Mike's Minute: Government's socialist ideology threatens Air NZ's success

Author
Mike Hosking,
Publish Date
Mon, 12 Apr 2021, 10:03AM

Mike's Minute: Government's socialist ideology threatens Air NZ's success

Author
Mike Hosking,
Publish Date
Mon, 12 Apr 2021, 10:03AM

I'd love to be able to start the week on the Warriors, but to do that they have to win and when you lose to a useless side there isn't a lot you can say. So maybe next Monday, eh.

Anyway - red flag time. The socialist agenda of this government was on display Friday with the news that they had lent Air New Zealand another $600 million. This is on top of the $900 million already offered up and being burnt through as we speak.

Now, for many this would have meant nothing. The financials of an airline - even if it's our own airline - are not the hot chat for many. But there is an insidious game at play nevertheless.

Air New Zealand are in trouble as are most airlines. They burn cash and until the borders open, they're sinking in debt. It won’t last - borders will open, there is pent-up demand and places like the States are seeing bookings rise and pilots being hired.

The bubble here will help, but Air New Zealand was most profitable when it was ferrying New Zealanders to London, Los Angeles and Beijing - and bringing foreign holiday-makers back.

So in the meantime, what to do. Well, what they were going to do was a capital-raise. In other words, go to the market, offer up a chunk of the company in return for money.

A lot of people have done it. In fact it's been a feature of Covid. The number of people who have asked for cash and not just that - got it - and then some. The world is awash with people with money looking for a place to park it.

Air New Zealand was going to do this by June. Now they're not. They may do it by September. Meantime, our government hands them another $600 million.

Ask yourself why? The $900m was at 8 to 9 % interest - daylight robbery. The $600m is at 5+ % - also daylight robbery.

Why? The government wants to own the airline, the government wants to control how the airline is run.

Why is that dangerous? Because the government can't build a house, it can't deliver light rail and it's run the economy into recession. This government can't run a bath, far less an airline. And when the New Zealand government last ran the national carrier, it went bust.

But that’s not stopping them having another crack. Air New Zealand is now hopelessly beholden to Grant Robertson. They’ll never say it - because they can't - and that’s part of the danger.

The lesson of the modern age of business is that companies operate best, on average, when they're run by experts with no government interference.

That model which has seen Air New Zealand spectacularly profitable these past years is now getting tipped on its head by a government driven by socialist ideology, and a staggeringly-arrogant belief that it actually knows what it's doing.

It won't automatically end in tears but it’s a hell of a lot more likely to, now that Grant used our money to buy a level of influence I would be deeply wary of.