AIR - Air NZ.

[kiwijay]

Someones gotta explain how and why transtasman taxes are $57. With the e gates theres not even the need for someone to look at the passports just one person to walk the cute beagle along to sniff and other typical airport costs.

feels weird when these $69 fares are hyped but in europe the fares are much cheaper.

i flew from bremen germany to fez morroco for 10 euro or less than 20 nzd for a 3 hour flight. Granted it was a low cost carrier but this really doesn’t change things like fuel.

i also flew from Bremen to stockholm for 13 euros or about 20 bucks and yes only about an hour flight time but it wasn’t even a special fare just a standard one you could book anytime.

Looks like Transtasman costs need to be seriously looked at and cut down.

Looking at my GDS display, taxes on AKL-MEL:

New Zealand Passenger Service Charge International Departures (KK)
NZ$17.15
New Zealand Passenger Security Charge International (IA)
NZ$15.62
Australia Passenger Services Charge Arrival International (WY)
NZ$21.90
New Zealand Border Clearance Levy International Departure (F1)
NZ$2.94


That's the how... The why I'll leave to politicians. This is also NOT the breakeven cost (does anyone know what that is per passenger for Air NZ?), BUT just the minimum external cost of carriage. Basically at $57, the airline is flying the passenger for free on the airlines dime. At $69, we're giving Air NZ all of $12 to take us to Melbourne.

[winner69]

Looking at my GDS display, taxes on AKL-MEL:

New Zealand Passenger Service Charge International Departures (KK)
NZ$17.15
New Zealand Passenger Security Charge International (IA)
NZ$15.62
Australia Passenger Services Charge Arrival International (WY)
NZ$21.90
New Zealand Border Clearance Levy International Departure (F1)
NZ$2.94


That's the how... The why I'll leave to politicians. This is also NOT the breakeven cost (does anyone know what that is per passenger for Air NZ?), BUT just the minimum external cost of carriage. Basically at $57, the airline is flying the passenger for free on the airlines dime. At $69, we're giving Air NZ all of $12 to take us to Melbourne.

Covers the cost of the food and drink lol

[allfromacell]

If you go to book the flights there actually aren't that many flights for $79 and the ones that are there are inconvenient times and days for most travelers not to mention the return flights arnt discounted much. I wouldn't say this is Air NZ at panic stations just yet but rather a smart promotion to get people thinking about trans-tasman travel as well as filling seats.

It was only two days ago when Air NZ released guidance on the impact of the virus, I imagine they have a better understanding of the impact then the posters in this thread.

[Beagle]

Covers the cost of the food and drink lol

It doesn't. There's also airways fees for air navigation and landing fees in Australia. They are flying people there for free including free fuel.

Fees and charges out of Australia are much higher so return for $205 to Melbourne is essentially all fees. It is desperation pricing and I have never in my life seen anything like this.

[BlackPeter]

It doesn't. There's also airways fees for air navigation and landing fees in Australia. They are flying people there for free including free fuel.

Fees and charges out of Australia are much higher so return for $205 to Melbourne is essentially all fees. It is desperation pricing and I have never in my life seen anything like this.

Good news is ... airlines seem to assume that the scare is over in a handful of months. Just checked prices for some flights to Europe we might need in September ... and the offers so far are pretty standard. No discounts on offer.

Which is obviously the bad news - we might need to pay the normal price :): Damn.

[Beagle]

Good news is ... airlines seem to assume that the scare is over in a handful of months. Just checked prices for some flights to Europe we might need in September ... and the offers so far are pretty standard. No discounts on offer.

Which is obviously the bad news - we might need to pay the normal price :): Damn.

Suggest you hold off with your booking and if you are still determined to go you will find really amazing specials come out in due course. I saw Emirates to Europe the other day for $1,599...the same airline that brought the virus infected guest back that had been to Iran...good luck mate.

[dreamcatcher]

Suggest you hold off with your booking and if you are still determined to go you will find really amazing specials come out in due course. I saw Emirates to Europe the other day for $1,599...the same airline that brought the virus infected guest back that had been to Iran...good luck mate.

Every 1 of 3 posts on AIR Sharetrader is your constant empty-glass down-ramping as everyone knows your 'SHORT' position which you remind at every opportunity. Your biased empty/full glass thoughts are becoming less meaningful as just your current position..............

GS

"The soft 1H20 result was largely led by the inability to place the incoming incremental fleet capacity into the market (in particular in international). While holding costs of the new fleet rose (+NZ$29mn), AIR was unable to offset this with the planned 1H20 capacity growth (T&PI +0.3% vs. guidance +2-3%; Int’l +5.8% vs. +7-8%) given the dilution to RASK (T&PI -1.5%; Int’l -1.9%) that it faced.

revised 12m TP of NZ$2.71 TP (was NZ$3.07)"

[macduffy]

It's just as well that AIR still has that domestic network making a dollar or two!

;)

[Beagle]

Every 1 of 3 posts on AIR Sharetrader is your constant empty-glass down-ramping as everyone knows your 'SHORT' position which you remind at every opportunity. Your biased empty/full glass thoughts are becoming less meaningful as just your current position..............

GS

"The soft 1H20 result was largely led by the inability to place the incoming incremental fleet capacity into the market (in particular in international). While holding costs of the new fleet rose (+NZ$29mn), AIR was unable to offset this with the planned 1H20 capacity growth (T&PI +0.3% vs. guidance +2-3%; Int’l +5.8% vs. +7-8%) given the dilution to RASK (T&PI -1.5%; Int’l -1.9%) that it faced.

revised 12m TP of NZ$2.71 TP (was NZ$3.07)"

The inconvenient truth is I have called it right and sold at $2.98. If you believe GS you should double down and stand right in front of the approaching bear and see what happens. Good luck with that lol

[Raz]

The inconvenient truth is I have called it right and sold at $2.98. If you believe GS you should double down and stand right in front of the approaching bear and see what happens. Good luck with that lol

Sounds like an Investor holding and not liking it.

[Beagle]

Sounds like an Investor holding and not liking it.

Understandably a bit hot under the collar after the shares going down a whopping 24% in just a few weeks when the broader market is down just 6%.

[Beagle]

Keep up the fine work Beagle. If you can talk the price down to NTA of $1.69 that would be a wonderful buying opportunity.

:) NTA on the direct broking website showing as $1.63. They never accrue the dividend in the accounts so when that 11 cents is paid out shortly the adjusted NTA is going to be $1.52. Personally I'm thinking I want a fairly decent discount to NTA to account for known and unknown risks.

At a 50% discount to NTA, (76 cents) I might be interested. Will never happen I hear shareholders gasp in disbelief ! Those people should check out the share price history of Qantas in January 2014, just 6 years ago, at one point that I recall traded at just $1.02 intraday...or AIR's share price last time they faced a massive challenge of a similar magnitude when in February 2009 in the depth's of the GFC the share price was just 70 cents.

History never repeats...or does it, especially with low margin cyclical airlines ?

[winner69]

They touted they had a billion in cash

I recall they also said that just before the Govt bailed them out

[Beagle]

They touted they had a billion in cash

I recall they also said that just before the Govt bailed them out

I recall exactly that too. The inconvenient truth is its not theirs, prepaid travel in advance is just on $1.4 Billion, some of that yours ?
I forget what price the shares were issued to the Govt on the last bailout, from vague memory was it 25 cents each ?
Don't want to fly anywhere for the foreseeable future so might start spending up large in their airpoints store.

Edit Yeah it was 25 cents each. Some of the cuts the Government made when they bailed out AIR are worth revisiting.
Staff numbers 800-1000 gone, I bet they chose highly paid flight crew and management. 15% pay cuts elsewhere.
Couldn't happen again ? But could it if we all have to go into lockdown for months ?
https://www.wsws.org/en/articles/2001/11/nz-n03.html

[Bjauck]

Sounds like an Investor holding and not liking it. I know that feeling. I have been lightening my shareholding's gradually over the last couple of years but now I have got holder's remorse over not acting more quickly.

[dreamcatcher]

I know that feeling. I have been lightening my shareholding's gradually over the last couple of years but now I have got holder's remorse over not acting more quickly.

Don't kick yourself, mine are almost all free but this investors complaint was about the constant down-ramping nothing else the SP will go where it goes.

@Beagle is thick skinned and hopefully takes no offense at my yelping.

[Baa_Baa]

Almost 50% retrace of the 2012 low-to-high 2017. A reminder what a cyclical looks like, monthly chart log scale. (https://invst.ly/p-34d)

[winner69]

Almost 50% retrace of the 2012 low-to-high 2017. A reminder what a cyclical looks like, monthly chart log scale. (https://invst.ly/p-34d)

Nice chart BaaBaa ....not much ‘noise’ on it is there?

[Baa_Baa]

Nice chart BaaBaa ....not much ‘noise’ on it is there?

Thanks winner, keep it simple eh, its not a GFCII so I'd be surprised if it didn't find support around the .618 or worse the .786 and do a V shaped recovery. So much pessimism and doom around here lately. In any event, good buying ahead, just need to be patient and keep an eye on the chart. This is quickly becoming more about sentiment than fundamental, despite AIR being shafted on all metrics.

[dreamcatcher]

Thanks winner, keep it simple eh, its not a GFCII so I'd be surprised if it didn't find support around the .618 or worse the .786 and do a V shaped recovery. So much pessimism and doom around here lately. In any event, good buying ahead, just need to be patient and keep an eye on the chart. This is quickly becoming more about sentiment than fundamental, despite AIR being shafted on all metrics.

Really nice chart Baa_Baa viewed on 50" screen

[Beagle]

Don't kick yourself, mine are almost all free but this investors complaint was about the constant down-ramping nothing else the SP will go where it goes.

