NZ investors recommend alternative to Qantas for Air NZ

By NZPA

Tuesday 20th August 2002

As Qantas today flexed its muscles in its campaign to win a stake in Air New Zealand, New Zealand investors and businesses were gearing up a campaign to offer alternative options.

A group including most of New Zealand's leading fund managers have sent a letter to Finance Minister Michael Cullen reminding him of the alternatives for capital to Qantas, which, if successful, would effectively kill aviation competition in New Zealand and across the Tasman.

A spokesman for the group, which does not wish to disclose the identities of those involved, said it was hoping to meet the minister shortly.

However, Dr Cullen is attempting to steer clear of lobbying and is referring such matters to the Air New Zealand board.

"The representation is very comprehensive and very simple. It says 'don't forget about us, New Zealand capital markets are alive and well'," the fund manager spokesman said.

The fund managers, who control billions of dollars, are backed by some of New Zealand's leading businessmen who oppose Qantas taking a quarter or larger stake, including The Warehouse founder Stephen Tindall, cereal manufacturer Dick Hubbard, Fonterra chief executive Craig Norgate and investment banker with Morrison & Co, Lloyd Morrison.

As well, new Wellington sharebroking firm McDouall Stuart Securities has set up a website, www.investinairnz.co.nz, to gauge and galvanise support for alternative fresh capital for the New Zealand airline.

Qantas today requested its shares be suspended for three days ahead of its result tomorrow and another material announcement.

There has been speculation it will announce a $A1-$1.5 billion ($NZ1.2-$1.7 billion) capital raising, most of which would be used for a massive new fleet refurbishment, but some of which could be used to buy a stake in Air New Zealand.

Air New Zealand felt the need to release a statement to the Stock Exchange to "re-confirm no deal (was) reached with Qantas" after the suspension. Air New Zealand said "that although discussions with Qantas are on-going, no relevant agreement or commitment has been reached".

It said no agreements were expected with Qantas in the next few days and it did not expect any significant strategic agreements in the next few weeks.

Chris Stone, executive director at McDouall Stuart, said his firm set the site up to assess the level of investor interest in Air New Zealand and to ensure the Government understood alternative options to Qantas.

The public's appetite to put money into New Zealand had been underestimated in many similar deals, he said.

While his firm would welcome a foreign airline taking a cornerstone holding in Air NZ, Mr Stone said the concern related specifically to Qantas.

"The difficulty we have got with Qantas is simply it is Air New Zealand's major competitor. There are fundamental competition issues that are raised should Qantas get this stake."

A number of major fund managers had indicated their support.

"Certainly, most people looking at Air New Zealand recognise it is going to need additional funds. We don't think the only option available is Qantas."

McDouall Stuart has also taken its campaign out to Wellington airport to try to increase public support against Qantas. Mr Stone said the website had had several thousand hits and around 20 percent of visitors had registered their interest.

While Dr Cullen was not wanting to debate the sensitive financial affairs of Air New Zealand in public, Mr Stone argued it would be wrong for the Government to agree to sell a stake to Qantas without any real open debate.

"Successive governments and government officials have sold numerous New Zealand assets, sometimes poorly, often without listening to the needs of the New Zealand investing public," the website stated.

It cites the sales of Contact Energy and Auckland Airport as examples where overseas investors received favourable treatment over locals.

"It is our belief that, at the right price, there is appetite amongst New Zealand investors for Air New Zealand shares, and that this would be in the best interests for Air New Zealand shareholders, the New Zealand travelling public, and the New Zealand economy," the website said.

Mr Stone said McDouall Stuart's campaign did not mean it endorsed Air New Zealand's share price. He agreed with most analysts that the price was unjustified.

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