Air New Zealand goes on sale

The Kiwi government is showing some entrepreneurial flair of its own.

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The government of New Zealand has announced it intends to sell down its ownership of Air New Zealand (ASX: AIZ) from 73% to 53%. The company has been placed into a trading halt over Monday and Tuesday while a book-build is organised. With the shares approaching five-year highs, the Kiwis may have chosen a good time to unload a sizeable portion of their holding.

The government took a majority holding in the airline in 2001, after the terrorist attacks of September 11 and industry crisis that followed. The mixed-ownership model has proven successful, with the government receiving over NZ$500 million in dividends since 2001, while providing support for the airline to execute its turnaround programme.

Air New Zealand has easily outperformed rivals Qantas (ASX: QAN) and Virgin Australia (ASX: VAH) in 2013. The company owns 23% of Virgin Australia with speculation that it may move to assume full control. The two airlines are allied in flying the critical trans-Tasman route.

The business posted a net profit after tax of NZ$182 million for financial-year 2013, up 156% on the prior year. Operating cash flow of NZ$750 million was also a record for the business. An attractive yield of approximately 4.55% is also available at current prices.

Foolish takeaway

The airline business is notoriously competitive and this remains a key risk. In its home New Zealand market, ruthless price competition from low-cost carrier Jet Star could yet cause turbulence ahead. The investment in Virgin Australia is also a strategic gamble — the results of which are yet to fully play out. Air New Zealand will have to fight hard to continue its recent success.

Motley Fool contributor Tom Richardson does not own shares in any of the companies mentioned in this article. 

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »