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Airways meets govt request for higher dividend payments

Airways meets govt request for higher dividend payments

By Tina Morrison

Sept. 1 (BusinessDesk) - Airways Corp of New Zealand, the state-owned enterprise in charge of the nation's air traffic control, has met a government request for a higher dividend payment in its latest financial year and promised to increase it further this year.

State-Owned Enterprises Minister Todd McClay wrote to Airways chair Susan Paterson in December 2014 outlining the government's expectation of dividends, and noting that Airways had been paying a reduced dividend while it invested in a shift from radar to satellite-based navigation. He said ministers expected to be engaged early in the decision-making process if the board was considering paying a reduced dividend in the future. He noted achieving a budget surplus and reducing debt was a priority for the government.

Airways paid a final dividend of $2 million on June 25 for the financial year ended June 30, more than the year earlier $1 million payment. That takes the company's total dividend for the year to $4 million, ahead of the previous year's $3 million. Paterson said the dividend is forecast to increase further to $5 million in the 2015/16 year.

"The board acknowledges the shareholder's note that Airways has been paying a lower dividend whilst it executes its Mana (making a new airways) strategy. Specifically, Airways continues to balance the essential capital expenditure programme required to enable the transition to satellite-based navigation with the expectation of paying a dividend," Paterson said in a March 2015 letter to McClay, Finance Minister Bill English and Associate Finance Minister Steven Joyce.

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The dividends "are higher than the guidelines set out in Airways' dividend policy and reflect Airways' commitment to meeting the shareholder's expectations," she said.

The government wants to take a more active management role in state-owned commercial assets so as to avoid another rapid deterioration such as witnessed by coal miner Solid Energy. Treasury is taking a more rigorous approach when assessing the entities, and has earmarked a strategic review of Airways for 2015/16, following reviews of Landcorp, KiwiRail and New Zealand Post in recent times as part of a shift to improve its advice on the running of the government's commercial operations.

Landcorp, the state-owned farmer, has come under increased government scrutiny after it failed to pay a dividend this year as it increases debt to fund dairy conversions during a period of slumping milk prices.

Airways posted a 28 percent gain in net profit to $15.1 million in the past financial year as revenue rose 2.8 percent to $186.3 million.

Chief executive Ed Sims attributed the improvement to cost control and a 2.3 percent increase in aviation volumes.

The company pulled back its investment spending 5 percent to $32.1 million.


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