AIR - Air NZ.

[skid]

Jetstar is a loss leader for a reason... if you understand the strategic plan, the point was a clear example where price will convert kiwis even with an inferior network & product.

Yes I'm aware, I know about the Deloitte 200 awards and actually some of the past winners, they are competent. Now look at how many kiwis have made it overseas on boards and excelled. A very small group indeed. I work on a number of advisory boards in the US, and because of family... three boards in europe. It is such a small group we know each other..the group really is that small. I would like to think I'm competent as well haha however I can tell you I have worked with some exceptional directors overseas..they are on another level, opened my eyes to what is possible...now that is what I call world class. People like Chris Liddell are in demand back here for a reason. Not many in little old NZ from my experience.

I think it would be a whole lot fairer to compare AIR to another premium airline with cheaper prices.
no getting around the fact that Jet star longer flights are crap.

[Raz]

Thanks for your comments RAZ but as a shareholder its water off a ducks back as far as I'm concerned. Fact is demand and seat load factors YTD are very strong and there are literally millions of happy customers. Demand growth is significantly outstripping seat capacity growth despite the airline growing at a faster rate in FY16 than in their entire 75 year history and further, their RPK growth is double that of the average Asia pacific airlines so they're doing a heck of a lot of things right in the assessment of millions of their other customers. One of two anecdotal reports from you, me or anyone else, (no disrespect intended) mean very little in the face of these compelling YTD operating statistics.
Fact is load factors above 80% have been the norm for the last five years so I have every confidence that management and marketing team are a highly competent group of people.

Yes load factors are good, YTD is strong, question demand growth is actually outstripping seat capacity as they would not be discounting as much as seen in Feb vs Jan

Share price has highly likely fallen in part directly as a result of management mis-step on pricing and PR on competition.

I have made no suggestion they are not competent, I do think they could do better, think they enjoy a captive market which is a mixed bag, good for investors not so good for passengers...still that does not mean they are not a good investment.

I like to be objective about investments, when you get biased you can run into problems...I have no need to influence your opinion..just putting it out there for consideration.

I'm holding and buying. Not going to ever be enamored by a company.

[Beagle]

Suggest we let the half year results and outlook speak for themselves Raz.

[dobby41]

When I fly price is one input.
Quality of experiance is another (meal for long haul, luggage, pitch etc).
Reputation for being on-time etc.
Plus time of day. I have to save a lot of money to get a really early flight!
If you look at a longish holiday (3-4 weeks) then a few hundred to get a better flight on a better airline is neither here nor there.
I believe I am not the only one who thinks like this.

[Raz]

Skid - Emirates is usually cheaper when I fly, economy or business, for frequently flyers they offer serious discounts after you first flight and on sector upgrades to business or first class via email before next flight, also smart way to keep your real pricing not clear on their website and to you opposition. In essence, I go business class to Australia at economy pricing. I suspect only Rodger would say it is not a superior product:-)

[Raz]

Suggest we let the half year results and outlook speak for themselves Raz.

Sure if you want to ignore the share price.

[Snow Leopard]

Doors open in an hour (https://www.singaporeairshow.com/).

I will let you know if I see anyone from Air New Zealand spending your dividend on some shiny new hardware.

Best Wishes
Paper Tiger

[Beagle]

When I fly price is one input.
Quality of experiance is another (meal for long haul, luggage, pitch etc).
Reputation for being on-time etc.
Plus time of day. I have to save a lot of money to get a really early flight!
If you look at a longish holiday (3-4 weeks) then a few hundred to get a better flight on a better airline is neither here nor there.
I believe I am not the only one who thinks like this.

You're not and Raz I would be the first to acknowledge Emirates have a very good product offer to Europe. Personally if I go this winter it will be an Air New Zealand Dreamliner to Singapore, then Singapore Airlines A380 to London and I'd be looking for an Emirates A380 out of Paris to Dubai and onward on the way back. Now don't fall out of your chair when you read this post :-)

PT - If you see Chris Luxon eyeing up those shiny new A350's please tell him we'd all prefer XXXXXL special dividends instead.

[skid]

Speaking of dreamliners--I know its a long shot .but I was wondering if possible the big drop in Boeings SP has caused any ripples(It had more to do with potentially dicey accounting than the planes though)
Yep Emirates and Singapore Air are great airlines and as far as planes and flying experience I think most would say they have the edge over AIR IMO (dare I say it)....but even if Im not as comfortable in Air New Zealand planes,who cares...they have good management:p

[winner69]

Airline management thinking. Is US-centric but interesting as shareholders need to trust management to balance customer needs but make money

http://www.strategy-business.com/blog/Leave-the-Airlines-Alone?gko=f1ee7

Extract -

There’s a market-based method to airlines’ current approach to pricing and passenger perks. Most industries don’t cut prices unilaterally unless market conditions, or competitors, force them to. But persistently rising demand proves that airlines don’t need to cut prices to goose sales.

And

But the flying public, simply put, should get over itself. For the fare increases have far more to do with the dynamics of the broader travel marketplace than with the short-term greed of companies. And counterintuitive as it may seem, airlines are making a smart long-term move.

[Raz]

Airline management thinking. Is US-centric but interesting as shareholders need to trust management to balance customer needs but make money

http://www.strategy-business.com/blog/Leave-the-Airlines-Alone?gko=f1ee7

Extract -

There’s a market-based method to airlines’ current approach to pricing and passenger perks. Most industries don’t cut prices unilaterally unless market conditions, or competitors, force them to. But persistently rising demand proves that airlines don’t need to cut prices to goose sales.

And

But the flying public, simply put, should get over itself. For the fare increases have far more to do with the dynamics of the broader travel marketplace than with the short-term greed of companies. And counterintuitive as it may seem, airlines are making a smart long-term move.

Well with respect the US they have not had a financially sustainable industry, they have had to widen the margins and with consolidation they might just pull it off.

Just like AIR if you can condition customers to a higher price point with perceived value all the better, that is why those counter arguments that Air is so much better yesterday on this forum is so reassuring to me as an investor :-)

Given the crown is majority shareholder and AIR is so closely linked with the NZ Brand and vital infrastructure how do you think strategy should be moderated if at all for the NZ context?

[blockhead]

Listening to the wireless this morning they were saying AIR is not completely out of the woods yet regards the air freight price fixing cartel allegations, this is the US class action suit, not the OZ action which I understand was settled a while back.

Uneasy feeling having that lurking in the background ?

[Beagle]

Been lurking in the background for a long time now and no, its not a material consideration IMO.

Anyway...the U.S. airlines I follow Delta and American airways are both up ~ 10% over the last week. Strong increases overnight on Wall St. Both on cheap forward PE's of less than 6. The sky isn't falling and a similar 10% recovery in AIR from $2.695 would equate to $2.96. I strongly prefer AIR's metrics to either of these other two airlines and anyone that's closely studied the operating stat's knows there's a blinder of a half year result coming shortly and a big increase in dividend. Disc: Bought more this morning on the open.

[skid]

Well with respect the US they have not had a financially sustainable industry, they have had to widen the margins and with consolidation they might just pull it off.

Just like AIR if you can condition customers to a higher price point with perceived value all the better, that is why those counter arguments that Air is so much better yesterday on this forum is so reassuring to me as an investor :-)

Given the crown is majority shareholder and AIR is so closely linked with the NZ Brand and vital infrastructure how do you think strategy should be moderated if at all for the NZ context?

They are certainly so much better than Jet Star Raz,but when you strip out the budget airlines and get down to regular airlines,with meals,sometimes better seats,then it gets to be a more level playing field.

I certainly agree with the time of day point--Even a good airline with a big layover making a 9hr flight come out to 18hrs makes it worth spending a bit more,for a better schedule. There are just so many things in the mix.--If you want to go to Canada,but via LA or San Fran,you are now forced to get an electronic visa for the US just to transit through(luggage off -through customs -back on) what a pain--That certainly makes the Vancouver direct flight much more attractive--If your going to the States then If American air or AIR has a cheaper price and all else is similar then I would suggest the majority would go with the savings ---I think for most part,airlines are predominately price orientated and most things being equal thats what most travelers will look at.
There is no doubt that ,after flying a bunch of US domestic flights or air Canada that getting back on a plane with the Kiwi atmosphere is a nice change,but that soon wears thin if your cramped,even with nice stewardess.and a cool design on the outside of the plane. 12-13 hrs in a tin box is hard.
To show the value of having a route ''in the bag'' the last 4-5 trips we have always flown AIR to Canada-The ,probably 10 times to southeast Asia--never.---So Id say its Price-Convenience-Availability,..with devotion to brand last. IMO of course.
Since the wife will fly in May she can give me feedback on whether its gotten more comfortable than last time on Air New Zealand.

[iceman]

Skid the electronic Visa waiver through the USA isn't that much of a pain. 10 minutes on the internet and it lasts for multiple travel for 24 months !

[Beagle]

Skid the electronic Visa waiver through the USA isn't that much of a pain. 10 minutes on the internet and it lasts for multiple travel for 24 months !

Hi mate...care to share about the freight thing we discussed the other day...just a small bit of info but could be of some interest to stave off the boredom while we wait for the half year results.

[iceman]

Hi mate...care to share about the freight thing we discussed the other day...just a small bit of info but could be of some interest to stave off the boredom while we wait for the half year results.

Wasn't really much but speaking to crew on my flight EZE-AKL they told me that freight volumes on that leg has surprised on the upside and most of the flights full of freight. Some so full and heavy that they've had to limit seat sales.
They also told me that all the flights have been well booked, with over 75-80% of seats full each time. This morning I booked the last business class seat for a flight back to EZE in just under 3 weeks time !! Looks like EZE has been a great choice for AIR

[skid]

Skid the electronic Visa waiver through the USA isn't that much of a pain. 10 minutes on the internet and it lasts for multiple travel for 24 months !

Thats good to know Ice ..not so painful after all--although having to go through customs for transit passengers is still ludicrous,--last time there was a long line to stand in, with luggage...maybe there was some glitch ,but after a long flight ,it was not fun(especially with the thought of the possibility of missing the connection) Can anyone think of a logical reason for that--instead of just transferring luggage--(of course I understand why they want US to go through so they can get us (and our fingerprints)on their data base)--watching them electronically fingerprinting our 6 yr old daughter was laughable in a dark humor sort of way.

[skid]

Hi mate...care to share about the freight thing we discussed the other day...just a small bit of info but could be of some interest to stave off the boredom while we wait for the half year results.

Sorry Roger,im having a senior ,moment---Do you mean about the ''total weight thing'',where light weight people get more luggage? (They'ed probably call it discriminatory,but weight is weight eh?)..I guess I was'nt totally serious in my expectation but you never know. :) We just contributed $2300 to your Dividend fund yesterday for that ticket for the missus:)

[stoploss]

http://www.stuff.co.nz/business/industries/76979213/air-new-zealand-enhances-main-trunk-schedules

[skid]

Been lurking in the background for a long time now and no, its not a material consideration IMO.

Anyway...the U.S. airlines I follow Delta and American airways are both up ~ 10% over the last week. Strong increases overnight on Wall St. Both on cheap forward PE's of less than 6. The sky isn't falling and a similar 10% recovery in AIR from $2.695 would equate to $2.96. I strongly prefer AIR's metrics to either of these other two airlines and anyone that's closely studied the operating stat's knows there's a blinder of a half year result coming shortly and a big increase in dividend. Disc: Bought more this morning on the open.

I think there are alot of factors that could increase the SP or decrease it..but a good result seems to be the worse kept secret around--wouldnt you think that is already factored in? (mind you ,Im often at a loss on the Share price action on this one) I wonder if anyone can really make sense of it in this period...I guess outside markets and competition are the main factors?

Any mention of competition in the Herald seems to take its toll ,but Ive noticed that there is a lag between the news and the SP fall--If one was looking for a pattern they could have sold and bought and done quite well on the second one .

Interesting how that golden $3 mark turned out to be just a passing sign going both ways.

I believe there is a travel Expo this weekend-(Auck)-might be interesting to go and see which company has the biggest crowds at their booth

[JohnnyTheHorse]

Globally, airline stocks are showing stronger technical signals, indicating they may be coming back into favour over the short-med term. I'm playing to it, but keeping a very close eye on it.

Should see an investor update and fuel hedge disclosure from AIR today.

[Raz]

I have been trading AIR for 12 months, prior more long term holder on shares (except xero which I traded from listing) as was too busy making money other ways.

Bought and sold AIR six times, never sold at the top, great overall return after tax ,this is a great traders share however you have to keep you eye on it all the time. Confident a good short term play on the results then the noise will take over once again. Its high media profile near guarantees its volatility.

[Beagle]

Delta and American AIR up further overnight..now recovered circa 13% from their recent hammerings on "fear of the bear". Same recovery for AIR would see it at $3.05 ($2.70 x 1.13).
Agree with Raz and JTH. Forward PE on my estimate of FY16 earnings incl VAH of 68 cps is 4.1 at $2.80. Very high confidence that management will navigate their way very successfully with new competition coming and AIR will remain a highly profitable company. Sure there are risks but in my experience when the PE is 4 there's usually a lot of money to be made.

[Hoop]

I have been trading AIR for 12 months, prior more long term holder on shares (except xero which I traded from listing) as was too busy making money other ways.

Bought and sold AIR six times, never sold at the top, great overall return after tax ,this is a great traders share however you have to keep you eye on it all the time. Confident a good short term play on the results then the noise will take over once again. Its high media profile near guarantees its volatility.

Hmmm....maybe, but maybe it's the other way around, perhaps its the AIRs "natural"(expansion/contraction) activities and the share price behaviour that keeps it in the Media's spotlight

Sorry to harp on, but, one has to keep reminding one's self about the theoretical behavioural characteristics of cyclical stocks..(sorry Roger I said that nasty C....word again:p).. I've mentioned before (many times:p) the behavioural characteristics such as very low PE being a warning sign... shareprice being very sensitive to any economic change.. cyclical growth (expansion during consumer good times/contraction during consumer bad times)...sensitive to competition pressures...very sensitive to customer discretionary spending patterns..etc..etc

On a long term chart... cyclicals show a characteristic Oscillation pattern, often correlated with economic activity, usually the lagged activity due to the trickle down effect finally reaching the consumers from the mature business/economic bull cycle..
Also observing the charts on a shorter term... Referring to the results of an overall market (the Index).. the volatility tends to rise during the end/beginning of market cycles (top/bottom) and for the "end is near" disbelievers :) also during corrections within the market cycles..

