Air New Zealand shareholders have approved a move by the New Zealand government to buy NZ$885 million ($370 million) worth of shares to save the airline from insolvency.

The airline will repay a NZ$300 million government loan with new stock and sell the government a further NZ$585 million worth of shares. Major shareholders have agreed to support the deal but will not invest further in the troubled airline. Air NZ's board and the government believe the plan will address the immediate liquidity problems and under capitalisation, and will provide a reasonable platform to restructure the business over the next five years. But a report by investment bank Grant Samuel & Associates says: "Never-the less shareholders must recognise that-Air NZ will not be in a financial position to sustain any further material extended downturn in business or other adverse impact. In such circumstances the company will be dependent on the government's willingness to provide further loan or equity capital, or to underwrite a cash issue, or support a private placement possibly to another airline."

Source: Flight International