AIR - Air NZ.

[brend]

For those interested - recording of today's results.

http://new.livestream.com/accounts/7...ideos/78221890

[modandm]

For those interested - recording of today's results.

http://new.livestream.com/accounts/7...ideos/78221890

thats just for the media. The analyst presentation is at 10:30am...

[Beagle]

Initial thoughts:

better dividend then we thought!

Better cargo revenue and contract services revenue than I had (I was conservative)

They have spelled out the fuel benefit next year which is HUGE - $250m!!, this will get people excited.

And they have hedged FX very well

2H15 is 94% hedged at 0.8452 > 1H16 is 80% hedged at 0.8175

Obviously much better than 75c which is spot.

Expect the shares to be up today. Those brokers will be scrambling to upgrade their FY16 eps estimates... 31c... more likely 45c...

-Mod

Yep I was especially pleased with the extent of and attractive rates on FX forward cover.
Potential fuel price gain next year is a real cracker.
Gearing is up with the acquisition of 3 new 787-9's in the period so I'm not expecting a special divvy this year but ordinary final divvy could be very good if we see fuel price gains materialise fully.

Maybe 8 or 9 cents fully imputed. If we call it 8.5 cents final that's 15 cps fully imputed for the year or 15 / 0.72 = 20.83 cents gross / 260 = 8% gross dividend yield. This means we're being paid very handsomely as well as enjoying tremendous growth !!!!!!

[modandm]

From the call it seems management are pretty confident about demand and yields. More than expected. Pretty bullish!

I was also impressed that when asked about political/PR pressure to lower fares Rob was pretty resolute that fares were fair! Thumbs up!

All in all excellent results! A detailed model update will follow in a few days.

Brief notes:

Forward demand: Revenue in advance only up 2% vs significant increase in capacity?
Chris: Demand is strong, asia, we are confident
Rob: Asian forward sales Yen/AUD weaker, revenue from codeshare with Singapore airlines only arrives when flown hence forward revenue is understated somewhat.

Competitive environment: Jan stats showed a lowering of yield advancement – have you seen prices moving lower?
Rob: FY16 competitive threats may occur, as yet we are not seeing adjustment to capacity, also supply chain for aircraft puts a constraint on capacity. Everyone’s capacity increases together. NZ is not a big business class high yield, so not that attractive. Network decisions reflect economics. Don’t expect competition to toughen much.

Have you seen yield compression yet?
Rob: No, price is set by demand and supply. Some markets are struggles Asia etc, others such as US remain strong.

$249m improvement due to fuel brings political pressure to lower fares?
Rob: 10 years ago, oil was what it is now – ccy same. Average domestic fare is the same. In the interim a lot of costs have gone up airports etc.

Marcus: Underlying ccy yield declines would not be expected for the 2nd half?
Rob: Growth from LH – so mix shift negative. Other than that no.

Singapore – no material impact on LH yields?
Rob – good demand, starting into that route lower yield (certainly than US!)

Labour 80ppl added, more? Rates? One-offs? Upfront coming off? Pilots?
Chris: Training bubble is nearly through, resets (cabin crew),
Rob: Headcount – altitude 100 people left, actual operational increase was 200, c2% but filled 10% growth in January. Lots of training last 18 months. Pretty well through this now – few seat changes left.

End of year and balance sheet – how does the board look at specials again?
Rob: can’t comment. Looking back at previous capital management – was a reflection of where cash was. Don’t confuse equity and liquidity. One thing is we will borrow less with new a/c. 44% increase in dividends reflects where we see earnings are heading.

Is this bigger dividend indicate a higher sustainable pay out or reflecting stronger growth?
Rob: Reflects the stronger growth expected.

-regards mod

[KiwiGekko]

Cheers Mod, much appreciated.

[hoyinma]

Thanks Mod, appreciated.

[percy]

Yes,Thank you.

[Beagle]

Yes,Thank you.

You know you want some more of this stock (Disc bought more Monday / Tuesday @ $2.57 and again this morning at $2.62).

[percy]

You know you want some more of this stock

I do,I do,I do [feel as though I am marrying AIR] !!! lol.
And yes you and Forest were right!!!!!!

[h2so4]

Excellent

I am pleased Buffetts 0800 airline investment hotline is blocked to AIR investors.