Jones-Air NZ spat a chance for Govt to rethink how it uses its slice of airline

Wednesday, 21 March 2018

OPINION: Coverage of the locked horns between Shane Jones and Air NZ in recent days could fail to uncover the real issue at play – and therefore any potential solution to the standoff.

Jones has criticised Air NZ for failing to support some regional flight routes, with the recent silly announcement of it stopping its services from the Kāpiti Coast to Auckland. This has followed other such routes to Kaitaia, Westport and other centres over the past few years.

It's easy to write this stoush off as 'Politician oversteps, Private Company corrects.' However, there is something deeper at play. The Government owns 52 per cent of Air NZ. The original purchase of 82 per cent of the company, in the form of an $885 million bailout in 2002, was to save it from certain insolvency. This paid off, and New Zealanders remain grateful that their proud national carrier was saved.

The enduring purpose of a public share of ownership, particularly in the face of recently announced eye-watering profits, could now seems hazy to some. The remaining reason appears to be no more than a fat dividend on the balance sheet of the Government, thereby allowing them to spend the revenue in any area that takes their fancy.

* PM defends Shane Jones' warning to Air NZ to stop shutting down regional flights

* Concern for future of Kāpiti Coast Airport after Air NZ axes flights

* Shane Jones calls for Air NZ chair to step down, asks CEO to step down or shut up**

The opportunity that Shane Jones presents to the Government, is to update the purpose in its publicly owned shares of Air NZ. The Government appears to want to direct management as the majority shareholder, and management is saying, 'leave us alone to do our job'. Politicians – or governors here – must set the purpose of their interest; in this case the public interest in owning shares in Air NZ. The management of the company must deliver the results.

Air New Zealand has delivered those results spectacularly, while enhancing a high quality and world-renowned brand.

Neither side is incorrect in their respective positions to date. The minister is demanding a return on the investment of Kiwis in their airline, while the company stating the view that the board requires an arms-length interest from politicians.

The outstanding question however is; if the public has shares in a national airline that makes a significant profit and which has set about divesting nationally important regional routes; why would the public keep its interest? Surely, once moving into profitability, there must be some additional significant public good? Or is the public end just the profit in this case?

Nick Leggett: The opportunity that Shane Jones presents to the Government, is to update the purpose in its publicly owned shares of Air NZ.

This is not written with a slant that suggests the Government should sell its shares. Essential monopolies should usually be owned by government, so the public gains from both the services they deliver and the profits they make.

In the case of Air NZ, the solution is about the Government re-establishing the 'why do we own these shares?'

There lies a political answer to a regional economic problem. The Government could choose to set aside a portion of its dividend from Air NZ and ask the airline management to reinvest it in kick-starting those regional routes (yes, a subsidy!) that are important to jobs and growth and to the local shareholders who live and do business in those areas (taxpayers).

There can be a greater benefit to taxpayers in owning a large slice of Air NZ. Minister Jones could help enhance that benefit immediately by suggesting to Cabinet that it ringfence and reinvest its dividend and work with the company to restart regional routes. That will test whether Minister Jones' attack on Air NZ was just populist words, or the start of a re-striking of the purpose of public ownership, and more importantly, public benefit. New Zealanders will be all ears as to what happens next.

Nick Leggett is a director of Wellington Regional Council Holdings Ltd and a former mayor of Porirua City.