Share sale won't alter Air NZ's flight path

Photo / Janna Dixon

The Government selling more of its stake in Air New Zealand will not change the way the airline is run, say analysts.

Prime Minister John Key signalled National's desire to sell Air New Zealand shares during his state of the nation speech yesterday.

The Government holds a 76 per cent stake in the airline and receives almost a 20 per cent annual return on its investment.

A decision would not be made on the sale before the next election, Key said.

He also stressed that if it went ahead, the Government would remain a majority shareholder.

In downsizing its stake to just over 50 per cent, the Government would be selling shares worth about $400 million, said Forsyth Barr's Rob Mercer.

"The Government ended up with more [shares] than they really need to control the business. They've never needed to own that much," Mercer said.

The Government's stake increased to over 80 per cent in 2001 when it injected $885 million to bail out the airline from financial collapse.

Mercer said a partial sell-down of the Government's shares was not a new idea, but had not been viable in previous years because of market volatility.

He said the proposed sale would have no impact on the way Air New Zealand operates.

"Since its Government ownership [Air New Zealand has] gone from being probably one of the most hated companies to one of the most loved companies - it's outperforming Qantas at the moment in about any measure you want to look at."

An Air New Zealand representative also said the proposition would have no effect on the way the airline operates.

Goldman Sachs' Marcus Curley said that given the performance of the company there would be strong demand for the shares.

"There should be good appetite from both domestic and international fund managers. Air New Zealand is obviously a household name, so there's obviously going to be reasonable interest in it from the retail network as well."

Although foreign investors will be interested, Key suggested that New Zealanders would be first in line to buy shares and that any deal must keep a large amount of ownership in the country.

Curley said this might be an attempt to get mum and dad investors to get involved in capital markets.

"Part of this initiative is also to stimulate broader saving habits, it's not simply designed around redistributing assets."

Curley said the sale would also ignite interest in Air New Zealand on the markets.

Air New Zealand shares closed down 2c at $1.43 on the NZX yesterday.