AIR - Air NZ.

[Poet]

Mean I know calling it Ansett but they should have known better so deserve it and I might yet make mention of Ansett MK2 fiasco at the next ASM, we will see.

So what's my wish list for the period between now and the annual meeting.

1. A clean and complete exit from Virgin that includes repayment of that short term loan they recently advanced to them. If they have to take a haircut on their misadventure then so be it but I'd like the exit to be clean, tidy, complete and executed before the next annual meeting.

2. A deal that includes an ongoing alliance between the two carriers, code sharing on flights in a way that's mutually beneficial.

3. Anything more than $350m Kiwi provided its clean and tidy is something I would see as a reasonable exit from this mess.

4. Continue to execute well and deliver an underlying profit of not less than $900m before tax for the year.

5. Last and by no means least - Pay out the full proceeds of the Virgin sale to shareholders

Until they can prove they can clean up this mess in a satisfactory manner I think the shares are fair value at around $2.85.

Disc - I presently hold only a modest position.

It seems to me they could achieve that objective by simply distributing their shares in VAH to the current shareholders of AIR.

[Beagle]

Poet. In theory yes but there's very little in the way of a free float in Virgin, vast majority is tied up by airline shareholders who bought in for their own reasons.

If we all tried to dump our Virgin shares on the Aussie market guess what would happen to the price

Some Chinese airlines are growing capacity to Australia by 50% this year so hopefully one of them will take this motley canine off AIR's hands at something like fair value.

[777]

Have a read.

http://www.afr.com/business/transpor...0160331-gnvds9

[winner69]

Poet. In theory yes but there's very little in the way of a free float in Virgin, vast majority is tied up by airline shareholders who bought in for their own reasons.

If we all tried to dump our Virgin shares on the Aussie market guess what would happen to the price

Some Chinese airlines are growing capacity to Australia by 50% this year so hopefully one of them will take this motley canine off AIR's hands at something like fair value.

Motley canine - very linguistic of you

[boysy]

Interesting article 777 lets just hope an existing or new shareholder is happy to pay up for air nz stake

[Beagle]

Yes it is a fascinating read, thank you 777. This has been building for some time I believe. About this time last year was when the cracks in the relationship between Borghetti and Luxon first appeared in public. C.L. came out in the media and basically said that Virgin should be making a profit already and in a thinly disguised manner was critical of management for not achieving it, (by early 2015).

Been some interesting articles on this matter behind the paywall on NBR too...not quite a juicy as this one but interesting nonetheless. Basically AIR is better doing their own thing and they should pay out the Virgin sale money in the manner I suggested or an on market buy-back. Govt will be happy to see a special dividend no doubt whatsoever about that.

[mikeybycrikey]

And to celebrate AIR have some ripper specials which you'd almost think were an April fools joke on grabaseat...like under $500 return to Honolulu on a Dreamliner !

And if you had got on the bus to Hawaii, you could've got to Honolulu for even less: https://www.facebook.com/AirNewZeala...3515909580777/

This is Air NZ's marketing team at its best. Forgetting all the noise here about Virgin, electric cars and everything else, this sort of video is part of what make AIR such a great company.

[Hoop]

Some good posts around the time of AIR buying the VAH stake..some had doubts as to why ... some thought it was a good strategic protective and gain access move....
see those posts starting at page 33

TA's OBV indicator thought it was just plain dumb!! see chart below

Also some posters doubted the TA.... see screen grab below
In all fairness Jaa's postings around this time were very informative

[RTFQ]

From the AFR 30Mar16

Air New Zealand could sell its stake to either Etihad or Singapore Airlines if minority shareholders supported the move. It could also mount a full takeover of the airline or sell the stake to a third partly, possibly a Chinese or American airline seeking to expand in the region

Read more: http://www.afr.com/business/transpor...#ixzz44ikfcpn8


Roger what do think of the Takeover chances suggested in the above?

Regards

[Beagle]

RTFQ - Pretty clear AIR want to sell and crystal clear Chris Luxon no longer has confidence in Borgetti. Sorry folks in advance if this post is a bit fractured / disjointed but this is a collection of my thoughts on this matter over the last few days.

