Annual Report 2001 Air New Zealand Limited
AIR NEW ZEALAND LIMITED ANNUAL REPORT 2001 Brought to you by Global Reports KEY RESULTS
Financial • Net Loss after Tax for the Group1 of $1.4252 million (207.1 cents per share (cps))
• Net Loss after Tax, excluding Unusual Items of $173.0 million (25.1cps)
• Cash Flow From Operations of $146.3 million (21.3 cps)
• Revenue up 117.7 percent to $7,960.1 million
• Net Debt to Book Capitalisation (including off-balance sheet items) of 93.7 percent
• Total Dividend for year of 4 cps (no final dividend)
Operational • Flew 21 million passengers (up 1.1 percent) to 190 destinations
• During Ansett fleet groundings managed to deliver 95 percent of passengers to their destinations on the scheduled day at critical Christmas and Easter periods
• Flew an extra 25,000 domestic New Zealand passengers in the week following the collapse of Qantas NZ
• Successfully launched Freedom Air in the New Zealand domestic market
Subsequent Events Ansett
• Ansett Holdings Limited placed was into voluntary administration on 12 September 2001
• The effect of this has been to cause Air New Zealand to recognise additional losses of approximately $350 million. This amount includes allowance for the $185 million settlement between the company and the Voluntary Administrator of Ansett
International Aviation
• Terrorist attacks in the United States on 11 September have had a significantly negative impact or airlines internationally
• Consequently, Air New Zealand has initiated schedule changes to respond to lower demand
Recapitalisation
• Plan announced to seek shareholder approval to recapitalise Air New Zealand by up to $885 million through the placement of new shares to the New Zealand Government
• $300 million was received on 15 October as proceeds of a loan agreement with the New Zealand Government. Repayment of this loan is proposed to be by issue of convertible preference shares as part of the above recapitalisation.
1 “The Group” throughout this release refers to all Air New Zealand consolidated businesses (including Ansett Holdings Limited and subsidiary companies). 2 All currency amounts are in New Zealand dollars unless otherwise indicated Brought to you by Global Reports KEY INDICATORS CONTENTS
ASKs* REVENUE EARNED (Millions) (NZ$ Millions) Key Results IFC 60,000 8000 7960
7000 Contents 1 50,000 50017 6000 Directors’ Report 4 40,000 5000 Management Discussion
29624 28995 28946 30114 30,000 4000 3656 and Analysis 5 3359 3089 3000 2931 20,000 Board of Directors 11 2000 Corporate Governance 12 10,000 1000 New Zealand Stock 0 0 97 98 99 00 01 97 98 99 00 01 Exchange Disclosures 14
Group Financial Statements 16
Statement of EARNINGS PER SHARE CASHFLOW PER SHARE Accounting Policies 20 (Cents per share) (Cents per share) Notes to Financial Statements 24 40 38 70 69 29 26 Auditor’s Report 53 20 60 58 59 Ten Year Statistical Review 56 0 50 -40 Shareholder Information 58 40 -80 Directors’ Statement 66 30 28 -120 -106 21 Air New Zealand and 20 -160 Star Alliance Partners -200 10 Route Network 67 -207 -240 0 97 98 99 00 01 97 98 99 00 01 Corporate Directory 68
TOTAL ASSETS GEARING (NZ$ Millions) (%)
9,000 8965 100 93 8114 8,000 90
7,000 80 76 70 6,000 60 56 5,000 52 53 4391 4104 50 4,000 3356 40 3,000 30
2,000 20
1,000 10
0 0 97 98 99 00 01 97 98 99 00 01
1 Brought to you by Global Reports DIRECTORS’ REPORT
The 2001 Financial Year and subsequent months have been among the most demanding in Air New Zealand’s history. The company has faced challenges unprecedented in the airline industry generally and at Air New Zealand specifically. We close the period with a recapitalisation proposal to be put at our forthcoming Annual Meeting which, if approved, will see the New Zealand Government return as the largest shareholder of Air New Zealand. This recapitalisation proposal would also result in Air New Zealand’s financial position being returned to a more sustainable base from which it can re-develop its strength as the New Zealand national flag carrier. Since acquiring the second half of Ansett Holdings from News Corporation in late June 2000, the Air New Zealand-Ansett Group has endured extremely adverse operating conditions. Much of this has been extensively covered in the media, but still warrants comment in this Annual Report for the 2001 Financial Year. At an industry level, high fuel costs, low exchange rates and intense competition have suppressed airline profitability globally. These influences were foreshadowed in Air New Zealand’s previous Annual Report. Notwithstanding this, the degree to which these factors would affect the company was not known at that time and they have had a significant impact on our 2001 financial year results. For example, the combination of high oil prices and low exchange rates resulted in Air New Zealand’s fuel bill for the year increasing by $378 million. Additionally, intense competition in the Australian domestic market resulted in Ansett Australia’s revenues under-performing budget significantly. At a Company level, these influences had a major detrimental effect on the Company’s integration programme for Air New Zealand and Ansett. This programme was intended to capture the significant cost savings and revenue enhancement opportunities that under-pinned the logic for bringing the businesses together. The establishment of a successful Air New Zealand-Ansett Group had always been expected to be a substantial task in view of the issues confronting Ansett. However, the detail and extent of the problems (especially poor maintenance planning) found at Ansett once Air New Zealand had assumed management control from News Corporation was greater than expected. The consequence was unacceptable reliability and punctuality performance which in turn lowered customer satisfaction and manifested itself in declining market share. This issue was most obvious when it led to the groundings of the B767-200 fleet during the Christmas and Easter holiday periods. These groundings occurred as a result of issues uncovered when rigorous maintenance procedures were applied to the Ansett fleet. Problems identified were notified, as legally required, to CASA which decided to halt flying until it could be assured that safety was not being compromised. The impact of this was to dent customer confidence and further market share was ceded to competitors. To address these issues Air New Zealand’s new management team early in the second half of the financial year implemented a two pronged strategy to recover Ansett’s performance. The solutions first involved addressing Ansett’s performance as a full service airline to recover its share of the premium business travel market. The second element of the strategy required development of an opportunity for the Air New Zealand-Ansett Group to compete in the rapidly evolving low cost airline market. Ansett was facing entrenched high costs, unreliable and outdated product and aggressive competition both from Qantas as a full service airline and from new entrants at the budget operator level. This left Ansett losing market share in both sectors and having to follow the enormous pricing discounts being offered at all market levels.
2 Brought to you by Global Reports Ansett’s strengths included its dedicated staff, loyal customer base and well-established brand. These were a key part of the basis on which the company was confident its recovery strategy would succeed. It was understood that Ansett’s recovery would require tough measures on cost reduction while investing heavily in catching up a large backlog of aircraft maintenance falling due during 2001 and 2002. This in turn required substantial capital investment in additional and newer aircraft capacity initially to maintain and then to grow Ansett’s services. Further capital was required to improve in-flight product and terminal standards to remain competitive. With lower costs and revitalised product, Ansett would have been well placed to recover its market share and profitability. Both the established major airlines in Australia had to react to the new entrants offering different service levels. The unrealistic pricing offered by these operators soon saw Impulse facing financial failure until it was effectively acquired by Qantas. Ansett was left without a response in the low cost market and discussions with owners of the new Australian low-cost entrant Virgin Blue were entered into while parallel options, including the expansion of Freedom, were developed. A successful outcome in that market would have added significant value to Ansett itself as it focused on its traditional full service airline role. The deteriorating profitability of Ansett in a rapidly changing industry and newly highly competitive domestic market in Australia, on top of poor financial performance of Air New Zealand’s international operations, meant however that the short term demand for capital to fund Ansett’s revival and establish a position in the low cost market was beyond the existing financial resources of Air New Zealand. Following extensive work by management and by industry advisers, an initial recapitalisation plan was discussed with the New Zealand Government in June 2001 and a formal proposal followed in mid-July. The proposal, supported by Singapore Airlines, included a plan to increase Singapore Airlines’ share ownership to 49 percent by way of a share placement. This placement was proposed to be followed by a pro-rata rights issue to all shareholders and a potential capital notes issue. Combined, these initiatives would have raised capital in excess of NZ$1 billion, allowing Air New Zealand to sustain the ongoing losses at Ansett while completing the integration programme, upgrading the fleet and acquiring Virgin Blue, all of which would have put the business on a sound competitive footing. Ultimately this plan was not able to be implemented due largely to delays in the approval process exacerbated by an untimely intervention by the Australian Government promoting a competing Qantas proposal. As industry and market conditions worsened, Singapore Airlines in early September retracted its support for a share placement at a price sufficient to raise the required capital, rendering the original proposal unworkable. A further recapitalisation proposal was announced in conjunction with the release of Air New Zealand’s 2001 Financial Results on 13 September 2001 after the Board had been left no option but to place Ansett into voluntary administration to prevent the collapse of Air New Zealand itself. However, as the implications of the 11 September terrorist attacks in the United States became more evident, the composition of the capital from this proposal was also recognised to be insufficient. In particular as a large part of it (the Government’s contribution) was interest-bearing debt. In addition the fact that the whole of the proposal was subject to due diligence by the major shareholders and the Government rendered its successful implementation too uncertain, in the Directors’ view, given the changed global environment.
3 Brought to you by Global Reports On 4 October 2001 the Air New Zealand Board, its major shareholders and the New Zealand Government announced a new and substantially different proposal to shareholders. This new proposal would provide a substantial capital injection from the New Zealand Government, resulting in it gaining a significant majority shareholding. The proposal also included the previously planned merging of the company’s A and B shares into one class. This proposal will be presented to shareholders for their approval at either the Annual Shareholders Meeting scheduled for 19 December 2001 or at a Special Meeting in January 2002. If approved, the proposal will result in the New Zealand Government providing Air New Zealand with up to $885 million in new equity. The proposal has the support of our current major shareholders, Singapore Airlines and Brierley Investments. Full documentation including an Independent Appraisal Report and other relevant information will be sent to shareholders prior to the meeting. The Board is unanimously in favour of the proposal as the best path forward for Air New Zealand. The Board is highly conscious that this has been a tremendously difficult year for shareholders as the company’s share price has suffered from the effects of both the poor global airline environment and the very poor profitability of Ansett. As Directors we sincerely regret the need to place Ansett into voluntary administration and the impact it has had on shareholders, employees, customers and suppliers. As part of the new recapitalisation and restructuring plans we have reduced the size of the Board from a maximum of thirteen members to eight and halved the fees payable to Directors. With the changes to the Board we note the retirements of the Chairman, Sir Selwyn Cushing and directors Hon Philip Burdon, Mr John Curtis, Mr Charles Goode, Professor John Rose, Mr Michael Tan and Mr Greg Terry, and thank them for their contribution. We also welcome Mr Roger France, appointed to the Board of Directors following his valuable independent financial advice during the difficult weeks of September and October. Mr Gary Toomey, who unfairly bore the brunt of much personal criticism from Australia after the Ansett collapse, resigned from the position of President and Chief Executive Officer on 9 October 2001. Mr Toomey and the entire management team led by him worked extremely hard during the course of this year and it is doubtful that many of the Company’s critics have any real appreciation of the difficulties with which they were struggling. We have initiated a search for a new Chief Executive Officer, a process we expect to take up to six months. In the interim Mr Roger France has been appointed to the role of Executive Director, acting as the interface between the Board and the senior executive team. Finally we want to thank our customers, suppliers and staff for their support through this period. With their continued support, and the support of our shareholders, we look forward to restoring the strength of the Air New Zealand brand and our market positions and to rebuilding a prosperous company.
For and on behalf of the Air New Zealand Board of Directors
Dr J A Farmer QC ACTING CHAIRMAN
4 Brought to you by Global Reports MANAGEMENT DISCUSSION AND ANALYSIS
Consolidated Financial Results Overview3 ASKs* Extremely difficult trading conditions throughout fiscal 2001 have resulted in (Millions) the Group reporting a Net Loss for the year, excluding Unusual Items, of $173.0 million for the financial year ended 30 June 2001. 60,000
The Net Loss before Tax, Earnings From Associates and Unusual Items for the 50,000 50017 Group was $280.2 million, down $423.5 million on the previous financial year. 40,000 Group Earnings Before Interest and Tax was a loss of $53.7 million, down 30114 $269.1 million on the 2000 fiscal year. 30,000 29624 28995 28946
The full results for the fiscal year included significant Unusual Items. Most 20,000 important amongst these was the write-down of the carrying value of the Net Assets of Ansett, resulting in an Unusual Loss of $1.321 billion in the Group 10,000 Accounts. In total, Unusual Items after Tax contributed a loss of $1.252 billion 0 for the financial year. 97 98 99 00 01 As a consequence the Group recorded a Net Loss after Tax, Earnings From Associates and Unusual Items of $1.425 billion or $2.07 per share. REVENUE EARNED Cash Flow from Operations (net of funding costs) was $146.3 million (21.3 cps), (NZ$ Millions) a decrease of 69.2 percent on the 2000 financial year. 8000 7960
Dividend 7000 6000 The Board of Directors of Air New Zealand has not declared a final dividend for the year to 30 June 2001. The total dividend for the year to 30 June 2001 5000 therefore remains as an unimputed four cents per share. This dividend was 4000 3656 3359 3089 declared on 20 February 2001 and paid on 30 March 2001. 3000 2931
2000 Trading Environment 1000 The Group result was adversely affected by a number of conditions during 0 the year: 97 98 99 00 01 • Fuel prices were sustained at historically high levels; • The New Zealand and Australian dollars reached record lows against PAX REV PER RPK the US dollar; (Cents) • New entrants and intense competition resulted in unprecedented 18 discount fares; 16.9 16 • Australian domestic travel levels were low during the Sydney Olympic 14 13.1 Games period; and 12.2 12 11.4 • Groundings of Ansett B767-200 aircraft at Christmas and Easter added 10.9 10 costs and impacted market share. 8
Tourism flows remained reasonably strong for both New Zealand and Australia 6 during the 2001 financial year. However, slowing global economic activity and 4 recent terrorist attacks have impacted demand, particularly from high yield 2 customers on some of the key international routes. 0 97 98 99 00 01
3 The Statement of Financial Performance for the year ending 30 June 2001 includes for the first time a full consolidation of the results of Ansett Holdings Limited, following the completion of the acquisition of this business on 23 June 2000. As a consequence, many year-on-year comparisons of items within the Statement of Financial Performance show large one-off changes. The Statement of Financial Position as at 30 June 2000 included a full consolidation of the position of Ansett Holdings Limited and therefore comparisons with the current year Statement of Financial Position do not show the same one-off changes.
5 Brought to you by Global Reports The Australian and New Zealand airline markets entered a period of significant structural changes during the year. There were two discount carrier start-ups, two significant airline collapses, three Australian regional airline failures, and a significant expansion in operating capacity by the Group’s major competitor. Also, on 12 September 2001, Ansett Holdings Limited and its subsidiaries were placed into Voluntary Administration.
Group Operating Results Group operating results for fiscal 2001 reflect the outcome of the full year of the integrated operation of Air New Zealand and Ansett airlines which accounts for the significant variations from results for the previous year. Aircraft capacity for the Group was 50.0 billion Available Seat Kilometres (ASKs), up 66.1% from the 30.1 billion ASKs flown by Air New Zealand (alone) during the previous corresponding period. Total operating revenue for the Group rose to $7.960 billion, an increase of $4.304 billion over the prior year following inclusion of the contribution from Ansett Australia. Passenger revenue increased 122.2% to $6.091 billion. Total operating expenditure for the year was $8.014 billion, an increase of $4.573 billion when compared with the previous financial year. This increase was primarily attributable to the full year inclusion of the Ansett Group.
Air New Zealand Operating Results Air New Zealand international operations posted EBIT losses of $50.9 million as high fuel costs and weakening global economic conditions impacted international services. The majority of these losses were incurred on trans-Tasman operations. The revenue improvement due to the strength of the US dollar was more than offset by increases in fuel costs and other foreign currency denominated expenditures. Air New Zealand’s international operations recorded 28.3 billion ASKs, up 3.9% when compared with the 2000 fiscal year. This increase reflects increased services to Japan and Los Angeles offset by the withdrawal from uneconomic services between Los Angeles and Frankfurt and Los Angeles and Honolulu. RPKs increased by 5.7%, driven partially by Olympics traffic, however yields were largely unchanged year-on-year once the impact of foreign exchange gains were removed. Air New Zealand’s domestic New Zealand operations performed well, delivering EBIT of $149.3 million for the financial year, up 24.8% on the prior period. The collapse of Qantas New Zealand provided Air New Zealand with both the opportunity and the challenge of providing service for much higher passenger numbers, resulting in higher load factors of 67.9% on capacity growth of 5.3%. Significant yield improvement of 11% was also achieved. Although Air New Zealand’s domestic New Zealand operation continues to face strong price competition on the main trunk routes servicing Auckland, Wellington and Christchurch, it continues to be a solid base of profitability. The introduction of Freedom Air, with its low cost base, enables the Company to operate effectively in this increasingly important part of the airline market.
6 Brought to you by Global Reports Ansett Operating Results NET PROFIT (LOSS) The extremely difficult trading conditions in the domestic Australian business (NZ$ Millions) were evident through the Ansett domestic4 EBIT loss of $165.4 million. This 200 loss was a consequence of the intense competition from two new entrants and 172 164 150 Qantas resulting in significant yield declines, coupled with increased fuel and 150 130 foreign exchange costs. The grounding of Ansett’s B767-200 aircraft twice 100 during the year also affected earnings. 50 0 A slight decline in Australian domestic Revenue Passenger Kilometres -50 (RPKs) resulted in a relatively stable load factor of 74.0%. On a year-over-year -100 basis yields declined by 13.8% (in Australian dollar terms) due to intense -150 price competition from new entrants and Qantas across the Australian -200 domestic network. -250 Ansett International made an EBIT loss of $22.8 million and a loss of $16.5 -300 -280 million at the Associates level. Passenger revenue increased due to yield 97 98 99 00 01 (excluding unusual items improvements and the introduction of Melbourne-Hong Kong services. Total and taxation) revenue increases were not sufficient to cover the total of the increase in cost of fuel, resulting in an overall operating loss. EARNINGS PER SHARE Ansett International’s aircraft capacity declined marginally (0.7%) during the (Cents per share) financial year, primarily due the reduction of services to Fiji following political unrest in that country. The 1.2% decline in RPKs meant the load factor fell 40 38 29 26 0.3 percentage points. 20
Additional Capital 0 -40 As a consequence of the write-downs in relation to Ansett determined by the Board on 12 September 2001, total equity in the Group fell from -80 $1.839 billion to $518.0 million. Group gearing5 at 30 June 2001 rose -120 -106 to 93.0% from 75.7%. -160
On 13 September, in conjunction with the announcement of the unaudited -200 -207 financial results for fiscal 2001, the Board of Air New Zealand announced a plan -240 to recapitalise the Company to enable it to continue operations from a more 97 98 99 00 01 stable base. This plan involved equity injections from Air New Zealand’s two major shareholders of NZ$150 million each and a two-stage loan from the New Zealand Government of up to $550 million. CASHFLOW PER SHARE (Cents per share) As the fuller implications to the airline industry of the 11 September terrorist attacks in the United States became apparent, it was clear that 70 69 this recapitalisation plan would not be sufficient. On 4 October a revised 60 58 59 recapitalisation plan was announced under which it is proposed that up to $885 million in equity will be provided by the New Zealand Government 50 in return for a substantial shareholding in Air New Zealand. This plan is 40 intended to be put to shareholders for their approval at the 2001 Annual 30 28 Meeting on 19 December or at a Special Meeting in January 2002. 21 20 The first phase of the recapitalisation programme, which was not subject to shareholder approval, was completed on 15 October 2001 involving a Crown 10 loan to the Company of NZ$300 million. 0 97 98 99 00 01 The Crown loan bears interest at the 90 day bank bill rate plus 4% (in total currently about 9.3%) and interest will be payable on repayment of the loan.
4 Consisting of Ansett Australia, Kendell Airlines, Hazelton, SkyWest and Aeropelican 5 As measured by Debt to Debt plus Equity, including non-cancellable aircraft operating lease commitments
7 Brought to you by Global Reports Proceeds from this loan were partially applied to a payment to the Ansett Group of $A150 million in settlement of potential claims by the Ansett Group against Air New Zealand. The balance of the Crown loan is being used by the Company for working capital. As part of the Ansett settlement, the Company is relinquishing claims against the Ansett Group for moneys owed, amounting to approximately A$160 million.
