Day of share hell for Air NZ

By DANIEL RIORDAN aviation writer

Air New Zealand shares took their biggest pounding yet as the market bet on statutory management being imposed on the airline.

The rout came despite a weekend in which the airline's board said it had made "good progress" towards resolving the urgent need for recapitalisation. But such talk was not enough to calm a skittish market, which took more notice of Prime Minister Helen Clark's acknowledgment on Sunday that statutory management was a viable option.

Although Government negotiator Rob Cameron described talk of statutory management as "premature", the airline's A shares (available only to New Zealand nationals) yesterday fell 11c to 18c and the freely traded B shares fell 10.5c to 15.5c. The shares have fallen more than 90 per cent since the start of the year.

Almost one billion dollars has been wiped from Air NZ's market value since it bought all of Ansett Australia, now in voluntary administration.

In February last year, when Air NZ announced its conditional purchase of the half of Ansett it did not already own, the airline's market capitalisation was about $1.1 billion and its A and B shares were trading at just under $2. At yesterday's closing prices, market cap was $127 million.

The low share prices leave little room for a discounted rights issue, and make it even more unlikely that the airline's major shareholders, 30 per cent owner Brierley Investments and 25 per cent owner Singapore Airlines (SIA), will come to the party with fresh capital.

Each has agreed to put $150 million of new capital into the airline, and the Government has offered a $550 million loan subject to due diligence. But analysts estimate the airline will need at least a further $500 million to survive.

At yesterday's share prices, an injection of $300 million in new equity would require the issue of 1.75 billion new shares, compared with the present 756 million on issue.

Analysts say that is highly unlikely.

Air New Zealand directors took a breather yesterday after a series of crisis meetings through the weekend after the full board adjourned on Friday night.

Independent directors are seeking a commitment from Brierley and SIA to the rescue package.

The market took little solace from a statement issued just before midnight on Sunday by acting chairman Dr Jim Farmer, QC, who said "good progress" had been made over the recapitalisation plans and that he expected to reconvene the full board early in the week.

Dr Farmer was unavailable for comment yesterday and a company spokesman said the board meeting had yet to be rescheduled.

Calls to the Singapore head offices of Brierley and SIA were not returned yesterday.

Forsyth Barr Frater Williams executive director Don Turkington described the market savaging as "horrendous" and questioned how the company could survive as a listed entity with such a low share price.

Other brokers said the situation had deteriorated to the stage where statutory management was needed just to maintain confidence in the airline's future.

But one analyst, who asked not to be named, said the airline's chances of staying out of statutory management were not being helped by market speculation, and he remained hopeful another solution could be found.

There was, however, some good news for the national carrier, from Australia. Ansett's administrator said he hoped to avoid legal action against Air New Zealand and apologised for saying he was shocked at the state of the airline's books.

Mark Mentha said discussions with Air New Zealand over the weekend had been fruitful and the company cooperated fully. He said legal action against the airline might not take place for months, if at all.

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