SQ To Get Part Of An! About Bloody Time!

Tue Feb 13, 2001 10:53 am

I, as well as other people, have said that this has been a long, long time coming.

What I still fail to understand is why Air NZ bought the full 100% of AN in the first place, when it was quite obvious that:

1) Ansett was going to require a fleet renewal program, and;
2) That there is no way on "Godzone" earth that Air NZ would be able to finance such a program.

But we are now in the situation where AN's market share has dropped to 40%, they have been plagued by management problems, problems with maintenance, and staff morale is up to shit.......SQ will probably get their share of AN for a song.

In future NZ, stick to investing in small airlines like Eagle Airways and Air Nelson, and leave the larger carriers to a more experienced player in the game of airline acquisitions and operations


Singapore poised to take stake in Ansett

Monday 12 February 2001

Singapore Airlines is understood to be poised to take a direct shareholding in Ansett Australia from owner Air New Zealand because of that airline's stretched financial position after paying $580 million last year to News Ltd for the Australian airline.

Airline analysts in Singapore say Singapore Airlines, which acquired 25 per cent of Air NZ last year, had wanted to raise that stake to 45 per cent but was capped by the New Zealand government, thus limiting its influence on the airline.

Similarly, in 1999, Singapore Airlines was thwarted from taking 50 per cent of Ansett from News Ltd after Air NZ exercised its pre-emptive rights to the shares.

Singapore-based analysts see a direct buy by Singapore Airlines into Ansett as the only way to give the Australian airline company the balance-sheet strength to underwrite a major fleet-acquisition program that is long overdue.

The Singapore Airlines' move has gained momentum as Ansett's market share continues to take a battering, with its fleet of Boeing 767 aircraft grounded over Christmas and again last month.

"Public confidence is fading in Ansett and something must be done urgently," said one analyst. "Only substantial funding is going to rectify the problems of Ansett and only Singapore Airlines has the cash." Analysts say that Singapore Airlines is expected to post a net profit for the year to March of over $A1.5 billion.

Air NZ's new chief executive, former Qantas deputy Gary Toomey last week flagged that the airline required a stronger balance sheet to proceed with a re-equipment program for Ansett, according to analysts. Mr Toomey also confirmed that the airline was talking to Boeing and Airbus about an aircraft order.

But Air NZ's major shareholder, Brierley Investments Ltd, with 30 per cent of its capital, is in no position to put more funds into the NZ carrier.

Last October, analysts made a savage profit revision for Air NZ after its was revealed that Ansett was trading at a loss and that its market share had dropped to an all-time low of 41.5 per cent.

Since then, Peter Harbison of the Centre for Asian Pacific Aviation said that Ansett's market share had slumped below 40 per cent.

J.B.Were cut its Air NZ profit forecast from $NZ146 million ($A110 million) to just $NZ67 million late last year. In the year to last June, Air NZ booked a one-off abnormal tax charge of $NZ768 million, resulting in a $NZ600.1 million loss. Its operating profit was $NZ177.9 million on revenue of $NZ3.72 billion.

Air NZ chairman Sir Selwyn Cushing warned investors in October that fuel costs, a weak dollar and new competition in Australia would drive down profits.

Ansett suffered a $38.8 million drop in operating profit to $101.6 million for the year to June 30, while Qantas posted a record $517.3 million for the same period.



RE: SQ To Get Part Of An! About Bloody Time!

Tue Feb 13, 2001 11:56 am

Perhaps Air NZ thought that with a strategic ownership of Ansett would come SQ dollars to help with it's own fleet renewal?

However it appears that SQ are not interested in NZ's ideas and are forcing NZ's hand at the negotiating table..

Well, this was to be predicted.

I'll do a ring around my broker buddies and see what the consensus is.


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RE: SQ To Get Part Of An! About Bloody Time!

Tue Feb 13, 2001 12:10 pm

This happened a day or two ago...


RE: SQ To Get Part Of An! About Bloody Time!

Tue Feb 13, 2001 12:25 pm

No need to do that know that we are right, and the analysts would only echo our sentiments.

Like you said NZ bought the extra 50% to try and force SQ's hand...HOW WRONG THEY WERE.

Air NZ is one of the two airline stocks I currently have shares in (QF being the other), and over the last couple of years, their stock value has not moved anywhere in a major way.

Should I get rid of these NZ shares, or should I hold onto them until at least SQ gets AN from them?

Also, what are people's opinions on how much of AN SQ will grab from NZ? And at what percentage of the initial purchase price??

RE: SQ To Get Part Of An! About Bloody Time!

