% at that time.
New Zealand government policy says no foreign airline can own more than 25% of
Air New Zealand.
Mallard said the March 2000 decision to decline the Singapore Airlines'
proposal was the right decision at the time.
"It wouldn't have been good policy to have raised the (foreign ownership) cap
(in March 2000) without working through the issues involved. These included the
protection of Air New Zealand's landing rights in other countries and the
interests of the New Zealand tourism industry," Mallard said.
He also said lifting the foreign ownership cap on Air New Zealand to the
extent sought by Singapore Airlines would have required Australian foreign
investment regulatory consent, "so the processing of the request was, and is,
always uncertain."

(MORE) Dow Jones Newswires 06-09-01
0310GMT(AP-DJ-09-06-01 0310GMT)

Mallard rejected an opposition claim his government must accept some of the
responsibility for Air New Zealand's financial problems because it didn't permit
Singapore Airlines to take control of the affairs of the local carrier last
year.
"I want to make it clear that the problems Air New Zealand currently face are
as a direct result of an ill-advised purchase of Ansett," he said.
Air New Zealand purchased a half-stake in Ansett Australia Holdings Ltd.
(A.AAH) in 1996 and raised that to 100% four years later.
Now Air New Zealand needs an injection of equity to help fund a
multibillion-dollar Ansett fleet upgrade.
In June, Singapore Airlines said it wanted to raise its stake in the local
carrier from 25% to 49% and it was prepared to pay NZ$1.31 a share for the
privilege.
Any move by Singapore Airlines to recapitalize the local carrier requires New
Zealand government approval because of the government's policy on foreign
ownership of the airline.
Wednesday the government delayed making a ruling on the issue because it said
Air New Zealand's plans remained imprecise and unclear.
At 0320 GMT (11:20 p.m. EDT Wednesday), Air New Zealand's resident-only
A-shares were trading at 79 NZ cents, down 11% from 89 cents at Wednesday's
close.
The unrestricted B-shares were trading at 90 NZ cents, down 9% from 99 cents
at Wednesday's close.

-By Chris Ritchie, Dow Jones Newswires; 644 4715990;
[email protected]

(END) Dow Jones Newswires 06-09-01
0342GMT(AP-DJ-09-06-01 0342GMT)

It looks painful and not a little bit sad. Good luck to all the good folk at AN - by the look of this thread you are going to need it. :(

Latest business news from New Zealand.....


Business News


NZ stocks: Falling Air NZ shares dominate sharemarket

06.09.2001

Air New Zealand shares continued to spiral downward as the Government refused to make a decision on the airline's ownership structure.

The NZSE-40 capital index fell 5.82 to 2021.41 on the back of a quiet total turnover of $15.2 million.

It was largely led down by market leader Telecom, which fell 4c to 490 after European telcos took a beating overnight. Yesterday it fell 10c to 494, its lowest point since early January.

But all eyes were on Air New Zealand, whose resident-only A shares fell to an all-time low of 75 before climbing back to 80, down 9c, on $1 million turnover.

The unrestricted B shares also fell to an all-time low of 87, before recovering to 91, down 9c, on turnover of $796,464.

This morning's selling flurry occured on the back of a media report that Singapore Airlines had cut the amount it was willing to pay to increase its shareholding in Air NZ if the rescue plan gets Government backing.

Another newspaper reported the Government would not take on the risk of supporting an Air NZ capital raising plan.

UBS Warburg broker Paul Nicolson said that the reports had lifted the uncertainty over the airline's future.

"The selling today is nervous mums and dads...I can see retail brokers panicking out in two-way trading."

Bryon Burke of ABN Amro Craigs Equities said another capital raises was on the cards, as was the sale of Ansett , but this was not likely to be popular, given that Air NZ had already raised capital once this year.

And then there was two???

[Dow Jones] SINGAPORE: Australia's Deputy PM and Transport Minister John Anderson to hold press conference at 4.30pm (Sydney time) on Air NZ unit Ansett; Australia concerned about Ansett as NZ government considers whether to approve Singapore Airlines bid to raise its stake in Air NZ. (ILM)

Quote from Wiley:

<<But spare much of your opprobrium for the bit players – the upper level underlings, some, I understand, with a keen interest in football now and some still on the increasingly sloping and ever more slippery AN deck – who knew where the Fat Man’s policies were leading the company then (and especially twelve) years ago, but played along with him for their own short term advancement.>>

Wiley, the plunder of the asset rich Ansett began in 1979 the day after Sir Reg Ansett was displaced< not just twelve years ago.




<<I have more than a little sympathy for many among the current AN staff and the hard times they have ahead of them. (Dare I say it - ‘Been there, done that, goy the T-shirt’.) However, I’d be a hypocrite to say the same about the many in AN (and not just pilots) who hopped on the gravy train and took the high wages the Fat Man offered for them to look the other way at what Blind Freddie could see he and his ‘Yank’ mate were doing to the assets of the company.>>

Wiley I assume you were in Ansett or joined during the period after 1979 so you were happy to take your pay even though everyone knew what was afoot so what does that make you?

And this from ABC on line??


*Ansett not in financial trouble: Air NZ*

Ansett's owner Air New Zealand has denied the Australian airline is
facing a financial crisis.

Concern is mounting over Ansett's position as it continues to run up
huge losses.

Ansett's future hangs in the balance as the New Zealand Government
considers a bid by Singapore Airlines to raise its stake in Air New
Zealand.

This will provide Air New Zealand with the money it needs to upgrade
Ansett's ageing fleet in an attempt to raise its falling market share in
Australia.

