Forum Archive Index - June 2001

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

> 
>In regard to the matter of the Government coming in as underwriter
>for the issue of new A shares,  I am unable to see why they would do
>that.  The only reasons I can see relate to national pride and
>economic sovereignty. 
>

And landing rights. Don't forget those, as that is the real value of 
Air New Zealand internationally.   

I'm not sure what AirNZs share of the overseas tourist market is.   
But there would be fairly severe repurcussions if arrivals into New 
Zealand tourism dropped by 40%.

Just look what Rotorua was saying when Qantas NZ pulled its flights 
from there. 

>
>
>Reasons against such a bail out of the
>interests of existing shareholders include that the
>taxpayer/Government  does have an existing loss exposure to the
>shares going into freefall.  Such a bailout could be characterised
>as using public funds to benefit private interests.   
>
>

Like central government buying the Auckland rail corridors back of 
Tranzrail you mean?
 
>
>
>Underwriting
>an issue of A shares could well result in the Government buying very
>large numbers of shares given the rights issue last year and the
>prevailing negative sentiment to AIRVA shares.   
>
>


It *might* do, but I would imagine the rights issue would have to be 
priced so that there is at least *some* chance of existing AirNZ 
shareholders taking the rights up.   Hopefully there wouldn't be 
too many leftovers for the underwriters to take up.   And after the 
recapitalisation is over the risk of the shares going into 'free 
fall', as you put it, is over. 

It might look good going into election year.  The Labour 
lead government crowing about 'saving our airline' yet having put 
very little (if any) money in.
> 
>
>Additionally there
> would be an impact on the public debt borrowing requirement. 
>
> 

But the economic picture might also be affected if 40% of GST that 
tourists visiting here used to give us, suddenly disappeared.  It's a 
balancing act. SNOOPY


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