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Is Air New Zealand In Trouble?  
User currently offline767er From Australia, joined Apr 2001, 1092 posts, RR: 4
Posted (12 years 6 months 2 weeks 4 days 6 hours ago) and read 2738 times:

From this mornings NZ Herlald

11.04.2002
By DANIEL RIORDAN aviation writer
News that Air New Zealand might need a further $700 million to keep flying has failed to spook the market, with analysts saying the shortfall confirms views they have held since last year's taxpayer bailout.

Air NZ's share price rose 1c yesterday to 36c, despite the release of hundreds of pages of letters, briefing papers and Cabinet minutes related to the Air NZ bailout under the Official Information Act.

Arcus Investment Management equities head Simon Botherway said the $700 million shortfall - mentioned in a Treasury report last November - was "in the ballpark"of his firm's original estimate.

How much progress Air NZ has since made to reducing that funding gap was unclear.

But he said a rights issue of $200 million - mooted by airline managing director Ralph Norris - would go only a small way to solving the airline's capital needs, and be only the first stage of a capital-raising effort.

Macquarie Equities research head Arthur Lim said the Treasury figure related to a worst-case scenario, and conditions in the airline industry, especially in Asia, had improved since its calculation.

But Air NZ remained highly geared and might have to raise more capital on top of the rights issue, depending how the industry developed over the next couple of years.

Based on advice from consultants PA Consulting and Cameron & Co, the Treasury report said: "Air NZ is a viable business, notwithstanding a high-risk one, but requires capital of $1.705 billion."

The Government ended up providing $885 million and pledging a further $150 million if needed by June next year. The airline disputes the figure's validity, and says it is making progress towards financial solidity.

Air NZ spokesman David Beatson said the $1.705 billion was the amount that would be needed to achieve a reduction in the airline's gearing to 65 per cent by June next year, a reduction the company did not need to achieve immediately or in the coming year.

An improvement in the company's gearing could be achieved without requiring additional equity from shareholders.

"We can improve performance, retain profits and sell assets to bridge any capital gap needed to reduce our gearing to a level acceptable to our lenders," he said.

But even after last year's recapitalisation, Air New Zealand's balance sheet remains stretched.

At December 31, its gearing (as measured by debt to debt plus equity) was 93.8 per cent. After the recapitalisation on January 18, it dropped to 53.1 per cent, or 78.2 per cent with aircraft operating leases included.

Another Treasury report dated November 7 noted the sale of non-core assets could yield up to $900 million in the medium term.

But it is hard to see where that might come from. So far Air NZ has sold its Jetset travel agency businesses and is negotiating the sale of NZski.com, which runs the Coronet Peak and Remarkables fields in Queenstown and Mt Hutt in Canterbury.

The Australian Jetset business fetched less than $10 million and the New Zealand business will have fetched less. One valuation puts the ski fields' worth at between $35 million and $45 million.

But its most attractive non-core asset, its world-renowned engineering operations, are not for sale. One analyst values the business at about $200 million.

The airline admits the asset sales, along with route and fare restructuring it has announced to date, will have only an incremental long-term effect.

Instead, Air NZ is pinning its hopes on the results of the strategic review it began last year, and which is nearing completion.

The review has focused initially on changes to the airline's short-haul network (less than four hours flight time) before moving on to longer international routes.

Options include downgrading service levels on some routes, although Norris has ruled out conversion to a no-frills airline.

Other initiatives include higher ticket prices, cutting international routes, using smaller planes on some routes, and renegotiating the terms of its air points contract with Bank of New Zealand.

















Aircraft flown:F27,Viscount. EMB120, SAAB340, ATR70, 737-200.737-300,DC8, DC10,747-100,747-200,747-300,747-400, A320, A3
27 replies: All unread, showing first 25:
 
User currently offlineTG992 From New Zealand, joined Jan 2001, 2910 posts, RR: 10
Reply 1, posted (12 years 6 months 2 weeks 4 days 3 hours ago) and read 2662 times:

AIR NZ CAPITAL NEEDS “MISINTERPRETED” IN MEDIA REPORTS

11 April 2002.

Air New Zealand has issued a statement to news media and the New Zealand Stock Exchange to correct inaccurate media reports concerning its future capital needs. The statement follows.

“A Reuters’ report claiming Air New Zealand needs NZ$670 million on top of money already pledged by the New Zealand Government to remain a viable entity over the coming year is incorrect..

