Cabinet paper misinterpreted - Air NZ

By Phil Boeyen, ShareChat Business News Editor

Thursday 11th April 2002

Air New Zealand (NZSE: AIR) is unhappy with media reports claiming it will need a further $670 million over the coming year to remain viable.

The reports stem from news agency Reuters and were based on documents made public by the government on Tuesday into last year's $885 million rescue package of the airline.

Air NZ company secretary, John Blair, says a Reuters' report misinterpreted the content of a November Cabinet paper on the company's need for an injection of additional capital.

"The Cabinet paper refers to the company's need for $1.705 billion in additional capital to achieve a workout and contains recommendations for the provision of Government funding of up to $1.035 billion.

"The Reuters' report misinterprets this to mean that the company needs an additional $670 million to remain viable over the coming year."

Mr Blair says the $1.705 billion is a sum that government advisers initially estimated would be required to achieve a gearing target of 65% debt to debt plus equity.

"While the 65% gearing target represents a desirable capital structure, it is incorrect to infer that the company would not be viable if it was not achieved in the coming year.

"The workout is to be over an extended period of time, and there are other means available to the company to improve gearing which do not require the capital gap to be funded entirely by further equity."

Mr Blair says other means for improving gearing include asset sales and improved and retained profits. He also notes that the company currently has in excess of $550 million on short-term deposit and "there is no reason to believe it is not viable over the coming year given its current position."

Air NZ shares have been trading steadily at around 36 cents since the documents were released.

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