Market Sectors also exhibit their own characteristic volatile behaviour ..Defensive stocks (Utilities) usually have a low Beta value.The lower the beta value the more boring the market sector...so one can easily assume the media will run with the more exciting market sectors such as the techs and cyclicals which have a much higher Beta value....Its common to find that some of the best performing stocks are off the radar or have very forum few post numbers often because of few company/media announcements which may or may not contribute to their low beta value..

EDIT:,,, It may be worthwhile to mention that when Beta goes super low e.g negative that stock becomes uncorrelated to its market index behaviour.....eg it's shareprice is uneffected by the index market cycle

[Beagle]

Plenty of cyclical's in the states on a low PE like the aforementioned American airlines, Delta and Ford but there's low PE cyclical's and then low PE cyclical's that have been beaten down aggressively because of fear of the bear and fear of new competition. :ohmy: I used the word cyclical three times. Fear says there's a 50% chance we're entering a world-wide recession but maybe interest rates at 60 year lows and cheap fuel acts like a shock absorber and we get a soft economic landing and a benign consumer environment such that consumers can spend on travel, food, whatever. Perhaps this low worldwide growth continues to supress demand for oil and keeps airfares low and we're entering a golden age of air travel where airlines generally do extremely well...especially the well managed ones...

Interesting article a while back on CNBC, sorry looked for a link but couldn't find it, but essentially the theme was the market isn't treating the gains airlines are receiving from low oil as "real earnings". Yield compression is very real however and to some extent balances out those gains, likewise new competition. Probably ~ $70 oil is better for AIR with its relatively new efficient fleet. If we get there the world-wide economic picture will be more robust, more demand and yields will be higher so maybe those gains from low oil are real and a forward PE of only 4, lower than most other carriers, is a bit low for a company experiencing revenue passenger kilometre growth of 17% on capacity growth of 12%.

AIR by its very nature with so many users and Govt controlled ownership will always be something of a media and political football so volatility and media scrutiny will always be par for the course. This is a stock to own if you are a value investor that's prepared to weather a turbulent ride. Best to keep your seatbelt fastened at all times.

http://www.fool.com.au/2016/02/16/is-air-n-z-fpo-nz-a-better-investment-than-qantas-airways-limited/ Air beaten down too much ?
AIR are very well positioned to deal with future competition IMO.

[Snow Leopard]

...
PT - If you see Chris Luxon eyeing up those shiny new A350's please tell him we'd all prefer XXXXXL special dividends instead.

Dropped by the Kiwis Can Fly School (http://www.aviationinstitute.co.nz/ai/) booth today but not met your mate Chris yet.
Still there is all of tomorrow.

Best Wishes
Paper tiger

[winner69]

Compared to previous months January was a bit slack

Suppose 9% increase in RPK not too bad though

[Beagle]

Pretty solid numbers Winner, not as spectacular as December's but highly credible nonetheless especially in the context of starting two new routes contemporaneously . Fuel hedge position looks good and they're taking the opportunity to collar in low oil prices for 56% of their requirements for the first half of FY17 already, which looks like a sensible move to me.
Load factors good at over 85%. Yields holding up well in this low fuel price environment.

Average broker valuation $3.22. http://www.4-traders.com/AIR-NEW-ZEALAND-LIMITED-6491407/consensus/

[JohnnyTheHorse]

Globally, airline stocks are showing stronger technical signals, indicating they may be coming back into favour over the short-med term. I'm playing to it, but keeping a very close eye on it.

The strategy is playing out - a down day on US markets and the airline index (XAL) up 3.23%. Doesn't look like AIR got the message though :).

[Hoop]

The strategy is playing out - a down day on US markets and the airline index (XAL) up 3.23%. Doesn't look like AIR got the message though :).

Yeah..AIR correlates very well but lately its been a little laggy.
Interesting to see:..
1...Some sort of problem for AIR around the beginning of 2012
2...Buyers futile attempt to push AIR through the secular resistance ~$3.14,...You can't beat the market forces ..eh?

Below is a crude chart ...The AIR layer not entirely in sync (resulted in a best fit) with the $XAL layer and the comparison is not accurate so ignore the AIR line being below the $XAL most of the time..
What I attempted to achieve with the overlayered chart was to see if the trending behaviour correlated which I achieved to do...

So if XAL keeps climbing then a I'd expect AIR will follow, however the XAL chart does seem to have a completed Head and shoulder pattern and the bad news is that the neckline break occurred around Xmas...probabilities are that the XAL latest rally looks to be nearly done...

http://i458.photobucket.com/albums/qq306/Hoop_1/AIR%20V%20Index%20A%2018022016.png (http://s458.photobucket.com/user/Hoop_1/media/AIR%20V%20Index%20A%2018022016.png.html)

[winner69]

Hoop - as long as AIR do better than that index AIR management will be happy as - bigger bonus.

What a rort

[Beagle]

Base salary $1.4m for running an organisation with over 10,000 staff and with turnover over $5,000m and looking at circa $1,000m profit before tax this year...we're lucky to have him and I would think he'd be well entitled to a decent bonus if he beats the airline index. How does that base salary compare to your mate Jeff running HBL looking at $50m profit this year ?

[Hoop]

Hoop - as long as AIR do better than that index AIR management will be happy as - bigger bonus.

What a rort

I don't mind bigger bonuses if they deserve it....What really pisses me off is when Directors and Management get these huge payouts and back slapping when the shareholder funds shrink with the cash burn (the gold plated pig trough).
Overall I think the AIR Management has done very well...they managed to keep making a profit (just) during the last recession which for a cyclical business is very good..That 2011-2012 sticky economy patch saw AIR keeping out of trouble when some airlines went to the wall...Yep I'm happy to pay them something extra...

[winner69]

I don't mind bigger bonuses if they deserve it....What really pisses me off is when Directors and Management get these huge payouts and back slapping when the shareholder funds shrink with the cash burn (the gold plated pig trough).
Overall I think the AIR Management has done very well...they managed to keep making a profit (just) during the last recession which for a cyclical business is very good..That 2011-2012 sticky economy patch saw AIR keeping out of trouble when some airlines went to the wall...Yep I'm happy to pay them something extra...

Not saying bonus/incentives are bad (even though totally excessive in some cases)

I just think it odd that a listed NZ company with mainly NZ shareholders use a global airline index as a key measure of management performance.

Grant you they use a blended index made up ofNZX All and the global airline index so to some extent performance is relevant to NZ - but the use of the airline index seems to be a back stop in case airlines do badly.

Not just AIR but many plans have market related incentives (top quartile TSR etc) meaning even in real down markets as long as you don't go down as much as the next guy you still get our juicy bonus - even though shareholders have lost.

Good article on Luxon in last weeks The Listener - maybe his incentive should include share of media space

[Raz]

Not saying bonus/incentives are bad (even though totally excessive in some cases)

I just think it odd that a listed NZ company with mainly NZ shareholders use a global airline index as a key measure of management performance.

Grant you they use a blended index made up ofNZX All and the global airline index so to some extent performance is relevant to NZ - but the use of the airline index seems to be a back stop in case airlines do badly.

Not just AIR but many plans have market related incentives (top quartile TSR etc) meaning even in real down markets as long as you don't go down as much as the next guy you still get our juicy bonus - even though shareholders have lost.

Good article on Luxon in last weeks The Listener - maybe his incentive should include share of media space

I tend to agree, his official base may be low but in reality is the bonus/incentive really that much of a hurdle. Seems to me the total compensation is in reality the base, split this way for political reasons. This leads to the question is there a real mutually beneficial incentive scheme in place....

I say the base is low when I consider most CEOs with any international experience of success would tend not to get out of bed for 1.4

[Raz]

Compared to previous months January was a bit slack

Suppose 9% increase in RPK not too bad though

Yes especially given it was January. I was underwhelmed, like the market reaction. Management in cruse mode.

[percy]

I don't mind bigger bonuses if they deserve it....What really pisses me off is when Directors and Management get these huge payouts and back slapping when the shareholder funds shrink with the cash burn (the gold plated pig trough).
Overall I think the AIR Management has done very well...they managed to keep making a profit (just) during the last recession which for a cyclical business is very good..That 2011-2012 sticky economy patch saw AIR keeping out of trouble when some airlines went to the wall...Yep I'm happy to pay them something extra...

I totally agree,too often these bonuses come at shareholders' expense.
When shareholders benefit,then management should too.

[Hoop]

" Not saying bonus/incentives are bad (even though totally excessive in some cases)

I just think it odd that a listed NZ company with mainly NZ shareholders use a global airline index as a key measure of management performance..................."
By not using company growth incentive bonuses and preferring to compare AIR's performance with the Airline market index (a cyclical market) instead....... maybe Chris Luxon's AIR management secretly think AIR is a cyclical company after all.....ehhttp://www.sharetrader.co.nz/images/smilies/wink2.gif (https://issuu.com/apn_mediaservices/docs/mood_of_the_boardroom_2015)?

13 August 2015 page D13 Chris Luxon Quote ".....We cannot choose between growth and sustainability. We have to have both...." (https://issuu.com/apn_mediaservices/docs/mood_of_the_boardroom_2015)

[winner69]

By not using company growth incentive bonuses and preferring to compare AIR's performance with the Airline market index (a cyclical market) instead....... maybe Chris Luxon's AIR management secretly think AIR is a cyclical company after all.....ehhttp://www.sharetrader.co.nz/images/smilies/wink2.gif (https://issuu.com/apn_mediaservices/docs/mood_of_the_boardroom_2015)?

13 August 2015 page D13 Chris Luxon Quote ".....We cannot choose between growth and sustainability. We have to have both...." (https://issuu.com/apn_mediaservices/docs/mood_of_the_boardroom_2015)

I was going to say that but didn't want to use the C word

[iceman]

Base salary $1.4m for running an organisation with over 10,000 staff and with turnover over $5,000m and looking at circa $1,000m profit before tax this year...we're lucky to have him and I would think he'd be well entitled to a decent bonus if he beats the airline index. How does that base salary compare to your mate Jeff running HBL looking at $50m profit this year ?

Delta Airlines announced yesterday that they will pay USD 1.5 billion bonus to its 80,000 staff members. They get $18,750 each, including the CEO !!

[brend]

AIR announced Vietnam as a new destination back in November..They must be due to release the second new destination soon. Wednesday perhaps?

[Beagle]

Yes especially given it was January. I was underwhelmed, like the market reaction. Management in cruse mode.

I presume you meant cruise mode ? Really ? The facts suggest they're actually in overdrive.

First up AIR in its entire history dating back nearly 76 years has never grown anywhere near as fast as its growing this year.
YTD Available seat Kilometres have grown a whopping 15.8% and revenue passenger kilometres have grown 16%. This on top of last year which was historically considered a strong growth year when ASK's and RPK's grew 6% by comparison.

AIR's management have launched two brand new routes this year and a third is planned shortly for Vietnam.
The management and (marketing team in particular), have done a brilliant job of stimulating demand by a whopping 16% in what is generally considered to be softer economic conditions than last year while launching these new routes and I note this growth rate significantly outstrips the general tourism growth rate, itself a strong 10%.

RPK growth for January itself was in fact 9.8% on ASK growth of 12%. This against a backdrop of launching two new routes. Being realistic about it and understanding that new routes take time to develop I think January's result was very pleasing.

Yield in $N.Z is only down 1.1% YTD despite new routes, (historically launches with cheap specials) and demand growth being stimulated by 16% and all this while burning jet fuel that's dramatically lower than last year.

I'm not sure how anyone looking at the facts objectively could be disappointed with management's efforts. They've grown the airline very strongly at a great time to do so when fuel is dirt cheap and filled the planes well with minimal impact on yield. Credit where its due, management are doing a brilliant job in my opinion. Surely Chris Luxon and AIR New Zealand are hot favourites in the Deloitte 200 top business awards to get the CEO and company of the year awards this year.

I realise many people are disappointed by the recent SP performance but please don't blame management. This is simply Economics 101, the laws of supply and demand. Its clear that one or more institutions want to reduce their investment for reasons that you'd be best to ask them but may be to do with concerns over future competition. The way management are performing I am more than comfortable that they'll rise to any foreseeable challenges ahead and am more than happy to hold what's my #1 investment position.

[winner69]

Roger - I was saying Jan growth was slightly less than previous months. Like the 10% increase in RPKs was less than the 18% in December

Spose can't count on 18% every month

Maybe in cruise mode means reached full speed but in cruise mode maintaining the momentum (or something)

All good

Plenty of cash to give back to shareholders - yes?

[Beagle]

Yes December was a ripper set of stat's, so I suppose some were disappointed January didn't replicate them but anyone with a rudimentary understanding of airlines and networks understands you don't build new routes into super profitable parts of the network overnight. Operating cash flow for the first half will be a real highlight. They'll need to factor in some capex for new and bigger cash registers this year...

P.S. I checked my Mercedes manual and you're quite right about the cruise control...it can be set to maintain the maximum speed of 250 k.p.h. :)

[Raz]

Roger - I was saying Jan growth was slightly less than previous months. Like the 10% increase in RPKs was less than the 18% in December

Spose can't count on 18% every month

Maybe in cruise mode means reached full speed but in cruise mode maintaining the momentum (or something)

All good

Plenty of cash to give back to shareholders - yes?

Well said, I intended the double meaning however i will put my hand up that i was in a sarcastic mood. Bad me. All that has happened was the rate of change (growth) decreased..

In a growth oriented world it is interesting our expectations, a lower growth rate is seen as a bad thing (even if it is monthly rather than YTD figure) yet in reality the share price did not move in a growth oriented news bite. Expectations seem very high.

