Float is ‘at odds’ with air decision

Press, 15 January 1986, Page 27

Float is ‘at odds’ with air decision

PA Auckland Air New Zealand’s acquisition of a majority holding in the Mount Cook Group was prompted by the need for a hedge against future losses as well as the prospects of diversification, said the former Air New Zealand chairman, Mr Bob Owens.

Mr Owens said he was prompted to speak up because of the Government’s proposal to privatise 25 per cent of the Development Finance Corporation.

The proposal sat oddly alongside the same Government’s rejection of his board’s plans to sell off 25 per cent of Air New Zealand to staff and the public.

In spite of recent profits, Air New Zealand could easily find itself in the same dangerous financial situation as it was in 1981. It was in a fickle industry where changes came quickly, he warned.

The one way it had of weathering future downturns was by increasing its capital, and the only source was the public, particularly the airline’s emolovees. Mr Owens said he mooted the plan for the Mount Cook take-over during his first year of office. “It would have been an outlet for diversification—-

road transport and hotels. “But it would also have been a valued safeguard for when the inevitable downturns came, and we found ourselves with insufficient capital to support operations. "We could then sell off most of the group to raise funds, while still retaining Mount Cook Airlines.” Mr Owens said the Government’s rejection of Air New Zealand’s partial privatisation plans and its approval of a DFC float was all the more bewildering in light of the nature of the two organisations. “The DFC is, in a sense, a

bank and a dead cert for profitable returns. You never hear of banks going broke. • “But airlines are always a big risk. It’s in the nature of the business. “Yet it was suggested by the Minister of Transport, Mr Prebble, that the Air New Zealand proposal played into the hands of the fat cats.” Mr Owens said he was perplexed at Air New Zealand’s reluctance to speak up about its low capital base. His board had decided it should have a S2OOM capital