AIR - Air NZ. [Archive] - Page 3

modandm

21-01-2011, 11:43 AM

I can only think that someone else hostile to the alliance was prowling around VBA. There have been rumours of such for a while. Air NZ now have an effective blocking stake considering VBA's 49.9% foreign ownership limit. Take your pick of rival airlines or Middle Eastern soverign wealth funds.

At 44 cents they have hardly overpaid for VBA at least.

I think you have hit the nail on the head here Jaa - as other commentators in Australia have also commented today - the AIR rationale may likely have been a defensive one. VBA is a highly attractive commercial partner and one that Etihad and Qatar would both have been looking at. AIR getting in early means it is now considerably less likely that one on these players could buy-in an have a hand in VBA's strategic direction - possibly to the detriment of AIR through long haul competition.

I am a little disappointed I bought more AIR at $1.44 a few days earlier but them's the breaks and I still have every confidence the SP will continue its uptrend towards $1.80 - $2.00 mark by the latter part of the year.

modandm

21-01-2011, 11:44 AM

So it looks like AIR paid a 10% premium for VBA on the day but still a lot less than the $2.80 highs reached a few years ago. Given VBA seems to be a down trending stock there must be good reasons to have purchased - perhaps they are picking its reached the low and can only go up.

Maybe you should give Rob a call and offer some TA insights to him as a consultant.

Jaa

21-01-2011, 12:16 PM

But it looks like few were expecting them to go shopping

As modandm pointed out above the market was expecting something. The share price had consolidated above $1.50 in a range between $1.50-$1.53, falling well before the annoucment yesterday.

So it looks like AIR paid a 10% premium for VBA on the day but still a lot less than the $2.80 highs reached a few years ago. Given VBA seems to be a down trending stock there must be good reasons to have purchased - perhaps they are picking its reached the low and can only go up.

VBA's recent problems were mostly caused by their diastrous V Australia expansion and to a lesser degree NZ domestic service. VBA were silly enough to use the wrong aircraft type to start up a South African service where 2 engined planes are heavily penalised. This is one area where Air NZ can definitely help them, no airline flies more long-haul routes as a % of their total routes.

With alliances with Eithad (Middle East & Europe), Air NZ (Tasman), Skywest (Regional) and Delta (Pacific - if they can get it across the line) VBA has good future prospects. They also plan to consolidate down to one brand which will bring cost savings and help brand synergy.

Domestically VBA are currently destroying both Qantas mainline and Jetstar flying more services than either, an important selling point for business travellers. They have more modern reliable aircraft than Qantas and better service, reliability and comfort than JetStar and Tiger. Domestically they are also more profitable.

The one brand strategy to cover all classes of travellers is the same as Air NZ's strategy, though Air NZ have executed it much better (Consistent branding, GrabaSeat, innovation galore). Thus there doesn't seem to be any strategic disagreements.

percy

21-01-2011, 01:06 PM

Roll back the clock - did you really say this 10 years or so ago percy

Aussie is a much larger market than NZ.AIR really need a big "feeder" to grow,which Ansett will provide.Cemeting this arrangement with a 100% shareholding in Ansett will give AIR more influence. Makes sense to me

I would have done,except I would not have said Ansett. Same arguements still relevent today,if not more so.You can not grow AIR without Aussie "feeder'.

percy

21-01-2011, 01:10 PM

As modandm pointed out above the market was expecting something. The share price had consolidated above $1.50 in a range between $1.50-$1.53, falling well before the annoucment yesterday.

VBA's recent problems were mostly caused by their diastrous V Australia expansion and to a lesser degree NZ domestic service. VBA were silly enough to use the wrong aircraft type to start up a South African service where 2 engined planes are heavily penalised. This is one area where Air NZ can definitely help them, no airline flies more long-haul routes as a % of their total routes.

With alliances with Eithad (Middle East & Europe), Air NZ (Tasman), Skywest (Regional) and Delta (Pacific - if they can get it across the line) VBA has good future prospects. They also plan to consolidate down to one brand which will bring cost savings and help brand synergy.

Domestically VBA are currently destroying both Qantas mainline and Jetstar flying more services than either, an important selling point for business travellers. They have more modern reliable aircraft than Qantas and better service, reliability and comfort than JetStar and Tiger. Domestically they are also more profitable.

The one brand strategy to cover all classes of travellers is the same as Air NZ's strategy, though Air NZ have executed it much better (Consistent branding, GrabaSeat, innovation galore). Thus there doesn't seem to be any stragic disagreements.

Jaa.
I thought you post was excellent.

modandm

21-01-2011, 02:05 PM

Jaa.
I thought you post was excellent.

As did I.

Looking forward as an AIR shareholder - I hope the VBA/ Delta Alliance doesn't make it. If it should fall through this may open the door to AIR VBA transpacific cooperation.

From VBA's standpoint using most of their 77W's to serve Abu Dhabi and maybe two transpacifc - say SYD-AKL-LAX might be a good virtual longhaul strategy.

In anycase AIR will want to engulf VBA from the west so to speak (making AKL a VBA hub for eastbound routes to USA and SA- and let Etihad/VBA look after the routes west of australia and southern/eastern europe.

Other possibilities include a Perth - JHB codeshare

Jaa

25-01-2011, 03:11 PM

Thanks guys :) You have encouraged me to expand on my analysis of Air and VBA.

While it may be useful in some industries to see if the Timaru or New Plymouth store or in this case flight is full you really are wasting your time in Air NZ's case. They publish a 1 pager of key operating stats about 3 weeks after month end. This covers their entire network, something which 1 person could never hope to do and even if they could they would only have a 3 week advantage.

Personal investigation of airlines is much better spent on the why of travel. e.g. Would you prefer to fly Air NZ or Jetstar? If so how much more would you pay to do so and for what reasons? For me its about $30 a flight and the reasons are faster checkin, quicker disembarkation and baggage collection, later checkin times, reliability, flexibility, airpoints and my ticket is on my iPhone (I don't own a printer). For others it will be the Koru lounge access or the customer service.

Obviously the above exercise is easy to do but what about LA - London? I have heard rumours that Air NZ does very well with celebrities on this route as the airline is considered less of a target but if I was being honest I really have no clue.

So to the operating stats, here is Air NZ's Dec stats:
http://file.nzx.com/000/030/4566030.pdf

The key figure to look at is the load factor. A rule of thumb is that an airline makes money when more than 75% of its seats are filled. This varies a bit between airlines but is a good guide.

Air NZ has increased their overall load factor by 1.3pts on a capacity increase of 6.2% giving an increase in revenue per kms of 7.7%!! This is an outstanding result and shows the trend in place for the last 6 months is continuing.

A fair question to ask is did they have to cut prices to fill their planes? No, Air NZ state their group wide yields are up 3% on the same period last year. I would be surprised if that wasn't the case as the cheapest tickets on a plane are usually sold first with any tickets sold once the plane reaches 75% capacity escalating in cost. This is a simplification but generally holds true in aggregate.

Margin analysis is also an area where you can gain an insight into future trends by playing around with an airline's booking engine or comparing airlines with something like House of Travel and WebJet.

What about LA-London? The load factor for North America/UK is at 89.1% on a 5.5% increase in capacity from last year. While influenced by the Christmas holidays this is still a ridiculous load factor to have and can be a sign of capacity constaints which could affect future profit potential.

So is Air NZ capactiy constrained going forward? No! In the last month they have recieved delivery of the first of a number of 777-300s and domestic A320s. This is perfectly timed and can be put down to good management.

Airlines have both very high marginal (fuel, landing fees, flight crew to some extent etc) and fixed (planes in the short term, engineering, computer systems, head office etc) costs. Thus profits can be very volatile and scale matters. Therefore any increase in capacity that doesn't affect margins or load factor is very profitable and any increase in load factor is extremely profitable.

Air NZ has achieved both over the last 6 months and thus should deliver a good result in February. Just as importantly if the current trends continue over the next year as they integrate the new planes then the following year's result should be even better.

Jaa

25-01-2011, 03:49 PM

I have long held the opinion that the Herald and Dom Post give great contrian signals when an international investment trend is about to reverse (I learnt this painfully after a year long rebound in Japanese stocks a bullish Herald article encouraged me to buy into a Japanese ETF). My theory being that by the time some NZ reporter finds out everyone who matters in the world already knows! Today brings us this headline:

Pressured Qantas may bite back at Air NZ-Virgin Blue alliance
http://www.stuff.co.nz/dominion-post/business/4575753/Pressured-Qantas-may-bite-back-at-Air-NZ-Virgin-Blue-alliance

Which paints a picture of Qantas at odds with the one in todays SMH:

Qantas aircraft punt comes unstuck
http://www.smh.com.au/business/qantas-aircraft-punt-comes-unstuck-20110124-1a2v6.html

Unlike Air NZ's excellently timed and selected aircraft purchases over the last 10 years, the article explains well what Ben at Plane Talking has been hammering away at for over a year. Qantas have had a shocker in this area of core airline competency.

With no hub constraints Air NZ not only have 777-200s but larger more effecient 777-300s entering service this year as of course do VBA. Sure Air NZ are the launch customer for the 787-9 that Qantas have also ordered but they are not dependent on it for growth or effeciency gains, taking the decision 2 years ago to add fuel saving winglets to their 767s in what at the time had to be a marginal decision but which now seems inspired. Qantas made no such risk mitgating investment and are paying heavily for it.

IMO, Qantas mainline domestically and internationally has greatly reduced ability to pressure the VBA/AIR alliance as the declining effeciency of its aircraft and thus profitability leave it a sitting duck for the next few years.

In my next post I will dig into the operating stats of both Qantas and VBA to see who is actually winning in Australia and see how they stack up to Air NZ.

modandm

25-01-2011, 04:17 PM

In my next post I will dig into the operating stats of both Qantas and VBA to see who is actually winning in Australia and see how they stack up to Air NZ.

That would be interesting. I would also enjoy your musings on potential VBA/AIR codeshare agreements on longhaul flights and the prospects of both VBA and Etihad joining star alliance.

Also what do you reckon AIR is worth? It is great talking about airlines but I would also be interested to hear your views on the company as an invesment. They are currently are large % of my nz portfolio

winner69

25-01-2011, 09:20 PM

VBA seem pretty gloomy about life at the moment

http://www.businessspectator.com.au/bs.nsf/Article/Virgin-flags-40m-revenue-hit-slump-in-H1-profit-pd20110125-DEUU3?OpenDocument&src=hp8

winner69

25-01-2011, 09:23 PM

VBA at 41 cents .... as someone suggested they should have taken some TA advice from Sharetraders and not bought into downtrending stocks

Suppose a bit difficult to average down now

percy

26-01-2011, 07:50 AM

The article in www.theaustralian.com.au on VBA was interesting.What caught my eye was VBA "reinventing itself to capture more corporate and business travel".
This is where AIR has made it's money and retained customer loyality rather than a budget low profit airline.I would think this has attracted AIR's attention.The short term does hold headwinds for VBA.Floods and lower customer spending,however the benefits to AIR will outway these.

26-01-2011, 08:10 AM

VBA at 41 cents .... as someone suggested they should have taken some TA advice from Sharetraders and not bought into downtrending stocks

Suppose a bit difficult to average down nowThe fact they didn't pay a premium to get a 15% stake may have been enough. I guess it depends how much lower it goes.

Would they have got 15% at a cheaper price (and blocked another airline) if they had waited till it got lower.

Hoop

26-01-2011, 10:20 AM

The fact they didn't pay a premium to get a 15% stake may have been enough. I guess it depends how much lower it goes.

Would they have got 15% at a cheaper price (and blocked another airline) if they had waited till it got lower.

On a technical basis Mr Market thinks so... CJ

The VBA.ax chart shows a sudden drop in its OBV indicator on the 21st January, this indicates on that particular day Mr Market assumes smart money exited the stock. It seems Air NZ provided the dumb money:mellow:

winner69

26-01-2011, 10:30 AM

percy

26-01-2011, 10:36 AM

Hoop,
Loved your post.correct,however I look forward to see whether the "dumb money"trade inside indrustry investor out smarts "the smart money" and Mr Market changes his mind.I have put my money with AIR.

Jaa

26-01-2011, 10:49 AM

26-01-2011, 10:53 AM

On a technical basis Mr Market thinks so... CJ

The VBA.ax chart shows a sudden drop in its OBV indicator on the 21st January, this indicates on that particular day Mr Market assumes smart money exited the stock. It seems Air NZ provided the dumb money:mellow:This could be an interesting test. What timeframe do we need to revisit this on to determine who was smart and who wasn't?

How is OBV calcuated.

Investopedia explains On-Balance Volume - OBV
OBV attempts to detect when a financial instrument (stock, bond, etc.) is being accumulated by a large number of buyers or sold by many sellers. Traders will use an upward sloping OBV to confirm an uptrend, while a downward sloping OBV is used to confirm a downtrend. Finding a downward sloping OBV while the price of an asset is trending upward can be used to suggest that the "smart" traders are starting to exit their positions and that a shift in trend may be coming.Surely be definition then a large puchase by one of many smaller shareholdings has to be a decreasing OBV?

Jaa

26-01-2011, 11:32 AM

That would be interesting. I would also enjoy your musings on potential VBA/AIR codeshare agreements on longhaul flights and the prospects of both VBA and Etihad joining star alliance.

I see minimal benefits at this stage. Branson has always been anti large alliances.

Pooling of spares for 777-300s seems to be the only concrete example so far but many airlines do this quietly anyway.

Also what do you reckon AIR is worth? It is great talking about airlines but I would also be interested to hear your views on the company as an invesment.

I only do rough broad brush valuations as I don't think there is value in much more as sharemarkets look forward and businesses and industries constantly change. I prefer to invest based on business momentum. So let me just say more, lots more. Morningstar have a valuation of $2.15.

They are currently are large % of my nz portfolio

This is not something I would not recommend as any and everthing bad that happens in the world can and does affect airlines. They are always a high risk/high reward investment which in my case require a large margin of safety.

Floods, earthquakes, volcanoes, snow, SARS, war, political instability, business confidence, economic growth, terrorism you name it :scared:

percy

26-01-2011, 12:34 PM

Today's news

It would also look at reducing Government shareholding in national carrier Air New Zealand, he said. (John Key)

No surprises there.

Jaa

26-01-2011, 12:39 PM

shasta

26-01-2011, 12:45 PM

No surprises there.

Govts shouldnt interfere in the aviation industry fullstop. Labour wouldnt allow Infratil & Waitakere CC to develope Whenuapai, to "protect" AIR rather than in the best interests of air travellers in NZ

Takes 55 mins to fly Wgtn to Auckland & another hour plus to get the North shore, Whenuapai is alot closer to Aucklands population than the current Mangere site

Problem is the most logical buyer of the Govts stake in AIR would be Qantas, & the commence comission has already boo hooed that tie up previously!

Who would want a major stake in AIR, when they would most likely be forced to run unprofitable domestic routes to get around the OIO?

shasta

26-01-2011, 12:48 PM

In today's other news, more expansion from Air NZ, Paraparaumu - Auckland flights.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10702105

Lots of Executives and IT people live around Kapiti so should be plenty of demand. Also allows Air NZ some leverage on Wellington Airport.

See my last post, AIR dont own any of Wellington Airport, but Infratil do own 2/3rds of it (Wgtn city council the other 1/3), & the last Labour Govt showed a bias towards AIR, to prevent IFT from competing with them.

Another reason why the Govt should sell its AIR stake & mind its own business!

26-01-2011, 12:51 PM

In today's other news, more expansion from Air NZ, Paraparaumu - Auckland flights.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10702105

Lots of Executives and IT people live around Kapiti so should be plenty of demand. Also allows Air NZ some leverage on Wellington Airport.

"It's all part of our constant drive to innovate in ways that save our customers time in their overall journey with new services such as self check in and Fast Bag."so Why did AIR take part in Blocking Whanuapai. Amazing how they can twist the story to suit them selves.

Disc: Shore Boy.

percy

26-01-2011, 01:06 PM

Govts shouldnt interfere in the aviation industry fullstop. Labour wouldnt allow Infratil & Waitakere CC to develope Whenuapai, to "protect" AIR rather than in the best interests of air travellers in NZ

Takes 55 mins to fly Wgtn to Auckland & another hour plus to get the North shore, Whenuapai is alot closer to Aucklands population than the current Mangere site

Problem is the most logical buyer of the Govts stake in AIR would be Qantas, & the commence comission has already boo hooed that tie up previously!

Who would want a major stake in AIR, when they would most likely be forced to run unprofitable domestic routes to get around the OIO?

Would be interesting if govt sold to IFT.

shasta

26-01-2011, 01:45 PM

Would be interesting if govt sold to IFT.

Maybe the NZ Super Fund could buy it off the Govt, they did a public/private deal with IFT to buy Shell's downstream assets

Would keep ownership in the country (avoiding OIO issues) & its a conservative long term investment

J R Ewing

26-01-2011, 02:27 PM

so Why did AIR take part in Blocking Whanuapai. Amazing how they can twist the story to suit them selves.

Disc: Shore Boy.

Interesting question. It's certainly not because AIAL gives them the red carpet treatment when it comes to landing charges!

Jaa

26-01-2011, 03:07 PM

Interesting question. It's certainly not because AIAL gives them the red carpet treatment when it comes to landing charges!

Auckland is Air NZ's main hub. Most of their international routes depart from it and are fed by their domestic network. Whenuapai would dilute the network effects of their network.

As you say JR this must have been a close run thing. The additional leverage it would give them on AIA to decrease landing fees combined with the increased demand/margin that Whenuapai might generate must have been worth less than the network affects. At the moment Air NZ pay top dolllar while JetStar International, China Southern and Continental are given sweetheart deals. Its classic price discrimination but is counter productive as a strong and growing Air NZ is good for AIA.

See my last post, AIR dont own any of Wellington Airport

I know who owns Wellington airport. I was pointing out that Air NZ are trying to limit the airport's monopoly power by flying from Masterton and now Paraparaumu.

26-01-2011, 04:38 PM

Interesting question. It's certainly not because AIAL gives them the red carpet treatment when it comes to landing charges!

From what I understood, they didn't want it as they would continue to use AIA for the Hub effect per Jaa post.

But other low cost operators could use the low cost airport to significantly undercut AIR prices. This is what happens overseas with small low cost operators flying to a cities 2 or 3rd main airport (sometimes a long bus ride from the city) which lowers their fares (I even thing Easyjet lost the right to say they flew to Barcelona as their airport was so far out of town).

J R Ewing

26-01-2011, 05:56 PM

From what I understood, they didn't want it as they would continue to use AIA for the Hub effect per Jaa post.

But other low cost operators could use the low cost airport to significantly undercut AIR prices. This is what happens overseas with small low cost operators flying to a cities 2 or 3rd main airport (sometimes a long bus ride from the city) which lowers their fares (I even thing Easyjet lost the right to say they flew to Barcelona as their airport was so far out of town).

