Forum Archive Index - July 2001

["Bruce Harris" <bruce99@freemessage.com>]

Ansett needs investment for new planes. $5 biilion has been mentioned.
Assume that this cannot reasonably or prudently be totally borrowed.
Air NZ says keeping Ansett is critical to long term growth, synergies, 
passenger feed and so on. Also it is not clear that SIA (or anyone else)is in 
fact willing to buy Ansett at more than a fire sale price.
Therefore Air NZ must have cash injection. NZers (including quasi NZers BIL) 
apparently unwilling to invest the amount required. The government may be 
willing to put money up as a bond, but assume this is not an option they wish. 
Other NZers may also be willing in fact but probably only at a significant 
discount which would alienate foreign shareholders. 
Therefore money invested almost certainly has to be substantially foreign. 
For this they must receive more shares- and new shares have to be issued- this 
presumably can be more B shares, increasing the proportion of the total held by 
foreigners. It is not obvious why they would need to change the A, B structure, 
except that a higher proportion of shares would need to be B shares.
Up to a point I suspect the landing rights issue and 51% local ownership is a 
red herring. With the government Kiwi share and reasonable controls in place, 
no foreign government is likely to cancel landing rights on these grounds. 
Rather SIA cannot go beyond 49% ownership, management must stay in NZ, brand 
must stay etc. 
The government is likely to take some time to contemplate with Air NZ how much 
it really needs; whether it wishes to invest directly ( very unlikely, although 
the socialists among them I'm sure would love to be on the board of an 
airline); or whether there are in fact NZers who have the wherewithall and 
willingness to invest in Air NZ. 
Once they have concluded how much and no, no respectively to the questions 
above, they are likely to let SIA take enough extra shares, supported by a 
rights issue partially taken up(ex BIL), to recapitalise the airline.
Not sure if the above adds to the discussion but has cleared my own mind in 
what may happen. Regards, Bruce

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