Air NZ offers anti-Qantas shareholders a sweetener

By NZPA

Tuesday 29th October 2002

Air New Zealand sugared the grumpy mood at its annual shareholder meeting today against a proposed Qantas buy-in with some sweet financial news.

The company had only limited success in placating the approximately 350 investors who attended the Auckland meeting.

Roger France, deputising for chairman John Palmer who was attending a funeral, had little new to say on the Qantas talks.

However, he announced the forecast of an annual profit before unusual items of $100 million, made just two months ago, had been doubled.

The 82 percent Government-owned airline had a net profit for the first quarter -- traditionally a loss-making period -- of $17 million. It had made a net profit before unusual items and tax of $30.4 million.

Mr France said the talks with Qantas were "progressing satisfactorily" but the issues were "complex and difficult".

"Our discussions are still incomplete and we are unable to make any further disclosure to the market at this point.

"There is no `done deal' as some have suggested. If there was, we would have honoured our obligations to the market and announced it," he said.

Within minutes of the start of the 2-1/2 hour meeting, shareholder Douglas Cammell jumped to his feet demanding debate on the proposed Qantas' involvement in Air NZ.

It was a theme taken up by a number of those present.

"If we are not too greedy as shareholders, and you, as directors are not too greedy in taking your cut, to hell with Qantas and keep Air NZ for New Zealanders," said one elderly woman shareholder.

Bruce Sheppard of the Shareholders Association questioned whether, given Qantas was blamed by the previous chairman Jim Farmer for Air NZ's virtual demise, why directors saw value in any strategic alliance with Qantas.

In a stunt that bypassed the order of business, he requested anyone to stand who believed board members were "complete twits in talking to Qantas at all".

Around a third of the audience stood, which Mr France later said he took as quite encouraging support for the board.

One woman suggest that if the deal whereby Qantas was expected to buy a quarter share was completed, the airline should be re-named Dingo Airlines.

Despite numerous questions, Mr France added little new.

Asked if Air NZ had a plan B, he said the board was rigorously exploring other options, but again he would not elaborate.

Any alliance with Qantas was not driven by the desire to raise additional capital.

However, later he said the capital structure was by no means perfect.

The desire for an alliance was driven by the imperative to improve the company's positioning in the international market, he said.

"We are determined to achieve this improved position without compromising the principles of majority ownership and control of the company, or its capacity to determine its own strategic direction."

He told reporters that Air NZ would want a seat of the Qantas board to "put some glue in the relationship".

Chief executive Ralph Norris said he was hopeful of a deal this year.

Among the "complex and difficult" issues under discussion were how to get it past competition regulators, and how to get Air NZ to switch from the global Star alliance to the alternative Oneworld grouping.

Mr France signalled directors fees were likely to double once the airline's wage moratorium ends in June next year. Independent advisers said the directors were receiving half what they should be.

Mr Norris said Internet bookings of the company's new domestic Express Class operations were five times the original target.

Mr France suggested the reason Air NZ shares had fallen 22 percent in the last quarter while the company was recovering was due to its lower weighting in the proposed new NZSE-50 share index.

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