Tue Feb 13, 2001 1:23 pm


A quick chat with my buddy at Ord Minnett NZ didn't reveal much except that NZ's shares are trading down the lower end at the moment. A definite hold until the whole business with AN is sorted out! SQ can't really do anything to NZ at the moment as it has a 1/4 stake in NZ.

Given that NZ do not have the funding in reality to do anything productive with AN, they will be forced into a deal with SQ sooner rather than later. That deal will see NZ getting some of it's capital back, which will ensure it's fleet upgrades and should bring it's share price into line.

All depends in how bad a shape AN is in over the next few months. No doubt NZ's medlling has done a lot of damage already, to what extent will only be known by the staff.

Maybe SQ will do a cash / equity swap with NZ, giving them back their 25% and taking 75% - 100% of AN?

Also, no one should forget how extremely shrewd SQ are. You can bet they have been waiting for these circumstances ever since NZ tooks the AN option. Once SQ get's it's hands on AN, I wouldn't like to see what SQ does with it's share in NZ.

The sad part of all this is that AN is sufferring in the meantime.


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RE: SQ To Get Part Of An! About Bloody Time!

Tue Feb 13, 2001 4:04 pm

SQ are keen to get money into the NZ/AN Group to realise something on the investment they have already made and also make life difficult for their real enemy (BA/QF). Whilst there is no doubt that SQ are displeased with NZ over last year's antics, it is equally assured that they will not P*ss their investment in NZ up against the wall to prove a point.

NZ have denied this transaction is in the wings but if you paid careful attention to what Gary Toomey said on Business Sunday last weekend, you will note that he did not rule out some exotic methods by which SQ could increase its investment in the Group and overcome the NZ government's archaic ownership limits.

Sure, SQ was always more interested in AN than NZ but this does not mean they do not see value in the synergies of combining the 2 antipodean airlines into one.

If SQ just wanted AN, they had their opportunity last year when QF offered to buy a stake in NZ which would have immediately put AN back on the auction block with SQ the only live bidder. SQ blocked QF by taking the shares in NZ.

It is unlikely NZ will sell a majority of AN to NZ and SQ may not want a majority. Splitting the airlines back into 2 businesses will remove many of the synergies sought to be gained through the merger. SQ can control what NZ/AN do without taking a majority in either airline.

SQ played a big part in getting Gary Toomey into NZ/AN. I think they did this as they see a future in the group.

Having said that, I also think that they would be happy to see the back of Selwyn Cushing and I'm sure they can arrange this whenever they are ready. I'm sure the good doctor has heard the expression "Revenge is a dish best eaten cold."

RE: SQ To Get Part Of An! About Bloody Time!

Tue Feb 13, 2001 6:28 pm


The problem is that there is no "synergy" between the two airlines. NZ came in a made a mockery of the AN management and practices, that made AN one of the leading carriers.

Speaking to brokers in Singapore they have re-iterated my comments on how NZ has handled the whole situation. They (NZ) are up shit creek without a paddle unless SQ drops some cash their way. SQ are not really interested in NZ anymore, otherwise the board of directors which is dominated by SQ would have bigger expansion and fleet plans sorted for NZ.

As I said earlier, you could more than expect SQ to do an equity swap with NZ and then cash them back. SQ has huge US reserves of cash by the way...

The point is that SQ was never interested in NZ, as you said yourself, if only to block QF. QF now has it's hand tied with other options it is seeking around the globe to not be too interested in NZ.

I would have loved to have been at the last board of directors meeting in NZ. Toomey must have just about kicked it to be so bold on national television.

Whatever the outcome, it had better be quick. I would like to see SQ take over AN as quick as possible and cash her up. Bring in new a/c, start new routes and bring back what was one of the best domestic (and the best international) airlines in the world.


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RE: SQ To Get Part Of An! About Bloody Time!

Tue Feb 13, 2001 8:52 pm

OK some answers

From Dowjones via Yahoo SIngapore Finance, it reported that Ansett are unaware of any SIA deal, and SIA wouldn't comment. Hmmm. I don't think that means SIA are going to buy into Ansett in the short term

Secondly, why does SIA want to buy into Ansett anyway? Is it profitable? Does it have a strong market position in Australia? (The last I heard it was falling way behin QF). Or maybe SIA wants to be friends?

Ive read the transcript from Business Sunday at or something, and the interview with the AirNZ man was extremely interesting. I get the feeling like many of you do that SIA aren't that interested in AirNZ. I would ask why not? They have a strong presecence in the NZ - USA market and LAX or something - LHR market. Also, they have a nice Economy Class.

A few questions, but no paradoxes
Anyone can fly, only the best Soar.
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RE: SQ To Get Part Of An! About Bloody Time!