So a somewhat cynical summary of that is to say that AIR will put up with being shafted by a monopoly AIA because that allows it in turn to shaft the NZ public as a monopoly supplier? Perhaps we would all prefer the alternative explanation that they didn't want to have to double up on infrastructure in Auckland :)

modandm

27-01-2011, 04:46 PM

I see minimal benefits at this stage. Branson has always been anti large alliances.

Pooling of spares for 777-300s seems to be the only concrete example so far but many airlines do this quietly anyway.
:
Branson has in the past spoke ill of alliances and even considered creating his own virgin alliance BUT i believe he has come to his senses and realised without alliance membership Virgin is vulnerable and won't attract corporate travellers. Something J.B is well aware of. Here is an article to that effect.

http://www.brisbanetimes.com.au/business/bransons-airline-looks-for-global-alliance-20110118-19v9b.html

I expect Virgin (all) to join Star within the next few months.

On another matter - who do you think VBA will tie-up with on flights to Asia? I was thinking Singapore Airlines but what is in it for Singapore who are great already?
Perhaps VBA will negotiate to operate Singapore's lounges or something? I think that Air NZ Branson and J.B have a lot of ideas but Singapore airlines is really holding all the keys so will be interesting.

Could they tie -up with Asciana as a last resort? I don't think Air China would be favoured

macduffy

27-01-2011, 05:34 PM

but what is in it for Singapore who are great already?

To prevent VBA tying up with anyone else?

Arguably, that's the reason for AIR taking its shareholding in VBA.

I don't hold AIR, subscribing to the Buffett theory on investing in airlines!

percy

27-01-2011, 07:02 PM

.

I don't hold AIR, subscribing to the Buffett theory on investing in airlines!

Buffett as allways is correct. I have held off,held off,and finally brought,just to prove Buffett correct.!!!!

nick00

28-01-2011, 06:10 PM

Hey, I always turn to the wisdom of buffet, but isn't the airline industry a little different in NZ.

I read that Buffet does not subscribe to airlines as specialised employment makes them susceptible to union strikes, but didn't AirNZ handle the last strike quite well by training up non union staff to cover union staff etc?

I could be wrong, as I'm quite new to investing etc.

macduffy

28-01-2011, 06:18 PM

Welcome to the forum, nick!

Buffett's dislike of airlines as an investment extends well beyond the industrial aspect.

Basically, it's to do with the fact that airlines, as an industry, have made some cumulative net losses of $x billion since the Wright brothers' first flight.

Personally, I don't think that rules them out as a trade, as distinct from a long term investment. It's just that I don't have the temperament or the inclination to try to trade AIR, or any other airline stock.

percy

28-01-2011, 06:27 PM

He is however the same as all of us and can change his mind, as his part ownership of an aircraft leasing company proves.
I do not know if he lost money on that investment.!!!!

nick00

28-01-2011, 06:41 PM

Thanks macdufffy :)

Yeah i do remember reading that he said something along the lines of 'the best thing that could happen to investors would be for someone to go back in time and kill the wright brothers before they made their flight'

I have a small holding in AIR so will be keeping an eye on them

modandm

22-02-2011, 12:07 PM

Interesting week ahead for AIR followers. VBA 1H results tomorrow and AIR 1H results on Thursday.

My take as a Preview:
VBA:
Not going to be a great result - they have had their challenges of late with floods, and a highly competitive Australian domestic market. All the while going through a costly rebranding exercise which is soon to be unveiled (rumors of thursday 24th feb might be premature - we will see). The transformation of VBA0 will be an ongoing and drawn out process but I think they are on the right track. Its a shame for VBA holders the company is not better positioned now as the climate for airlines at present is as good as it has been for some time.

AIR:
I'm expecting results to exceed expectations and forecasts. Operating statistics have been good and AIR has positioned itself effectively to be attractive to leisure and business customers alike. Load factors and market share is up across the board and particularly on the Tasman as a result of the new fare product. Yield might be slightly weaker TT but this has been offset by factors mentioned. The arrival of the 2nd and 3rd 777-300er heralds a year of growing profitability for AIR as fuel costs continue to be trimmed while revenue per passenger is enhanced through new product offerings.

What im particularly excited about:

VBA: New livery, possible discussion of joining an alliance or transpacific codeshares with AIR

AIR: Possible new aircraft to compensate for 787 delays, new routes announcements to start after RWC,

24-02-2011, 11:52 AM

The market has been hammering AIR for the past couple of days, starting on Tuesday before the quake. The results look good but maybe not good enough? Or is this because people expect lower tourism numbers and internal flights within NZ going forward?

Down to 1.30 now

Disc: the big drop on Tuesday triggered my order which I wouldn't be so unhappy about if the quake didn't hit a just 1 hour later.

winner69

24-02-2011, 03:08 PM

Doesn't seem that Air NZ got many votes in this poll

http://www.stuff.co.nz/travel/4699737/Hottest-air-hostess-survey-slammed

As Phar said "We are the first responders on the plane," Phar said, "and I don't see that looks have anything to do with that." so it doesn't really matter does it

winner69

24-02-2011, 03:11 PM

24-02-2011, 09:07 PM

CJ signs off CJ
Free delivery worldwide with Book Depository http://www.bookdepository.co.uk

CJ - most times I find www.fishpond.co.nz cheaper than Book Depository - also free delivery and delivery bloody fast even from overseasI have found bookdepository cheaper from experience and when the NZ Hearld did a survey comparing bookshops to the online shops, this was proved as well. Though at the moment Amazon UK is cheaper as you can get supersaver delivery (free) as their prices are cheaper, but delivery (if charged) makes it more expensive.

modandm

25-02-2011, 11:10 AM

I have found bookdepository cheaper from experience and when the NZ Hearld did a survey comparing bookshops to the online shops, this was proved as well. Though at the moment Amazon UK is cheaper as you can get supersaver delivery (free) as their prices are cheaper, but delivery (if charged) makes it more expensive.

Not sure what this has to do with AIR or why it is posted here...

Anyway on topic: Results were good I thought although a little light on strategy going forward - new routes, potential additional lift etc.

Numbers were good but not great. Normalized profit of 94m (taking out 18m gain on equity swaps which I don't think should be included)
I did the EPS calculation on a FY profit of $205m which is conservative with the RWC scheduled. Even if the oil price goes higher the rest of the FY is ~90% hedged. Next year is a different story but imho the oil price will settle back down to 80-90USD barrel in the next few months. The world economy cannot afford high oil prices right now.

Have AIR on:

FY11 EPS of 19c
PE of 6.93 at $1.31

Seems very low to me and clearly the spiking oil price and terrible events of the last few days is having a strong effect on the appetite and sentiment for the stock.

I for one am picking up stock at 1.31

03-03-2011, 05:38 PM

Seems very low to me and clearly the spiking oil price and terrible events of the last few days is having a strong effect on the appetite and sentiment for the stock.

I for one am picking up stock at 1.31Well it keeps falling (closed at 1.28) and it hasn't gone ex div yet so that isn't the excuse. I assume with oil going up (increased costs or if passed on, reduced demand), Chch earthquake effecting tourism numbers, and oil increases effect global growth, this is pulling AIR down.

Now I know airlines are meant to be a good way to lose money but I thought it was different this time (when will I learn).

waterboy

03-03-2011, 05:43 PM

started dropping when announced buy in to virgin then dropped more when gov announced it wanted to sell down, oil price on top of this.

Blendy

03-03-2011, 11:41 PM

thanks to everyone (in all threads) who post all the interesting charts and calculations. I've never studied anything relevant to share trading at school or university, so all the in depth analysis you guys come up with makes for great reading. I'm learning a lot from this place!

04-03-2011, 07:11 AM

CJ sad to hear you losing on this one ......since March 2009 Air has been in a long term uptrend and been a good performer.

Thanks - I am a long term holder so not overly concerned and just topped up recently as I thought it had dropped as far as it was going to. Given the quake, I am happy I have got off with just the loss I have.

modandm

04-03-2011, 11:39 AM

there has been a confluence of negative events which has really depressed the stockprice in the last 2 months. If you can hold on for the medium term I expect strong capital appreciation over the year.

This is clearly a situation where the sentiment for a stock has been affected although the earnings outlook hasn't. Oil price is a concern for all airlines but since the current spike is likely just a blip, the concern should have subsided over the course of the year.

Don't forget all the significant positives for AIR over the coming 2-3 years.

- RWC demand should see a bumper FY11 result
- A320 increasing capacity domestic and lower costs
- 777 lower costs and increased revenue opportunities
- New route potential - starting end of year, then more when 787 arrive
- Strong growth in tourism from Asia particularly China
- Solid double digit earnings growth profile out 5 years as world economy recovers

All this for a company on a PE of about 7 and paying a nice yield. Rest assured medium term uptrend will continue. BUY

shawsie

04-03-2011, 12:59 PM

Jaa

04-03-2011, 02:01 PM

hi modandm

agree with your conclusions but not how you get there. nothing personal of course, just want to spark some fundy debate...

Oil a blip? you may/may not have a crystal ball, my read is supply side will stay constrained and has the potential to get really fubarred up, while demand side should continue to grow, so signals are price goes up and staysup.

AIR fundys, well,

they make all, yes all, of their profits on short haul. long haul is the nice to have. and of course gets the punters here to make short hauls, but in truth most drive around,

so for short haul with the quake, that is nothing but good news for AIR.

and that pretty much gives my reason for not liking your fundy's, they are mainly based on long haul, all except RWC, good point well made.

on fundy's i'm a buyer. but i'm scared by the POO.

would a TA like to inform my decision making process?

disc - dont hold ... yet.

Hi Shawsie, good to hear another perspective.

Air NZ's long haul is profitable these days, its the Tasman that has always been marginal for them. How much the VBA alliance helps here is yet to be seen.

The super-normal profits that Air NZ could have made from the RWC have been limited somewhat by the quake even if Christchurch does end up holding RWC games. Whether it does or not is a key unknown at this point.

Was at a Flight Centre this week and the agent commented that during Sep-Oct domestic ticket prices were already pretty crazy. e.g. there was no cheapie flights (sub $100) available at all between Auckland-Wellington.

I am however less worried about the POO. Modandm is right that the middle east situation is a blip that Air NZ is well hedged against however the longer term increase in demand driven by an improving economy is actually good for Air NZ. Higher economic growth leads to a disproportionate rise in air travel and the willingness to pay more for that travel (up to a point).

Another key factor in play is the exchange rate which is dropping fast. This will positively impact tourists willingness to come to NZ but also negatively affect Air NZ's costs. How these balance out with our tourism industry reeling in Christchurch and already at full capacity later in the year is another unknown.

Lastly, National's plan to sell down the government's stake created an overhang that was weighing on the share price even before the oil and quake effects.

So that's 2 positive and 4 negative unknown new factors to consider. Uncertainty is always bad for airline share prices and thus I would expect further weakness.

scamper

04-03-2011, 02:16 PM

Shawsie,
on hoop's chart above, I think most TAs would suggest a wait until the sp breaks up through the orange r&s line -- so, above ~138.
More conservative TAs would wait for a string of higher highs and higher lows as well.
Experienced TAs who don't mind a bit of risk AND are happy to hold for the medium term would point out the continuing 2-year uptrend and say that now is ok for buying.
It occurs to me that fundamentals AND world events are extremely important in timing AIR -- probably more so than TA.
Sorry to hedge my bets and not be more helpful....

Phaedrus

04-03-2011, 03:38 PM

On fundy's I'm a buyer. but I'm scared.......
Would a TA like to inform my decision making process? disc - dont hold ... yet.Good on you for waiting, Shawsie. It is very easy to see that AIR is currently in a downtrend and has been pretty much all this year. Nobody knows how far this will run, so why buy when AIR is getting cheaper every day? There is no hurry - right?

Here are half a dozen suggestions that would help you time your AIR entry. All of the indicators featured here have given good entry signals in the past and there is no reason to suspect that they will not work well in the future.

You will note that the current trendline (that's the important one!) is exactly as drawn on Hoop's chart and Scamper's suggestion to wait for an uptrend is an excellent one. (That's when AIR makes a higher High after a higher Low).

http://i602.photobucket.com/albums/tt102/PhaedrusPB/AIR34.gif

shawsie

04-03-2011, 04:41 PM

The technicals, Phaedrus and Scamper, are compelling. Superb stuff, thank you.

Lizard

15-03-2011, 09:51 AM

Fairly sombre profit update from AIR today:

The financial impact of the Christchurch earthquake is more severe than expected then. Further, the recent tragic events in Japan will also impact revenue in that important market. Based on current fuel prices and demand trends the company does not expect to be profitable in the second half year and full year normalised earnings are expected to fall below $100m.

modandm

15-03-2011, 12:10 PM

terrible announcement but read the annoncement closely. A few key takeaways

1. The use of the word trends. If trends continue we won't make a profit. If trends revert even slightly we may make a small profit. Hopefully for shareholders the price of oil will revert lower and demand from Japan recovers quickly. I have more faith in the oil price honestly. Japanese are very nervous people. I guess flight cancellations are inevitable on the NRT and KIX routes. Maybe the planes could be diverted to new routes.

2. "operating profit" - the airline will declare a net profit because it has 90% of fuel hedged. The hedge gains are considered no-op. If oil reverts back down then NZ could almost have never felt the impact of the short term spike.

I really am surprised the earthquakes are having such a significant impact... I guess the operating leverage of airlines is that great.

blackcap

15-03-2011, 01:02 PM

PS...Blackcap ..an example of TA before the event........... not in hindsight as you say we all do[/QUOTE]

Cheers Hoop.... will be watching and learning.. :)

shawsie

15-03-2011, 01:13 PM

Christchurch will weigh on AIR considerably more than Japan.

The lead time to change schedules, airframes etc to meet changing demand is substantial. If you can see 10 empty seats on a flight, given the way all airlines price these days, then that flight is losing money.

I dont follow point 2. The fuel hedge will be fully costed in I would have thought.

Now, can I please have some light shed on the TA approach to a shareprice that has gone through the long term lower channel. Are there TA points that AIR will now test? Or do you give ity over to the FAs to find a new floor?

15-03-2011, 02:46 PM

PS...Blackcap ..an example of TA before the event........... not in hindsight as you say we all doSo TA predicted Chch, Oil prices and Japan - Who needs Ken Ring?

Phaedrus

15-03-2011, 02:59 PM

Can I please have some light shed on the TA approach to a shareprice that has gone through the long term lower channel. Are there TA points that AIR will now test? Or do you give it over to the FAs to find a new floor?TA based attempts to predict future AIR support levels would be little better than FA attempts to define AIR's "value" and expect the stock to bottom out there.

Shawsie, no-one, no system, can tell you where the current downtrend will end. Technically, it is very easy to suggest possible levels at which AIR might again find support.... or not. I could post such a chart if that is what you want, but the fact is that the current downtrend will continue until the market decides on the new floor. Monitor the downtrend. It is the one reality that you can observe in real time and all else is of secondary importance.

winner69

15-03-2011, 03:11 PM

A shocker of an announcemet and the share falls 5%-6% .... whoops I forget that many have already bailed over the last few weeks ... the lucky ones or the wise ones?

15-03-2011, 04:25 PM

A shocker of an announcemet and the share falls 5%-6% .... whoops I forget that many have already bailed over the last few weeks ... the lucky ones or the wise ones?It has now droped 30% since its recent highs and 21% since the chch earthquake.

castelinop

15-03-2011, 08:48 PM

13 cents drop, now it ain't looking too good for AIR. Almost free falling.

shawsie

15-03-2011, 10:38 PM

Hoop

I get your drift,

the price of TA (to paraphrase Voltaire on democracy) is constant vigilance

whereas FAnalysts knew about the change agents, shouldnt have been too hard to work out the elasticity on earnings, but it took the announcement to start the orderly stampede to the exits.

I take a huge random stab in the dark and surmise that Net Tangible Assets puts a floor on sp, it is worth what it is worth and that takes us to somewhere near the global minima of 75cps.

Under that you go down an interesting path that includes signifance of national carier, export value of NZ tourism, goodwill etc. I wouldnt necessarily buy it as a going concern but I'm pretty damn sure it wont be sold for parts.

Heh maybe itll bounce back to 116 tomorrow.

Yeah right

shawsie

16-03-2011, 09:32 AM

Thanks Hoop.
Even the most fervent TA must be interested in the fundamentals of the company, surely? We are in the game of predicting the future, and while TA gives you patterns, there are leading indicators and future events that you can, with little bias, be confident about.

Hoop, your note to wait for the turn around contains a value judgment.
When Hanover rolled to Allied, at 20c ish, I didnt think ALF would turn around. Wouldnt have touched it with your money. Equities are boiunded by zero, and sooner or later thats where they will all end up.
Shareholders are the least secured of all creditors.

I am confident all equitues will get pummelled as Japanese contagion spreads.
AIR especially.
I think AIR will turn around, but not soon and not sharply.

modandm

16-03-2011, 12:21 PM

No offence but I really wish we could keep the FA vs TA argument in another thread and keep this on-topic. If there is something FA or TA that is AIR specific that you would like to share by all means post it here.

I just don't want to have to troll through everyones 'system' and people self validating explanations of their trading approach. This sort of content belongs in the investment strategies section IMHO.

Please don't flame me and lets keep it on topic. Cheers

UPDATE:
Hoop - I don't think post removal was so necessary (especially indiscriminate removal of your posts). I have no problem with a post with TA insights relevant to the stock or a chart link being posted - infact I enjoy your and others posts of that nature. What I am against is full screen posts arguing and rebutting others points on the merits of TA vs FA bloating threads. Hope you don't feel targeted. Regards Mod

Hoop

16-03-2011, 12:26 PM

shawsie

16-03-2011, 12:35 PM

Back to flat intraday, after -10% yesterday and on a positive morning for the market I would say that is underwhelming.

Turning an H1 profit of $100m against cap of $1.3b into an H2 loss is dramatic.

My target buy will be in some months, once POO has normalised and AIR has attacked its cost base (and, of course, the technical signals are in accord).

biker

18-03-2011, 03:43 PM

terrible announcement but read the annoncement closely. A few key takeaways

I really am surprised the earthquakes are having such a significant impact... I guess the operating leverage of airlines is that great.

It 'costs ' ( as Rob Fyfe puts it) $100million a week to run the airline. The margin on 5 billion a year is more than super thin!!

24-03-2011, 09:10 PM

Jaa

24-03-2011, 10:24 PM

this has to be good for AIR shareprice:

http://www.stuff.co.nz/world/australia/4803862/Qantas-pilots-grapple-two-cockpit-fires

QAN are having a lot of maintenance issues at the moment. Who would you fly with!

I highly doubt it CJ but their maintenance problems are showing up their strategic mistakes. They had some bad luck with the A380s but a lot of the blame rests with management.

