Air NZ's philanthropic programme for dividends won't extend to cash-hungry Crown

Air New Zealand [NZX: AIR] has proposed that shareholders reinvest their dividends for philanthropic endeavours as part of its sustainability aims but the concept won't be foisted on its biggest shareholder, the Crown, which is urging state-owned businesses to maximise payouts.

The Auckland-based airline is planning to offer retail shareholders a "gividend" in 2016 as part of a sustainability push, letting them reinvest their dividend payments into organisations which address social and environmental challenges. The gividend proposal was a post-script to Air NZ's first-ever sustainability report, launched last week, which also includes reducing the airline's carbon footprint by switching to an electric ground fleet by 2017.

Retail investors are typically mums and dads who own smaller parcels of shares. According to the airline's 2014 annual report 94.4 percent of its 24,880 shareholders held parcels of 10,000 shares or less. Collectively, those shareholders owned about 2.4 percent of the company, meaning they got about $5.3 million of the total $221.8 million dividends that year, which included a special dividend of 10 cents per share.

Air NZ paid $179.4 million in dividends in the 2015 financial year, although the 2015 annual report with the latest shareholder figures hasn't been released yet. Based on last year's numbers, about $4.31 million in dividends would be available for reinvestment from smaller shareholders.

However, the National-led government, which booked $93 million in 2015 dividend payments from its 51.95 percent stake in the airline, is more focused on receiving regular payments from its assets to help balance its books, and wouldn't be a likely participant even if the offer was open to it.

"The Treasury's advice is there would be no expectation for the Crown to participate," said Chris Ritchie, an official in Finance Minister Bill English's office. The government "doesn't hypothecate revenues," he said, referring to the practice of allocating revenue from a specific tax to a particular expense.

"Crown revenues, including that from dividends, are directed into the consolidated accounts of the Crown and any decisions on supporting social, economic or environmental programmes are made independently," Ritchie said.

Central government's push for dividends from its state-owned enterprises was highlighted last month when Landcorp Farming said it wouldn't pay a dividend this year, while at the same time taking on debt to convert forestry land into dairy farms.

State-Owned Enterprises Minister Todd McClay told the farming SOE in December that he wanted it to avoid any strategies requiring significant capital investment, increases in overheads or reductions in cash returns. The directive suggests that as a shareholder, the government is more concerned to get income to balance its own budget than to allow its businesses to invest for future growth.

In 2013 the government sold down its stake in Air New Zealand from 72.85 percent holding as part of an asset sale programme that saw the partial privatisation of power companies MightyRiverPower, Meridian Energy and Genesis Energy.

The airline said it is working with Aera Foundation, founded by entrepreneur Derek Handley, on its gividend programme and expected to tell its retail shareholders more about the gividend plan next year.

(BusinessDesk)