AIR - Air NZ.

[Joshuatree]

Thanks Roger. heres a bit of history re the Govt investment if anyones int.
I guess they will want to sell down at some point.Hey flying within NZ might become more reasonable if they did ehhh
The Crown's Investment in Air New Zealand (Part 1) (16 May 2016)
The Crown's Investment in Air New Zealand (Part 2) (18 May 2016)
The Crown's Investment in Air New Zealand (Part 3) (20 May 2016)

[Baa_Baa]

LOL You've been reading too many of Marilyn Munroe's posts Joshuatree.

As you know already the Government's majority controlling interest protects Kiwi's national interests and provides a reliable source of new capital if for some unknown reason the airline needed it in the future. Something many people aren't aware of is that Government approval is required before any shareholder can own more than 10% of the airline.

This is purely speculative but in my opinion if for some reason the Govt wanted to remove those safeguards, (not that I think this is a good idea and is counter intuitive to protecting our national interest) you can well imagine a carrier like Singapore Airlines being able to borrow cheaply on the international debt market at 2-3% acquiring the airline at a significant premium to the current market price and based on a PE of say 10 giving an earnings yield of 10% this would be strongly EPS accretive for them from the get-go.

Disclaimer: I am not aware of any speculation in business or Govt circles or in any media channell which might suggest this is even a vague possibility.
Only our dear friend Marilyn Munroe's posts suggest this is the best strategy for the Govt.

The OECD report specifically recommends that the government sell AIR and gentailers. Why would they say that?

[couta1]

The OECD report specifically recommends that the government sell AIR and gentailers. Why would they say that?

No matter why, it ain't going to happen in an election year and not in any Labour Govt's term, should they gain power.

[Joshuatree]

You lucky bugger you've got a/the Tardus and have been into the future.Hey who's the winner at Flemington All comers thoroughbred stakes on Feb 8th 2018 on a fast track

Those AIR $ could come in handy to cover the lower tax rate National are parroting on about ehhh.

[Baa_Baa]

No matter why, it ain't going to happen in an election year and not in any Labour Govt's term, should they gain power.

I'm not sure about yours or even if you have one, but in my trading diary (system) I have a tab called 'risks' for every share I own or is on my watch list.

Risks are things that 'might happen', not things that have happened, they can be upside or downside risks.

So making a note of the 'OECD recommendation for the government to sell AIR' is a new risk, whether upside or downside, is just part of my system.

I thought I would try and ask what others here think about why the OECD would say that.

Discounting the risk out of hand by saying "no matter why" suggests a cavalier attitude towards identifying, monitoring and responding to investment risks.

The notion that a Labour government would not entertain any asset sales is slightly helpful, though I would rate that as very low likelihood as it is attached to whether Labour are the government.

In the event that National continue as government, the notion that they might sell AIR based solely on an OECD report in an election year seems highly unlikely, so conversely your suggestion has some merit imo as well.

Taking that a step further, if the National government remain in power past Sept 2017, with their predilection for selling national assets, it seems warranted to maintain at least a moderate risk of them acting on the OECD recommendation (even if not primarily because the OECD recommended it).

My question though is about consequence, not likelihood. It seems to me to be a fair and reasonable question.

If this is all a bit too much for some, maybe they could refrain from flippant off-the-cuff answers. That might give some breathing room for those who might be tempted to post their thoughts, but don't, because this thread is dominated by the fan club who refuse to engage in any existential discussion, beyond financials and moving averages.

The question still stands. "The OECD report specifically recommends that the government sell AIR and gentailers. Why would they say that?"

