Air NZ shares jump on share buyback announcement
BUSINESSDESK: Air New Zealand says its share price does not reflect the strength of the national carrier's financial performance and is to begin a share buyback scheme as a consequence, chairman John Palmer told the company's annual meeting in Auckland.
Air NZ shares were up 6.4% mid-afternoon to 70 cents as it targets on-market purchases of up to 3% of the issued stock, valuing the purchase of 33 million shares at approximately $23.1 million.
Reaffirming the outlook statement made a month ago at the annual profit announcement, Mr Palmer says Air NZ is on track to "more than double normalised earnings before taxation", which clocked in at $91 million in the year to June 30.
"Clearly, we operate in a volatile industry with certain variables beyond our control. However, three months into the 2013 financial year we believe we are well placed to deliver that result.
"We believe the current share price does not fairly reflect the underlying value of the company's shares. The board has therefore decided to undertake a share buyback programme.
"We will do so through an on-market share buyback on the NZX and the ASX to acquire up to 3% of the company's shares."
The government, which owns 73% of the ordinary shares on issue, will not participate.
"The programme may commence from October 4, 2012, and may continue until September 27, 2013," Mr Palmer told shareholders, and will not buy shares at a price more than 5% above the five-day volume weighted average market share price, as required by ASX rules.
Shares will be held as treasury stock and may be used for the purposes of fulfilling Air NZ's possible future obligations under employee share-based compensation plans.
Mr Palmer stressed that volatile market conditions mean Air NZ "cannot expect a return to what could be considered normal operating conditions anytime soon" but remained "committed to providing our shareholders with a consistent dividend stream where possible".
The airline had been the only one in Australasia to consistently pay a dividend over the last seven years – "one of the toughest periods the airline industry has ever experienced".
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Comments and questions2
How does this benefit the largest shareholder?
Does not DonKey need money, i.e. Divvies?
So shareholding is going to be consolidated in Govt hands until the inevitable sell down?
The buying of AirNZ by the govt. at the time was never intended as a money maker. It was to save our national airline from the bloodsucking, mismanaging, corporate private enterprise we knew as Brierly Investments.
They were the ones responsible for the poor investment decision in the purchase of doomed Ansett Australia and its rogue Australian Unions that were holding the company to ransom.
They were the ones lead by Sir Selwyn and their own selfish greed to the almost liquidation of Air NZ and nearly 10000 jobs.
On a case by case basis, AirNZ in my opinion is not aligned with other state owned assets when you consider it's history and the type of market it competes in.
What the company requires to survive in this type of market is a focus on its long term viability and satisfaction of its stakeholders. Today's shareholder driven market with its only interest in maximum financial gains over the shortest period I believe is not in its best interests, whilst trying to drive up the shareprice, payouts, and assist with those corporate bonuses.
Long term viability will mean its continued existence, whilst others will ( as they have always done) start up then fold.