Ansett Settlement Under the terms of the agreement reached with the Voluntary Administrators of the Ansett Group, the Air New Zealand Group and its Directors are released from all claims by the Voluntary Administrator and the Ansett companies themselves relating to Air New Zealand’s involvement with the Ansett Group. Air New Zealand has also agreed in principle to enter into a commercial arrangement with the Ansett Group as a preferred partner and to provide intellectual property to assist the Voluntary Administrators to carry on the Ansett business as long as it is not detrimental to Air New Zealand. The Company’s Board of Directors and its advisers have reviewed other potential exposures relating to Ansett and any further material liability for the Company is considered to be unlikely.
Crown equity investment The second phase of the recapitalisation programme, which is subject to shareholder approval, is expected to completed between December 2001 and January 2002. It involves: • the Company’s obligation to repay the NZ$300 million loan and accrued interest being satisfied by the issue to the Crown of new convertible preference shares in the Company; • the investment of up to a further NZ$585 million by the Crown in new ordinary shares in the Company; and • the reclassification of the Company’s A and B shares into one class of ordinary shares. The convertible preference shares will be issued to the Crown at a price of 24 cents per share or any lower price at which the ordinary shares are to be issued to the Crown. They will carry a fixed cumulative dividend of 5% per annum and will have full voting rights. They will convert to ordinary shares on a one-for-one basis on 1 January 2005 or such earlier date as the Crown decides. They will not be listed before conversion. The issue price for ordinary shares issued to the Crown will be determined by the Crown after due diligence, as representing fair value and could be higher or lower than 24 cents. In deciding the issue price for these ordinary shares, the Crown will not have regard to the issue price of the convertible preference shares which represent funds invested in different circumstances. The precise amount the Crown will invest in ordinary shares (up to NZ$585 million) will be decided after the Crown has determined the sum required to put Air New Zealand on a stable financial footing with a prudent equity base. The Board of Air New Zealand must also conclude that the issue prices of the convertible preference shares and ordinary shares are fair and reasonable to the Company and its existing shareholders.
8 Brought to you by Global Reports No further capital will be sought from Brierley Investments and Singapore Airlines, or other shareholders as part of the recapitalisation package. Brierley TOTAL ASSETS Investments and Singapore Airlines have agreed to support the transactions (NZ$ Millions) contained in the agreement and to vote in favour of the shareholder resolutions 9,000 8965 8114 to implement it. They will retain their current shareholdings until at least 8,000
31 January 2002, when the recapitalisation process is expected to have 7,000 been completed. 6,000
If the full amount of NZ$885 million is invested by the Crown at 24 cents 5,000 4391 4104 per share, the Crown will hold approximately 83% of the enlarged share capital. 4,000 3356 If the issue price is higher the percentage will be correspondingly lower, and 3,000 vice versa. 2,000 The Board 1,000 0 The Board of Air New Zealand has been reduced to eight Directors comprising 97 98 99 00 01 one nominee of Singapore Airlines, one nominee of Brierley Investments, four independent Directors, and two Directors nominated by the Board and approved by the Crown. The Board currently comprises: GEARING (%) • Dr Jim Farmer QC (Chairman) 100 • Mr Ralph Norris 93 90 • Sir Ronald Carter 80 76 • Ms Elizabeth Coutts 70 • Dr Cheong Choong Kong 60 56 52 53 • Mr Bill Wilson QC 50 • Mr Roger France 40 30 One further Director is still to be nominated by the Board and approved by the 20 Crown. All other Directors resigned with effect from 4 October 2001. 10 The Directors have been given an indemnity by the Crown in respect of certain 0 liabilities relating to the Company’s trading between now and the time new 97 98 99 00 01 equity is invested by the Crown.
SHAREHOLDER FUNDS Outlook (NZ$ Millions) Trading conditions remain very difficult for the core continuing airline businesses 2500 of Air New Zealand. Global economic activity, and in particular international airline travel, is likely to be subdued throughout the current financial year as the 2124 2000 1989 impact of recent terrorist events and the subsequent retaliatory military actions 1673 cause market uncertainty. 1590 1500 With these expected lower levels of demand, combined with the separation of Ansett, Air New Zealand must shrink its network to a sustainable core in the 1000 short-term which has been recognised in the Air New Zealand Five Year 518 Business Plan which is nearing completion. The plan will focus on aligning 500 aircraft capacity with changes made to the network, protecting and enhancing our New Zealand domestic business and securing cost savings and other 0 benefits from the organisational and other restructures. When, as expected, 97 98 99 00 01 demand resumes, then capacity will be selectively added again on profitable routes. As part of this, a major management and staff restructuring programme has been announced by the Group following the separation from Ansett. This programme is designed to realign the organisation with its smaller size and to ensure that its cost structures are sufficiently low to enable Air New Zealand to
9 Brought to you by Global Reports compete effectively into the future. While job losses will be mitigated by natural attrition and other mechanisms, regrettably redundancies will inevitably occur. Fuel prices have eased somewhat as a consequence of declining world demand although rapid escalation is possible should military conflicts or producer agreements restrict production by oil producing nations. Air New Zealand has been active in reducing its fixed swap hedging positions. Whilst we retain some hedging cover in the current financial year, it is largely by way of options and collars thus providing benefit to the company should fuel prices remain at lower levels. Offsetting this, low exchange rates lead to higher overall costs for Air New Zealand as foreign currency denominated expenditures exceed foreign currency revenues. The immediate areas of focus are clearly to stabilise the business, reduce financial and operational risk and return the business to sustainable profitability in the medium term. In the short term, Air New Zealand will continue to monitor industry developments and adjust the business as conditions demand.
10 Brought to you by Global Reports BOARD OF DIRECTORS
CURRENT DIRECTORS * RETIRED DIRECTORS *
Dr J A Farmer QC LLM (Hons), PhD (Cantab) Hon P R Burdon LLB Acting Chairman (from 29 May 2001) First appointed – 25 May 1999 (A Director) First appointed – 26 June 1989 (A Director) Retired – 4 October 2001 Dr Farmer is a Queen’s Counsel in both New Zealand and Australia, specialising in corporate and commercial Mr J S Curtis BA, LLB (Hons) law, competition law and public law. First appointed – 31 May 1995 (B Director) Retired – 4 October 2001 Sir Ronald Carter KNZM, D Eng (Hon), FIPENZ, FICE, FNZIM, FCIT Sir Selwyn Cushing KNZM, CMG First appointed – 23 July 1998 (A Director) (Chairman to 29 May 2001) Sir Ronald is a Director of Auckland Chamber of First appointed – 17 April 1989 (A Director) Retired – 4 October 2001 Commerce and Industry and of Beca Group Limited. He is also a Council Member of the Royal Society Mr C B Goode of New Zealand. AC, BCom (Hons), MBA (Columbia), Hon LLD (Melb) First appointed – 10 August 2000 (B Director) Dr C K Cheong BSc (Hons), PhD Retired – 20 September 2001 First appointed – 10 August 2000 (B Director) Dr Cheong is Deputy Chairman and Chief Executive Dr P J B Rose BCom (NZ), DipEc (Camb), PhD (Melb) Officer of Singapore Airlines Limited. He is Chairman First appointed – 6 December 2001. of SIA Engineering Company Limited and Singapore Retired – 4 October 2001 Airport Terminal Services Limited. He is also a Mr M J N Tan Director of a number of companies including Virgin First appointed – 10 August 2000 (B Director) Atlantic Airways Limited and Vice Chairman of the Retired – 4 October 2001 Singapore-US Business Council. Mr G J Terry LLB, MA Ms E M Coutts BMS, CA First appointed – 20 December 1999 (B Director) First appointed – 7 August 2000 (A Director) Retired – 4 October 2001 Ms Coutts is Chair of Meritec Group Limited and is a Director of a number of companies including Viking Pacific Holdings Limited, New Zealand Tennis Inc and Industrial Research Limited. She is a member of the Hilary Commission and the Pharmaceutical Management Agency.
Mr G R W France BCom, CA First appointed – 4 October 2001 Mr France is the Chairman of Tappenden Holdings Limited and a member of the Market Surveillance Panel of the New Zealand Stock Exchange. He is also a member of the Council of The University of Auckland.
Mr R J Norris FNZIM, FNZCS First appointed – 27 August 1998 (A Director) Mr Norris was Managing Director of ASB Bank Limited and Chairman of Sovereign Assurance Limited until he retired in September 2001. He is currently a Director of Fletcher Building Ltd and a trustee of the Starship Foundation.
Mr W M Wilson QC LLM (Hons) First appointed – 20 December 1999 (A Director) Mr Wilson is Chairman of BIL New Zealand Assets Limited. He is a Queen’s Counsel specialising in corporate and commercial law, banking law and media law.
* As at the date of this Report, 26 October 2001.
11 Brought to you by Global Reports CORPORATE GOVERNANCE
Corporate governance concerns the structure and and financial targets and reports that performance mechanisms adopted by Air New Zealand to ensure to the Board through the Chief Executive Officer. decision making and management of the Company Delegated Authority is consistent with the protection and enhancement The Board delegates some of its powers to the of the Company’s assets. standing Board Committees detailed below and Incorporation and Listing on appropriate occasions to ad hoc committees where this is necessary to avoid conflicts of Air New Zealand Limited was incorporated in 1940 interest or to ensure efficiency of decision making. and is registered in New Zealand under the Certain authorities are delegated to the Chief Companies Act 1993. It is registered to carry on Executive Officer and through him to various business in Australia under ARBN 000 312 685. levels of management. The Company is listed, and its A and B Ordinary Board Composition Shares are quoted on the New Zealand Stock Under the Constitution the Board comprises Exchange. The Company’s shares are listed with a between five and thirteen Directors plus a Managing “non-standard” or “NS” designation. This is due to Director, if any. It is a further requirement of the particular provisions of the Company’s Constitution, Constitution that A Directors must be New Zealand including the rights attaching to the Kiwi Share in citizens and must comprise a majority of the Board. the capital of the Company held by the Crown and Further, at least two-thirds of the Board must be requirements regulating ownership and transfer of New Zealand or Australian citizens. All Directors as A Ordinary Shares and B Ordinary Shares and the at 30 June 2001 were non-executive. appointment of Directors by the holders of those two classes of shares. A Ordinary Shares may be Board Committees held only by New Zealand Nationals as that term is In respect of the year to 30 June 2001, the Board defined in the Constitution. maintained the following standing Committees The A and B share structure will be reclassified into comprising the Directors listed and exercising the one class of ordinary shares if the recapitalisation responsibilities described: programme is approved by shareholders. Finance Committee Air New Zealand’s B Ordinary Shares are also quoted on the Australian Stock Exchange where the Company Sir Selwyn Cushing (Chairman) is listed as an exempt foreign Company. This status Hon Philip Burdon exempts the Company from compliance with most Dr C K Cheong of the Australian Listing Rules provided the Company Mr R J Norris continues to be listed on and comply with the Mr G J Terry Listing Rules of the New Zealand Stock Exchange. President & CEO The Australian Stock Exchange has announced that Responsibilities from 30 June 2002 it will be raising the threshold for 1. Establish and review compliance with policies companies to qualify for “exempt foreign listing” as to the Group’s foreign exchange exposures, status. Air New Zealand is considering its position interest costs incurred and liquidity profile. with regard to this proposed change. 2. Recommend to Board and review compliance with policies on fuel hedging, capital expenditure Board of Directors commitment and treasury funds management. Role of the Board 3. Approve documentation for finance raising The business and affairs of the Company are transactions of the Group. managed by or under the direction of the Board 4. Approve the granting by the Company of any of Directors. The Board is elected by shareholders guarantee, indemnity or other credit support in to govern the Company in the shareholders’ respect of borrowings by a subsidiary of the interests and has overall responsibility for decision Group and also any mortgage, charge, making. A shareholders vote for A Directors and encumbrance or other security interest over B shareholders vote for B Directors. The Board any assets or revenues of any Company in establishes and reviews management performance the Group. against Air New Zealand’s strategic objectives, medium term financial plans, annual budgets and 5. Approve documentation for acquisition, disposal group policies for operation of the business. An or financing of any Group aircraft or engine. executive management group meets regularly to 6. Examine any other matters referred to it by review business performance against strategies the Board.
12 Brought to you by Global Reports Audit Committee of management succession and senior organisation structure. Ms E M Coutts (Chair) Hon Philip Burdon 2. Decide on the President & Chief Executive Sir Selwyn Cushing Officer’s remuneration package* and consider Dr C K Cheong the President & Chief Executive Officer’s Dr J A Farmer QC recommendations for remuneration of senior Mr R J Norris executives reporting to the President & Chief President & CEO (in attendance) Executive Officer. CFO (in attendance) 3. Approve options to be issued to the President & Responsibilities Chief Executive Officer* and the President & 1. Recommend to the Board the external auditor Chief Executive Officer’s recommendations for appointment, removal and remuneration; the issue of options to executives. 2. Endorse the appointment and removal of the 4. Determine policy in relation to staff equity Manager Group Assurance; participation schemes 3. Liaise with the internal and external auditors; (* President & Chief Executive Officer excluded from Committee for this purpose.) 4. Review the external auditors annual audit plan and reports, assess performance against plans; Committee For Approval Of Businesses As 5. Review the draft half year and annual financial New Zealand Nationals statements, and New Zealand and Australian Stock Exchange statements and recommend Sir Selwyn Cushing (Chairman) approval to the Board; Sir Ronald Carter Ms E M Coutts 6. Review public documents and disclosures Dr J A Farmer QC relating to financial information; 7. Review material accounting policy changes Responsibilities proposed by management or the external 1. Consider applications by companies which are auditors; New Zealand Businesses (as defined in the Constitution of the Company) to be approved as 8. Assess the performance of financial New Zealand Nationals and therefore permitted management; to hold “A” ordinary shares. 9. Review the internal audit function and 2. Consider applications by persons who would its activities; meet the requirements of section 8(2) or section 10. Review the audit findings and ensure that 8A of the Citizenship Act 1977 and would recommendations highlighted in internal audit therefore be eligible to hold “A” shares. reports are actioned by management; 11. Review risk management plan. Nominating Committee 12. Review compliance with Company risk Sir Selwyn Cushing (Chairman) management, legal and regulatory policies; Sir Ronald Carter 13. Supervise special investigations when requested Dr C K Cheong by the Board; Mr J S Curtis Mr W M Wilson QC 14. In addition, the Committee shall examine any other matters referred to it by the Board. Responsibilities 1. To consider and recommend to the Board Remuneration & Management Structure any applicants for the positions of President & Committee Chief Executive Officer or direct reports to the Sir Selwyn Cushing (Chairman) President & Chief Executive Officer. Sir Ronald Carter 2. To consider and make recommendations on Mr J S Curtis potential appointments of Directors to the Board. Dr J A Farmer QC Mr R J Norris Constitution Committee Mr M J N Tan Dr J A Farmer QC (Chairman) President & CEO Mr C B Goode Responsibilities Mr G J Terry 1. Monitor human resources development in areas Mr W M Wilson QC
13 Brought to you by Global Reports Responsibilities Planning Committee 1. To consider and develop any potential changes Hon P R Burdon (Chairman) to the Constitution which might of benefit of Mr J S Curtis the Company and its shareholders, and the Mr M J N Tan means by which such changes may be Mr G J Terry implemented. Responsibilities 2. To consider and recommend to the Board 1. To consider and recommend to the Board changes to the Constitution required in order to strategic issues involving substantial change to comply with recent changes in the New Zealand the Company’s airline network or aircraft fleet. Stock Exchange Listing Rules and recent 2. Examine any other matters referred to it by relevant legislation. the Board.
NEW ZEALAND STOCK EXCHANGE DISCLOSURES
The following information is provided in accordance with the New Zealand Stock Exchange (“NZSE”) Listing Rules. Current Credit Rating Status As at 19 October 2001 the most recent announcement by Standard & Poor’s in relation to Air New Zealand’s credit rating was its announcement on 5 October 2001 that its ‘B–’ long-term corporate credit rating on the Company remains on CreditWatch with developing implications and that the ‘C’ short-term rating on the Company also remains on CreditWatch with developing implications. Current NZSE Waivers As at 19 October 2001 the following waivers from the NZSE Listing Rules granted by the Market Surveillance Panel (“Panel”) remain current: (a) A waiver from Listing Rule 10.1(d) to enable the Company to provide “due diligence” information to the Crown in connection with the proposal under which the Crown will be issued with up to $885 million of new shares in the Company. In accordance with normal practice the Crown has entered into an NZSE approved confidentiality deed in relation to the information to be provided to it under that due diligence. (b) A waiver from Listing Rule 9.1 in relation to the provision of the $300 million subordinated loan by the Crown. That loan was made on 15 October 2001. (c) A waiver from Listing Rule 9.2 in relation to the voting commitments given by the Company’s major shareholders to support the recapitalisation proposal announced on 4 October 2001. As a result of that waiver the Singapore Airlines and Brierley Investments companies that hold shares in Air New Zealand will not be disqualified from voting on the shareholder resolutions to approve the issue of new shares to the Crown. (d) A further waiver from Listing Rule 9.2 in relation to certain indemnities given by the Crown to the Directors of Air New Zealand. Exercises of NZSE Powers During September and October 2001 the NZSE exercised its powers to suspend trading or halt trading in the Company’s shares on the NZSE on the following occasions: (a) On 13 September 2001 the Panel, on application from the Company, suspended the Company’s shares temporarily until the release by the Company of a recapitalisation announcement as part of its annual results announcement. That suspension was lifted following the release of that announcement later that day. (b) On 26 September 2001 the NZSE halted trading in the Company’s shares pending clarification of what the Panel described as “the Prime Minister’s statements as reported in today’s media that shareholders ‘Don’t sell’ their Air New Zealand shares”. Following clarification from the Company that on closer examination of the Prime Minister’s remarks it appeared that they did not constitute a statement as to Air New Zealand’s future structure, the NZSE lifted the trading halt later that day. (c) On 28 September 2001 the NZSE halted trading in the Company’s shares pending clarification of statements made by Greg Terry of Brierley Investments Limited, an Air New Zealand Director, which had appeared in the media. (d) On 28 September 2001 the Company requested and the Panel agreed to suspend quotation of the Company’s shares on the NZSE until the Company was able to make a comprehensive announcement. On 4 October 2001, after the Company made an announcement in relation to its recapitalisation, the Panel lifted that suspension.