No chance whatsoever of AIR taking over Virgin if that's what you are asking me. They simply don't have the balance sheet strength to execute the deal without materially compromising their own position, risks vastly outweigh the rewards. No way the N.Z. Govt as major shareholder would approve that and extremely unlikely that they could convince the other airline partners in VAH its a good idea and / or getting approval from Canberra to take their stake above 49%.

Most likely outcome in my opinion is AIR selling its stake pro rata to remaining airline shareholders...they could well have pre-emptive rights to acquire same anyway.

Second most likely outcome is outright sale to another airline outside of existing shareholders, probably one of the Chinese airlines that are growing capacity into Australia 50% this year.

An in-specie distribution to AIR shareholders is also highly unlikely as it would leave the crown with a large stake in an airline that the board have lost confidence in.

I think we and especially I, need to take a deep breath here and reflect.

1. Neither Chris Luxon or Tony Carter were at the helm when the initial stake was taken in Virgin.

2. This is pure speculation on my part but I think its highly likely that the reason they lent Virgin the money a little over a week ago was because they had a pre-existing contractual obligation to do so.
Often partners have signed heads of agreement that if their baby need s further support they have a legal obligation to act in their associate companies best interests on a pro rata basis.

3. Chris Luxon has been rooting for better financial performance for quite some time. He was on record about a year ago basically saying their financial performance wasn't good enough. I said the same thing on here at the time.

4. Other airline partners are prepared to take a longer view and are prepared to continue to back the CEO Borghetti so there was little C.L. could do and I think basically his position on the board became untenable after he called Borgetti out and the other shareholders wouldn't back him.

5. Good that we have Tony Carter who strikes me as an absolute gentleman to come to the rescue and calm the waters and hopefully that still means AIR and VAH can enjoy a mutually beneficial alliance going forward.

Been thinking about this a lot this weekend. Chris Luxon is a relatively young CEO and obviously has plenty of fire in his belly. I like that he's taken an aggressive approach here and won't tolerate mediocrity which is probably what Borgetti represents.

Bottom line is Australian unions are extremely powerful and have long outdated work practices and unless the CEO is prepared to take them on head to head like QAN's CEO did and get a wage freeze, costs of labour will be extremely high. Any wonder why a spokesman of the pilot's union in Australia said things are good at Virgin ?...they probably are very good for the senior pilots and other senior workers but not for the shareholders that's for sure !

C.L. isn't happy with the return on equity that Virgin is returning to AIR and neither am I. No way with Borghetti's track record the company deserves more capital, risks outweigh potential rewards.

Someone has to clean up Rob Fyfe's mess and Mr Luxon and Mr Carter are in my opinion the right men for the job. If they did nothing AIR, as I suggested the other day would be on the hook for potentially another $A300m further equity as their share to get VAH to a 2:1 debt to equity balance sheet, which is far from robust so that's the minimum really. Someone has to stand up and say enough's enough... VAH's performance is pathetic at a time when most other airlines in the world have record profits and I am pleased Chris Luxon had the courage to do it. Tony Carter is the perfect diplomat to patch things over and help retain a mutually beneficial alliance notwithstanding the potential forthcoming sale.

I always thought those two would work well together...Tony the calmer older gentleman and Chris Luxon the fire in his belly CEO ruthlessly pursuing efficiency and greater profitability and growth.
I will give them the benefit of the doubt as to why they advanced that loan to VAH and will assume its because for one commercial reason or another they had no choice.

I'd be curious to know how others feel who have sold because of the loan now they know AIR have put their stake in VAH on the market ? Does the decision to sell change your view of management ?
Worth giving the team at AIR a chance to clean up Rob Fyfe's mess ? What happens if AIR makes an announcement in due course they've sold and contemporaneously announces a special dividend of 15 cps fully imputed and a $150m on market buy-back and you have no shares ?

As for me, I might look to accumulate back some of the shares sold on any further weakness and / or depending on monthly operating stat's in due course and get back to a normal balanced sized shareholding for my portfolio, (neither underweight nor overweight).