Wirraway From Australia, joined Mar 2001, 1321 posts, RR: 1 Posted (11 years 1 week 1 day 23 hours ago) and read 670 times:
18 MAY 2001
Market warns of risks Air New Zealand is running
By Nicholas Bryant
Some of Air New Zealand's institutional investors say a deeply discounted rights issue is urgently needed or the country's flag carrier will be the next local airline in receivership.
The airline's only other option, which would put egg on the faces of chairman Sir Selwyn Cushing and his board while destroying huge shareholder value, is to sell part or all of Ansett Australia to Singapore Airlines for a massive discount. "It's exactly the same situation Qantas New Zealand found itself in, if the shareholders don't stump up then the thing goes bust," Arcus Investment Management's Simon Botherway said.
He added that the notion Air New Zealand might get money from the government was "totally inappropriate and ridiculous from the outset."
Other sources said a government cash injection was looking like a dead issue.
At presstime Air New Zealand still had not approached the government for a meeting.
The important parties in Air New Zealand's short term future are now large equity investors like AMP Henderson and ANZ Nominees.
Their views will have a major influence on whatever strategy Air New Zealand's new management team comes up with.
Big and small investors alike got burnt by Air New Zealand last September when the company registered a capital raising prospectus full of good news.
Though the $284 million rights issue was undersubscribed, many took up their rights in full only to get the surprise of their lives when Air New Zealand issued a profit warning two weeks later.
While supportive of Gary Toomey and his new management team, this week all the major institutions spoken to by the National Business Review were highly critical of Sir Selwyn and the board.
But changes to the board are not likely for some months and in the meantime it is faced with a cash conundrum.
There are very few options for filling the $700 million-plus short-term hole in its balance sheet.
That money is urgently needed to sign leases for new aircraft to replace Ansett Australia's antique fleet of 767s. Sir Selwyn has said the total fleet upgrade over the next decade has been estimated at about $5 billion - $6 billion. While government funding looks unlikely, raising debt is not an option either; with debt of about $3.1 billion, Air New Zealand is "leveraged to the eyeballs," one commentator said.
Its ratio of net debt plus equity is about 59%, leaving no leeway to take on any significant additional debt in the near future.
Also unlikely is getting the government to relax the rules relating to its bilateral air service agreements.
According to Rudd Watts & Stone foreign affairs and trade specialist Murray Denyer the agreements are important, despite recent liberalisation of aviation agreements around the world.
"Most of our bilateral agreements have strict ownership provisions...the aeronautical authorities of other countries scrutinise Air New Zealand and keep a close eye on ownership provisions, as do some powerful airlines.
"The government has been pushing for greater ownership possibilities for New Zealand airlines in the future but for now effective control must be here."
So Air New Zealand would not be able to sell more of the company offshore to the likes of eager 25% shareholder Singapore Airlines.
Its only options are a rights issue, similar to that which re-financed Fletcher Forests, or the embarrassing sale of Ansett on which Air New Zealand would book a huge loss and be back at square one.
The Ansett sale is a last resort in most people's eyes, except for one party, Air New Zealand's 30% shareholder Brierley Investments.
It has been looking to exit Air New Zealand for a long time and, according to sources close to the company, would be loathe to see the value of its investment further diminished.
But that is simply bad luck, according to Mr Botherway.
"What is Brierley going to do? Let it go bust otherwise, it has to be recapitalised and they have to put their hands in their pockets...sure Brierley doesn't want to put any more money in but Selwyn [also Brierley Investments' chairman] pulled the trigger on the Ansett deal, they've only got themselves to blame."
Mx5_boy From , joined Dec 1969, posts, RR: Reply 1, posted (11 years 1 week 1 day 15 hours ago) and read 607 times:
Recent news from my reuteurs screen in the office:
SIA expected to announce shortly a AUD 1.67 Billion profit.
Analysts expect SIA to make a 'swoop' on Ansett of Australia.
