Air NZ tries to pull up out of share dive

By Phil Boeyen, ShareChat Business News Editor

Thursday 6th September 2001

Air New Zealand (NZSE: AIRVA) has moved to reassure the market in the wake of its failed attempt to purchase a stake in Australian competitor Virgin Blue.

The airline's shares are reaching new lows this week as concerns mount about the company's recapitalisation plans.

Air NZ chairman, Jim Farmer, admits that not being able to secure a deal with Virgin Blue is disappointing but says it simply means that the board is now placing greater focus on other strategies.

"The alternatives have different levels of equity requirement.

"The board is in the process of discussing among the company's major shareholders and the New Zealand and Australian Governments, the financial and other measures required to secure positive outcomes from the different strategies now under consideration."

Dr Farmer says as far as the board is concerned Singapore Airlines is still interested in taking its stake to 49% of the company and discussions with the government are continuing for a change in ownership regulations.

"There has been no agreement between the company and Singapore Airlines as to the pricing of equity participation other than the publicised price of $1.31 per share contained in a non-binding Memorandum of Understanding."

The airline's chairman says the current round of board meetings to try to sort out the airline's future are not in any sense 'crisis' meetings but are an active response to ensure that its strategy remains appropriate as circumstances change.

And although Ansett continues to be plagued by high fuel prices, forex woes and intense domestic competition, the airline reports that passenger volumes have been significantly increasing in recent weeks.

It says the improvement is in response to new commercial initiatives and forward bookings are particularly strong, with many sectors being well ahead of this time last year.

"The underlying financial issue remains the need to achieve satisfactory yields on revenue and it is the board's view that this can best be addressed by substantial reinvestment in equipment. It is the need for that reinvestment which drives the requirement for additional capital," says Dr Farmer.

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