Air New Zealand censored and ordered to pay $ 40,000 for breach of NZX rules

Cash-strapped Air New Zealand must pay $ 40,000 for a “serious” violation of the NZX rules covering the disclosure of important information.

The NZ Disciplinary Markets Court found that the airline earlier this year did not disclose market-sensitive information when it learned and made it public before reporting to the NZX.

In its ruling, the court detailed information released on the impact of Covid-19 on the airline before the afternoon of June 5, when Air NZ CEO Greg Foran told staff, Airpoints members and to the “ selected media ” on a triphasic. plan for the next 800 days.

The three phases were called Survive, Revive and Thrive, as previously reported by the Herald. A key facet of the survival phase was Air New Zealand’s plans to further reduce its labor costs (in addition to those announced on May 26 by around $ 150 million, including the implementation of reduced hours, unpaid leave, work shared, voluntary departures and possible layoffs). .

This launch was not announced through the NZX Market Announcement Platform (MAP).

Instead, it was delivered sequentially to staff, selected media, and New Zealand-based Airpoints members between 12:46 PM and 3:26 PM on the afternoon of June 5.

Following contact by the NZX, an announcement materially similar to Foran’s message was released via MAP at 8:30 am on Monday June 8.

NZX launched an investigation into whether the post of the CEO’s message was material.

After the investigation, NZX concluded that the objective of reducing the labor cost mentioned in the message was material information, therefore the airline had breached its obligations by not disclosing it promptly and by disclosing this information by means other than MAP.

The court notes that the airline had provided frequent market updates related to the impact of the pandemic on its business and operations.

” The breach occurred in the context of unique and extraordinary pressures on the business as a result of the Covid-19 pandemic. The uncertainty surrounding the duration, scale and impact of the pandemic, and the rapid changes needed to respond to changing government action, have had a particularly significant impact on the airline industry. ”

The airline accepted that it had breached its obligations.

The court’s ruling said a violation related to ongoing disclosure is a violation of a fundamental obligation.

“Compliance with these Standards by Issuers is essential to maintain the integrity of the market and the confidence of investors.”

The violations were serious and could result in a $ 500,000 fine.

The court found that there were aggravating factors in this case:

• Air New Zealand did not follow its own policy of continuous disclosure at the end of the June 5 communication, nor did it forward the communication to its disclosure committee. NZX believes that if internal policy had been followed, this breach would have been avoided.
• NZX had published specific guidance regarding disclosure in light of the COVID-19 pandemic shortly before the breach occurred, so AIR was aware of the potential materiality of a cost reduction decision for workforce. Additionally, AIR had released previous updates via MAP on reducing its labor costs.
• NZX reported that 2,520 transactions in AIR shares occurred on the afternoon of June 5, 2020 while there was information asymmetry in the market. The airline’s share price rose significantly on June 8, although NZX believes that a pattern of price surges within the global aviation industry between June 5-8 contributed, in part, to this move. .

Mitigating factors include:

• Air NZ did not itself benefit financially from the infringement.
• Once the problem was identified, it was addressed immediately. The total duration of the information asymmetry was short (4 hours and 44 minutes).
• NZX considers that there is no evidence of any financial benefit or financial damage caused by asymmetric trading on the afternoon of June 5.
• The violation appears to have been inadvertent, although the airline did not follow its own policy of ongoing disclosure.

“The court has taken into account in its decision to approve the settlement that the infringement occurred during a period of significant uncertainty, particularly for those in the airline industry, as a result of the Covid-19 pandemic.”

Taking into account the aggravating and mitigating factors, the court finds that although the infraction merited a sanction at the lower end of the available range, along with public censure.