14 Brought to you by Global Reports FINANCIAL CONTENTS
Statements of Financial Performance 16 Statements of Movements in Equity 17 Statements of Financial Position 18
Statements of Cash Flows 19
Statement of Accounting Policies 20
Notes to Financial Statements 24
Auditor’s Report 53
15 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES STATEMENTS OF FINANCIAL PERFORMANCE Year ended 30 June 2001
Group Parent
Notes 2001 2000 2001 2000 $000 $000 $000 $000
Operating revenue Passenger revenue 6,091,464 2,741,839 2,774,125 2,455,724 Cargo and mail 532,488 317,353 314,415 316,160 Other 1,336,173 597,207 537,737 534,339
2 7,960,125 3,656,399 3,626,277 3,306,223
Operating expenditure Labour 2,152,171 697,271 666,220 602,314 Fuel and oil 1,199,032 463,708 681,200 432,136 Maintenance and overhaul 776,474 381,197 322,887 332,236 Aircraft operations 639,470 395,023 305,724 354,167 Passenger services 566,281 261,038 350,030 242,952 Sales and marketing 1,017,413 583,638 524,052 547,643 Other 526,596 177,445 173,230 133,327
6,877,437 2,959,320 3,023,343 2,644,775
Earnings before interest, taxation, depreciation, rental and amortisation expenses 1,082,688 697,079 602,934 661,448
Depreciation and amortisation 532,464 185,830 95,225 83,144 Rental and lease 603,889 295,799 569,898 479,814
Earnings before interest and taxation (53,665) 215,450 (62,189) 98,490
Net interest charge/(income) 226,568 72,170 (66,559) (54,551)
Operating (deficit)/surplus before taxation and unusual items 3 (280,233) 143,280 4,370 153,041
Unusual items 4 1,277,019 (20,319) 1,476,571 (13,647)
Operating (deficit)/surplus before taxation (1,557,252) 163,599 (1,472,201) 166,688
Taxation (credit)/expense 5 (148,470) 37,340 (22,348) 93,520
Operating (deficit)/surplus before accounting policy change (1,408,782) 126,259 (1,449,853) 73,168
Deferred taxation arising on accounting policy change 5 - 786,227 - 186,388
Operating (deficit) after taxation and accounting policy change (1,408,782) (659,968) (1,449,853) (113,220)
Minority interest in surplus of subsidiaries - 1,704 - - Share of (deficit)/surplus of associates 11 (16,536) 58,120 - -
Net (deficit) attributable to shareholders of parent company ($1,425,318) ($600,144) ($1,449,853) ($113,220)
16 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES STATEMENTS OF MOVEMENTS IN EQUITY Year ended 30 June 2001
Group Parent
Notes 2001 2000 2001 2000 $000 $000 $000 $000
Equity at the start of the year 1,590,085 2,126,168 1,450,645 1,597,741
Net (deficit) attributable to shareholders (1,425,318) (600,144) (1,449,853) (113,220) Movement in foreign currency translation reserve 19 103,086 148,436 47,157 50,075
Total recognised revenues and expenses (1,322,232) (451,708) (1,402,696) (63,145)
Movement in minority interests - (424) - - Shares issued 17 280,459 1,174 280,459 1,174 Distribution to owners 15 (30,273) (85,125) (30,273) (85,125)
Equity at the end of the year $518,039 $1,590,085 $298,135 $1,450,645
17 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES STATEMENTS OF FINANCIAL POSITION As at 30 June 2001
Group Parent
Notes 2001 2000 2001 2000 $000 $000 $000 $000
Current assets Bank and short term deposits 20 811,670 743,370 777,128 519,288 Trade and other receivables 1,414,198 1,208,034 628,756 529,893 General stores 7 372,530 350,535 141,995 174,577 Finance lease receivables 8 22,133 62,357 - - Other assets 9 170,901 75,171 389,873 412,033
Total current assets 2,791,432 2,439,467 1,937,752 1,635,791
Non-current assets Trade and other receivables 13,631 19,939 8,260 4,859 Property, plant and equipment 10 4,997,659 6,027,055 534,553 658,193 Investments 11 52,472 54,341 197,522 1,513,900 Goodwill 11 8,767 194,281 - - Other assets 9 250,068 229,483 111,022 108,806
Total non-current assets 5,322,597 6,525,099 851,357 2,285,758
Total assets 8,114,029 8,964,566 2,789,109 3,921,549
Current liabilities Bank overdraft and short term borrowings 20 47,221 47,876 20,916 31,210 Trade and other payables 1,464,514 974,274 509,178 416,329 Transportation sales in advance 686,561 779,433 305,414 263,384 Borrowings 12 897,230 1,049,866 393,226 446,885 Capitalised lease obligations 13 115,049 224,010 - - Other liabilities 14 428,582 352,371 861,342 876,370 Dividend payable 15 - 51,075 - 51,075
Total current liabilities 3,639,157 3,478,905 2,090,076 2,085,253
Non-current liabilities Trade and other payables 117,307 120,997 47,079 10,157 Borrowings 12 2,989,964 2,386,978 188,041 89,377 Capitalised lease obligations 13 211,651 204,559 - - Other liabilities 14 191,520 421,668 110,097 124,582 Deferred taxation 16 446,391 761,374 55,681 161,535
Total non-current liabilities 3,956,833 3,895,576 400,898 385,651
Total liabilities 7,595,990 7,374,481 2,490,974 2,470,904
Net assets $518,039 $1,590,085 $298,135 $1,450,645
Equity Issued capital 17 1,007,485 727,026 1,007,485 727,026 Capital reserves 18 8,649 8,649 12,340 12,340 Revenue reserves 19 (499,879) 852,626 (721,690) 711,279
516,255 1,588,301 298,135 1,450,645 Minority interests 1,784 1,784 - -
Total equity $518,039 $1,590,085 $298,135 $1,450,645
Dr James A Farmer QC Ms Elizabeth M Coutts ACTING CHAIRMAN DIRECTOR
FOR AND ON BEHALF OF THE BOARD 26 OCTOBER 2001
18 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES STATEMENTS OF CASHFLOWS Year ended 30 June 2001
Group Parent
Notes 2001 2000 2001 2000 $000 $000 $000 $000
Cash flows from operating activities Cash provided from: Receipts from customers 7,626,657 3,742,312 3,873,384 3,345,431 Dividends 29,936 10,026 5,505 10,026 Interest 85,483 33,851 101,562 73,656
7,742,076 3,786,189 3,980,451 3,429,113 Cash applied to: Suppliers and employees (7,292,867) (3,302,151) (3,844,014) (3,058,143) Interest on: - Finance leases (20,769) (9,674) - - - Borrowings (282,125) (82,543) (29,501) (14,520) Income taxation - - - -
(7,595,761) (3,394,368) (3,873,515) (3,072,663)
Net cash flow from operating activities 20 146,315 391,821 106,936 356,450
Cash flows from investing activities Cash provided from: Disposal of property, plant and equipment 401,802 144,432 178,444 330,304 Operating lease deposits 3,461 13,492 1,766 - Investment receipts 39,644 33,233 - 26,561
444,907 191,157 180,210 356,865 Cash applied to: Acquisition of property, plant and equipment (485,762) (302,479) (149,785) (293,272) Capitalised interest (362) (2,033) - (2,033) Acquisition of subsidiary less cash acquired 11 (34,878) (556,390) - - Acquisition of investments - - (1,285) (776,396) Advance to related party (54,396) - - - Operating lease deposits (2,890) (807) (171) -
(578,288) (861,709) (151,241) (1,071,701)
Net cash flow from investing activities (133,381) (670,552) 28,969 (714,836)
Cash flows from financing activities Cash provided from: Borrowings 1,479,881 1,152,804 505,633 533,063 Issue of shares 280,459 1,174 280,459 1,174 Net (decrease)/increase in related party borrowings - - (347,137) 185,629
1,760,340 1,153,978 438,955 719,866 Cash applied to: Borrowings and capitalised lease obligations (1,622,971) (386,993) (454,449) - Net (decrease)/increase in related party borrowings - - 229,071 (65,852) Dividends (81,348) (85,081) (81,348) (85,081)
(1,704,319) (472,074) (306,726) (150,933)
Net cash flow from financing activities 56,021 681,904 132,229 568,933
Net increase in cash holding 68,955 403,173 268,134 210,547
Opening cash balance 695,494 292,321 488,078 277,531
Closing cash balance 20 $764,449 $695,494 $756,212 $488,078
19 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES STATEMENT OF ACCOUNTING POLICIES Year ended 30 June 2001
Entities reporting The financial statements for the Parent are for Air New Zealand Limited as a separate legal entity. The consolidated financial statements for the Group comprise Air New Zealand Limited, its subsidiaries and associates including Ansett Holdings Limited in accordance with SSAP 8, Accounting for Business Combinations and the Financial Reporting Act 1993.
Statutory base The financial statements have been prepared in accordance with the Companies Act 1993 and the Financial Reporting Act 1993. The Parent and the Group are issuers under the Financial Reporting Act 1993.
Measurement basis The financial statements have been prepared on the historical cost basis, with the exception of certain items as identified in specific accounting policies below.
Accounting policies The financial statements are prepared in accordance with New Zealand generally accepted accounting practice. The accounting policies that materially affect the measurement of the financial performance, financial position and cash flows are set out below.
Basis of consolidation The consolidated financial statements include those of the Parent, its subsidiaries accounted for using the purchase method, and the results of associates accounted for using the equity method.
Subsidiaries are entities that are controlled, either directly or indirectly, by the Parent. Associates are those entities in which the Parent, either directly or indirectly, holds a significant but not a controlling interest.
All material intercompany transactions, balances and unrealised surpluses and deficits on transactions between Group members, are eliminated.
The results of subsidiaries or associates acquired or disposed of during the year are included in the consolidated Statement of Financial Performance from the date of acquisition or up to the date of disposal.
Goodwill The excess of cost over the fair value of the net assets, of the subsidiary or associate, at the date of acquisition is recognised as goodwill and amortised to the Statement of Financial Performance over the period of expected benefit. This period has been assessed as no longer than 20 years from the date of acquisition. The carrying amount is reviewed annually by the Directors and adjusted where it is considered necessary.
Discount on acquisition Discount on acquisition, representing the excess fair value of net assets acquired over the cost of shares in a subsidiary or associate, is applied to proportionately reduce the value of non-monetary assets.
Revenue recognition Airline revenue Passenger and cargo sales are credited to Transportation Sales in Advance. Amounts are transferred to revenue in the Statement of Financial Performance when the actual carriage is performed.
The Group operates various codeshare and alliance arrangements. Revenue under these arrangements is recognised when the Group performs the carriage or otherwise fulfils all relevant contractual commitments.
Investment revenue Dividend revenue from associates is recognised when the dividend is declared. All other dividends are recognised when the cash is received.
Interest income from investments and fixed deposits is recognised on an accruals basis.
Work in progress Contract work in progress is stated at cost plus the surplus recognised to date, using the percentage of completion method, less any amounts invoiced to customers. Cost includes all expenses directly related to specific contracts and an allocation of direct production overhead expenses incurred by the Group’s contract operations.
Capital work in progress includes the cost of materials, services, labour and direct production overheads.
General stores General stores are recognised at the lower of cost and net realisable value. Cost is determined using the weighted average method.
Accounts receivable Accounts receivable are carried at estimated realisable value after providing against debts where collection is considered to be doubtful.
20 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES STATEMENT OF ACCOUNTING POLICIES Year ended 30 June 2001
Property, plant and equipment Recognition Property, plant and equipment is initially recorded at cost. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to working condition for intended use. Certain land and buildings were subsequently recorded at valuation. The Directors elected to continue to account for these assets on the basis of the revalued amounts as at 30 June 1992, and accordingly this value represents their deemed cost.
Assets which are held with the intention of resale are transferred from non-current assets to current assets.
Depreciation Depreciation of the aircraft fleet is calculated to write down the cost of these assets on a straight line basis to an estimated residual value over their economic lives. The aircraft and related engines, simulators and spares are being depreciated on a straight line basis as follows:
Jet aircraft 15 - 20 years to 20 - 40% residual value Other aircraft 10 - 20 years to 0 - 40% residual value
Non-aircraft assets are depreciated on a straight line basis using the following estimated economic lives: Buildings 50 - 100 years Aircraft specific plant and equipment 10 - 20 years Non-aircraft specific plant, equipment, furniture and vehicles 3 - 10 years
Leased assets Finance leases Assets acquired under finance leases are included as non-current assets in the Statement of Financial Position. Leased assets are recognised initially at the lower of the present value of the minimum lease payments and their fair value, and depreciated on the same basis as equivalent property, plant and equipment. A corresponding liability is also established and each lease payment allocated between the liability and the finance lease interest expense.
Operating leases Leases under which all the risks and benefits of ownership are effectively retained by the lessor are classified as operating leases. Operating lease payments are recognised as an expense in the Statement of Financial Performance in the periods the amounts are payable.
Investments Investments in subsidiaries are carried at cost. Investments in associates are stated at the fair value of the net tangible assets at acquisition together with the Group’s share of post-acquisition increases or decreases in reserves. Other investments are carried at the lower of cost and net realisable value.
Impairment The Directors assess the carrying value of each asset annually. Where the estimated recoverable amount of the asset is less than its carrying amount, the asset is written down. The impairment loss is recognised in the Statement of Financial Performance.
Deferred credits Net credits arising from the sale and subsequent finance lease back of aircraft are amortised over the term of the respective leases. Net credits arising on a sale and subsequent operating lease back are recognised as a surplus in the year the transaction occurs.
Taxation Taxation recognised in the Statement of Financial Performance for the year is based on the accounting result, adjusted for permanent differences between accounting and taxation rules.
The impact of all timing differences between accounting and taxable income is recognised as a deferred taxation liability or asset. This is the comprehensive basis for the calculation of deferred taxation under the liability method.
A deferred taxation asset, or the effect of losses carried forward that exceed the deferred taxation liability, is recognised in the financial statements only where there is virtual certainty that the benefit of the timing differences, or losses, will be utilised.
Change in accounting policy On 30 June 2000 the Group and Parent changed their accounting policy in relation to accounting for deferred taxation to the comprehensive basis. The comprehensive basis is the preferred basis of Statement of Standard Accounting Practice No. 12 (SSAP 12) - Accounting for Income Tax and is the basis required by international generally accepted accounting practice. The change was made recognising the international nature of the Group following the purchase of Ansett Australia. The financial effect of this change in accounting policy was to reduce the net surplus of the Group for the year ended 30 June 2000 by $786,227,000 and to recognise a deferred taxation liability of the same amount.
21 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES STATEMENT OF ACCOUNTING POLICIES Year ended 30 June 2001
Statement of Cash Flows The following are the definitions of the terms used in the Statement of Cash Flows: a) Operating activities include all transactions other than events that are investing or financing activities. b) Investing activities are those activities relating to the acquisition, holding and disposal of property, plant and equipment and of investments. c) Financing activities are those activities that result in changes in the size and composition of the capital structure. This includes both equity and debt not falling within the definition of cash. Dividends paid in relation to the capital structure are included in financing activities. d) Cash is considered to be cash on hand, demand deposits and current accounts in banks, net of overdrafts.
Financial instruments Recognised Financial instruments carried on the Statement of Financial Position include cash and bank balances, investments, receivables, payables, borrowings, and capitalised lease obligations. The particular recognition methods adopted are disclosed in the individual policy statements associated with each item.
Unrecognised Interest rate instruments Interest payments and receipts under interest rate swaps are recognised on an accruals basis in the Statement of Financial Performance.
The net differential to be paid or received on an interest swap agreement is recognised as a component of interest expense over the period of the agreement.
Foreign exchange instruments Forward exchange contracts entered into as hedges of foreign exchange assets and liabilities are valued at exchange rates prevailing at year end. Any unrealised gains or losses are offset against gains or losses on the item being hedged.
Gains and losses on contracts which hedge specific short term foreign currency denominated commitments are recognised as a component of the related transaction in the period in which the transaction is completed, as part of the Group’s in-house rate setting mechanism. The Group is not involved in foreign exchange speculation.
Premiums paid on currency swaps and options are amortised over the period to maturity or period of benefit.
Cross currency interest rate swaps have been entered into to convert foreign currency exposures into United States Dollars. The Group employs the integrated instrument approach in recognising such contracts, whereby the underlying obligation is converted into United States Dollars at the contracted swap rates.
Fuel instruments The Group enters into fuel option contracts to hedge a portion of its price risk related to aircraft fuel purchases.
Gains or losses on call/put options designated as hedges are recognised upon contract expiration. Gains or losses arising from fuel swaps are recognised at maturity dates.
Other Losses from financial guarantees are recognised if and when the Group becomes liable for the outstanding amounts.
Foreign currencies Transactions Foreign currency transactions are translated to New Zealand currency at the rate of exchange ruling at the date of the transaction. Where short term forward currency contracts have been entered into, the transaction is translated at the rate contained in the contract. At balance date, monies held and amounts receivable or payable in foreign currencies are converted at exchange rates ruling at balance date. Resulting exchange differences are accounted for in the Statement of Financial Performance.
Hedges The residual value of the aircraft fleet, engines, simulators and progress payments which are denominated in United States Dollars are designated as a natural hedge of secured United States Dollar denominated borrowings and capitalised lease obligations. The designated hedge of aircraft to liabilities is deemed to exist until the disposal of an aircraft. Upon disposal, all exchange gains or losses related to the aircraft and the associated funding are transferred from the foreign currency translation reserve to retained earnings.
Exchange differences arising on the translation of aircraft, borrowings and capitalised lease obligations are transferred to the foreign currency translation reserve.
22 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES STATEMENT OF ACCOUNTING POLICIES Year ended 30 June 2001
Foreign operations Assets and liabilities of independent overseas operations are translated at exchange rates existing at balance date. Revenue and expenses of independent overseas operations are translated at rates of exchange approximating those ruling at the date of the transaction. The exchange gain or loss arising on translation is carried direct to a foreign currency translation reserve, together with the unrealised gains and losses on foreign currency monetary liabilities, that are identified as hedges of these operations.
Change in hedging policy Formerly the Group’s jet aircraft fleet, engines, simulators and progress payments, denominated in United States Dollars were designated as a natural hedge of the United States Dollar denominated borrowings and capitalised lease obligations. On 30 June 2000, in order to align the Group policies, the Group and Parent elected to change the hedging policy to designate only the residual values of the aircraft, engines, simulators and progress payments as a natural hedge of the United States Dollar denominated secured borrowings and capitalised lease obligations, in recognition that it is the residual value that will ultimately be realised in United States Dollars. As a consequence of this change, only the residual value of aircraft, engines, simulators and progress payments are denominated in United States Dollars. There was no financial impact resulting from the change for the year ended 30 June 2000.
Earnings per share Earnings per share is based on the (deficit)/surplus attributable to the shareholders of the Parent and the weighted average number of ordinary shares issued and fully paid during the year.
Comparatives Where necessary, comparative information has been reclassified to achieve consistency in disclosure with the current year.
Changes in accounting policies There have been no material changes in accounting policies in the current year. Changes in accounting policies arising in the prior year have been documented above under the relevant accounting policy.
23 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS Year ended 30 June 2001
1. Ansett Holdings Limited and Subsidiaries, Subsequent Events and Implications for the Going Concern of Air New Zealand Limited
Accounting for Ansett Holdings Limited and Subsidiaries at 30 June 2001 For some months the Board of Air New Zealand Limited has been working on the recapitalisation of Air New Zealand Limited so that it could fund the future expected losses of Ansett and re-equip Ansett to make it a strong competitor. This programme was underwritten by a Memorandum of Understanding entered into by the Company with Singapore Airlines under which Singapore Airlines agreed to take new equity at an agreed rate of $1.31 per share and to support a rights issue. However, on Thursday 6 September 2001 Singapore Airlines advised the Board that it was no longer willing to subscribe for equity at the rate of $1.31 per share.
On Sunday 9 September 2001 the Board of Air New Zealand became aware that after further review by the two major shareholders they would not inject sufficient equity into Air New Zealand to enable Ansett to re-equip.
The Board then actively sought to sell Ansett to another airline and on 10 September 2001 entered into a non-binding memorandum of understanding with Qantas Airways Limited to sell the businesses of the Ansett Group to them. On 12 September 2001 Qantas advised Air New Zealand that it did not wish to proceed with the acquisition (refer to Note 11).
On 12 September 2001, after all avenues to support or dispose of Ansett were exhausted, the Directors of Ansett Holdings Limited and subsidiaries met and resolved to place the companies into voluntary administration.
The Financial Reporting Act 1993 and SSAP 8 - “Accounting for Business Combinations” requires Air New Zealand to consolidate all controlled entities at balance date. At 30 June 2001 Ansett Holdings Limited was an entity controlled by Air New Zealand Limited and therefore these financial statements include the full consolidation of Ansett’s results for the year and its assets and liabilities at the balance date.
However, the decision to place Ansett in to Voluntary Administration necessitated the following unusual write-downs at 30 June 2001 (refer to Note 4):
Group Parent $000 $000
Investment in Ansett - 1,374,240 Net assets of Ansett 1,087,694 - Goodwill 184,900 - Write-back of restructuring provision (52,600) -
1,219,994 1,374,240
Inter-company advances 100,865 100,865
Total write-off 1,320,859 1,475,105
Following the above write-downs the net assets of Ansett in the Group accounts and the investment in the Parent accounts are stated at net nil values. In addition this led to the breach of banking covenants in unsecured loans to the Air New Zealand banking group.
The write-downs to the net assets of Ansett in the Group accounts have been firstly applied to investments, goodwill and carry forward tax losses in Ansett and the remainder against the carrying value of aircraft.
In addition to the net asset and investment write-downs noted above, the Parent had an inter-company advance owing from Ansett of $228,615,000 as at balance date. Of this amount, $127,750,000 was repaid subsequent to 30 June 2001. The final amount outstanding of $100,865,000 has been deemed as not recoverable and has also been written-off as an unusual item at 30 June 2001.
Subsequent Events On 4 October 2001, Air New Zealand announced that it is to be recapitalised by the injection of up to $885 million in a two-phase loan and equity investment by the New Zealand Government (“the Crown”), under the terms of an agreement reached between the Government, the Company, and its major shareholders – Brierley Investments Limited (“BIL”) and Singapore Airlines Limited (“SIA”).
The company has also reached agreement with the Voluntary Administrators of the Ansett Group to settle claims between the Ansett Group and Air New Zealand.
The first phase of the recapitalisation programme has been completed. It involved: • A Crown loan to the Company of NZ$300 million which bears interest at the 90 day bank bill rate plus 4% (in total currently about 9.3%) and interest is payable on repayment of the loan; • Payment to Ansett of A$150 million in settlement of claims against Air New Zealand; • The balance of the Crown loan being used by the Company for working capital; • The Company relinquishing claims against the Ansett Group for moneys owed, amounting to approximately A$160 million as part of the Ansett settlement.
