According to the Labour Party leader, David Cunliffe, the timing of the Government's selldown of shares in Air New Zealand is arrogant. Describing it as astute would have been far closer to the mark. Shares in the airline have been trading at a five-year high and investment advisers have voiced their enthusiasm for them. What better time could there be for the Government to reduce its holding in the national carrier from 73 per cent to 53 per cent?
That sentiment is underlined by any examination of the airline's recent history and the industry in which it operates. The Government stake in Air New Zealand was acquired not by design but through a bailout in 2001 after a failed venture with Ansett Australia. Since then, successive governments have watched and waited patiently as the airline recovered and then began to thrive. Many problems had to be confronted and overcome, including rising fuel prices, landing fee increases, the impact of the Christchurch earthquake, and competition from discount operators.
The success of Air New Zealand's strategies is evident from a share price that currently sits 34 per cent above its value at this time last year. This upswing contrasts sharply with the fate of many of its competitors, not least Qantas. No one has been surprised by the struggles of these carriers. The industry has always been volatile, whether because of its susceptibility to economic conditions, the impact of terrorist attacks, a Sars-type pandemic, or a serious accident. Consequently, there is normally considerable investor caution when a stake in any airline is offered. Not this time, however, giving the Government every reason to strike.
The selldown has been criticised because it is being done just before a referendum on the part-sale of state assets. That complaint is misplaced. The focus of the Government's mixed-ownership model strategy and, therefore, the referendum has always been the part-sale of the state's three power companies, not an airline that the government acquired essentially by accident. Air New Zealand is very much an ancillary part of that strategy. After the disappointments of the Mighty River and Meridian part-floats, it may, however, produce the best result. The $350 million to $400 million that the Government will gain from Air New Zealand will go some way to alleviating the power companies' shortfalls.
Green co-leader Russel Norman has gone so far as to suggest the selldown could lead to reduced regional services or higher fares. This, he argued, would be a product of a company with an increased private shareholding giving more priority to profit than the national interest. This disregards the fact that the Government is retaining a majority shareholding and that the airline has been operating on fully commercial lines since it was bailed out 12 years ago. Both Labour and National-led governments have allowed it to operate as if it were in private ownership. That means any future changes in regional services or fare prices will be the product of patronage or competition, as has been the case since 2001.