Outsourcing as much crew, pilot and engineering work overseas as possible. De-Australianising the airline is not going to make Aussies want to travel with them.
20yr+ old 767s flying domestically (without the foresight to add fuel saving wingtips like Air NZ). Breakdowns, incidents and delays will only increase.
20yr+ old 747s still forming the backbone of their international long haul fleet. Breakdowns, incidents and delays will only increase.
Banking to heavily on the 787 before it had even flown leaving the airline dependent on the above.
Most new aircraft they have bought have gone to JetStar. Budget passengers couldn't care less but the added fuel efficiency makes JetStar's figures look artificially good.
The Qantas/Jetstar 2 brand strategy. Air NZ tried this with Freedom Air with some success but it is an inferior higher cost strategy compared to Air NZ's single brand with flexible pricing/seats/service strategy. Premium customers get the service they expect and budget customers can get cheap fares. Air NZ saves on marketing, IT, admin and other head office costs. Everyone benefits from greater frequency.

Air NZ know all this of course which is why they took the stake in VBA. Unfortunately the cost pressures of high Australian wages also applies to VBA.

Just as well Qantas still have their frequent flyer program!

iceman

25-03-2011, 07:08 AM

CJ, I think you are right about people becoming hesitant to fly with Qantas after such frequent headlines over a sustained period. I recently booked a Europe trip for our family of 6 and at the outside excluded Qantas from our price comparisons, for this very reason. I'm sure I'm not alone. If Jaa's suggestions that we will only see increase in these breakdowns are correct, then I think that is a very serious situation for Qantas as passenger will leave them in droves.

this has to be good for AIR shareprice:

http://www.stuff.co.nz/world/australia/4803862/Qantas-pilots-grapple-two-cockpit-fires

QAN are having a lot of maintenance issues at the moment. Who would you fly with!

25-03-2011, 07:32 AM

I highly doubt it CJ I agree any benefit will be lost in the rounding - It was more to kick the oppostion while they are down but you correctly point out a few management issues with QAN. AIR does seem to be a well run company (with the possible exception of 'Rico' - still in two minds about him).

minimoke

25-03-2011, 07:56 AM

No offence but I really wish we could keep the FA vs TA argument in another thread and keep this on-topic. If there is something FA or TA that is AIR specific that you would like to share by all means post it here.

I just don't want to have to troll through everyones 'system' and people self validating explanations of their trading approach. This sort of content belongs in the investment strategies section IMHO.

Please don't flame me and lets keep it on topic. Cheers

TA and FA - what about the Tea Lady? Remember my comments back on 20 Jan. Since then the SP has done nothing but go down hill.

Talking to the Tea Lady yesterday and apparently flights in and out of Christchurch since the earthquake have been chocker full. Droves of citizens leaving and tons of assessors and USAR etc arriving. It may not be the earthquake that is the problem but AIR internal staff ability to price the fares. $50 to where ever you like is a generous offer but someone forgot about the shareholders.

macduffy

25-03-2011, 08:22 AM

I'm not sure that there are all that many $50 fares from/to Christchurch. I'm told that there's a limited number, you have to go on standby and be prepared to hang around the airport. Most people are still booking and paying in the usual way from what I hear.

For what it's worth, IMO AIR is a very well run business doing better than most in a difficult industry. Not my idea of an investment but possibly worth a trade from time to time.

modandm

12-05-2011, 11:46 AM

some buying activity moving into the AIR shareprice over the last week. The shareprice has broken out of it's rangebound trading between 1.09 and 1.12 to make 1.16 today. If any TA's want to provide a short term target or resistance levels on the up that would be good. I imagine $1.30 and $1.44 are key. Depth currently shows 940k on the buy side and 181k on the sell side.

My opinions on the fundamentals is that this company is a screaming bargain and worth at least $1.80 a share. As Jaa and I have outlined AIR is in a strong position with new planes arriving, and demand increasing. I won't go into my entire investment rationale but to say that AKL is strategically the Dubai of the pacific in that it provides an ideal connection for Australians not living in Sydney to fly to North America and soon South America means AIR will increasingly be able to steal pax from Qantas. The VBA alliance helps transtasman and the recent re-alingment towards a value-carrier in shorthaul will continue to stimulate demand and capture market share. Jetstar NZ will get pounded once the a320's arrive.

ratkin

13-05-2011, 05:50 AM

iceman

13-05-2011, 08:00 AM

modandm, could you please enlighten me about you saying "soon to South America" ? Is something new on the horizon there ? I'm just courious as I travel several times a year AKL-Buenos Aires and am not happy with the currently available services

I won't go into my entire investment rationale but to say that AKL is strategically the Dubai of the pacific in that it provides an ideal connection for Australians not living in Sydney to fly to North America and soon South America means AIR will increasingly be able to steal pax from Qantas. .

modandm

13-05-2011, 10:59 AM

modandm, could you please enlighten me about you saying "soon to South America" ? Is something new on the horizon there ? I'm just courious as I travel several times a year AKL-Buenos Aires and am not happy with the currently available services

hi iceman, unfortunately nothing has been announced yet, but rob fyfe and others have several times over the last few years mentioned the desire to open up routes to south america once the 787s arrive in another 2.5 years. On other websites there is speculation that NZ might seek 777-200LR's for interim lift to open new routes. Others are speculating that 747-400's could have additional fuel tanks added to open up south america.

If this occurs GRU - Sao Paulo, and EZE - Buenos Aires, would be the two obvious destinations.

You might have to be patient with this one but you can feel fairly confident Air NZ will be flying these routes by 2014 if not sooner.

iceman

14-05-2011, 06:58 AM

Thanks modandm. A direct Air NZ serive AKL-EZE is music to my ears, should it happen. I have taken the opportunity on every after trip survey from Air NZ to push for a Air NZ/Star Alliance service to South America. They would inject some much needed competition to Aerolineas Argentinas direct to EZE and LAN/Qantas via Santiago. I shall patiently keep my fingers crossed :)

hi iceman, unfortunately nothing has been announced yet, but rob fyfe and others have several times over the last few years mentioned the desire to open up routes to south america once the 787s arrive in another 2.5 years. On other websites there is speculation that NZ might seek 777-200LR's for interim lift to open new routes. Others are speculating that 747-400's could have additional fuel tanks added to open up south america.

If this occurs GRU - Sao Paulo, and EZE - Buenos Aires, would be the two obvious destinations.

You might have to be patient with this one but you can feel fairly confident Air NZ will be flying these routes by 2014 if not sooner.

Jaa

14-05-2011, 09:58 AM

modandm

14-05-2011, 07:53 PM

Aerolineas Argentinas is due to join the Star Alliance next year.

Air NZ's 777's would be useless for such a long journey without alternate airports. Thus you really need a 4 engine jet to make it work.

I agree with you at the present time, and this is why the 747s being retained past 2012 are the subject of this speculation.

However NZ has the ability to apply for EDTO 240m and 330m after operating 77L's for a certain time which would open up the routes. Also due to the advances in engine reliability the restrictions on twin engine aircraft are expected to be reduced. The 787-9 is expected to be certified for EDTO 330 - although NZ and South American aviation authorities would have to grant approval also.

As NZ management have pointed out - twin aircraft actually have lower incidences of engine related diversions, and are required to carry engine fire extinguishers and other related safety equipment that 4 engined aircraft aren't.

It won't happen overnight but it will happen - and with a twin engined aircraft IMHO.

Jaa- whats your take on the shareprice? are you buying?

ratkin

19-05-2011, 02:33 PM

Govt going to flick some of this off , but who will want it?

macduffy

19-05-2011, 03:00 PM

Skol will be keen on a few!

modandm

19-05-2011, 03:51 PM

if its at the current shareprice I think there would be substantial interest from private and institutions. At this level I expect significant sp growth over the next 2 years.

One thing holding the sp back has been the lack of liquidity - it will be good to have a larger float.

Air NZ is something to be proud of - even if people think investing in airlines is a bad idea simply because of the 'american' result.

Before sarcastically criticising those who do choose to invest in Air NZ - perhaps consider the differences in geography and the aviation market in NZ relative to the US and the strength of NZ product and management vs its competitors. Combine this with the advancing fleet modernisation program and I rate NZ as having excellent potential.

The growth of China, India etc increasing demand for air travel as economies recover etc etc - the fundamentals are all there.

And recently the Oil Price is down too:D

ratkin

19-05-2011, 05:15 PM

if its at the current shareprice I think there would be substantial interest from private and institutions. At this level I expect significant sp growth over the next 2 years.

Its not for another year or so, who knows , maybe they will pump up the price beforehand, they wouldnt
want to see too low a shareprice ahead on any announcement

Oiler

19-05-2011, 05:44 PM

One thing holding the sp back has been the lack of liquidity - it will be good to have a larger float.

Air NZ is something to be proud of - even if people think investing in airlines is a bad idea simply because of the 'american' result.

Before sarcastically criticising those who do choose to invest in Air NZ - perhaps consider the differences in geography and the aviation market in NZ relative to the US and the strength of NZ product and management vs its competitors. Combine this with the advancing fleet modernisation program and I rate NZ as having excellent potential.

The growth of China, India etc increasing demand for air travel as economies recover etc etc - the fundamentals are all there.

As someone who spends a lot of time flying, usually on Air NZ but many other international/national airlines, I agree Air NZ has a lot to be proud of. They are very nimble and innovative in cutting costs. They were one of the first if not the first to adopt the check in kiosks for example.

I may not invest in AIR stock but they sure as hell get a big chunk of my airfare money and proud to fly with them, especially on the long hauls. Gotta love the 777 300 :t_up:

macduffy

19-05-2011, 05:47 PM

One thing holding the sp back has been the lack of liquidity - it will be good to have a larger float.

The main reason for the lack of liquidity is of course the fact that the last Labour govt had to bail out the airline a few years ago, of necessity watering down the interests of then shareholders.

Not disputing that it runs a good operation - I travel on it by choice - but that doesn't make it a good investment, IMO.

shasta

19-05-2011, 06:00 PM

The main reason for the lack of liquidity is of course the fact that the last Labour govt had to bail out the airline a few years ago, of necessity watering down the interests of then shareholders.

Not disputing that it runs a good operation - I travel on it by choice - but that doesn't make it a good investment, IMO.

Airlines are notorious for losing money, & the Govt selling down from 78% to 51% isnt good enough in my mind, it should do an institutional book build & sell it all

It is NOT a strategic asset, & Govt ownership has hindered investment in the sector to provide real competition.

The moth balling of Whenuapai when Waitakere City Council & Infratil wanted to spend $50m shows that the Govt wasnt acting in the best interests of NZ travellers

modandm

20-05-2011, 11:23 AM

Airlines are notorious for losing money, & the Govt selling down from 78% to 51% isnt good enough in my mind, it should do an institutional book build & sell it all

It is NOT a strategic asset, & Govt ownership has hindered investment in the sector to provide real competition.

The moth balling of Whenuapai when Waitakere City Council & Infratil wanted to spend $50m shows that the Govt wasnt acting in the best interests of NZ travellers

I respectfully disagree strongly with you shasta.

1. Airlines are a vital infrastructure and even if they all 'lost money' (FYI Air NZ has actually made a great return for the govt since bail-out) they should still be supported as they are by governments all over the world. Why? The positive externalities from air travel on trade and tourism are great. Even if the govt loses money on the airline - it make it back tourists spending boosting gdp and tax take. Especially in a county like NZ where tourism is a key part of the economy.

And if you think other airlines would serve NZ the same way NZ does your kidding yourself. They would be far more agressively profit maximising and route structures and frequency would be limited.

Govt has not hindered the sector - it has invested in it - Air NZ can and does compete with overseas mega airlines who often receive govt support greater than Air NZ does. There is no place for small airlines in the business - natural monopolies and requirement for scale dictate this in the same way as the power generation sector.

In summary - it is a strategic asset - the government is right to own 51% and bail it out if necessary. The airline has been given a strong mandate to grow tourism and trade with key partners in india/china/us, as well as maintaining links between regional NZ to support NZ business. The bail-out was given with the mandate that Air NZ should maintain a large cash position and operate defensively as it does to prevent any need for a future bail out.

At this stage I would say it is doing this very well.

Regarding the airport thing...
I agree AIAL is a monopoly - and should be regulated more closely.
However if you look at Sydney with one airport - there is no capacity need for another at whenuapai. Duplication of assets is not economically efficient - and splitting traffic would mean the benefits of a hub at AKL for international/domestic and premium lounges etc would have been lost.

The demand was not there from airlines to fly to whenuapai. Case closed.

Jaa

29-05-2011, 04:42 AM

Jaa- whats your take on the shareprice? are you buying?

No I have not been buying, I think the share price might go sideways for a while yet as all the growth drivers I was seeing have been pushed out or disappeared. The shares are good value but when it comes to airlines I require a bigger margin of safety.

Am getting tempted to pick up some VBA at 29c though, I like the new brand and they have approval for all the new alliances. Qantas also continues to go downhill in my opinion which can only be good for VBA & AIR.

modandm

29-05-2011, 01:23 PM

Jaa

30-05-2011, 03:44 PM

interesting you say that jaa.

I would own AIR over VBA any day - and do.

Where NZ operates with a relative monopoly domestically and is in a strong position internationally, VBA operates in a competitive domestic and international market.

If you look that the latest operating stats for both - as im sure you do - air nz's load factors and likely profits look much better. This said if VBA can improve yields as it aims to - it could be quite successful. I just don't think it will be as successful as AIR.

I agree the NZ is yet to fully recover from the japan and chch quakes but looking at the stats - there was a recovery in april from march.

A key one is the Asia/Japan/UK demand. In march it was 15% lower than last year - due to the quakes, in april it was 11% lower. I will be keeping a close eye on stats going forward and will post updates when they come out - usually around 22nd of month.

I agree AIR is the better company. I just think VBA has more growth potential over the next 2 years than AIR as all their current initiatives come on stream, I believe AIR were thinking along the same lines when they bought their stake in VBA, It was this purchase that got me thinking about VBA and since then the price is down over 10cents,

Your comments about each airline`s competitive environment probably explain why VBA has bigger share price swings than AIR, Which again means there should be a bigger risk/reward payoff,

As for AIR I agree they will recover but it will be slower than before the earthquakes, They will also not get such a good boost from the Rugby World Cup, The Governments impending sale is also hanging over the share price, Thus AIR could take a while to get to get back to where it was in January

Jaa

04-06-2011, 12:36 AM

News in the last few days that both Tiger and Qantas are cutting capacity in Australia and Aus/NZ respectively can only be good for Air NZ & VBA. Shows how tough things are out there though.

Tiger Cuts
http://blogs.crikey.com.au/planetalking/2011/06/03/tiger-cuts-deeper-into-its-australian-services/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+CrikeyBlogs%2Fplanetalking+%2 8Plane+Talking%29

Qantas Cuts
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10729870

BIRMANBOY

04-06-2011, 10:35 AM

Agree with you there Jaa...as they say.."Fish got to swim, birds got to fly" (and Kiwis got to travel). Whats nor to like, it pays a decent dividend, is in a bit of a trough and has a history of ups and downs...time to buy!
(Disc. just added to my port.)
News in the last few days that both Tiger and Qantas are cutting capacity in Australia and Aus/NZ respectively can only be good for Air NZ & VBA. Shows how tough things are out there though.

Tiger Cuts
http://blogs.crikey.com.au/planetalking/2011/06/03/tiger-cuts-deeper-into-its-australian-services/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+CrikeyBlogs%2Fplanetalking+%2 8Plane+Talking%29

Qantas Cuts
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10729870

modandm

10-06-2011, 03:44 PM

guys i would like to touch on a few points relevant to VBA/NZ following SQ - VBA tie up

This is excellent news for VBA and is the best possible outcome for their expansion into asia. One stopping to everywhere in asia and india is a great selling point for VBA. Note that Singapore is the largest destination in asia from australia, followed by HKG, KUL, NRT (tokyo) then BKK/PVG.

VBA's asian expansion plans now center on deploying a few a330's to primary non-SIN asian destinations (1st priority HKG) from Melbourne and Brisbane. Combined with a codeshare on Virgin Atlantic to HKG from SYD VBA will have the 2 primary asian business destinations non-stop sewn up, with all destinations as a one stop in singapore.

Depending on NZ's negotiation skills I would like to see VBA flights to HKG link to NZ's HKG-LHR flight (which is sort of struggling) giving Australians another option on the kangaroo route. Obviously this wouldn't go down to well with ETIHAD - hence NZ buying the stake (they get a louder voice). We should note that VS's SYD-HKG (day flight) does codeshare with NZ but it doesn't connect to NZ's flight well at all. Such is this VBA could consider opening a SYD-HKG (overnight) service also. This would mean SYD-BRI-MEL all feeding NZ at HKG for the on flight to London. This supporting a daily 777-300 in place of a 777-200 5xweek on the route which would be much better use of the LHR slots.

Obviously this is somewhat pie in the sky- but plenty are predicting VBA provide a direct HKG service with their new a330s since MEL and SYD business travelers who might accept a SIN stopover to PEK/PVG etc a vs direct on a Chinese carrier (poor reputation) will not accept a stopover on the way to Hong Kong.
In addition due to the shortish flight time 1 a330 could do each destination comfortably daily. With 2 doing perth and 2 more on order - one more could do perth (SYD/MEL/BRIS - PERTH daily) and 1 could do HKG-MEL/SYD maybe 3x to mel 4x to syd weekly.

Be great to hear your thoughts

Edit: Just had a look at the VBA timetable - at present 2 a330's being fully utilized on SYD-PER. This being the case it looks unlikely that VBA will deploy either of the 2 a330's on order on international routes. Stay tuned for a further order from VBA for a330's. IMHO another 1 or 2 is needed so Melbourne and Brisbane have enough links to Perth, so an order for 4 or more would suggest international ambitions.

BIRMANBOY

20-06-2011, 08:56 PM

Looks like it might be on the way up ..SP at 1.11, 1.12 and 1.13. Yee ha.

modandm

22-06-2011, 12:39 PM

Looks like it might be on the way up ..SP at 1.11, 1.12 and 1.13. Yee ha.

A strong move upwards in the SP over the past week - the shareprice has risen from lows around 1.06 to last trade at 1.16 today.

The May operating stats are due and I expect better than expected figures after Sydney and Melbourne had bumper months of May.

Key data I am looking for:
- Domestic Demand (RSK) to reverse a trend and post yoy growth over 8% (last 7.0%)
- Tas/Pac Demand (RSK) yoy growth to return to pre-quake levels (around 13%) from last 9.8%

Most importantly
- Asia Japan RSK growth yoy to -6%. Was -15% in March and -10.8% in April

And yield-wise - Group yields need to rise to 2%. Last was 1.2% vs 2.4% Dec-Feb
- Shorthaul needs to stabilise as -2%
- Longhaul needs to get back above 5% last 4.3%

modandm

22-06-2011, 12:54 PM

Looking at NZ's strategy it is becoming increasingly aggressive towards competitors (particularly Trans-Tasman).