@Beagle is thick skinned and hopefully takes no offense at my yelping.

Pretty thick fur too :)


Thanks winner, keep it simple eh, its not a GFCII so I'd be surprised if it didn't find support around the .618 or worse the .786 and do a V shaped recovery. So much pessimism and doom around here lately. In any event, good buying ahead, just need to be patient and keep an eye on the chart. This is quickly becoming more about sentiment than fundamental, despite AIR being shafted on all metrics.
Good chart mate, thanks for sharing and a stark reminder what a cyclical indeed does look like.
Not GFC Mk2 yet but it could become that in a worse case scenario.
Did we ever get over the first one properly ? I see they've started "helicopter money" in Hong Kong already...didn't Ben Bernake pioneer that ?

Suppose I shouldn't be such a glum dog. Just because I wouldn't get on any plane to go anywhere doesn't mean others wouldn't.

[James108]

Yes I think it is odd that you wouldn’t get on a plane, but you aren’t alone. Maybe it’s because I am (relatively) young but economic impact aside I’m not really concerned with Coronavirus at all. Just booked flights to the states for July.

[Beagle]

I thought I was bullet proof when I was young too.

Samoa flights halved.
https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12312891

[winner69]

Yes I think it is odd that you wouldn’t get on a plane, but you aren’t alone. Maybe it’s because I am (relatively) young but economic impact aside I’m not really concerned with Coronavirus at all. Just booked flights to the states for July.

About 10 million people flew on planes yesterday

Wonder how many got the virus

[dr_]

Air New Zealand offers $9 domestic flights to combat lagging saleshttps://www.newshub.co.nz/home/travel/2020/03/coronavirus-air-new-zealand-offers-9-domestic-flights-to-combat-lagging-sales.html

Some pressure by CONVID-19

[Blue Skies]

For anyone worried about cabin air quality, the air in modern planes is probably far cleaner & more sterile than the air in most offices, movie theatres or supermarkets.

https://www.askthepilot.com/questionanswers/cabin-air-quality/

[Tomtom]

Air New Zealand offers $9 domestic flights to combat lagging saleshttps://www.newshub.co.nz/home/travel/2020/03/coronavirus-air-new-zealand-offers-9-domestic-flights-to-combat-lagging-sales.html

Some pressure by CONVID-19 I cant speak about Air NZ but typically around two thirds of the cost of operating an airline are fixed. So when things are good they are very good and when things are bad it rapidly turns into a savage race to the bottom from which they cannot escape.

[Raz]

Yes I think it is odd that you wouldn’t get on a plane, but you aren’t alone. Maybe it’s because I am (relatively) young but economic impact aside I’m not really concerned with Coronavirus at all. Just booked flights to the states for July.

And if you come down with it while in the US, you will be equally concerned about your health and your financial position to gain access to care to deal with it :)

[Raz]

I cant speak about Air NZ but typically around two thirds of the cost of operating an airline are fixed. So when things are good they are very good and when things are bad it rapidly turns into a savage race to the bottom from which they cannot escape.

Still starting to looking more like marketing in this case.

[BlackPeter]

Air New Zealand offers $9 domestic flights to combat lagging saleshttps://www.newshub.co.nz/home/travel/2020/03/coronavirus-air-new-zealand-offers-9-domestic-flights-to-combat-lagging-sales.html

Some pressure by CONVID-19

Sounds though you have to pay full price if you want to return :):

[Balance]

Sounds though you have to pay full price if you want to return :):

Exactly!

Same as the international ‘sale’.

Great deals though if you are flying one way

[winner69]

Wow, a 1000 seats at $9

Cheapest marketing / advertising campaign have ever run .....media lapping it up with big headlines

Well done AIR marketing team

[BlackPeter]

Wow, a 1000 seats at $9

Cheapest marketing / advertising campaign have ever run .....media lapping it up with big headlines

Well done AIR marketing team

True.

AIR boosts they have 400 flights per day - which would be 2800 per week. This 1000 cheap one way seats might wear a bit thin across the number of flights they have ... if the sale is for a week than it would be only one cheap seat on every third plane :):

[winner69]

True.

AIR boosts they have 400 flights per day - which would be 2800 per week. This 1000 cheap one way seats might wear a bit thin across the number of flights they have ... if the sale is for a week than it would be only one cheap seat on every third plane :):

But Cam says a great opportunity to take the family to see parts of nz they haven’t seen before.

[BlackPeter]

But Cam says a great opportunity to take the family to see parts of nz they haven’t seen before.

Well, that's probably referring to these single person families :). Growing demographic, they say, which is a bit sad, but AIR is clearly catching the trend to cater for them:

according Dr. Google:

The single-person household is a household that contains one person who lives alone. In a culture that includes family and marriage as part of the American Dream, the single-person household is a growing demographic.

Buy a $9 ticket for all your family and never come back ...

[winner69]

Well, that's probably referring to these single person families :). Growing demographic, they say, which is a bit sad, but AIR is clearly catching the trend to cater for them:

according Dr. Google:


Buy a $9 ticket for all your family and never come back ...

So the zillions they’ve spent on collecting customer data and analytics and all that stuff is being put to good use ...identifying the single person family

Suppose one gets Elite points as well on these tickets?

[winner69]

AIR website crashed at 9 ....demand so hot ....virus not putting people off flying

Great advertising ...pity they couldn’t fulfil punters expectations and excitment

Maybe another offer tomorrow

[Jaa]

Historically these kind of shocks have been good for Air NZ long term as they drive out any struggling competitors. Leisure demand always more affected than business travel.

Jetstar and Qantas have reduced flights across the Tasman by 5%. Virgin has announced a 3% cut across the Tasman. You would think an already struggling Virgin will be hurt the most.

Should also see some rationalisation from Gulf airlines and from airlines flying to US/Canada.

[BlackPeter]

AIR website crashed at 9 ....demand so hot ....virus not putting people off flying

Great advertising ...pity they couldn’t fulfil punters expectations and excitment

Maybe another offer tomorrow

Shhh - you really shouldn't use the "v" word these days ... scaremongers waiting behind every corner :) ... and who knows, maybe they have one of these you know what already in their system?

[Snow Leopard]

Air Asia X (i.e. long haul) offering me all I can fly for one year for MYR499 (NZ$200).

It comes with a few caveats that adds a few more ringgit to each flight that you can actually book but it is making headlines.

https://www.airasia.com/deals/passes/airasia-unlimited-pass/offers/airasia-unlimited-pass

[Mr Slothbear]

I saw that Air Asia deal yesterday and was very tempted but didn't go through the fine print and as is often the case the devils probably in the details

[Beagle]

Air Asia X (i.e. long haul) offering me all I can fly for one year for MYR499 (NZ$200).

It comes with a few caveats that adds a few more ringgit to each flight that you can actually book but it is making headlines.

https://www.airasia.com/deals/passes/airasia-unlimited-pass/offers/airasia-unlimited-pass

Hit the link and it comes up -sorry deal no longer exists. Talk about desperation pricing...(that's even worse that AIR's $9 domestic offer today which is actually free flying as airways and landing fees are more than $9 per passenger). Maybe Air Asia have gone bankrupt already ?

[James108]

And if you come down with it while in the US, you will be equally concerned about your health and your financial position to gain access to care to deal with it :)

Not really.. I will have travel insurance and I would imagine I have a similar chance of catching it in the US as I do in NZ AND I am fairly healthy so I may not even need to visit a GP. The quarantine would be a pain though but hey not about to change travel plans on the basis of a near 0% chance of infection ;)

[Mr Slothbear]

Hit the link and it comes up -sorry deal no longer exists. Talk about desperation pricing...(that's even worse that AIR's $9 domestic offer today which is actually free flying as airways and landing fees are more than $9 per passenger). Maybe Air Asia have gone bankrupt already ?



Air Asia CEO and founder is a prodigee of O'leary from Ryan air. Two of the longest serving captains of industry around both growing their companies from pretty much nothing so would be surprised if air asia in any real strife. Well oiled machine, that one

[Beagle]

Air Asia CEO and founder is a prodigee of O'leary from Ryan air. Two of the longest serving captains of industry around both growing their companies from pretty much nothing so would be surprised if air asia in any real strife. Well oiled machine, that one

I was just yanking the snow cat's tail :)

[Jaa]

Air Asia CEO and founder is a prodigee of O'leary from Ryan air. Two of the longest serving captains of industry around both growing their companies from pretty much nothing so would be surprised if air asia in any real strife. Well oiled machine, that one

Air Asia X (the long haul part) is a separately listed and financially much more troubled and risky company than the core Air Asia. I would have serious concerns over Air Asia X surviving another year in this environment.

Likewise Malaysia Airlines, already dependent on government support could see losses escalate.

To my earlier post about the strong surviving and then getting stronger, core Air Asia as the strongest regional low cost airline should survive and thrive.

It should also be noted, Malaysia has handled the outbreak really well so far.

[Raz]

Air Asia X (the long haul part) is a separately listed and financially much more troubled and risky company than the core Air Asia. I would have serious concerns over Air Asia X surviving another year in this environment.

Likewise Malaysia Airlines, already dependent on government support could see losses escalate.

To my earlier post about the strong surviving and then getting stronger, core Air Asia as the strongest regional low cost airline should survive and thrive.

It should also be noted, Malaysia has handled the outbreak really well so far.

Malaysia airlines has been keen to offer business class at a discount and especially if you have flown with them previously. That is a real concern if they do not have sticky premium customers to fill the premium cabin. Assume the Government will continue financial support thou....

