AIR - Air NZ.

[Jaa]

Was thinking today might be a chance to buy in before our hard working government offer support on Tuesday ala 2001. Sign of a well run company and board they instead put the shares in a trading halt. Night and day difference compared to the neo-liberals in charge then.

Guaranteed seat purchases, subsidies for key routes to ensure Air NZ keep flying in vital supplies and people or just a rights issue. Plenty of ways for NZ Inc to provide support.

[macduffy]

I agree, Jaa. "NZ Inc" holds the majority shareholding and will see to it that "our" investment is supported.

[Beagle]

https://www.nzherald.co.nz/business/...ectid=12317117

Trying to get my head around this but if revenue falls from 6 billion to just 1 billion per annum and staff are reduced by just 30%, staff costs come down to $945m per annum, that leaves them with just $55m for everything else. Hmmm...Houston, we have a "small" problem.

On a real quick and dirty look the numbers are really scary.

Revenue $1000m

Labour 2019 less 30% = 945m
Fuel - 2019 less 85% = 190m
Maintenance 2019 less 85% = 60m
Aircraft Operations 2019 less 85% = 102m
Passenger Services 2019 less 85% = 48m
Sales and Marketing 2019 less 85% = 53m
Other expenses 2019 less 85% = 44m (I seriously doubt the above could be reduced by 85% but lets just run with that for the sake of a quick and dirty back of the envelope calculation)
Total Direct Expenses $1,442m
Loss before other items $442m
Other items
Depreciation and amortisation - unchanged 567m
Rental and Lease expenses - unchanged 245m
Losses before finance costs $1,254m
Net Finance Costs - unchanged 368m
Share of earnings from subsidiary - unchanged = (37)m

Net Forecast Loss - $1,585m

I very seriously doubt direct costs could be cut by 85%.
I also doubt revenue would fall by as much as suggested in that article but seriously folks, I just don't see how the airline can survive losing something like $4-5m per day with its dramatically shrunken business but with the vast majority of its fixed and labour costs still being incurred ?

I don't see how the revised business model is sustainable ?

Will await the Govt's support proposal with interest.

[BlackPeter]

https://www.nzherald.co.nz/business/...ectid=12317117

Trying to get my head around this but if revenue falls from 6 billion to just 1 billion per annum and staff are reduced by just 30%, staff costs come down to $945m per annum, that leaves them with just $55m for everything else. Hmmm...Houston, we have a "small" problem.

On a real quick and dirty look the numbers are really scary.

Revenue $1000m

Labour 2019 less 30% = 945m
Fuel - 2019 less 85% = 190m
Maintenance 2019 less 85% = 60m
Aircraft Operations 2019 less 85% = 102m
Passenger Services 2019 less 85% = 48m
Sales and Marketing 2019 less 85% = 53m
Other expenses 2019 less 85% = 44m (I seriously doubt the above could be reduced by 85% but lets just run with that for the sake of a quick and dirty back of the envelope calculation)
Total Direct Expenses $1,442m
Loss before other items $442m
Other items
Depreciation and amortisation - unchanged 567m
Rental and Lease expenses - unchanged 245m
Losses before finance costs $1,254m
Net Finance Costs - unchanged 368m
Share of earnings from subsidiary - unchanged = (37)m

Net Forecast Loss - $1,585m

I very seriously doubt direct costs could be cut by 85%.
I also doubt revenue would fall by as much as suggested in that article but seriously folks, I just don't see how the airline can survive losing something like $4-5m per day with its dramatically shrunken business but with the vast majority of its fixed and labour costs still being incurred ?

I don't see how the revised business model is sustainable ?

Will await the Govt's support proposal with interest.

If they manage to triple their margins they might be fine. And I am not saying this in jest - expect flights to get much more expensive!

[Mr Slothbear]

If they manage to triple their margins they might be fine. And I am not saying this in jest - expect flights to get much more expensive!

the government is going tomannounce some sort of flight subsidy tomorrow, i’m almost sure of it

[Beagle]

If they manage to triple their margins they might be fine. And I am not saying this in jest - expect flights to get much more expensive!

JetStar are gone from here and won't be missed as far as I am concerned...its only a matter of time. I agree fares are going to have to increase dramatically as well as dramatic further staff retrenchment. Never waste a good global financial crisis !!
This is AIR's chance to completely reconfigure their cost structure and I suspect Greg Foran is the right man for the job.

[Jaa]

https://www.nzherald.co.nz/business/...ectid=12317117

Trying to get my head around this but if revenue falls from 6 billion to just 1 billion per annum and staff are reduced by just 30%, staff costs come down to $945m per annum, that leaves them with just $55m for everything else. Hmmm...Houston, we have a "small" problem.

On a real quick and dirty look the numbers are really scary.

Revenue $1000m

Labour 2019 less 30% = 945m
Fuel - 2019 less 85% = 190m
Maintenance 2019 less 85% = 60m
Aircraft Operations 2019 less 85% = 102m
Passenger Services 2019 less 85% = 48m
Sales and Marketing 2019 less 85% = 53m
Other expenses 2019 less 85% = 44m (I seriously doubt the above could be reduced by 85% but lets just run with that for the sake of a quick and dirty back of the envelope calculation)
Total Direct Expenses $1,442m
Loss before other items $442m
Other items
Depreciation and amortisation - unchanged 567m
Rental and Lease expenses - unchanged 245m
Losses before finance costs $1,254m
Net Finance Costs - unchanged 368m
Share of earnings from subsidiary - unchanged = (37)m

Net Forecast Loss - $1,585m

I very seriously doubt direct costs could be cut by 85%.
I also doubt revenue would fall by as much as suggested in that article but seriously folks, I just don't see how the airline can survive losing something like $4-5m per day with its dramatically shrunken business but with the vast majority of its fixed and labour costs still being incurred ?

I don't see how the revised business model is sustainable ?

Will await the Govt's support proposal with interest.

The 85% cut is to international flights exl Tasman/Pacific. Remember Air NZ makes most of its money flying domestically and demand here will fall less and for a shorter period. So you should probably double your revenue estimate. Then things don't look so bad. Loss of 585m.

[James108]

Do aircraft depreciate if they are parked up? Or is it based on km travelled. Also jet fuel will be reduced more. Still though.. very ugly picture you painted. Having said that billions have been wiped off the company already so market reaction is in keeping.

[Jaa]

Do aircraft depreciate if they are parked up? Or is it based on km travelled. Also jet fuel will be reduced more. Still though.. very ugly picture you painted. Having said that billions have been wiped off the company already so market reaction is in keeping.

They do, but most aircraft maintenance costs are related to hours spent flying and number of take offs/landings.

Golden chance here for Air NZ to get that 787 fleet working well again. They can also let go leases.

[Dassets]

Some big technical issues here. Firstly GONZ is a shareholder in AIR. It will need a shareholder vote to do anything where it cannot vote on the resolution. If GONZ tries to wipeout other shareholders ligition funds will have a field day. Why? Because better for shareholder to close operations and take the net assets of say $1 a share. Do you think the 48% will vote for their shares to be wiped out to support a GONZ bailout??

Directors' position. Can't let it trade insolvent. IMO insolvent now by definition. They are personally liable for debts and face criminal sanctions. So go to tell the secured lenders. The secured lenders have to call the receivers in. Why? New RB rules on capital adequacy would need the banks to bank in amazing levels of capital to support the loan.

Cash levels from 31 December almost certainly gone. The refunds from the pre-paid fares return will see to that plus opex, divvy etc.