[Beagle]

Thanks Roger. heres a bit of history re the Govt investment if anyones int.
I guess they will want to sell down at some point.Hey flying within NZ might become more reasonable if they did ehhh
The Crown's Investment in Air New Zealand (Part 1) (16 May 2016)
The Crown's Investment in Air New Zealand (Part 2) (18 May 2016)
The Crown's Investment in Air New Zealand (Part 3) (20 May 2016)

Thanks for the links Joshuatree. Treasury's analysis focus's solely on direct financial returns from dividends and capital return.
It does not take into account indirect returns, taxation and other national interest issues.
The whole issue of international transfer pricing is "red hot" at present. All sorts of international companies doing large amounts of business in N.Z. and paying no or negligible tax here.
I am certain that if Marlyn had her way and AIr was sold to one of the sand state airlines the following would ensue
1. Sand state INC would pay very little if any tax in N.Z. This factor alone could have deprived the N.Z. Govt of over $200m in tax revenue just in the FY16 year
2. Sand State Inc would predominantly use their nationals to staff the airline depriving the N.Z. Govt of a significant portion of the annual PAYE they earn on AIR staff wages of circa $1.1 billion per annum
3. Sand State Inc would charge whatever they like for internal airfares within N.Z. due to their near market dominance and Jetstar would simply play along and extricate significantly more money from the N.Z. economy too.
3b Kiwi's would be effectively held hostage and pay hundreds of million of dollars, potentially as much as $1 billion a year in increased domestic airfares

Treasuries analysis does not look at the bigger picture as their brief is to strictly focus on quantifiable financial returns without considering broader social and national interest issues.

Baa Baa, I suggest you ask the report's author(s). From a conceptual point of view they are probably hypothesizing that Government normally doesn't have a good track record in commercial enterprise.
I think the mixed ownership model is working just fine. OECD recommend all sorts of things from time to time, doesn't mean there's a political will to follow along like a meek sheep to the slaughter.

An awful lot of Governments around the world either own their national airline outright or own a significant stake in it to protect the national interest. I think if one of the sand state airlines owned AIR Kiwi's would find out the real meaning of truly usurious airfares. We can rely on the Commerce Commission to ensure in those circumstances that domestic airfares are fair and reasonable...yeah right, someone please hand me a Tui !

Perhaps you'd be so kind as to post a link to their report which might assist people to see their conceptual point of view.

[peat]

The question still stands. "The OECD report specifically recommends that the government sell AIR and gentailers. Why would they say that?"

Because that is the default position of NGO Think Tanks as a result of the neo-liberal perspectives developed since the Thatcherism/Reaganism/ era that wishes to shrink government on the basis the market knows best.
I'm not judging just sayin.

[Baa_Baa]

Hey Roger, no problem, here's what Marilyn Monroe kindly posted, including the link to the OECD report.

Long term viewers of this thread will be aware I have made repeated calls for John Key to sell the governments share of Cullen Airlines.

Quelle Surprise! The OECD has published a reform agenda paper recommending this;

http://www.oecd.org/eco/growth/Going...aland-2017.pdf

Will the Double Dipper from Dipton follow the advice of policy wonks from Paris?

Boop boop de do
Marilyn

PS Maybe when the Sheik of Etihad, His Excellency Mohammed Al Mazouri learns of this recommendation he will be winging his way to Aotearoa bearing Bill gifts of gold frankincense and A320-NEO options.

[Baa_Baa]

Baa Baa, I suggest you ask the report's author(s). From a conceptual point of view they are probably hypothesizing that Government normally doesn't have a good track record in commercial enterprise.
I think the mixed ownership model is working just fine. OECD recommend all sorts of things from time to time, doesn't mean there's a political will to follow along like a meek sheep to the slaughter.

Lol, Roger, provocative, but I can move past the the sheep jokes, though definitely unhelpful and certainly an unrealistic suggestion to 'ask the reports authors'.

Just read the report, maybe you have an answer to my question. OECD try to justify why they make it. Hopefully we can get to some reasoned discussion.

[Beagle]

Because that is the default position of NGO Think Tanks as a result of the neo-liberal perspectives developed since the Thatcherism/Reaganism/ era that wishes to shrink government on the basis the market knows best.
I'm not judging just sayin.

Lol, Roger, provocative, but I can move past the the sheep jokes, though definitely unhelpful and certainly an unrealistic suggestion to 'ask the reports authors'.

Just read the report, maybe you have an answer to my question. OECD try to justify why they make it. Hopefully we can get to some reasoned discussion.

I have debated this issue at great length with Marilyn before and taken the time to clearly and thoroughly articulate my viewpoint which I succinctly summarized for you in post #10674 above.

For my money Peat has summed it up very succinctly and perfectly.