[Raz]

Not really.. I will have travel insurance and I would imagine I have a similar chance of catching it in the US as I do in NZ AND I am fairly healthy so I may not even need to visit a GP. The quarantine would be a pain though but hey not about to change travel plans on the basis of a near 0% chance of infection ;)

Your cute, this is not covered by most travel insurance policies and everyone has underlying health issues..its just a matter if events trigger them. Given that, you are likely right, you most likely will have no problems. Just if you did...

[IAK]

I like this guy more than the last one already. Foran heading out on the frontline. "One of the aspects of my job I get most satisfaction about is getting hands-on with customers and staff. Don't be surprised to see me working with our Cabin Crew serving on flights, checking customers in at airports or welcoming everyone arriving or departing at Koru lounges."

https://www.stuff.co.nz/travel/news/119965705/new-air-new-zealand-ceo-to-clean-planes

[Blue Skies]

I like this guy more than the last one already. Foran heading out on the frontline. "One of the aspects of my job I get most satisfaction about is getting hands-on with customers and staff. Don't be surprised to see me working with our Cabin Crew serving on flights, checking customers in at airports or welcoming everyone arriving or departing at Koru lounges."

https://www.stuff.co.nz/travel/news/119965705/new-air-new-zealand-ceo-to-clean-planes


Wow, fantastic appointment & great timing. Couldn’t think of a better person to head AIR at moment.

[stoploss]

I like this guy more than the last one already. Foran heading out on the frontline. "One of the aspects of my job I get most satisfaction about is getting hands-on with customers and staff. Don't be surprised to see me working with our Cabin Crew serving on flights, checking customers in at airports or welcoming everyone arriving or departing at Koru lounges."

https://www.stuff.co.nz/travel/news/119965705/new-air-new-zealand-ceo-to-clean-planes

Great he puts his email address out there . Might get yapped at from time to time , but I suppose that goes with the job :)

[winner69]

One guy in this article says things going to be bad for AIR

And now Jacinda not ruling out banning of TransTasman travel ..wow

https://www.stuff.co.nz/business/119964728/air-nzs-coronavirus-hit-opportunity-for-travellers-as-airline-struggle-with-disruption

[dobby41]

One guy in this article says things going to be bad forvAIR

And now Jacinda not rulin out banning of TransTasman travel ..wow

"Not ruling out" and "likely" are two very different things.
She wouldn't be stupid enough to rule anything out given this is all very fluid.

[dreamcatcher]

This bird took the recent opportunity to fly South with the flock............. and will return North once climate changes

[Beagle]

One guy in this article says things going to be bad for AIR

And now Jacinda not ruling out banning of TransTasman travel ..wow

https://www.stuff.co.nz/business/119964728/air-nzs-coronavirus-hit-opportunity-for-travellers-as-airline-struggle-with-disruption

Wouldn't surprise me in the slightest if they actually lose money in the second half and burn heaps of cash. No worries according to the board though, lets just keep the dividends the same, everything will come out in the wash because we have $1b in cash. What could possibly go wrong :eek2:

[winner69]

Wouldn't surprise me in the slightest if they actually lose money in the second half and burn heaps of cash. No worries according to the board though, lets just keep the dividends the same, everything will come out in the wash because we have $1b in cash. What could possibly go wrong :eek2:

You’re not listening again Beagle

Made $198m (before significant items of course) and the much admired and vaunted Greg says they going to $152m in H2 and that’s with fuel at $65

And that $152m is About the same as H219 ...that’s very good

[Beagle]

Deaf Dog can think for himself. No way the current guidance sticks....there's at the very least one more downgrade to FY20 earnings coming, probably 2 or even 3 and if they do make any money this half its only because of profits in Q3 when most had already made their bookings and couldn't annul them. Q4 is going to be a total financial disaster for AIR, mark my words mate. The board will be tearing their hair out later this financial year wondering why they didn't see this coming and asking why they paid out the regular amount to shareholders....or maybe they don't do that and simply turn up with the begging bowl at the Beehive ?

[winner69]

Deaf Dog can think for himself. No way the current guidance sticks....there's at the very least one more downgrade to FY20 earnings coming, probably 2 or even 3 and if they do make any money this half its only because of profits in Q3 when most had already made their bookings and couldn't annul them. Q4 is going to be a total financial disaster for AIR, mark my words mate. The board will be tearing their hair out later this financial year wondering why they didn't see this coming and asking why they paid out the regular amount to shareholders....or maybe they don't do that and simply turn up with the begging bowl at the Beehive ?

I hadn’t thought about in quarters ....prob O.k up to Q3 and Q4 will be the shocker

All points to F21 being a really bad year then ..impact of virus and recession just starting to really hurt from July onwards

[Maverick]

As reported on Interest.co.nz. This will really hurt airlines and all tourism related stocks.

CORONAVIRUS IMPACTS NO LONGER AN INSURABLE TRAVEL EVENT
Insurance agents are reporting that insurance companies now deem coronavirus to be a ‘known event’ globally. Travel insurance purchased after 2 March no longer covers losses or additional costs associated with Covid-19; for example, Medical costs, Cancellation/Delay, Loss of deposits etc. anywhere in the world. Travel insurance still offers cover for other unforeseen events as outlined in individual policies - such as a broken leg, lost baggage or the impacts of a significant weather event.
Most excellent point their Mogul,and there in lies the real problem. It's one thing for a percentage of peps to worry themselves out of travel but the rest of us ( I genuinely fell bad for covid if it lands on me) have to consider getting "left " somewhere because a politician decides to "lock down".....and now at our own indefinite expense . Only that possibility makes someone as rudely fit as myself want to stay at home for now. Every one else will stay at home because they place themselves somewhere in between these two parameters.....that leaves no one with an un-impaired mind traveling just for pleasure.

While we only have AIR to vicariously watch (surely no ones here owns them at this point, right?), I'd hate to see what the cruise ship shares were suffering right now.

[peat]

I'd hate to see what the cruise ship shares were suffering right now.

I saw in Reuters that a Japanese cruise ship company has already filed for the big B

[Beagle]

I am keeping my powder dry until its trading at a 50% discount to NTA, that's 76 cents, ex divvy NTA = $1.52.

[Beagle]

I hadn’t thought about in quarters ....prob O.k up to Q3 and Q4 will be the shocker

All points to F21 being a really bad year then ..impact of virus and recession just starting to really hurt from July onwards

The biggest problem with buying even at 76 cents is the prospect of a repeat bailout at 25 cents is actually not all that remote in my opinion. Average forward booking is ~ 3 months so that suggests this virus really starts to drill holes in their balance sheet from mid May 2020 onwards.

[Marilyn Munroe]

If things go really pear shaped does the Cullen Put still apply?

If the alternative means parliamentarians have to travel back to their constituency's by bus I say it does.

Boop boop de do
Marilyn

[Beagle]

As reported on Interest.co.nz. This will really hurt airlines and all tourism related stocks.

CORONAVIRUS IMPACTS NO LONGER AN INSURABLE TRAVEL EVENT
Insurance agents are reporting that insurance companies now deem coronavirus to be a ‘known event’ globally. Travel insurance purchased after 2 March no longer covers losses or additional costs associated with Covid-19; for example, Medical costs, Cancellation/Delay, Loss of deposits etc. anywhere in the world. Travel insurance still offers cover for other unforeseen events as outlined in individual policies - such as a broken leg, lost baggage or the impacts of a significant weather event.

Owning you own Campervan for holidays just keeps looking better and better.

[see weed]

I am keeping my powder dry until its trading at a 50% discount to NTA, that's 76 cents, ex divvy NTA = $1.52.
The cheapest price I paid for AIR was 84c and 87c in June 2012. Do you remember when AIR got into trouble many years ago and sp went down to 15c. It was only at that price for a very short time, and some character bought in one or three million shares, and the same day the government announced they were going to bail out AIR, and sp went back up about a dollar. Good profit for a day...$3,000,000, better than lotto:cool:. ps..I wonder if insider.

[janner]

The cheapest price I paid for AIR was 84c and 87c in June 2012. Do you remember when AIR got into trouble many years ago and sp went down to 15c. It was only at that price for a very short time, and some character bought in one or three million shares, and the same day the government announced they were going to bail out AIR, and sp went back up about a dollar. Good profit for a day...$3,000,000, better than lotto:cool:. ps..I wonder if insider.

Perish the thought seeweed. NZ is known to be on the lower end of corrupt countries.

COUGH..COUGh..COUG.... COU....CO.... Just very good at turning a blind eye...

[bull....]

Planning a trip later this year? Chances are you won't be covered for any issues relating to coronavirus (https://www.stuff.co.nz/world/coronavirus) – even if you've paid for insurance.
A number of New Zealand-based travel insurers, such as Southern Cross, Tower and 1Cover, are not offering cover to travellers for anything related to coronavirus

https://www.stuff.co.nz/business/119953122/coronavirus-most-travel-insurers-not-offering-kiwis-cover-for-virusrelated-claims

[dobby41]

The board will be tearing their hair out later this financial year wondering why they didn't see this coming and asking why they paid out the regular amount to shareholders....or maybe they don't do that and simply turn up with the begging bowl at the Beehive ?

With so little faith in the board I'm surprised that you'd consider buying at any price.

[dobby41]

Unfortunately for Air NZ it is shaping up to be good year for a staycation and minimising travel.

Looks like it will be left to me to help them out - planning to increase travel this year as the deals come up.

[winner69]

Unfortunately for Air NZ it is shaping up to be good year for a staycation and minimising travel. Hard to see recovery in demand for some time. The balance sheet is not strong with $8.8 b of total assets, $6.8 b of liabilities (including of $3.7 b interest bearing liabilities and lease liabilities) and $2.0 b in equity. Weak demand and weak balance sheet not a great recipe. Capital raise of $200 m+ at NTA or less in 2020?

...any off Balance Sheet stuff?