The movement to seats to suit is stealing market share from Emirates and Jetstar who have traditionally picked up the lower yielding pax. With the Alliance coming into force and greater frequency and even new TT routes (AKL-HBA/CBR most likely) AIR is well placed.

I believe it is Jetstar that will most be affected as Emirates is a quality long haul full service product and should be able to maintain pricing levels even with Air NZ priced slightly lower. Loads though are likely to be affected somewhat. Jetstar on the other hand needs to price at least 25% below Air NZ and will really struggle with both loads and basement yields as perception of the carrier worsens.

BIRMANBOY

22-06-2011, 01:46 PM

Thanks for your posts modandm..good to get some inside info from someone who obviously does some research..as opposed to lazy buggers like me!
Looking at NZ's strategy it is becoming increasingly aggressive towards competitors (particularly Trans-Tasman).

The movement to seats to suit is stealing market share from Emirates and Jetstar who have traditionally picked up the lower yielding pax. With the Alliance coming into force and greater frequency and even new TT routes (AKL-HBA/CBR most likely) AIR is well placed.

I believe it is Jetstar that will most be affected as Emirates is a quality long haul full service product and should be able to maintain pricing levels even with Air NZ priced slightly lower. Loads though are likely to be affected somewhat. Jetstar on the other hand needs to price at least 25% below Air NZ and will really struggle with both loads and basement yields as perception of the carrier worsens.

modandm

22-06-2011, 04:32 PM

The May operating stats are due and I expect better than expected figures after Sydney and Melbourne had bumper months of May.

http://www.smh.com.au/business/airports-traffic-booms-as-dollar-soars-20110620-1gam6.html

fair use copy: from June 20

In figures released today, Melbourne airport reported an 18.5 per cent increase on May last year in the number of international passengers to 490,306, while Sydney Airport posted a 7.8 per cent gain on the same month last year to 853,000.

According to Melbourne Airport...traditional markets also continued to grow with New Zealand increasing by 15.8 per cent

modandm

27-06-2011, 03:40 PM

May has the lowest number of international visitors per month in the year. With less than 150k arrivals to NZ and 892k pax on AIR. November to Feb sees over 200-300k arrivals and 1-1.3mill pax on AIR.
As such figures for May are probably less important than other months and load factors are lower than usual as capacity remains at base levels.

Review of stats: 1st figure actual, 2nd figure expectations
(all figures are growth and my expectations are based on prior months)

Total pax - 1% vs 4-5% BAD
SH pax - 2.5% vs 6% BAD

Domestic - 3.4% vs 7% POOR
Tasman/Pacific - 4.4% vs 8% BAD

LH pax - -9.5% vs -4% POOR
UK/North America - (4%) vs 3% POOR

Asia ex Japan - 4.5% vs 4% OK
Asia inc Japan - (13.3) vs (13%) POOR

Group yields - 1.4% vs 1.2% GOOD
SH yields - (2.6%) vs (3%) GOOD
LH yields - 4.3% vs 4.3% OK

Commentary:
Overall 3.5/10 quite disappointing. My forecast for May was too optimistic on nearly every measure. Below average growth domestic and SH (though still growth). Poor performance on UK/North America - the first negative growth month in over a year and well short of expectations. Asian demand is looking good (ex Japan). Japan's improvement is still clearly quite slow - looks to be steady from April (though this is an informed guess). Load factors to Asia were unacceptably low in May.

Yields were ok though - so NZ may not have been discounting enough IMHO. Groupwide yield was up 1.4% which is an improvement and short haul yields are firming at -2.5% (were as bad as -3.2%) - these reflecting seats to suit.

Singjet was $126 and WTI was $98 for May (approx)

Bring on the World Cup I say.

Anonymous

27-06-2011, 04:48 PM

modandm

27-06-2011, 06:18 PM

Just a thought but AIR must have done very well out of Qantas not flying lately. I have had to move both freight and pax onto NZ at a considerable cost premium. (My travel agent said he issued me the most expensive one way fare in his career on Friday). I cant be the only one in this boat. Now I have to start the fight with the insurance coy to get this back...

Exactly right here. AIR will have had a very nice June. Lots of full transtasman flights and many paying upwards of $500 one way. Some even $1000+ one way. Thats about 3-5x the normal fare. NZ ran a 747 over the weekend to sydney aswell due to demand.

Even with the extra fuel costs - the ash cloud will likely have a financial and reputation benifits for air nz

Sadly some can't afford the premium and weddings are being missed etc so its not something to trumpet to much.

Anonymous

27-06-2011, 08:38 PM

Even with the extra fuel costs - the ash cloud will likely have a financial and reputation benifits for air nz

Certainly agree on the reputation benefits. As a platinum qantas FF I haven't had much chance to use Air NZ but I was massively impressed with the way AIR handled out situation and I am bitterly upset with Qantas's attitude with this ash cloud to the point that I am considering foregoing my oneworld benefits and switching to star alliance.

iceman

27-06-2011, 08:58 PM

Consider yourself lucky that you have options Anonymous. I've been stuck with 46 staff to fly domestically in Argentina with Aerolineas Argentinas for 4 days. No info communicated and no alternative options. Absolute chaos. Also have a Kiwi flying home who has ben stuck in Buenos Aires for 3 days. Looks like they (LAN) may get him on a plane on 28th, via Santiago, Easter Island, Tahiti, Sydney and then onto Auckland, instead of the normal Santiago-Auckland route. Can't wait for Air NZ to start flying to South America !

Certainly agree on the reputation benefits. As a platinum qantas FF I haven't had much chance to use Air NZ but I was massively impressed with the way AIR handled out situation and I am bitterly upset with Qantas's attitude with this ash cloud to the point that I am considering foregoing my oneworld benefits and switching to star alliance.

Anonymous

27-06-2011, 09:40 PM

Jaa

28-06-2011, 02:23 AM

Consider yourself lucky that you have options Anonymous. I've been stuck with 46 staff to fly domestically in Argentina with Aerolineas Argentinas for 4 days. No info communicated and no alternative options. Absolute chaos. Also have a Kiwi flying home who has ben stuck in Buenos Aires for 3 days. Looks like they (LAN) may get him on a plane on 28th, via Santiago, Easter Island, Tahiti, Sydney and then onto Auckland, instead of the normal Santiago-Auckland route. Can't wait for Air NZ to start flying to South America !

If you need to move your staff within Argentina, get them to take the bus. Argentina has the best buses in the world. For maybe 50% more than the cheapest bus (still very good) you can buy them full lie flat beds with first class service that comes with food and champagne etc. Try Via Bariloche and send them overnight.

I have just been travelling in Argentina and have some friends there so if you need more help let me know.

As for Aerolinas..... well that is why Argentina has the best buses in the world!!

Jaa

28-06-2011, 02:31 AM

Its because of South America that I have stuck with oneworld as star alliance have very little market share there. I've had people stuck trying to go both ways between here and Chile over the last weeks. LAN scheduled to resume normal service on the SCL-AKL leg on 3rd July, ash permitting, (which means first return flight on 5th). AR are a joke of an airline and who knows what they are up to. Had someone stuck in Papeete for a few days trying to jump on the alternative route you mentioned. Got a pile of freight racking up... Is definitely chaos.

Aerolinas are joining the Star Alliance next year so expect to see code shared flights with Air NZ.

Air NZ really only have 747s that would be any good to fly to South America (you need 4 engines as there are no close alternative airports for 9hrs) which would leave them with no flexibility to downsize or upsize the aircraft type if demand drops away. Something they do all the time to Asia, Japan, US, Uk etc. This is a serious disadvantage for this route.

Air NZ's goal with any new route is to get the frequency up first to daily and then to increase the aircraft size from 777-200 to 777-300 or 747.

iceman

28-06-2011, 05:30 AM

Thanks Jaa. Been here for a few years and agree with you on the buses. They arer World class. Having to travel from Ushuaia to Corrientes by chartered bus however, includes ferry rides accross to the mainland and then 72 hrs non stop (only toilet stops) driving with cooks etc onboard the bus. The boys are not terribly enthused about it if they can avoid it :)

If you need to move your staff within Argentina, get them to take the bus. Argentina has the best buses in the world. For maybe 50% more than the cheapest bus (still very good) you can buy them full lie flat beds with first class service that comes with food and champagne etc. Try Via Bariloche and send them overnight.

I have just been travelling in Argentina and have some friends there so if you need more help let me know.

As for Aerolinas..... well that is why Argentina has the best buses in the world!!

Anonymous

28-06-2011, 10:16 AM

Aerolinas are joining the Star Alliance next year so expect to see code shared flights with Air NZ.

I hope Air NZ think hard about flying codeshare with AR. Flying AR across the Pacific is not a matter of how many hours late you will arrive, but a matter of how many days...

I would have thought that AIR NZ's first port of call if they start flying themselves into South America will be into Brazil to tap into the TAM network (who are also Star Alliance). Although I dont know what will happen when/if LAN and TAM merge.

Hoop

28-06-2011, 10:17 AM

Aircraft grounded for cash, not ash - analyst (http://www.stuff.co.nz/business/industries/5199168/Aircraft-grounded-for-cash-not-ash-analyst) by ROELAND VAN DEN BERGH

Quotes from Article

Forsyth Barr aviation analyst Rob Mercer said the high cost of fuel and the continuing effects of the global economic downturn meant most airlines were running at a loss in the second half of the financial year ending June 30.

Air New Zealand was also losing money in the second half of the year, but its domestic networks were highly profitable, Mr Mercer said. That explained the desire to keep flying, even though cruising at much lower altitudes to stay clear of the ash added about 10 per cent in fuel costs for its jets.
While grounding aircraft still incurred fixed costs, the impact on the bottom line was not as great during a period of losses compared with a time of high profits, Mr Mercer said.

"The decisions not to fly are easier if you are running at a loss, than they are if you are running at a profit. [Air] New Zealand probably came out of this with a lot more customer loyalty than Qantas," Mr Mercer said.

iceman

06-07-2011, 02:15 PM

Received the below comments from my travel agent today. He has been in the industry for a long time. I found the comments interesting so thought I'd share them here.

"Its amazing how the flights globally are filling up in the past two / three months it’s a different year than normal. Air NZ are doing very well and appear to be in the leading bunch of Airlines World Wide, they are doing all the correct things in their operation thus lots of Brownie Points with customers and we receiving great reports back from clients who are regularly fly with them."

Discl: Hold Air NZ

minimoke

06-07-2011, 02:45 PM

Management of AIR either gullible, narrow thinkers or worried about cash given their withdrawal from the EMA on the back of Alasdair Thompsons comments which have now seen him fired.

06-07-2011, 02:55 PM

Management of AIR either gullible, narrow thinkers or worried about cash given their withdrawal from the EMA on the back of Alasdair Thompsons comments which have now seen him fired.I would say they have their finger on the pulse of populous NZ but then they have continued with Rico who likes NZ Bitches (beaches) and our nice bushes

tim23

06-07-2011, 05:31 PM

Gee Minimoke - that seems harsh, I think the CEO is really well regarded, he was one reason I decided to buy shares recently.

minimoke

07-07-2011, 08:17 AM

Gee Minimoke - that seems harsh, I think the CEO is really well regarded, he was one reason I decided to buy shares recently.A bit harsh perhaps but two questions:
Why would AIR become embroiled in this media led spat? (If you hear the whole interview Thompson is actually an advocate for equal pay)
Why would it withdraw from the EMA?

It didn't have to do either.

Jay

07-07-2011, 10:09 AM

It sounded to me that AIR now had (or were looking for) an "excuse" to get out of the EMA for whatever reason

Disc - Do not hold at present

patrick

07-07-2011, 10:37 AM

Must be making heaps.
$1900 for 2 one way Auckland to Cairns.. without food!

percy

07-07-2011, 11:09 AM

tim23

07-07-2011, 08:07 PM

Miminmoke - you need to watch the interview again I think AIR have been spot on

modandm

20-07-2011, 12:37 PM

A nice little run for AIR up to touch $1.20 today. I see there have been a number of new holders on this board coming in at levels around 1.10-1.15 and I congratulate you. As evidenced by my posting I am a strong believer in AIR and it is my largest holding at present across both asx and nzsx stocks.

Looking at the chart it is now clear that the beginning of an uptrend is forming. I would appreciate any technical views on the stock.

My view is that the august results announcement will be a catalyst for further improvement in the shareprice. I am not expecting a great result - no doubt the 2nd half has been absymal, but am looking for strong guidance for fy12 stemming from:
1. Strong forward bookings for the RWC and into the all important Summer. (most of the companies profits are generated in a few busy months)
2. Yield uplift on LH routes
3. Increased market share and profits on the TT (early indications from VBA alliance)
4. Further guidance around fleet changes (including 777-200er refurbishment) and potential new routes.
Manchester is looking the most likely next new route at this stage.

Mostly a rerating of the stock towards a P/Book of 1 and a PE of 14-16 on FY12 earnings. Taking the stock towards $1.50-$1.70

As usual I will be summarising the latest operating stats next week. Looking back you will remember I was quite disappointed with the May figures - lets hope for a better June.

BIRMANBOY

20-07-2011, 04:28 PM

Yes, sitting on a nice profit....always tempting to sell and run ...but will hold as I think has quite a bit more movement yet long term and I am really after dividends anyway.
A nice little run for AIR up to touch $1.20 today. I see there have been a number of new holders on this board coming in at levels around 1.10-1.15 and I congratulate you. As evidenced by my posting I am a strong believer in AIR and it is my largest holding at present across both asx and nzsx stocks.

Looking at the chart it is now clear that the beginning of an uptrend is forming. I would appreciate any technical views on the stock.

My view is that the august results announcement will be a catalyst for further improvement in the shareprice. I am not expecting a great result - no doubt the 2nd half has been absymal, but am looking for strong guidance for fy12 stemming from:
1. Strong forward bookings for the RWC and into the all important Summer. (most of the companies profits are generated in a few busy months)
2. Yield uplift on LH routes
3. Increased market share and profits on the TT (early indications from VBA alliance)
4. Further guidance around fleet changes (including 777-200er refurbishment) and potential new routes.
Manchester is looking the most likely next new route at this stage.

Mostly a rerating of the stock towards a P/Book of 1 and a PE of 14-16 on FY12 earnings. Taking the stock towards $1.50-$1.70

As usual I will be summarising the latest operating stats next week. Looking back you will remember I was quite disappointed with the May figures - lets hope for a better June.

modandm

26-07-2011, 05:10 PM

June is about your typical total pax month at 1056. Substantially more than May 892 - but well less than peak months of 1200+.

All % are pax growth yoy (revenue passenger kilometres) and Load factors unless otherwise mentioned.

total pax 2.3% improvement but still below trend of 5%+ for 2011 :mellow:

Domestic 3.2% w 80.7% LF - A weak result vs trend but LF is okay :mellow:

Tasman/Pacific 13.1% w 85.5% LF - Great result! Ash cloud benefits to AIR on display :t_up:

Long Haul overall (8.7%) - improvement from Japan offset by weaker performance for UK/USA :mellow:

UK/USA (6.3%) w 88.6% LF - disappointing growth :t_down:(why? people waiting to come for RWC instead?) Load factors excellent very very good capacity management. :cool:

Asia/Japan (8.9%) w 78.6% LF - improvement here beyond expectations and a good Load factor too. (capacity to Japan was significantly lower - matching demand) :t_up:

Asia ex Japan 1.0% w 79.6% LF - decent but below average ~3%. Good LF improvement from May. :mellow:

Yields:
Group - up 2% yoy :)
Short haul - down 1.7% yoy (prior were negative 3.2,2.8,2.6) likely this reflects selling high priced fares during ash cloud and unlikely to be sustained. :mellow:
Long Haul - up 4.3% yoy - have been consistent at 4.3%-4.6% for 4 consecutive months - 77W benefits here and good capacity management sustaining higher prices. :t_up:

Overall commentary:

A nice result with a great shorthaul performance due to the ash cloud. A poor UK/US balanced by some signs of improvement out of Asia and Japan that we have been waiting for. :t_up:

Rating 6/10 - A substantial improvement on the May numbers I thought were poor.

Domestic pretty steady as usual - nothing to write home about. Looking to a good Sep-Oct.

Looking forward I expect ongoing lower yields on shorthaul - price scanning reveals fares are really affordable (e.g middle of RWC return from sydney for ~$400-$440) and even Xmas and NY fares are pretty cheap vs what I am used to seeing from AIR. I expect Sh yields to average -3% over next few months at least before stabilising (when?). My hopes are that this is an indication that AIR feel the strategy is paying off (i.e lower yields + higher LF > higher yields + lower LF). It will be interesting to hear at the Results presentation how successful Seats to Suit has been in dollar terms though we may not get that info.

Longhaul was a bit sick overall this month and the deteriorating pax growth on US UK should be cause for concern. Japan still poor but good to see some turnaround.

modandm

29-07-2011, 04:36 PM

credit suisse - $1.34 (20% discount to valuation $1.68 reflects jet fuel yield and fx risks)
DB - $1.55

Mac Bank - yet to update.

percy

29-07-2011, 07:40 PM

credit suisse - $1.34 (20% discount to valuation $1.68 reflects jet fuel yield and fx risks)
DB - $1.55

Mac Bank - yet to update.

Craigs research 26/7/11 Price target - 12mths $1.55.

iceman

30-07-2011, 09:47 AM

Thanks for your good summary and comments modandm. I have just booked 2 trips to Europe in the next 2 months and was surprised at how highly priced AIR is compared to say Singapore and Thai.

waterboy

05-08-2011, 03:56 PM

Well my timing was lucky for change sold my holding yesterday at 1.18 now at 1.11. Oil price down nicely overnight just in time for those world cup fans to come over which should be a good scenario for AIR but will it be reflected in a share price increase or are stocks just to scary right now to see any positive movement coming.

percy

16-11-2011, 08:55 AM

Well I believe one or all the 747s sitting at Auckland airport have been sold.
What upsets me is one has been sold to Israel,who will convert it to a freighter.why AIR leaves frieght to Emmerites and others beats me.They should have converted one to frieght themselves.

percy

16-11-2011, 12:59 PM

[QUOTE=belgarion;361117]Percy, the largest airline fleets in the world are (or used to be) frieght and parcel ones. The two types of businesses - passengers vs freight - are very, very different. Thus just few 747s isn't going to make a very good freight business.[/QUOTE

every night Emmerits are flying out of ChCh with a full load of freight to Sydney.does not matter whether they have a paasenger on board or not because freight pays.Qantas are also carrying a huge amount of freight out of Chch to Sydney.
Air NZ are not,because they do not have the freight capacity.Neither qantas or emmerites are freight airlines.