“The report misinterprets the content of a November Cabinet paper on the company’s need for an injection of additional capital.

“The Cabinet paper refers to the company’s need for $1.705 billion in additional capital to achieve a workout and contains recommendations for the provision of Government funding of up to $1.035 billion.

“The Reuters’ report misinterprets this to mean that the company needs an additional $670 million to remain viable over the coming year. In fact, the $1.705 billion referred to in the Cabinet paper is a sum that Government advisers initially estimated would be required to achieve a gearing target of 65% debt to debt plus equity.

“While the 65% gearing target represents a desirable capital structure, it is incorrect to infer that the company would not be viable if it was not achieved in the coming year.

“The workout is to be over an extended period of time, and there are other means available to the company to improve gearing which do not require the capital gap to be funded entirely by further equity. These means include asset sales and improved and retained profits.

“The company currently has in excess of $550 million on short-term deposit and there is no reason to believe it is not viable over the coming year given its current position.”

--issued by Public Affairs



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User currently offlineMx5_boy From , joined Dec 1969, posts, RR:
Reply 2, posted (12 years 6 months 2 weeks 4 days 1 hour ago) and read 2640 times:

Guys,

I am sure Geoffy has different views, QF are moving in, permanently - pointy end yields to the rat. DJ will be next - bottom feeders to them.

What will NZ have left?

mb


User currently offlineRmm From Australia, joined Feb 2001, 524 posts, RR: 1
Reply 3, posted (12 years 6 months 2 weeks 4 days ago) and read 2627 times:

The Govt will always bail them out though, that is, unless QF finally get a share of AirNZ.

Rmm


User currently offlineJiml1126 From , joined Dec 1969, posts, RR:
Reply 4, posted (12 years 6 months 2 weeks 4 days ago) and read 2625 times:

May be other Star Alliance member could help ANZ like those days when they're trying to rescue Air Canada.

User currently offlineWirraway From Australia, joined Mar 2001, 1321 posts, RR: 1
Reply 5, posted (12 years 6 months 2 weeks 3 days 21 hours ago) and read 2599 times:

767 er

I suggest you read todays article by Geoffrey Thomas
in the "West Australian"
http://www.thewest.com.au/20020411/business/tw-business-home-sto52279.html

"The problem for Air NZ is that Qantas and other competitors are equipping with more modern fleets and are spending considerable capital on in-flight video systems and seating improvements, including beds in business class which will leave Air NZ at a severe competitive disadvantage."

"In 2006, Qantas will start taking delivery of the luxurious 555-seat Airbus A380 and by 2008 the Australian airline will have the high-speed Boeing Sonic Cruiser. Those aircraft, which will make others obsolete overnight, will be used on Air NZ's most profitable routes to the US."

So the answer to your question is YES AirNZ are in
trouble, Unless they play nicely with Qantas.

Wirraway


User currently offline'Longreach' From Australia, joined Jul 2001, 505 posts, RR: 0
Reply 6, posted (12 years 6 months 2 weeks 3 days 20 hours ago) and read 2576 times:

Sonic Cruiser by 2008?

-news to me.


User currently offlineJesseycy From New Zealand, joined Aug 2001, 343 posts, RR: 0
Reply 7, posted (12 years 6 months 2 weeks 3 days 19 hours ago) and read 2564 times:

Guys, grim as the news sounds, part of it is right. Even though Air NZ's service is good, it can't rely on that forever. Whenever others criticise the airline about not being modern, (Eg: No PTVs, old fleet), we always jump to its defence of having good service. Same excuse, everytime.....

This can't continue. Air NZ must upgrade! No improvement means that it'll fall behind while others are improving....

Just my honest opinions.....


User currently offlineTG992 From New Zealand, joined Jan 2001, 2910 posts, RR: 10
Reply 8, posted (12 years 6 months 2 weeks 3 days 19 hours ago) and read 2554 times:

Air NZ is returning/retiring aircraft for a reason...
*hint hint*



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User currently offlineWirraway From Australia, joined Mar 2001, 1321 posts, RR: 1
Reply 9, posted (12 years 6 months 2 weeks 3 days 19 hours ago) and read 2549 times:

TG992

Mate, you have got to face up to reality sooner or
later, so tell us where the money is coming from for
AirNZ to refleet, now your Govt has said it will not
be putting anymore in, your airline needs outside
help be it QF or Star Alliance or whoever.