[Beagle]

The cheapest price I paid for AIR was 84c and 87c in June 2012. Do you remember when AIR got into trouble many years ago and sp went down to 15c. It was only at that price for a very short time, and some character bought in one or three million shares, and the same day the government announced they were going to bail out AIR, and sp went back up about a dollar. Good profit for a day...$3,000,000, better than lotto:cool:. ps..I wonder if insider.

Gidday mate. I remember the bailout at 25 cents and remember them saying very shortly before that they had $1b in cash so it was a real Deja-vu moment the other day when they said exactly the same thing. An ominous sign for the future ?


Unfortunately for Air NZ it is shaping up to be good year for a staycation and minimising travel. Hard to see recovery in demand for some time. The balance sheet is not strong with $8.8 b of total assets, $6.8 b of liabilities (including of $3.7 b interest bearing liabilities and lease liabilities) and $2.0 b in equity. Weak demand and weak balance sheet not a great recipe. Capital raise of $200 m+ at NTA or less in 2020?

I need to have another good look at the balance sheet...but my initial assessment the other day is that they are not in a strong position to weather this storm and if it turns into a hurricane $200m will be like putting sellotape on the windows, almost completely ineffective.


With so little faith in the board I'm surprised that you'd consider buying at any price.
They're normally good but they are all at sea with this virus thing and should have front footed it and cut the dividend. I expect in the near future they will do what "Hyatt" have come out and done overnight and admit they cannot reliably forecast the impact of this virus so Hyatt withdrew forward earnings guidance altogether. AIR's board would have more credibility if they did the same thing. https://www.chicagobusiness.com/health-care/coronavirus-shakes-hotel-industry-including-hyatt

[macduffy]

They're normally good but they are all at sea with this virus thing and should have front footed it and cut the dividend. I expect in the near future they will do what "Hyatt" have come out and done overnight and admit they cannot reliably forecast the impact of this virus so Hyatt withdrew forward earnings guidance altogether. AIR's board would have more credibility if they did the same thing. https://www.chicagobusiness.com/heal...ncluding-hyatt

This would apply to many other companies as well, at present, but would probably stoke more concern than it warranted. Best that we regard any "current" earnings advice as being highly conditional on how this virus thing plays out.

[winner69]

Was a 1 for 5 share consolidation post the bailout so 25 cents is really a bit higher on a comparable basis

[Beagle]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/AIR/349043/317644.pdf

Balance sheet on page 11 is quite interesting from a solvency perspective.
Total Current Assets $1.768b, (very shortly to be reduced by the payment of a $124m dividend so ex dividend is just $1.644b).
Current Liabilities are $2.927b which represents $1.283b more than the adjusted net current assets.
If we deduct the current lease liability created by the new IFRS16 accounting for leases which is $357m this still gives a deficiency in working capital of $926m.

So by now non-accountants might be wondering why they are not insolvent and heading to the Beehive for a Govt rescue already...don't worry, (this is a distinct possibility later this year) but for the present time their solvency is being maintained by...not shareholders, but yes, you guessed it, the flying public.

Revenue in advance, that's Joe public who have bought tickets in advance and is included in the current liabilities as AIR haven't delivered on the service yet, amounted to $1,388m as at 31 December 2019...so provided they can continue to provide those services, (that's not a given with possible significant extra route and service cuts) their deficiency in working capital of $926m is covered by revenue in advance of $1,388m as at 31/12/2019. Just $462m comfort there, as at 31 December 2019.

If there are mass cancelations of services and there is widespread public loss of confidence in the safety of air travel, AIR will need another bail out or a potentially massive capital raise later this year.

On a more positive note, not all airlines are Government majority owned by any means so we could see a quite significant reduction in competition going forward as some other airlines go under and others dramatically reduce capacity on long skinny routes such as those to N.Z. Jetstar might retrench from N.Z. as well.

[Jay]

I've helped them a bit then.
Booked and paid for a trip to Melbourne during Xmas school holidays!

[Beagle]

I've helped them a bit then.
Booked and paid for a trip to Melbourne during Xmas school holidays!

Good point that at times like this we should do the right thing and if we are flying, be parotitic and support our national airline. If another airline has a better deal, phone AIR up and ask them to price match.

[BlackPeter]

On a more positive note, not all airlines are Government majority owned by any means so we could see a quite significant reduction in competition going forward as some other airlines go under and others dramatically reduce capacity on long skinny routes such as those to N.Z. Jetstar might retrench from N.Z. as well.

Good point, Air NZ used to charge on less competitive routes already previously ways over the top (try to get a cheap flight to South America), reduced competition will mid term quite likely boost their margins (after the initial "no fly' shock - say for the next 4 to 6 months).

Wondering however what drastically reduced competition and number of flights would mean for the rest of our tourism industry? This well might result in a long ice age for the likes of THL as well as any hospitality industry for a long time after the virus scare is gone ....

[Beagle]

Korean AIR just announced suspension of services to N.Z. Over 5,000 cases in South Korea and growing rapidly.

Yes BP. It could be a REALLY challenging period coming up for the tourism sector. SKC also directly in the path of the storm.

[Beagle]

Travel on any aircraft, even N.Z. domestic flights will involve significant risk going forward. https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12313758
Travel by private car has never looked so good !

[Dassets]

Dead right. I looked at the balance sheet this morning I was shocked. Look at the drop in cash too from pcp Any course in financial statement analysis presented this would come to one conclusion.

[Traderx]

Surely AIR needs to cancel its dividend due to be paid on March 25. Demand is evaporating internationally and could evaporate domestically very soon. Precautionary principal says they'll need all the cash they can get in coming months and so should hold on to every cent.

[Benny1]

Surely AIR needs to cancel its dividend due to be paid on March 25. Demand is evaporating internationally and could evaporate domestically very soon. Precautionary principal says they'll need all the cash they can get in coming months and so should hold on to every cent.

Shane Jones has probably been promised the governments share for more election bribes for Northland :scared: ( in return for him leaving AIR alone for a while!)

[dobby41]

Shane Jones has probably been promised the governments share for more election bribes for Northland :scared: ( in return for him leaving AIR alone for a while!)

Unneccessary bull*

[Beagle]

Dead right. I looked at the balance sheet this morning I was shocked. Look at the drop in cash too from pcp Any course in financial statement analysis presented this would come to one conclusion.

Cash and Short Term Deposits - spot the trend folks
June 2018 $1,343m
Dec 2018 $1,217m
June 2019 $1,055m
Dec 2019 $1,003m
June 2020 ??

The strength to withstand any conditions ?

[Beagle]

Surely AIR needs to cancel its dividend due to be paid on March 25. Demand is evaporating internationally and could evaporate domestically very soon. Precautionary principal says they'll need all the cash they can get in coming months and so should hold on to every cent.

The board really are "in denial" about the seriousness of this crisis. If one was being extremely kind about it you could possibly make the case that they have been caught out by the rapidly evolving nature of how the risk to the airline has developed, but I think that case is quite weak and they have been a bit reckless keeping the dividend the same. Perhaps they think they really do have the financial strength to withstand any conditions...but the last company I can think of that made that bold claim as part of their advertising was Hanover Finance.

[macduffy]

Travel on any aircraft, even N.Z. domestic flights will involve significant risk going forward. https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12313758
Travel by private car has never looked so good !

Agree, but plenty of (other) risk there, too.

[macduffy]

Agree 100%. Not doing so would raise serious questions about the prudence of Board decision making as Beagle has alluded to. You would think Air NZs bankers would be wanting the company to shore up its balance sheet.

Luckily? the govt still has that big shareholding, an incentive to prop AIR up financially, if necessary.

[Beagle]

Agree, but plenty of (other) risk there, too.

True that but the key is you are in control of your own destiny at least to a certain extent...washing one's hands very thoroughly after touching a fuel bowser, paying by pay-wave, driving carefully etc and most importantly you are only in very close proximity in your car to people you choose to be with.

Anyway back to Air - I wouldn't want to be Greg Foran for all the tea in China, talk about a baptism of fire !! Welcome to the airline industry Greg, lets hope you're a very fast learner and already have Grant Robertson on your speed dial !

[peat]

Anyway back to Air - I wouldn't want to be Greg Foran for all the tea in China, talk about a baptism of fire !! Welcome to the airline industry Greg, lets hope you're a very fast learner and already have Grant Robertson on your speed dial !

Imagine the kudos if he navigates through this, though. I mean he's no Bezos but he's rich enough that he wont be working for the money anymore, so maybe he is fully enthused at the challenge.

With the govts backing and being the national flag carrier I guess the company is safe , presumably the state will do what it needs to so as to retain a sovereign airline , which doesn't mean the share price cant go down a lot but as with say Meridian its unlikely it goes completely down the gurgler.

[winner69]

Air Chatham cutting flights to the Chathams

https://www.stuff.co.nz/business/industries/120005925/air-chathams-and-korean-air-latest-airlines-to-axe-flights-due-to-coronavirus

[Baa_Baa]

Luckily? the govt still has that big shareholding, an incentive to prop AIR up financially, if necessary.

Govt shareholder is last resort financier, for a price (% holdings), we saw how low the SP went before the govt stepped in last time. Holding 50% this time if it collapsed the govt surely would nationalise the airline, i.e. forced buyout all shareholders at some desperately low SP.

[winner69]

Govt shareholder is last resort financier, for a price (% holdings), we saw how low the SP went before the govt stepped in last time. Holding 50% this time if it collapsed the govt surely would nationalise the airline, i.e. forced buyout all shareholders at some desperately low SP.

