KEY POINTS:
When the Government bought its majority stake in Air New Zealand 5 1/2 years ago it was acting gallantly to protect a vital piece of national infrastructure, or so it thought.
The investment - made in the wake of the Ansett collapse - has paid off big time.
Yesterday's special dividend and accompanying share price rise lifted the Government's gains past the magic $1 billion mark.
The Crown paid a total of $1.034 billion for its stake - which now sits at 76.75 per cent. (That includes an initial stake of $885 million plus rights issue investment of $149 million). As of yesterday that was worth about $1.8 billion - representing a paper gain of $776 million.
Throw in $239 million in dividends over the period and the Government has achieved returns of $1.005 billion - or 97 per cent - on its investment.
Amazingly that's been achieved through some of the most turbulent times ever for the aviation industry as it grappled with post-9/11 uncertainty and the doubling of fuel costs.
Analysts now believe the best is yet to come for Air New Zealand as fuel prices stabilise and it cashes in on four years of cost-cutting and investment in new planes.
Rumours that Government may sell down its stake have been swirling around Wellington in the past few weeks - but based on the immediate outlook, why would it want to?
Michael Cullen's office has not commented on the speculation but Air NZ chairman John Palmer yesterday poured cold water on the idea. "The Government position is unchanged. They intend to remain long-term majority holders and have no current plans to sell down their stake."
The dividends announced yesterday would deliver $104 million to the Crown coffers, Palmer noted. "So I think the Government would be reasonably content with its position."
Palmer had heard the sell down rumours but said they had no substance and seemed to be fuelled by investment banks trying to get a deal.
"The relationship between the Crown, Michael Cullen and the board is a very good one," he said. "If [the Government] was in process of changing its intention I think we'd have a pretty good view on that."
Nice earner
* The Government holds a 76.75 per cent stake in Air NZ.
* It paid a total of $1.034 billion for that stake in 2001.
* Yesterday's market value was $1.8 billion - a gain of $766 million.
* Payments of $239 million in dividends over the period take the total return to $1 billion - or 97 per cent.