Air NZ is said to be ready to recapitalise, but politics could be getting in the way

Air New Zealand has confirmed it is considering raising capital, but the process is believed to have been held up by the Government, which owns 52 per cent of the airline. Photo / Brett Phibbs

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Conditions for Air New Zealand to raise money are unlikely to get better than when the airline releases its results in August, but politics means it will almost certainly wait until after the election.

Already held up by politics, the longer the process waits, the greater the political risk becomes.

While the NZX plunged in March, it has recovered most of its ground since. Companies hit hard by Covid-19, such as Auckland Airport and Sky Television, have managed to raise huge amounts of capital from investors, as interest rates fall to record lows.

The Herald has been told that while Treasury continues to assess a possible cash call for the airline, majority owned by the taxpayer, it is doing so in such a way as to delay forcing the Government into making a decision.

While the airline and its bankers - publicly speculated to be UBS and Forsyth Barr - are said to be ready to undertake a capital raising of around $1 billion, the Government is said to have signalled there is no point coming with a proposal before the election, just over two months away.

Finance Minister Grant Robertson's office would not comment beyond a short statement, that it was "very supportive" of the airline, which had promised a loan of up to $900 million. "It would not be appropriate to talk about any potential capital raising as Air New Zealand is a listed company."

Air New Zealand simply pointed to a statement it issued in mid-June when it confirmed it was "currently considering various funding options, including a potential capital raising".

With New Zealand largely Covid-19 free, Air New Zealand's chief executive Greg Foran has speculated that it may be flying more aircraft than any airline in the world.

But delaying the capital raising could end up being a mistake for Air New Zealand's current shareholders.

Air New Zealand's need for capital is one of a growing list of things being held up because of the country's political situation, ranging from advancing Auckland's public traffic plans to how the Government could offer relief for commercial tenants hit by Covid-19.

Labour is increasingly uneasy about trying to advance plans because of the risk that an unpredictable NZ First may exploit the situation for political gain.

Back in March Robertson announced that the Government would extend a loan of up to $900m to Air New Zealand.

Although this amounted to an effective promise not to allow the airline not to go bust, Air New Zealand's difficulties to a large extent were due to the Government's decision to close the borders and later, put the country into lockdown.

The loan was expensive at 7-9 per cent, but the airline is free to arrange alternative borrowing if it can find a better deal.

A key element of the deal, under which the Crown was advised by Goldman Sachs, is that whatever discount taxpayers get if the Government supports a capital raising (in return for the loan which was effectively a bail-out) is yet to be decided.

Meanwhile Air New Zealand continues to burn through cash. As it does so, there are signs that NZ First is increasingly willing to exploit the difficulties of major companies to boost its political fortunes.

In an opinion piece in the Herald published Thursday about the potential closure of the Tiwai Point aluminium smelter, NZ First leader Winston Peters said the party "will ensure those jobs are not lost to Southlanders", pointing to its support of a worker buy-out of the smelter for the next part of a decade.

Peters also said that there was a "compelling reason to try" to save the Marsden Point refinery, where the board has indicated it may be transformed into a mere import terminal.

Later in the day, Peters launched an extraordinary attack on Meridian, more than a fortnight after the Electricity Authority made a preliminary announcement about potential market abuse.

As the election looms, what is to say that Peters may use the national carrier's increasingly serious need for new capital as a rallying cry to take back the airline?