After the bailout the govt owned 82% of AIR

[iceman]

Govt shareholder is last resort financier, for a price (% holdings), we saw how low the SP went before the govt stepped in last time. Holding 50% this time if it collapsed the govt surely would nationalise the airline, i.e. forced buyout all shareholders at some desperately low SP.

A good article in the Herald 4.5 years ago. SP not far off now where it was then so a nice little history refresher course https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11508152

[peat]

After the bailout the govt owned 82% of AIR

and Key sold at $1.60 from memory. Too Keyn to get out he was but the right thing to do of course.

[dr_]

More domestic and international flights cuts by AIR due to corona beer.

https://www.stuff.co.nz/travel/travel-troubles/120022653/air-nz-announces-further-flight-cuts-in-wake-of-coronavirus-outbreak

[Snow Leopard]

Cash and Short Term Deposits - spot the trend folks
June 2018 $1,343m
Dec 2018 $1,217m
June 2019 $1,055m
Dec 2019 $1,003m
June 2020 ??

The strength to withstand any conditions ?

Those that make the decisions made the decision some time ago (as in: I forget when and damned if I m going to go look for it) to reduce the amount of cash they held and it is this deliberate policy that the above trend is a result of.

This is one of the prime reasons for the current mismatch between current assets and current liabilities.

Historically AIR was at the more conservative end in this regard and even now, probably still is.

Probably best not to invest in airlines at the moment. :p

[BlackPeter]

Some airlines still planning for a better future, even if it involves more nightmares:

https://www.marketscreener.com/SOJITZ-CORPORATION-6496186/news/Japan-s-ANA-orders-15-more-Boeing-787-Dreamliners-worth-5-billion-at-list-prices-30057087/

Not sure, though I would have purchased planes from the the maker of the well feared 737 Max ... but at least they avoided the Rolls Royce engines to go with them. This must be a silver lining.

[Snow Leopard]

link: China launches funding scheme to keep services flying through coronavirus
(https://www.flightglobal.com/strategy/china-launches-funding-scheme-to-keep-services-flying-through-coronavirus/137078.article)

[Blue Skies]

Coronavirus & the daily media & internet drenching of hysterial headlines can make us a bit short sighted.

For those holding AIR, keep in mind looking ahead (& once there's effective medication for those who need treatment from Coronavirus which looks like only months away, or it naturally fades or vaccines produced ) air passenger numbers projected to double by 2037 with huge & the most growth in the Asia Pacific region & an extra 2.3 billion passengers for a total of 3.9 billion passengers in this market alone.

https://www.iata.org/en/pressroom/pr/2018-10-24-02/

[BlackPeter]

Coronavirus & the daily media & internet drenching of hysterial headlines can make us a bit short sighted.

For those holding AIR, keep in mind looking ahead (& once there's effective medication for those who need treatment from Coronavirus which looks like only months away, or it naturally fades or vaccines produced ) air passenger numbers projected to double by 2037 with huge & the most growth in the Asia Pacific region & an extra 2.3 billion passengers for a total of 3.9 billion passengers in this market alone.

https://www.iata.org/en/pressroom/pr/2018-10-24-02/

Sure ... though I doubt they considered in this analysis global warming and flight shame. Linear extrapolations are sometimes useful, but always wrong :):

On top of that - one of their "working assumptions" to come up with this numbers was that the trend to globalization continues. I doubt that.

Anyway - I think the current discussion is more around whether it is more fun to buy AIR for $2.00, $1.00 or $0.50 per share. No matter how much or little you pay, you always end up with the same share of the airline which may or may not have a great future.

Why paying full price if you can get it some weeks later as well at a nice discount?

[bull....]

Coronavirus: Air New Zealand cuts more flights
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12313941

demand obviously falling rapidly

[Blue Skies]

Sure ... though I doubt they considered in this analysis global warming and flight shame. Linear extrapolations are sometimes useful, but always wrong :):

On top of that - one of their "working assumptions" to come up with this numbers was that the trend to globalization continues. I doubt that.

Anyway - I think the current discussion is more around whether it is more fun to buy AIR for $2.00, $1.00 or $0.50 per share. No matter how much or little you pay, you always end up with the same share of the airline which may or may not have a great future.

Why paying full price if you can get it some weeks later as well at a nice discount?


Yes well I have to admit I halved my holding at beginning of January even before Coronavirus struck due to challenges AIR facing with RR Dreamliner engines not even beginning to be solved for at least another 18 months.
Then have sold almost rest of holding recently as this does look really ugly.
Everyone I know postponing/cancelling holidays & with no travel insurance I cant imagine how anyone could take the risk.
One of our family members ended up in hospital in the US and the eventual bill was well over US $100,000 - fortunately covered by insurance.

[winner69]

Once an airline gest into strife it doesn't take much to tip it over the edge

Flybe broke (again)

https://www.theguardian.com/business/2020/mar/05/flybe-collapses-two-months-after-government-announces-rescue


Gwyn Topham, the Guardian’s transport correspondent, predicts this morning that Flybe won’t be the last. Virgin has enacted emergency money-saving measures after bookings halved; Ryanair and easyJet have cancelled hundreds of flights to Italy and elsewhere; BA has even cut transatlantic flights; and Donald Trump has held crisis talks with US airline bosses

[Raz]

Once an airline gest into strife it doesn't take much to tip it over the edge

Flybe broke (again)

https://www.theguardian.com/business/2020/mar/05/flybe-collapses-two-months-after-government-announces-rescue


Gwyn Topham, the Guardian’s transport correspondent, predicts this morning that Flybe won’t be the last. Virgin has enacted emergency money-saving measures after bookings halved; Ryanair and easyJet have cancelled hundreds of flights to Italy and elsewhere; BA has even cut transatlantic flights; and Donald Trump has held crisis talks with US airline bosses

https://www.odt.co.nz/news/dunedin/doubt-cast-over-school-university-travel

Just more examples of a further step down in demand, when main NZ organisations reduce travel domestically expect things to financially deteriorate quickly for AIR

[iceman]

Amongst some of the airline news from Europe today, FlyBe gone into receivership and Lufthansa Group parks up 150 planes and cancels 7,100 flights in March, about 25% of its schedule. Their shares down 5.5% today and 22% since Feb 21

[Balance]

https://www.barrons.com/articles/southwest-airlines-stock-has-more-bad-coronavirus-news-for-travel-stocks-51583422748

Airlines stocks getting hammered - ugly day for the sector.

US$100 billion expected in losses for airline sector.

Guess another earnings downgrade for Air NZ may be on the cards.

[Beagle]

IATA just came out and just on quadrupled their estimate of the impact globally on airlines from their earlier estimate in February.
Many North American carriers down 12-13% overnight.
Some cruise lines down ~ 15% overnight.
I expect AIR will go under $2 in the very near future.
Several experts on CNBC saying the sector is basically un-investable at present, (Airlines, cruise ship operators, hotels and other tourism stocks).
Extremely serious implications for AIR, THL, SKC and Skyline enterprises in my opinion.

[dr_]

'This is a crisis.' Airlines face $113 billion hit from the coronavirus
https://us.cnn.com/2020/03/05/business/airlines-coronavirus-iata-travel/index.html

[Beagle]

'This is a crisis.' Airlines face $113 billion hit from the coronavirus
https://us.cnn.com/2020/03/05/business/airlines-coronavirus-iata-travel/index.html

Thanks for the link. I can't help wondering what IATA's estimate of the financial impact will be a month from now ? My guess is it could very easily quadruple again.

AIR to downgrade outlook substantially in the next couple of weeks or just play it safe and withdraw guidance altogether and say we can no longer estimate the impact ?

[Blue Skies]

IATA just came out and just on quadrupled their estimate of the impact globally on airlines from their earlier estimate in February.
Many North American carriers down 12-13% overnight.
Some cruise lines down ~ 15% overnight.
I expect AIR will go under $2 in the very near future.
Several experts on CNBC saying the sector is basically un-investable at present, (Airlines, cruise ship operators, hotels and other tourism stocks).
Extremely serious implications for AIR, THL, SKC and Skyline enterprises in my opinion.


Govt must desperately need this AIR dividend, which must be only thing holding up the SP, but can't imagine there'll be any future ones after this for some time.
Noticed a serious change in tone from Public Health officials in last day or two. Is it too late now for AIR to cut this dividend?
If there was a sudden announcement next week, SP would drop like a stone.

[BlackPeter]

Govt must desperately need this AIR dividend, which must be only thing holding up the SP, but can't imagine there'll be any future ones after this for some time.
Noticed a serious change in tone from Public Health officials in last day or two. Is it too late now for AIR to cut this dividend?
If there was a sudden announcement next week, SP would drop like a stone.

In my view excellent example for a dividend trap.

Holders might ask themselves what the share is worth without the in the current situation unsustainable dividend payment. If it is less than the current SP minus the dividend, it might be a good time to sell.

Of course - in 12 to 18 months things are likely to look rosier again (with many competitors gone and the virus coming under control). I do have as well no (well, little) doubt that AIR will survive, even it it is just due to government intervention. But really hard to say what the remaining value of the shares will be if significant dilution due to a bailout is a possibility.

The worst thing is - any dividend payments now are reducing their chances to get without capital raise through this crisis. I don't think it is in the best interest of the shareholders.

Anyway - not holding . DYOR.

[Beagle]

Govt must desperately need this AIR dividend, which must be only thing holding up the SP, but can't imagine there'll be any future ones after this for some time.
Noticed a serious change in tone from Public Health officials in last day or two. Is it too late now for AIR to cut this dividend?
If there was a sudden announcement next week, SP would drop like a stone.

I don't think the Govt desperately needs it, (their books are in pretty good shape at this stage), but the lack of caution by the board, and / or their lack of foresight is concerning. I think its highly likely the next financial transaction between shareholders and AIR after this dividend will be AIR asking for money i.e. capital riase.
I cannot recall any company declaring a dividend before and then annulling it before its paid. Such a move to the best of my knowledge would be not only unprecedented but a serious embarrassment for the board.

