Air New Zealand says its share price doesn't reflect the strength of the national carrier's financial performance and is to commence a share buyback scheme as a consequence, chairman John Palmer announced at the company's annual meeting in Auckland.
Air NZ shares were up 6.4 per cent mid-afternoon to 70 cents as it targets on-market purchases of up to 3 per cent of the issued stock, valuing the purchase of 33 million shares at approximately $23.1 million.
Reaffirming the outlook statement made a month ago at the annual profit announcement, Palmer said Air NZ is on track to "more than double normalised earnings before taxation," which clocked in at $91 million in the year to June 30.
"Clearly we operate in a volatile industry with certain variables beyond our control. However three months into the 2013 financial year, we believe we are well placed to deliver that result," said Palmer.
"We believe that the current share price does not fairly reflect the underlying value of the company's shares. The board has therefore decided to undertake a share buyback programme.
We will do so through an on-market share buyback on the NZX and the ASX to acquire up to 3 per cent of the company's shares."
The government, which owns 73 per cent of the ordinary shares on issue, will not participate.
"The programme may commence from 4 October 2012 and may continue until 27 September 2013," Palmer told shareholders, and will not buy shares at a price more than 5 per cent above the five day volume weighted average market share price, as required by ASX rules.
Shares will be held as treasury stock and may be used for the purposes of fulfilling Air New Zealand's possible future obligations under employee share-based compensation plans.