New Zealand Aviation NEWS: Air NZ pin-up model for joint ownership

Air New Zealand has been held up as a shining example of the benefits of a joint government and private ownership of strategic assets.

The Government bailed out the airline in 2001 after its Australian subsidiary Ansett Airline collapsed, threatening to drag the national carrier down with it.

The Government injected $885 million of taxpayer money in Air New Zealand that year, and owns 76.5 per cent. It invested a further $149m in 2004 as part of a rights issue, taking its total investment to $1.03 billion.

Yesterday, Air New Zealand shares were trading at $1.43, down 2c and compared with the Government's average buy-in price of $1.29 each.

The airline paid the Government $56.3m in dividends last year.

Forsyth Barr head of research Rob Mercer said that as a majority government-owned listed company, the airline had grown and innovated in a highly competitive market.

"It has probably gone from one of the most hated companies to one of the most loved companies."

The airline had paid a good dividend and the Government had made a capital gain on its investment, Mr Mercer said.

Air NZ said "a change in the Government's shareholding while retaining a majority stake would have no influence on Air New Zealand's business but would provide greater market liquidity for shareholders".

Goldman Sachs JBWere aviation analyst Marcus Curley said a partial sell-down had been expected.

"I don't think the market is going to be hugely surprised with this. What the statement does is firmly bring it on to the agenda."

Air New Zealand had poor liquidity for a company with a large market capitalisation, Mr Curley said.

Improved liquidity would attract the attention from investors in New Zealand and overseas.

A counter investment by Air New Zealand's new Australian alliance partner, Virgin Blue, did not appear to meet the Government's test of a "widespread and substantial New Zealand ownership", Mr Curley said.

Last week Air New Zealand bought a 15 per cent stake in Virgin Blue to gain further exposure to the benefits of their trans-Tasman alliance and possible future co-operation on long-haul routes.

NEHA JAIN

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