Tue Feb 13, 2001 8:58 pm

Oh look, I've found some "conflicting" reports. I say conflicting but I don't really know. See what you lot think!

Singapore circles big Ansett stake again
The West Australian - ABIX; Feb 13, 2001

A bigger equity stake in Ansett Australia by Singapore Airlines is being seen as a method of helping Air New Zealand with fleet replacements. A report on 12 February 2001 indicates Singapore Airlines is again looking at taking a bigger stake in the Australian and international carrier. The Singaporean company attempted to buy the News Corporation stake in Ansett in 1999. Armed with $13 billion in available funds, Singapore is again reportedly keen to increase its investment, but on 12 February 2001 declined to comment. Air New Zealand, who bought News Corporation's stake in 2000, has been confronted with a need to replace some of the Ansett and Air New Zealand fleet, but a shortage of funds at the same time.

World Reporter All Material Subject to Copyright

(Oh well good news so far)

Asia Pulse; Feb 13, 2001

MELBOURNE, Feb 13 Asia Pulse - Ansett Australia has denied reports that Singapore Airlines (SIA) was preparing to buy a major stake in the Air New Zealand-owned carrier.

Ansett said media reports on SIA's intention to acquire a direct shareholding in the financially-stretched airline were "speculative".

"We (Ansett or Air NZ) have received no indication from Singapore Airlines of anything," the Australian Associated Press Tuesday quoted Ansett spokesman as saying.

The Sydney Morning Herald Monday quoted Singapore analysts as saying that SIA was preparing to swoop on the Australian carrier.

SIA acquired 25 per cent of Air NZ last year. Its stake is limited due to NZ government foreign ownership laws.

Air NZ chief executive, Gary Toomey told a televison business programme here that the airline's board would start discussing how SIA could increase its stake next week.

"There are many ways in which this can be achieved and I guess it's early days but certainly at next week's board meeting we'll start that dialogue and we'll pursue any of the opportunities available to us but I think it's too early to give any specifics," he said.

He said Air NZ was keen to "become a lot closer" with Singapore Air.


World Reporter All Material Subject to Copyright

(oh dear!)
Anyone can fly, only the best Soar.
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RE: SQ To Get Part Of An! About Bloody Time!

Tue Feb 13, 2001 9:11 pm

The official word From Singapore Airlines

Singapore Airlines says Ansett stake story speculative
SINGAPORE (Reuters) - Singapore Airlines (Singapore: SIAL.SI - news) Ltd (SIA) said on Tuesday media reports that it was looking to take a stake in Air New Zealand Ltd's Ansett Australia subsidiary were speculative.

SIA on Monday declined to comment on a Sydney Morning Herald report that it was eyeing an equity position in Ansett to support the stretched balance sheet of Air NZ, its 25 percent owned affiliate.

"We are saying that the reports are speculative," an SIA spokeswoman told Reuters on Tuesday. "We usually don't say anything on speculative reports."

Ansett said SIA had not approached it with intent to directly buy a stake in the Australian carrier.

SIA, which had initially wanted to buy Ansett, has expressed interest in moving to a 40 percent holding in Air NZ but is hindered by the New Zealand government's foreign ownership restrictions.
Anyone can fly, only the best Soar.
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RE: SQ To Get Part Of An! About Bloody Time!

Wed Feb 14, 2001 8:37 am

MX, the problem is that even before NZ arrived AN was in real trouble. It had suffered from a starvation of capital from its owners for years, hadn't made anything approaching a reasonable profit since 1988/89 and had a fleet mix that Rod Eddington once described as Noah's Ark - Two of everything.

Even Rod Eddington himself was only brought in by News to strip the business down a bit so it could be sold. He never had any plan supported for a fleet renewal except for the CRJs into Kendall.

NZ have not made a great fist of it so far but then again the first year of QF's ownership of TN were equally fraught.

AN has more pain to go through before it is in the clear again. Its cost are still the highest of any airline in Australia (much higher than the newcomers and NZ itself), its fleet mix is a mess as well as old, its staff morale is poor and has been for years with no one in management even talking to staff until Gary Toomey came on the scene recently.

I recently went to a presentation by James Strong where he discussed how he involved all levels of QF/TN staff in the restructure and tendering for parts of the business. Contrast this empowerment with Rod Eddington's approach where he came in and made all his first reports reapply for their jobs. When this was completed and a number of staff replaced, the same thing happened to the next level. Three years later this demoralising approach was still going on in ever lower levels of management. In the meantime good managers had seen the writing on the wall and left. It is no wonder the place is a shambles.

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