1.Benefits from Air NZ's stake in Virgin
A shareholding in Virgin Blue gave Air New Zealand access to a much larger population in a way that did not require a large capital outlay, New Zealand Funds Management chief investment officer Michael Lang said yesterday.
New Zealand's national carrier yesterday lifted its stake in Virgin Blue to 14.99%, with chief executive Rob Fyfe saying there was no intention to go above that holding.
Air New Zealand spent $145 million, or 44c a share, to buy into the Australian-listed airline.
The airline had no intention of entering the Australian domestic market in its own right, he said.
Mr Lang said the cornerstone shareholding in Virgin Blue by Air New Zealand cemented the airline's position as the dominant partner in the recently announced Air New Zealand-Virgin alliance.
"Airlines are a lot about brand, consumer perception and vision, and Fyfe and the broader team have this in spades. The problem is they have such a small population to capitalise on."
The result of the purchase was expected to bring changes to Virgin Blue, resulting in the new alliance taking market share from Qantas - a good thing for Air New Zealand shareholders, Mr Lang said.
Mr Fyfe had found a way to continue to expand his "Air New Zealand vision" in a way that did not require a full takeover.
That was positive for shareholders as they would not need to provide additional capital for the next stage of the airline's growth.
Air New Zealand had rejuvenated itself from a dowdy government-owned entity which bankrupted itself over the Ansett deal, turning itself into an industry leader, with shareholders having seen their shares rise 22% in the past year alone, he said.
The airline's reputation and stock price would both continue to appreciate, with NZ Funds Management valuing the company's share price at more than $2, Mr Lang said.
Mr Fyfe said the investment in Virgin Blue reinforced the airline's strategy to expand its business in Australia-New Zealand, which was continually evolving as a single aviation market.
The alliance with Virgin Blue was a key step in that strategy.
The investment provided Air New Zealand with an interest in the No 2 airline in Australia and, through that, access to the opportunities in the growing Australian domestic market, he said.
Air New Zealand would not seek representation on the Virgin Blue board for at least six months and any representation would be a decision for the Virgin board and shareholders, Mr Fyfe said.
NZ Funds Management expected Air New Zealand to announce on February 24 an "extremely strong" first-half result for the six months ended December, Mr Lang said.
"Conditions are ideal for airlines and I think you'll find Air New Zealand management are capitalising on this very well."
The global airline industry was in the early stages of a long cyclical rebound after the global financial crisis, which led to a "nuclear winter" in demand.
A recent increase in the oil price had slowed the industry's rate of growth, but there was enough customer demand - and limited new capacity - so that airline profits would continue to rise despite the oil price. Airlines would increase prices.
Qantas announced on Thursday it planned increasing prices, Mr Lang said.
Forsyth Barr broker Peter Young said the alliance with Virgin Blue was valuable for both companies, but Virgin Blue probably had the most to gain through benefits that should strengthen its Australian domestic business.
"For most strategic alliances, it makes perfect sense to also back that up by an equity investment. Realistically, the alliance is an obvious long-term partnership that should strengthen both companies."
2. Air New Zealand picks up sizeable stake in Virgin Blue
Air New Zealand has notified the Australian Stock Exchange and New Zealand Stock Exchange that it has become a substantial shareholder in Virgin Blue, as part of a planned acquisition of a shareholding between 10% and 14.99%, announced the firm Friday.
Air New Zealand shares fell after the company made the A$145 million investment in a minority stake in new trans-Tasman partner Virgin Blue.
Rob Fyfe, Air New Zealand Chief Executive Officer, said however that there were no plans to make a takeover bid for Virgin Blue.
Air New Zealand obtained Australian Foreign Investment Review Board approval to purchase up the 14.99% percent of Virgin Blue; a shareholding which it believes will keep the total foreign ownership of Virgin Blue within the statutory limit of 49%. Virgin Group based in the UK has a 26% shareholding.
According to Mr. Fyfe, the investment in Virgin Blue is part of Air New Zealand's strategy to develop scale and reach in the region. The Tasman alliance with Virgin Blue was the first step in this strategy, he said, adding that the investment cements the emerging relationship between Air New Zealand and Virgin Blue and demonstrates the confidence Air New Zealand has in Virgin Blue both as an entity and as a partner for Air New Zealand.
Confirming that Air New Zealand had no intention to go over 14.99%, Fyfe noted that the investment was merely a move that reinforces Air New Zealand's strategy to grow its business in Australasia which, according to him, is continually evolving as a single aviation market. The Tasman alliance with Virgin Blue was a key step in this strategy.