Wirraway,
Looks like Sir Selwyn is going to be pushed against the wall for his agressive and bloated ego. Has anyone else noticed that ANZ's share price on the NZE has slipped more than fifty percent form 2.20 NZD in the beggining of 2000 to trading this morning at 1.01 NZD, very close to the .99 mental barrier. The creditors are worried, the shareholders are worried and so are both governments.
I always reckoned SIA would strangle finance to ANZ till they got what they wanted and Sir Selwyn refused to make a strategic agreement with them in the beggining because of some trans tasman ego problems.
Mx5_boy From , joined Dec 1969, posts, RR: Reply 3, posted (11 years 1 week 1 day 14 hours ago) and read 595 times:
Wpr8e,
What you fail to understand is that ANZ has always known the risks involved (or should shoot their auditors) in buying the lot of AN. Unfortunately some of ANZ's board of directors thought that they could 'force the hand of SIA' into financing fleet expansions accross the board whilst keeping total control of AN.
SIA only ever bought into ANZ to get it's hands on AN.
The resentment that many feel over ANZ's purchase of AN is that they should never have done it in the first place. It would be the same if it had been any other carrier that was clearly unable to finance the resturcturing and new aircraft purchases that AN desperately need.
BTW, most Aussies love our Kiwi cousins - and there has always been a bit of healthy competition between us - however when push comes to shove we will always barrack for each other!
Dalecary From , joined Dec 1969, posts, RR: Reply 4, posted (11 years 1 week 1 day 14 hours ago) and read 591 times:
I think the wheel may turn the full circle and SQ will buyout 100% of AN and NZ will end up with their long-term historical partners-QF/BA.
Just a hunch, but didn't QF put a bid in for the 25% stake of NZ that SQ purchased last year?
Wirraway From Australia, joined Mar 2001, 1321 posts, RR: 1 Reply 5, posted (11 years 1 week 1 day 13 hours ago) and read 585 times:
Mx5_boy
Yes I agree with your comments, the Air NZ B shares
have also taken a dive this morning to a low of A$1.07,
I just sold my QF shares yesterday (good one) and
was considering getting into Air NZ, but after finding
the above article at 2.am this morning it has spooked
me off. Selwyn is holidaying in Fiji and is not expected
back in NZ untill Tuesday, talk about fiddling while
Rome burned.
Wpr8e
You have got to admit Selwyn and his board have made
a complete hash of the Ansett deal through vanity and
are failing to see reality even now, the sooner they
wake up and bite the bullet the better.
No, I don't believe Ansett would be in the same mess
if it had been controlled by SQ.
Tullamarine From Australia, joined Aug 1999, 1062 posts, RR: 0 Reply 6, posted (11 years 1 week 1 day 13 hours ago) and read 578 times:
Now that QF's acquisition of Impulse has been approved, we should probably see some movement in the AN/DJ camp very shortly. This morning's AFR reports that AN and DJ are still in negotiations but there are some sticking points though the approval of the ACCC will undoubtedly concentrate the mind and get the two back to the table. The AFR reports analysts as speculating that should AN and DJ get into some form of alliance, look for DJ continuing in Australia under its own name but obviously as the bargain carrier of the AN Group. Likewise it is probable that Air NZ will rebrand Freedom in NZ as Virgin Something.
Once this has played out, it is likely that SQ will revisit AKL to recommence its negotiations. SQ would be pleased by this development as it would improve the profitability of AN/NZ and would begin to combine all SQ's Antipodean relations into a powerful grouping. SQ have some other wishes such as the retirement of Sir Selwyn and I would guess institutional investors in NZ will be visiting him shortly to press for his retirement as they don't want to see their shares in NZ go down the toilet.
Whether, at the end of this, SQ would still want to hold onto NZ or just take AN and run is debatable but I'd guess they'd probably hold onto NZ. They realise the surrender of their shares in NZ would be a free kick to QF/BA who would quickly swoop to move NZ into oneworld and there is no doubt they are the real enemies of SQ.
