Buoyant airline hailed as model for asset sales

Last updated 05:00 01/03/2013

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In the slipstream of its best interim profit for five years, Air New Zealand's chairman says the company is a good model for partly privatising state-owned assets.

The NZX-listed national carrier reported a statutory net profit of $100 million for the half-year till the end of December - up 163 per cent on the previous corresponding half. It also forecast it would double earnings for the full year.

Chairman John Palmer also announced a 3 cents-a-share interim dividend - including a $24m payout to the Government, the 73 per cent shareholder.

Air New Zealand had shown that it could have both shareholders' and New Zealanders' interests at heart during the last 12 years, Palmer said.

". . . New Zealanders feel extraordinarily connected to this business; they don't feel as though it's owned by other people even though it's a listed company," he said.

The Government bailed out the airline in 2001 after its Australian subsidiary Ansett collapsed, threatening to drag Air New Zealand down with it.

The Government injected $885m of taxpayer money into the company that year, hence its stake.

"It's a very good example of both the tensions you get from being publicly listed and the opportunity for the Crown to ensure that it is able to be a cornerstone stable shareholder for these companies to take a longer-term view about what is good for New Zealand as well."

Palmer was formerly chairman of state-owned coal company Solid Energy, but left in June last year when he turned 65, after being on the board since 2006.

Earlier this week, the Government blamed Solid Energy for the company's failure after it was refused a $1 billion capital injection but went ahead with diversification plans.

When leaving Solid Energy, Palmer said he expected it to be partially privatised by early 2014.

Asked whether Air New Zealand was prepared for a government selldown, Palmer said such sales were a long process and the Government would be mainly concentrating on Mighty River Power.

The Government has indicated it would retain a majority shareholding of at least 51 per cent in each partial selldown.

The company's new chief executive, Christopher Luxon, who officially took over from Rob Fyfe at the start of the year, said the airline's good interim profit showed it was moving into a growth phase.

Luxon said he was targeting "a virtuous circle of profitable growth" leading to better shareholder returns, reinvestment in the business and more cost control.

The company said it stood to break through the $200m barrier in annual normalised pretax earnings - a measure that strips out the effect of derivative financial instruments. On this measure, Air New Zealand reported a 300 per cent improvement over the previous corresponding half.

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Luxon's focus on growth included leasing two new Boeing 777 aircraft to bolster the airline's international capabilities around the Pacific Rim. Luxon said the new aircraft were not a response to any perceived risk that its order of Boeing Dreamliner 787-9 aircraft might not be up to scratch, after its sister craft the 787-8 was grounded by the United States Federal Aviation Authority.

- Fairfax Media

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