New Zealand to Sell Airline, Bank to Help Reduce Debt

The New Zealand government said Wednesday that it would sell the national airline and the country’s leading savings bank for a total of $840 million to help repay its foreign debt.

Air New Zealand and PostBank are being sold to raise funds to help repay a total foreign debt of more than $19 billion. It decided to retain the leading trading bank in the meantime because bids were not high enough.

New Zealand has never reneged on a repayment but the nominally Socialist government believes that the burden is too high and that it should not be involved in commercial enterprises.

The government said asset sales in the financial year ending next March now total almost $1.1 billion.

The series of deals virtually wipe out its projected budget deficit, but deferment of the sale of Bank of New Zealand leaves it about $630 million short of a planned surplus.

The announcement overshadowed Prime Minister David Lange’s victory over fired Finance Minister Roger Douglas in a Labor Party leadership vote. Lange won 38-15 with two abstentions in the contest that followed his dismissal of Douglas last week after a year-long feud over economic policy.

Douglas is a staunch advocate of debt repayment and tight monetary policies to curb inflation. He has accused Lange, concerned about rising unemployment, of overturning his policies without Cabinet approval.

Qantas Is a Partner

New Finance Minister David Caygill and State-owned Enterprises Minister Stan Rodger said in a joint statement that profitable Air New Zealand would be sold to a consortium led by Brierley Investments, a leading local company, and Australia’s Qantas Airways for $418 million.

They said PostBank would go to Australia’s ANZ Banking Group for $421 million.

The ministers said the government would not sell its 84% stake in Bank of New Zealand at present because no bid was high enough. Some analysts have estimated the holding to be worth about $630 million.

The consortium that won Air New Zealand includes American Airlines and Japan Air Lines, which will each get 7.5%.

Brierley gets 65%, with 30% to be sold to the public and staff, and Qantas 19.9%. The remaining “Kiwi” share will be held by the government to ensure the airline retains its New Zealand identity.

A rival consortium that included British Airways, Japanese tourism investor EIE Development and local investment bank DFC New Zealand said it was disappointed in the outcome but wished Air New Zealand well.

“We are confident that this new ownership arrangement is in the airline’s best interest, and will assure that it remains a competitive, viable airline on the international scene well into the future,” Caygill and Rodger said.

They said PostBank’s sale to ANZ Bank, one of New Zealand’s four leading trading banks, ensured it would continue.

PostBank was set up when the New Zealand Post Office was split into postal, banking and telecommunications corporations last year.

Apart from Bank of New Zealand, the sales virtually complete the government’s privatization program for 1988. Many other assets worth billions of dollars remain on the auction block, including forests and possibly telecommunications.