NZX hits Air NZ with $40,000 penalty for non-disclosure

Air New Zealand must pay $40,000 for a “serious” breach of NZX rules on the disclosure of information.

The NZ Markets Disciplinary Tribunal has found the airline this year did not release market-sensitive information when it became aware of it, and made i nf ormation public bef ore informing the NZX.

In its ruling, the tribunal detailed information released about the impact of Covid-19 on the airline leading up to the afternoon of June 5, when Air NZ chief executive Greg Foran t ol d s t af f , Airpoints members and some media representatives about a three-phase plan for the next 800 days.

A key facet of the “Survive” phase was Air NZ’S plan to further reduce its labour costs (in addition to reductions already announced) by about $150 million.

This release was not announced via NZX’S market announcement platform (MAP). Instead, it was released to staff, selected media and Nz-based Airpoints members between 12.46pm and 3.26pm on June 5.

Following contact by the NZX, a materially similar announcement to Foran’s message was released through the MAP at 8.30am on Monday, June 8.

After i nvestigating, t he NZX concluded that the labour cost reduction target mentioned in the message was material information, so the airline had breached its obligations by not releasing it promptly and by releasing it through means other than MAP.

"Compliance with these [continuous disclosure] rules by issuers is essential in maintaining market integrity and investor confidence."

NZX tribunal

The tribunal noted that the airline had provided frequent market updates relating to the impact of the pandemic.

“The breach took place in the context of unique and extraordinary pressures on the business as a result of the Covid19 pandemic.”

The airline accepted it had breached its obligations.

The tribunal ruling said “compliance with these [continuous disclosure] rules by issuers is essential in maintaining market integrity and investor confidence.” The breaches were serious and could result in a penalty as high as $500,000.

The tribunal considered that there were aggravating factors:

Air NZ didn’t observe its own cont i nuous di s c l osure pol i c y when finalising the June 5 communication, nor did it refer the communication to its disclosure committee. ● NZX had published specific guidance in respect of disclosure in light of the pandemic shortly before the breach occurred, so Air NZ was on notice that information on the cost cuts was potentially material. As well, Air NZ had released previous updates via MAP on reducing its labour costs.

NZX advised that 2520 trades in Air NZ shares occurred on the afternoon of June 5. The airline’s share price rose significantly on June 8, although NZX considered that price surges in the global aviation industry had contributed to that.

Mitigating factors included the fact that Air NZ did not itself benefit financially from the breach. And, once the issue was identified, it was promptly addressed.

As well, NZX saw no evidence of any financial benefit or financial harm caused by asymmetrical trading on the afternoon of June 5, and the breach appeared to have been inadvertent.

The tribunal decided the breach warranted a penalty at the low end of the available range, together with public censure.