The potential for very serious demand destruction going forward should be obvious to all and airlines trade on very thin margins with a very high fixed cost base. Once they have worked their way through delivering on the ~ $1.4b of prepaid tickets that existed at 31 December 2019 (and let's for the sake of keeping this simple assume a similar figure that existed at the start of February before this started to look really worrisome), which amounts to about 3 months worth of flights, by May 2020 this could get very serious for AIR.

If it was safe to travel in aircraft with this virus why have AIR stood their entire crews down that were working on those flights that the corona virus passenger was on ?
They weren't within 1 metre of that passage for 15 minutes like the ministry of health tells us is their "official risk zone". Who's telling porkies ? Ministry of Health, AIR or are we in some sort of state of malaise where nobody really knows how to accurately assess the risk ?
How long before the public en-masse, decide its better to play it safe than be sorry ?

[fish]

I don't think the Govt desperately needs it, (their books are in pretty good shape at this stage), but the lack of caution by the board, and / or their lack of foresight is concerning. I think its highly likely the next financial transaction between shareholders and AIR after this dividend will be AIR asking for money i.e. capital riase.
I cannot recall any company declaring a dividend before and then annulling it before its paid. Such a move to the best of my knowledge would be not only unprecedented but a serious embarrassment for the board.

The potential for very serious demand destruction going forward should be obvious to all and airlines trade on very thin margins with a very high fixed cost base. Once they have worked their way through delivering on the ~ $1.4b of prepaid tickets that existed at 31 December 2019 (and let's for the sake of keeping this simple assume a similar figure that existed at the start of February before this started to look really worrisome), which amounts to about 3 months worth of flights, by May 2020 this could get very serious for AIR.

If it was safe to travel in aircraft with this virus why have AIR stood their entire crews down that were working on those flights that the corona virus passenger was on ?
They weren't within 1 metre of that passage for 15 minutes like the ministry of health tells us is their "official risk zone". Who's telling porkies ? Ministry of Health, AIR or are we in some sort of state of malaise where nobody really knows how to accurately assess the risk ?
How long before the public en-masse, decide its better to play it safe than be sorry ?

I was laughing and joking to a colleague a couple of nights ago and noticed I was emitting small droplets landing on his face-he didnt seem to notice but I moved away to about 2 metres which seemed a lot safer.On reflection if I had corvid-19 it would only have taken seconds to transmit the virus.Also my droplets were all over his face so he could easily inoculate himself later(also I probably put a few on his conjunctiva).
So yes they must be telling porkies as it saves having to test people.

[Beagle]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12314164

AIR takes axe to services with Hong Kong, Taipei and Singapore flights down 25-50% over the next few months. "Demand has fallen off a cliff"

[King1212]

Denial... denial... denial

[winner69]

Airlines heading towards worst year for long time ...and it’s only March

[Beagle]

Airlines heading towards worst year for long time ...and it’s only March

I think people have already decided en-masse to not choose to make new airline bookings unless its absolutely necessary for business purposes.
Younger travellers less at risk might still choose to make new discretionary leisure bookings if the price is right but the real wealth lies with the baby boomer generation who are most at risk so there's likely to be a lot of empty seats towards the front of the plane.

[BlackPeter]

I put this into the Serko thread, but it might be still more relevant for AIR:


Just seen an interesting stats in a German magazine. About half of people asked said that they would delay or cancel a planned overseas trip due to the corona virus ... and the other half said that they would still go ahead.

Assuming that the split in other first world countries might be similar it would be fair to assume that travel might drop this year by half. Not the end of the world for everybody, but likely to kill anybody in the travel industry with too much leverage or too much fixed costs.

[Beagle]

I put this into the Serko thread, but it might be still more relevant for AIR:

Was listening on CNBC this morning to the multi billionaire that owns the Houston Rockets and chains of hundreds of restaurants around the world as well as hotel and casino interests. He said he lost ~ $1m a day this week on his restaurants. He likened them to the airline industry with very high fixed overheads. "Once you lose just 20% of your customers for a sustained period of time you go broke".

AIR's average load factor has been about 83%. 20% off that is 66% and I would think with that load factor on a reduced level of services, their losses would be more than $1m a day. If that survey is indicative of forward intentions towards travel world-wide, there's very, very serious trouble ahead for all airlines.

[Beagle]

Times like these a strong balance sheet gets you through. Oops.

Opps indeed. Another problem is the vast number of staff making $250K plus https://www.youtube.com/watch?v=3JxSLnvxP0w

[macduffy]

No surprises here. We have always known that airlines was about the riskiest sector on all exchanges.

[44wishlists]

Air New Zealand Sells London Heathrow Airport Slot For $27 Million (Published on Mar 6 2020)



https://www.forbes.com/sites/willhorton1/2020/03/06/air-new-zealand-sells-london-heathrow-airport-slot-for-27-million/?fbclid=IwAR0PeUsG7iOlJt9n2nmnuM5qzy9z-kvsz-7_ddj433y6_aFUyZ_Dvwd4Nno#73519e1c763d

[BlackPeter]

I think Air NZ will have to update guidance soon. Air NZ made earnings before significant items and tax of $198 m in H1 and are forecasting $300 m to $350 m for the full year i.e. $102 m to $152 m in H2 after allowing for $35 to $75 m hit from Coronavirus. Assuming they made $66 m in Jan/Feb (based on same monthly run rate as H1), then they will need to make $36 m to $86 m in the last four months of the financial year in the midst of the Coronavirus impact to achieve guidance. I forecast that they will make a loss in H2 (assuming capacity reduction of 10%, load factor declining to 70% and a 3% decrease in revenue yield per RPK from March through June), which would be massively different to current guidance. Could easily be losing $1m+ per day in last 4 months of the financial year.

I agree, though I would think your assumptions re capacity reduction still quite optimistic. You are modelling a roughly 25% reduction of flight traffic. Lufthansa just cut 50% of their flights!

https://www.theguardian.com/business/2020/mar/06/norwegian-airlines-shares-plummet-as-coronavirus-hammers-travel-sector

Obviously - nobody knows yet how long the virus scare keeps going, but I'd think something like 6 months (our winter half year) with 50% capacity and after that some ramp up again might well be in the cards.

Better expect a red FY2021 as well ...

[Beagle]

I think Air NZ will have to update guidance soon. Air NZ made earnings before significant items and tax of $198 m in H1 and are forecasting $300 m to $350 m for the full year i.e. $102 m to $152 m in H2 after allowing for $35 to $75 m hit from Coronavirus. Assuming they made $66 m in Jan/Feb (based on same monthly run rate as H1), then they will need to make $36 m to $86 m in the last four months of the financial year in the midst of the Coronavirus impact to achieve guidance. I forecast that they will make a loss in H2 (assuming capacity reduction of 10%, load factor declining to 70% and a 3% decrease in revenue yield per RPK from March through June), which would be massively different to current guidance. Could easily be losing $1m+ per day in last 4 months of the financial year.

At any one time they have 2-3 months worth of flights pre-booked so these booked before this virus turned really scary will see them doing sort of okay in March and April, maybe scratching to break even for those two months. (I predict a lot of people won't turn up for their scheduled travel). Things get VERY ugly from May onwards in my opinion and I agree, this probably drags them down into a loss for 2H.

I think its highly likely they'll be looking for substantial new capital before the end of 2020. Realistically the only way to get this will be a deeply discounted rights issue with very clear implications for the current share price. I hope shareholders enjoy the dividend payable shortly, its probably their last one for the foreseeable future. This is uninvest-able at present, unless you are short :D

Meanwhile, across the Tasman https://www.smh.com.au/business/companies/ir-upside-for-joyce-as-qantas-shrinks-routes-to-stem-viral-damage-20200306-p547mz.html?utm_source=ST&utm_medium=email&utm_campaign=ShareTrader+AM+Update+for+Saturday+7+ March+2020 Its pretty ugly there too.

[biker]

I’m picking that on Monday we will have a much clearer picture of where Air NZ is at.

[Beagle]

Beagle, have to say, you called this one early and took a position based on your conviction. Impressive. It took me a while to get it. I was focused on the 10 year return to normal view and not quick enough to grasp the implications of the short term being so brutal, especially given the weak balance sheet.

Thanks mate. A case of once bitten twice shy. I was slow exiting last time this quickly lost altitude so have made a point of sitting very close to the emergency exit and having a parachute, ever since :)
One has to feel a bit sorry for Greg Foran. What a brutal introduction into the industry :eek2:

[winner69]

AIR have been in an earnings recession for years now ....so what’s new

[Baa_Baa]

AIR they say is cyclical, I posted a monthly chart recently to try to illustrate. Didn't get much feedback on it, perhaps because the up/down of pre-2012 had a predictability about it (20 month cycle), whereas after that the SP just chewed up three cycle period upwards ending at $3.61 (very close to the third cycle period end - spooky).

Since then the next 20-month cycle down period, has been followed by the current period, also down. So maybe there is a new super-cycle 5-years period. If so, I have technical supports at $1.82 (the .618 fib), $1.72 the recent low, $1.32 (horizontal support and .786 fib), below that is the 2012 low $0.72.

Who knows what all the factors are the make a sector cyclical (and company), TA doesn't help with the 'why' question, but one thing is for sure, this cycle is down, ending October 2020. If it really is now 5-year cycle (currently down), the sub $1 SP is in play.

Hard to believe I bought into AIR in 2012 with great expectations, sold a few years later for a very nice profit then rued not holding as it went to well over $3. Nowadays I couldn't stomach getting back into a gut churning flight on AIR unless it plumbed the depths and presented an opportunity too good to ignore.