Wirraway From Australia, joined Mar 2001, 1321 posts, RR: 1 Reply 7, posted (11 years 1 week 1 day 12 hours ago) and read 570 times:
Tullamarine
Guess any of your scenarios are possible, if SQ got
full control of AN and got out of Air NZ completely,
they could then use AN as the Star alliance airline
serving NZ
should your scenario of them joining One World
eventuate.
Wirraway From Australia, joined Mar 2001, 1321 posts, RR: 1 Reply 8, posted (11 years 1 week 1 day 11 hours ago) and read 557 times:
From AAP
18may01
14:30 (AEST) DISCOUNT airline Virgin Blue has criticised the competition watchdog's decision to approve a Qantas takeover of the troubled Impulse.
Virgin Blue chief executive officer Brett Godfrey said the Brisbane-based carrier was "disheartened and disappointed" by the Australian Competition and Consumer Commission's decision.
"We strongly believe this decision is not in the interest of true competition in Australian skies," Mr Godfrey said.
"This is without doubt, a very sad day for the Australian travelling public."
The ACCC said earlier today it would not oppose the takeover of Impulse by Qantas, following undertakings given by Qantas.
Mr Godfrey said the ACCC did not consult Virgin Blue on the undertakings placed on Qantas, despite requests and a willingness to deal with the issues urgently.
"We believe these undertakings placed on Qantas will not address the key anti-competitive issues of capacity dumping and predatory pricing and merely relate to Sydney slots that we would have obtained in any case.
"In light of this decision, Virgin Blue's team will now need to decide how we should move forward in a market where the player who already holds over 50 per cent of the market, could use all of its assets, financial resources and position to dominate the playing field without fear of restraint."
The ACCC said it had considered two alternatives, either to allow Impulse to go into receivership, or allow Qantas to acquire the company
Mx5_boy From , joined Dec 1969, posts, RR: Reply 9, posted (11 years 1 week 1 day 11 hours ago) and read 548 times:
Tulla,
Interesting scenario. The only concrete thing occuring here is that ANZ is in trouble. The share price today of ANZ on the NZSE was 1.01 on thin volumes still.
I think the question is begging to be asked. Which airline out of AN / ANZ has the most potential for expansion and would be a perfect tie in with SIA?
What was the original benefit of SIA buying into ANZ?
With all the complications and different competitive reasons, I still believe that SIA want AN and AN only. They may still want to keep 25% of ANZ for strategic purposes but I doubt they are that concerned about it, otherwise why would they refuse to help finance AN / ANZ's fleet renewal amongst other things?
All of the market analysts are predicting a strangulation of ANZ so SIA can come in and pick up AN at a bargain. Whether this is what happens in the end is anybodies guess - but don't forget SIA is going to be cashed up, cranky and spoiling for a win.
That doesn't bode too well for ANZ retaining AN. But then what would I know?
As for DJ and AN forming an alliance, I hope AN's professionalism is enforced at DJ. I shudder at the thought of that ungodly alliance..... Ha Ha.
Wirraway From Australia, joined Mar 2001, 1321 posts, RR: 1 Reply 11, posted (11 years 1 week 1 day 1 hour ago) and read 503 times:
Wpr8e, I think you will find that it is Sir Selwin Cushing
and his board of directors that are living in fantasy
land, unless of coarse you kiwis have money trees
growing over there.
Go air canada From , joined Dec 1969, posts, RR: Reply 12, posted (11 years 6 days 1 hour ago) and read 484 times:
just like ive said on cheek of air new zealand...air new zealand have got too big for their boots and they didnt need ansett, its a weight they dont need.
thanks to all of you who have said about anz being in financila difficulty, most people on my topic refuse to accept this!!!
Ryanair From United Kingdom, joined Jul 1999, 654 posts, RR: 0 Reply 13, posted (11 years 5 days 22 hours ago) and read 477 times:
ANZ was soooo stupied buying AN. AN has been troubled for a very long time, not least because of the power of the merged Qantas/Australian against it. Ansett is part to blame with it's expansion overseas occuring in a very fool hardy way with the mamoth 747 (which meant on many routes they could only operate a few flights a week, because they burnt their allowed capacity up so quick with those big plaes, hence they were an unattractive option).