I know that I'm not the only one questioning some of managements recent actions however we will get an overall reasonable result as shareholders. This coming week will be interesting.

[Beagle]

If you call being on track to more than double last year's interim record profit "reasonable" then you're a very tough person to please.

[trader_jackson]

Air NZ have done well, in fact even a bit better than every other airline (that is also doing well right now)

Enjoy the good times while it lasts...

[Baa_Baa]

Air NZ have done well, in fact even a bit better than every other airline (that is also doing well right now)

Enjoy the good times while it lasts...

AIR SP doesn't seem to respect it's fundamentals, which by all accounts are extraordinary. It does correlate well to international market sentiment. The question one might ask is 'for how long does the excellent returns to shareholders outweigh the capital exposure to market sentiment'?

[Raz]

AIR SP doesn't seem to respect it's fundamentals, which by all accounts are extraordinary. It does correlate well to international market sentiment. The question one might ask is 'for how long does the excellent returns to shareholders outweigh the capital exposure to market sentiment'?

Investors looking forward know AIR has had a golden period of limited competition on some sectors which is now changing. Share price is just as much about future fundamentals vs current, in addition to market sentiment. It is already partly priced into the share price with uncertainty showing.

Current Fundamentals - sure historical trading has been extraordinary as they have benefit from lack of competition on some key sectors, as an example - AUC to LAX, sector prices rose on average $300-400 across that period after the loss of competition, a licence to print money. They have gained from monopolistic pricing however it can created whiplash when that time comes to an end, as many business case studies show. AIR naturally has diversified from the opportunity into new sectors yet the results are too early. More uncertainty. They may come through it well yet uncertainty on that plays out for now.

A higher than expected dividend is already the expectation..we wait to see on that one.

I was in Wellington last week where all the talk was about the overall multiplier effect of the loss of export income on the wider economy..more uncertainty yet the media is just talking about Dairy in isolation for now, so more to play out yet on that. That is before you take a world view...

To me there is no surprise with the current fundamentals disconnect with share price as it all in transition = uncertainty.

[brend]

To me there is no surprise with the current fundamentals disconnect with share price as it all in transition = uncertainty.

Management have always said they put extreme amount of resource into new routes before announcing them. They create demand unlike some airlines that fly a plane somewhere and then create demand.

As far as I know Houston has been a massive success. So much so they are are having to offload freight to deal with the prevailing headwinds back.

[Raz]

Management have always said they put extreme amount of resource into new routes before announcing them. They create demand unlike some airlines that fly a plane somewhere and then create demand.

As far as I know Houston has been a massive success. So much so they are are having to offload freight to deal with the prevailing headwinds back.

Good to hear. I have had two return trips and it was essentially full each flight. It is still just one factor and we don't even have 12 months data on it..

[Beagle]

Investors looking forward know AIR has had a golden period of limited competition on some sectors which is now changing. Share price is just as much about future fundamentals vs current, in addition to market sentiment. It is already partly priced into the share price with uncertainty showing.

Current Fundamentals - sure historical trading has been extraordinary as they have benefit from lack of competition on some key sectors, as an example - AUC to LAX, sector prices rose on average $300-400 across that period after the loss of competition, a licence to print money. They have gained from monopolistic pricing however it can created whiplash when that time comes to an end, as many business case studies show. AIR naturally has diversified from the opportunity into new sectors yet the results are too early. More uncertainty. They may come through it well yet uncertainty on that plays out for now.

A higher than expected dividend is already the expectation..we wait to see on that one.

I was in Wellington last week where all the talk was about the overall multiplier effect of the loss of export income on the wider economy..more uncertainty yet the media is just talking about Dairy in isolation for now, so more to play out yet on that. That is before you take a world view...

To me there is no surprise with the current fundamentals disconnect with share price as it all in transition = uncertainty.

All the broker analysts are fully cognisant of the competition issues you've enunciated and have built them into their valuation's which are currently sitting at a consensus $3.22.
Some brokers such as Craig's analyst haven't upgraded for many months and were expecting lower yields, higher oil and less RPK growth than AIR are achieving so I expect analyst upgrades on the back of a stunning result on Thursday along with a generous fully imputed dividend payable in March. I think you're underestimating AIR's adaptability and management capability and the number of Kiwi's who take a far more parochial approach to who they trust with their travel requirements than you do. Are you going to take a Jetstar night flight into Queenstown ?

[vin]

Just booked 2x flights to Queenstown via Air for a couple of different hunt trips, looking forward to it. Well priced.

Never been to Qtown before!

[Beagle]

Just booked 2x flights to Queenstown via Air for a couple of different hunt trips, looking forward to it. Well priced.

Never been to Qtown before!

Book yourself in for the buffet lunch at the top of the gondola Stratosphere its called, $57 incl the $32 gondola ride. Book well ahead and ask for a table by the window. My wife and I had a fabulous lunch there last month, trust me you'll absolutely love it ! We also flew AIR and had seats 1A and IB on the way back. The staff were very friendly and professional. Fabulous trip...wish it was longer and we were still there...

This will wet your appetite http://www.skyline.co.nz/queenstown/restaurant/

[Raz]

All the broker analysts are fully cognisant of the competition issues you've enunciated and have built them into their valuation's which are currently sitting at a consensus $3.22.
Some brokers such as Craig's analyst haven't upgraded for many months and were expecting lower yields, higher oil and less RPK growth than AIR are achieving so I expect analyst upgrades on the back of a stunning result on Thursday along with a generous fully imputed dividend payable in March. I think you're underestimating AIR's adaptability and management capability and the number of Kiwi's who take a far more parochial approach to who they trust with their travel requirements than you do. Are you going to take a Jetstar night flight into Queenstown ?

haha too funny, possibly i'm underestimating and you are overestimating. The reality is the share price is no where near the consensus forecasts. Its lower than my estimate of fair value, all forecast are based on assumptions as you well know. The sentiment on this thread, which really interest me, has hardly been confident on share price of late...I'm hoping for a short term burst from Thursday..will that be short lived?

AIR certainly in Feb. has been doing price matching which indicates they don't see it quite as you do on consumer market behaviour. Even if they lose no market share they will struggle to maintain their ideal margins if they continue to price match.

ps never fly Jetstar..planes to old, always try to keep that risk return relationship in mind. Still not everyones is alike...look at the number of kiwis flying domestic with them for a mere $20 savings..it all comes down to how you value :-)

[Beagle]

haha too funny, possibly i'm underestimating and you are overestimating. The reality is the share price is no where near the consensus forecasts. Its lower than my estimate of fair value, all forecast are based on assumptions as you well know. The sentiment on this thread, which really interest me, has hardly been confident on share price of late...I'm hoping for a short term burst from Thursday..will that be short lived?

AIR certainly in Feb. has been doing price matching which indicates they don't see it quite as you do on consumer market behaviour. Even if they lose no market share they will struggle to maintain their ideal margins if they continue to price match.

ps never fly Jetstar..planes to old, always try to keep that risk return relationship in mind. Still not everyones is alike...look at the number of kiwis flying domestic with them for a mere $20 savings..it all comes down to how you value :-)

Assumptions that have generally been on the light side when it comes to RPK growth and on the heavy side when it comes to fuel price.
Glad we agree on something.

[skid]

haha too funny, possibly i'm underestimating and you are overestimating. The reality is the share price is no where near the consensus forecasts. Its lower than my estimate of fair value, all forecast are based on assumptions as you well know. The sentiment on this thread, which really interest me, has hardly been confident on share price of late...I'm hoping for a short term burst from Thursday..will that be short lived?

AIR certainly in Feb. has been doing price matching which indicates they don't see it quite as you do on consumer market behaviour. Even if they lose no market share they will struggle to maintain their ideal margins if they continue to price match.

ps never fly Jetstar..planes to old, always try to keep that risk return relationship in mind. Still not everyones is alike...look at the number of kiwis flying domestic with them for a mere $20 savings..it all comes down to how you value :-)

some,like our daughter will take the early flight with Jetstar to save $10(and Mun and Dad have to get up at some ungodly hr to take her to the airport:mad ;:

[dobby41]

some,like our daughter will take the early flight with Jetstar to save $10(and Mun and Dad have to get up at some ungodly hr to take her to the airport:mad ;:

don't do it and it will change her behaviour.

[skid]

don't do it and it will change her behaviour.

we had a bit of a chat about that,you can be sure.

[boysy]

Time to start a thread re what profit and interim divi will be ?

[h2so4]

I don't want to be a 1/2 glass kind of person so until it is announced Ill go with Roger.

[h2so4]

..... But it will be huge.

[Beagle]

Less than $400m underlying before tax and Virgin contribution I'll be gutted, more than $500m I'll be very pleased. I can't see any reason the dividend shouldn't be in line with the ~ 100% profit increase from last year's interim of $216m so 6.5 cps should become ~ 13 cps fully imputed, maybe a little more which would be very nice.

[winner69]

Time to start a thread re what profit and interim divi will be ?

No need to - answer already on this thread

[Raz]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11593816

The premium space..where the real money is made.

[JohnnyTheHorse]

Airline index (XAL) continues its stellar run - up over 20% in the last two weeks or so. It is starting to reach some strong technical resistances though (along with the major indexes). Will AIR follow suit, or has it completely fallen out of favour with punters? Next few days will tell us.

[Beagle]

Airline index (XAL) continues its stellar run - up over 20% in the last two weeks or so. It is starting to reach some strong technical resistances though (along with the major indexes). Will AIR follow suit, or has it completely fallen out of favour with punters? Next few days will tell us.

Yes strong further gains overnight. AIR bottomed out in the recent correction to $2.695 so a similar recovery would see it at $3.23. AIR's SP is now basically unchanged from a year ago and yet they're about to announce a profit that is circa double last year's interim profit. I understand there's new competition coming, (this is not unique to N.Z. believe me, almost all carriers are subject to new competition) but AIR have new routes too and how many people understand that Auckland is actually in a direct line between Tokyo and Bounes Aires ? As Iceman has kindly pointed out there's a big opportunity for AIR with Bounes Aires for Asian travellers using N.Z. as a stopover. Housten too another good route if anecdotal reports are correct. QAN set to announce a strong first half today should give something of a heads-up about the tailwinds for the sector.
VAH announced a good 1H on 11 February, underlying A$81.5m, AIR have 26%. Perhaps more importantly statutory profit after tax was $A62.5m v (A$47.8m) loss in pcp so a circa $N.Z31m turnaround for AIR's share in 1H Fy16 which I would have thought is very relevant seeing as AIR's statutory profit after tax for 1H 2015 was $133m.

[Balance]

I understand from a broker that institutional investors have been switching between Air NZ and Qantas as airline plays in this part of the world.

The strategy worked very well for them in 2013/2014 when AIR took off and QAN struggled. In recent times, QAN has been the better play.

I suspect a switch back the other way is now likely if AIR confirms a positive outlook.

[Beagle]

Interesting. I'm pretty sure the current price difference between them is very close to an all time record high, just over $1.20 (plus exchange rate as well, obviously).
Their relative EPS performance this first half will be most interesting, (Fy 2015 QAN 25cps AIR 29 cps).

[Balance]

Interesting. I'm pretty sure the current price difference between them is very close to an all time record high, just over $1.20 (plus exchange rate as well, obviously).
Their relative EPS performance this first half will be most interesting, (Fy 2015 QAN 25cps AIR 29 cps).

Watch for QAN results today, Roger. Market is not only expecting a spectacular result but also, special dividends and/or capital returns.

Bearing in mind that QAN has not paid a dividend since 2010 while AIR has paid dividends every year, market is not expecting anything special in capital initiatives from AIR so let's see if AIR springs a surprise.

[Beagle]

Yes I wouldn't entirely rule out some form of capital initiative for AIR on Thursday as they're in a far better position in terms of gearing than QAN but I think its far more likely at year end. Tony Carter told me after the annual meeting they'd copped a bit of criticism for not announcing a special dividend in FY15. Interestingly SP price to book value according to 4 traders for Qan 2.12, AIR 1.36. Forecast PE 6.72 QAN, 5.54 AIR.
Qan growing RPK's at just under 5%., AIR at 16% YTD, (from latest available YTD operating stat's of each airline)

3 more ~ $150m Dreamliners due CY16 for 9 by year end and once they're here we enter a period of more modest capex, (some of this has already been paid with deposits on new aircraft on order at a very high $520m as at 30 June 2015). Conclusion, I think AIR are in very robust shape for high dividends and / or some form of capital initiative this year, (special divvy / share buy-back).

P.S. You could say we're well positioned :D

[Balance]

Great result from Qantas just announced - better than market expectations.

Share buyback of $500m announced to commence from March 2016. No outlook given dynamics and volatile nature of industry.

Here's to AIR showing QAN how it is done comes 25th Feb.

[Beagle]

QAN result out and its right at the top of guidance provided on 15 December. A Stunner. Underlying profit $921m,, last year$367m up 251% (previous guidance provided 15/12/15 $875-925m). EPS 31.9 cps. $500m on market buy back.
Will analyse further shortly. I like the idea of the on market buy back...you guys at AIR reading this ?

[sharp]

http://www.asx.com.au/asxpdf/20160223/pdf/4357vzz45j5xg7.pdf

Qantas - underlying profit AU$921M

Best performance in 95 year history

Buy-back AU$500M

Just saying.

[Beagle]

Interesting that they're expecting ~9% increase in competitor capacity in 2H v tourism growth currently running at 8.2%. They're growing group capacity at ~5% so are expecting to lose market share to Chinese airlines who are growing capacity to Australia by a whopping 50%
Total seat capacity growth in CY16 in N.Z. is expected at 11.9% on Tourism growth of 10% so those forward competition metrics are not materially dissimilar.

31.9 cents EPS is a highly credible and satisfactory effort for the half year, (25 cps for the full Fy2015). AIR will need to be on top of its game to match that.

