Air nz cancelled our domestic flights and gave credit instead of refund.

Forums › Travel (planes, train, cruise) › Air nz cancelled our domestic flights and gave credit instead of refund.

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#2593188 29-Oct-2020 12:16

BlinkyBill:

It’s an interesting ruling. It would be interesting to know how many people are through the process and have accepted credits and how many are left not having taken credits, instead preferring refunds. It might not be a huge issue in real terms.

Unless people who reluctantly took credits are now going to take on a Disputes Tribunal case to change to a refund.

Remember disputes tribunal cases aren't any form of case law or precedent. Just because somebody won this case doesn't mean others could - from reading it there could be some very unique circumstances. It would be interesting to read the ruling.

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#2593194 29-Oct-2020 12:26

sbiddle:

BlinkyBill:

It’s an interesting ruling. It would be interesting to know how many people are through the process and have accepted credits and how many are left not having taken credits, instead preferring refunds. It might not be a huge issue in real terms.

Unless people who reluctantly took credits are now going to take on a Disputes Tribunal case to change to a refund.

Remember disputes tribunal cases aren't any form of case law or precedent. Just because somebody won this case doesn't mean others could - from reading it there could be some very unique circumstances. It would be interesting to read the ruling.

Well, the reporting is that the cancelled flights, and there were some domestic and some international flights involved, were cancelled not because of COVID but because of operational matters. The operational matter being the cost to AirNZ of running the flights. That seems straightforward and the same for everyone more or less.

But my point is different - how many people who have already accepted credits would be wanting to change to a refund by taking on a DT case? I would guess not too many.

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#2600872 10-Nov-2020 10:25

It’s good to see that they could afford to give the executives millions in share options but couldn’t afford to return our money. Oh. Also they needed to borrow more from us as well.

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#2600878 10-Nov-2020 10:32

Geektastic: It’s good to see that they could afford to give the executives millions in share options but couldn’t afford to return our money. Oh. Also they needed to borrow more from us as well.

How do share options work?

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#2600884 10-Nov-2020 10:45

Geektastic: It’s good to see that they could afford to give the executives millions in share options but couldn’t afford to return our money. Oh. Also they needed to borrow more from us as well.

That's a disgrace. All those staff furloughed or outrightly dismissed and executives are still getting shares.

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#2600885 10-Nov-2020 10:46

BlinkyBill:

Geektastic: It’s good to see that they could afford to give the executives millions in share options but couldn’t afford to return our money. Oh. Also they needed to borrow more from us as well.

How do share options work?

They're now digging into the Govt Loan.

But from limited understanding, they are either handed. Or offered shares at a stupid low rate based on meeting performance. And if they meet that performance, they get profit/dividend payouts. While the workers take paycuts, deferred raises and in cases are cut loose and so on to keep afloat. If not only to ensure they prop those dividends up for shareholders.

Similar to FH. Took a covid payout, and just paid out dividends instead of deferring. Seemingly taken and passed it out to keep shareholders happy (although a follow up story says they paid part of it back).

https://www.stuff.co.nz/business/opinion-analysis/300149913/fulton-hogan-subsidy-highlights-how-covid19-response-making-rich-richer

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Geektastic

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#2600890 10-Nov-2020 10:50

networkn:
Geektastic: It’s good to see that they could afford to give the executives millions in share options but couldn’t afford to return our money. Oh. Also they needed to borrow more from us as well.

That's a disgrace. All those staff furloughed or outrightly dismissed and executives are still getting shares.

It is. I’m a pretty staunch capitalist, but that exceeds even what I consider acceptable. Essentially it’s a direct transfer of wealth from our unrefunded fares and from our taxes into the pockets of the Air NZ executives.

I don’t expect the optics of this to look too good over the week.

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#2601003 10-Nov-2020 12:48

Geektastic:
networkn:

That's a disgrace. All those staff furloughed or outrightly dismissed and executives are still getting shares.

It is. I’m a pretty staunch capitalist, but that exceeds even what I consider acceptable. Essentially it’s a direct transfer of wealth from our unrefunded fares and from our taxes into the pockets of the Air NZ executives.

I don’t expect the optics of this to look too good over the week.

It's a rights issue. No money is changing hands. When the new shares are issued, existing shareholders will see their shares diluted. So effectively existing shareholders are paying for it. The money is not coming from existing cash reserves or retained wage subsidy payments. So it is very different to what Fulton Hogan and others have done.

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#2601015 10-Nov-2020 13:09

Let me explain how share options work. It might help your understanding of the situation.

A share option is an option to purchase shares. It is not a gift of shares, it costs the company no money, and executives need to purchase the shares in order to exercise the options.

How it works is: the executive is provided an option to purchase shares in the future, at a price settled today, usually today’s share price. The options are usually vested, one scheme might be 33% in 2 years time, 33% in 3 years time and 34% in 4 years time. The company purchases the shares today.

The idea is that increases in share price are acquired at favourable prices are worth more when purchased; a fictitious example is the share is worth $1 when optioned, $1.20 when vested, the exec buys the shares for $1 (which is the company’s cost) and immediately makes $0.20. If the share was worth $0.80 when vested the exec would not buy the share, which is retained by the company.

The point of this type of scheme is to direct performance to a) to drive up the share price, and b) retain valuable staff.

So, share options cost a company nothing to offer, are incentives to increase the value of the share (which benefits all shareholders), and incentive executive performance according to the Board’s strategy.

So no need to get upset about this.

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#2601021 10-Nov-2020 13:16

Having explained how share options work, I do agree that the move is tone-deaf in the circumstances. It most likely didn’t need to happen.

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#2601023 10-Nov-2020 13:21

BlinkyBill:

Having explained how share options work, I do agree that the move is tone-deaf in the circumstances. It most likely didn’t need to happen.

I am surprised it got past the board, and it's 52% shareholder the NZ Govt to be honest.

I have serious questions about the board and it's management's judgement if it would allow this to go ahead simply on how it appears.

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nova

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#2601037 10-Nov-2020 13:38

networkn:

BlinkyBill:

Having explained how share options work, I do agree that the move is tone-deaf in the circumstances. It most likely didn’t need to happen.

I am surprised it got past the board, and it's 52% shareholder the NZ Govt to be honest.

I have serious questions about the board and it's management's judgement if it would allow this to go ahead simply on how it appears.

Quite likely the shareholders agreed to it some time ago. There was a long term incentive plan approved in 2015, and this may have been issued as part of that, but in any case I don't think it went to the shareholders for approval in the last few months.

Personally I believe that company executives are paid too much, but that is a different question to how they are paid. Using a mixture of base pay plus equity is better for the operating cash flow of the company than funding the CEO remuneration entirely with cash.

Oblivian

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#2601074 10-Nov-2020 15:19

Bit of a hump today.. https://www.nzx.com/instruments/AIR

sbiddle

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#2601224 10-Nov-2020 18:22

Oblivian:

Bit of a hump today.. https://www.nzx.com/instruments/AIR

The whole NZX went backwards this afternoon though, AIR hit around 1.72 or so this morning. No doubt plenty of people started selling down after the huge morning!

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#2601227 10-Nov-2020 18:27

nova:

It's a rights issue. No money is changing hands. When the new shares are issued, existing shareholders will see their shares diluted. So effectively existing shareholders are paying for it. The money is not coming from existing cash reserves or retained wage subsidy payments. So it is very different to what Fulton Hogan and others have done.

It's a rights issue in 2023 if KPIs are hit. It's not a handout.

Executive positions generally have a high at risk portion, reports for Air NZ are ~60% of executive remuneration is made up of incentives, with a combination of short term and medium term incentives.

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