24 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS Year ended 30 June 2001
1. Ansett Holdings Limited and Subsidiaries, Subsequent Events and Implications for the Going Concern of Air New Zealand Limited (continued) The estimated pre-tax profit and loss effect of Ansett being placed in voluntary administration is approximately $350 million which will be included as an unusual item for the year ended 30 June 2002.
In addition, performance in the short-term will be impacted by the loss of Australian feeder traffic from the Ansett operations.
Ansett Settlement
Under the terms of the agreement reached with the Voluntary Administrators of the Ansett Group, the Air New Zealand Group and its Directors are to be released from all claims relating to the Ansett Group.
Air New Zealand has also agreed to enter into a commercial arrangement with the Ansett Group as a preferred partner and to provide intellectual property to assist the Voluntary Administrators to carry on the Ansett business as long as it is not detrimental to Air New Zealand.
The agreement with the Voluntary Administrator was approved by the Federal Court of Australia on 12 October 2001.
The investigation that is currently being undertaken by the Australian Securities and Investment Commission, following its current inquiry, is not affected by the settlement with the Voluntary Administrator.
The Company’s Board of Directors and its advisers have reviewed other potential exposures relating to Ansett and any further material liability for the Company is considered to be unlikely.
Crown Equity Investment
The second phase of the recapitalisation programme is expected to completed between December 2001 and January 2002. It involves: • The Company’s obligation to repay the NZ$300 million loan and accrued interest being satisfied by the issue to the Crown of new convertible preference shares in the Company; • The investment of up to a further NZ$585 million by the Crown in new ordinary shares in the Company; and • The reclassification of the company’s A and B Ordinary shares into one class of Ordinary shares
The convertible preference shares will be issued to the Crown at a price of 24 cents per share or any lower price at which the ordinary shares are to be issued to the Crown. They will carry a fixed cumulative dividend of 5% per annum and will have full voting rights. They will convert to ordinary shares on a one for one basis on 1 January 2005 or such earlier date as the Crown decides. They will not be listed on the New Zealand Stock Exchange before conversion.
The issue price for ordinary shares issued to the Crown will be determined by the Crown after due diligence, as representing fair value and could be higher or lower than 24 cents. In deciding the issue price for these ordinary shares, the Crown will not have regard to the issue price of the convertible preference shares which represent funds invested in different circumstances.
The precise amount the Crown will invest in ordinary shares (up to NZ$585 million) will be decided after the Crown has determined the sum required to put Air New Zealand on a sound financial footing with a prudent equity base.
The Board of Air New Zealand must also conclude that the issue prices of the convertible preference shares and ordinary shares are fair and reasonable to the company and its existing shareholders.
No further capital will be sought from BIL, SIA, or other shareholders as part of the recapitalisation package. BIL and SIA have agreed to support the transactions contained in the agreement and to vote in favour of the shareholder resolutions to put it in place. They will retain their current shareholdings until at least 31 January 2002, when the recapitalisation process is expected to have been completed.
If the full amount of NZ$885 million is invested by the Crown at 24 cents per share it will hold approximately 83% of the enlarged share capital. If the issue price is higher the percentage will be correspondingly lower.
This material change in ownership of the Company (if approved), will result in the denial of any currently recorded carry forward tax losses. At 30 June 2001, the quantum of carried forward tax losses related to the Company’s New Zealand operations totalled $238,185,000 and was recognised as an asset amounting to $78,602,000 (tax-effected). These losses may not be recovered before the date of the change of ownership and may therefore need to be written off as an unusual tax charge for the year ended 30 June 2002.
Shareholder Approvals
The necessary approvals for the implementation of the second phase of the agreement – including the reclassification of shares and the adoption of consequent amendments to the Company’s constitution – will be sought from Air New Zealand shareholders at the Annual Meeting scheduled for 19 December 2001.
25 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS Year ended 30 June 2001
1. Ansett Holdings Limited and Subsidiaries, Subsequent Events and Implications for the Going Concern of Air New Zealand Limited (continued) Conditions Precedent
The principal conditions applying to the implementation of the recapitalisation programme are detailed below.
The conditions attached to the Crown loan have been satisfied and the monies were advanced on 15 October 2001. These conditions included: • The agreement with the Voluntary Administrators of the Ansett Group approved by the Federal Court of Australia and the Ansett Committee of Creditors. • Formal confirmation of ongoing support from the Company’s banks and other financiers. • The changes to the Board of Directors. • The Crown’s satisfaction as to the extent of the Company’s residual exposure to Ansett.
The loan is repayable on 31 January 2002 if not earlier replaced with equity and is repayable earlier in various events of default.
The Crown’s subscription for shares (convertible preference and ordinary) is dependent on:
• The continued operation of the agreement with the Voluntary Administrators of the Ansett Group. • Completion of due diligence examination of Air New Zealand by the Crown to assess its value. • Determination of an acceptable issue price for the new shares. • Shareholder approvals being obtained. • Shareholders collectively holding more than 2% of the existing share capital not exercising their minority buy-out rights following the shareholders meeting. • Air New Zealand’s unsecured bankers agreeing to continue their facilities (or replacement facilities) until at least 31 December 2003 and the Crown being satisfied as to the repayment profile of other financiers. • No steps being taken to place any member of the Air New Zealand Group in statutory management or liquidation, and no secured creditor exercising rights in respect of material assets.
United States of America Terrorist Attacks Profitability for the balance of the year will clearly be negatively affected by the terrorist attacks that occurred in the United States on 11 September 2001 along with the impact of worsening global economic conditions.
As a result of the above events, significant uncertainty exists around the trading performance of Air New Zealand’s operations in the short term.
The future business plan will take into account latest trading and economic conditions. A reorganisation of the Company’s management structure and reductions in flight schedules from 1 November 2001 by 10.5 percent have already been announced.
The bulk of the flight reductions will take place on international routes and be mainly between Sydney and Los Angeles and across the Tasman. This reduction, coupled with the reorganisation of the Company following the loss of Ansett from the Group, will also impact staffing levels at Air New Zealand. There will be redundancies in some areas, and these will be managed through processes which have been agreed with unions in current collective employment contracts, or contained in individual contracts.
The business plan will also include the business strategy, a programme of cost reductions and rationalisation, including further potential network and schedule changes. This plan will be subject to due diligence by key stakeholders including the major shareholders, the New Zealand Government and banks as part of the recapitalisation process.
Implications for the Going Concern of Air New Zealand Limited These accounts have been prepared on a going concern basis, except for the treatment of the Ansett related net assets and the investment in Ansett which have been written down to nil.
The going concern of Air New Zealand Limited is dependent upon implementation of the recapitalisation plan. If the recapitalisation plan is not successfully completed and Air New Zealand Limited was unable to continue in operation for the foreseeable future, adjustments would have to be made to reflect the fact that assets may need to be realised at amounts other than their current recorded amounts. In addition, provision for additional liabilities may be required along with changes to the classifications of non current assets and non current liabilities. This uncertainty has been referred to in the Audit Report.
26 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS Year ended 30 June 2001
2. Segmental information The Group operates predominantly in one industry segment, its primary business being the transportation of passengers and cargo on scheduled airline services. The assets are based in two principal locations being New Zealand and Australia.
New Zealand Australia Group 2001 2000 2001 2000 2001 2000 $000 $000 $000 $000 $000 $000
Analysis of revenue Flight revenue 3,446,619 3,059,192 3,177,333 - 6,623,952 3,059,192 Contract services 371,244 403,703 199,002 518 570,246 404,221 Other (including non-airline passenger revenue) 234,779 150,403 531,148 42,583 765,927 192,986
Total revenue 4,052,642 3,613,298 3,907,483 43,101 7,960,125 3,656,399
Interest revenue (refer to note 3) 83,395 35,571
Total operating revenue 8,043,520 3,691,970
Analysis of result
Earnings before interest and taxation 138,102 230,657 (191,767) (15,207) (53,665) 215,450
Net interest charge (refer to note 3) 226,568 72,170
Unusual items (refer to note 4) 1,277,019 (20,319)
Operating (deficit)/surplus before taxation ($1,557,252) $163,599
Analysis of total assets
Total assets 4,451,720 4,277,417 3,662,309 4,687,149 $8,114,029 $8,964,566
In accordance with the Group’s internal reporting system, earnings before interest and taxation is considered to be the most appropriate measure of the contribution to the Group, and accordingly, has been reported above.
On 12 September 2001 the Directors of Ansett Holdings Limited and subsidiaries met and resolved to place the companies into voluntary administration. Further details are provided in Note 1. The following statements reflect the financial performance and financial position of the Group showing the continuing operations of Air New Zealand Limited and subsidiaries and the discontinued operations of Ansett Holdings Limited and subsidiaries.
2001 2000
Continuing Discontinuing Continuing Discontinuing $000 $000 $000 $000
Statement of Financial Performance Operating revenue 4,089,903 3,870,222 3,656,399 - Earnings/(loss) before interest and taxation 123,971 (177,636) 215,450 -
Statement of Financial Position Total Asset 4,630,443 3,483,586 5,786,242 4,441,604 Total Liabilities (4,112,404) (3,483,586) (3,862,502) (3,361,863)
Net Assets 518,039 - 1,923,740 1,079,741
27 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS Year ended 30 June 2001
3. Operating (deficit)/surplus before taxation and unusual items Group Parent
2001 2000 2001 2000 $000 $000 $000 $000
Operating (deficit)/surplus before taxation and unusual items has been determined by debiting/(crediting) the following:
Fees paid or payable to Auditors Audit fees paid to principal Auditors 1,338 539 356 314 Other services provided by principal Auditors 1,269 1,777 1,112 909
2,607 2,316 1,468 1,223
Directors’ fees Company fees 1,689 890 1,544 890 Retirement allowances - 240 - 240
1,689 1,130 1,544 1,130
Net foreign exchange (gain)/loss (48,570) 10,181 (54,492) (32,215)
Depreciation and amortisation Depreciation 516,495 184,427 95,225 83,144 Amortisation of goodwill 15,969 1,403 - -
532,464 185,830 95,225 83,144
Interest Interest charges - Finance leases 20,769 15,068 - - - Borrowings 289,194 92,673 41,199 3,661 - Subsidiary companies - - 24,022 17,506 Less interest income - External (83,395) (35,571) (59,090) (35,674) - Subsidiary companies - - (72,690) (40,044)
Net interest charge/(income) 226,568 72,170 (66,559) (54,551)
Rental and lease Buildings 133,477 33,150 31,159 27,285 Aircraft (operating leases) 470,412 262,649 538,739 452,529
603,889 295,799 569,898 479,814
Donations 90 190 6 176
Dividend revenue (19,092) (15,078) (5,505) (15,078)
(Gain)/loss on disposal of property, plant and equipment (33,673) 49,129 (5,561) 48,633
Bad debts Written off/(recovered) 918 296 (8) - Increase/(decrease) in estimated doubtful debts 15,560 (1,018) 9,861 486
16,478 (722) 9,853 486
28 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS Year ended 30 June 2001
4. Unusual items Group Parent
2001 2000 2001 2000 $000 $000 $000 $000
The following unusual items have been (credited)/debited to operating (deficit)/surplus before taxation:
Gain on sale of TIAS entities (83,259) - - - Taxation expense - - - -
(83,259) - - -
Gain on sale of Christchurch Engine Centre (18,030) - (40,939) - Taxation expense - - - -
(18,030) - (40,939) -
Writedown of carrying value of Ansett related asset balances 1,320,859 - 1,475,105 - Taxation (credit) - - - -
1,320,859 - 1,475,105 - Ansett unusual items - Olympic spend 21,795 - - - - Kendell network expansion 8,087 - - - - Other net asset adjustments 21,470 - 39,450 -
51,352 - 39,450 - Taxation (credit) (17,460) - - -
33,892 - - -
Gain on sale of Equant shares (16,948) (33,233) (17,037) (26,561) Taxation expense - - - -
(16,948) (33,233) (17,037) (26,561)
Other 23,045 12,914 19,992 12,914 Taxation (credit)/expense (7,215) 18,885 (5,778) 18,885
15,830 31,799 14,214 31,799
Unusual items before taxation 1,277,019 (20,319) 1,476,571 (13,647) Taxation (credit)/expense on unusual items (24,675) 18,885 (5,778) 18,885
Unusual items after taxation $1,252,344 ($1,434) $1,470,793 $5,238
Included in unusual items before taxation is the writedown of the carrying value of Ansett related asset balances amounting to $1,320,859,000 in the Group and $1,475,105,000 in the Parent. Further details are provided in note 1.
The gain on sale of TIAS entities of $83,259,000 relates to the sale of Southern Cross Galileo and Sabre Pacific by Travel Industries Automated Systems Pty Limited (“TIAS”). TIAS is 50% owned by the Air New Zealand Group.
29 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS Year ended 30 June 2001
5. Taxation Group Parent
2001 2000 2001 2000 $000 $000 $000 $000
Taxation has been calculated as follows:
Operating (deficit)/surplus for the year (1,557,252) 163,599 (1,472,201) 166,688
Taxation on (deficit)/surplus for the year at 33% (513,893) 53,988 (485,826) 55,007
Adjustments Permanent differences (12,843) (17,961) (30,018) (14,582) Permanent differences on unusual items 425,675 - 493,046 - Timing differences not previously recognised (60,572) 1,884 - 53,666 Change in taxation rates 12,713 - - - Other 450 (571) 450 (571)
Taxation (credit)/expense ($148,470) $37,340 ($22,348) $93,520
Comprising: Current taxation 166,513 62,193 83,506 118,373 Deferred taxation (314,983) (24,853) (105,854) (24,853)
($148,470) $37,340 ($22,348) $93,520
Timing differences recognised on change in accounting policy - 786,227 - 186,388
At 30 June 2001 the New Zealand future tax benefit relating to carried forward tax losses amounted to $78,602,000 (2000 - $nil).
Australian taxation losses of AUD79,244,000 (2000 - AUD60,909,000) are also available for offset by Jetset Travel Technology Holdings Pty Limited (Jetset) only, provided that Jetset meets the taxation loss carry forward provisions in Australian taxation legislation. No income taxation benefit has been recognised in relation to the Jetset taxation losses.
Remaining taxation losses in other jurisdictions amounting to AUD138,832,000 (2000 - AUD21,145,000) have not been included as a taxation benefit, as there is no virtual certainty of recovery of these losses.
At 30 June 2001 the New Zealand taxation recoverable by the Group was $77,782,000 (2000 - $102,621,000).
At 30 June 2001 the Australian taxation payable for the Group was AUD24,689,000 (2000 - recoverable AUD17,325,000).
6. Imputation credit account Parent
2001 2000 $000 $000
Balance at the start of the year 62 36 Imputation credits attached to dividends received 316 26
Balance at the end of the year $378 $62
Imputation Credits directly and indirectly available to shareholders are: Parent 378 62 Subsidiaries --
$378 $62
30 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS Year ended 30 June 2001
7. General stores Group Parent
2001 2000 2001 2000 $000 $000 $000 $000
Contract work in progress 62,756 36,063 31,798 36,063 Engineering expendables 174,398 153,863 81,619 108,316 Consumable stores 135,376 160,609 28,578 30,198
$372,530 $350,535 $141,995 $174,577
8. Finance lease receivables Group Parent
2001 2000 2001 2000 $000 $000 $000 $000
The future lease rental receipts under finance leases are due as follows: Not later than 1 year 23,815 72,430 - - Between 1 and 2 years - - - - Between 2 and 5 years - - - - Over 5 years - - - -
23,815 72,430 - - Less future interest income (1,682) (10,073) - -
Present value of future rentals $22,133 $62,357 - -
Represented by: Current assets 22,133 62,357 - - Non-current assets - - - -
$22,133 $62,357 - -
The Group is party to aircraft leasing arrangements which involve external leasing entities as both lessor and lessee of aircraft. This gives rise to external finance lease receivables. These receivables are not subject to set off arrangements.
31 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS Year ended 30 June 2001
9. Other assets Group Parent
2001 2000 2001 2000 $000 $000 $000 $000
Current Assets intended for resale 103,475 3,344 73,681 3,344 Income taxation recoverable 48,093 46,123 - - Amounts owing from subsidiaries (refer to note 23) - - 298,003 391,509 Amounts owing from associates (refer to note 23) 19,333 25,704 18,189 17,180
$170,901 $75,171 $389,873 $412,033
Non-current Capital work in progress 104,662 165,738 63,527 81,847 Progress payments on aircraft 27,951 47,639 21,600 15,245 Amounts owing from associates (refer to note 23) 59,396 - - - Other assets 63,059 16,106 25,895 11,714
$250,068 $229,483 $111,022 $108,806
Included within Group assets intended for resale is an amount of $37,794,000 (2000 - $nil) representing the short term holding of shares in France Telecom received as consideration for the disposal of Equant. The carrying value at 30 June 2001 represents the market value of this holding. The remainder of assets intended for resale relate to old aircraft and support equipment to be retired from the fleet.
32 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS Year ended 30 June 2001
10. Property, plant and equipment Group Parent
2001 2000 2001 2000 $000 $000 $000 $000
Aircraft, engines and simulators Cost 5,467,994 5,479,646 267,503 710,385 Pre-operational costs 66,512 70,574 24,462 22,405
5,534,506 5,550,220 291,965 732,790 Accumulated depreciation (1,937,527) (1,787,209) (127,407) (376,047) Foreign currency translation 857,130 488,260 42,140 29,940 Provision for diminution of Ansett aircraft (915,830) - - -
3,538,279 4,251,271 206,698 386,683
Capitalised leased aircraft, engines and simulators Cost 596,053 1,062,434 - - Accumulated depreciation (257,559) (453,524) - - Foreign currency translation 97,189 87,501 - - Provision for diminution of Ansett aircraft (148,217) - - -
287,446 696,411 - -
Spares Cost 419,574 384,983 132,082 126,536 Accumulated depreciation (183,378) (182,212) (46,146) (44,336)
236,196 202,771 85,936 82,200
Plant, equipment, furniture and vehicles Cost 1,254,916 1,057,603 393,326 325,070 Accumulated depreciation (873,944) (786,451) (236,644) (207,617)
380,972 271,152 156,682 117,453
Land and buildings Land 18,911 24,118 79 - Buildings 205,374 199,947 30,396 108,359 Leasehold improvements 436,151 453,563 124,429 27,977
660,436 677,628 154,904 136,336
Accumulated depreciation (105,690) (72,178) (69,667) (64,479)
554,746 605,450 85,237 71,857
$4,997,659 $6,027,055 $534,553 $658,193
Capitalised interest for the year ended 30 June 2001 is $362,000 (2000 - $2,033,000).
Note 1 provides further information in relation to the provision for diminution of Ansett aircraft.
33 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS Year ended 30 June 2001
10. Property, plant and equipment (continued)
Aircraft market values
The market values of aircraft tend to fluctuate significantly from year to year. The Directors have obtained independent valuations as at 30 June 2001 from The International Bureau of Aviation to ascertain indicative market values of the jet aircraft within the fleet. The average of the valuations obtained is shown below for Air New Zealand Operations only:
As at 30 June 2001 NZD Book USD Value Value Difference Value @ 0.4042 NZD NZD $000 $000 $000 $000
Boeing 747 340,880 843,345 815,644 27,701 Boeing 767 310,857 769,067 764,066 5,001 Boeing 737 171,759 424,935 351,750 73,185
$823,496 $2,037,347 $1,931,460 $105,887
As at 30 June 2000 NZD Book USD Value Value Difference Value @ 0.4680 NZD NZD $000 $000 $000 $000
Boeing 747 343,861 734,746 782,373 (47,627) Boeing 767 397,295 848,920 876,466 (27,546) Boeing 737 180,912 386,565 351,501 35,064
$922,068 $1,970,231 $2,010,340 ($40,109)
Other valuations The latest available Government and independent valuations of the Group’s New Zealand land and buildings, adjusted for additions and disposals, is $195,925,000 (book value - $73,972,010) [2000 - $199,176,000 (book value - $70,843,571)].