Jay

16-11-2011, 01:05 PM

percy

16-11-2011, 01:22 PM

modandm

17-11-2011, 06:47 AM

I should point out a good friend of mine who follows shares works for air new zealand in ChCh,and he tells me AIR are missing out on this huge amount of freight going to Sydney all the time.Now I believe the 747 was sold for $40mil and will cost very little to convert to a freighter.Had this been done,instead of sitting on the ground at Auckland AIR could have had this market sown up.

your friend should know better percy. There are enough passenger aircraft crossing the tasman to carry frieght that there is noo need for a freighter (except DHL's own).

the 777-300er carries 40% more freight than a passenger 747 and emirates are flying a number of them daily from nz to sydney with an average passenger load of around 50-60%, well below what is economic. They have MASSIVE excess capacity to carry frieght and try and make up of the losses on the route. AIR can't and doens't want to compete in this market because they will lose money - AIR actually entered an agreement with emirates to cooperate by acting as a freight reseller for Emirates - effectively clipping the ticket.

Further AIR had a freighter and got rid of it. You can be assured they did the numbers.

modandm

17-11-2011, 06:54 AM

To anyone else invested in AIR - we can look forward to operating stats next week as well as the Annual Analyst day presentation - which tends to be the most interesting of the year. The september stats were disappointing indicating people were not travelling due to RWC and no school hols. So we will need good stats for october and november.

Air has also recieved its 4th 77W and 3rd A320 (domestic) - the A320 brings 20% lower seat mile costs to the 737-300 so having 4 in the fleet by end year should really get the domestic business a kick. The transtasman business and seats to suit has been so strong they are adding another a320 - back from lease and with Virgin super busy in Aus, Air is flying virtually all the capacity transtasman. With Pac Blue's shoddy product I wish virgin would move over and stick to aussie. Their 737's are better for short hops anyway where the A320's suit the TT perfectly.

Key things we will be looking out for are:
- Longhaul review outcomes
- Update on trading through RWC and guidance

modandm

17-11-2011, 06:59 AM

Now I believe the 747 was sold for $40mil and will cost very little to convert to a freighter..

Really if they got $40m for it I would be over the moon. They bought one for $15m not long ago. Also conversion to freight costs $18-$25 million USD from what I understand.

percy

17-11-2011, 08:27 PM

Really if they got $40m for it I would be over the moon. They bought one for $15m not long ago. Also conversion to freight costs $18-$25 million USD from what I understand.

Hope to catch up with my friend over the weekend so I can add "some facts". $40mil is wrong.sorry.

percy

21-11-2011, 12:38 PM

Saw a Qantas freight plane leave Auckland Airport the other weekend - so may operate out of Auckland as well.
Thre are a number of freighters that fly out of Akl. Maybe with only 1 or 2 planes cannot compete??
This service started about 4 years ago.Sydney,Auckland,christchurch,Sydney.was 4 days a week using a 767.they then brought a 767-200 from USA,which ran 5 days a week. They have now brought a freighter x ANAreg VH-ERF which works 6 days a week.Qantas are more than happy with the loads they are achieving.

percy

21-11-2011, 12:47 PM

your friend should know better percy. There are enough passenger aircraft crossing the tasman to carry frieght that there is noo need for a freighter (except DHL's own).

the 777-300er carries 40% more freight than a passenger 747 and emirates are flying a number of them daily from nz to sydney with an average passenger load of around 50-60%, well below what is economic. They have MASSIVE excess capacity to carry frieght and try and make up of the losses on the route. AIR can't and doens't want to compete in this market because they will lose money - AIR actually entered an agreement with emirates to cooperate by acting as a freight reseller for Emirates - effectively clipping the ticket.

Further AIR had a freighter and got rid of it. You can be assured they did the numbers.

I beleive AIR got rid of their freighter , {a DC 8 series 50}which was the wrong aircraft 20 years ago.
Emirets out of Auckland and Chtristchurch carry up to 40 to 50 tons a day.This capacity can be booked up months in advance.
Qantas and Singapore carry 100 ton out of each ChCh/Auck a day.Because AIR are full of passengers their capacity is only 2 tons per plane.ChCh with fish/meat is stretched.

Jay

21-11-2011, 12:47 PM

This service stated about 4 years ago.Sydney,Auckland,christchurch,Sydney.was 4 days a week using a 767.they then brought a 767-200 from USA,which ran 5 days a week. They have now brought a freighter x ANAreg VH-ERF which works 6 days a week.Qantas are more than happy with the loads they are achieving.

Thank for the info percy

modandm

23-11-2011, 01:42 AM

I beleive AIR got rid of their freighter , {a DC 8 series 50}which was the wrong aircraft 20 years ago.
Emirets out of Auckland and Chtristchurch carry up to 40 to 50 tons a day.This capacity can be booked up months in advance.
Qantas and Singapore carry 100 ton out of each ChCh/Auck a day.Because AIR are full of passengers their capacity is only 2 tons per plane.ChCh with fish/meat is stretched.

re AIR NZ freighter - the 747 RTW freighter service commenced in 2005 and ended in march 2009 - pretty much ends the discussion.

Air NZ 747 freighter - http://www.airnewzealand.co.nz/press-release-2005-round-the-world-1st-stop-in-auckland-05apr
http://www.airnewzealand.co.nz/assets/Resources-AirNZ/Investor-Centre/2010-interim-results-presentation.pdf - termination of lease march 09

But Percy - thanks for the info - the point your friend brings up is interesting isn't it. I think the problem for Christchurch is that Air NZ only flys a320's there which as you say are limited in their freight capacity. Focusing on Chch origin trans tasman

Emirates with the 777-300 40-50 tons trans tasman sounds right
Qantas freight 767 maybe 50tonnes a trip tasman. 1 trip per day.
Air NZ a320 under 10t daily.

Then to asia
SQ flys the 777-200 to Singapore - and would carry 10-20 tons max I would guess.

So I guess from the perspective of a farmer paying air freight from CHCH you would bemoan the lack of competition. Still there is not much of an under supply. Should emirates go twice daily the market will be oversupplied. Hardly room for NZ to employ a dedicated 767, much less a 747. What could happen is AIR upgauge a a320 to a 777 but this is unlikely to happen as the 777s are needed for long haul from akl.
Out of Auckland the picture is alot more balanced -

NZ dominates to USA/Canada maybe 20-30tonnes daily
NZ dominates China - maybe 10-20tonnes daily
NZ has a presence trans tasman with widebodies to MEL, BRI but codeshares with EK to SYD because 2 767's to SYD don't cut it.
EK dominates TT with multiple 777s and a380
SQ KE TQ carry 10-20t per flight on to their hubs unopposed
QF no presence besides freighter

When might it change?
when 787s replace 767s there will be a big lift in cargo AKL-SYD
if AIR converted a 767 to 767ERF to face up to QF

thats pretty much it.

I think we both understand now that there is no economic justification for an AIR freighter. It costs too much and cant compete with EK once one off spares training pilots are taken into account. Chch will continue to go underserved im afraid

Jaa

23-11-2011, 05:58 AM

Modandm is right, freight is really only a bonus to airlines.

I would say today's announcement of Air NZ's new OneSmart Airpoints/MasterCard card is more significant. Loyalty is where the majority of Qantas's profits come from and the OneSmart card looks pretty compelling. I am travelling overseas at the moment and no ATM fees would be useful. The key decider for me will be the exchange rates used as this is where the banks make a lot of there money. NZ bank spreads are often 2% or more. I found this bit of information which is intriguing but just a tease.

What is the exchange rate when I transfer money between currencies on my OneSmart Account?

Answer: Specialist foreign exchange providers are worked with to obtain great exchange rates at the time of your transfer. You can get a quote or view up-to-date exchange rates by logging in to your OneSmart Account and selecting Manage Wallets.

Have been disappointed with Air NZ's performance of late which I think has been heavily affected by the earthquakes in Christchurch and to a lesser extent Japan. Any long term structural shift away from Christchurch to Auckland is bad news for Air NZ as it reduces the need for people to fly domestically regularly, especially high value business travellers.

percy

23-11-2011, 07:45 AM

modandm,
thank you for the post.most informative.No more from me about a freighter.!!!!! I did also learn that Emirates takes that freight a lot further than Sydney.

24-11-2011, 07:17 AM

I would say today's announcement of Air NZ's new OneSmart Airpoints/MasterCard card is more significant. Loyalty is where the majority of Qantas's profits come from and the OneSmart card looks pretty compelling. I am travelling overseas at the moment and no ATM fees would be useful. The key decider for me will be the exchange rates used as this is where the banks make a lot of there money. NZ bank spreads are often 2% or more. I found this bit of information which is intriguing but just a tease.I agree the card looks promising. there is an account fee (though not always payable and cheaper than a credit card). I also think I did see the exchange rate (check the account fees page maybe). I think it said Mastercard and 2.5%????

modandm

24-11-2011, 09:13 AM

Modandm is right, freight is really only a bonus to airlines.

Have been disappointed with Air NZ's performance of late which I think has been heavily affected by the earthquakes in Christchurch and to a lesser extent Japan. Any long term structural shift away from Christchurch to Auckland is bad news for Air NZ as it reduces the need for people to fly domestically regularly, especially high value business travellers.

you and me both Jaa. Although I disagree with you on the causes.

From my ss which tracks operating stats:
- Domestic RSK growth has averaged 4.6% over the 8 months since the quake
- Tasman Pacific RSK growth has averaged 7.9% over the same
- Longhaul RSK growth has averaged -6.8% over the same

My take is that the domesic and trans tasman business are in rude health (even after chch) - as good as they have ever been. The intro of grab a seat and s2s has really stimulated demand across both businesses and capacity is set to increase significantly over the next 4 years with the A320s and new ATRs domestically.

Its the Intl business thats slow - and its not just japan. The Uk and US are having a poor year with the current economic woes. Looking forward to the preso this week and hearing about upcoming changes to fix the longhaul business.

As you say increasing loyalty and that business is great for the co. The new cards are a good idea - and the trial of oneup will be interesting.

No doubt about it the level of innovation at NZ is fantastic - this follows the success of reverse auctions grabaseat et al. Lets see it drive SH value over the next year.

modandm

30-01-2012, 12:25 PM

A belated update from me on the investor presentation, fallout, recent operating stats, and outlook - a month before the interim results announcement.

Also - read my outlook at the end for new destination predictions including a south american destination - something I know some of you have long been waiting for

INVESTOR PRESENTATION SUMMARY:

- NZ present on loyalty strategy (onesmart)
- Discuss a/c funding strategy
- Business update:
- Domestic recovering well from Chch and continuing to be company's goldmine, new A320s going well and ATR-600 ordered, looking to grow
- TT & PI sustainable profitability :t_up: amazing VBA alliance going well, new destinations 2012 (Hobart, Canberra or Newcastle my guesses)
- Intl - little said of value - more later

Trading environment: Commentary that operating conditions remain "challenging" and overall still expect "some improvement" on 2011 depending on economic conditions.

- Partnerships explained types and NZ experience and seeking to grow partnerships

Long Haul: target $110m profit improvement by FY15 - interesting wheel of sources keys are fleet (787), ancil rev(more travel packages i think), alliances (ANA announced - whos next?), also grow Pac rim business
787-9 - leisure configuration expected (seats IFE food) - a bit cryptic here. Clearly the config will be high density low premium seatcount relative to 777-300er but how will IFE and food be "leisure" orientated? Can't imagine buy on board for flights to China/Japan.
Grow Pac rim business - China deepen and grow (will they increase agreement from 7 weekly?), recover Japan (of course), explore new markets in South America, Asia, USA - (here more indications of ambitions and priority I think)
Fleet - Noted opportunity to replace 777-200 with 787-9 (1st time I have seen acknowledged but a clear must do)
Cost base - Renewed focus on cost base (long overdue in my opinion - must be tackled and redundancies inevitable unfortunatly)

FALLOUT

Analysts from all major brokers downgrade FY12 estimates on the back of management downtalking results. Clearly commentary from management is less optimistic than at FY11. Recovery taking time and ongoing EU weakness having an impact.

I won't break down every research report but most have downgraded target from $1.30-1.50 to $1.10- 1.20. Very disappointing for all shareholders.

And the shareprice falls from around $1.10 to around 85c-90c and is currently at around 90c. More research comes out from DB saying that AIR is now at the same discount to BV as it was in GFC 2008.... around 0.6 P/B. Actually DB still have $1.43 12 month target so what I wrote above re target prices was a bit worse than is the case. Concensus is now $1.27 - must have been around $1.40+ prior to preso. CS at 1.15 UBS 1.19 GS 1.20.

Interesting that DB has (i think) the highest target price and is also the IB advisor for AIR (see VBA purchase).....

RECENT OPERATING STATS

Quick comments only on Nov and Dec stats.

Overall yoy growth is negative 1% roughly
Domestic growth anemic at 1.8%
tasman pacific growth slowing - seats to suit now 15 months old so growth slowing as last year growth was 13% for nov and dec (anything above 4% is good now)
longhaul growth -5% - this is the big weight on the business. North America not growing (but profitable) and same sad story for Japan Asia UK.

Really its just the same story every month. The sooner the longhaul review takes effect the better.

MY OUTLOOK ON THE LONGHAUL REVIEW CHANGES EXPECTED TO BE ANNOUNCED SOON

1st: Redundancies in the UK office and further tie up with Virgin Atlantic (maybe virgin holdiays take over some functions?) other redundancies in head office no doubt. -My sympathies to anyone affected.

2nd: As indicated recently a reduction in flying to the UK (not sure how this will be implemented most likely just freqency reductions and seasonal increases

3rd: I am expecting an announcement imminently of new destinations, possibly even 2 new longhaul and at least one trans-tasman. My pick is EZE 3x weekly with the 777-200 (ETOPS 330 on 777-200 coming soon!!! FINALLY) and Taiwan to resume services 2x week (its out on a limb but with EVA joining star makes sense) otherwise can't figure out where else they could go in Asia. India is often talked about but it is too far for direct service without the 787.

4th: I should mention NZ will now codeshare with ANA - JAL dumped. Great news as ANA now pre-eminent Japanese airline so lets see what impact this had on Jap routes - comes into place in march 25th

FINAL NOTES

Interim result should be interesting looking forward to it - lets hope its a better one than expected by extrapolations of commentary in November.

Thanks for reading - comments discussion welcomed.

Blendy

30-01-2012, 12:51 PM

modandm

30-01-2012, 09:17 PM

thanks - i always appreciate your in-depth analysis on AIR.

i'm being a bit lazy - is the investor presentation online yet? I'm about to write an essay for my MBA with a focus on AIR and this is just the sort of info i'm after.

yes it is
http://www.airnewzealand.co.nz/investor-centre-presentations

The 2011 analyst presentation was not as interesting as I expected. I was hoping to hear outcomes of long haul review but they have kept quiet over christmas and the announcement will be in February (likely prior to Interim results with rationale detailed further in interim results presentation). Exciting times

percy

30-01-2012, 09:56 PM

Exciting times? I hope so as it has been a bit depressing of late.
Would it be time to have Ralph Norris on board again? Would make a fine chairman.

corporateraider

30-01-2012, 09:58 PM

Modandum
EZE ? Ezeiza -Buenos Aries?

31-01-2012, 08:34 AM

modandm

31-01-2012, 10:29 AM

Rumour is out (on Stuff I think) that Rob Fyfe will resign before the pending Govt float of 25%.

He is seen as a "rock star CEO" (not my phrase) so assume the SP will go down on anticipation and on announcement.

He made CEO in October 2005 - how has the company actually gone (performance wise) under his guidance. It hasn't gone bankrupt like many of the American ones but it did require a Govt cornerstone to give it stability.

Yes it has been floating around for a while - he was turned down the CEO gig at Fonterra. I don't think the shareprice will be impacted. The "rockstar" is more to do with his fashion sense and popular appeal than anything. He does have his detractors though - who suggest NZ has been to conservative and not taken advantage of its rights to fly from australia to asia and the us.

My personal view is that he has done a great job creating a positive culture which is so important, and steered the ship safely through the GFC, dealt well with the loss of an A320 and NZ souls aboard, apologised for erebus, and really made AIR the most trusted brand in NZ - a wonderful achievement. He also presided over S2S which has been a great success.

He has however not done enough to improve the financial performance by making the tough decisions, which are finally being fronted up to. The non fuel cost per seat mile of AIR is still to high. This only really applies to the international business - but when you are competing globally having a competive cost base is essential.

I hope Rob McDonald the present CFO is appointed to replace Rob Fyfe. He is really the brains behind the business and has his finger on the pulse - knows all the details as you would expect. Fyfe often defers to him in analyst questioning and generally seems less in touch with the operations of the business. I'm not a expert on being a CEO and I guess his focus is more on strategy, culture, and who knows what else but my feeling is that NZ needs an operator to squeeze every dollar of profit out of it. As we know with Airlines it can be like blood from a stone. But who better than a aviation wise accountant who knows everything about the company already.

Let us pray they don't bring in some fool who doens't understand NZ culture values and what makes AIR special.

modandm

31-01-2012, 10:31 AM

Well, the saying goes that you don't buy before you know who the new CEO is, and what they plan is.

Others say that the resignation of a good CEO is a reason to sell or reduce your holding.

Be interesting to see what happens with the SP over the week.

Rob Fyfe has been at AIR for a while - he himself says it's important to let someone else with fresh ideas and new vigour take over. Stale CEO's are bored and can often be toxic for a company.

modandm

31-01-2012, 10:37 AM

Wow just read the announcement - sorry to be spamming the thread. Fyfe will step down in 2013.

http://theflyingsocialnetwork.com/archives/992

And folks - it seems like I called it re Rob McDonald based on:

"Rob has also been clear with the Board that he did not want to become a road block to the career aspirations of the executive management team and the decision to leave at the end of this year will create an opportunity for growth and renewal within that team at Air New Zealand"

"we believe there are some very strong candidates from within Air New Zealand’s existing executive management team"

Both quotes - Chairman NZ

Hoop

31-01-2012, 10:49 AM

Yes the rumour been around for a while now and I think Mr Market has known this and it is already factored in to the shareprice.
AIR currently down 1c to 90 (-1.1%) but thats more likely due to investor reactions to the "European noise" as the NZX50 index is down -0.6%.

However............. it disgusts me to read it in the Newpaper before the official shareholders announcement at 10.05am today....Come-on you guys at the NZX show some respect for the shareholders..they should officially know before it hits the press.

Zaphod

31-01-2012, 11:17 AM

However............. it disgusts me to read it in the Newpaper before the official shareholders announcement at 10.05am today....Come-on you guys at the NZX show some respect for the shareholders..they should officially know before it hits the press.

IMO this information should be distributed to all parties at the same time. No preference should be given to any one party, whether they are current shareholders, future shareholders or otherwise.

macduffy

31-01-2012, 11:56 AM

However............. it disgusts me to read it in the Newpaper before the official shareholders announcement at 10.05am today....Come-on you guys at the NZX show some respect for the shareholders..they should officially know before it hits the press.

Quite so, but are you sure that it's the NZX at fault here?