[Balance]

Interesting that they're expecting ~9% increase in competitor capacity in 2H v tourism growth currently running at 8.2%. They're growing group capacity at ~5% so are expecting to lose market share to Chinese airlines who are growing capacity to Australia by a whopping 50%
Total seat capacity growth in CY16 in N.Z. is expected at 11.9% on Tourism growth of 10% so those forward competition metrics are not materially dissimilar.

31.9 cents EPS is a highly credible and satisfactory effort for the half year, (25 cps for the full Fy2015). AIR will need to be on top of its game to match that.

Fuel savings came through strongly for Qantas.

Situation with Air NZ is a longer hedging strategy vs Qantas? So benefit could kick in next financial year?

[Beagle]

From what I can see Balance QAN have been hedging out further than AIR and are using options more than the collars AIR have been using. Another factor around the fuel savings for QAN is their slightly older and less efficient fleet. AIR have not done especially well with their fuel price hedging in recent times but seem fairly well positioned as at their latest disclosure.
The old 747's QAN are still using are thirsty beasts so you're going to save more when fuel is cheap with older technology than newer. AIR will do well too and own ~80% of their fleet so lower impact of operating leases being paid in $U.S.

QAN SP reaction unsurprisingly is positive with early action seeing it up ~ 13 cents to $4.12.

Really AIR have been issuing a lot of shares to executives over the years with ~ 45m outstanding to be exercised as at 30 June 2015 IIRC so they need to mop up the excess supply of shares in the market if they are serious about looking after investor interests. An on market buy-back of circa $300m is well and truly within AIR's financial capabilities and is something I am sure many shareholders would warmly welcome. Their previous buy-back regime that was seldom activated was for up to $60m per annum or 30 million shares whichever was the greater. Not really all that serious for a company with over 1.1 billion shares on issue and cash flow from operations of just on $1.1b last year is it !

[Balance]

Share buyback and special dividends - comes down to government being the majority shareholder, Roger.

A higher sp does not really do anything anymore for NZ government as it is unlikely to sell down any more shares but a higher dividend would. So watch out for that.

[sb9]

QAN SP reaction unsurprisingly is positive with early action seeing it up ~ 13 cents to $4.12.

May have spoken bit too soon there Roger, its drifting back now down 13c as I type.

[Beagle]

Share buyback and special dividends - comes down to government being the majority shareholder, Roger.

A higher sp does not really do anything anymore for NZ government as it is unlikely to sell down any more shares but a higher dividend would. So watch out for that.

Fully cognisant of that mate, (and a given that the N.Z. Govt need all the help they can get to soften the impact of a rising deficit) but I am sure they understand that with consensus analyst forecast of 50 cps this year any share buy-back would be highly EPS accretive. Anyway...I have sent an appropriately (read politely), worded e.mail to the top brass suggesting a decent sized on market buy-back. Worth trying...nothing ventured nothing gained but I won't be holding my breath. Bit frustrating at the moment being a shareholder in case it wasn't already obvious LOL

WOW yes sb9. Must have been refusal to give a forecast that's got the market a little unsettled.

[Hoop]

...QAN SP reaction unsurprisingly is positive with early action seeing it up ~ 13 cents to $4.12.


Spectacular result and QAN fallen to 381 -13 -4.5%

...

WOW yes sb9. Must have been refusal to give a forecast that's got the market a little unsettled.
...or ..what I have been harping on about for ages now...Be careful what type of FA you use when dealing with Cyclicals.

[Beagle]

They're all already on very cheap PE's Hoop, some a LOT cheaper than others. Market isn't treating fuel price gains as repeatable earnings going forward. Probably fair enough given potential for yield to compromise in relation to fuel price over time. As I've mentioned before in the medium term AIR would not be hurt with their fuel efficient and modern fleet with a return to ~ $70 Oil and yields would recover and some competitors would rationalise marginal routes.

On another note Jetstar must be losing truck loads in their provincial N.Z. routes at present. Little birdie tells me flight cancellations are a regular feature of these new services due to crew requirements and technical issues. Translation... minimal crew, (to heck with providing a reliable service), with little or no back up for sickness / absenteeism and really old planes with lots of engineering and technical issues. Jetstar rapidly becoming Jokestar on their new provincial routes...so I hear.

With all due respect, (and I mean that sincerely as I really appreciate the effort you put into technical analysis and charting), Delta and American Airlines are trading on less compelling metrics than AIR and are a consensus BUY by analysts. American AIR trading on 6 times book value of its aircraft, Delta 3.3 times, both on forward PE's of circa 5.5 - 6.
All those other analysts can't be all wrong and indeed as we all know Airline stocks are high beta stocks, (usually move more than the market does) and highly susceptible to market sentiment, we've seen a 20% correction upwards in the American airline index as fears of a global recession have started to abate.

Just saying that we haven't seen that correction back up with AIR and they look dirt cheap.

[sb9]

I understand from a broker that institutional investors have been switching between Air NZ and Qantas as airline plays in this part of the world.

The strategy worked very well for them in 2013/2014 when AIR took off and QAN struggled. In recent times, QAN has been the better play.

I suspect a switch back the other way is now likely if AIR confirms a positive outlook.

Looks like they're switching to AIR going by afternoon trading trend.

[Hoop]

They're all already on very cheap PE's Hoop, some a LOT cheaper than others. Market isn't treating fuel price gains as repeatable earnings going forward. Probably fair enough given potential for yield to compromise in relation to fuel price over time. As I've mentioned before in the medium term AIR would not be hurt with their fuel efficient and modern fleet with a return to ~ $70 Oil and yields would recover and some competitors would rationalise marginal routes.

On another note Jetstar must be losing truck loads in their provincial N.Z. routes at present. Little birdie tells me flight cancellations are a regular feature of these new services due to crew requirements and technical issues. Translation... minimal crew, (to heck with providing a reliable service), with little or no back up for sickness / absenteeism and really old planes with lots of engineering and technical issues. Jetstar rapidly becoming Jokestar on their new provincial routes...so I hear.

Roger ..you are not paying attention... I will write it again in bold letters...Be careful what type of FA you use when dealing with Cyclicals.

Cyclical Stocks with very Low PE ratios can spell danger....Its these times the stock may be (or may be not) at their height of their cycle..I mentioned "maybe not" to highlight the fact of how unreliable it is to value a cyclical stock by using its PE Ratio..

Go google it for more info on how to value cyclicals

[Beagle]

Broker consensus forecast based on DCF model's is $3.22 Hoop. Certain they're factoring in global industry and economic factors and specifics of tourism growth, supply and demand ex N.Z. yields, free cash flow price to book e.t.c. all relative to other peers in the airline industry. Any way you slice and dice this thing it looks cheap and seems to have built in an overtly negative view of future competition pressure.

[Marilyn Munroe]

Queer and Nasty Airlines have just announced a half year profit of $A921m.

Still no dividend though(last in 2011) but a $500m share buy-back. Shows you gooseing the variables which support executive bonuses are more than rewarding shareholders.

http://www.asx.com.au/asxpdf/20160223/pdf/4357vzz45j5xg7.pdf

Boop boop de do
Marilyn

[Raz]

Queer and Nasty Airlines have just announced a half year profit of $A921m.

Still no dividend though(last in 2011) but a $500m share buy-back. Shows you gooseing the variables which support executive bonuses are more than rewarding shareholders.

http://www.asx.com.au/asxpdf/20160223/pdf/4357vzz45j5xg7.pdf

Boop boop de do
Marilyn

Got to feel for Qantas shareholders today in more ways than one..now onto the main event!

[Hoop]

Broker consensus forecast based on DCF model's is $3.22 Hoop. Certain they're factoring in global industry and economic factors and specifics of tourism growth, supply and demand ex N.Z. yields, free cash flow price to book e.t.c. all relative to other peers in the airline industry. Any way you slice and dice this thing it looks cheap and seems to have built in an overtly negative view of future competition pressure.

Yep Roger..I suspect my view is biased well into the negative...I blame it on my upbringing:)...(I used to be a long term FA investor)

[sb9]

On the move....interesting to see where it finishes today price wise with results due tomorrow.

[JohnnyTheHorse]

Short term higher highs and higher lows. Looking good.

[winner69]

Short term higher highs and higher lows. Looking good.

That 3 bucks again very soon

This time it will kick on to 4 bucks (or at least 350) - before cyclical influencers kick in

[winner69]

Did anybody read that feature on Luxon in TheListener

[JohnnyTheHorse]

That 3 bucks again very soon

This time it will kick on to 4 bucks (or at least 350) - before cyclical influencers kick in

Rog says it's different this time mate. No longer cyclical so all good.

[Robomo]

Did anybody read that feature on Luxon in TheListener

Yes, the article reiterates that he is the man for the job. I read that Alan Joyce is intent on remaining CEO of Qantas for "many years to come" so I hope Chris Luxon does the same at Air New Zealand, regardless of where the cyclical pattern may be!

[Beagle]

Did anybody read that feature on Luxon in TheListener
Thanks for the heads up but I didn't get around to getting it. Having met him after the 2014 meeting and had a good discussion I was extremely impressed.

Rog says it's different this time mate. No longer cyclical so all good.
LOL we'll see. The whole world seems to be pricing airlines like we're going into a global recession...only time will tell.

Yes, the article reiterates that he is the man for the job. I read that Alan Joyce is intent on remaining CEO of Qantas for "many years to come" so I hope Chris Luxon does the same at Air New Zealand, regardless of where the cyclical pattern may be! He's fairly young too for a CEO with plenty of enthusiasm so I really hope he makes AIR N.Z. his long term career. I'm certain he could earn substantially more overseas but he earns plenty and not everything by any means in terms of quality of life can be measured by money. I reckon we have it pretty good here in little old N.Z.

I planted a seed with the suggestion of a decent sized on market buy-back yesterday.

[Raz]

That 3 bucks again very soon

This time it will kick on to 4 bucks (or at least 350) - before cyclical influencers kick in

Had to double check, we have a four cent move! Lets hope the emotional highs around here do not correspond with equally emotional lows as we slid back at times..:=)

[Raz]

Thanks for the heads up but I didn't get around to getting it. Having met him after the 2014 meeting and had a good discussion I was extremely impressed.

LOL we'll see. The whole world seems to be pricing airlines like we're going into a global recession...only time will tell.
He's fairly young too for a CEO with plenty of enthusiasm so I really hope he makes AIR N.Z. his long term career. I'm certain he could earn substantially more overseas but he earns plenty and not everything by any means in terms of quality of life can be measured by money. I reckon we have it pretty good here in little old N.Z.
.

It a relativity game, not many people earn consistently a seven figures here, while in the US or Europe you are in a large crowd. The money certainly does not go so far overseas. He certainly could get another airline gig however in real purchasing power terms it would not pay much more and not offer the same advantages as AIR. He an't going to move into the major eight figures unless he makes it in the US and more than likely leaves the airline industry. More likely to move within NZ/Australia if at all, esp given his education and I understand he hasn't been a senior investment banker/consultant in NYC, Chicago or LA.

[sb9]

I planted a seed with the suggestion of a decent sized on market buy-back yesterday.

Hope they take note of your point there Roger.

[Beagle]

Hope they take note of your point there Roger.

Yeap me too. I asked C.L. to table my suggestion to the board. I wouldn't mind having a chat with Tony Carter directly about this and follow up on my questions and discussion with him after the 2015 Annual meeting. If anyone has his e.mail or phone contact details I'd really appreciate it if you could PM me with them.

[Raz]

Yeap me too. I asked C.L. to table my suggestion to the board. I wouldn't mind having a chat with Tony Carter directly about this and follow up on my questions and discussion with him after the 2015 Annual meeting. If anyone has his e.mail or phone contact details I'd really appreciate it if you could PM me with them.

You may getter better idea if it is a starter by contacting Jan Dawson. Rodger have you met her?

[Beagle]

No but she's very well regarded in the accountancy profession and won Chartered Accountant of the year in 2011.

[Kelvin]

Jetstar NZ regional is getting 3 additional aircraft

For the second half of 2015/16, Qantas said it would add two Boeing 717-200s to the fleet, while three Q300 turboprops would be transferred from QantasLink to Jetstar’s regional operations in New Zealand

http://australianaviation.com.au/2016/02/qantas-expects-first-a320neo-delivery-end-of-calendar-2017/

[mikeybycrikey]

So, with the push from Roger for a buyback to match the Qantas buyback, I was wondering what the benefit of a buyback is over a special dividend?

Is there any reason why I should favour one over the other?

[Beagle]

The basic thrust of my proposal is a mopping up of excess supply of shares. Over many years AIR has issued tens of millions of shares to executives as part of their incentive package, (now changed to a performance rights scheme). As at 30 June 2015 there were some 45 million shares remaining to be exercised which is over 8% of the free float of shares available to the public, (Govt owns just over 50%) and is too many in my opinion.

A special is a one off whereas a share buy-back would confer ongoing and enduring benefits to all shareholders in that it would be EPS accretive. It would also mop up some of the excess supply of shares that one or two institutions appear keen to sell down. Remember AIR can borrow money at extremely low single digit rates so even if its debt funded, (it won't be as AIR have cash coming out of their ears so too speak), it'll be EPS accretive.

Directors have a fiduciary obligation to act in the best interests of shareholders at all times. This would be consistent with that obligation when the company is trading on such compelling fundmental's.

It probably won't happen anytime soon but I don't think it hurts to plant the seed and I'll water it at the next annual meeting, if not earlier.

[Beagle]

Forsyth Barr are apparently looking for a special divvy announcement tomorrow ! If so I am sure the Govt will be pleased and sure they won't be the only ones. Might be a monster pay day for our friend Couta1 and anyone else in the special club of 96 :)

[sb9]

Forsyth Barr are apparently looking for a special divvy announcement tomorrow ! If so I am sure the Govt will be pleased and sure they won't be the only ones. Might be a monster pay day for our friend Couta1 and anyone else in the special club of 96.

Analysts/brokers must be twisting their arm for special divvy in lieu of the one they didn't announce for FY15.
To be honest, I did expect they might declare special divvy for FY15.