34 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS Year ended 30 June 2001
11. Investments Group Parent
2001 2000 2001 2000 $000 $000 $000 $000
Subsidiaries Shares at cost - - 1,622,333 1,542,509 Advances - - 93,766 93,766
- - 1,716,099 1,636,275 Provision for diminution in value - - (1,518,577) (127,411)
- - 197,522 1,508,864
Associates Shares at cost 65,666 30,455 - - Share of post acquisition (decrease)/increase in net assets (6,310) 10,226 - - Provision for diminution in value (10,854) - - - Foreign currency translation 3,031 1,745 - - Advances 2,478 2,478 - -
54,011 44,904 - -
Other Shares in other companies at cost 529 21,407 529 5,565 Other investments 1,342 - 1,337 -
1,871 21,407 1,866 5,565 Provision for diminution in value (1,866) (8,435) (1,866) (529)
5 12,972 - 5,036
Goodwill on consolidation of subsidiaries 7,223 190,746 - -
$61,239 $248,622 $197,522 $1,513,900
Represented by: Investments 52,472 54,341 197,522 1,513,900 Goodwill on consolidation 8,767 194,281 - -
$61,239 $248,622 $197,522 $1,513,900
Note 1 provides further information in relation to the provision for diminution in value of the investment in Ansett Holdings Limited and subsidiary companies of $1,374,240,000 in the Parent.
35 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS Year ended 30 June 2001
11. Investments (continued)
Subsidiaries
Significant subsidiaries comprise:
% owned Name 2001 2000 Principal activity
Aeropelican Air Services Pty Limited* 100 100 Aviation Air Nelson Limited 100 100 Aviation Air New Zealand (Australia) Pty Limited 100 100 Holding company Air New Zealand Destinations Limited 100 100 Hotel reservations and events marketing Ansett Australia Limited* 100 100 Aviation Ansett Australia & Air New Zealand Engineering Services Limited 100 100 Engineering services Ansett Holdings Limited* 100 100 Holding company Blue Pacific Tours Limited 100 100 Travel wholesaling Eagle Aviation Limited 100 100 Aviation Hazelton Airlines Limited* 100 - Aviation Jetset Travel & Technology Holdings Pty Limited 100 100 Travel products & technology distribution Kendell Airlines (Aust.) Pty Limited* 100 100 Aviation New Zealand International Airlines Limited 100 100 Aircraft leasing and financing Safe Air Limited 100 100 Aviation engineering Show Group Pty Limited* 100 100 Travel products Skywest Airlines Pty Limited* 100 100 Aviation South Pacific Air Charters Limited 100 100 Aviation Tasman Aviation Enterprises (Queensland) Pty Limited 100 100 Engineering services The Mount Cook Group Limited 100 100 Aviation and ski-field operations Traveland International Pty Limited* 100 100 Travel products * Company placed into voluntary administration on 12 September 2001. Refer to Note 1.
Acquisition of subsidiaries
During the current year, the Group acquired 100% of the shares in Hazelton Airlines Limited for cash consideration of A$25,272,000. The operating results of Hazelton Airlines Limited have been included in the Statement of Financial Performance from 30 April 2001.
On 23 June 2000 the Group acquired the remaining 50% of the shares in Ansett Holdings Limited for a cash consideration of A$580,000,000 with an additional obligation to make a second payment by way of shares or cash equivalent to 10.5% of the value of Air New Zealand shares on issue on 18 February 2000.
Ansett Holdings Limited has been consolidated from 30 June 2000. Therefore, 50% of the earnings had been equity accounted, and the financial position consolidated as at 30 June 2000.
36 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS Year ended 30 June 2001
11. Investments (continued) Summary of the effect of acquisitions Group
2001 2000 $000 $000
Assets Property, plant and equipment 23,058 3,409,855 Investments - (575,165) Other non-current assets 3,235 118,437 Bank balances - 203,077 Finance lease receivables - 62,357 Other current assets 17,739 860,416
Liabilities Bank overdraft (3,678) - Borrowings and capitalised lease obligations (12,547) (1,456,470) Payables and accruals (18,165) (1,744,715) Minority interest - (1,784)
9,641 876,008 Goodwill on acquisition 21,559 -
Purchase price 31,200 876,008 Deferred consideration - (116,541)
Net cash outflow to the company 31,200 759,467 Cash acquired with subsidiary 3,678 (203,077)
Net cash outflow to the Group $34,878 $556,390
Associates
Significant associate companies comprise:
% owned Name 2001 2000 Principal activity Ansett International Limited 49 49 Aviation Travel Industries Automated Systems Pty Limited (TIAS) 50 50 Airline reservation systems Christchurch Engine Centre 49 - Engineering services Ansett International Limited was placed into voluntary administration on 12 September 2001. Refer to Note 1.
Results of associates Group
2001 2000 $000 $000
Share of surpluses (less deficits) 60,518 76,279 Taxation (24,893) 3,771
Surplus after taxation 35,625 80,050 Unusual items - 6,738 Less amortisation of goodwill (1,991) (13,630) Less dividends received (50,170) (15,038)
Share of surpluses of associates ($16,536) $58,120
37 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS Year ended 30 June 2001
12. Borrowings Group Parent
2001 2000 2001 2000 $000 $000 $000 $000
Unsecured borrowings 1,064,578 878,567 581,267 536,262 Secured borrowings 2,822,616 2,558,277 - -
$3,887,194 $3,436,844 $581,267 $536,262
Repayable as follows: Not later than 1 year 897,230 1,049,866 393,226 446,885 Between 1 and 2 years 662,590 421,634 106,557 89,377 Between 2 and 5 years 1,094,184 852,131 81,484 - Over 5 years 1,233,190 1,113,213 - -
$3,887,194 $3,436,844 $581,267 $536,262
Fixed rate 347,184 271,775 - - Floating rate 3,540,010 3,165,069 581,267 536,262
3,887,194 3,436,844 581,267 536,262
Represented by: Current liabilities 897,230 1,049,866 393,226 446,885 Non-current liabilities 2,989,964 2,386,978 188,041 89,377
$3,887,194 $3,436,844 $581,267 $536,262
Secured borrowings are secured over aircraft.
38 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS Year ended 30 June 2001
13. Capitalised lease obligations Group Parent
2001 2000 2001 2000 $000 $000 $000 $000
The future lease rental payments under finance leases are: Not later than 1 year 127,089 243,967 - - Between 1 and 2 years 220,579 36,897 - - Between 2 and 5 years 1,727 185,852 - - Over 5 years - - - -
349,395 466,716 - - Less future interest expense and swap cost (22,695) (38,147) - -
Present value of future rentals shown $326,700 $428,569 - -
Represented by: Current liabilities 115,049 224,010 - - Non-current liabilities 211,651 204,559 - -
$326,700 $428,569 - -
Under long term finance leases the Group has an obligation to ensure the lessors receive minimum residual values for the aircraft.
Capitalised lease obligations are secured over aircraft. Interest rates are fixed throughout the life of the lease.
14. Other liabilities Group Parent
2001 2000 2001 2000 $000 $000 $000 $000
Current Employee entitlements 311,891 251,146 81,372 73,418 Provision for taxation - - 280,713 187,976 Amounts owing to subsidiaries (refer to note 23) - - 466,442 583,128 Amounts owing to associates (refer to note 23) 116,691 101,225 10,782 5,871 Deferred credits with subsidiaries - - 22,033 25,977
$428,582 $352,371 $861,342 $876,370
Non-current Employee entitlements 77,331 147,549 7,665 8,041 Deferred consideration 82,432 116,541 82,432 116,541 Other provisions 31,757 157,578 20,000 -
$191,520 $421,668 $110,097 $124,582
The deferred consideration of $82,432,000 (2000 - $116,541,000) represents the outstanding obligation to News Corporation Limited for final settlement in relation to the acquisition of its shares in Ansett Holdings Limited. The amount represents 10.5% of the number of Air New Zealand shares on issue on 18 February 2000, valued as at 30 June 2001.
39 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS Year ended 30 June 2001
15. Distribution to owners Group Parent
2001 2000 2001 2000 $000 $000 $000 $000
Interim dividend 30,273 34,050 30,273 34,050 Final dividend - 51,075 - 51,075
$30,273 $85,125 $30,273 $85,125
16. Deferred taxation Group Parent
2001 2000 2001 2000 $000 $000 $000 $000
Balance at the start of the year 761,374 - 161,535 - Current year movement (314,983) (24,853) (105,854) (24,853) Change in accounting policy - 786,227 - 186,388
Balance at the end of year $446,391 $761,374 $55,681 $161,535
17. Issued capital Group Parent
2001 2000 2001 2000 $000 $000 $000 $000
Issued and fully paid up capital
Balance at the start of the year 727,026 725,852 727,026 725,852
Ordinary shares issued under renounceable share offer 280,211 - 280,211 - Ordinary shares issued under the Executive Share Option Plan 1 July 1999 to 31 December 1999 (465,000 shares) - 1,130 - 1,130 1 January 2000 to 30 June 2000 (25,000 shares) - 44 - 44 1 July 2000 to 31 December 2000 (155,000 shares) 248 - 248 - 1 January 2001 to 30 June 2001 (nil shares) - - - -
Total issued capital $1,007,485 $727,026 $1,007,485 $727,026
40 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS Year ended 30 June 2001
17. Issued capital (continued)
Share issue details and rights
Ordinary shares There are 756,821,185 (2000 - 567,499,639) shares on issue. The classification of shares is 385,979,030 (2000 - 289,424,985) A and 370,842,155 (2000 - 278,074,654) B Ordinary shares. The A shares may be held only by New Zealand Nationals as defined in the Constitution. Both the A and B shares rank equally with one vote attached to each fully paid share. In addition to the above issued shares, options over 5,353,217 (2000 - 6,968,117) A shares and 4,660,483 (2000 - 5,658,583) B shares are outstanding under the Air New Zealand Limited Executive Share Option Plan and options over 6,553,500 (2000 - n/a) A shares and 6,296,500 (2000 - n/a) B shares are outstanding under the Air New Zealand - Ansett Australia Executive Share Option Plan.
Under the terms of the recapitalisation programme the A and B Ordinary shares will be reclassified into one class of Ordinary shares. Refer to Note 1.
Renounceable share issue On 10 November 2000, 189,166,546 shares were issued in accordance with the renounceable share offer. Total cash proceeds received were $283,750,000. Costs incurred in completing the issue were $3,539,000. These issue costs were taken as a reduction of the amounts recognised as being generated by the share issue. Accordingly, $280,211,000 has been recognised as contribution from shareholders.
Kiwi share One fully paid special rights convertible share (“the Kiwi Share”) is held by the New Zealand Government. While the Kiwi Share does not carry any general voting rights, the consent of the Crown as holder is required for certain prescribed actions of the Company as specified in the Constitution.
18. Capital reserves Group Parent
2001 2000 2001 2000 $000 $000 $000 $000
Asset revaluation reserve $8,649 $8,649 $12,340 $12,340
41 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS Year ended 30 June 2001
19. Revenue reserves Group Parent
2001 2000 2001 2000 $000 $000 $000 $000
Retained earnings Balance brought forward 622,772 1,305,790 708,522 901,010 Retained (deficits) (1,455,591) (685,269) (1,480,126) (198,345) Transfers from foreign currency translation reserve (14,626) 2,251 (9,372) 5,857
Closing retained earnings (847,445) 622,772 (780,976) 708,522
Foreign currency translation reserve
Loans and capitalised lease obligations Balance brought forward (440,952) (157,547) (25,135) (33,762) Translation (loss)/gain (416,079) (164,320) 30,483 (3,199) Transfers to retained earnings 8,979 11,686 11,097 11,826 Reclassified on acquisition - (130,771) - -
(848,052) (440,952) 16,445 (25,135)
Aircraft related items including progress payments Balance brought forward 549,113 166,837 31,664 (4,900) Translation gain 385,255 260,930 27,517 54,247 Transfers to/(from) retained earnings 5,647 (13,937) (1,725) (17,683) Reclassified on acquisition - 135,283 - -
940,015 549,113 57,456 31,664
Investments Balance brought forward 34,719 46,686 - - Translation gain 4,695 14,645 - - Reclassified on acquisition - (26,612) - -
39,414 34,719 - -
Tax on reserve movements Balance brought forward 86,974 43,744 (3,772) (2,799) Tax on reserve movements 129,215 40,301 (10,843) (973) Reclassified on acquisition - 2,929 - -
216,189 86,974 (14,615) (3,772)
Share of associate entities’ foreign currency translation reserve Balance brought forward - (16,051) - - Translation (loss) - (3,120) - - Reclassified on acquisition - 19,171 - -
-- --
Closing foreign currency translation reserve 347,566 229,854 59,286 2,757
Total revenue reserves ($499,879) $852,626 ($721,690) $711,279
42 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS Year ended 30 June 2001
20. Notes to the Statements of Cash Flow Composition of closing cash
Cash, as stated in the Statements of Cash Flow, is reconciled to the related balances in the Statement of Financial Position as follows:
Group Parent
2001 2000 2001 2000 $000 $000 $000 $000
Cash balances 32,859 247,745 3,753 23,663 Other short term deposits and short term bills 778,811 495,625 773,375 495,625
Bank and short term deposits 811,670 743,370 777,128 519,288
Bank overdraft and short term borrowings (47,221) (47,876) (20,916) (31,210)
Closing cash balance $764,449 $695,494 $756,212 $488,078
Receipts and payments in respect of funding to/from related parties have been combined to present a net cash flow in the Parent. Given the large amounts involved and the short maturities of the deals, it is considered more appropriate to present these flows as net.
Reconciliation of net (deficit) attributable to shareholders to net cash flow from operating activities
Group Parent
2001 2000 2001 2000 $000 $000 $000 $000
Net (deficit) attributable to shareholders (1,425,318) (600,144) (1,449,853) (113,220)
Plus/(less) non-cash items: Depreciation and amortisation 532,464 185,830 95,225 83,144 Capitalised interest on borrowings and leases 15,883 5,504 - - (Gain)/loss on sale of assets (33,673) 49,129 (5,561) 48,633 Share of surplus of associates 16,536 (58,120) - - Deferred taxation (314,983) 786,227 (105,854) 161,535 Write-down of carrying value of Ansett 1,320,859 - 1,475,105 - Other non-cash items 53,373 7,066 73,110 (43,730)
165,141 375,492 82,172 136,362 Increase/(decrease) in working capital items: Payables and accruals 372,951 1,243,216 (150,383) 70,087 Transportation sales in advance (92,872) 563,860 42,030 63,768 Receivables and prepayments (276,910) (734,079) 143,707 89,450 General stores (21,995) (170,585) (10,590) (3,217) Less balance on acquisition of Ansett - (886,083) - -
(18,826) 16,329 27,764 220,088
Net cash flow from operating activities $146,315 $391,821 $106,936 $356,450
43 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS Year ended 30 June 2001
21. Financial instruments The Group is subject to credit, foreign currency, interest rate, and fuel price risks. The Group manages these risks using various financial instruments, using a set of policies approved by the Board of Directors. Air New Zealand policy is not to enter, issue or hold financial instruments for speculative purposes.
Credit risk Credit risk is the potential loss from a transaction in the event of default by a counterparty during the term of the transaction or on settlement of the transaction. The Group and Parent incurs credit risk from transactions with trade receivables and financial instruments in the normal course of its business.
The Group and Parent place their cash, short term deposits and off balance sheet instruments with good credit quality financial institutions and the New Zealand Government. Limits are placed on the exposure to any one financial institution.
Credit evaluations are performed on all customers requiring direct credit. The Group and Parent are not exposed to any concentrations of credit risk within receivables and other assets. The Group and Parent do not require collateral or other security to support financial instruments with credit risk. A significant proportion of receivables are settled through the IATA clearing mechanism which undertakes its own credit review of members.
Fair values
Methods and assumptions The following methods and assumptions were used to estimate the fair value of each class of financial assets and liabilities:
Cash, short term deposits, bank overdrafts The carrying amounts of these balances are equivalent to their fair value and therefore have been excluded from the table below. Investments The fair value of shares in other companies is based on the market value for these investments. Finance lease receivables The fair value of finance lease receivables is based on current interest rates on similar terms and conditions. Borrowings, net capitalised lease obligations and operating lease deposits The fair value of these balances is estimated based on current interest rates available to the Group and Parent for funding on similar terms and conditions. Denomination of book values is further disclosed in Note 22. Currency swap, interest rate swap and foreign currency exchange contracts The fair value of these amounts is estimated based on the quoted market prices of comparable financial instruments. The carrying value of the interest rate swaps represents the accrued interest and amortisation costs on these instruments. Options The fair value of options is estimated on valuations from counterparties with whom the Group holds the contracts. The carrying value of options represents the unamortised premium/discount on these instruments. Financial guarantees It is not practical to estimate the fair value of the financial guarantees with an acceptable level of reliability. Other guarantees are disclosed in Notes 14, 24 and 26. Other balances The carrying amounts of other balances are equivalent to their fair value and therefore have been excluded from the below table.
44 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS Year ended 30 June 2001
21. Financial instruments (continued)
Fair value summary
The estimated fair value of the Group’s and Parent’s financial assets and liabilities which differ from the carrying values are as follows:
Carrying Fair Carrying Fair Value Value Value Value 2001 2001 2000 2000 $000 $000 $000 $000
Group
Recognised financial assets and liabilities
Borrowings (3,887,194) (3,771,642) (3,436,844) (3,531,436) Gross primary capitalised lease obligations (269,570) (309,189) (398,832) (443,083) Currency swaps of liabilities (57,130) (27,564) (29,737) 1,944
Net capitalised lease obligations (326,700) (336,753) (428,569) (441,139)
Finance lease receivables 22,133 23,418 62,357 62,919
Unrecognised financial assets and liabilities
Foreign currency forward exchange contracts - 100,153 - 6,193 Currency options 1,766 1,100 1,695 415 Fuel options 19,359 5,720 6,372 28,820 Fuel swaps - 1,136 - 15,464 Interest rate swaps (2,801) (31,226) 543 13,032
Parent
Recognised financial assets and liabilities
Borrowings (581,267) (590,039) (536,262) (537,968)
Unrecognised financial assets and liabilities
Foreign currency forward exchange contracts - 81,172 - (11,827) Currency options 1,766 102 8,067 19,963 Fuel options 19,359 5,720 - - Fuel swaps - 1,136 - - Interest rate swaps (712) (8,961) 8 728
The Group and Parent anticipate that debt and capitalised lease obligations will be held to maturity, and accordingly settlement at the reported fair value of these financial instruments is unlikely.
Currency risk Currency risk is the risk of loss to the Group arising from adverse fluctuations in exchange rates.
The Group has exposure to foreign exchange risk as a result of offshore funding activities and transactions denominated in foreign currencies, arising from normal trading activities. Where exposures are certain, such as foreign currency borrowings and capital commitments, it is the Group’s policy to hedge these risks as they arise.
The Group enters into foreign exchange contracts to hedge foreign currency transactions. Any exposure to gains or losses on these contracts is generally offset by a related loss or gain on the item being hedged.
Currency swap arrangements have been entered into to convert foreign currency exposures into United States Dollars. The Group employs the integrated approach in recognising such contracts, whereby the underlying obligation is converted into United States Dollars at the contracted swap rates. The notional principal amounts under these swaps for the Group convert JPY5,716,657,000 to USD60,728,326 (2000 - JPY5,654,000,000 to USD53,000,000).
45 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS Year ended 30 June 2001
21. Financial instruments (continued)
Foreign currency forward exchange contracts have been entered into with various counterparties in accordance with dollar limits set by the Board of Directors. The notional amount outstanding at balance date is $2,217,536,000 (2000 - $1,429,612,000).
The Group has entered into currency option agreements to reduce the impact of changes in foreign exchange currency transactions. At 30 June 2001, the Group had currency option agreements outstanding with commercial banks. The notional principal hedged was AUD82,859,000 (2000 - AUD19,300,000), and USD46,700,000 (2000 - USD nil), GBP500,000 (2000 GBP nil) and EUR1,500,000 (2000 EUR nil) (2000 - JPY750,000,000). The agreements mature in 2001 (2000 - 2000).
Interest rate risk Interest rate risk is the risk of loss to the Group arising from adverse fluctuations in interest rates.
The Group has exposure to interest rate risk as a result of the long term borrowing activities which are used to fund ongoing activities. It is Group policy to ensure the interest rate exposure is maintained to minimise the impact of changes in interest rates on its floating rate long term borrowings.
The notional principal or contract amounts of interest rate contracts outstanding at balance date are as follows:
Group Parent
2001 2000 2001 2000 $000 $000 $000 $000
Interest rate swaps 1,006,085 1,311,346 321,623 341,880
46 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS Year ended 30 June 2001
21. Financial instruments (continued) The interest rate re-pricing analysis below is based on the earlier of contractual re-pricing or maturity. Asset and liabilities that are interest rate insensitive have been excluded from this analysis.