Wirraway


User currently offlineTG992 From New Zealand, joined Jan 2001, 2910 posts, RR: 10
Reply 10, posted (12 years 6 months 2 weeks 3 days 19 hours ago) and read 2547 times:

Wirraway -

From returning existing aircraft (leased at pre-911 prices) and negotiating new lease deals in what is currently a very depressed market.





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User currently offlineWirraway From Australia, joined Mar 2001, 1321 posts, RR: 1
Reply 11, posted (12 years 6 months 2 weeks 3 days 18 hours ago) and read 2538 times:

TG992

How would ANZ order aircraft like the A380 that is
mentioned, skybeds and IFE in your widebodies, not
to mention when QF ramps up in NZ closely followed
by Virgin Blue, Nah, give it up to Qantas and let them
organise your airline properly, just do it.

Wirraway



User currently offlineMx5_boy From , joined Dec 1969, posts, RR:
Reply 12, posted (12 years 6 months 2 weeks 3 days 18 hours ago) and read 2537 times:

TG992,

I have to agree with Wirraway on this one. Unfortunately with no kitty to speak of NZ is fast bleeding away to nothing.

QF are moving on in and DJ have desires of their own now, particularly with a recalcitrant and seriously pissed off SQ manipulating in the wings.

The forces against NZ are huge and they can either attempt to fight it, which is pointless as they have no money or they can run to QF House and speak with Geoffy before QF drive them down further.

The big question is whether or not QF want to take them in or out. From the look of things with QF's expansion plans in NZ it appears they want to take them on. It's anyones guess how they will ultimately play their card but I suspect Geoffy wants to maginalise NZ as much as possible.

Remember QF are getting the yields both domestically and Internationally which is pouring money into their coffers. Sad as it may be, QF have never touched the NZ domestic market so much by virtue as they are not interested. It's clearly a political and clever ploy to bring NZ to it's knees.

If any other Star carrier had any intention of intervening they would have done it by now. SQ have been burnt and spurned by NZ so I cannot for any reason see them being a saviour. It's unheard of really that another alliance carrier would encrouch on anothers turf as SQ is doing now.

Ending revenue sharing is just the beginning.

At any rate mate - brace yourself for more change as the storm has not calmed in the least.

mb


User currently offlineWirraway From Australia, joined Mar 2001, 1321 posts, RR: 1
Reply 13, posted (12 years 6 months 2 weeks 3 days 18 hours ago) and read 2533 times:

Mx5
Well if they attempt to fight it, it will be all the less
QF have to pay when they cave in, I'm sure Qf will
do a better job than AirNZ did trying to run Ansett.


Wirraway


User currently offlineMx5_boy From , joined Dec 1969, posts, RR:
Reply 14, posted (12 years 6 months 2 weeks 3 days 18 hours ago) and read 2519 times:

Wirraway,

It's so obvious though. QF are using AWAS on STL for a lot of their NZ work. You only need take a look at the prices QF are chargeing for all classes of fare that they are undercutting NZ big time.

It's easy for people to say the NZ government will underwrite and pay for NZ but they can't possibly do it indefinitely. It would be politcal suicide. The NZ goverment years earlier has already sold off the farm so to speak and it's only a matter of time before NZ itself (the airline) squanders or fails.

As I have said a squillion times this is all about the SQ/QF war in the south pacific.

Something interesting to ponder mate and off topic, I have it on good authority the KD (Ansett owned) CRJ's, some are to return to the air. The Anstaff proposal wants to eventually do city pairs - part of the original proposal for KD that was to link with Tesna.

mb



User currently offlineDuff From New Zealand, joined Oct 2001, 117 posts, RR: 1
Reply 15, posted (12 years 6 months 2 weeks 3 days 17 hours ago) and read 2506 times:

It is a sad state of affairs. QF sure did luck out on this one. A lot of circumstances led to their dominance and they continue to ride the wave of fortune and luck.

I just hope they decide to start hiring kiwi pilots to fly in NZ.


User currently offlineAir Taiwan From Australia, joined Dec 1999, 1518 posts, RR: 4
Reply 16, posted (12 years 6 months 2 weeks 3 days 17 hours ago) and read 2507 times:

Jim1126,

As Mx5 have said, Star airlines are not going to bail out NZ. What is the benefit for them to bail NZ out? Losing Ansett wasn't such a big problem for them, so why would NZ matter?

just my thoughts...