[Raz]

Analysts/brokers must be twisting their arm for special divvy in lieu of the one they didn't announce for FY15.
To be honest, I did expect they might declare special divvy for FY15.

That is what the Government would prefer I'm sure.

[Beagle]

Analysts/brokers must be twisting their arm for special divvy in lieu of the one they didn't announce for FY15.
To be honest, I did expect they might declare special divvy for FY15.

TC told me there was some disappointment but then quipped since they'd paid a special in 2014 if they paid one in 2015 it wouldn't be special if you did it every year. I'd rather see a buy-back TBH but knowing the Govt...they like cash coming in so...I suppose it can't hurt to spill a bit of air out of the spinnaker seeing it's under so much pressure so that's all settled then, 10 cent interim and 10 cent special both fully imputed :)

[sb9]

10 cent interim and 10 cent special both fully imputed :)

You think so, I'm picking more along lines of 10c special and 7.5c interim.

[Raz]

You think so, I'm picking more along lines of 10c special and 7.5c interim.

Personally would be happy to forgo the special if they invested into a few new investments, especially if it gave them back their innovative mojo

[brend]

i thought Special divs would be more appropriate with final full year results?

[Beagle]

i thought Special divs would be more appropriate with final full year results?

Yes my base case expectation is still 13 cps ordinary dividend. I was being a little cheeky earlier :) I disagree Raz, I think they've invested enough in things like the biggest solar array in N.Z., electric cars and ground vehicles coming and they have plans already that will significantly lower the average aircraft age over the next few years with heaps of new efficient aircraft on order.
All time record profit tomorrow will prove they haven't lost any mojo...anything but !!

[sb9]

Yes my base case expectation is still 13 cps ordinary dividend. I was being a little cheeky earlier :)

OMG, you mean incl For Barr's expectations of special divvy.

[Raz]

Yes my base case expectation is still 13 cps ordinary dividend. I was being a little cheeky earlier :) I disagree Raz, I think they've invested enough in things like the biggest solar array in N.Z., electric cars and ground vehicles coming and they have plans already that will significantly lower the average aircraft age over the next few years with heaps of new efficient aircraft on order.
All time record profit tomorrow will prove they haven't lost any mojo...anything but !!

Disagree with Raz without even knowing what I'm referring about haha..Id bite your head off, actually something else..I have tabled my thoughts to them:-) All for free as we do deserve the world best airline with a point of difference that mitigates the competition that is coming...

[brend]

Yes my base case expectation is still 13 cps ordinary dividend. I was being a little cheeky earlier :) I disagree Raz, I think they've invested enough in things like the biggest solar array in N.Z., electric cars and ground vehicles coming and they have plans already that will significantly lower the average aircraft age over the next few years with heaps of new efficient aircraft on order.
All time record profit tomorrow will prove they haven't lost any mojo...anything but !!

+ investing in 3d printers....

[Beagle]

Chill Raz, we all like to think we have the answers on how to run the airline better and here's another great idea. The X and cuteness factor is off the charts, (IMHO, former beagle dog owner here), and capex is really low too :) http://www.nydailynews.com/news/world/sherlock-returns-lost-items-owners-amsterdam-airport-article-1.1951176
They could even boost their business...if you fall in love with the beagle you can take it on the flight as a companion animal for the price of another seat, business class only....only the best for Beagles :)

[Raz]

Chill Raz, we all like to think we have the answers on how to run the airline better and here's another great idea. The X and cuteness factor is off the charts, (IMHO, former beagle dog owner here), and capex is really low too :)
http://www.nydailynews.com/news/world/sherlock-returns-lost-items-owners-amsterdam-airport-article-1.1951176

No need to chill, I know they are least looking at part of it actively, so just goes to show they have an open mind :-)

[Beagle]

Good to hear Raz. hopefully there's one or two dog lovers on the board too. Pretty sure a returned item from a beagle would generate an extremely positive response !

[Raz]

Chill Raz, we all like to think we have the answers on how to run the airline better and here's another great idea. The X and cuteness factor is off the charts, (IMHO, former beagle dog owner here), and capex is really low too :) http://www.nydailynews.com/news/world/sherlock-returns-lost-items-owners-amsterdam-airport-article-1.1951176
They could even boost their business...if you fall in love with the beagle you can take it on the flight as a companion animal for the price of another seat, business class only....only the best for Beagles :)

Dubai Eagles by law can only fly business class...

[Snow Leopard]

So the thread, but hopefully not the airline is going to the dogs...:p

Anyway, as I will not be around for the next few days I will comment on tomorrows result announcement now.

A) Even worse than I imagined - told you so

B) Spot on - Am I the Cat's Whiskers or What?

C) Well there is a surprise!

Best Wishes
Paper Tiger

[Beagle]

While we shoot the breeze and pass time till tomorrow's stellar result, does anyone know why AIR are so reluctant to take pets on board in the cabin ? Suppose its something to do with odious MAF requirements ?
These guys have the right idea about caring for man's best friend...and what's more the dog on the website bears a startling resemblance to my Skippy :)
http://www.jetblue.com/travel/pets/

[777]

Because the aircraft cabin would suffer the same stink as a dog/cat owners car.

[Raz]

Because the aircraft cabin would suffer the same stink as a dog/cat owners car.

Travelled beside other passengers with their dogs in US, they have to be complex certified companion animals for liability reasons over there to fly. First I was so shocked you would never know they were under the front seat in business class...they are that so well trained and groomed.

[Robomo]

I've travelled a few times on internal flights with guide dogs, generally they have boarded first with their owner. All lay happily (the dog, not the owner!) under the seat, not a sound out of any of them and unless you looked closely you would never know they were there. No problem.

[boysy]

Interesting to note the last interim special divi was last paid in 2007. Let's hope the normal divi smashes last years 6.5 cents. As others have mentioned here I'd rather have money in the hand than a share buy back.

[winner69]

Back to what's important

He share price is on a roll

Paper Tigers option 3) comes true and 3 bucks by close of day -.or at least by end of week

[Beagle]

Back to what's important

He share price is on a roll

Paper Tigers option 3) comes true and 3 bucks by close of day -.or at least by end of week

Where's option D - Absolutely stunning result !
C won't cut the mustard in terms of adequately describing how great the result is !!

[babymonster]

Option 3, and share buy back. Judging buy other surprisingly good profit companies, sp should close above 3 bucks if option 3 came true

[blockhead]

Blockhead topped up yesterday @ $2.84, so option "D" is the only option !

[brend]

Highlights:
- Earnings before taxation of $457 million, up 132%
- Net profit after taxation of $338 million, up 154%
- Passenger revenue of $2.3 billion, up 16%
- Group capacity up 16%, with 84.4% load factor
- Operating cash flow of $541 million, up 43%
- Gearing at 53.8%
- Board approves fully imputed interim dividend of 10.0 cents per share, an increase of 54%.

[Jantar]

10 cents per share div sounds OK to me. Although NPAT at $338 M is possibly not quite as high as some had forecast.

[sharp]

Profit from ordinary activities after tax attributable to security holders up 154.1%

10c interim dividend!

Who's to hazard a guess as to what the final divvy will be?

[GR8DAY]

.......incredible set of numbers. Forecasting $800m plus F/Y. Fully imputed 10cps. More growth to come. What more could a shareholder ask for? Great work directors.

[winner69]

.......incredible set of numbers. Forecasting $800m plus F/Y. Fully imputed 10cps. More growth to come. What more could a shareholder ask for? Great work directors.

Forecasting $800m+ for FY (npbt)

Wimps

Rogers $1 billion is more like the real story

[winner69]

With FY eps likely to be 64 cents that $3 will be smashed big time today

[vin]

Stop saying that winner, I actually believe you have jynxed it haha.

Very surprised if the day finishes over $3.

[Nasi Goreng]

Earnings of 30cps with Air NZ banking 20cps after dividend ($200M+ cash retained which I think is wise for a cyclical). Full year earnings of around 60cps means forward PE of 5. This may be a peak in the cycle but this will be mouth watering for many investors. There looks to be more upside than downside potential here.

[Baddarcy]

Forecasting $800m+ for FY (npbt)

Wimps

Rogers $1 billion is more like the real story

Yes true, the forcast $400m+ for this half year and ended up with $451m, thou traditionally isn't the 2nd half usually a bit weaker than the first half ? (excluding last year !)

[Beagle]

Very strong result and more than satisfied with the outcome. Slightly disappointed with the dividend but obviously a big half of acquisitions with 3 new Dreamliner's arriving.
Big investment for the future with average aircraft age coming down to a remarkably low 6.2 years steadily as we work towards 2019.
8-10% capacity increase for Fy17.
Outlook to exceed $800m not including contribution from VAH is pleasing and exceeds consensus analyst forecasts. I still think $1billion inclusive of VAH is attainable this year and super low fuel prices really only kick in this half.

Company setting itself up for a big special divvy with the final. EPS 30.12 cps for the half.

[winner69]

Stop saying that winner, I actually believe you have jynxed it haha.

Very surprised if the day finishes over $3.

Last 2 trades were very profitable. Hoop might say that AIR is a 2-3 week cyclical ha ha

This trade will be even better and hopefully will last longer before any pull back. I'd prefer the $3 to be smashed good and proper in next day or two before heading steadily up to $3.50 .....maybe $4.00

I haven't jinxed AIR yet vin - every time I bought the price has gone up ....and no planes have crashed either

Keep the faith vin

[winner69]

Yes true, the forcast $400m+ for this half year and ended up with $451m, thou traditionally isn't the 2nd half usually a bit weaker than the first half ? (excluding last year !)

2nd half this year has the impact of the new routes to come remember

[vin]

Sorry, AIR was my first share purchase, around $1.90 and topped up evers since. Has been an emotional rollercoast since day one. (roughly 2 years ago, newbie trader)

[Beagle]

Sorry, AIR was my first share purchase, around $1.90 and topped up evers since. Has been an emotional rollercoast since day one. (roughly 2 years ago, newbie trader)

But a profitable roller coaster and that's what counts :)

[vin]

Yep, + keeps life exciting :D

[Beagle]

It sure does when you own heaps of them :D

[winner69]

Well was it a C) then

At least we now know Paper Tiger isn't the The Cat's Whiskers

[Beagle]

Well was it a C) then

At least we now know Paper Tiger isn't the The Cat's Whiskers

LOL That's the quote of the day :)

Speaking of quoteable quotes. I liked this bit from the analyst presentation
"Well positioned to respond to the changing environment and grow the network profitably"

[GR8DAY]

......anyone know off hand what the Industry average PE is?

[Beagle]

From what I can see of airlines I follow the average forward PE is about 5.5- 6.

[skid]

Honestly,did any one really doubt that this (pre competition)result would not be good?
The more interesting scenario is where to from here--will it carry on through winners $3?..or settle (result already priced in,for the most part)

With good management ,clever marketing,and realistic pricing,they will hold their own in a tougher ,more competitive market.
But does that mean that they will surge ahead into the share price stratosphere?
This phase IMO is where the rubber meets the road--It is the difference between accounting and financial planning.

Meanwhile all you holders ..go out and buy a bottle of champagne to celebrate what they have done up to now. Congrats.

[Beagle]

Honestly,did any one really doubt that this (pre competition)result would not be good?
The more interesting scenario is where to from here--will it carry on through winners $3?..or settle (result already priced in,for the most part)

LOL - You make out like there's no competition already ROFL. I watched 3 Emirates A380's arrive one after the other as they flew over the Manukau harbour while I was fishing the other day.
Capacity growth into and out of N.Z. for CY 2016 is forecast to grow from 8.4 million seats to 9.4 million,11.9%. Tourism is presently growing at 10%. With cheaper oil translating into cheaper fares is it really so hard to join the dots and see demand is growing strongly in line with supply...

Average price of delivered Oil for AIR for 1H Fy16 was $60 barrel. Interesting compared to the current spot price isn't it. i.e. the big fuel gains are coming this half and beyond.

I am pleased they made their forecast of exceeding $800m excl VAH and I am sure they will deliver on it even with another Emirates flight starting next month plus other new competition coming shortly.

[iceman]

LOL - You make out like there's no competition already ROFL. I watched 3 Emirates A380's arrive one after the other as they flew over the Manukau harbour while I was fishing the other day.
.
So that's why your wife caught fish and you didn't :-)

[stoploss]

Roger another nice day in Auckland , Prince concert was superb .
Maybe take the day off and go fishing .... You can lead a horse ......

[skid]

LOL - You make out like there's no competition already ROFL. I watched 3 Emirates A380's arrive one after the other as they flew over the Manukau harbour while I was fishing the other day.
Capacity growth into and out of N.Z. for CY 2016 is forecast to grow from 8.4 million seats to 9.4 million,11.9%. Tourism is presently growing at 10%. With cheaper oil translating into cheaper fares is it really so hard to join the dots and see demand is growing strongly in line with supply...

Average price of delivered Oil for AIR for 1H Fy16 was $60 barrel. Interesting compared to the current spot price isn't it. i.e. the big fuel gains are coming this half and beyond.

I am pleased they made their forecast of exceeding $800m excl VAH and I am sure they will deliver on it even with another Emirates flight starting next month plus other new competition coming shortly.

You caught me before i could add my last bit--They have done well indeed Roger--of course there was some competition--but you did see what happened when more companies saw the juicy NZ market--I certainly do not want to rain on your picnic--just pointing out that any market is self regulating to some extent and now we will see how they do in this new market.
I believe they are well positioned to carry on, but not sure of the growth % in terms of bums on seats from here.
but having said that we have put one bum on one of their seats this May!--Now go out and get that bottle of Champagne!:)

PS-Man your quick!

[Beagle]

So that's why your wife caught fish and you didn't :-)

Sssshhh you mustn't tell tales out of school :)...she was using my favourite rod and reel though...that's my excuse and I'm sticking to it LOL

So is this result priced in and how did we fare compared to QAN , (lasted traded at circa $4.00).
Qan obviously subject to similar competitive pressure and as posted recently is facing a circa 50% growth in Chinese carrier capacity.
Their EPS was 31.9 cps for the half, (AIR 30.12 cps) so with their older fleet including many old 747's they reaped more of a fuel price benefit and are reaping efficiency benefits from the three year wage freeze many of their unions agreed to after their recent $2.8 billion loss.