Group 2001 2000 Effective Within Effective Within interest Total 1 year interest Total 1 year rate % $000 $000 rate % $000 $000
Financial assets Bank and short term deposits 5.67 811,670 811,670 6.85 743,370 743,370
Total financial assets 811,670 811,670 743,370 743,370
Non-financial assets ------
Total assets 811,670 811,670 743,370 743,370
Financial liabilities Bank overdraft 7.09 47,221 47,221 7.23 47,876 47,876 Borrowings 4.91 3,540,010 3,540,010 6.52 3,165,069 3,165,069
Total financial liabilities 3,587,231 3,587,231 3,212,945 3,212,945
Non-financial liabilities ------
Total liabilities 3,587,231 3,587,231 3,212,945 3,212,945
Off-balance sheet financial instruments Net interest rate contracts 6.30 1,006,085 1,006,085 6.14 1,311,346 1,311,346
Parent 2001 2000 Effective Within Effective Within interest Total 1 year interest Total 1 year rate % $000 $000 rate % $000 $000
Financial assets Bank and short term deposits 5.67 777,128 777,128 6.85 519,228 519,228
Total financial assets 777,128 777,128 519,228 519,228
Non-financial assets ------
Total assets 777,128 777,128 519,228 519,228
Financial liabilities Bank overdraft 8.00 20,916 20,916 7.12 31,210 31,210 Borrowings 4.96 581,267 581,267 6.77 536,262 536,262
Total financial liabilities 602,183 602,183 567,472 567,472
Non-financial liabilities ------
Total liabilities 602,183 602,183 567,472 567,472
Off-balance sheet financial instruments Net interest rate contracts 6.33 321,623 321,623 6.29 341,880 341,880
47 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS Year ended 30 June 2001
22. Foreign currencies Group Parent
2001 2000 2001 2000 $000 $000 $000 $000
Amounts owing under borrowing agreements and capitalised leases comprise:
Borrowings (Note 12) 3,887,194 3,436,844 581,267 536,262 Capitalised lease obligations (Note 13) 326,700 428,569 - -
$4,213,894 $3,865,413 $581,267 $536,262
The above debt is repayable in the following currencies: United States Dollars 3,505,682 3,058,884 123,701 - Australian Dollars 708,212 726,222 457,566 536,262 Deutschmark - 29,220 - - Japanese Yen - 51,087 - -
$4,213,894 $3,865,413 $581,267 $536,262
Group Parent
2001 2000 2001 2000 $000 $000 $000 $000
Aircraft engines, simulators and capitalised leased aircraft comprise: Aircraft, engines and simulators (Note 10) 3,538,279 4,251,271 206,698 386,683 Capitalised leased aircraft (Note 10) 287,446 696,411 - - Progress payments (Note 9) 27,951 47,639 21,600 15,245
$3,853,676 $4,995,321 $228,298 $401,928
The above assets are denominated in the following currencies: United States Dollars 2,463,643 4,708,387 106,837 327,303 Australian Dollars 379,675 165,191 - - New Zealand Dollars 1,010,358 121,743 121,461 74,625
$3,853,676 $4,995,321 $228,298 $401,928
The residual value of the aircraft fleet, engines, simulators and progress payments are denominated in United States Dollars.
48 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS Year ended 30 June 2001
22. Foreign currencies (continued) Group Parent
2001 2000 2001 2000 $000 $000 $000 $000
Cash and bank balances comprise: Cash balances (Note 20) 32,859 247,745 3,753 23,663 Other short term deposits and short term bills (Note 20) 778,811 495,625 773,375 495,625 Less bank overdraft and short term borrowings (Note 20) (47,221) (47,876) (20,916) (31,210)
$764,449 $695,494 $756,212 $488,078
The above bank balances are denominated in the following currencies: United States Dollars 123,163 19,282 122,157 5,768 Australian Dollars 8,111 243,885 1,899 40,808 New Zealand Dollars 633,175 432,327 632,156 441,502
$764,449 $695,494 $756,212 $488,078
Significant foreign exchange rates used at balance date for ($1.00) New Zealand Dollar are: 2001 2000 United States Dollar 0.4042 0.4680 Australian Dollar 0.7977 0.7832 Deutschmark 0.9351 0.9797 Japanese Yen 50.13 49.36 United Kingdom Pound 0.2871 0.3083
23. Related parties
Subsidiaries and associates
During the year there have been transactions between Air New Zealand Limited, its subsidiaries and associates which have been conducted on a commercial basis. The transactions during the year from the Parent’s perspective comprise:
Parent
2001 2000 $000 $000
Revenue 55,521 29,082 Operating costs 517,904 411,999 Net interest received 48,668 21,573 Dividend revenue 25,085 15,078
Disposal of property, plant and equipment 4,445 235,038
For balances outstanding at year end refer to notes 9 and 14.
Staff share purchase schemes The Air New Zealand A and B Staff Share Purchase Schemes were established by the Group in 1998. All full time and regular part-time employees were invited to participate in the Scheme and purchase a maximum of 2,000 shares each. The price of the shares was $1.60, being the lower of the offer price and a price 10% below the weighted average sale price for the shares at the date of allotment, being 12 August 1998. The shares are held by the Trustees during a three year restrictive period which is due to expire in September 2001. Allocated shares carry normal voting rights and participate in dividends. Voting rights are exercised by the Trustees on behalf of the employees during the restrictive period, after which time the rights are transferred to the employee. At 30 June 2001 Dr J A Farmer QC, Sir Selwyn Cushing (both Directors of the Parent) and Mr L F Doolan (Senior Vice President Government & International Affairs) were Trustees of the Scheme and are appointed by the Parent’s Board of Directors.
49 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS Year ended 30 June 2001
23. Related parties (continued)
At 30 June 2001 the Trustees held 7,481,626 (2000 - 6,753,126) ordinary Air New Zealand A shares and 220,874 (2000 - 165,656) B shares fully paid with full voting rights, of which 3,137,000 A shares and 220,874 B shares had not been allocated to employees (2000 - 2,232,850 A shares and 165,656 B shares, all unallocated), representing 1.0% (2000 - 1.2%) of the total shares on issue. Advances to the Scheme from the Parent are at 1% interest and payable on demand. As at 30 June 2001, the balance of such advances totalled $8,113,000 (2000 - $9,026,000).
Executive Share Option Plans
1995 share option plan On 3 July 1995 the Parent established the Air New Zealand Limited Executive Share Option Plan (“the 1995 Share Option Plan”). Options over 7,818,950 (2000 - 7,818,950) A shares and 6,243,050 (2000 - 6,243,050) B shares have been issued under the 1995 Share Option Plan to senior executives representing 1.9% (2000 - 2.5%) of the total shares on issue. No new options were issued during the current financial year and those issued over the past five years represent 1.55% of the total number of shares on issue. At 30 June 2001, options over 2,465,733 A shares and 1,582,567 B shares have lapsed or been exercised. The 1995 Share Option Plan’s pricing formula allows participants to benefit only to the extent that the Parent’s share price out-performs the NZSE-40 gross index after taking account of dividends paid. An option can be exercised only after the first anniversary date of its issue and lapses if it has not been exercised by the fifth anniversary of its issue date. 2001 share option plan On 31 March 2001 the Parent issued options to selected senior executives over 6,553,500 A shares and 6,296,500 B shares under the Air New Zealand - Ansett Australia Executive Share Option Plan (“the 2001 Share Option Plan”). The options represent 1.7% of the shares on issue and carry an exercise price of $1.00 per share for options over A shares and $1.28 per share for options over B shares (except that in respect of 490,000 options over B shares, an exercise price of $1.00 applies). The options issued on 31 March 2001 vest in three tranches: 25% on the first anniversary of the issue date (31 March 2002); 25% on the second anniversary of the issue date (31 March 2003); and 50% on the third anniversary of the issue date (31 March 2004). Options can be exercised only after they have vested and then only if the weighted average A and B ordinary share price increases by 7.25%, 15% and 23% respectively for each tranche calculated from the issue date. Options lapse if not exercised by the fifth anniversary of their vesting date. Except as provided for in the Plan rules, options also lapse if the executive leaves employment of the Air New Zealand Group. Other related party disclosure Ansett Australia Holdings Limited has a loan from associate Ansett International Limited. The loan is AUD$75,000,000 (2000 - AUD$75,000,000) and is repayable on demand. Interest is charged at market based rates. Ansett Australia Holdings Limited also has an advance account with Ansett International Limited, the balance of which has been included in Note 9 under “Amounts owing from associates”. No interest is charged on this advance account. Furthermore, the two entities transact under normal commercial terms. These transactions are not considered material to Air New Zealand Limited. Other balances and transactions with related parties are not considered material to Air New Zealand Limited. Trade amounts owing between related parties are payable under normal commercial terms. During the year $100,865,000 (2000 - $nil) was written-off relating to amounts owing from Ansett Holdings Limited and subsidiaries from the Ansett Group being placed into voluntary administration. Refer to Note 1. No other amounts were written off or forgiven during the period.
24. Capital commitments Group Parent
2001 2000 2001 2000 $000 $000 $000 $000
Commitments for property, plant and equipment are as follows: Aircraft (USD translated to NZD) 245,267 234,575 228,644 52,947 Non-aircraft 14,111 2,935 1,314 -
$259,378 $237,510 $229,958 $52,947
Commitments shown are for those asset purchases committed and contracted at balance date.
50 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS Year ended 30 June 2001
25. Operating lease commitments Group Parent
2001 2000 2001 2000 $000 $000 $000 $000
Commitments for the lease of aircraft and properties are as follows:
Aircraft leases payable: Not later than 1 year 444,383 305,364 519,864 440,321 Between 1 and 2 years 328,665 244,276 319,139 393,659 Between 2 and 5 years 543,152 248,538 342,721 366,484 Over 5 years 374,951 212,915 274,619 79,417
$1,691,151 $1,011,093 $1,456,343 $1,279,881
Property leases payable: Not later than 1 year 95,266 90,095 23,825 22,446 Between 1 and 2 years 90,180 90,132 20,643 18,540 Between 2 and 5 years 216,512 244,836 36,362 38,451 Over 5 years 872,049 969,977 22,818 26,001
$1,274,007 $1,395,040 $103,648 $105,438
The Parent leases a number of aircraft from its wholly owned subsidiary, New Zealand International Airlines Limited (“NZIA”), and has an option to purchase these aircraft, on three month’s notice, at the higher of the net book value of the aircraft or the value of the outstanding secured loan.
NZIA also has the option to purchase one Boeing 737-300 aircraft which is currently under an operating lease arrangement. The option may be exercised at the end of years two, three or five of the lease.
26. Contingent liabilities Group Parent
2001 2000 2001 2000 $000 $000 $000 $000
Uncalled capital of subsidiaries - - 2,100 2,100 Letters of credit and performance bonds 91,270 86,073 57,906 15,428
$91,270 $86,073 $60,006 $17,528
All significant legal disputes involving probable loss have been provided for in the accounts. No significant contingent claims are outstanding at balance date.
Ansett Australia Holdings Limited is a guarantor of certain obligations of AWAS, an aircraft leasing and financing business no longer related to the Ansett Group. These contingent obligations currently amount to USD762,621,000 (2000 - USD1,077,000,000) and will be extinguished over 13 years. Air New Zealand and Ansett are both indemnified in respect of these obligations by TNT Post (up to AUD425,000,000 [2000 - AUD425,000,000]) and News Corporation (up to approximately AUD680,000,000 [2000 - AUD680,000,000]) and further by Morgan Stanley Dean Witter & Co, the present owner of AWAS, without a financial limit. The amount shown is the maximum liability the Group could be called upon to pay and in addition to the indemnities noted, the Directors consider that this contingent liability is significantly hedged by the value of the aircraft under lease.
51 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS Year ended 30 June 2001
26. Contingent liabilities (continued) Under certain of the Group’s leasing arrangements for aircraft and related equipment the Parent has undertaken to indemnify the lessors so as to maintain a specified rate of monetary return after taxation on each of the lessors’ investments as agreed at the inception of the leases. Air New Zealand is not aware of any events giving rise to a potential liability at balance date. Under certain operating lease arrangements the Group has an obligation to return aircraft to specified operational conditions prior to redelivery.
Air New Zealand and the other investors in Ansett International Limited have entered into put and call options for the purchase of Ansett International Limited shares by Air New Zealand for AUD36,200,000. If Air New Zealand is legally unable to purchase the shares, Air New Zealand is required to find a new qualifying party to hold the shares.
The Board and its advisers have reviewed other potential exposures relating to Ansett and any further material liability for the Company is considered to be unlikely.
Parent The Parent has guaranteed the indebtedness of New Zealand International Airlines Limited and Jetset Travel and Technology Holdings Pty Limited, both wholly owned subsidiary companies. At 30 June 2001, the net indebtedness of these companies were as follows: Parent
2001 2000 $000 $000
Total indebtedness 2,065,722 1,886,728 Undrawn facilities 259,772 583,761
Net commitments $2,325,494 $2,470,489
27. Earnings per share Group Parent
2001 2000 2001 2000 $000 $000 $000 $000
Earnings per share (cents per share) (207.1) (105.8) (206.7) 37.8
Earnings per share is calculated by dividing the operating (deficit)/surplus before extraordinary items by the weighted average number of ordinary shares on issue during the year.
52 Brought to you by Global Reports AIR NEW ZEALAND LIMITED AND SUBSIDIARIES AUDITOR’S REPORT
TO THE SHAREHOLDERS OF AIR NEW ZEALAND LIMITED
We have audited the financial statements on pages 16 to 52. The financial statements provide information about the past financial performance and financial position of Air New Zealand Limited and Group as at 30 June 2001. This information is stated in accordance with the accounting policies set out on pages 20 to 23.
Board of Directors’ Responsibilities The Board of Directors is responsible for the preparation, in accordance with New Zealand law and generally accepted accounting practice, of financial statements which gives a true and fair view of the financial position of the Company and Group as at 30 June 2001 and of the results of their operations and cash flows for the year ended 30 June 2001.
Auditors’ Responsibilities It is our responsibility to express an independent opinion on the financial statements presented by the Board of Directors and report our opinion to you.
Basis of Opinion An audit includes examining, on a test basis, evidence relevant to the amounts and disclosures in the financial statements. It also includes assessing: • the significant estimates and judgements made by the Board of Directors in the preparation of the financial statements, and • whether the accounting policies are appropriate to the company and group circumstances, consistently applied and adequately disclosed.
We conducted our audit in accordance with New Zealand Auditing Standards. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to obtain reasonable assurance that the financial statements are free from material misstatements, whether caused by fraud or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.
Our firm carries out other assignments for the Company and Group in the area of consultancy advice. In addition to this, principals and employees of our firm deal with the Company and Group on arms length terms within the ordinary course of trading activities of the Company and Group.
The firm has no other interests in Air New Zealand Limited or its subsidiaries.
Fundamental Uncertainty In forming our unqualified opinion, we have considered the adequacy of the disclosures made in the financial statements concerning: 1. The recapitalisation programme for the Company and Group, under the terms of an agreement reached between the New Zealand Government, the Company and its major shareholders, Brierley Investments Limited and Singapore Airlines Limited. The recapitalisation programme is in two phases. The first phase is complete and involved the Government making a loan for $300 million and the settlement of all obligations owing to and from the Ansett Group with the Voluntary Administrators. The second phase of the programme involves additional equity funding by the Government of up to $585 million in ordinary shares and the issue of convertible preference shares to satisfy the obligation for the Crown loan and accrued interest. The Government’s subscription for the ordinary and convertible preference shares is conditional on a number of matters which are outlined in Note 1 to the financial statements. In particular, the Government has yet to complete its assessment of the business plan in order to determine what level of equity funding it will put into the Company.
2. The ability of the Company and Group to maintain a sufficient level of profitability and cash flow to continue in operation. Uncertainty exists surrounding the future trading performance of the Company and Group as a result of the circumstances disclosed in Note 1 including the possible impact of the terrorist attacks in the United States and the effect of placing Ansett Holdings Limited into voluntary administration.
3. The requirement for ongoing support of the Company and Group’s financiers.
53 Brought to you by Global Reports The financial statements have been prepared on a going concern basis, the validity of which depends on the successful conclusion of the matters noted above. If the Company and Group were unable to continue in operation for the foreseeable future, adjustments would have to be made to reflect the situation that assets may need to be realised other than at the amounts at which they are currently carried in the Statement of Financial Position. In addition, the Company and Group may have to provide for further liabilities that may arise, and to reclassify non-current assets and non-current liabilities. Further details of the circumstances relating to the factors leading to the existence of these fundamental uncertainties are described in Note 1.
Unqualified Opinion We have obtained all the information and explanations we have required.
In our opinion : • proper accounting records have been kept by the Company as far as appears from our examination of those records; and • the financial statements on pages 16 to 52: – comply with generally accepted accounting practice in New Zealand; – give a true and fair view of the financial position of the Company and Group as at 30 June 2001 and the results of their operations and cash flows for the year ended on that date.
Our audit was completed on 26 October 2001 and our unqualified opinion is expressed as at that date.
DELOITTE TOUCHE TOHMATSU Chartered Accountants Auckland, New Zealand
54 Brought to you by Global Reports GENERAL INFORMATION
Ten Year Statistical Review 56 Directors’ Interests – General 58 Directors’ Interests – Shareholdings 59 Directors’ Interests – Remuneration 60
Employees’ Remuneration 64
Shareholder Information 65
Directors’ Interests – Indemnities 66
Directors’ Statement 66
Air New Zealand and Star Alliance Partners Route Network 67
Corporate Directory 68
55 Brought to you by Global Reports TEN YEAR STATISTICAL REVIEW AIR NEW ZEALAND LIMITED AND SUBSIDIARIES
As at 30 June: 2001 2000 Revenue 7,960 3,656 Operating Expenditure 8,014 3,440 Operating Surplus (1,557) 164 Tax / Minorites / Associates (165) (22) Financial Performance ($m) Surplus attributable to Shareholders of Parent Company (1,425) (600) Earnings per Share (cents) (207.1) (105.8) Dividend per Share (cents) 4.0 15.0 Financial Position ($m) Total Assets 8,114 8,964 Shareholders’ Funds 518 1,590 Air New Zealand – Domestic 4,251 4,067 Air New Zealand – International 3,578 3,351 Passengers (000s) Ansett – Domestic 12,394 Ansett – International 673 Total 20,897 7,418 Air New Zealand – Domestic 2,033 1,896 Air New Zealand – International 20,172 19,082 Revenue Passenger Kilometres (m) Ansett – Domestic 13,825 Ansett – International 3,768 Total 22,205 20,978 Air New Zealand – Domestic 2,994 2,844 Air New Zealand – International 28,332 27,270 Available Seat Kilometres (m) Ansett – Domestic 18,691 Ansett – International 5,323 Total 50,017 30,114 Air New Zealand – Domestic 67.9% 66.6% Air New Zealand – International 71.2% 70.0% Passenger Load Factor (%) Ansett – Domestic 74.0% Ansett – International 70.8% Total 71.9% 71.9% Air New Zealand 755 821 Ansett – Domestic 145 Freight Tonne Kilometres (m) Ansett – International 139 Total 1,040 821 Boeing 747-400 10 10 Boeing 747-200 – – Boeing 767-300 12 10 Boeing 767-200 12 13 Boeing 737-300 40 34 Jet Aircraft Fleet Boeing 737-200 4 7 Airbus A320 20 20 BAe 146-200 7 3 BAe 146-300 7 7 Bombardier CRJ-200 11 7 Group Staff Numbers 24,479 9,554
56 Brought to you by Global Reports 1999 1998 1997 1996 1995 1994 1993 1992 3,359 3,089 2,931 3,000 2,888 2,598 2,338 2,209 3,209 2,959 2,759 2,746 2,602 2,399 2,198 2,075 150 130 172 254 286 199 140 134 64 15 (22) (29) (26) (8) 0 (19) 314 145 150 225 260 191 140 115 37.8 25.6 29.0 50.8 58.7 43.3 32.7 28.9 15.0 16.0 20.0 20.0 20.0 14.0 10.0 10.0 4,391 4,101 3,356 3,135 3,107 2,861 2,766 2,409 2,124 1,989 1,673 1,400 1,274 2,430 1,114 985 3,536 3,491 3,512 3,558 3,626 3,381 3,117 2,999 2,986 2,908 3,122 3,033 2,756 2,430 2,090 1,915
6,522 6,399 6,634 6,591 6,382 5,811 5,207 4,914 1,634 1,598 1,610 1,655 1,637 1,507 1,421 1,365 18,031 18,011 18,671 18,458 16,086 14,090 12,360 11,633
19,665 19,609 20,281 20,113 17,723 15,597 13,781 12,998 2,717 2,697 2,664 2,706 2,648 2,464 2,396 2,403 26,229 26,298 26,960 26,987 23,158 19,579 17,808 16,096
28,946 28,995 29,624 29,693 25,806 22,043 20,204 18,499 60.1% 59.2% 60.4% 61.2% 61.8% 61.2% 59.3% 56.8% 68.7% 68.5% 69.3% 68.4% 69.5% 72.0% 69.4% 72.3%
67.9% 67.6% 68.5% 67.7% 68.7% 70.8% 68.2% 70.3% 833 851 796 692 581 493 428 428
833 851 796 692 581 493 428 428 75555332 –4544453 98876322 43255776 42–––––– 11 11 11 11 13 12 12 12 –––––––– –––––––– –––––––– –––––––– 9,177 9,560 9,340 9,929 9,618 9,039 8,791 8,825
57 Brought to you by Global Reports DIRECTORS’ INTERESTS – GENERAL AIR NEW ZEALAND LIMITED AND SUBSIDIARIES
General Disclosures The following are particulars of general disclosures of interest given during the year to 30 June 2001 by Directors of the Company holding office on that date, pursuant to section 140(2) of the Companies Act 1993. Where applicable, the disclosures also include directorships of subsidiaries of the following companies. Details of Directors’ shareholdings and indemnities are set out on pages 59 and 66.
