Air NZ Plans to Sell Virgin Australia Stake by 30th June
4th May 2016
Earlier in March, Virgin Australia lost one of its mayor stakeholders as Air New Zealand flagged a full or partial sale of its stake in the Australian carrier. After an investor briefing held this Tuesday, it seems we have a timetable as to when this might happen.
An analyst for Macquarie Equities Nick Amar attended an investor briefing Air NZ held on Tuesday, where it was revealed the carrier had up to NZ$750 million (about AUS$692 million) of imputation credits available for a special dividend.
"The next catalyst would be the successful divestment of its Virgin stake. The outcome here could be a full, partial or no sale, but the board ideally see this resolved before balance date (30th June)."
Mr Mar also added:
"Air New Zealand see some choppy times ahead as it adjusts to higher capacity from both itself and competitors. It will continue to maximize revenue 'ruthlessly' through capacity management, reallocation of capacity, working with alliance partners and timing of the 767 fleet exit."
Right now, Mar said, Air NZ's international revenue consists about 70 per cent of revenue-sharing deals with partners such as Virgin, Air China, United Airlines, Singapore Airlines and Cathay Pacific. Air New Zealand has more revenue-sharing agreements than any other carrier in the world.
Commenting on this, analyst for Craigs Investment Partners Matt Peek said he did not expect Virgin stake review to be longwinded, saying:
"We expect an announcement potentially in the next few months."
Air New Zealand's 25.9 per cent stake is worth around AUS$300 million at market price and several potential buyers of the entirety or a part of that stake have already surfaced, including fellow Virgin Australia shareholder Singapore Airlines, American-based companies United Airlines and Delta Air Lines and China Southern.
Any government-backed buyers would have to have their bid approved by the Foreign Investment Board and reviewed by the federal Treasurer first. However, this is not very likely to happen before 2nd July and the elections.
Air New Zealand has posted a strong balance sheet and it is expected the airline will report a full-year underlying profit of NZ$843 million, but will likely have earnings fall to NZ$746 million next year, largely because of lower currency benefits and lowered average fare prices caused by competition.