KEY POINTS:
A resurgent Air Zealand flush with cash said today it would pay out $136 million in interim and special dividends, sending its share price soaring to a three-year high.
The Government will collect $104m of that payout by dint of its 76.3 per cent stake.
Finance Minister Michael Cullen said the Government had no intention of selling down, even to 51 per cent, despite sitting on a $735m paper profit from its rescue investment six years ago.
Asked if the Government, much criticised for bailing out Air NZ after the collapse of its Ansett Australia unit in 2001, was tempted to sell part, or all of the shares, he said: "No, very much not tempted to sell part of the shares in this case.
"I think Air New Zealand still needs a very strong continuing shareholder on which it can rely."
Dr Cullen said the airline business was always going to be a fragile because of its highly competitive nature "and obviously running a small airline out of New Zealand does need that kind of strength that the Government shareholding gives".
He called the 61 per cent jump in the airline's net half year profit to $74m "a very pleasing result".
Not many airlines around the world were making a reasonable rate of return, he said.
However, airline chairman John Palmer disagreed saying the board's view was "we are not yet achieving the levels of performance we consider appropriate to properly reward shareholders for the capital employed and associated investment risk".
The Crown's original investment in 2001 cost $892m and in December 2004 it participated in a one-for-six rights issue at a cost of $149m.
Up until today, the Government has received $127m in dividends, so including capital gains, it has made around 14 per cent per year on its investment -- around double its average cost of borrowing.
The company lifted its interim dividend to 3 cents per share from 2.5c a year ago and said it would pay a special dividend of 10 cents per share.
Mr Palmer noted that the airline had completed the first stage of a three-year $2.6 billion capital investment programme with over $1 billion still in the bank and a debt ratio of just 46.7 per cent.
Savings were running better than forecast with $63m trimmed in the half year and $130m expected for the full year.
A four-year cost-saving programme originally targeted to take $245m of costs would actually make $326m in annualised savings.
Mr Palmer said analysts' expectations for the full year profit of $204m to $232m were "realistic".
The Engineering, Printing and Manufacturing Union attacked the airline for planning to outsource 1800 ground jobs.
Secretary Andrew Little said the 60 per cent profit rise showed the airline was not in crisis and could afford to treat its workforce humanely.
Air NZ shares jumped 8c to a three-year high of $2.22 after the news. They had slumped to $1.32 in September 2001 (on a pre-consolidation basis). In August last year, when fuel prices were near their zenith, the stock was down at $1.09.
Jet fuel remains the company's most significant cost, up 13 per cent over the last year and 55 per cent over the same period two years ago.
However, all key metrics, including yield, passenger numbers, revenue, profitability and share price were up, despite significant external pressures.
Operating revenue rose 12 per cent to $2.14 billion with group passenger yields up 10.7 per cent.
Short-haul passenger revenue increased 11 per cent with yields up 8.9 per cent. Long-haul passenger revenue increased 13 per cent with yields up 12.7 per cent.
Cargo revenue rose 20 per cent due to the increased capacity offered by new Boeing 777 planes and higher cargo yields.
- NZPA
