N.A.C. FINANCES TO BE CHANGED

Press, Volume CIII, Issue 30561, 2 October 1964, Page 1

N.A.C. FINANCES TO BE CHANGED

(Ni'u> Zealand Press Association*

WELLINGTON, October 1.

The capital of the National Airways Corporation will be recoinstructed, to align it with commercial practice and to (recognise the airline as a trading agency. In future, profits earned by the Government-owned airline in excess of State dividend requirements will be retained with the organisation to provide reserves.

At present, the corporation has a nominal capital of £1 million, but this has never been paid by the Government and capital requirements have been met from State loans.

Assets of the airline have risen steadily, to £10.5 million. Legislation introduced in Parliament today lifts nominal capital to £5 million. Of an amount of £6 million owing to the Government’s National Development Loans Account, £2.5 million will be cancelled as an N.A.C. debt. Since it is a credit within the loans account it will be capitalised and transferred back to the corporation as called, or paid-up capital, representing half the nominal capital. UNCALLED BALANCE The remaining, uncalled balance in nominal capital of £2.5 million may thus be sought in future from the Government If, for example, the airline needs it for building projects. These paper transactions leave an amount of £3.5 million owing to the National Development Loans Account. On its loan capital, the airline has in the past paid the standard state interest rate of 4,5 per cent. Last year, the corporation paid £277,451 in interest to the State. Coupled with airport and airways dues, its total contributions to the Government were £833,502.

Remaining loan capital of £3.5 million, will be converted to a State Advances Corporation loan, repayable over 15 years, at an interest rate of 5.5 per cent. This should afford some relief in interest outgoings, modified by the higher rate on the lesser debt. ANOTHER CHANGE The measure, the New Zealand National Airways Corporation Amendment Bill, makes one other major change. In future, the corporation will declare a yearly dividend of such amount as the Minister of Finance fixes. At present all profits are normally paid into the Public Account, Last year, a profit of £lB,OOO was, however, used to write down aircrew training expenses and treated as development spending.

Future dividends, when they are justified by trading and required by the Government, will be paid into the Public Account NO LESS COSTLY Depending on net profits and dividend requirements, capital servicing by the corporation may in future be no less costly than it is now. The higher interest rate is not expected to affect fares. For the first time, the reconstitution of accounts will recognise permanent capital and loan capital. That relating to permanent facilities and assets will no longer be subject to yearly interest charges but will be rewarded by dividend, or residual profit: those capital advances needed for plane purchase will be subject to interest charges, and the sum borrowed will be repaid over the life of the planes.