Dr J A Farmer QC New Zealand Tennis Inc. Director Air New Zealand Staff Share Purchase Schemes Trustee Public Trust Office Modernisation Board Director Air New Zealand Superannuation Scheme Trustee Rannoch Estate Limited Director Robert Henry Limited Director Vending Technologies Limited Director Hon Philip Burdon Viking Pacific Holdings Limited Director EBOS Limited Chairman Hilary Commission Member MFL Mutual Fund Limited Chairman Pharmaceutical Management Agency Member Superannuation Investments Limited Chairman ANZCO Limited Director Brierley Investments Limited Director Mr J S Curtis NZI Insurance Limited Director Allianz Australia Limited Chairman OPUS International Limited Director Caliburn Partnership Pty Limited Chairman Sealord Limited Director First Data Resources Australia, Advisory Committee Chairman Australian Technology Group Limited Director Sir Ronald Carter Perpetual Trustees Australia Limited Director Auckland Chamber of Commerce & Industry Director St George Bank Limited Director Beca Group Limited Director Credit Agricole Lazard The Royal Society of New Zealand Council Member Financial Products Bank Chief Representative
Dr C K Cheong Mr C B Goode SIA Engineering Company Limited Chairman Australia and New Zealand Singapore Airport Terminal Services Limited Chairman Banking Group Limited Chairman The National University of Singapore 11th Council Chairman Australian United Investment Company Limited Chairman Singapore-US Business Council Vice Chairman Diversified United Investment Limited Chairman Singapore Airlines Limited Deputy Chairman Woodside Petroleum Limited Chairman Singapore Press Holdings Limited Director CSR Limited (resigned 31 March 2001) Director The Oversea-Chinese Banking Corporation Limited Director Singapore Airlines Limited Director Virgin Atlantic Airways Limited Director Virgin Atlantic Limited Director Virgin Travel Group Limited Director Mr R J Norris ASB Bank Limited (retired Sep 2001) Managing Director & Singapore International Foundation Member Chief Executive Officer Sovereign Assurance Limited (retired Sep 2001) Chairman Sir Selwyn Cushing Defence 2003 Trustee Limited Director Brierley Investments Limited Chairman Fletcher Building Limited Director New Zealand Rural Properties Limited Chairman Northern Lifeguard Services Trustee New Zealand Symphony Orchestra Chairman Starship Foundation Trustee Viking Pacific Holdings Limited Chairman Woolf Fisher Trust Trustee Ashfield Farm Limited Governing Director Commonwealth Bank Group Head of International Fairway Finance Limited Governing Director Financial Services H & G Limited Governing Director Pastoral Holdings (Waewaepa) Limited Governing Director Dr P J B Rose Seajay Securities Limited Governing Director Australian Ballet Centre Director Bank of New Zealand Limited Director Australian United Investment Company Limited Director Cabletalk Group Limited Director Melbourne Business School (retired Jan 2001) Director Williams & Kettle Limited Director The Ian Potter Foundation Limited Director Esam Cushing & Company Partner Woodside Petroleum Limited Director Waewaepa Station Partner University of Melbourne, Commerce & Business Administration (retired Dec 2000) Professor Strategic Advisory Committee, Ms E M Coutts John Curtin School of Medical Research Member Meritec Group Limited Chairman C Me Limited Director Industrial Research Limited Director
58 Brought to you by Global Reports Mr M J N Tan ALTERNATES Singapore Airlines Limited Executive Vice- President (Commercial) Mr Arun Amarsi SATS Airport Services Pte Limited Brierley Investments Limited Executive (resigned September 2000) Chairman Singapore Airlines Cargo Pte Limited Chairman Lt-Gen Bey Soo Khiang Singapore Airport Terminal Singapore Airlines Limited Executive Vice- Services Limited Deputy Chairman President (Technical) Virgin Atlantic Airways Limited Director Singapore Airport Services Chairman Virgin Atlantic Limited Director SIA Engineering Company Director Virgin Travel Group Limited Director Silkair Pte Limited Director
Mr G J Terry Mr Chew Choon Seng Brierley Investments Limited Managing Director/Chief Singapore Airlines Limited Senior Executive Vice Executive Officer President Administration Singapore International Chamber of Commerce Director SilkAir (Singapore) Private Limited Chairman Thistle Hotels Plc Director Singapore MRT Limited Chairman Board of Overseers of the Singapore LRT Pte Limited Chairman Fletcher School of Law & Diplomacy Member SMRT Corporation Limited Chairman Blake Dawson Waldron Advisory Board Member International Development and Madrona Venture Fund 1-A, L.P Advisory Board Member Consultancy Corporation (Pte) Limited Chairman Singapore Airport Terminal Services Limited Director Virgin Atlantic Limited Director (alternate) Mr W M Wilson QC Virgin Atlantic Airways Limited Director (alternate) Anafi Investments Limited Chairman Virgin Travel Group Limited Director (alternate) BIL New Zealand Assets Limited Chairman Isa Investments Limited Chairman BIL New Zealand Charitable Trust Chairman of Trustees Mr Huang Cheng Eng Singapore Airlines Limited Executive Vice President Directors who retired from office during the year to (Marketing & Regions) 30 June 2001 SATS Catering Pte Limited Chairman Silkair (Singapore) Pte Limited Director J McCrea (retired 07/07/00) Asian Frequent Flyer Limited S P Wareing (retired 01/11/00) (in voluntary liquidation) Director
DIRECTORS’ INTERESTS – SHAREHOLDINGS
The following details the number of shares in Air New Zealand Limited held by each Director or former Director and associated persons as at 30 June 2001. Unless otherwise indicated the Company did not receive notice of any share transactions by Directors during the year. Name Balance A Shares B Shares Sir Selwyn J Cushing (1) (2) 370,000 155,453 Sir Ronald P Carter 20,000 - Mr J S Curtis - 20,000 Dr J A Farmer (2) 7,500 2,045 Mr J McCrea (3) 141,600 38,618 Mr R J Norris - 18,662 Mr S P Wareing (4) - 13,333 Dr C K Cheong 100,000 Dr P J B Rose - 10,000 Mr A Amarsi 150,000
(1) Sir Selwyn Cushing also holds a beneficial interest in 260,131 A shares and 23,669 B shares and a non-beneficial interest in 133,333 A shares and 333,333 B shares. (2) In addition Dr Farmer and Sir Selwyn Cushing are Trustees of the Staff Share Purchase Schemes and as such had a non-beneficial interest in 7,481,626 A shares and 220,874 B shares, as at 30 June 2001. (3) As at 7 July 2000. Mr McCrea also held 900,000 options on ordinary shares under the Executive Share Option Plan which lapsed 7 July 2001. (4) As at Mr Wareing’s retirement date 1 November 2000.
59 Brought to you by Global Reports DIRECTORS’ INTERESTS – REMUNERATION AIR NEW ZEALAND LIMITED AND SUBSIDIARIES
Parent Company The following persons held the office of Director of the Company during the year and received the total amount of remuneration and other benefits shown. Director Amount ($) Director Amount ($) P R Burdon (rs) 90,000 J McCrea (r) (b) 3,874,175 R P Carter 90,000 R J Norris 90,000 C K Cheong (a) 80,815 P J B Rose (rs) (a) 50,538 E M Coutts (a) 80,815 M J N Tan (rs) (a) 80,815 J S Curtis (rs) 90,000 G J Terry (rs) 90,000 S J Cushing (rs) W M Wilson 90,000 Director’s Fees 154,166 S P Wareing (r) Executive Remuneration (c) 270,000 Director’s Fees 30,000 J A Farmer 106,666 Retirement Payment 186,667 C B Goode (rs) (a) 80,815 (a) At the Annual Meeting in 1999, shareholders approved total remuneration of $900,000 plus GST for Directors. Section 32.2 of the Constitution and NZSE Listing Rule 3.5.1 allow for additional Directors to be paid the average amount then being paid to other non-executive Directors. (b) Including payment in respect of a non competition covenant, superannuation entitlements and substantial accrued leave. (c) Remuneration as Executive Chairman 7 July 2000 to 31 December 2000. (r) Retired during the year. (rs) Retired subsequent to year end. Directors are entitled to a travel allowance on Air New Zealand services at an estimated average cost to the Company of $1000 per Director. Subsidiary Companies The following persons held the office of Director of the respective subsidiaries during the year to 30 June 2001. Except where either shown below or included within disclosures for Directors of the parent Company above, no Director of any subsidiary Company received beneficially any Directors’ fees or other benefits except as an employee.
New Zealand Companies Company Directors Air Nelson Limited GKT, AFM, JHB, JLG*, ABM* Air New Zealand Associated Companies Limited GKT, AFM, JHB, JMC*, LFD* Air New Zealand Associated Companies (Australia) Limited GKT, AFM, JHB, JMC*, LFD* Air New Zealand Destinations Limited GKT, AFM, JHB, JMC*, LFD* Air New Zealand Engines Christchurch Limited GKT, AFM, IJD, TNH Air New Zealand International Limited GKT, AFM, JHB, JMC*, LFD* Air New Zealand Travel Business Limited GKT, AFM, JHB, JMC*, LFD* ANEX Holdings Limited GKT, AFM, JHB, PE*, JAD* ANNZES Engines Christchurch Limited GKT, AFM, IJD, TNH Ansett Australia and Air New Zealand Engineering Services Limited GKT, AFM, WEJ, DJI*, CAW*, JMC*, IJD* Ansett Technologies Limited (NZ) GKT, AFM, JHB, DJI*, JAD*, ACP* BPT (New Zealand) Limited GKT, AFM, JHB, JMC*, LFD* CI Air Services Limited GKT, AFM, JHB, TO, TWD*, JLG*, LFD* Eagle Air Maintenance Limited GKT, AFM, JHB, JLG*, ABM*, JGH* Eagle Airways Limited GKT, AFM, JHB, JLG*, ABM*, JGH* Eagle Aviation Limited GKT, AFM, JHB, JLG*, ABM* Enzedair Tours Limited GKT, AFM, JHB, JMC*, LFD* Events Marketing Limited GKT, AFM, JHB, JMC*, LFD* First Express Limited GKT, AFM, JHB, JMC*, LFD* Hazelwoods Travel Limited GKT, AFM, JHB, JMC*, LFD* Hotpac Reservations (NZ) Limited GKT, AFM, JHB, JMC*, LFD* Jetaffair Holidays Limited GKT, AFM, JHB, JMC*, LFD* Jetset Holdings (NZ) Limited (deregistered) JHB, LFD, JMC* Jetset Holidays (New Zealand) Limited (deregistered) JHB, LFD, JMC* Jetset Tours (NZ) Limited (deregistered) JHB, LFD, JMC* Jetworld Air Services Limited (deregistered) JHB, LFD, JMC*
60 Brought to you by Global Reports Lexington Securities Limited GKT, AFM, JHB, JMC*, LFD* Mount Cook Airline Limited GKT, AFM, JHB, ABM*, JLG*, WJW* National Airlines Company Limited GKT, AFM, JHB, JMC*, LFD* National Airways Corporation (NAC) Limited GKT, AFM, JHB, JMC*, LFD* New Zealand International Airlines Limited GKT, AFM, JHB, JMC*, SJC*, ASR*, IJD*, MJT* New Zealand Skiing Company Limited GKT, AFM, JHB, LFD*, JLG* New Zealand Tourist Promotion Co Limited GKT, AFM, JHB, JMC*, LFD* NZ Tourism Incorporated Limited GKT, AFM, JHB, JMC*, LFD* NZ Tourist Air Travel Limited GKT, AFM, JHB, LFD*, JLG* Safe Air Limited GKT, AFM, JHB, JMC*, IJD*, RPC* Showfilm (NZ) Limited GKT, AFM, JHB, JAD*, GRK*, DJI*, BPH* Showfreight (NZ) Limited GKT, AFM, JHB, JAD*, GRK*, DJI*, BPH* Showsports (NZ) Limited GKT, AFM, JHB, JAD*, GRK*, DJI*, BPH* Showtickets (NZ) Limited GKT, AFM, JHB, JAD*, GRK*, DJI*, BPH* Showtravel (NZ) Limited GKT, AFM, JHB, JAD*, GRK*, DJI*, BPH* South Pacific Air Charters Limited (t/a Freedom Air) GKT, AFM, JHB, LFD*, JLG* Tasman Empire Airways (1965) Limited GKT, AFM, JHB, JMC*, LFD* The Mount Cook Group Limited GKT, AFM, JHB, LFD*, JLG* Tourism New Zealand Limited GKT, AFM, JHB, LFD*, JLG* Tranzair Limited GKT, AFM, JHB, JAD*, ACP*, DJI* Traveland International (NZ) Limited GKT, AFM, JHB, JAD*, GRK*, LFS*, PJC* Travelseekers International Limited GKT, AFM, JHB, JMC*, LFD* United Travel Agencies Limited GKT, AFM, JHB, JMC*, LFD* Variety Travel (Central) Limited GKT, AFM, JHB, JMC*, LFD* Variety Travel Limited GKT, AFM, JHB, JMC*, LFD*
Australian Companies Ansett Holdings Limited SJC, JAF, PRB, RPC, EMC, CKC, MJT, GJT, WMW, CBG, PJR, RJN, JSC, JMC*, RHN*, SPW* 501 Swanston Street Pty Limited GKT, JHB, SDR, JAD*, ABM*, DJI*, ACP*, GCA* Aeronautical Industries Aust Pty Limited GKT, JHB, SDR, JAD*, ABM*, ACP*, DJI*, GCA* Aeropelican Air Services Pty Limited GKT, JHB, SDR, DMK*, CAW*, JLG*, ABM*, RMR*, WKH*, DJI* Air New Zealand (Australia) Pty Limited GKT, JHB, SDR, JMC*, SPW*, MJG*, JSC*, ACP*, GRK* Aircraft Leasing Finance Pty Limited GKT, JHB, SDR, JAD*, ACP*, ABM*, DJI*, GCA* Aircraft Leasing Pty Limited GKT, JHB, SDR, JAD*, ACP*, ABM*, DJI*, GCA*, Airport Terminals Pty Limited GKT, JHB, SDR, JAD*, ACP*, ABM*, DJI*, GCA*, Aldong Services Pty Limited GKT, JHB, SDR, JAD*, ACP*, ABM*, DJI*, GCA* Ansett Aircraft Finance Limited GKT, JHB, SDR, JAD*, ACP*, ABM*, DJI*, GCA*, CAW* Ansett Australia Holdings Limited GKT, JHB, SDR, GF, AFM*, JMC*, RHN*, JSC*, ACP*, SPW* Ansett Australia & Air New Zealand Engineering Services Limited GKT, AFM, WEJ, SDR, GF, GCA*, JAD*, TGJ*, DJI*, CAW*, IJD*, ABM*, JMC* Ansett Australia Limited GKT, JHB, SDR, GF, JAD*, ABM*, DJI*, CAW*, JMC*, ACP* Ansett Aviation Equipment Pty Limited GKT, JHB, SDR, JAD*, ACP*, ABM*, DJI*, GCA* Ansett Carts Pty Limited GKT, JHB, SDR, JAD*, ACP*, ABM*, DJI*, GCA* Ansett Equipment Finance Limited GKT, JHB, SDR, GF, JAD*, ABM*, ACP*, DJI*, GCA*, CAW* Ansett Finance Limited GKT, JHB, SDR, GF, JAD*, ACP*, ABM*, DJI*, GCA*, CAW* Austfin Nominees Pty Limited GKT, JHB, SDR, JAD*, ACP*, ABM*, DJI*, GCA* Bodas Pty Limited GKT, JHB, SDR, JAD*, ACP*, DJI*, GCA*, RMR*, WKH* Brazson Pty Limited GKT, JHB, SDR, JAD*, ACP*, ABM*, DJI*, GCA* Eastwest Airlines (Operations) Limited GKT, JHB, SDR, GF, JAD*, ACP*, ABM*, DJI*,GCA*, CAW* Eastwest Airlines Limited GKT, JHB, SDR, GF, JAD*, ACP*, ABM*, DJI*, GCA*, CAW* Jetset Corporate Services Pty Limited LFD, ACP, JMC*, GJC*, JLG* Jetset Finance Proprietary Limited GKT, JHB, SDR, JMC*, LFD*, ACP*, GJC*, JLG* Jetset International Corporation Proprietary Limited GKT, JHB, SDR, LFD, JMC*, GJC*, JLG*, ACP* Jetset Nominees Pty Limited KMM, JOB, KG, RJJ†, MAR*, PL*, MC* Jetset Tours (Operations) Pty Limited GKT, JHB, SDR, JMC*, LFD*, ACP*, GJC*, JLG* Jetset Tours (Queensland) Pty Limited LFD, ACP, JMC*, GJC*, JLG* Jetset Tours Pty Limited GKT, JHB, SDR, LFD, JMC*, ACP* GJC*, JLG* Jetset Tours (SA) Pty Limited LFD, ACP, JMC*, GJC*, JLG* Jetset Travel and Technology Pty Limited GKT, JHB, SDR, LFD, JMC*, ACP* GJC*, JLG* Kendell Airlines (Aust ) Pty Limited GKT, JHB, SDR, DMK*, CAW*, JLG*, ABM*, RMR*, WKH*, Koine Pty Limited LFD, RKB‡, JAM*‡, JMC*,
61 Brought to you by Global Reports Koru Leasing Limited RKB‡, RAG, JAM*‡ Morael Pty Limited GKT, JHB, SDR, JAD*, ACP*, ABM*, DJI*, GCA*, Northern Airlines Limited GKT, JHB, SDR, GF, JAD*, ACP*, ABM*, DJI*, GCA*, CAW* Northern Territory Aerial Work Pty Limited GKT, JHB, SDR, JAD*, ACP*, ABM*, DJI*, GCA* Planar Holdings Pty Limited GKT, JHB, SDR, JAD*, ACP*, ABM*, DJI*, GCA* Queens Road Nominees Pty Limited ACP, MC, KMM, JMC*, LFD*, JLG*, Rock It Cargo (Aust ) Pty Limited JAD, ACP, ABM, DJI*, GCA* Show Group Pty Limited GKT, JHB, SDR, JAD*, GRK*, ABM*, PCB*, DJI* Skywest Airlines Pty Limited GKT, JHB, SDR, DMK*, CAW*, JLG*, ABM*, TGJ*, WKH*, DJI*, RMR* Skywest Aviation Limited GKT, JHB, SDR, GF, JAD*, ACP*, ABM*, DJI*, CAW*, GCA* Skywest Holdings Pty Limited GKT, JHB, SDR, JAD*, ACP*, ABM*, DJI*, GCA*, Skywest Jet Charter Pty Limited GKT, JHB, SDR, JAD*, ACP*, ABM*, DJI*, GCA*, South Centre Maintenance Pty Limited GKT, JHB, SDR, JAD*, ACP*, ABM*, DJI*, GCA* SPACA Pty Limited GKT, JHB, SDR, DJI*, GCA*, LFD*, JLG*, Southern Aviation Leasing Pty Limited GKT, JHB, SDR, JAD*, GRK*, ABM*, LFS*, PJC*, WAW* Tasman Aviation Enterprises (NSW) Pty Limited GKT, JHB, SDR, PAT*, IJD* Tasman Aviation Enterprises (Queensland) Pty Limited GKT, GF, SDR, WEJ, AFM, PAT*, IJD*, Trans West Airlines Pty Limited GKT, JHB, SDR, JAD*, ACP*, ABM*, DJI*, GCA* Traveland Discovery Holidays Pty Limited GKT, JHB, SDR, JAD*, GRK*, ABM*, LFS*, PJC*, WAW*, Traveland International (Aust ) Pty Limited GKT, JHB, SDR, JAD*, ABM*, GRK*, LFS*, PJC*, WAW* Traveland International Pty Limited GKT, JHB, SDR, JAD*, ABM*, GRK*, LFS*, PJC*, WAW* Traveland New Staff Pty Limited GKT, JHB, SDR, JAD*, ABM*, GRK*, LFS*, PJC*, WAW* Traveland Pty Limited GKT, JHB, SDR, JAD*, ABM*, GRK*, LFS*, PJC*, WAW*, DJI*, SGW* Walgali Pty Limited GKT, JHB, SDR, JAD*, ACP*, ABM*, DJI*, GCA* Westintech Limited GKT, JHB, SDR, GF, JAD*, ACP*, ABM*, DJI*, GCA*, CAW Westintech Nominees Pty Limited GKT, JHB, SDR, JAD*, ACP*, ABM*, DJI*, GCA* Westralian Aviation Pty Limited GKT, JHB, SDR, JAD*, ACP*, ABM*, DJI*, GCA* Whitsunday Affairs Pty Limited GKT, JHB, SDR, JAD*, ACP*, ABM*, DJI*, GCA* Whitsunday Harbour Pty Limited GKT, JHB, SDR, JAD*, ACP*, ABM*, DJI*, GCA* Whitsunday International Aviation Pty Limited GKT, JHB, JAD*, ACP*, ABM*, GCA*, WKH* Worldmaster Technology Pty Limited GKT, JHB, SDR, JMC*, ACP* LFD*, GJC*, JLG* Wridgways (NSW) Pty Limited GKT, JHB, SDR, JAD*, ACP*, ABM*, DJI*, GCA* Wridgways (VIC) Pty Limited GKT, JHB, SDR, JAD*, ACP*, ABM*, DJI*, GCA* Wridgways Holdings Limited GKT, JHB, SDR, JAD*, ACP*, ABM*, DJI*, GCA*, CAW*
