By DANIEL RIORDAN aviation writer
Air New Zealand's share prices dived yesterday after a proposed rescue deal from Singapore Airline.
As the national carrier's top brass began a series of meetings with the Government aimed at lifting foreign ownership caps to accommodate its deep-pocketed suitor, the company's A shares - available only
to New Zealand residents - fell 10c to $1.11 while the B shares - open to allcomers - tumbled 30c to $1.33.
JP Morgan head of equities John Rattray was not surprised at the falls.
"To most people [the Singapore deal] wasn't a surprise. Perhaps the surprising thing is that the shares had rallied as much as they had prior to the announcement."
Contributing to the nosedives was the disappointing price of $1.31 at which Air NZ wants to issue extra shares to its 25 per cent shareholder, signals from Air NZ of the probable merging of its A and B shares, and confirmation of a rights issue within the next few months
Brokers speculated that Air NZ might seek to replace the A and B structure (designed to cap total foreign ownership at 49 per cent) with a structure similar to that of jilted suitor Qantas.
The Australian airline has one class of share, but the registrar is prevented from issuing more than half the shares to foreign entities.
Mr Rattray said any rights issue would have to be deeply discounted.
A $284 million issue last year was heavily undersubscribed when the airline's financial outlook was considerably better than it is today.
Air NZ acting chairman Dr Jim Farmer, QC, would not be drawn on the size of any rights issue, which would be influenced by the level of shareholding Singapore is allowed.
He and chief executive Gary Toomey held a press conference yesterday afternoon but provided little detail to flesh out Tuesday night's announcement that their preferred option was greater investment from Singapore. The pair then flew to the Beehive to argue their case to the Government.
Air NZ's ownership caps prevent a single foreign airline exceeding 25 per cent and foreign airlines in total exceeding 35 per cent.
There is no suggestion that the final cap, limiting total foreign investment to 49 per cent, will be tested.
The issue price of $1.31 to Singapore is halfway between the prices of the A and B shares on Friday. Air NZ is not saying how many shares will be issued or what class of shares they will be.
Singapore has 189.2 million shares of Air NZ's 756.8 million shares on issue.
The issue of an additional 56 million new shares to Singapore would lift the airline's stake in Air NZ to 35 per cent, and raise $73 million. To get to 40 per cent, 81 million new shares would need to be issued, raising $106 million.
Commentators have said an increase to 35 per cent would be unlikely to jeopardise Air New Zealand's international access rights.
Mr Toomey said the Singapore deal had been one of eight options, including a Qantas buy-in.
"They all had their merits, but we liked this one."
He said no Plan B had been chosen if the Government refused to lift foreign ownership limits.
A five-year strategic plan for Air NZ should be ready for the board's consideration in September.
Qantas has predictably slammed the Singapore option, with chief executive Geoff Dixon saying it was a backdoor attempt by the airline to control the aviation industry on both sides of the Tasman. Australian Prime Minister John Howard entered the fray, saying he would seek to preserve the "legitimate interests of Qantas."
Mr Dixon's comments were a bit rich, however, given that under the Qantas proposal, Singapore would have taken over Ansett anyway.
Mr Toomey plans to fly to Australia on Sunday night but has asked his general manager of government and international affairs, Peter Harris (a former Australian Department of Transport deputy secretary) to begin discussions with Australian authorities before then.
The good news for New Zealand domestic travellers in Qantas' rejection is that the Australians are now almost certain to beef up their operations here.
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By DANIEL RIORDAN aviation writer
Air New Zealand's share prices dived yesterday after a proposed rescue deal from Singapore Airline.
As the national carrier's top brass began a series of meetings with the Government aimed at lifting foreign ownership caps to accommodate its deep-pocketed suitor, the company's A shares - available only
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