The financial
costs to New Zealand's government of saving the flag
carrier airline from collapse are expected to continue
into the new financial year.
Papers released under the Official Information Act
yesterday suggest Air New Zealand will need a further
NZ Dollars 670m (Pounds 204m), on top of the NZ Dollars
1.04bn committed last year when the government was
forced to take an 83 per cent stake.
Economists say these are big numbers for a country
with a total revenue base of NZ Dollars 37bn, despite
the country's strong growth. Craig Ebert, a BNZ economist,
said he still forecast a budget surplus of between
NZ Dollars 1bn to NZ Dollars 1.6bn this year despite
the government's investment of NZ Dollars 1bn in Air
New Zealand in the year to March.
Glenn Phillips, a Treasury official, said the costs
of the rescue had been funded through the government's
borrowing programme.
Analysts say it is far from clear how much extra money
the government will need to find as much will depend
on the airline's success in selling assets, including
its valuable New Zealand skifields, an Australian
travel bureau and possibly its engineering business.
Air New Zealand was not available to discuss the matter.
Last month Ralph Norris, the new chief executive,
said the company might seek to raise NZ Dollars 200m
through a rights issue before August.
The official papers said the government's advisers
saw the airline as a high risk though viable business
that should be profitable by June 2003.
Air New Zealand has posted a half yearly loss of nearly
$376 million. Air New Zealand has reported its first
financial results since it ditched Ansett Australia
and losses from the demise of Ansett continue to hit
the company hard. The airline has had to write off
another $380 million.
But the company's new managers say the worst is over.
A grounded 747 is currently parked at Auckland Airport
- surplus to requirements because of falling passenger
numbers. Air New Zealand has written off the remaining
value of the jet's lease - and it has had to face
up to the massive losses caused by its disastrous
investment in Ansett Australia.
But Managing Director Ralph Norris says this is as
bad as it gets and is a one-off clearing of the decks
in regard to Ansett. The clean-up involves writing
off another $379 million on top of the $1.3 billion
it wrote off when Ansett collapsed last September.
Chairman John Palmer says Air New Zealand has put
the immediate crisis of last year behind it, and is
getting on building a successful business into the
future. But the loss of Australian feeder traffic
from Ansett is a major blow, and the prospect of even
stiffer competition from Qantas will make life difficult.
"The company's condition can now be characterised
as having moved from critical to stable, but is still
in intensive care," Norris said.
The treatment involves more cost-cutting, and Air
NZ is about to start a fresh round of negotiations
with unions on staff cutbacks. After injecting $885
million to become the major shareholder, the government
wants a "credible plan" to restore financial
health.
Finance Minister Michael Cullen said the six monthly
result was mostly in line with expectations and the
strategy to return to financial health "is still
only in the very early stages of implementation".
National's finance spokesman David Carter says his
party is not happy with the result which represents
"a substantial loss for all New Zealanders".
Meanwhile, Air NZ's fuel and maintenance bills are
falling and passenger numbers are increasing. "I'm
feeling confident that we're going to see improvements
from here on in," Norris said.
May 10, 2002.
[Source: Financial Times; April
11, 2002]
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