For Fyfe, the investment provides Air New Zealand with an interest in the number two airline in Australia and, through this, access to the opportunities in the growing Australian domestic market.
Air New Zealand last month won approval to cooperate with the Brisbane-based carrier on flights across the Tasman Sea as it competes with Qantas Airways Ltd and Emirates Airline. It bought more shares in Virgin Blue off-market overnight, according to the statement.
The stake purchase was made from existing cash resources. The investment marks a return to Australia for Air New Zealand, which previously controlled Ansett Holdings Ltd. The failure of Ansett in 2001 eventually forced the New Zealand government to buy a controlling stake in Air New Zealand to save its flag carrier from collapse.
3. Flight of the Concorde
I don't know if all you PhysicsBuzz readers at home know this, but today's the 35th anniversary of the first flight of the Concorde.
No, not the world famous folk duo from New Zealand; the fleet of supersonic commercial airplanes that crisscrossed the globe for 27 years. On January 21, 1976, the first paying passengers took a trip on a jet that could travel faster than the speed of sound from London England to Bahrain. These planes were fast, traveling twice the speed of sound. A flight from New York to Paris would only take a Concorde about three and a half hours, a far cry from the typical eight hours it takes most jets. However there was a downside; the sonic booms that come with faster than sound travel.
Because of these booms, the Concorde originally had trouble coming to the United States. At first Congress banned them because of worries over sonic booms, and then once the national ban was lifted, individual airports like JFK in New York barred the sleek planes from landing.
Though they sound dramatic, sonic booms aren't explosions. They are loud roars that objects make when a plane breakes the sound barrier.
When an object moves through a fluid medium, like a plane flying through the air, it has to push that air out of the way. A normal plane would just push the air aside and fly through the space left. However a plane traveling faster than the speed of sound is moving faster than the air can move out of the way. Air pressure builds up along the wing because more air hits the wing than can slide out of the way, collecting into a cone of compressed air that protrudes out from the nose of the plane. If a person is standing on the ground and this front of changing air pressure rolls over them, they've got front row seats to a loud boom of the sonic variety.
A sonic boom is really two noises. The first boom comes when the compressed air first rolls over the listener. The abrupt change from regular pressured air to high pressure is the first part of the rumble. As the plane flies by, the air pressure actually drops below normal. The second boom is air pressure snapping back to normal. The two booms sound like one, because they happen so close to each other.
What does this sonic boom sound like? Believe it or not, you only have to go as far as the circus to find out. When a lion tamer cracks her whip, you're hearing a sonic boom. The end of the whip is moving faster than the speed of sound, and the crack it makes is its own sonic boom.
Supersonic airplanes like the Concorde or the SR-71 Blackbird which can travel at 3.3 times the speed of sound, all have the same kinds of swept back wings to help dissipate the built up air pressure. This was found by trial and error. The first few generations of supersonic airplanes, like the Bell X-1,
had wings that stuck straight out. After more testing and different designs, airplane manufacturers found that having wings that sweep backwards lets the air dissipate the built up air pressure better, reducing drag letting the plane cut through the air faster.
As for the fate of the fleet of Concords, they never really made much economic sense. There was never much demand for them because seats on board were tremendously expensive, in part because they were so costly to maintain. In July of 2000 a disastrous crash at an airport in Gonesse France killed 113 people, marking the beginning of the end of the Concords. The final flight of a Concorde took place on November 26, 2003 from Heathrow Airport to Bristol. Concords now roost only in aviation museums like the Smithsonian's Steven F. Udvar-Hazy Center in Virginia.
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4. Wings over Wairarapa expects 50,000
"To be 100 metres away from three jets flying in formation – I defy anyone not to find that exciting," Wings over Wairarapa event manager Liz Pollock enthuses.
More than 50,000 people are expected to attend the event, at Masterton's Hood Aerodrome today, tomorrow and Sunday.
One of the biggest airshows in New Zealand and Australia, held every two years, it includes displays from the Red Checkers, air force Hercules and Iroquois helicopters, and three Czech Albatross jets among the Tiger Moths, topdresser planes, helicopters and model aircraft.
One of the largest privately owned collections of World War I planes will also be on display, and 75 trade stores will be showing their wares.
Since it first began 12 years ago, the show had continued to grow in popularity, Mrs Pollock said.
"An airshow is a serious full day of entertainment, and you don't even have to know about aeroplanes. The proximity to all the aircraft, that's what really makes it."
Last night, 90 Cessnas were flying in from across New Zealand for the 50th anniversary of the Cessna 180 aircraft.
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