Jimmy


User currently offlineWirraway From Australia, joined Mar 2001, 1321 posts, RR: 1
Reply 17, posted (12 years 6 months 2 weeks 3 days 17 hours ago) and read 2500 times:

Duff
QF-NZ are currently looking to employ NZ nationals
for their domestic operation there, QF would take no
more than 49% of AirNZ and would of course employ
all NZs, AirNZ would still be that, a NZ airline.

Mx5
Very interesting about the Kendel CRJs, keep your
ears to the deck for more info.

Wirraway


User currently offlineJiml1126 From , joined Dec 1969, posts, RR:
Reply 18, posted (12 years 6 months 2 weeks 3 days 8 hours ago) and read 2461 times:

As Mx5 have said, Star airlines are not going to bail out NZ. What is the benefit for them to bail NZ out? Losing Ansett wasn't such a big problem for them, so why would NZ matter?

NZ do matters to Star. It's ok for Star to lose one member for the south Pacific/Oceania region. But Star is not willing to lose ANZ as it will also means that Star shrinks it's presence in the region.

From returning existing aircraft (leased at pre-911 prices) and negotiating new lease deals in what is currently a very depressed market.

This is the most brightest way to move ahead during the difficult time. You trade old aircraft for new aircraft. Boeing and Airbus is happy to do that.

How would ANZ order aircraft like the A380 that is
mentioned, skybeds and IFE in your widebodies, not
to mention when QF ramps up in NZ closely followed
by Virgin Blue, Nah, give it up to Qantas and let them
organise your airline properly, just do it.


This doesn't makes sense. You should use better example like A340 or B777. A380 will not be out till 2006, and NZ is currently continuing monitor its capacity on its over all fleet. If ANZ gets A380, then why would NZ trade its 744?

Although QF looks like it's on fire, but this doesn't means that QF will on fire forever. Trust me, I wouldn't be surprise if QF falls into the financial crisis trap someday.






User currently offlineMarara From Australia, joined Oct 2001, 678 posts, RR: 0
Reply 19, posted (12 years 6 months 2 weeks 3 days 1 hour ago) and read 2436 times:

Yes, but ANZ have already fallen.


I like work: it fascinates me. I can sit and look at it for hours. Jerome K Jerome
User currently offlineDocpepz From Singapore, joined May 2001, 1971 posts, RR: 3
Reply 20, posted (12 years 6 months 2 weeks 3 days 1 hour ago) and read 2427 times:

Why would the NZ govt let QF take 49% of their airline, but not let SQ take 49% to "protect national interests"?

Unless of course race has something to do with this.


User currently offlineAerokiwi From New Zealand, joined Jul 2000, 2736 posts, RR: 4
Reply 21, posted (12 years 6 months 2 weeks 3 days ago) and read 2425 times:

Air NZ has $500 million in cash at the moment. And that is a fact. This can be used to underwrite significant service/fleet improvements.

And out of curiosity, does Air NZ have the same rights in Australia has in New Zealand? I suspect not. I remember something about NZ aircraft only being allowed to fly in Aussie for a a few weeks or so before they have to return to NZ again. Until the playing field is fair and even, I think, quite frankly, Qantas should be booted out of New Zealand. And it still can be. Labour will likely win the coming election and I suspect will do all it can to protect Air NZ.

We've been dicked by Australian companies for decades. Enough is enough.


User currently offlineMx5_boy From , joined Dec 1969, posts, RR:
Reply 22, posted (12 years 6 months 2 weeks 3 days ago) and read 2423 times:

Aerokiwi says:

""We've been dicked by Australian companies for decades. Enough is enough.""

That is the funniest thing I have heard said in such a long time!!

Bravo Aerokiwi!  Smile Smile Smile Smile Smile

mb


User currently offlineJiml1126 From , joined Dec 1969, posts, RR:
Reply 23, posted (12 years 6 months 2 weeks 3 days ago) and read 2420 times:

Hehe, Aerokiwi, you're funny.  Smile

User currently offlineRmm From Australia, joined Feb 2001, 524 posts, RR: 1
Reply 24, posted (12 years 6 months 2 weeks 3 days ago) and read 2418 times:

Air NZ has $500 million in cash at the moment.

Is that like the Billion dollars they assured Ansett staff they had? Don't let them fool you.

Rmm


25 Jiml1126 : Are we talking about $500million NZ dollars or US?
26 Aerokiwi : NZ dollars I think. This was disclosed in a statement to the sharemarket, which they are being very careful about at the moment.
27 Aerokiwi : What can I say Mx5 boy/Jiml1126, I am hilarious. It's just a fact.
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