Neha Jain: http://newzealandaviationnews.blogspot.com/31

1. National carrier a tempting prospect
Investors with an appetite for rollercoaster rides will have had their interest piqued by Air New Zealand lately.

Last month the airline got the green light from regulators for its alliance with Virgin Blue on trans-Tasman flights, then followed up this month with the purchase of 15% of Virgin Blue.

Prime Minister John Key then added to the mix by announcing on Wednesday the government was considering selling some of its 75% Air NZ stake, although it would keep a majority holding.

The sell-down scenario is vague so far – we don't know how it might be sold or at what price – but it could weigh on the company's share price until the overhang is dealt with.

In the long run, however, a sell-down may be beneficial as it widens the market for Air NZ shares.

Analyst Geoff Zame of Craigs Investment Partners said Key's announcement was welcome news.

"Liquidity [given the small free float] has always been a major issue in attempting to diversify the register so a partial selldown is likely to be well received," he said.

"Air NZ has also been one of the highest-yielding NZX50 stocks through the global financial crisis – so there is no reason why it may not be attractive to the retail base despite the super-cyclical nature of the sector."

Some of the volatility in the shares can be seen in the change since early last July, when Zame upgraded his rating on Air NZ from "hold" to "buy" at a price of $1.07.

Last week Air NZ was trading around $1.45, having closed as high as $1.53 in mid-January.

Last year Zame noted the company had proven profitable through a "perfect storm" for the aviation sector and continued to pay respectable dividends, which made it a relatively conservative investment play compared to most of its airline peers.

Subsequent developments appear to have reinforced his view.

Commenting on the airline last week, he said: "I think Air NZ has a great story to tell and has a great niche in the fastest-growing aviation region in the world [Asia-Pacific]."

In the interests of disclosure, it should be noted that Craigs is part-owned by Deutsche Bank, whose Australian investment banking arm was involved in advising on and executing the Virgin Blue transaction.

Another analyst with a positive view was Morningstar, which reaffirmed its "buy" rating on Air NZ following the Virgin deal.

"We think this is a good move by Air NZ although sceptics would argue that the firm's previous investment in Ansett proved to be a disaster. We expect earnings to accelerate this year on the back of strong demand and higher yields."

Like Zame, Morningstar commented on the airline's record through the recession.

Jetstar Asia and Valuair are launching a codeshare partnership with Qantas on major Asia Pacific routes, building up the Jetstar Group’s hub at Singapore Changi Airport.

Since 2004, Qantas has codeshared with Jetstar across most of its Australia, New Zealand and Asia Pacific services.

This arrangement, subject to final regulatory approval, will now be expanded to include Jetstar operations from Singapore, Qantas’ primary hub and Jetstar’s major flying base in Asia.

QF flight numbers will initially be applied to 11 Asian destinations served from Singapore Changi International Airport by Jetstar Asia and Valuair, including Jetstar Asia’s daily Singapore-Auckland A330 service, set to start from March 17, 2011.

Beginning March 1, 2011 and effective for travel from April 1, 2011, the Qantas and Jetstar Asia/Valuair codeshare partnership will cover the following routes operated from Singapore.

Destination

* Singapore-Jakarta (operated by Valuair)
* Singapore-Auckland* (A330 from 17 March 2011)
* Singapore-Kuala Lumpur
* Singapore-Bangkok
* Singapore-Osaka (via Taipei)
* Singapore-Denpasar (Bali)
* Singapore-Penang
* Singapore-Ho Chi Minh City
* Singapore-Phuket
* Singapore-Hong Kong
* Singapore-Taipei

Jetstar Group CEO Bruce Buchanan heralded the partnership saying, “This commercial arrangement strengthens our existing market leadership position for value based flying in Singapore. It also provides greater consumer traction and access to future Jetstar and Qantas services.”

Jetstar Asia CEO Chong Phit Lian said Jetstar’s extended codeshare partnership with Qantas was an important advancement and next step in Jetstar’s evolving Singapore flying hub, a cornerstone to its Pan Asian network expansion and overall large presence in Asia.

“Jetstar’s ongoing strategic development and evolution of our major Singapore flying hub we predict will be greatly enabled over time by this new commercial arrangement with Qantas,” Ms Chong said.

“This is a common sense and practical next step to further develop both our Singaporean and broader Pan Asian business.

“This agreement, enhanced by Jetstar’s current strong competitive market position, will no doubt incentivize future travel from Qantas customers, such as those in the United Kingdom and Europe, on the growing Qantas Group network throughout the Asia Pacific region,” she said.

Chong said the new agreement included for Qantas customers a seamless booking and ticketing experience, with full baggage connectivity, standard Qantas baggage allowance, as well as complimentary onboard offerings such as meals and comfort packs.

Group executive Qantas Airlines commercial, Rob Gurney, said the codeshare agreement with Jetstar would expand Qantas' network of destinations in Asia, providing greater choice and convenience for passengers.

"Singapore is Qantas' major hub in Asia and we are pleased to be able to offer our customers a wider range of travel options from Changi Airport, in partnership with Jetstar Asia and Valuair," Gurney said. “Today’s announcement underline

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