Air New Zealand's chairman Jim Farmer has confirmed the board met
yesterday to discuss Ansett's position but denies they were crisis
talks.

Dr Farmer says although Ansett has been hit hard by intense competition
and high fuel prices, the airline has managed to increase passenger
volumes in recent weeks and forward bookings remain strong.

He also says Air New Zealand is disappointed it has failed in its bid to
buy discount airline Virgin Blue.

-------------------------------------------

SIA have their say:

[Dow Jones] SINGAPORE: Kim Eng says SIA may find it difficult to justify to its shareholders hefty premium to rescue Air NZ if it ends up with, say, 35% stake, instead of 49% stake it wants; as Air NZ's share price has fallen 28% since deal announced on June 15, it won't be surprising if SIA wants to reduce Air NZ's pricing even if this further complicates negotiations, says Kim Eng. SIA down 0.9% at S$11.70.

How's this for a scenario:
* Ansett is allowed to fail, but on the day of its closure, VB says it will honour all of AN's tickets; possibly Golden Wing is folded into Virgin Atlantic's (VS) Flying Club so that the premium pax are kept; VB joins Star.
* SIA gives Branson some cash for a 49% stake in VB (mirroring their tie-up in VS) and Branson buys AN assets from NZ at fire-sale prices.
* As AN itself has failed, all employment contracts are voided; VB offers lower-cost contracts to ex-AN workers and gets tax breaks in Queensland by expanding his HQ there.
* Ex-AN aircraft start flying (the next day) on trunk routes and are gradually repainted in VB colours.
* Freedom Air gets an Australian AOC and starts running the super-cheapies and regionals against Qantaslink.
So we again have two... SIA would still hold the box seat, owning 100% of a now-less- burdensome (and internally profitable) NZ and a large stake in an Australian domestic carrier with decent market share and a lower cost base than previous.
Virgin Express in Europe already offers a business class (of sorts), as does VS, so clearly not all Branson's ventures are aimed at the cheap market and the Australian operation would still be able to keep the high-end punters.
Any thoughts, guys?

Sorry - didn't mean SIA owning 100% of NZ - meant 'a sizeable stake in' NZ.

Deputy PM:

Anderson not ruling out Ansett bail-out

There are growing concerns about the future viability of Ansett.

The New Zealand Government has delayed a decision on whether it will allow Singapore Airlines to increase its stake in Air New Zealand, which owns Ansett.

The deal would provide urgently needed investment to revitalise Ansett.

The Federal Transport Minister, John Anderson, has not ruled out a Government bail-out of the airline but says it would be unusual.

Mr Anderson says he is optimistic about Ansett's future but wants Air New Zealand to reveal further details of Ansett's financial position.

"It's time the board clearly established what it is they want, if you like, the urgency of it for the sake of the New Zealand Government which has to make a difficult decision and one I might add we've always respected its responsibility and its right to make," he said

ABC TV News just had a story on the Ansett/Air NZ problems, including a rumour that an administrator is to be appointed for Ansett next week?

Must be bad......

It all seems a bit odd to me. Big Kev, oops I mean Gary Toomey, says they have one billion dollars in the bank. Air New Zealand can afford to fork out $250 million for a company that made, alledgedly $500,000. Another 767 arrived today from overseas for Ansett with a couple more on the way. If things are that bad, why are these aircraft still coming?

Government may invest in Ansett

From AAP
06sep01

THE Australian government would consider an approach from the New Zealand government for an equity stake in Ansett airlines, Deputy Prime Minister John Anderson has said.

"We've not been formally approached for an equity injection," Mr Anderson told reporters in Canberra by phone from Dubbo.

"It would be an unusual thing to do, but obviously a formal approach from the New Zealand government in particular would be treated with respect and looked at on its merits by the Australian government."

"It runs a little counter to everything that we sought to do in aviation which is to recognise that the private sector does a better job of it than the public sector," Mr Anderson said.

Ansett, owned by Air New Zealand, is reportedly losing $NZ1 million a day.

But it said Singapore Airlines, which owns 25 per cent of Air New Zealand, would be likely to bail out Ansett if the New Zealand government allowed it to lift its stake to 49 per cent.

The New Zealand government, which is looking for an alternative to Singapore's bid, has denied reports it approached Australia to help bail out Air New Zealand's troubled subsidiary.

The only time private enterprise does it better than Govt is when said private enterprise isn't run(and a(n)ssett stripped) by criminals.
If it's a comparison of the damage that can be done by big govt as opposed to the likes of Murdoch,Abeles and the Silver Crybaby then look no further.
There's an old quote by some squillionaire who was in an unusually candid mood,

"I can tell you exactly where all my millions came from except the first one"

Chuck.

Following report filed at 0958 gmt, 6/9 Wellington, Sept. 6 (Bloomberg) -- Air New Zealand Ltd., the national carrier, is in worse shape than expected, said New
Zealand Finance Minister Michael Cullen in an interview on Australian Broadcasting Corp.
New Zealand's government is considering a plan to allow Singapore Airlines Ltd. to buy more shares in the Auckland-based
carrier, increasing its stake to as much as 49 percent from 25 percent. Air New Zealand would use the funds to buy new planes for
its unprofitable Ansett unit in Australia.
"It's fair to say the position of Air New Zealand is worse than anyone had anticipated,'' Cullen said on Australian
Broadcasting Corp.'s 7:30 report. "It is up to Air New Zealand's management and board to come up with a viable business plan. It
isn't up to the government to come up with a viable business plan'' for the airline, he said.