Do we know when the company advised the NZX?

Hoop

31-01-2012, 01:05 PM

Quite so, but are you sure that it's the NZX at fault here?

Do we know when the company advised the NZX?

Fair comment MacDuffy..I could be blamimg the wrong company, if so I hope the NZX is vocal about the late announcement from AIR to the NZX

gonzo56

03-02-2012, 11:16 AM

What's up with the AIR SP? Their NTA/Share are worth more than their current share price!

So you can buy a share at $0.915 and own a company that has tangable assets worth $1.32 per share.
Their Dividend Yield alone is quite good at 6%, far more than the interest you would get at a bank!
And they are going to pay out very soon with a 2.5-3 Cent dividend in March. :t_up:

We need more buyers in NZ! Or is there something I don't know about.. (other than the slowly recovering economy!)

Newman

03-02-2012, 12:08 PM

Where did you get this number? Air NZ has not made an announcement to the market on its accounts.

What's up with the AIR SP? Their NTA/Share are worth more than their current share price!

So you can buy a share at $0.915 and own a company that has tangable assets worth $1.32 per share.
Their Dividend Yield alone is quite good at 6%, far more than the interest you would get at a bank!
And they are going to pay out very soon with a 2.5-3 Cent dividend in March. :t_up:

We need more buyers in NZ! Or is there something I don't know about.. (other than the slowly recovering economy!)

03-02-2012, 12:10 PM

They loss a million a week on their long haul. Those planes would make up a significant part of that $1.32 NTA.

There is also an overhang as the Govt has said it will sell 25%. If they are struggling to find buyers for the current 25% which is floated (indicated by the low share price), how are they gong to find buyers for another 25%

Disc: Hold and believe they are currently undervalued.

gonzo56

03-02-2012, 12:33 PM

Where did you get this number? Air NZ has not made an announcement to the market on its accounts.

It's the fiscal year ended June 30, 2011. It's all over the net CNBC's Christine Tan caught up with CEO Rob Fyfe to find out what is his long-haul strategy (http://www.cnbc.com/id/44811302/Air_New_Zealand_CEO_International_Network_to_Make_ Profit_by_Year_End). If you are referring to the dividend, that is just a guess based on the last few.
If you are referring to their NTA/Share, which will mostly be their planes. Check this out.

3802

There is also an overhang as the Govt has said it will sell 25%. If they are struggling to find buyers for the current 25% which is floated (indicated by the low share price), how are they going to find buyers for another 25%.
I have no idea...

gonzo56

06-02-2012, 01:30 PM

Wow Sparky, 70% on what it is today, I do like the sound of that. It was odd though that when the CEO news was formally announced the SP went up 2% in the middle of the day...
I would say your nervousness would be valid though it is looking like we will see a rebound, for how long it continues who knows.

Jaa

06-02-2012, 02:02 PM

Thanks for the write up modandm, always insightful.

I see their new route is to Bali in the NZ winter. I was going to suggest this as the next logical addition to their asian routes. I flew to Bali 1.5 yrs ago with Virgin from Wellington via Brisbane and the flights weren't fantastic or cheap. 6 hours is a long time on a cramped 737 without even free water and no entertainment! Also the 10 hrs lay over in Brisbane on the way back wasn't ideal.

Positives

Air NZ will be #1 on the route (used to be their key requirement)
Great destination
Alternative way into Asia and means of connecting with the Asian low fare operators as they all fly to Bali.
Will fit in nicely with backpackers round the world tickets which usually go Europe>Asia>Aus/NZ>Sth or Nth America>Europe

Negatives

Not much return demand from Indonesia but who knows they could create it. Indonesia has plenty of people amongst its 200m that can afford to fly to NZ and that number is increasing rapidly.
No suitable Indonesian code share partner available as almost all their airlines are on the European black list! Garuda came off it a few years ago.
A leisure not a business market. Seats to suit will help.

Only 3 months a year so small beer for now but has potential. Might be able to maintain a year round frequency albeit via Australia with the Virgin codeshare.

tony64peter

16-02-2012, 04:05 PM

Qantas to stop flying AKL - LAX from May 6. This will give AIRNZ a monopoly on this route. Should make it more profitable on the North American routes.

modandm

24-02-2012, 05:25 AM

Air NZ new destinations - Bali

Great route imho - represents a shift in NZ thinking towards tourist destinations and lower fares which it has shown it can make money with on trans tasman. This route will be popular with students young people and hopefully some retirees up in Business at those reasonable fare levels. Thailand will be the big loser as $1000-$1200 return is cheaper than going to Bankok/Phuket, and for a similar experience. It is also 2/3rds as far so NZ costs should be lower. I see this as a great way of further marginalising Jetstar's AKL-SIN flight as this flight is used by many holidaymakers going to Bali and Thailand. It also impacts Jetstar's indirect offering via Australia. NZ is really going after Jetstar with S2S etc and now grabaseat + bag domestically. I have always wanted to check out Bali - but always was too hard compared to Thailand - no longer.

Sunshine Coast
Good to see NZ/VAH looking to continue to grow the TT. Can't see this one lasting year round im afraid though because realistically Brisbane is very close and Sunshine Coast is not as big as Gold Coast (by a long way). I would have preferred NZ to head to Newcastle but maybe further down the track. Agian NZ trying to further build the AKL hub by offering Aussies one stop -LAX/SFO/YVR without going through SYD. The connection to Queenstown also mentioned.

Qantas pulls out of AKL-LAX
Great news for NZ. This should turn around the trend of declining US RPKs. NZ has mentioned increasing capacity and I would expect NZ 5/6 to go daily year round. This still leaves a capacity shortfall but with United IAH-AKL supposed to come online late this year supply will return to normal. I am not expecting Jetstar to launch this route as some have suggested - I think it is too far for a330-200 in Jetstar config, they don't have the aircraft spare, and is a premium heavy route (which doesn't suit Jetstar). Jetstar honestly are getting walked on by NZ on the TT market, and AKL-SIN is not performing, I can't see them trying again with a330 vs 777-300er AKL-LAX. I should mention that I think jetstar is likely doing alright on the domestic market (financially if not by reputation).

Jan Stats:
Not as bad as some might think - sure demand was down on US routes but demand to asia was up 10% excluding Japan (NZ added services to PVG and HKG). Yield was up and Load factor fell but was still around 89% - hardly a bad result. I think some commentators just look at the headline -4% long haul number and get excited. Anyway domestic and TT holding up well. Lets see what they come out with in the interim results.

modandm

24-02-2012, 10:23 AM

Below expectations - disappointing. The company has been too slow to react and cut costs and cut unprofitable routes from the international business.

787-9 - now further delayed - new delivery schedule agreed and options converted, looks like they will be refitting the 777-200ers.

EDIT: listened to the webcast - 3 787s in CY14 then 3 in CY15. So no real delay here.

wbosher

24-02-2012, 01:44 PM

Bad news must have already been priced into the SP, doesn't seem to have had too much effect on it. Not too bad considering...

24-02-2012, 02:35 PM

The bad news was expected. The kwy thing is what they are going to do about it. A steady shareprice suggests they are still looking for the silver bullet but in the mean time will keep gong with the basics (staff cuts, new routes to Bali and Sunshine cost etc).

wbosher

25-02-2012, 10:02 AM

D B Cooper

25-02-2012, 10:11 AM

Completely off topic but does anybody know what happened to Rmbbrave the starter of this thread? He was an informative interesting poster who I think lived in Fukuoka (Japan) and was going to live in Auckland?

percy

25-02-2012, 11:07 AM

This mornings The Age reports that Virgin Blue intend to spilt the company in two.One company doing domestic, the other international.
AIR's 20% holding should ensure they are in a good position to take up any opportunities.I would expect they would look seriously at VB's domestic business.

Hoop

25-02-2012, 11:55 AM

From a TA perspective, it looks like the 85c support is holding up. It's been tested three times now and keeps bouncing back. Things can't get too much worse, only up from here?

Might be a good time to get in. :)

Hmmmm had crossed my mind as well WB....Yes as you said in your earlier MR Market has already factored this result in...it seems the market corrected itself around the 22 November announcements.
The complete lack of interest from investors both buyers and sellers shown by very low volumes trading since July last year is quite startling.
Once yahoo updates fridays NZX data...I may chart it...the lack of volume is fascinating. I will research this area.

brucey09

25-02-2012, 03:18 PM

Snrs.
Mr Fyfe is called a top New Zealand leader - Where has the share price from in last 5 years? Is he to do this for Telecom? Was he ever at University with to MS Gatting?

Lion

25-02-2012, 04:18 PM

Snrs.
Mr Fyfe is called a top New Zealand leader - Where has the share price from in last 5 years? Is he to do this for Telecom? Was he ever at University with to MS Gatting?

Snr brucey, I know English not your first language, but maybe you please try say that again. me no comprend just what you say. Gracias, senor

Animeart

26-02-2012, 09:18 PM

Surprised that you didn't like the Rico campaign but liked the new seats. I heard exactly the opposite. Certainly not looking forward to flying on the new B777-300s, even the majority of the crew I spoke to hate it. Don't even get me started on the so call "new uniform". Anyway, I reckon Fyfe could've handled last year's union issue a lot better. Still too much internal bickering for my liking.

Remember what Buffet said? If you ever feel like investing in an airline, just lie dowon until the feeling goes away...LOL.

winner69

26-02-2012, 09:31 PM

suppose this chart has a story ot two to tell ,,,,, starts just after we bailed it out .... a good investment?

winner69

26-02-2012, 09:39 PM

Interesting the charismatic with the colourful ties didn't do too much damage to the shareprice in his tenure .... 110 when he started and only down to 86 now

Jaa

28-02-2012, 03:31 PM

Air NZ are making their first charter flight to Buenos Aires to take the All Blacks aver to play Argentina. Nice bit of PR to build up the brand and destination before launching a regular commercial service?

With ETOPS 330 Buenos Aires is now within range of their 777s, this is not my area though and will be interested to see what kind of plane they use. I think they could make the route work with 747s as their competitors fly A340s and thus are not going to be at much of a cost disadvantage. Anyone know when Air NZ plan to retire the last of their 747s?

What I would like to see is a service from Auckland to Sao Paulo (GRU) via Buenos Aires. The demand and the money in South America is now unquestionably in Brazil and Sao Paulo city has the population of Australia. With our beaches, laid back lifestyle, and relatively cheap english schools we are a popular destination for Brazilians. Air NZ could also source significant traffic out of Australia via connecting trans-tasman flights for this service.

Not sure if the Argentines would allow such a hop but can't see why not as it would be good for their tourist industry and is the same thing that Aerolinas do, currently stopping at Auckland on their way to Sydney.

One other problem is a potential lack of code share and alliance partners for the route. TAM, a member of the Star Alliance would have been a perfect fit but since the merger with LAN has been announced they have indicated more of a preference for the combined group to join Oneworld which leaves Star Alliance with only Avianca in South America.

Air NZ would be easily be no. 1 on the route with little real competition as Aerolinas is comfortably the worst airline I have ever flown with yet Aerolinas is also regularly full on this route!

modandm

29-02-2012, 01:37 AM

Air NZ are making their first charter flight to Buenos Aires to take the All Blacks aver to play Argentina. Nice bit of PR to build up the brand and destination before launching a regular commercial service?

I dont think NZ will want to use the 747 and will be hoping to get ETOPS 330 on the 200ers for the route. The 747's are too big and premium heavy - they are being kept for the SFO route really. The 747 are supposed to be retired in 2014-15 with the 767s. Part of the reason they are being kept is they use the same engines as the 767s. I could be totally wrong and NZ could launch 3 weekly 747's to EZE - but it seems like a big risk with nearly 350 economy and economy+ seats to fill and over 40 business class on a leisure route. The 200er with 26/30/244 is a better suited config and size for the route.

Regarding EZE vs GRU - I think AIR has realised GRU is a bit too far even for the 787. Also with Qantas switching to SCL EZE makes good sense since BA is a popular destination and Aussies will have Qantas 1 stop or NZ 1 stop to BA.

Regarding feed at the EZE end I think NZ could put a strong case to Gol, and with Avianca/TACA + Gol they would have their bases covered. If Gol is not interested then it may be some time before AV Brazil gets large enough. I don't see why Gol would say no - they are skyteam and there is no skyteam carrier in NZ/AUS for them to link with.

iceman

29-02-2012, 07:44 AM

Very interesting discussion Jaa and modandm. I desperately wait for Air NZ to start flying this route as I am tired of flying LAN via Santiago every couple of months and I will not fly Aerolineas long haul. Do either of you have any inkling as to when Air NZ would start this service ?

Jaa

29-02-2012, 10:35 AM

I dont think NZ will want to use the 747 and will be hoping to get ETOPS 330 on the 200ers for the route. The 747's are too big and premium heavy - they are being kept for the SFO route really. The 747 are supposed to be retired in 2014-15 with the 767s. Part of the reason they are being kept is they use the same engines as the 767s. I could be totally wrong and NZ could launch 3 weekly 747's to EZE - but it seems like a big risk with nearly 350 economy and economy+ seats to fill and over 40 business class on a leisure route. The 200er with 26/30/244 is a better suited config and size for the route.

As a leisure market albeit one with a lot of business growth potential (from Iceman and others!) wouldn't frequency be of less importance to say overall capacity?

Do you know of any other airline flying 777s with ETOPS 330 across open ocean modandm?

Regarding EZE vs GRU - I think AIR has realised GRU is a bit too far even for the 787. Also with Qantas switching to SCL EZE makes good sense since BA is a popular destination and Aussies will have Qantas 1 stop or NZ 1 stop to BA.

I wasn't suggesting they fly direct to GRU, rather make a stopover at EZE on their way to GRU. Brasil is the destination that could provide the premium traffic. Avianca Brasil might be ok for their purposes with maybe another alliance with flypluna.

As for when they might start the route Iceman, I have no special knowledge, can just see the opportunity and am reading the tea leaves.

Anonymous

29-02-2012, 11:15 AM

I would have thought that as a leisure market people would tend to go to South America for longer holidays and also probably more than one country. Therefore arriving at SCL, EZE or GRU wouldn't be so much of an issue for the tourists. As a business market I am pretty sure that that Chile would have the most business relations with NZ currently and Brazil would have the most potential. Argentina would be 3rd and slipping further away currently.

I would think it is the same for Australia and is precisely the reason why Qantas have canned direct SYD - EZE flights in favour of SYD -SCL despite being in direct competition with their Lan codeshare flying the same route via AKL.

In saying all this I suspect Air NZ will choose EZE (unfortunately for me).

Wouldn't it be great if the LAN TAM alliance went to Star Alliance instead of Oneworld as impossible as this may be....

modandm

29-02-2012, 11:46 PM

As a leisure market albeit one with a lot of business growth potential (from Iceman and others!) wouldn't frequency be of less importance to say overall capacity?

Yes true but exisiting competitors are flying near daily or daily. Your right that 3x747 would be roughly same as 4x777. Just a lot of pressure to sell those seats on those days is all. With the 777 they could be more flexible adding extra weekly flights or removing (and still have 3x a week which is really a minimum requirement).

Maybe Air NZ should just do the 747 2x weekly this year then 4x weekly with 777 next year once ETOPS is sorted

Do you know of any other airline flying 777s with ETOPS 330 across open ocean modandm?

Air NZ is leading the charge on this one Jaa. They were first to fly 180 and 240 etops also.

Blendy

04-03-2012, 08:53 AM

iceman

07-03-2012, 06:01 PM

Aerolineas Argentinas is due to join the Star Alliance next year.

Air NZ's 777's would be useless for such a long journey without alternate airports. Thus you really need a 4 engine jet to make it work.

Just received an email from Aerolineas announcing they're joining Sky Team, so time for Air NZ to start a Star Alliance service to South America !!

Jaa

13-03-2012, 12:09 AM

Just received an email from Aerolineas announcing they're joining Sky Team, so time for Air NZ to start a Star Alliance service to South America !!

There is a bit of talk about NZ being an air hub between Asia and South America. Singapore to Santiago only 21hrs flying time via Auckland! Guess Singapore Airlines might consider it, they fly to Buenos Aires via Barcelona at the moment but a Star solution would make more sense.

Another small win for Air NZ today with Air Asia X pulling out of Christchurch and Air NZ picking up their booked customers past May.
AirAsia X confirms end to Christchurch services (http://www.stuff.co.nz/business/6562935/AirAsia-X-confirms-end-to-Christchurch-services)

modandm

13-03-2012, 07:16 AM

There is a bit of talk about NZ being an air hub between Asia and South America. Singapore to Santiago only 21hrs flying time via Auckland! Guess Singapore Airlines might consider it, they fly to Buenos Aires via Barcelona at the moment but a Star solution would make more sense.

Another small win for Air NZ today with Air Asia X pulling out of Christchurch and Air NZ picking up their booked customers past May.
AirAsia X confirms end to Christchurch services (http://www.stuff.co.nz/business/6562935/AirAsia-X-confirms-end-to-Christchurch-services)

Hi Jaa - I think the NZ hub Asia-South America is overplayed by NZ and the media, its about the same time to GRU/EZE via DXB and we all know that NZ can't compete with EK.

NZ is a useful hub for Aussie NZ and maybe Japan, but if you think about connection times it seems NZ can either:

1. connect a service to incoming China/Japan flights by departing late morning from NZ and arriving evening into NZ - makes it hard for Aussies to connect though

2. depart late evening around 10pm as do almost all NZ longhaul international flights - allows good domestic connections and good for Aussies. Arrive early morning to allow onward connections.

Based on history NZ will go with the second option you would think - therefore not a good connection for SA-Asia.

Re AAX - must have been bleeding cash for awhile, Jetstar is losing mega-money too. And yet people call for Jetstar-LAX etc. Consumers just see the fare and have no idea what the costs of providing the service is - call NZ SQ etc a rip off... 800 return to KUL.... fuel alone would cost that

Jaa

13-03-2012, 10:47 AM

Hi Jaa - I think the NZ hub Asia-South America is overplayed by NZ and the media, its about the same time to GRU/EZE via DXB and we all know that NZ can't compete with EK.

NZ is a useful hub for Aussie NZ and maybe Japan, but if you think about connection times it seems NZ can either:

1. connect a service to incoming China/Japan flights by departing late morning from NZ and arriving evening into NZ - makes it hard for Aussies to connect though

2. depart late evening around 10pm as do almost all NZ longhaul international flights - allows good domestic connections and good for Aussies. Arrive early morning to allow onward connections.

Based on history NZ will go with the second option you would think - therefore not a good connection for SA-Asia.