I still find the dichotomy in how the market is treating these two airlines very interesting. Whilst its fair to say the wage freeze is presently benefiting QAN these things don't last forever and we all know how militant Australian unions can be so given the market is constantly pricing companies based on (at least theoretically the net present value of future cash flows) how is it that QAN commands such a price premium ? I reckon those unions will all want big catch up increases when that wage freeze ends.

Higher gearing QAN and lower book value per share certainly don't explain it. No dividends either since 2011 so no dividend yield. $500m buy-back a little contrived to boost the SP perhaps ? Growth in Australian Tourism is 8% lower than N.Z. tourism currently running at 10% so that doesn't explain it either.

AIR are on a pathway to a very modern fuel efficient fleet and I think they're at least as well positioned as Qantas to meet the ever changing dynamics of the airline industry for the foreseeable future. I think some N.Z. institutions remain excessively risk averse when it comes to AIR N.Z.

[Beagle]

You caught me before i could add my last bit--They have done well indeed Roger--of course there was some competition--but you did see what happened when more companies saw the juicy NZ market--I certainly do not want to rain on your picnic--just pointing out that any market is self regulating to some extent and now we will see how they do in this new market.
I believe they are well positioned to carry on, but not sure of the growth % in terms of bums on seats from here.
but having said that we have put one bum on one of their seats this May!--Now go out and get that bottle of Champagne!:)

PS-Man your quick!

Fair enough mate and apologies that I was a bit snappy. Huge vested interest = ruling out the morning and studying the **** out of it :) Speaking of which I'd better listen in to the analysts conference call..starts at 11.00. Just time for a quick coffee first. Essential to have good quality beans in your coffee when you're a bean counter :) Might have a couple of bevvies this afternoon.

[sb9]

Typical market reaction!!!

[dobby41]

This person isn't so enamoured in AIR
http://www.stuff.co.nz/travel/travel-troubles/77098980/Passenger-went-hungry-for-a-day-of-flying-after-Air-NZ-forgot-to-pack-her-meal
$5k London-Auckland return and they can't get her a meal!

[Bjauck]

Typical market reaction!!! Sure...bit like the reaction for the good results from SUM. Both operate in sectors with good current tailwiinds.

[skid]

Sure...bit like the reaction for the good results from SUM. Both operate in sectors with good current tailwiinds.

I think Quantas also had a similar scenario---maybe we should all go back to uni and study Psychology

[Mickey]

Typical market reaction!!!

Mr Market sure moves in mysterious ways... I'm watching some of the SP movements following pretty good results and they are all over the place - AIR, AIA, SPK, NZR & SCL to name a few. Happy with the divvies though and less worried about the SP fluctuations for now (unless of course they start heading too far south....)

[Jantar]

This person isn't so enamoured in AIR
http://www.stuff.co.nz/travel/travel-troubles/77098980/Passenger-went-hungry-for-a-day-of-flying-after-Air-NZ-forgot-to-pack-her-meal
$5k London-Auckland return and they can't get her a meal!

She can't eat gluten, dairy, sugar, fish, pork, and a few other things. I'm sure they could have provided her with a bottle of water. Her list of what she can't eat rules out any and every other type of food. Even fresh fruit contains sugar.

[winner69]

Vin, don't worry

Action will come after lunch - always does

[brend]

ruthless revenue growth was a key word Luxon used.

[Beagle]

I felt the conference call went well and analysts were by and large happy that AIR are up to the task of managing the company in a highly profitable growth oriented way and are comfortable with the new competition coming.

Unit costs down 11%.
New long haul routes have lowered average yields a little which is to be expected.
AIR feel their launch of Bounes Aires and Housten have gone exceptionally well and that they have done phenomenally well to make these routes profitable from day 1.
Most of the growth in FY17 is annualisation of existing new routes
2% growth in full time employees compares to 16% growth in RPK's
Cargo business in great shape
American airlines basically using corporately configured aircraft on their new route down here ~ 230 seats per aircraft...will grow the market overall.
AIR returning to a more normal competitor environment
AIR has "never been better positioned" C Luxon
The brand has "never been stronger"
$36m of extra sales and marketing costs this half included expensed costs to launch new routes
9 new Dreamliners on hand by Nov 2016 making this new efficient type the most prolific wide body aircraft in the fleet.
Higher capex over next few years as average aircraft age comes down dramatically ensuring a highly modern and fuel efficient fleet going forward.
"As we look toward the latter part of this decade there is tremendous potential for cash flow generation"...signified to me capex to dramatically tail off from Fy18 onwards.

Overall impression - They're managing our airline extremely well with maximum medium term profitability their #1 priority.

[percy]

I felt the conference call went well and analysts were by and large happy that AIR are up to the task of managing the company in a highly profitable growth oriented way and are comfortable with the new competition coming.

Unit costs down 11%.
New long haul routes have lowered average yields a little which is to be expected.
AIR feel their launch of Bounes Aires and Housten have gone exceptionally well and that they have done phenomenally well to make these routes profitable from day 1.
Most of the growth in FY17 is annualisation of existing new routes
2% growth in full time employees compares to 16% growth in RPK's
Cargo business in great shape
American airlines basically using corporately configured aircraft on their new route down here ~ 230 seats per aircraft...will grow the market overall.
AIR returning to a more normal competitor environment
AIR has "never been better positioned" C Luxon
The brand has "never been stronger"
$36m of extra sales and marketing costs this half included expensed costs to launch new routes
9 new Dreamliners on hand by Nov 2016 making this new efficient type the most prolific wide body aircraft in the fleet.
Higher capex over next few years as average aircraft age comes down dramatically ensuring a highly modern and fuel efficient fleet going forward.
"As we look toward the latter part of this decade there is tremendous potential for cash flow generation"...signified to me capex to dramatically tail off from Fy18 onwards.

Overall impression - They're managing our airline extremely well with maximum medium term profitability their #1 priority.

Thank you Roger.
Yes they certainly are managing "our" airline extremely well."
Leaves us "well positioned."
An excellent result.
Right people,right aircraft,right routes.Can't ask for more.!

[Beagle]

One more snippet. Airpoints members up 17% this half to 2 million...pretty useful for expanding their digital marketing efforts one would have thought.

So there we have it. EPS for 2016 at least 60 cps put the stock on a forward PE of less than 5 trading cum dividend. Seems too cheap to me but DYOR folks and decide for yourself. I am a happy holder and have a high degree of confidence the management team will perform well over the long haul.

[Biscuit]

Vin, don't worry

Action will come after lunch - always does

They must be having a long lunch :)

[vin]

Vin, don't worry

Action will come after lunch - always does

Just finished my early arvo sweet craving, a boy waits.

[Raz]

They must be having a long lunch :)

The result is right where informed opinion thought it would be, Rodger wanted to make a bet with him at 450, i wanted to take a higher or lower as that was my best guess as well, simply everyone thought would be mid-fours. Dividend not going to set the market on fire either so share price not getting the nudge one would hope. I think they have held a good amount back for future expansion and competition. I thought competition is on a number of minds which I thought came across on the analyst call.

[neyney2010]

Looks like they're all back from lunch and 'action' is happening

[Beagle]

Listen for yourself to the analyst presentation and conference call if you missed it live.

http://edge.media-server.com/m/p/f653wz2y

[Raz]

Looks like they're all back from lunch and 'action' is happening

What action is that??

[axe]

slide 6 :)

[B747-419]

Vin, don't worry

Action will come after lunch - always does

Yea'h Right!!

[Tony Two Gloves]

Unfortunately there are to many sellers who are not reading this thread......

[vin]

The Cats Whiskers? More like Minx the Jinx

hahahah jokes mate.

[Biscuit]

Ah well, profit up 150%, share price down 2%, perhaps not what you would expect?

[Marilyn Munroe]

Marilyn blows a congratulatory kiss at Roger for his staunch support of Cullen Airlines.

The major future vulnerability of Cullen Airlines is the introduction of A380's on the North American routes. While threatening this unlikely because North American airlines who are the most likely competitors on this route have a "not invented here" prejudice against this aircraft.

What about sand state airlines you ask, they are everywhere why aren't they flying this route? The North American airlines are paranoid about sand state airlines and own the finest Congressmen that money can buy, so that is not going to happen.

My hope that Cullen Airlines would be sold by John Key to Eitihad is in a prolonged holding pattern with nowhere to land. Low oil prices mean the backers of sand state airlines have no cash to splash on acquisitions.

Boop boop de do
Marilyn

[fungus pudding]

Marilyn blows a congratulatory kiss at Roger

boop boop de do
Marilyn


I wanna be loved by you, just you,
And nobody else but you,
I wanna be loved by you, alone!
Forget Roger.

[Beagle]

http://www.4-traders.com/AIR-NEW-ZEALAND-LIMITED-6491407/news/Air-New-Zealand-and-AJW-Aviation-expand-partnership-with-B767-power-by-the-hour-programme-21906750/
http://www.4-traders.com/AIR-NEW-ZEALAND-LIMITED-6491407/news/Air-New-Zealand-New-Zealand-to-3D-print-its-own-craft-interior-parts-21906436/

and...consensus valuation view before today's announcement was $3.27 http://www.4-traders.com/AIR-NEW-ZEALAND-LIMITED-6491407/consensus/

It'll be interesting to see how the consensus view changes over the next few days after the analysts have reworked their projections. My sense is some institutions are currently overtly concerned by incoming competition. What C.L. said was this would lead to short term price pressure. e.g. Malaysian Airlines are back to charging nearly $3,000 return to Europe now in the shoulder season now that they think everyone has forgotten about recent incidents. Sure there will be launch specials to get routes started for the new competitors and then pricing will settle back to sustainable level's..well that's how AIR N.Z. management see it. They will price match, only when they have too and only short term.

[winner69]

The Cats Whiskers? More like Minx the Jinx

hahahah jokes mate.

Well there was more action after lunch eh

You be right vin, I'm on your side

[skid]

I figured out how we all went wrong.....We tried to use logic.:confused:

[Beagle]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11595451

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11595418 Watch the video contained in the link. Looks like another new route will be announced in the near future.

[Bjauck]

http://www.4-traders.com/AIR-NEW-ZEALAND-LIMITED-6491407/news/Air-New-Zealand-and-AJW-Aviation-expand-partnership-with-B767-power-by-the-hour-programme-21906750/
http://www.4-traders.com/AIR-NEW-ZEALAND-LIMITED-6491407/news/Air-New-Zealand-New-Zealand-to-3D-print-its-own-craft-interior-parts-21906436/

and...consensus valuation view before today's announcement was $3.27 http://www.4-traders.com/AIR-NEW-ZEALAND-LIMITED-6491407/consensus/

It'll be interesting to see how the consensus view changes over the next few days after the analysts have reworked their projections. My sense is some institutions are currently overtly concerned by incoming competition. What C.L. said was this would lead to short term price pressure. e.g. Malaysian Airlines are back to charging nearly $3,000 return to Europe now in the shoulder season now that they think everyone has forgotten about recent incidents. Sure there will be launch specials to get routes started for the new competitors and then pricing will settle back to sustainable level's..well that's how AIR N.Z. management see it. They will price match, only when they have too and only short term.
Quite a few of the NZ shares I follow have 4-traders consensus valuations 10-20% above their current SPs - and some have delivered good results too.

[Beagle]

Quite a few of the NZ shares I follow have 4-traders consensus valuations 10-20% above their current SPs - and some have delivered good results too.

A cynic could make the case that if brokers valuations weren't higher on average than the average SP's then people wouldn't buy shares.
On the other hand here we have a company that's doing very well trading on, (by my estimate) a 2016 PE of only 4.5 !! so maybe this is the exception to the cynics rule :) (based on future ex divvy SP of $2.71 ($2.81 less the imminent dividend of 10 cps) and my estimate of 2016 earnings of 60 cps, (revised down slightly from previous estimate). $2.71 / 0.60 = PE of 4.52.

TBH I was hoping for $500m before tax today but $457m is still very good considering a big part of the extra $36m sales and marketing costs was to do with the set up and establishment of the new Housten and Bounes Aires routes. Without that we would have gone closer to $500m but its great that they're investing for future growth...that's what its all about !!

Of course the cynics will say that current earnings aren't repeatable in FY17 and yet most of the other airlines I follow are on forward PE's of 5.5 - 6.0 and aren't growing nearly as strongly as AIR.
My base case is AIR with recent growth and future plans can earn at least 35 cps on average right across the cycle and with a long term historic PE average of circa 10.5 that's fair value of about $3.68.

It won't surprise me to see one or two brokers currently sitting at $3.40 upgrading their valuation to around that level over the next few days.

Trading at $2.81 cum a 10 cent fully imputed dividend the shares look like good value to me.

[Raz]

Marilyn blows a congratulatory kiss at Roger for his staunch support of Cullen Airlines.

The major future vulnerability of Cullen Airlines is the introduction of A380's on the North American routes. While threatening this unlikely because North American airlines who are the most likely competitors on this route have a "not invented here" prejudice against this aircraft.

What about sand state airlines you ask, they are everywhere why aren't they flying this route? The North American airlines are paranoid about sand state airlines and own the finest Congressmen that money can buy, so that is not going to happen.

My hope that Cullen Airlines would be sold by John Key to Eitihad is in a prolonged holding pattern with nowhere to land. Low oil prices mean the backers of sand state airlines have no cash to splash on acquisitions.

Boop boop de do
Marilyn

Qantas could deliver an A380 if they wanted to AUC - LAX

[Raz]

I figured out how we all went wrong.....We tried to use logic.:confused:

What logic was that..

[skid]

What logic was that..

Just a bit of humor Raz ,but one would logically assume that a good result-an increase in div would have meant that the early increase in SP would have held. Thats what I thought would happen ,although I didnt think it was going to blast through the $3 mark.
I think more than a few were surprised.