The point of dragging all this up, is the fact AN's new buyer (ie.when SQ and NZ fought it out) had to be capitalised strongly enough not only to buy the company, but also to pump money in to solve the pre existing problems. NZ won, but isn't up to that challange, never was up to that challange and thinking they could wing it somehow was such an ignorant thing for them to do.
I disagree with the article though, I don't believe the re-equipment need is 'that' great. The oldest AN plane is 18 years old, if the life span of an airliner is 30 years, 18 is middle aged and absolutely not 'elderly' I'd have though NZ's 732's are much more likely to need replacing. I agree it's a 'good' time to sell aircraft on at 18yrs or so, but it's hardly a disaster not to.
Looking at AN, roughly half it's narrow body fleet is A320's (although that includes some of the earliest examples, most are much newer and date from the mid 1990's onwards). The 733 is hardly over the hill and most of the Ansett examples are only a little over ten years old. That leaves the 146's and they're not too old. So where is the dire need to buy new planes? The 767's, oh yes they're already going. It'sbetter if they can bring in more efficient aircraft, but there is breathing space none the less in terms of fleet planning.
Would things have been different if SQ had won, yes because they have they can afford Ansett (which includes being able to afford the investment needed). NZ might have been able to buy AN, but it can't afford it. What a mess!!!! I kind of get the feeling nobody knows what to do.
Wirraway From Australia, joined Mar 2001, 1321 posts, RR: 1 Reply 14, posted (11 years 5 days 6 hours ago) and read 452 times:
Ryanair
Your logic bears thinking about, regarding no need to
panic about fleet upgrades at the moment, maybe
just upgrading the 767s in the next 12 months will
see ANZ through the present problems, I look forward
to tomorrow (Tuesday) when Toomey returns to
Australia and hopefully a statement where this is all
going.
Oz777 From Australia, joined Jun 2000, 521 posts, RR: 8 Reply 15, posted (11 years 5 days 2 hours ago) and read 442 times:
I think there are some excellent scenarios being put forward here, but let's examine a couple of statements.
SQ will only be interested in AN if it can show a profi(or ROI) at least equal to their other operations. Plain simple fact, SQ are not going to invest in a cash cow. Anyone thinking that a few newer aircraft would somehow "transform" AN are in fantasy land,
I remain 110% convinced that if SQ gets the majority of AN, both the Australian travelling public, and Air NZ will be substantially worse off.
The staff at AN will be forced to work for less remuneration, and there will be tacit discrimination as to the more senior management and cabin jobs. I have seen how SQ work. If ANZ lost AN, bang goes the OZ traffic feed for ANZ, and they would have a predator on the doorstep. True, SQ hates QF (strange actually since it was QF staff who originally set them up) but in the fight the real casualty would be ANZ. Buying AN was the best strategic decision for ANZ, they just went the wrong way about it.
I still say buying ANZ shares now is a good medium term investment - Cushing will go (like Ayling did at BA) and watch a more commercial culture emerge at ANZ.
The Coachman From Australia, joined Apr 2001, 1406 posts, RR: 0 Reply 16, posted (11 years 5 days 2 hours ago) and read 440 times:
Ryanair,
Ansett International turned up profits, it's domestically they've lost money.
The 'problem' with the B767-200's is the Australian public's lack of aviation knowledge and the perceived problems with their the safety of the B767's. At 18 years old, they're not too bad. But age is not the problem, the problem is the number of cycles they've had. No other airline in the world has B767's that have flown day-in and day-out SYD-MEL flights that last about 1 hour. In the US for example, many of the B767's used there are used on LAX-JFK/EWR, ORD-MIA, ATL-LAX, IAD-SFO, those sorts of routes, which are 4-5 hours long and therefore less cycles done per day, with less associated stress on take-off and landing.
It's been pointed out that none of AN's fleet needs replacing because they're not that old. The problem is that while the current fleet is maintained, expenses will continue to mount because of the mixed nature of the fleet. And while expenses mount and yields fall, there go profits. That is the problem with the fleet, it's not age.
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