Cheaper fuel powers up Air NZ

By CHRIS DANIELS

Falling jet fuel prices and more certainty about the future is helping pull Air New Zealand's share price out of the doldrums after a difficult year for airline investors everywhere.

Air NZ's share price, battered this year by shareholders selling out, rising fuel prices and general uncertainty, has joined the region's other airlines in a November resurgence.

The national carrier is in the middle of a rights issue, which it hopes will raise $186 million to help pay for a fleet upgrade.

The Crown, as 80 per cent owner of the airline, is paying another $150 million into Air NZ, by taking up its rights under the offer.

The latest share price surge for Air NZ began on November 8. Its share price hit a high for the year of $2.44 in January, but has been tracking downhill ever since. The low of $1.49 was struck in October, in the week before its annual shareholders' meeting and announcement of how much money it was seeking in the rights issue. It also gave its yearly profit forecasts, saying it expected full-year underlying profits to fall from $243 million to $220 million.

Despite making the share price look more impressive, the August five-for-one share consolidation did not mark a resurgence in investor confidence, which has also been hit by two big shareholder sell-offs.

At the end of January, BIL International, formerly Brierley Investments, which bought most of the airline when it privatised in 1988, sold its last 7.8 per cent stake. Singapore Airlines waited eight months before doing the same, bailing out of its 6.3 per cent share holding for about $61.7 million, or $1.63 per share.

Fuel price falls are also thought to be behind the recent share price rises of Australian airlines.

Virgin Blue's share price on the Australian stock exchange has surged more than 18 per cent this month, while arch-rival Qantas has enjoyed a similar, but smaller, share price rise of more than 6 per cent.

This is despite Virgin reporting a slight drop in profits for the past six months and warning that its outlook was uncertain. Revenues were up 27.6 per cent for the period, yet profits were down 1.8 per cent. Problems mean a delay in expansion of its low-cost services on to Air NZ's routes.

* The deadline for sending in acceptances for the rights issue is 7pm on December 3. Trading in the new shares is expected to begin on December 10.