But as to my earlier post-I think this stage coming is where we will find out whether they can continue to catch the same market share with the change in environment in terms of competition.

Thats not to say they are not a well run outfit ,as Roger has shown.

They have had a good run since Oct which reflects the anticipation of todays results. Now its all about the next results.

[stoploss]

http://www.stuff.co.nz/business/77273943/tourism-boom-may-force-kiwis-to-book-their-holidays-earlier-or-miss-out

[Raz]

http://www.stuff.co.nz/business/77273943/tourism-boom-may-force-kiwis-to-book-their-holidays-earlier-or-miss-out

I think i mentioned this here about a month ago, I had to go and see a client a couple of weeks ago in Queenstown on short notice, air fares were reasonable for one week out however found it hard to find any accommodation, the lower level hotels were 650$ a night , the client booked an AIR B&B for me instead at $2400 for two nights, nothing mid range available..it was a nice place.

Growth for AIR is going to be more overseas destinations, I just can't see tourism number here continue to grow at this rate without a heck of a lot of development, the lag factor to build is way too great... very quickly the kiwis are crowded out..that covered things this season now what...Air B&B would be the best bet to increase bed nights...

I know they want to increase demand in the low season spots, the problem is the target market is reduced greatly when you focus on those truly flexible on dates..naturally everyone else is looking at the same potential market.

[Raz]

Just a bit of humor Raz ,but one would logically assume that a good result-an increase in div would have meant that the early increase in SP would have held. Thats what I thought would happen ,although I didnt think it was going to blast through the $3 mark.
I think more than a few were surprised.

But as to my earlier post-I think this stage coming is where we will find out whether they can continue to catch the same market share with the change in environment in terms of competition.

Thats not to say they are not a well run outfit ,as Roger has shown.

They have had a good run since Oct which reflects the anticipation of todays results. Now its all about the next results.

I know, its always about the next results...I thought it was our best chance at a nudge up as well..the result just did not exceed expectations so the market was not as excited as the cheerleaders here:-)

Given the companies history it is a real step up..go figure! I actually think they have forecast FY 800 million to cover for contingencies like potential loss of market share & world outlook, the latest from the IMF is very negative on the world economy and the incidents of adverse shocks. All going and the stars align more likely to be around 950 million full year...

To make a fair return on this share you have to trade it...

[Beagle]

I know, its always about the next results...I thought it was our best chance at a nudge up as well..the result just did not exceed expectations so the market was not as excited as the cheerleaders here:-)

Given the companies history it is a real step up..go figure! I actually think they have forecast FY 800 million to cover for contingencies like potential loss of market share. All going well more likely to be 950 million plus full year...To make a fair return on this share you have to trade it...

If you keep that up I'll have to buy you a set of pom poms and appoint you my deputy so I can have the occasional day off :D

The surprisingly weak end to the day could easily have been the result of Chinese interests selling down. Shanghai market was off a steep 6.4% today.

If we get a strong lead overnight from the European and American markets I expect a solid bounce tomorrow as any way you slice and dice it that was a very strong result considering it included all the extra costs to launch two new routes. Actually AIR are themselves calling it "A Stellar Result" Scroll down the bottom of the page folks and click on the second attachment for the interim shareholder review https://nzx.com/companies/AIR/announcements/278284

Now...surely my work for the day is done....bring on $3 tomorrow :)

[blockhead]

I think i mentioned this here about a month ago, I had to go and see a client a couple of weeks ago in Queenstown on short notice, air fares were reasonable for one week out however found it hard to find any accommodation, the lower level hotels were 650$ a night , the client booked an AIR B&B for me instead at $2400 for two nights, nothing mid range available..it was a nice place.

Growth for AIR is going to be more overseas destinations, I just can't see tourism number here continue to grow at this rate without a heck of a lot of development, the lag factor to build is way too great... very quickly the kiwis are crowded out..that covered things this season now what...Air B&B would be the best bet to increase bed nights...

I know they want to increase demand in the low season spots, the problem is the target market is reduced greatly when you focus on those truly flexible on dates..naturally everyone else is looking at the same potential market.

You may well be right in what you say Raz, Blocky has been talking with people in Queenstown and Arrowtown and at the moment it is nearly impossible to get a bed some nights, AIRBNB is being used a lot (this will cause strife later when demand diminishes and full commercial providers are being pinched), the same issue is going on in Tekapo, it is also chocker at the momennt.

[Jantar]

You may well be right in what you say Raz, Blocky has been talking with people in Queenstown and Arrowtown and at the moment it is nearly impossible to get a bed some nights, AIRBNB is being used a lot (this will cause strife later when demand diminishes and full commercial providers are being pinched), the same issue is going on in Tekapo, it is also chocker at the moment.
If you have a rental car then try Cromwell, Clyde, or Alexandra. Only a 1 hr commute to Alex from Queenstown airport. Wanaka is also 1 hr over the Crown Range, but it also fills up pretty quickly.

[GR8DAY]

.......just caught part of the biz talk this morning. Went into AIRs result in some depth and it sounded like the consensus was that yes the $800m forecast is very conservative. Maybe they will crack the $1b mark then..........have they done it before anyone??

[skid]

You may well be right in what you say Raz, Blocky has been talking with people in Queenstown and Arrowtown and at the moment it is nearly impossible to get a bed some nights, AIRBNB is being used a lot (this will cause strife later when demand diminishes and full commercial providers are being pinched), the same issue is going on in Tekapo, it is also chocker at the momennt.

My daughter is based there and it is horrndously hard for the young workers to find accommodation as well--I thought about buying something a few years back -probably should have

[skid]

If you keep that up I'll have to buy you a set of pom poms and appoint you my deputy so I can have the occasional day off :D

The surprisingly weak end to the day could easily have been the result of Chinese interests selling down. Shanghai market was off a steep 6.4% today.

If we get a strong lead overnight from the European and American markets I expect a solid bounce tomorrow as any way you slice and dice it that was a very strong result considering it included all the extra costs to launch two new routes. Actually AIR are themselves calling it "A Stellar Result" Scroll down the bottom of the page folks and click on the second attachment for the interim shareholder review https://nzx.com/companies/AIR/announcements/278284

Now...surely my work for the day is done....bring on $3 tomorrow :)

Yep--everyone else was in the green incl. US markets as I speak(oil is up) US earnings look sick though---but with all markets up this should put your theory to the test..(you should know better than to talk about the $3 jinx though):)

[fungus pudding]

I think i mentioned this here about a month ago, I had to go and see a client a couple of weeks ago in Queenstown on short notice, air fares were reasonable for one week out however found it hard to find any accommodation, the lower level hotels were 650$ a night , the client booked an AIR B&B for me instead at $2400 for two nights, nothing mid range available..it was a nice place.



Just checking .....$2400 for 2 nights? Is that correct or have the gremlins crept in somehow? Makes 650 per night for a hotel a bargain.

[Raz]

That's right, the hotel was one of the bad ones, I was ok to stay there but as the client had taken over the booking I think he was embarrassed to consider putting me up there...

As an aside I have a cheapie houses there, rent out per room to real workers...always a waiting list so cant stay there.

The west coast for accomodation is even worse..drive over for the day the only option currently.

[skid]

Its Queenstown Jim,....but not as we know it.

For those that loved the old simple Qtown....kiss it goodbye
The majestic beauty of the lake and the Remarkables is still there ,but the town is heading towards another aspen Colorado tourist center.
This will kill the very thing that makes it wonderful--all the locals have for the most part left and gone from the town proper to surrounding areas,away from the craziness.
Direct flights from China ,and the new automated runway,allowing night flights,is the final straw.IMO

[Baddarcy]

Just noticed on the ASB website, morning start has updated their analysis for AIR NZ and is sticking with $2.80.

Don't agree with a number of points in there, namely "Our no-moat rating reflects the competitive environment. Our fair value estimate is unchanged at NZD 2.80 (AUD 2.60), with the uncertainty rating firming to high from very high."

I think they have underestimated the power of Airpoints, i know personally i will almost always book with Air NZ even when they are not the cheapest as i usually have some Airpoints to burn. I'm assuming i'm not the only one that does that? I'll fly Jetstar but only when there is daylight between prices, which i think has happened once in the last 4 years.

[dobby41]

They can all build at Jacks Point - the new subdivision there that has just been approved.

[brend]

Air New Zealand fell 1.9 percent to $2.81. The airline posted a record pretax profit in the first half, up 132 percent on a year ago, due to lower fuel prices and a jump in passenger revenue as it added new routes and more aircraft. The stock traded as high as $2.90 after the earnings announcement but fell away by market close.

"It was a pretty strong result, a bit better than recent guidance, but the stock has come off a bit on the back of a more conservative outlook for the second half," said Robert Garden, investment adviser at Craigs Investment Partners. "The result that came out now is largely driven by cheap oil prices, and that's outside of the company's control. Management's just highlighting that uncertainty to the market, and they've kept a lid on the share price."

quoted from the NBR http://www.nbr.co.nz/article/market-close-nz-shares-fall-air-nz-drops-cloudy-outlook-ebos-rises-record-b-185419


Im not sure the last sentence is right?

[skid]

They can all build at Jacks Point - the new subdivision there that has just been approved.

Yes it seems to be a really popular place...come with a full wallet.

[Raz]

I actually think AIR is usually hard to beat domestically, only the truly price blinded look elsewhere on the main trunk, the AUC - west coast USA flights to LAX and SFO is where they have extracted a premium until recently, that is the big question going forward - they have already price and product mix competition already via Asia ..the Tasman is a commodity...

[Baddarcy]

Yes it seems to be a really popular place...come with a full wallet.

Not sure i agree about the full wallet, you can pick up 1/4 acre sections in Jacks Point for high $200, that's less than half what they cost here in Auckland and they are 3 times the size!

[iceman]

You may well be right in what you say Raz, Blocky has been talking with people in Queenstown and Arrowtown and at the moment it is nearly impossible to get a bed some nights, AIRBNB is being used a lot (this will cause strife later when demand diminishes and full commercial providers are being pinched), the same issue is going on in Tekapo, it is also chocker at the momennt.

I think tourism worldwide is changing and increasing a lot due to new technologies such as AIRBNB and many others. Increased availabilities of flights is happening right around the World and is a positive for airlines and other tourism operators. I look at increased competition as a positive for AIR, not a negative. The result of this increased competition will be a LOT more people flying. I am sure AIR will adapt and do well.

An example of the benefit of healthy competition domestically is already being seen here in Nelson, where we now have 5 airlines competing. As a frequent flyer who still uses only AIR for my domestic flights, I am pleased as the flights have become MUCH cheaper.
Nelson Airport has just reported its busiest month ever in January, up 22% from January 2014. This followed on from December being the previous record. Now they need to build a new terminal which will open by 2018
Increased competition is a win win for all involved in the tourism industry, travellers and companies alike

[brend]

- they have already price and product mix competition already via Asia ..the Tasman is a commodity...

What do you mean?

Shanghai - yes - competition from China Eastern
Hong Kong - Revenue Share with Cathay Pacific
Singapore - Revenue Share
Japan - Sole carrier

[Beagle]

Have to reluctantly concede that Queenstown in the peak season is nothing like I remember it as a kid. Still beautiful but its really crowded.
Wanaka is nicer or better still travel out a bit further and enjoy Lake Hawea
http://www.lakehawea.co.nz/

[sb9]

Well, looks like the $3 party has to wait for longer than we're expecting.

[fungus pudding]

Its Queenstown Jim,....but not as we know it.

For those that loved the old simple Qtown....kiss it goodbye
The majestic beauty of the lake and the Remarkables is still there ,but the town is heading towards another aspen Colorado tourist center.
This will kill the very thing that makes it wonderful--all the locals have for the most part left and gone from the town proper to surrounding areas,away from the craziness.
Direct flights from China ,and the new automated runway,allowing night flights,is the final straw.IMO

How right you are. I used to go there for the occasional week or weekend. (from Dunedin- not far) Spent many Christmases there or over the lake on the Earnslaw to Mt. Nicholas station where relatives managed the farm. Nowadays it's just no fun anymore. Yes, the lake and mountains haven't changed but the town itself is dreadful, perhaps not to those who weren't familiar with the old Queenstown (and Arrowtown, and Cromwell) But for this kid - no thank-you.
Hawea - too windy.

[Teeps]

Well, the SP continues to baffle me - how on earth it can be regarded by the market as nothing but a safe bet for the next few years is beyond me. However, I am happy to keep topping up with any weakness and continue to grown my investment in one of NZ's most well run businesses. Happy to pick up decent dividends as well. Whilst i appreciate the volatility of a cyclical stock, it is still hugely frustrating that the market continues to under value the performance of Air NZ. Oil prices will likely remain low for some time - i am not convinced it will return to $70 per barrel in the medium term which most analysts are predicting.... happy to keep accumulating and will enjoy the rollercoaster ride!

[babymonster]

my order is in.. hope it will get filled

[Tony Two Gloves]

Agree with you Teeps, although it looks like a falling knife at the moment - keen to buy a few more but not sure of an appropriate entry point....

[Robomo]

Well, the SP continues to baffle me - how on earth it can be regarded by the market as nothing but a safe bet for the next few years is beyond me. However, I am happy to keep topping up with any weakness and continue to grown my investment in one of NZ's most well run businesses. Happy to pick up decent dividends as well. Whilst i appreciate the volatility of a cyclical stock, it is still hugely frustrating that the market continues to under value the performance of Air NZ. Oil prices will likely remain low for some time - i am not convinced it will return to $70 per barrel in the medium term which most analysts are predicting.... happy to keep accumulating and will enjoy the rollercoaster ride!

Just wonder how much we can rely on analyst's predictions about oil price 3 years from now. 2 years ago, did any of them pick that oil would go from ~120 US a barrel to less than $30 and stay around there for nearly two years now?

[stoploss]

Just wonder how much we can rely on analyst's predictions about oil price 3 years from now. 2 years ago, did any of them pick that oil would go from ~120 US a barrel to less than $30 and stay around there for nearly two years now?

the thing is if AIR .NZ likes the $ 30 a barrel available at the moment they are able to hedge this price 2 years in advance now , so there will be no risk to earnings if it shoots back up in a hurry .....
obviously if it goes lower they could be paying more than their peers.

