The Government's renationalisation of Air New Zealand in 2002 to save the airline from bankruptcy has paid off in the long run by delivering an annual return estimated at 8.4 per cent, the Treasury says.

The Crown took an 82 per cent stake in Air New Zealand at the start of 2002 to save a company reeling from its disastrous investment in Ansett Australia, which it was forced to put into administration in September 2001, a day after reporting a net loss of $1.4 billion. The Crown injected a further $149 million into the recapitalised airline in 2004, taking its total investment to about $1.04 billion.

Taking into account the original investment, dividends received, the sell-down of the Crown's stake, the current value of the shares and a time-value of money adjustment, Treasury staffer Justin Anderson calculated the Government's internal rate of return (IRR).

His report says the Crown has received dividend payments of about $869 million since January 2002, excluding any dividends paid to Crown financial institutions such as the New Zealand Superannuation Fund and the ACC that may have held the airline's stock. It does include dividends on the redeemable preference shares that converted to ordinary shares in 2005.


The Crown subsequently netted $365 million in cash to sell its stake down to 53 per cent in 2013, bringing total cash received to about $1.2 billion. At today's price of $2.20, the Crown's remaining 583 million shares were worth $1.28 billion (although Anderson did his calculation on May 9, when they were $2.30, or a total $1.34 billion).

On the face of it, the Crown doubled its money, but Anderson says it has to be taken into account that the investment was made 14 years ago. In that time, $1000 invested at 5 per cent would have grown to almost $2000.

Air New Zealand has forecast before-tax earnings of about $800 million for its 2016 year after the airline posted record first-half earnings of $457 million.