[Raz]

AIR they say is cyclical, I posted a monthly chart recently to try to illustrate. Didn't get much feedback on it, perhaps because the up/down of pre-2012 had a predictability about it (20 month cycle), whereas after that the SP just chewed up three cycle period upwards ending at $3.61 (very close to the third cycle period end - spooky).

Since then the next 20-month cycle down period, has been followed by the current period, also down. So maybe there is a new super-cycle 5-years period. If so, I have technical supports at $1.82 (the .618 fib), $1.72 the recent low, $1.32 (horizontal support and .786 fib), below that is the 2012 low $0.72.

Who knows what all the factors are the make a sector cyclical (and company), TA doesn't help with the 'why' question, but one thing is for sure, this cycle is down, ending October 2020. If it really is now 5-year cycle (currently down), the sub $1 SP is in play.

Hard to believe I bought into AIR in 2012 with great expectations, sold a few years later for a very nice profit then rued not holding as it went to well over $3. Nowadays I couldn't stomach getting back into a gut churning flight on AIR unless it plumbed the depths and presented an opportunity too good to ignore.

This has been by far my most profitable trading share on the NZX over that time although have to be on it at all times, if on holiday I simple exit it...

[winner69]

AIR they say is cyclical, I posted a monthly chart recently to try to illustrate. Didn't get much feedback on it, perhaps because the up/down of pre-2012 had a predictability about it (20 month cycle), whereas after that the SP just chewed up three cycle period upwards ending at $3.61 (very close to the third cycle period end - spooky).

Since then the next 20-month cycle down period, has been followed by the current period, also down. So maybe there is a new super-cycle 5-years period. If so, I have technical supports at $1.82 (the .618 fib), $1.72 the recent low, $1.32 (horizontal support and .786 fib), below that is the 2012 low $0.72.

Who knows what all the factors are the make a sector cyclical (and company), TA doesn't help with the 'why' question, but one thing is for sure, this cycle is down, ending October 2020. If it really is now 5-year cycle (currently down), the sub $1 SP is in play.

Hard to believe I bought into AIR in 2012 with great expectations, sold a few years later for a very nice profit then rued not holding as it went to well over $3. Nowadays I couldn't stomach getting back into a gut churning flight on AIR unless it plumbed the depths and presented an opportunity too good to ignore.

Earnings are very cyclical as well baabaa - repost of chart from a few days ago

Profits declined for 5 years in a row 07 to 12 ….grew 4 years in a row to 16 ...and its been downhill ever since with 4 years of decline ...and probably more to come and possibly heading back to 2010 levels.

I reckon youd have to say that 2016 was so exceptional that it should be called an outlier and a number never to be repeated, Exclude that and EPS has average 20 cents over the last 14 years.

The only thing that has kept the share price up is the seductive power of a high yield.

[Beagle]

AIR they say is cyclical, I posted a monthly chart recently to try to illustrate. Didn't get much feedback on it, perhaps because the up/down of pre-2012 had a predictability about it (20 month cycle), whereas after that the SP just chewed up three cycle period upwards ending at $3.61 (very close to the third cycle period end - spooky).

Since then the next 20-month cycle down period, has been followed by the current period, also down. So maybe there is a new super-cycle 5-years period. If so, I have technical supports at $1.82 (the .618 fib), $1.72 the recent low, $1.32 (horizontal support and .786 fib), below that is the 2012 low $0.72.

Who knows what all the factors are the make a sector cyclical (and company), TA doesn't help with the 'why' question, but one thing is for sure, this cycle is down, ending October 2020. If it really is now 5-year cycle (currently down), the sub $1 SP is in play.

Hard to believe I bought into AIR in 2012 with great expectations, sold a few years later for a very nice profit then rued not holding as it went to well over $3. Nowadays I couldn't stomach getting back into a gut churning flight on AIR unless it plumbed the depths and presented an opportunity too good to ignore.

Appreciate your chart, thanks. With you on this. It will have to be compelling value for me to get in again. Compelling value for me is not NTA of $1.52 (ex divvy). I would want a substantial discount to NTA and some TA sign that it had built a base to reenter. The chance of this going under $1 is very real in my opinion, perhaps 72 cents which is about half the ex divvy NTA is also a chance. A capital raise this year is a very high probability in my view and if this coincided with some signs of a vaccine for this virus being close to release that might present as an opportunity. To me this still presents as the standout short opportunity on the NZX so I'm keeping my position on.

[Raz]

Appreciate your chart, thanks. With you on this. It will have to be compelling value for me to get in again. Compelling value for me is not NTA of $1.52 (ex divvy). I would want a substantial discount to NTA and some TA sign that it had built a base to reenter. The chance of this going under $1 is very real in my opinion, perhaps 72 cents which is about half the ex divvy NTA is also a chance. A capital raise this year is a very high probability in my view and if this coincided with some signs of a vaccine for this virus being close to release that might present as an opportunity. To me this still presents as the standout short opportunity on the NZX so I'm keeping my position on.

https://www.stuff.co.nz/business/120026497/air-nz-needs-to-go-back-to-its-global-financial-crisis-playbook

common held view perhaps and why share price as not reacted more todate?

[winner69]

https://www.stuff.co.nz/business/120026497/air-nz-needs-to-go-back-to-its-global-financial-crisis-playbook

common held view perhaps and why share price as not reacted more todate?

He a good guy that Benje ...does some good work

[Beagle]

https://www.stuff.co.nz/business/120026497/air-nz-needs-to-go-back-to-its-global-financial-crisis-playbook

common held view perhaps and why share price as not reacted more todate?

QAN down a very similar percentage amount since the risk was obvious in early 2020. (AIR down to 206 from 305 = 32.5%, QAN down to 466 from 720 = 35.3%) Possibly at this stage investors are somewhat hopeful the virus doesn't become a world-wide pandemic.
I am working on the assumption it does and a vaccine isn't available until sometime in 2021.

The scenario I envisage is that as the death rate starts to build up in N.Z. the majority of people will be too afraid to fly. No amount of reassurance about their cleaning regime or air filtering system will be enough. The fear of possible death will put people off flying and AIR will see demand destruction unlike anything they've seen before, (if they're not getting it already). Well respected aviation commentator Grant Bradley in the Herald the other day said new booking demand had already fallen off a cliff.
Under that scenario AIR will be burning cash at a phenomenal rate and will have no other alternative later this year but to approach the Govt for another bailout.

The key difference between this risk and 9/11, (which required a bailout despite assurances almost immediately beforehand that they had $1b in cash, deja-vu anyone ?) is that 9/11 had a short and very sharp impact on demand and in the months that followed as it became clear that planes weren't going to be flown into tall buildings on a regular basis and new much stronger doors were installed on aircraft to protect the pilots, this time no short term solution is readily apparent. Also the risk is everywhere this time and cannot be seen, not limited to a bunch of nut case extremists like last time.

In terms of the GFC, being profitable during a lengthy financial crisis where people are worried about their finances is one thing, trying to remain profitable during a lengthy world-wide pandemic where people are afraid of dying, is quite another thing on a completely different scale in my opinion.

Paying out the full 11 cps dividend amounts to gross recklessness on the boards part in my opinion. What logic can there possibly be in pretending everything is okay and paying out the same dividend as last year in the current circumstances ?

[winner69]

QAN down a very similar percentage amount since the risk was obvious in early 2020. (AIR down to 206 from 305 = 32.5%, QAN down to 466 from 720 = 35.3%) Possibly at this stage investors are somewhat hopeful the virus doesn't become a world-wide pandemic.
I am working on the assumption it does and a vaccine isn't available until sometime in 2021.

The scenario I envisage is that as the death rate starts to build up in N.Z. the majority of people will be too afraid to fly. No amount of reassurance about their cleaning regime or air filtering system will be enough. The fear of possible death will put people off flying and AIR will see demand destruction unlike anything they've seen before, (if they're not getting it already). Well respected aviation commentator Grant Bradley in the Herald the other day said new booking demand had already fallen off a cliff.
Under that scenario AIR will be burning cash at a phenomenal rate and will have no other alternative later this year but to approach the Govt for another bailout.

The key difference between this risk and 9/11, (which required a bailout despite assurances almost immediately beforehand that they had $1b in cash, deja-vu anyone ?) is that 9/11 had a short and very sharp impact on demand and in the months that followed as it became clear that planes weren't going to be flown into tall buildings on a regular basis and new much stronger doors were installed on aircraft to protect the pilots, this time no short term solution is readily apparent. Also the risk is everywhere this time and cannot be seen, not limited to a bunch of nut case extremists like last time.

In terms of the GFC, being profitable during a lengthy financial crisis where people are worried about their finances is one thing, trying to remain profitable during a lengthy world-wide pandemic where people are afraid of dying, is quite another thing on a completely different scale in my opinion.

Paying out the full 11 cps dividend amounts to gross recklessness on the boards part in my opinion. What logic can there possibly be in pretending everything is okay and paying out the same dividend as last year in the current circumstances ?