Non-Australasian Companies Ansett Airlines Australia Limited (UK) GQ, JB, DJI* Ansett Equipment Limited (Cayman Is) GCA, RGD, MA‡, DJI* Ansett Industries (Hong Kong) Limited JFN, CML, ACP*, DJI* Ansett International Air Freight Inc (US) WM, CL, RB Ansett Leasing (Hong Kong) Limited JFN, CML, ACP*, DJI*, Ansett Niugini Enterprises Limited DJI, GCA Ansett Ticket Sales Limited (UK) GRK, GJF Blue Pacific Tours Limited (Japan) ADL, MS, MF, ST, HN, JAD*, HY*, SL*, MSH* Convention Organisers (Malaysia) Sdn Bhd KCK, ESM, LFD, RJJ Convention Organisers (S) Pty Limited (Sing) LFD, RJJ, JMC*, AK‡ INH Services (HK) Limited JFN, CML, ACP*, DJI*, Jetset Tours Limited (HK) LFD, RJJ, JMC* Jetset Tours (United Kingdom) Limited LFD, RJJ, JMC*, JLG* Jetset Travel (Hong Kong) Limited LFD, RJJ, JMC* Jetset Travel (Sing) Pte Limited LFD, RJJ, JMC*, AK* Jetset Travel 1990 (Thailand) Limited KESM, RJJ, PAL*, AT* Jetset Travel Holdings (Asia) Limited LFD, RJJ, JMC* Jetset Wholesale Pte Limited (Sing) LFD, RJJ, JMC*, AK* Landlink Worldwide Limited LFD, RJJ, JLG*, JMC* Moneydirect (UK Europe) Limited LFD, RJJ, JMC*, JLG* Mount Cook Tours Limited (USA) PW, MC* Showfilm UK Limited GJF, GRK Showfilm Inc (US) GJF Showfreight Singapore Pte Limited GRK, AT Showtravel (UK) Limited GJF, GRK Southern Aviation Leasing Limited (Cook Is) CDL
62 Brought to you by Global Reports Tour East (Far East) Limited LFD, RJJ, JMC* Tour East International Limited LFD, RJJ, JMC* Tour East International (Asia) Pte Limited LFD, RJJ, JMC*, AK‡ Tour East (Malaysia) Sdn Bhd KCK, ESM, LFD, RJJ Tour East 1990 (Sing) Pte Limited LFD, RJJ, JMC*, AK‡ Tour East (Thailand) Limited ESM, RJJ, PAL*, AT* Tour Holdings (Malaysia) Sdn Bhd KCK, ESM, LFD, RJJ Transpacific Enterprises Inc (US) GQ, CP Transportation & Hotel Marketing Services Sdn Bhd (Sing) KCK, ESM, LFD, RJJ Transportation & Hotel Marketing Services Int Limited (HK) LFD, RJJ, JMC* Traveland International UK Limited GRK, GJF Traveland South Pacific Limited (US) SR, IRA, PSS Viva Discovery Holidays Inc (US) EK, MK, IRA
* retired during financial year † alternate Director ‡ Received Director’s fees in total of: AK - SGD12,000 JAM – AUD3,000 RKB – AUD3,000 MA – USD7,500
Directors: ACP Allister C Paterson IRA Iain R Andrews PE P Elmsley ABM Andrew B Miller JAF James A Farmer PJR Philip J B Rose ADL Albert D Lovell JEC John E Chauvel PL Peter Lacaze AFM Adam F Moroney JOB Jo O’Brien PSS P Siva Subramaniam AK Avtar Kaur JFN Jeffrey F Naylor PW Peter Walsh ASR Anthony S Ramage JAM John A Moule RKB Roy K Boyce AT A Teo JHB John H Blair RAG Richard A Glenn BPH Barrie P Hopkins JAD John A Dell RPC Ronald P Carter CAW Craig A Wallace JB John Boyce RJN Ralph J Norris CBG Charles B Goode JGH John G Hambleton RMR Ronald M Rosalky CDL Corporate Directors Limited JLG John L Gribble RHN Robert H Nazarian CKC Cheong K Choong JMC Jim McCrea RJJ Rodney J Jackson CL Constance Lim JSC John S Curtis RB Robert Brown CML Chung M Lo KMM Kenneth M McQualter ST Satoru Terashima CP Charles Pentzer KG Karyn Gaudin SR Steven Rich DJI David J Irvine KCC Koay Choo Keng SDR Scott D Roworth DMK Donald M Kendell LFD Laurie F Doolan SGW Sean G Williams EMC Elizabeth M Coutts LFS Lyell F Strambi SJC Selwyn J Cushing ESM Encik S Murtaza MJT Michael J N Tan SPW Sean P Wareing EK Emanual Klein MS Mamoru Sano TWD Timothy Darby GKT Gary K Toomey MF Michio Fujita TD T Dery GF George Frazis MAR Michelle Ryan TO Temu Okotai GCA Graeme C Allison MSH Motokiyo Shikano TGJ Trevor G Jensen GRK Garry R Kingshott MK Mark King TNH Trevor Noel Hughes GJC Garry J Court MA Michael Austin WEJ William E Jacobson GJF Graham J Fear MC Michael Cronin WAW Wayne A Walker GQ Gregory Quinlan MC Michael Croy WMW William M Wilson GJT Gregory J Terry PJC Pamela J Catty WKH William K Herdman HN Hans Nagahara PCB Paul Birch WM Wayne Murphy IJD Ian J Diamond PAT Paul A Trask WJW William John Whittaker IE I Edwards PRB Philip R Burdon
63 Brought to you by Global Reports EMPLOYEES’ REMUNERATION AIR NEW ZEALAND LIMITED AND SUBSIDIARIES
Range Management Aircrew Overseas Range Management Aircrew Overseas $ and Executive Employees $ and Executive Employees 100,000-110,000 67 22 30 460,001-470,000 0 0 5 110,001-120,000 45 9 46 471,000-480,000 0 0 1 120,001-130,000 30 18 133 480,001-490,000 0 0 4 130,001-140,000 24 41 267 490,001-500,000 0 0 1 140,001-150,000 10 50 213 500,001-510,000 0 0 3 150,001-160,000 11 32 197 510,001-520,000 1 0 1 160,001-170,000 10 20 207 520,001-530,000 0 0 5 170,001-180,000 5 49 166 530,001-540,000 0 0 2 180,001-190,000 8 38 146 550,001-560,000 0 0 1 190,001-200,000 3 14 88 560,001-570,000 1 0 0 200,001-210,000 3 19 78 570,001-580,000 0 0 2 210,001-220,000 4 29 44 590,001-600,000 0 0 1 220,001-230,000 3 27 44 600,001-610,000 1 0 1 230,001-240,000 3 29 34 610,001-620,000 1 0 1 240,001-250,000 4 24 32 620,001-630,000 0 0 1 250,001-260,000 2 11 41 630,001-640,000 1 0 0 260,000-270,001 3 11 59 640,001-650,000 1 0 3 270,001-280,000 1 14 72 670,001-680,000 1 0 1 280,001-290,000 1 16 73 680,001-690,000 0 0 2 290,001-300,000 0 10 69 690,001-700,000 0 0 1 300,001-310,000 3 4 59 700,001-710,000 0 0 1 310,001-320,000 2 5 24 730,001-740,000 1 0 2 320,001-330,000 2 5 11 750,001-760,000 0 0 1 330,001-340,000 0 0 17 770,001-780,000 1 0 0 340,001-350,000 1 0 10 780,001-790,000 0 0 1 350,001-360,000 1 0 5 830,001-840,000 2 0 0 361,001-370,000 0 0 6 880,001-890,000 0 0 1 390,001-400,000 1 0 0 930,001-940,000 1 0 0 370,001-380,000 0 0 5 970,001-980,000 1 0 0 380,001-390,000 0 0 6 990,001-1,000,000 0 0 1 390,001-400,000 1 0 2 1,000,001-1,010,000 0 0 1 400,001-410,000 0 0 4 1,210,001-1,220,000 0 0 1 410,001-420,000 0 0 2 1,280,001-1,290,000 1 0 0 420,001-430,000 2 1 3 1,340,001-1,350,000 0 0 1 430,001-440,000 0 0 1 1,350,001-1,360,000 0 0 1 450,001-460,000 0 0 2 1,440,001-1,450,000 0 0 1 Total 263 498 2,244 Figures are all in $NZ - converted as at 30 June 2001
The substantial increase over last year in the number of employees who received remuneration and benefits in the accounting period in excess of $100,000 is attributable to a number of unusual factors:
• A significant number of management positions at Ansett, reflecting the generally higher salaries in Australia, compounded by the NZ$-A$ exchange rate differential
• A large number of staff were made redundant during the period resulting in redundancy and other termination payments exceeding their normal levels of annual remuneration
• Management salaries in the Air New Zealand-Ansett group reflecting enlarged responsibilities for Australasian rather than only New Zealand operations
64 Brought to you by Global Reports SHAREHOLDER INFORMATION AIR NEW ZEALAND LIMITED AND SUBSIDIARIES
Top Twenty Shareholders – 31 August 2001 Number of Shares % of Issued A Shares B Shares Total Capital Anafi Investments Limited 229,475,728 – 229,475,728 30.32 Singapore Airlines Limited – 189,166,545 189,166,545 24.99 NZCSD Limited (see below) 29,976,974 143,396,591 173,373,565 22.90 Air New Zealand Staff Share Purchase Scheme (Allocated)* 4,312,926 – 4,312,926 0.56 Air New Zealand Staff Share Purchase Scheme (Unallocated)* 3,145,000 220,874 3,365,874 0.44 Portfolio Custodian Limited 506,168 423,834 930,002 0.12 Eltub nominees Limited – 870,500 870,500 0.11 Toocooya Nominees Limited 844,193 – 844,193 0.11 Yarrow Consulting Limited 482,884 211,592 694,476 0.09 ASB Sharebroking Services Limited 573,839 36,357 610,196 0.08 Credit Suisse First Boston NZ Custodians Limited 530,879 58,864 589,743 0.07 Kai Loi Yip 380,000 200,000 540,000 0.07 Selwyn John Cushing 370,000 155,453 525,453 0.06 Neil Gary McGregor 525,000 – 525,000 0.06 W & K Staff Pension Fund Limited 133,333 333,333 466,666 0.06 Investment Custodial Services Limited 365,118 44,375 409,493 0.05 Peter Hanbury Masfen & Joanna Alison Masfen 400,000 – 400,000 0.05 Perpetual Trust Limited A/C GIF No 5 302,466 82,490 384,956 0.05 Beverley Warburton Shroff 371,357 – 371,357 0.04 Jennifer Ann Hurley & Gordon Hanbury Oswin 260,000 80,066 340,666 0.04
272,955,865 335,280,874 608,197,339 80.27
* Shares held by the Trustees of the Air New Zealand Staff Share Purchase Schemes are divided among those allocated to staff members pursuant to the Schemes and the remainder which are unallocated.
The ordinary issued shares are divided into two classes: A shares which are held by New Zealand Nationals and B Shares which may be held by New Zealand Nationals and by overseas holders. In addition, the crown retains one special rights convertible share (“Kiwi Share”) in Air New Zealand Limited. Full details of the rights pertaining to these shares are set out in the Company’s Constitution.
NZCSD (New Zealand Central Securities Depository Limited) is a depository system which allows electronic trading of securities by its members. As at 31 August 2001 the largest 10 holdings via NZCSD in Air New Zealand were:
A Shares B Shares Total National Nominees New Zealand Limited 3,100,900 67,470,551 70,571,451 ANZ Nominees Limited 202,454 21,000,554 21,203,008 Westpac Banking Corporation – State Street 540,266 13,320,264 13,860,530 Credit Suisse First Boston NZ Fixed Income Limited – 9,981,461 9,981,461 HSBC Nominees (New Zealand) Limited – 8,670,865 8,670,865 Citibank Nominees (New Zealand) Limited 1,767,494 4,876,281 6,643,775 AMP Superannuation Tracker Fund 3,205,660 3,080,003 6,285,663 AMP Life Limited 1,799,282 4,065,621 5,864,903 The Trustees Executors and Agency Company of New Zealand Limited 4,921,848 761,103 5,682,951 BNZ Nominees Limited 1,366,938 1,313,378 2,680,316
Substantial Security Holders The following information is provided in compliance with Section 26 of the Securities Amendment Act 1988 and is stated as at 31 August 2001. The total number of voting securities of Air New Zealand Limited at that date was 756,821,185. Substantial Security Holder Voting Securities in the Company in which a relevant interest is held Brierley Investments Limited 229,475,728 Singapore Airlines Limited 189,166,545 In addition the crown has issued a Notice that arises through its holding of the “Kiwi Share” and the power of the Kiwi Shareholder under the Constitution.
65 Brought to you by Global Reports Shareholder Statistics – 31 August 2001 A Shares Shareholders Number of Shares Size of Shareholding Number % Millions % 1 to 499 2,945 10.5 0.9 0.2 500 to 999 4,814 17.1 3.2 0.8 1,000 to 4,999 14,939 53.1 32.4 8.4 5,000 to 49,999 5,200 18.5 57.4 14.9 50,000 to 999,999 217 0.8 25.1 6.5 1,000,000 and over 4 0.0 266.9 69.2 28,119 100.0 386.0 100.0
B Shares Shareholders Number of Shares Size of Shareholding Number % Millions % 1 to 499 5,575 39.8 1.4 0.4 500 to 999 3,174 22.7 2.1 0.6 1,000 to 4,999 3,708 26.5 7.7 2.1 5,000 to 49,999 1,432 10.2 16.6 4.5 50,000 to 999,999 100 0.7 10.6 2.9 1,000,000 and over 2 0.0 332.6 89.7 13,991 100.0 370.8 100.0
Shareholders Number of Shares Class of Shareholding Number % Millions % A Ordinary Shares 28,119 66.8 386.0 51.0 B Ordinary Shares 13,991 33.2 370.8 49.0 Kiwi Share 1 – – – 42,111 100.0 756.8 100.0
Statistics include 2,166 employees who at the above date, were members of the Staff Share Purchase Schemes.
DIRECTORS’ INTERESTS – INDEMNITIES
Pursuant to section 162 of the Companies Act 1993 and the Constitution of the Company, the Company has given indemnities to, and has effected insurance for, Directors of the Company and its related companies which, except for specific matters which are expressly excluded, indemnify and insure Directors against losses as a result of actions undertaken by them in the course of their duties. Specifically excluded are certain matters such as penalties and fines which may be imposed for breaches of law. Directors have also received indemnities from the Crown as described on page 10.
DIRECTORS’ STATEMENT
This Annual Report is dated 26 October 2001 and is signed on behalf of the Board by:
Dr J A Farmer QC Ms E M Coutts ACTING CHAIRMAN DIRECTOR
66 Brought to you by Global Reports AIR NEW ZEALAND AND STAR ALLIANCE PARTNERS ROUTE NETWORK
VANCOUVER LONDON FRANKFURT To ZURICH MUNICH Sin gap TORONTO ore
SAN FRANCISCO NAGOYA TOKYO OSAKA LOS ANGELES
TAIPEI HONG KONG HONOLULU GUADALAJARA MEXICO CITY BANGKOK
SINGAPORE
APIA CAIRNS PAPEETE NADI NOUMEA RAROTONGA BRISBANE PERTH NORFOLK ISLAND AUCKLAND MELBOURNE WELLINGTON QUEENSTOWN CHRISTCHURCH
Operated by Air New Zealand Operated by Air New Zealand Shared services operated by Air New Zealand Star Alliance partner airlines Shared services operated by Air New Zealand Star Alliance partner airlines
L L L O O O
S S S A A A N N N G G G E E L E L E L E S E S S
EDINBURGH GLASGOW KAITAIA BAY OF ISLANDS
WHANGAREI TEESSIDE BELFAST
LEEDS/BRADFORD AUCKLAND MANCHESTER HAMBURG DUBLIN HAMILTON AMSTERDAM BERLIN TAURANGA WHAKATANE
LONDON ROTORUA GISBORNE DUSSELDORF BRUSSELS TAUPO FRANKFURT
NEW PLYMOUTH NAPIER/HASTINGS
WANGANUI S MUNICH IN G A P VIENNA O ZURICH R PALMERSTON NORTH E
S IN S S S G Operated by Air New Zealand IN IN IN A G G G PO AP A AP R O PO O E WELLINGTON Shared services operated by Air New Zealand Star Alliance partner airlines R R E RE E NELSON BLENHEIM
WESTPORT
HOKITIKA
CHRISTCHURCH LU LU VANCOUVER NO MT COOK HO SEATTLE TORONTO PORTLAND TIMARU BOSTON U LUL NO HO CHICAGO NEW YORK QUEENSTOWN SAN FRANCISCO PHILADELPHIA LU DENVER OLU WASHINGTON HON LAS VEGAS DUNEDIN LOS ATLANTA ANGELES PHOENIX LU LU DALLAS/FORT WORTH NO SAN DIEGO HO INVERCARGILL HOUSTON
MIAMI
AIR NEW ZEALAND GUADALAJARA National Network MEXICO CITY AIR NEW ZEALAND Link Network Shared services operated by Air New Zealand Star Alliance partner airlines
67 Brought to you by Global Reports CORPORATE DIRECTORY AIR NEW ZEALAND LIMITED
Registered Office Auditors Air New Zealand Limited Deloitte Touche Tohmatsu Level 19, Quay Tower Deloitte House 29 Customs Street West 8 Nelson Street Private Bag 92007 P O Box 33 Auckland, New Zealand Auckland, New Zealand Tel (64 9) 336 2400 Fax (64 9) 336 2401 Investor Inquiries Shareholders should address questions relating to Air New Zealand is registered in Australia dividends, certificates or changes of address to the ACN 70 000 312 685 Share Registrar detailed at left. Other questions Share Registrar should be addressed to Investor Relations at the registered office, by e-mail to [email protected] Computershare Registry Services Ltd 159 Hurstmere Road or phone on NZ tollfree 0800 22 22 18, or fax to Takapuna, North Shore City (64 9) 366 2943. Private Bag 92119 Internet Address Auckland 1030, New Zealand The main web site is at www.airnz.co.nz Tel (64 9) 488 8700 (Air New Zealand’s regional web sites Fax (64 9) 488 8787 can be accessed from the New Zealand Computershare Registry Services Pty Ltd web site). Level 3, 60 Carrington Street G P O Box 7045 Sydney, NSW 2001, Australia Tel (61 2) 8234 5000 Fax (61 2) 8234 5050
68 Brought to you by Global Reports