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'Disappointing' Air NZ share price erodes urgency for sale

BUSINESSDESK: Air New Zealand's "disappointing" share price means the government won't be in a hurry to sell down its 75% 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% to 88.5 cents in trading today, valuing the company at $973.2 million. That is a 40% 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," Mr 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.

Mr 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, he said.

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

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". 

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

Comments and questions
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The share price won't be heading north any time soon. Hawaiian Airlines, Fiji airlines will erode market share to the pacific islands, the Chinese airlines will do an Emirates on ANZ over the Asia trade, so its only downhill for ANZ's shareprice - I predict wont be sold off this term, if ever.

The share price won't be heading north while the same company administration that sent the share price south stays employed.

What kind of owner keeps the administration who destroyed shareholder value and defers getting rid of a business whose share price is grounded?

The share price is a disgrace which reflects on the performance of the CEO. Rob Fyfe puts out so much PR that he is brilliant but in reality he has been highly unsuccessful. He is a legend in his own mind but has been a total failure at Air NZ.

Fyfe built a brand - at massive expense. Actually, at the shareholder's expense. Turns out the brand thing didn't work, and they have gone on a massive cost cutting exercise. Isn't the point of a brand that it creates value? and that people pay more for products with that brand? Fyfe much better at marketing than running a company

Have another smoke mate. The latest world airline awards puts Air NZ lower than Korean Air.

Fyfe destroyed the Air NZ brand which had existed for over 30 years before he came along in the emperor's new clothes with a pedo puppet and a 777-300 inflight product nobody wanted.

Rob Fyfe is an alumnus of BNZ and the Theresa Gattung School of Telecom. There you have it. A bank and a telephone company, both former state owned enterprises (where the top dogs all become millionaires), which in the NZ big business community qualifies him in spades to run a re-nationalised former state owned airline. Being photogenic and having a fawning, unquestioning mass media call you a "rock star CEO" helps as well. This is cowboy NZ folks. It really is a bit of a club once you reach a certain level, which isn't all that high.

Photogenic? So is a dung beetle on National Geographic.

Air NZ must have a massive ad spend, and the latest efforts regarding inboard safety are a very small improvement on the previous infantile effort. The latest effort is spoilt by inane comments like " we all know we must listen to people in designer clother" or very similar. Right at the end we have the voices increasing in pitch and sounding like they have been at the helium gas, one hopes only helium!

What is the BOD doing about this situation? More butt covering going on?