Airways meets government request for higher dividend payments

Tuesday 1st September 2015

Airways Corp of New Zealand, the state owned enterprise in charge of the nation's air traffic control, has met a government request for a higher dividend payment in its latest financial year and promised to increase it further this year.

State-Owned Enterprises Minister Todd McClay wrote to Airways chair Susan Paterson in December 2014 outlining the government's expectation of dividends, and noting that Airways had been paying a reduced dividend while it invested in a shift from radar to satellite based navigation. He said ministers expected to be engaged early in the decision making process if the board was considering paying a reduced dividend in the future. He noted achieving a budget surplus and reducing debt was a priority for the government.

Airways paid a final dividend of $2 million on June 25 for the financial year ended June 30, more than the year earlier $1 million payment. That takes the company's total dividend for the year to $4 million, ahead of the previous year's $3 million. Paterson said the dividend is forecast to increase further to $5 million in the 2015/16 year.

"The board acknowledges the shareholder's note that Airways has been paying a lower dividend whilst it executes its Mana (making a new airways) strategy. Specifically, Airways continues to balance the essential capital expenditure programme required to enable the transition to satellite-based navigation with the expectation of paying a dividend," Paterson said in a March 2015 letter to McClay, Finance Minister Bill English and Associate Finance Minister Steven Joyce.

The dividends "are higher than the guidelines set out in Airways' dividend policy and reflect Airways' commitment to meeting the shareholder's expectations," she said.

The government wants to take a more active management role in state-owned commercial assets so as to avoid another rapid deterioration such as witnessed by coal miner Solid Energy. Treasury is taking a more rigorous approach when assessing the entities, and has earmarked a strategic review of Airways for 2015/16, following reviews of Landcorp, KiwiRail and New Zealand Post in recent times as part of a shift to improve its advice on the running of the government's commercial operations.

Landcorp, the state-owned farmer, has come under increased government scrutiny after it failed to pay a dividend this year as it increases debt to fund dairy conversions during a period of slumping milk prices.

Airways posted a 28 percent gain in net profit to $15.1 million in the past financial year as revenue rose 2.8 percent to $186.3 million.

Chief executive Ed Sims attributed the improvement to cost control and a 2.3 percent increase in aviation volumes.

The company pulled back its investment spending 5 percent to $32.1 million.

BusinessDesk.co.nz

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