Re AAX - must have been bleeding cash for awhile, Jetstar is losing mega-money too. And yet people call for Jetstar-LAX etc. Consumers just see the fare and have no idea what the costs of providing the service is - call NZ SQ etc a rip off... 800 return to KUL.... fuel alone would cost that

I also find it hard to take seriously... Though DXB to EZE is a 19hr flight alone! I had a look and the fastest flight time Sin > EZE is 28hrs via France, 26.5hrs flight time. So NZ at 22hrs flight time does offer a small saving.

iceman

13-03-2012, 11:03 PM

I also find it hard to take seriously... Though DXB to EZE is a 19hr flight alone! I had a look and the fastest flight time Sin > EZE is 28hrs via France, 26.5hrs flight time. So NZ at 22hrs flight time does offer a small saving.
Jaa & modandm. I fly about 30 Chinese guys every 60 days, bewteen Argentina & China. At present, we fly them with Lufthansa via Frankfurt or Air France via Paris. It would be quicker and easier (for the mainly no foreign language speakers) to fly via Auckland. We have looked into Aerolineas direct to Auckland and AirNZ from there to Beijing. It is pretty much the same price as Europe BUT the Chinese need Visas to travel through NZ, even if they don't leave the airport. For us, with 30 Chinese every 2 months and never knowing exact dates, it is impossible to use NZ as a hub. So we not only need Air NZ but also Immigration to come onboard and get real !

modandm

14-03-2012, 06:15 AM

Jaa

14-03-2012, 10:39 AM

from: http://www.gcmap.com/mapui?P=nrt-cdg-gru,+nrt-dxb-gru,+nrt-akl-gru

Tokyo - GRU is shorter distance via Dubai than Auckland 12500 vs 13000 miles

China - GRU is again shorter 11606 vs 13292 - alot shorter via DXB.

I find it hard to believe connection times at Auckland will be better than Dubai since in a few years EK will have 3 or 4 flights a day to most major cities such as PVG and GRU. And they will be cheaper for sure with 90 a380's on order.

Interestingly to EZE via Auckland is shorter than via DXB by over 1500 miles for Tokyo but not by much for China.

Singapore is about same for EZE and faster to GRU via DXB.

Things work better to SCL (Santiago) and onwards to Peru (S.A.'s major tourist draw). EZE looks similar for China and SE Asia and Brazil better via Dubai. From Japan you are better off going through America (LAX etc) on your way to South America.

The other point is that Asian tourists would probably prefer to stopover in NZ than Dubai. They have plenty of their own tall buildings to look at!

Zaphod

19-03-2012, 10:43 AM

Here's an interesting thread of mainly gold/gold elite airnz members complaining about the new upgrade changes and how they will now switch to other airlines instead for long haul....
http://www.flyertalk.com/forum/air-new-zealand-air-points/1319517-airpoints-upgrades-gone.html

Reading through that thread, it appears that it's not just the changes to the upgrades system that is causing concern, but also the reported gutting of the FFP. I certainly agree with the latter point - AirNZ's system is now incredibly complicated and has completely lost its focus on encouraging customers to continue flying with AirNZ. Instead, I can now even use APD to buy a toaster!

I think the change from "fly to earn" to "earn to fly" (as per the investor presentations) has certainly driven this.

I notice that Qantas have made some changes to their upgrades system to more closely mirror what Air NZ used to offer, providing certainty around whether an upgrade is available, and are actively promoting this to all their customers.

modandm

20-03-2012, 12:52 AM

Reading through that thread, it appears that it's not just the changes to the upgrades system that is causing concern, but also the reported gutting of the FFP. I certainly agree with the latter point - AirNZ's system is now incredibly complicated and has completely lost its focus on encouraging customers to continue flying with AirNZ. Instead, I can now even use APD to buy a toaster!

I think the change from "fly to earn" to "earn to fly" (as per the investor presentations) has certainly driven this.

I notice that Qantas have made some changes to their upgrades system to more closely mirror what Air NZ used to offer, providing certainty around whether an upgrade is available, and are actively promoting this to all their customers.

As someone who follows AIR very very closely I have no concerns. Note that when business class was removed from the A320 TT there was the same outcry from frequent flyers. And we all know that the change to seats to suit has be fantastic and successful in turning around NZ's profitibility on the TT.

I expect One-up to have a big impact in increasing the profitibility of the Long Haul operation over the next few years. If a few frequent flyers get annoyed than that is tough as far as I am concerned. The business is run for shareholders not FF. The loss of some (maybe 10% not more) of true HVC will be more than offset by the increased revenue from the tens of thousands of average punters like you and me having a chance to u/g.

There is a clear strategy at NZ to move from being a premium focused carrier to a carrier with a competitive mainstream product - with top notch service and premium seats too. There is no point flying around with fancy business class and premium economy half empty.

Zaphod

20-03-2012, 02:41 PM

As someone who follows AIR very very closely I have no concerns. Note that when business class was removed from the A320 TT there was the same outcry from frequent flyers. And we all know that the change to seats to suit has be fantastic and successful in turning around NZ's profitibility on the TT.

I expect One-up to have a big impact in increasing the profitibility of the Long Haul operation over the next few years. If a few frequent flyers get annoyed than that is tough as far as I am concerned. The business is run for shareholders not FF. The loss of some (maybe 10% not more) of true HVC will be more than offset by the increased revenue from the tens of thousands of average punters like you and me having a chance to u/g.

There is a clear strategy at NZ to move from being a premium focused carrier to a carrier with a competitive mainstream product - with top notch service and premium seats too. There is no point flying around with fancy business class and premium economy half empty.

The underlying impact to profitability of the One Up scheme really depends upon how the revenue team manage seat availability, and to a lesser extent how the status tier bonuses are applied to bids from frequent flyers. What I would not want to see is the business class cabin (in particular) become an upgrade cabin, filled with OneUp bidders, when this high-yield inventory could have been sold to full fare paying passengers (perhaps using more competitive lead-in fares). Under the previous systems the revenue team have IMO done a great job, releasing a few further upgrade seats very close to flight departure and auctioning off surplus inventory via third party auction sites, so hopefully my concerns will turn out to be unwarranted.

Reading through the complaints from on the FlyerTalk board, many of these could have been averted by better communication, something that Air NZ has traditionally been very good at.

With respect to the FFP I think a more streamlined, simpler, flight-focused scheme would be better fit, as the loyalty product market is already supersaturated with competitors of this generalised type. OTOH perhaps the scheme as currently operated could be a much more attractive going concern for Air NZ, and selling this division for a tidy profit to the operator of an existing loyalty company could allow the Airline to focus on its core business rather than a FFP, while injecting some significant capital into the business?

20-03-2012, 03:15 PM

Zaphod - my understanding is the seats avaliable for the one up auction are only confirmed very late (1 week out) so I assume they only release the amount of seats that are empty. Therefore, they maximise full payting customers (unless they buy less tahn a week out) and maximise the utilisation of Airdollars for seats that would otherwise have gone empty. On paper it sounds like a win for AirNZ.

The problem is snotty nosed Gold FFP who think they deserve free upgrades to business just because they fly economy all the time (or upgrades on personal flights as they haven't got the boss picking up the business class cost).

slimwin

20-03-2012, 04:08 PM

The more I hear,the less bad it sounds. Really sounds like a communication failure. I'm staff and I still can't get a definitive answer to how it affects our travel benefits.

modandm

20-03-2012, 11:46 PM

The problem is snotty nosed Gold FFP who think they deserve free upgrades to business just because they fly economy all the time (or upgrades on personal flights as they haven't got the boss picking up the business class cost).

Exactly. They fly business for work build up status and points then expect to upgrade cheaply when paying their own way. And they are not satisfied with standby upgrades they must have confirmed upgrades... heaven forbid they should have to bid against others for the upgrade. They are so special maybe we should actually downgrade non GE pax when a GE pax wants to upgrade too (sarcasam).

The FF world is full of people who think they are better because they fly premium classes. They also love using hyperbole such as describing long haul economy as torture. I don't pay much attention to them

Animeart

25-03-2012, 10:18 PM

Jaa

25-03-2012, 10:36 PM

Hope the new guy doesn't get the CEO job. OneUp could very well be a preview of his style/approach to make money. It's badly executed and the new GGM seems indifferent to customer/staff feedbacks.
I heard that business was so bad in March hence the decision to finally introduce fuel surcharge. The Chairman must be mad to be paying dividents when the company could be in the red comes the next announcement. Probably only doing it to please his master, the finance minister...LOL. Hope he goes together with Rob Fyfe end of the year.

This was the first dividend in the last few years where Air NZ ran a DRP so they didn't lose all the cash. But I agree it is not a good sign. Notably the government didn't subscribe to the DRP, which is one way to dilute it's overhang!

Jaa

25-03-2012, 10:50 PM

In other news, Aerolíneas Argentinas is not offering flights for sale on it's website to Auckland past 30 June 2012. Can anyone confirm that they have pulled the plug?

iceman

26-03-2012, 06:25 AM

In other news, Aerolíneas Argentinas is not offering flights for sale on it's website to Auckland past 30 June 2012. Can anyone confirm that they have pulled the plug?

Jaa I just asked my travel agent in Argentina about this. He was not aware of it but on checking, found that AA has no flights available after 30 June through his booking system over here in Argie. So they must be pulling out. He also said that with Qantas having already pulled out, it would leave only LAN via Santiago as a realistic option to fly between NZ and Argentina and he fears LAN flights may become full and hard to book with increased pricing !

bung5

29-03-2012, 04:18 PM

Yeah aerolineas cut their 2 worst performing routes. I thought that Cathay pacific have a flight there now or is it a code share?

Jaa

29-03-2012, 10:25 PM

I re-checked and the booking system says Aerolineas are flying direct to Sydney after June this year. Guess they are trying to pick up the old Qantas traffic. So much for Auckland being a hub to South America!

From Air NZ's perspective it removes their cheapest competitor on the Auckland > Sydney route. Also surely offers them the best chance they have ever had to start a profitable route to South America.

Edit: Here's a link: http://www.travelweekly.com.au/travel-today/news/aerolineas-to-operate-sydney-direct

I would argue they struggled to operate in both NZ & Aus because their planes never left on time, a 2 hour delay was normal, their product and service were crap and their fares non-nonsensical but what would I know.

modandm

30-03-2012, 09:50 AM

fyi - according to airliners.net they are still routing EZE-AKL-SYD, however the SYD-EZE leg will now be direct. (This is due to winds assisting on the SYD-EZE leg)

Interestingly some on ANet are promoting NZ take up AKL-LIM to connect with AV/TACA's Lima hub. It is about 10% further than SCL and 300miles further than EZE. It is also operable with EDTO 240m whereas EZE requires EDTO 330m. It is definately in range of the 777-200er.

I see this as potentially a better option than EZE since most travellers want to see Machu Pichu and also it avoids the uncertainty in Argentina. Realistically I dont see NZ operating direct to Brazil even with the 787s - unless fuel prices recede and the 787-9 exceeds current projections.

Animeart

30-03-2012, 10:36 PM

I reckon Rio is not far off the radar for Air NZ, as the airline seems to be chasing the Olympic hosting cities. SYD-BEJ-LON-RIO-TYO

Jaa

30-03-2012, 11:46 PM

fyi - according to airliners.net they are still routing EZE-AKL-SYD, however the SYD-EZE leg will now be direct. (This is due to winds assisting on the SYD-EZE leg)

That may be so but you can not buy a ticket through their website, Buenos Aires > Auckland past 30th June. Guess the PAX will be staying on the plane while it refuels.

I see this as potentially a better option than EZE since most travellers want to see Machu Pichu and also it avoids the uncertainty in Argentina. Realistically I dont see NZ operating direct to Brazil even with the 787s - unless fuel prices recede and the 787-9 exceeds current projections.

With respect to my many Peruvian friends, there is probably more demand from Uruguay than Peru. Animeart is right the demand is in Brasil then Argentina. I doubt there would be many non-pacific routes Air NZ could make work with only NZ and Australian demand. As a rough example, NZ gives out the following working holiday places to South Americans each year:

Peru: 100
Uruguay: 200
Chile: 1,000
Argentina: 1,000
Brasil: 300

These generally fill up within a couple of days every year. I am sure Air NZ could get Brasil's quota increased if it starts flying to the continent, fill up a few more planes lol There is also significant latent NZ based English language course demand in Brasil.

modandm

14-05-2012, 11:29 PM

Just a quick update on all things AIR - pre April stats.

The shareprice is moving up - good news - a steady move from lows of around 85c to around 94c today. Why? A few ideas below aswell as commentary on the March stats.

NEWS
- Shanghai daily - pulling out of beijing - good call coming out of the longhaul review. Shanghai is easily more popular and having a single mainland base is more cost effective. Also the flight is 10% shorter. Apparently there were solid numbers of people flying to Beijing and then backtracking to Shanghai which is crazy. Daily is always good and extracts most value from fixed costs - ie airport fees etc.

- Perth and HNL increases - further evidence of NZ taking an active stance in alocating capacity to meet demand and by using seats to suit targeting NZ leisure travellers. In combination with Bali, Fiji, Tahiti, and Raro AIR has a comprehensive medium haul leisure network now on the S2S model. To be adding flights and capacity indicates profitable growth on these routes which is great to see.

- Queenstown is getting an increase in capacity from both Auckland, Wellington and Australian destinations. I see this as a long overdue response to JQ success in ZQN. ZQN really is an world class destination and NZ needs to capture more of the low end market for the destination. Fares have traditionally been overpriced and with S2S and grab-a-seat I see NZ again increasing profits through demand stimulation. As we have seen on the TT market yields have not sufferred as much as expected and total profits are significantly higher using the model.

- Little other news on the longhaul front. Expected cuts haven't materialised as yet however speculation is that flights to the UK will be reduced post summer and the olympics. I could see the HKG-LHR route cut completely and would view this as a good move. NZ should still be able to maintain daily 777 to HKG.

OP Stats:
Now a full year from EQ so some funny data on the longhaul yoy numbers which must be noted.

My take and points of interest:
- Feb and March both saw slight declines in Domestic RSK -2.4 and -0.6. This needs to be watched in upcoming months as any loss of share/demand on the highly profitable domestic network is of concern to me. Load factors remain excellent at 84%

Tasman Pacific continues to flatten out, 4.2% RSK growth yoy vs -0.5% in feb more reflecting the weak result in March 11 vs Feb and April 11. Overall I interpret as stagnant but profitable, looking to see growth in June-July as recently announced changes to Perth and HNL come into effect. Also the July intro of Sunshine Coast (only 2x weekly though). Should see growth pickup to 5% on the back of these changes. 82.5% LF is solid if lower than average of 83.8% over last 12 months.

UK/NA - continued decline -5.4% RSK with LF at 84.8% on reduced capacity. Here we see why NZ is trying to growth the pacific rim routes - growth on Longhaul has been in decline for 12 months. Note that Qantas is off the AKL-LAX route sometime this month (May) which is a major boost for NZ so we should see some RSK growth return to this market, NZ is also increasing capacity to North America and with the recent improvement in the US economy signs may be looking up for these markets.

Asia/UK - +11.4% reflects weak March 2011 (-15%). Still shows market is now circa 95% of what it was pre earthquake which is good news. Traffic no longer being reported as split Japan which is a shame as gave more insight. Still Japan market weak as evidenced by lack of capacity - still significantly down. NRT for instance is just 4x777 vs 747s or daily 777s pre EQ. KIX is just a 1x767 per week. Very very weak market still. NZ was quite successful with charters over summer to japan and I would like to see a consolidation of NRT and cut KIX (same as done in China) - use ANA partner to service other parts of Japan. Then continue to use Charter flights to service KIX and other Japanese destiantions as demand dictates.
HKG continues to outperform. And HKG-LHR no doubt continues to struggle and be a loss maker.

Yield trends remain consistent at +4 longhaul and +2 shorthaul. Sadly Jetfuel continues to rise at greater than 4% per year although crack spread has narrowed.

SUMMARY:
- Some positive news on pacific capacity increases indicate NZ is profitable on these routes and looking to grow medium haul markets with S2S model.
- Positive factors including solid demand for Shanghai and move towards daily + Qantas off AKL-LAX and improving US economy bode well for an improvement in Longhaul performance in the 1st half of FY13. Expect an improvement in 2H FY12 vs 1H results, although 747 retirement x2 costs will be worn as well as redundancy costs. Overall Fy12 has been a bad year for AIR, however there does seem to be an improvement in outlook for FY13.

Hoop

15-05-2012, 11:07 AM

Falling Oil prices and depreciating NZ$ are perceived by investors as positive.

modandm

16-05-2012, 12:34 AM

Hoop

16-05-2012, 10:14 AM

Falling Oil prices and depreciating NZ$ are perceived by investors as positive.

yes the oil price has weakened in the past week with this macro troubles. But actually falling nzd is bad for shareprice and im sure analysts and fund managers would know that..

I stand to be corrected You are right Modandm. Thanks for that.... It seems my brain became disengaged while writing that post...I'm obviously not used to writing such small posts.. ;)

A quote from the Interim Review report 2012 (http://www.airnewzealand.co.nz/assets/PDFs/Air-New-Zealand-Interim-Review-2012.pdf)
Foreign Exchange Impact
"Overall the Group benefits from a stronger New Zealand dollar as a
result of costs decreasing more than revenues fall.
The full benefit of the stronger New Zealand dollar is delayed due
to the currency hedging programme, which......."

modandm

17-07-2012, 09:23 AM

Pre June stats update:

Some interesting developments in the fuel price since I last posted on AIR guys. Jet fuel was at around $135-140 USD levels in Feb-March-April and now is down at $116 USD barrel. For reference NZ expects to burn about 7.5 million barrels of jet fuel in FY13.

This will have a very material impact on NZ FY13 profit. I have been over the Goldmans and the Credit Suisse research as well as AIR's hedging updates and I can say that if you use $120 USD barrel for jet vs $142 USD which is what the analysts were using (in their latest notes 1 or 2 months ago) the upside to earnings is about +10cps.

Just to give an idea - GS has FY13 eps at 7c and after you factor in $152million USD of fuel savings EPS goes up to 19c

using the CS numbers (more agressive) they have FY13 eps at 10cps and after you factor in $152million USD of fuel savings EPS goes up to 22c

You might ask if NZ has hedged at a higher rate - no they have not based on last hedge update - they have bought a small % of calls (28% - FY13 consumption) for FY13 which will expire worthless but not set a collar structure or fixed the price on the downside. Possibly they have used recent oil price weakness to actually buy calls at $110-$120 per barrel - in WTI equivalent.

Anyway this upside to consensus forecast combined with my favourable view on NZ based on:
- Upside to Longhaul review
- Cost cuts
- Improving competitive environment and rational behaviour by competiors
- Strong competitive position in all markets bar europe
- Fleet renewal benefits starting to kick in as costs of transition mostly gone (77W now A320 4 arrived 10 more to come ATR 72 soon)
- Low capex until 787 arrive
- Potential for increased dividend

Means I am very bullish on the stock - much more than I was 2 months ago:t_up:

Catalysts to share price gains

- Upgrade to broker estimates to account for new lower levels of fuel cost - I would expect updates to flow following operating stats which are due end of week or early next
- Positive surprise at Aug 30 results
- Consencus or even weak results at Aug 30 results BUT strong positve comments

Anyway it would be great to hear your feedback

Hoop

17-07-2012, 10:41 AM

Thanks for your well informed post Modandm..much appreciated

biker

19-07-2012, 10:47 AM

modandm

29-08-2012, 09:45 AM

Update on July Stats, Fuel Hedge position, Virgin Australia, and my results preview and FY13 outlook - pre earnings:

July stats

Materially weaker than June's stats clearly.

