Air NZ Capital Need “Misinterpreted”


“A Reuters` report claiming Air New Zealand needs NZ$670 million on top of money already pledged by the New Zealand Government to remain a viable entity over the coming year is incorrect.


“The report misinterprets the content of a November Cabinet paper on the company`s need for an injection of additional capital.


“The Cabinet paper refers to the company`s need for $1.705 billion in additional capital to achieve a workout and contains recommendations for the provision of Government funding of up to $1.035 billion.


“The Reuters` report misinterprets this to mean that the company needs an additional $670 million to remain viable over the coming year.


“In fact, the $1.705 billion referred to in the Cabinet paper is a sum that Government advisers initially estimated would be required to achieve a gearing target of 65% debt to debt plus equity.

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While the 65% gearing target represents a desirable capital structure, it is incorrect to infer that the company would not be viable if it was not achieved in the coming year.


“The workout is to be over an extended period of time, and there are other means available to the company to improve gearing which do not require the capital gap to be funded entirely by further equity. These means include asset sales and improved and retained profits.


“The company currently has in excess of $550 million on short-term deposit and there is no reason to believe it is not viable over the coming year given its current position.”

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