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Cabinet paper

Cabinet Paper DEV-19-SUB-0072: Air New Zealand (Air NZ) Aircraft Replacement Transaction

Issue date: 
Wednesday, 20 November 2019
Version note: 

Some parts of this information release would not be appropriate to release and, if requested, would be withheld under the Official Information Act 1982 (the Act). Where this is the case, the relevant sections of the Act that would apply have been identified. Where information has been withheld, no public interest has been identified that would outweigh the reasons for withholding it.

Document Date: 
Wednesday, 10 Apr 2019
Publication category: 
Ministerial Portfolio: 
Finance

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Cabinet Paper DEV-19-SUB-0072: Air New Zealand (Air NZ) Aircraft Replacement Transaction

Proposal

1. Air NZ is considering purchasing and leasing a number of new aircraft and engines to replace its Boeing 777-200ERs, which are around 13 years old. The current plan is to exit eight Boeing 777-200ER aircraft in 2022 to 2025. This paper is to inform Cabinet of my intention, as shareholding Minister for Air NZ, to support the widebody replacement transaction (the transaction).

Background

2. Replacement of aircraft is a business as usual activity for Air NZ. However, Air NZ’s proposed widebody replacement would be a “major transaction” under the NZX listing rules, but not under the New Zealand Companies Act, where the threshold for a “major transaction” is higher.

3. This means the transaction, being a series of aircraft and engine purchases, requires approval by the majority of Air NZ’s shareholders. This ultimately means shareholder approval can be provided by the Crown alone, given the Crown owns 51.9% of Air NZ. Understandably Air NZ is seeking Crown support before progressing its negotiations further.

4. Air NZ has advised that it intends to fund the transaction from its own balance sheet and the transaction is not expected to have any direct impact on dividends. The improved economics of the new fleet should provide greater financial resilience for Air NZ, compared with the 777-200ER fleet, and therefore provide greater support for future dividends. The transaction cash flows will be spread over several years.

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Last updated: 
Wednesday, 20 November 2019