Domestic - weakening trend starting to become a concern. Yields down 4.5% and demand down 1.8% but is lapping tough comps which explains half. Still I am looking for reassurance that the domestic position remains strong.

Tasman/Pacific - strong result - +7.6% lapping a +7.2% comp. Capacity up 10% with the renewed focus on strongly performing regional routes such as Perth and Hawaii. Very pleasing result. Continued benefit of Virgin Alliance no doubt.

UK/North America - Solid result +4% continues June momentum. You can see the impact of QF pulling of LAX in the last two months numbers.

UK/Asia - Weak result really +4% with capacity up 13.5% lapping an easy comp of -12%. Unable to continue the momentum of June's +16%. Load factor sub 80%. Poor

Yields - Poor start -4.5% on longhaul offsets +1% on shorthaul for a groupwide -2.2. Analysts have -2%-3% in their numbers which I thought was too conservative but maybe they are right. One month down a long way to go.

Fuel and hedging

Well the fuel price is back up to where it was a few months ago. So my super-bull case has already died :( . Still upside but lets wait for results before I reset my valuation.

They have made about $4.5m in hedging gains since last reported. Have got good protection against any further increases in fuel price from here - at least for the first half. I am a little disappointed they weren't able to lock in more at the lower prices of last month - but I don't know what the option premium would have been.

VAH reported
Good results - shareprice now at 46-48c - seems NZ made a good investment really. Not as interesting a business as NZ for me and competition with QF will keep earnings growth constrained. Still futher profit growth ahead no doubt. Just would suggest alot of good work and good news is now in the stock. Management has really delivered.

Looking foward to Thursday - will be thouroughly looking through results.
Am expecting:

Revenue: 4519M
Normalised PBT: 79M
Normalised NPAT: 55M

Close to concensus - but really it could easily surpise 10 or 20m either side. Hopefully not more! Real driver of shareprice will be FY13 outlook and management commentary around the progress of the game change program. How much cost saving run rate has been achieved, and where are yields heading based on forward booking profile.

Pre results I am forecasting Fy13 Pax revenue up 4% with RSK growth accounting for most of that and yields flat. Analysts are more bearish than me with -3% yield and 1% RSK growth. Looking for FY12 CASK of 12c and FY13 CASK guidance of 11.5c as non-fuel costs are trimmed.

Cheers, and thanks to those who said they enjoyed reading my posts on the other thread.

Hoop

30-08-2012, 11:30 AM

WOW!! what a result considering the tough environment.
104 up 14.5c

biker

30-08-2012, 11:36 AM

Yes, great result and very positive outlook for the current year from Palmer at the press conference.

30-08-2012, 12:17 PM

Makes the analysts look a bit foolish - per NBR they were only about 80% out. Outlook is very promising so hopefully they will deliver. I may even make my money back on this one.

BIRMANBOY

30-08-2012, 03:00 PM

Now thats an impressive response...go you beauty!!!

Sauce

30-08-2012, 04:39 PM

Well called by Modandm
nice work and value strategy
Sauce

Zaphod

31-08-2012, 11:43 AM

Interesting comments from Fyfe re partnering with more airlines in the NZ Herald today. Any thoughts on which airlines and routes are likely to form part of this agreement?

Edit: Here's the link http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10830584

biker

31-08-2012, 04:15 PM

The Air shareprice has always been cyclical. This is very close to the bottom of the cycle IMO
I agree with your comments Modandm.
Bullish comments this morning on National Programme Business from both Palmer and Fyfe. Much more upbeat than the article in the Herald.
I am a buyer at these levels.

That was roughly the bottom at 87c. Palmer and Fyfe did give a heads up.

I would be much obliged if someone would advise when it is roughly the top!

Jaa

06-09-2012, 02:53 PM

What do people think of Qantas's and Emirates planned alliance which includes the Tasman?

Should still be inferior to the AIR/VBA alliance but might chip away at it or they might choose to rationalise some of the over capacity out of Auckland to Melbourne and Sydney especially and thus be good for both alliances?

ops.normal

18-11-2012, 09:23 PM

scamper

19-11-2012, 12:48 PM

Hi ops.normal
I can't see any definitive TA signals in August.
The price had been wobbling around 85--90 cps all year.
There was an investor update on 27 Aug that was mixed, but nothing to account for the leap.
The Report on 30 Aug was very good.
I think that your answer lies in FA, not TA.
Also, I suspect some lucky sods got a whisper ...
This is not a good example to learn TA from. Try tel or fbu.
I am not too active with TA these days, so I hope someone else answers your query. Cheers.

Hoop

19-11-2012, 11:05 PM

Hi all

If there are some TA guys floating around, I'd love to see what indicators triggered buy signals (if any) for you on Air NZ late august or before that. Even as a hypothetical, I'm keen to use it as an example to learn a bit from, just getting back into trading. Thanks!

All the TA signals fired buy signals all at once before the market opened (Depth) on the 30th August due to a sudden unexpected fundamental shift in FA occurring at 8.30am (Full year report announcement)......This caused all types of investors (not just FA investors) to enter buy orders before the market opened.

TA showing some sell signals just days before the announcement showing that Mr Market received no leakage of the good news beforehand ...normally, any good news leakage is picked by TA before the announcement with the change of investor behaviour creating buy signals.

Friday's chart (16th Nov) below is again showing TA weakness and evidence of technical disintegration....the question is how reliable is this?? adding to Mondays 19th (today) rise back up 2.5c to 123 the answer may be.. who knows??.

http://i458.photobucket.com/albums/qq306/Hoop_1/AIR16112012.png

scamper

19-11-2012, 11:44 PM

Many thanks hoop.
Do you have a quick and dirty explanation for Twiggs Money Flow?
I have never used it... Cheers.

Hoop

20-11-2012, 12:06 AM

Many thanks hoop.
Do you have a quick and dirty explanation for Twiggs Money Flow?
I have never used it... Cheers.

TMF is an improvement on Accummulation/Distribution indicator ....The AD indicator can be distorted with a sudden large price change (gap) for example a large seller having to ditch then the market price quickly recovers on the same (or next) day....TMF attempts to smooth out this and othersuch anomalies better than what the Chalkin MF does.

Explanation with examples here on Colin Twiggs site (http://www.incrediblecharts.com/indicators/twiggs_money_flow.php)

ops.normal

20-11-2012, 08:52 PM

Thanks heaps for that Hoop, will pore over it this evening.

Ops

biker

21-11-2012, 11:08 AM

[QUOTE=Biker] The Air shareprice has always been cyclical. This is very close to the bottom of the cycle IMO
I agree with your comments Modandm.
Bullish comments this morning on National Programme Business from both Palmer and Fyfe. Much more upbeat than the article in the Herald.
I am a buyer at these levels.

[QUOTE=Biker] That was roughly the bottom at 87c. Palmer and Fyfe did give a heads up.

My first post was 18th July, the second, the 31st of August.

Sometimes it is just a matter of eyes and ears open.

21-11-2012, 11:24 AM

So are we at the top. Price seems to be supported by the buyback at the moment providing a large part of the volume. Once that stops, a drop would be expected?

Hoop

21-11-2012, 12:26 PM

So are we at the top. Price seems to be supported by the buyback at the moment providing a large part of the volume. Once that stops, a drop would be expected?

My chart has warnings...Realised my capital gain + divy on Monday @123.5/share....on to my next adventure and looking forward to frying new fish.

Disc : don't blindly follow others make your own decisions.

modandm

29-11-2012, 11:19 AM

Hi chaps,

well - my charts didnt tell me anything... funny that.

But fundamentally I liked the stock prior to the August 30 results and had been accumulating a sizeable position when the stock was around 85-90c.

I am pleased to say I have more than doubled my position since then including a final top up today at 128c at the open to what is for me a monster oversized position (over 150,000 shares). I have been adding to my op stats tracker and have built out a decent P&L model.

I have been observing analyst research and enjoyed watching them slowly realising how undervalued this company is. They have been beyond conservative in upgrading their profit estimates - glacial I would say. The thing is they are not used to companies doubling profit in one year. The sheer leverage air nz has has and the benefits of improved FX, stablising fuel, 777-330er and a320 deployment, and improving demand has not been well understood - at all. (good - lets us take advantage of the mispricing)

To give you an idea - following the Full year results analyst upgraded earnings to 10-11c for FY13 - despite management saying "more than double(ie.>200%)" analysts gave them about 175% up to 11cps. My analysis came up with about 250% up (15cps). Yesterday management re-iterated guidance AGAIN! and even further gave half year estimate of 120-140m which is 7.5-9c eps for the half year. That means 15c is fair in my opinion (cathay benefit from march), my FY14 estimate is c.20c (subject to fuel and FX). Putting Air NZ on a multiple of 14x this year and 12x next year yields a PT of $2.10 then $2.40 - which is close to 100% upside when you consider you will likely get 10c in dividends this financial year.

My analysis is alot more detailed as you would think to build the conviction required to build this sort of position. I have analysed at the yield and rsk growth trends, calculated fuel expense using hedging stats, and based on my conversations with investor relations, estimated ancillary revenue growth, benefits of Cathay alliance, 777 refurbishment, increased capacity on domestic, likely interest costs and expense based on cash flow position forecast, labour cost, and more.

Air NZ expect to deliver $130m of a planned $250m in profit improvement this year. Another $120m further improvement is expected with 787, and a320 arrivals in the next 2 years, supply chain, and further network re-organisation.

Anyway you stack it PB, PE, EV/EBITDA, the stock is super super cheap. Re analysts - Goldmans upgraded the stock this week and Macquarie did yesterday. Both have PT's around $1.50 - both far to low (still). People are stuck in the past with their analysis on this one.

Look forward to your comments.

modandm

29-11-2012, 11:33 AM

Also I didn't mention - based on the target prices above you get a 20% stake in Virgin Australia (worth NZ 25cps) free. :t_up:

Now - someone - please tell me what are the charts telling you?:p

29-11-2012, 01:25 PM

Now - someone - please tell me what are the charts telling you?:pAgree with your comments if the economy keeps going as it is.

If the economy takes a turn, airline stocks will suffer a bigger drop than most shares.

So need to look to the global economy: not to concerned re fiscal cliff but what about Europe. I cant tell if the longer they draw this out, the safer it gets or the more precarious it gets.

modandm

30-11-2012, 10:13 AM

Jaa

30-11-2012, 04:57 PM

Europe has been bad for the past 2 years and terrible for the past 12 months. With Air not serving europe and reducing flights to the UK to one per day I consider the european macro of low importance.

In order of macro risks facing NZ imho:

- Fuel increases
- NZD falls
- NZ economy tanks
- US economy tanks

The stock copped another upgrade from deutsche bank today - thats 3 for the week!

I am more worried about something random. Think SARS, earthquakes, volcanoes, a terrorist attack, accidents or mechanical issues etc. All have had a big impact on the airline business in the past.

modandm

15-12-2012, 12:42 PM

Just been playing with my model so a quick update.

The NZD has run up to above 84c vs the USD - what does this mean for AIR going forward?

Well assuming Jet fuel stays flat at 130USD/barrel the change in fuel cost in NZD will be $1206m in FY13 to $1116m in FY14. This adds about 6cps to earnings taking my FY14 estimate from 20c to 26c. FY13 the airline is hedged 79% at 80c but I expect they will get a good benefit in FY14 should the USD continue to remain weak or weaken further.

Note that I haven't taken into account savings on a/c acquisition or lease costs or any other USD costs (because these aren't broken out) and because some revenue is in USD too so it doesn't make sense to.

For reference key assumptions in my model are 3% pax revenue growth p.a, 15% ancillary revenue growthp.a, labour costs rise at 3% p.a, fuel remains $130usd barrel and FX as mentioned at NZD=US 0.84c.

My numbers now run ahead to FY15 (extrapolating current trends) and keeping the same growth rates and Fuel FX assumptions I reach an EPS of 32cps. Obviously this should be taken with a pinch of salt. Alot can happen in 2 years in the airline business. Note that I don't assume any dividend from VAH either which would increase earnings.

As far as a valuation I consider a 10x PE on FY14 earnings of 26c (at current fuel/FX) = $2.60 per share - still attributing no value to the VAH stake which is worth about 24cps. Also not giving credit for the $1bn NZD of cash on the B/S because this is an ongoing liquidity requirement in my view.
With at least 10c in dividends on top of the capital appreciation you are looking at over 100% return over a 12-18month time frame.

Sure there are risks as Jaa mentions - but there are also risks to the upside:
1. NZD strengthens futher vs USD
2. Fuel falls as shale oil depresses energy costs
3. Management deliver cost savings (not all factored in)
4. Stronger than 3%pa pax revenue growth

Overall I maintain my conviction and as said before I am heavily invested.
Cheers

For posterity - AIR currently trades at $1.33 - with concensus at about $1.55 following recent u/gs. FY13 concensus EPS is 14c vs 15.7c my estimate.

janner

15-12-2012, 10:26 PM

Your enthusiasm is to be commended..

Your Dollar numbers suppliesd are not..

It matters to me one whit ..how much you have invested..

Why .. Is good..

Please keep those reasons coming

Just been playing with my model so a quick update.

The NZD has run up to above 84c vs the USD - what does this mean for AIR going forward?

Well assuming Jet fuel stays flat at 130USD/barrel the change in fuel cost in NZD will be $1206m in FY13 to $1116m in FY14. This adds about 6cps to earnings taking my FY14 estimate from 20c to 26c. FY13 the airline is hedged 79% at 80c but I expect they will get a good benefit in FY14 should the USD continue to remain weak or weaken further.

Note that I haven't taken into account savings on a/c acquisition or lease costs or any other USD costs (because these aren't broken out) and because some revenue is in USD too so it doesn't make sense to.

For reference key assumptions in my model are 3% pax revenue growth p.a, 15% ancillary revenue growthp.a, labour costs rise at 3% p.a, fuel remains $130usd barrel and FX as mentioned at NZD=US 0.84c.

My numbers now run ahead to FY15 (extrapolating current trends) and keeping the same growth rates and Fuel FX assumptions I reach an EPS of 32cps. Obviously this should be taken with a pinch of salt. Alot can happen in 2 years in the airline business. Note that I don't assume any dividend from VAH either which would increase earnings.

As far as a valuation I consider a 10x PE on FY14 earnings of 26c (at current fuel/FX) = $2.60 per share - still attributing no value to the VAH stake which is worth about 24cps. Also not giving credit for the $1bn NZD of cash on the B/S because this is an ongoing liquidity requirement in my view.
With at least 10c in dividends on top of the capital appreciation you are looking at over 100% return over a 12-18month time frame.

Sure there are risks as Jaa mentions - but there are also risks to the upside:
1. NZD strengthens futher vs USD
2. Fuel falls as shale oil depresses energy costs
3. Management deliver cost savings (not all factored in)
4. Stronger than 3%pa pax revenue growth

Overall I maintain my conviction and as said before I am heavily invested.
Cheers

For posterity - AIR currently trades at $1.33 - with concensus at about $1.55 following recent u/gs. FY13 concensus EPS is 14c vs 15.7c my estimate.

golden city

24-01-2013, 09:56 PM

why air stock is dropping ,does the forecast comes with credential

GBHcorp

25-01-2013, 08:14 AM

why air stock is dropping ,does the forecast comes with credential

I have been wondering too, put it down to the grounding of the 787 Dreamliner which AirNZ have purchased. Not sure weakness is warranted, presumably they will be insured against any defects??

25-01-2013, 08:26 AM

I have been wondering too, put it down to the grounding of the 787 Dreamliner which AirNZ have purchased. Not sure weakness is warranted, presumably they will be insured against any defects??AirNZ hasn't taken delivery so no direct effect and have to assume problem will be fixed before they take delivery. However, it that date gets pushed out (again) the fuel savings the planes are meant to deliver get pushed out as well.

I ink they are seeing increased competition from Emerates on the Tasman and onward route and from another airline on the Hawaii/pacific route. Haven't been follow to closely recently so could be wrong.

25-01-2013, 09:49 AM

Come on CJ, tell the truth...every dog has its day, AIR has just about had it good times:)I got out recently because I got sick of seeing to many bad times that seem to effect the airline industry more than most!

They have had a great recovery recently but I think since I first bought in, this was a very bad investment (I orginally started with B shares :0 )

Jaa

25-01-2013, 11:54 AM

The answer is simpler that all that, they have stopped the share buy back for now.

Last buyback notice was on the 21st Dec for 250k shares at $1.2881.

I always thought this buyback was designed mostly to stoke Rob Fyfe's ego by boosting the share price a bit letting him leave the airline with the share price higher than when he started...

25-01-2013, 12:57 PM

The answer is simpler that all that, they have stopped the share buy back for now.forgot about that. That was another reason I sold out when I did as in theory, that had to be holding up the price.

slimwin

26-01-2013, 08:33 AM

That was my thought and why I jumped.

modandm

27-01-2013, 11:43 PM

Okay - a few people patting themselves on the back because they 'foresaw' recent weakness - and come-on it is down like 5% - big deal....

The answer is simpler that all that, they have stopped the share buy back for now.

Last buyback notice was on the 21st Dec for 250k shares at $1.2881.

I always thought this buyback was designed mostly to stoke Rob Fyfe's ego by boosting the share price a bit letting him leave the airline with the share price higher than when he started...

That's too cynical for me. You can't deny the improvement in financial performance over the past 6 months - although all will be revealed in a months time. I won't rehash my prior posts because nothing has changed.

As to the recent shareprice decline I think both points mentioned are valid. The decline did coincide with the 787 problems - imho a temporary problem which shouldn't impact the -9.
The 787 will have no effect on AIR's financial performance in FY14, and only a marginal effect in FY15.

so shouldn't we be focusing on what matters... and ignoring the noise...

More important is NZ progress on cost cutting and in this regard news flow has been positive:

- Call centre rationalisation - i think I read $2m saved - straight to the bottom line
- Ground services contract Qantas out Menzies in - must be a good saving here would be a big contract

Other newsflow

- Emirates and Qantas denied co-operation on the trans-tasman
- CEO announces additional A320 to be added to domestic fleet this year - accelerating switch from 737

With concensus at 1.50 I think people are taking a wait and see approach with regard to the half year results. As you know I am a raging bull, and bought another 35k shares at 1.25 last week.

I expect a strong result and a significant increase in the half year dividend (possibly double last years) to perk investor interest.

Also we can look forward to an analyst day in March where the new CEO will be outlining his strategy.