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Air NZ surprise: Govt to sell 20% as referendum looms

November 18, 2013 Aviation, Headline News 1 Comment Email Email

egtmedia59The New Zealand government is to sell off 20% of Air New Zealand, worth about NZD 363 million, to institutions and brokers, reducing the government’s holding to 53%, reports from New Zealand said last night.

The move will beat a citizens’ initiated referendum on asset sales.

Reports said Craigs Investment Partners, Deutsche Bank and Goldman Sachs would oversee the selldown, which will start today.

The transaction should be finished by tomorrow evening (Tuesday), New Zealand’s Finance Minister Bill English and State-Owned Enterprises Minister Tony Ryall said in a joint statement.

The move comes just a few days after Air New Zealand confirmed that it would fully support Virgin Australia Holdings’ plans to raise AUD 350 million by offering new shares to existing Virgin Australia shareholders. The capital raising is underwritten by Virgin Australia’s major shareholders: Air New Zealand, Singapore Airlines and Etihad Airways.

That looming AUD 350 million foreign capital injection into Virgin Australia Holdings has incensed Qantas, with Qantas chief executive Alan Joyce calling on Australia’s federal ­government halt it.

Joyce, the Australian Financial Review reports today, sees the proposed capital injection as the latest move in a strategy by “predatory” state-owned airlines to subsidise Virgin Australia so Virgin can continue to undercut Qantas on profitable domestic routes. That in turn could make it difficult for Qantas to support its international network, to the advantage of the predatory foreign competitors.

Joyce says the “outdated” Qantas Sale Act, which he sees as disadvantaging Qantas, must be urgently revisited.

Air New Zealand sees it differently, saying only that the AUD 350 million Virgin Australia capital raising “will further strengthen Virgin Australia as it consolidates and builds its position in the Australian domestic and international airline markets”.

Air New Zealand currently holds 22.9% of Virgin Australia shares and has regulatory approval in Australia to increase that to 25.99%. Air NZ said it would take up its full pro rata entitlement under the rights issue and sub-underwrite the issue together with the other major shareholders, Singapore Airlines and Etihad. In the event that additional shares are available from the underwriting, Air New Zealand’s shareholding in Virgin Australia could increase to as much as 25.5%.

Commenting on yesterday’s surprise Air New Zealand 20% sale announcement, English was quoted as saying that an off-market selldown was “fast and efficient, which is important when working with a company that is already listed”.

Air New Zealand is doing well. It plans to double passenger and revenue growth in the next few years, chief executive Christopher Luxon said in an interview last month.

Tellingly, the 20% sale is being arranged as a citizens-initiated referendum is about to begin in New Zealand. The referendum asks the question: “Do you support the government selling up to 49% of Meridian Energy, Mighty River Power, Genesis Power, Solid Energy and Air New Zealand?”

Voting in the referendum starts on 22 November 2013 and runs until 13 December 2013. Many New Zealanders are unhappy with moves by the conservative government there to sell off big slices of state-owned assets.

Referendums are important in New Zealand. While a representative democracy, with a parliament consisting of members who represent the voters that elected them, voters’ views are also considered and can be acted on indirectly via their members of parliament. Referendums, polls of voters on particular issues, give voters the  opportunity to express their views more directly.

Written by Peter Needham

Currently there is "1 comment" on this Article:

  1. Mark says:

    Another chapter in the long running saga of the Virgin Airlines financial Black hole – they can have it, and the same goes for any other entity willing to throw more good money away ! The investment rating of Qantas is not much better…..

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