Waiver from NZX Main Board Listing Rule 9.2.1

NZX Regulation Decision Air New Zealand Limited (NS) ("AIR") Application for a waiver from NZX Main Board Listing Rule 9.2.1 21 February 2017 Decision 1. Subject to the conditions set out in paragraph 2 below, and on the basis that the information provided by AIR is complete and accurate in all material respects, NZXR grants AIR a waiver from Rule 9.2.1 to the extent required to allow AIR to enter into a Material Transaction with a Related Party without obtaining shareholder approval. 2.The waiver in paragraph 1 above is provided on the conditions that: a. two Independent Directors certify (on behalf of the AIR Board) that: i. the New AoG Contract has been negotiated on arms' length commercial terms; ii. entry into the New AoG Contract is in the best interests of all AIR shareholders (other than the Crown); and iii. the Crown, as the majority shareholder in AIR, has not influenced the AIR Board's decision to enter into the New AoG Contract; b. should AIR renew the New AOG Contract at the conclusion of the initial four year term two Independent Directors of AIR will provide certification as above at paragraph 2(a). AIR must provide new certification for every renewal under the New AoG Contract; and c. AIR clearly and prominently discloses this waiver, its conditions, and its implications in any half-year report, and annual report for the period of the waiver. 3. The information on which this decision is based is set out in Appendix One to this decision. This waiver will not apply if that information is not or ceases to be full and accurate in all material respects. 4. Capitalised terms that are not defined in the decision have the meanings given to them in the Rules. 5. The Rule to which this decision relates is set out in Appendix Two to this decision. Reasons 6. In coming to the decision to provide the waiver set out in paragraph 1 above, NZXR has considered that: a. Rule 9.2.1 seeks to regulate transactions where a Related Party to a Material Transaction may gain favourable consideration due to their relationship with the Issuer. NZXR may waive the requirement to obtain approval of a Material Transaction if it is satisfied that the involvement of any Related Party is plainly unlikely to have influenced the promotion of, or the decision to enter into, the transaction. The granting of this waiver will not offend the policy behind Rule 9.2.1; b. AIR has submitted, and NZXR has no reason not to accept, that the Related Party is plainly unlikely to have influenced entry into or the terms of the New AoG Contract, as: i. entry into, and the terms of, the New AoG Contract has been negotiated on an arm's length commercial basis; and ii. the Crown, as the Related Party, has had no involvement in AIR's participation in the New AoG Contract for air travel services. All of AIR's decisions in relation to pursuing the New AoG Contract have been made by AIR's Board (all of whom are independent directors who are not associated with the Crown) and AIR's senior management; c. the conditions at paragraphs 2a. and 2b. provide comfort that the Transaction has been negotiated on arms' length commercial terms, entry into the Transaction is in the best interests of all AIR shareholders, and that the Crown's connection as the majority shareholder in AIR has not influenced AIR Board's decision to enter into the Transaction; d. the condition at paragraph 2c. ensures that shareholders will have adequate disclosure of the waiver, its conditions and implications; and e. there is precedent for this decision. Confidentiality 7. AIR has requested that its application, and NZXR's decision, be kept confidential until the New AoG Contract is signed and announced. AIR has also requested that certain transactional values be kept confidential indefinitely, due to their commercial sensitivity. 8. In accordance with Footnote 1 to Rule 1.11.2 NZXR grants AIR's request. Appendix One 1. Air New Zealand Limited (NS) (AIR) is a Listed Issuer with Securities Quoted on the NZX Main Board. 2. In 2009, the New Zealand Government (the Crown) established a process for All-of-Government contracts. In 2011 AIR participated in a competitive tender process for the appointment of approved supplies and was appointed as a preferred supplier under an umbrella agreement between AIR and the Crown under which AIR provides air travel services to agencies that are part of the New Zealand state section (the 2011 AoG Contract). 3. The 2011 AoG Contract is due to expire on 28 February 2017. 4. On 13 May 2016, the of Business, Innovation and Employment (MBIE) released a Request for Proposals (RFP) inviting suitably qualified and experienced suppliers to submit a proposal for the provision of air travel services to the government. The scope of the RFP covered the provision of domestic New Zealand, Trans-Tasman (including the Pacific Islands) and international air travel services. The RFP included a form of supply agreement. 5. The RFP is a competitive tender process conducted on a genuine arms' length commercial basis. 6. AIR submitted its response to the RFP. The AIR Board (which are independent) and senior managers have been negotiating the terms of an appropriate supply agreement (based on the form of supply agreement included with the RFP). A successful conclusion to that process will see AIR appointed as a non-exclusive supplier pursuant to a formal umbrella agreement similar to the 2011 AoG Contract (the New AoG Contract). 7. AIR anticipates it will enter into the New AoG Contract on the following terms: a. the parties to the agreement will be AIR and the Crown (acting by and through the Chief Executive of MBIE); b. the agreement will be conditional upon AIR being granted any necessary waivers or confirmations by NZX Regulation (NZXR) and Australian Securities Exchange (ASX); c. the term will be for four years, with the potential for three rights of renewal for two years each; and d. AIR will be appointed a non-exclusive supplier of domestic New Zealand, Trans-Tasman and international air travel services. 8. The New AoG Contract will also contain commercially sensitive terms including pricing, and expected share of government spend either in total or by route. 9. The actual gross cost to AIR of the New AoG Contract in any financial year is likely to exceed an amount equal to 1% of the Average Market Capitalisation of AIR. At the time of this waiver AIR's market capitalisation is approximately $2.397 billion. The New AoG Contract is a material Transaction under Rule 9.2.2(e) 10. The Crown is a Related Party of AIR because the Crown is a 51.91% shareholder of AIR exceeding the 10% threshold pursuant to the Rule 9.2.3(b). 11. AIR has applied to NZXR for a waiver from Rule 9.2.1 to enter into the New AoG contract without shareholder approval. Appendix Two Rule 9.2 Transactions with Related Parties 9.2.1 An Issuer shall not enter into a Material Transaction if a Related Party is, or is likely to become: (a) a direct or indirect party to the Material Transaction, or to at least one of a related series of transactions of which the Material Transaction forms part; or ... unless that Material Transaction is approve by an Ordinary Resolution of the Issuer. 9.2.2 For the purposes of Rule 9.2.1 "Material Transaction" means a transaction or a related series of transactions whereby an Issuer: ... (e) provides or obtains any services (including without limitation obtaining underwriting of Securities or services as an Employee) in respect of which the actual gross cost to the Issuer in any financial year (ignoring any returns or benefits in connection with such services) is likely to exceed an amount equal to 1% of the Average Market Capitalisation of the Issuer; ... 9.2.3 For the purposes of Rule 9.2.1, "Related Party" means a person who is at the time of a Material Transaction, or was at any time within six months before a Material Transaction: ... (b) the holder of a Relevant Interest in 10% or more of a Class of Equity Securities of the Issuer carrying Votes. End CA:00297231 For:AIR Type:GENERAL Time:2017-02-22 16:15:50