Sharechat Logo

'Disappointing' Air New Zealand share price erodes urgency for sale

Wednesday 18th July 2012

Text too small?

Air New Zealand's "disappointing" share price means the government won't be in a hurry to sell down its three-quarter stake in the national carrier, which is ready to go at any time.

Chairman John Palmer told Parliament's finance and expenditure committee the airline's slim profit margins from a tough global environment had weighed on the shares, which weren't reflecting any of the upside from Air New Zealand's cost-cutting measures or its partnership with Virgin Australia.

The airline's stock rose 1.1 percent to 88.5 cents in trading today, valuing the company at $973.2 million. That's a 40 percent discount to the $1.625 billion enterprise valuation based on a consensus of seven analyst recommendations compiled by Reuters.

"Our view given our disappointment about current share price is that there probably isn't any particular urgency for the Crown to sell," chairman John Palmer told media after the committee. "We have been ready to go for some time. It's a decision the Crown can make very quickly."

Air New Zealand is among companies in the government's mixed ownership model that will see it reduce its stake by selling shares to the public.

Palmer, also the outgoing chairman of state-owned coal miner Solid Energy, has been a strong supporter of the partial privatisations, which will raise as much as $7 billion to be invested in other infrastructure, such as schools, hospitals and KiwiRail.

The government hasn't put forward a strong debate outlining the benefits of its plan to sell down minority stakes in the four energy companies, Palmer said.

"I've been disappointed there's been a reluctance of the government to be quite forthright about the range of benefits involved here," he said.

Removing politics from the companies' commercial decision-making will be the biggest boon for the SOEs, meaning "the expectation that the public and the market and the boards and management themselves have of those companies will be raised," Palmer said.

New Zealand needs to decide what assets the government owns and how they are managed, Palmer said.

"There are some SOEs that could be fully commercial where there is no significance attached to what I term strategic assets of the Crown," he said. Valuer QV was an example of a business the government didn't need to own.

"If you look at companies like the generators, a resource company like Solid Energy, key infrastructure like Air New Zealand, I think the Crown holding long-term majority stakes in those is important," he said.

BusinessDesk.co.nz

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

Air NZ plans to raise stake in Virgin Australia to 25.9 percent after gaining approvals
Air NZ keeps balance sheet plump, holds back on dividends as fleet renewal looms
Air New Zealand plans to close Auckland maintenance facility, cut 180 jobs, union says
Air NZ's Safe Air unit cuts 84 jobs in Blenheim as contracts end
Air NZ agrees to settle cartel case, expects earnings at upper end of guidance
Air NZ lifts stake in Virgin Australia to 23 percent , may creep up to 26 percent
Air NZ backs down on challenge to cargo suit against regulator
Air New Zealand reviews Japan flights as decline in yen makes travel more expensive
Ex-Foodstuffs boss Carter to head up Air NZ board
Air NZ shares jump 5.6 percent as airline flags annual earnings to more than double