Air N.Z. float favoured

Press, 19 July 1989, Page 36

Air N.Z. float favoured

PA-Reuter Wellington Industry and share analysts are optimistic about the flotation of Air New Zealand shares later this year, but most are wary about the carrier’s long term prospects. “In general, there are a number of reasons to be mildly optimistic about the company’s prospects, although I don’t think it’s going to be as profitable as it was,” said Mr Hugh Ammundsen, of the brokers, Morrow and Benjamin. The float, expected in September or October, will be New Zealand’s largest since the October, 1987, share crash. The Government sold Air New Zealand to a consortium headed by Brierley Investments for $660 million in April. Other shareholders are

Australia’s Qantas Airways, with just under 20 per cent, American Airlines and Japan Air Lines, each with just over 7.5 per cent. The sale was one of a series to be carried out by the New Zealand Government in an attempt to reduce its financial deficit.

Brierley, with 65 per cent, will sell 30 per cent of the total to staff and public at cost — about $2.36 per share. Air New Zealand’s float, likely to be accompanied by a huge public relations exercise, should be wellsubscribed. “If it’s packaged correctly, priced right, I think it will go very, very well," said Mr Alan Wills, managing director of the Auckland broker, Hendry Hay Mclntosh.

Air New Zealand boosted after-tax profit by 29 per cent to $25.5M in the six months to September 30, 1988. “It will add some depth to an area that we haven’t had before, which is a company based on tourism and the service sector,” Mr Wills said. In the longer term, analysts say a depressed New Zealand tourism industry, union troubles and Air New Zealand’s ability to compete with the bigger carriers in the lucrative Pacific Basin will be the company’s main concerns. Air New Zealand has 21 Boeings, 15 Fokker Friendships, over 8000 staff and most overseas routes centred on Pacific destinations. Since the sale, Air New Zealand has entered a venture to buy

51 per cent of Chile’s national carrier, LAN Chile.

Analysts said New Zealand was well-placed to take advantage of Asia’s growing affluence, with a rush of tourists expected from South Korea, Taiwan, Hong Kong and Japan. Mr John Bradbury, the manager of air services for the Transport Department’s air transport division, said it was a case of whether New Zealand could move fast enough to take advantage of the forecast boom.

"If they (the unions) expect the airline to keep its head above water and expand ... then they must be in a position to allow their company to compete with carriers which have at the moment a much lower paid workforce,”