[dobby41]

Well, the SP continues to baffle me

Buy the rumour and sell the fact!

[777]

Remember not all their fuel is hedged.

[h2so4]

Just noticed on the ASB website, morning start has updated their analysis for AIR NZ and is sticking with $2.80.

Don't agree with a number of points in there, namely "Our no-moat rating reflects the competitive environment. Our fair value estimate is unchanged at NZD 2.80 (AUD 2.60), with the uncertainty rating firming to high from very high."

I think they have underestimated the power of Airpoints, i know personally i will almost always book with Air NZ even when they are not the cheapest as i usually have some Airpoints to burn. I'm assuming i'm not the only one that does that? I'll fly Jetstar but only when there is daylight between prices, which i think has happened once in the last 4 years.

Yes. I'm happy to go with $2.80 and let Morningstar guide us through the cyclical nature of AIR.
Air is a $4b company, the margin of safety is huge,with $1.4b cash.
At $2.74 we are picking up a 10% div. Whats wrong with that?

[cdonald]

Just noticed on the ASB website, morning start has updated their analysis for AIR NZ and is sticking with $2.80.

Don't agree with a number of points in there, namely "Our no-moat rating reflects the competitive environment. Our fair value estimate is unchanged at NZD 2.80 (AUD 2.60), with the uncertainty rating firming to high from very high."

I think they have underestimated the power of Airpoints, i know personally i will almost always book with Air NZ even when they are not the cheapest as i usually have some Airpoints to burn. I'm assuming i'm not the only one that does that? I'll fly Jetstar but only when there is daylight between prices, which i think has happened once in the last 4 years.

I have been a member of airpoints for years. With the change from BNZ to westpac last year we have since taken the "cash" option with BNZ. As an example, my wife used the last of our airpoints flying to London at xmas time. the cost on AirNZ return economy was $3600. I flew to london at exactly the same time on Cathay and my cost was $2085 return. Was a bit inconvienient flying on different planes and on diff routes. I do prefer Airnz over the other airlines but I am not too sure how many people have actually stuck with Airpoints after losing Global plus last year. It would be interesting to see those numbers.

[Beagle]

AIR's fuel hedging policy is outlined in their investor databook. http://www.airnewzealand.co.nz/databook

On the call yesterday management explained they went from min forward hedging to their maximum position in late January when Brent hit $30 barrel.

There's a wide range of other credit cards that are linked in with airpoints.

[iceman]

I have been a member of airpoints for years. With the change from BNZ to westpac last year we have since taken the "cash" option with BNZ. As an example, my wife used the last of our airpoints flying to London at xmas time. the cost on AirNZ return economy was $3600. I flew to london at exactly the same time on Cathay and my cost was $2085 return. Was a bit inconvienient flying on different planes and on diff routes. I do prefer Airnz over the other airlines but I am not too sure how many people have actually stuck with Airpoints after losing Global plus last year. It would be interesting to see those numbers.

You can collect Airpoints on credit cards with both Kiwibank and ANZ as well !

[Raz]

Also for heavy users of the BNZ credit cards they provided great incentives to move from BNZ to another air points credit card.

At 2.73 before I was wonder if people thought their was some similarity to QAN shares..remember AIR provides dividends for starters...

[GuessX]

> It would be interesting to see those numbers.

With how slammed I got with different banks AND AirNZ telling me about their AirPoints offering after BNZ was removed, I'm sure the competing banks did very well out of it.

[winner69]

Vin - lunch almost over although for the money men it can be a bit longer on Friday

Plenty of action I reckon before close - the hot money just clearing out the dregs at the moment but they will want to be in before the week ends

Wouldn't want to be n wrong side of next weeks jump p would they?

[RTM]

Yes. I'm happy to go with $2.80 and let Morningstar guide us through the cyclical nature of AIR.
Air is a $4b company, the margin of safety is huge,with $1.4b cash.
At $2.74 we are picking up a 10% div. Whats wrong with that?

I am considering buying some more so could you help me a little with respect to the dividend. Looking at NZX I see the following for dividend: 2013: 3c / 5c (Interim / Final) 2014 4.5 / 5.5 and 10c special, 2015 6.5 / 9.5. So 2015 = 16c which is 6%. I am a holder and reasonably happy with this, especially adding in the SP appreciation I have seen. But how do you get your 10% Dividend ? What have I missed ?

[Beagle]

Hot money that was looking for a bounce is getting out and the smart money is buying in the mid 270's cum a 10 cent divvy (in 5 minutes time so too speak) so is really only paying mid 260's for their shares.

30 cps earnings in the last six months and only distributing 10 cents so there's 20 cents of accrued earnings extra in there than 6 months ago. NTA is up by slightly more.

Mid 260's effective considering the extra accrued earnings is the same as paying mid 240's In August 2015 when AIR was earning at the rate of circa $500m underlying earnings before tax for the full year, not the half year.

In last year's balance sheet as at 31 March 2015 my AIR shares were $2.73 ex divvy and they had just earned $133m after tax for the half year. Now they're almost the same price, cum dividend and they just earned $338 after tax. All those accrued earnings since March 2015 that haven't been paid out, only one 9.5 cent divvy between March 2015 and today and they've more than doubled their earnings and you can buy the shares for basically the same money today. Really the shares are amazing value at present.

Was chatting to a couple of mates this morning by e.mail. Thought I might as well share with all you good folks. Sums up how I see the current SP.

[777]

I am considering buying some more so could you help me a little with respect to the dividend. Looking at NZX I see the following for dividend: 2013: 3c / 5c (Interim / Final) 2014 4.5 / 5.5 and 10c special, 2015 6.5 / 9.5. So 2015 = 16c which is 6%. I am a holder and reasonably happy with this, especially adding in the SP appreciation I have seen. But how do you get your 10% Dividend ? What have I missed ?

Assumptions. Last years div was 16c. This years interim is 10c. Expectation of final div is 10c.
Therefore 20c for the year.

Divide that by .72 and you gat a div before tax of 27.778c

As a yield on share price of 2.75 this is 10.101%

I stand to be corrected.

[vin]

Eyes peeled Mr Jinx, I would be topping up but im substantially overweight as it is..

The divvy will make me feel better :P

[Beagle]

Assumptions. Last years div was 16c. This years interim is 10c. Expectation of final div is 10c.
Therefore 20c for the year.

Divide that by .72 and you gat a div before tax of 27.778c

As a yield on share price of 2.75 this is 10.101%

I stand to be corrected.

You forgot the 10 cent special to go with the final that's almost a given this year especially after only paying out a really stingy, (there... I finally called it what it really is), one third of the first half's earnings.

[Raz]

You forgot the 10 cent special to go with the final that's almost a given this year especially after only paying out a really stingy, (there I finally called it what it is), one third of the first half's earnings.

About blardy time..thats right very stingy AIR... from Rodger of all people..possibly he does SWOT analysis after all...:-)

[RTM]

Assumptions. Last years div was 16c. This years interim is 10c. Expectation of final div is 10c.
Therefore 20c for the year.

Divide that by .72 and you gat a div before tax of 27.778c

As a yield on share price of 2.75 this is 10.101%

I stand to be corrected.

Thanks. Roger's #4989 also interesting. I guess with Government as the major shareholder and wanting a decent return, also supports a decent payout later. Maybe closer to the election ? Might get a few more.

[h2so4]

I am considering buying some more so could you help me a little with respect to the dividend. Looking at NZX I see the following for dividend: 2013: 3c / 5c (Interim / Final) 2014 4.5 / 5.5 and 10c special, 2015 6.5 / 9.5. So 2015 = 16c which is 6%. I am a holder and reasonably happy with this, especially adding in the SP appreciation I have seen. But how do you get your 10% Dividend ? What have I missed ?

If you are with ASB securities have a look at the Morningstar report.
This is the relevant bit.
Our remodelled Air New Zealand fiscal 2016 NPAT forecast is NZD 632 million, peak cycle earnings of NZD 715 million in 2017, before declining to NZD 628 million in 2018. Our forecasts assume Brent oil prices bottom in 2016 and recover to USD 70/bbl by 2020. We forecast a fully franked dividend in fiscal 2016 of NZD 27 cents, NZD 32 cents in 2017 and NZD 28 cents in 2018.

[777]

You forgot the 10 cent special to go with the final that's almost a given this year especially after only paying out a really stingy, (there... I finally called it what it really is), one third of the first half's earnings.


Yes I realise that. Didn't want to vex it though.

[RTM]

You forgot the 10 cent special to go with the final that's almost a given this year especially after only paying out a really stingy, (there... I finally called it what it really is), one third of the first half's earnings.

I hope AIR has not forgotten it as well Roger. Not counting on it until I see the announcement. Still, stack up reasonably well even without it, so I did get some more at 2.74. Thanks for your post #4989

[Beagle]

If you are with ASB securities have a look at the Morningstar report.
This is the relevant bit.
Our remodelled Air New Zealand fiscal 2016 NPAT forecast is NZD 632 million, peak cycle earnings of NZD 715 million in 2017, before declining to NZD 628 million in 2018. Our forecasts assume Brent oil prices bottom in 2016 and recover to USD 70/bbl by 2020. We forecast a fully franked dividend in fiscal 2016 of NZD 27 cents, NZD 32 cents in 2017 and NZD 28 cents in 2018.

Morningstar my least trusted research house but FWIW that translates to EPS on 1122m shares of 2016 56.3 cps, 2017 63.7cps and 2018 56 cps. Average earnings for next 3 years 58.7 cps. On a $2.73 Sp that's a PE of 4.65 which is surely the lowest ever for AIR ?

Average dividend yield of 29 cps per year for the next three years and all with be fully imputed, (yes Morningstar we call it imputed here in N.Z. not franked), because they have heaps of imputation credits available so 29 / 0.72 = 40.28 cps gross / $2.73 gives a gross dividend yield on average for the next three years of 14.8%.

Not sure how they came up with a valuation of $2.80 on those PE and yield numbers...

Anyone aware of any other analyst valuation revisions at this point in time ?

[Beagle]

I hope AIR has not forgotten it as well Roger. Not counting on it until I see the announcement. Still, stack up reasonably well even without it, so I did get some more at 2.74. Thanks for your post #4989

You're welcome. People will be very cross at the Annual meeting is there's no special this year. Pretty sure directors and management like to mix and mingle with happy shareholders and I am even more sure that the N.Z. Govt loves to see cash dividends rolling in :)

[h2so4]

A good time for a buy back.

[h2so4]

....could be announced anytime. Yes?

[Beagle]

....could be announced anytime. Yes?

AFAIK it only needs a directors resolution and the ability to do so is already embodied within the companies constitution. They certainly kept plenty of money up their sleeve in terms of earnings this last half.

[h2so4]

Morningstar my least trusted research house but FWIW that translates to EPS on 1122m shares of 2016 56.3 cps, 2017 63.7cps and 2018 56 cps. Average earnings for next 3 years 58.7 cps. On a $2.73 Sp that's a PE of 4.65 which is surely the lowest ever for AIR ?

Average dividend yield of 29 cps per year for the next three years and all with be fully imputed, (yes Morningstar we call it imputed here in N.Z. not franked), because they have heaps of imputation credits available so 29 / 0.72 = 40.28 cps gross / $2.73 gives a gross dividend yield on average for the next three years of 14.8%.

Not sure how they came up with a valuation of $2.80 on those PE and yield numbers...

And the really good thing about Air divs is that you will have both divs in your bank a/c in just under 7 months.
Assuming you have just bought today.

[h2so4]

....annualise that.

[Beagle]

And the really good thing about Air divs is that you will have both divs in your bank a/c in just under 7 months.
Assuming you have just bought today.

Yes that point is not lost on me but I prefer to handle it a different way focusing on the medium term. My policy with shares that are paying a known dividend within the next month is to base my analysis on the theoretical ex div SP, (i.e. deduct the dividend that's coming in 5 minutes time so too speak) On that basis (i.e. $2.63) the three year average forward PE based on Morningstar's analysis becomes an incredible 4.48 and the gross dividend yield 15.32% ! Not too shabby is it when QAN isn't paying a dividend at all and most U.S. carriers typically pay 1-2 % annual dividends !

FWIW I think Morningstar are probably a bit light on this years EPS and a bit heavy on the following year. I don't want to make any call on Fy18 at this early stage

[Onion]

People will be very cross at the Annual meeting is there's no special this year.

Special provisions will be made for Roger... :scared:

7913

[Beagle]

LOL your leisure time activities are starting to worry me Onion...

[Beagle]

Yes that point is not lost on me but I prefer to handle it a different way focusing on the medium term. My policy with shares that are paying a known dividend within the next month is to base my analysis on the theoretical ex div SP, (i.e. deduct the dividend that's coming in 5 minutes time so too speak) On that basis (i.e. $2.63) the three year average forward PE based on Morningstar's analysis becomes an incredible 4.48 and the gross dividend yield 15.32% ! Not too shabby is it when QAN isn't paying a dividend at all and most U.S. carriers typically pay 1-2 % annual dividends !

FWIW I think Morningstar are probably a bit light on this years EPS and a bit heavy on the following year. I don't want to make any call on Fy18 at this early stage

Looks like the even some of the pessimists can see these are crazy numbers. I'd have bought myself earlier except I'm anxious to avoid this problem :)
https://www.youtube.com/watch?v=rXH_12QWWg8

[winner69]

Eyes peeled Mr Jinx, I would be topping up but im substantially overweight as it is..

The divvy will make me feel better :P

vin - told you there would be action after lunch

Overweight eh - but don't go on a diet. Better to hold on and get more overweight as the share price outperforms

[skid]

vin - told you there would be action after lunch

Overweight eh - but don't go on a diet. Better to hold on and get more overweight as the share [rice outperforms

Thats ok to say winner (as long as you dont even whisper those naughty words that have a number and a dollar sign):):)