Sounds like even cheap good quality beef cuts in the freezer won't be any use -- we'll all be dead

Nontheless when AIR profits were last down at where the heading the share price was below $1 for a long time ...low was around 60 cents by the look of it …..so you will probably be getting your cheap AIRshares one day ….assuming the virus aint got you first

[Beagle]

Yes, there's going to be some outstanding opportunities in cyclical shares and others for those that survive with their health and finances intact.
Many experts saying we already have a world-wide pandemic even if the WHO are not calling it that just yet. https://www.nzherald.co.nz/world/news/article.cfm?c_id=2&objectid=12314809

[winner69]

AIR was bailed out mainly because they had bought Ansett and had placed them in administration on 12/9/01 …. took the government a month or so to work out how much was needed to keep them flying

911 didn't help but if they hadn't gone the Ansett way they may have survived 911 OK

[Beagle]

AIR was bailed out mainly because they had bought Ansett and had placed them in administration on 12/9/01 …. took the government a month or so to work out how much was needed to keep them flying

911 didn't help but if they hadn't gone the Ansett way they may have survived 911 OK

If I remember correctly Ansett outlay was about $450m ? The Govt bailout was close to double that,. despite assurances immediately beforehand they had $1b in cash, just like they did the other day.
Their dividend due to be paid this month is ~ $124m so they'll have only about $879m in cash this time, + profits since 1 January, less any capex on new aircraft since then.

By May 2020 things will start to get desperate for AIR, you mark my words.

[macduffy]

By May 2020 things will start to get desperate for AIR, you mark my words.

Another "Cassandra" prediction? Better to remember not to invest in airlines!

;)

[BlackPeter]

Another "Cassandra" prediction? Better to remember not to invest in airlines!

;)

Nothing wrong with investing in airlines. Just remember not not invest into them during a downtrend :), but this is probably true for all industries:

[winner69]

Nothing wrong with investing in airlines. Just remember not not invest into them during a downtrend :), but this is probably true for all industries:

A couple of times I’ve tempted fate and held AIR .....and they didn’t crash a plane ...but now feel third time I’d be unlucky and couldn’t live with thinking I’d caused a AIRplane to cash and killed hundreds of people.

[BlackPeter]

A couple of times I’ve tempted fate and held AIR .....and they didn’t crash a plane ...but now feel third time I’d be unlucky and couldn’t live with thinking I’d caused a AIRplane to cash and killed hundreds of people.

Not quite sure I can follow ... why would your ownership cause a plane to crash? As well - planes don't crash because they are owned by winner, but because they are made by Boeing :p:

Anyway - current problem is not who owns the planes, but airlines business model (high fixed cost and swiftly dropping patronage) ...

[Beagle]

Not quite sure I can follow ... why would your ownership cause a plane to crash? As well - planes don't crash because they are owned by winner, but because they are made by Boeing :p:



Maybe so but I would double my short position if Winner held and they started scenic flights to Antarctica again :eek2:

[BlackPeter]

Maybe so but I would double my short position if Winner held and they started scenic flights to Antarctica again :eek2:

On the other hand - Antarctica is the only virus free continent left. Might be a desirable holiday destination :);

[Beagle]

FTR
Closed the short , a nice trade thanks Beagle for the suggestion.
And while I don't like airlines I must admit though I dont like to hold short positions too long either. Despite what Jesse Livermore said.

Posted 26 February. You got out way too early mate. Not too late to open a new position and get back on the ski slope.

[Beagle]

On the other hand - Antarctica is the only virus free continent left. Might be a desirable holiday destination :);

Probably be okay on the Auckland Islands too, as long as not too many Aucklanders actually go there lol. https://en.wikipedia.org/wiki/Auckland_Islands

[Beagle]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12314629

Bookings for March drying up according to Tourism New Zealand.

[winner69]

Guidance was really optimistic so not guessing anymore ....but dividend will still be paid

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/AIR/349581/318334.pdf

[winner69]

Don’t blame Greg for sort of blaming the media for creating these turbulent times ...“We have been continuously monitoring bookings and in recent days have seen a further decline which coincides with media coverage of the spread of Covid-19 to most countries on our network as well as here in New Zealand,” says Mr Foran.

[Gerald]

Don’t blame Greg for sort of blaming the media for creating these turbulent times ...“We have been continuously monitoring bookings and in recent days have seen a further decline which coincides with media coverage of the spread of Covid-19 to most countries on our network as well as here in New Zealand,” says Mr Foran.

"Greg Foran has voluntarily offered to reduce his base pay of $1.65 millionby approximately 15% ($250,000)"

Surely they could maintain guidence after such a generous gesture.

[bull....]

totally expected if you dont know what the virus going to do how can any company predict earnings. be the last dividend paid for quite some time i imagine , dividend hunters are going to get severely burned

[Beagle]

Yeah, I mentioned last week I expected they would withdraw guidance altogether. At some point very late this financial year you may see them come out and soften the market up for an overall loss in FY20, yes that's my updated view on this, they could lose more in 2H than they made in 1H).
Chief Executive Officer Greg Foran says that it is increasingly clear that Covid-19 has created an unprecedented situation and it is difficult to predict future demand patterns.
“
This obviously suggests this is worse than 9/11.
It is an interesting coincidence that after the Govt Bailout of the airline after 9/11 senior staff took a 15% pay cut. AIR also lost thousands of staff then.
All senior staff right across the airline earning more than $150K should do the right thing and accept a 15% pay cut until this thing is over. Extending a pay freeze when head office senior staff are so incredible generously paid is a weak response. At least Greg Foran did the right thing, good on him. Others should follow his example.

Absolutely ridiculous paying out the dividend in the current circumstances. Sends the wrong message to staff at AIR. Almost everyone, (except say workers earning less than $100K) should be taking a 15% haircut to their pay in the circumstances including shareholders.

[Sideshow Bob]

totally expected if you dont know what the virus going to do how can any company predict earnings. be the last dividend paid for quite some time i imagine , dividend hunters are going to get severely burned

Agree, it is the prudent thing to do. They have reigned in quite a few services, and a lot of unknowns.

Maybe they should instead just fly freight across the Tasman.....those Ozzies are pretty short of toilet paper and must be full of shi…...

[bull....]

Agree, it is the prudent thing to do. They have reigned in quite a few services, and a lot of unknowns.

Maybe they should instead just fly freight across the Tasman.....those Ozzies are pretty short of toilet paper and must be full of shi…...

if lots more countries go into lock down who they going to fly too?

[BIRMANBOY]

Question. "How can you achieve a very, very large dividend % return"? Answer. "Buy a share that is normally returning a very good dividend, but buy it when it has become leprous due to temporary conditions that will return to normal in due course." Dividend hunters can see the long term gains outweigh the short term burn IMO.
totally expected if you dont know what the virus going to do how can any company predict earnings. be the last dividend paid for quite some time i imagine , dividend hunters are going to get severely burned

[bull....]

the cold hard facts are if you are a air shareholder your going to lose a lot of your investment in the months ahead. until a virus cure is found or some other thing works

[bull....]

Question. "How can you achieve a very, very large dividend % return"? Answer. "Buy a share that is normally returning a very good dividend, but buy it when it has become leprous due to temporary conditions that will return to normal in due course." Dividend hunters can see the long term gains outweigh the short term burn IMO.
how many years can you wait?

[winner69]

Last AR said there were 23,000 ‘investors’ with less than 5,000 shares

Would hurt a lot if they stopped divie

[bull....]

Last AR said there were 23,000 ‘investors’ with less than 5,000 shares

Would hurt a lot if they stopped divie

alot of divdend people forget that air is a cyclical business and cyclical businesses are not generally reliable steady income stocks over the long term

this reminds me of the finance sector people seduced by the high yield

[winner69]

A fair proportion of AIRs Exec huge bonus payment is tied to the AIR shareholder returns relative to a global airline index.

So as long as the AIR shareholders don’t lose as much as shareholders of other airlines they might still get a bonus.

[peat]

Probably be okay on the Auckland Islands too, as long as not too many Aucklanders actually go there lol. https://en.wikipedia.org/wiki/Auckland_Islands

this is actually my next major trip.


Posted 26 February. You got out way too early mate. Not too late to open a new position and get back on the ski slope.

indeed , Jesse Livermore was right

[Beagle]

A fair proportion of AIRs Exec huge bonus payment is tied to the AIR shareholder returns relative to a global airline index.

So as long as the AIR shareholders don’t lose as much as shareholders of other airlines they might still get a bonus.

Like pigs in a trough eh. Just keep eating and polish up the begging bowl and ask the Govt for support. Shane Jones has plenty left in his regional development fund. Maybe he should give some to AIR so they can keep supporting the regions :)

[Beagle]

Forsyth Barr - Air New Zealand gets an outperform rating. Its structural and balance sheet strengths leave it well placed to weather the storm.
''Our analysis shows that the capacity of Air (NZ's) cuts are deeper than its competitors and historically its responses to black swan events have been rapid and rational."

Had a chuckle when I read this yesterday. Disc: I used to be a client of Forsyth Barr but stopped listening to their advice over a decade ago.

[trader_jackson]

share price only down 1 cent? Mr Market is being unbelievably kind to AIR (for the first 3 minutes at least!)
Would have thought we'd already be looking at sub $1.80

[winner69]

share price only down 1 cent? Mr Market is being unbelievably kind to AIR (for the first 3 minutes at least!)
Would have thought we'd already be looking at sub $1.80

Maybe it’s a case of the big holders hanging in there while the 23,000 small holders are either oblivious to the going ons or telling them I bought for the divie so I will hold

[Beagle]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12314969

[bull....]

share price only down 1 cent? Mr Market is being unbelievably kind to AIR (for the first 3 minutes at least!)
Would have thought we'd already be looking at sub $1.80

wait till after dividend is paid then declines will become bigger

[trader_jackson]

wait till after dividend is paid then declines will become bigger

Good point - might not be a next dividend...

[Beagle]

Give it time. Analysts will drastically adjust their forecasts in the next day or two and the poor unfortunates that can't think for themselves and have to wait to be told will suffer accordingly.

Heck even Forsyth Barr who just upgraded air to Outperform might have to do a very embarrassing about face and downgrade them again.

AIR will lose money after accounting for extraordinary items and costs in 2020...you read it from me first.

Massive reductions in flights are coming. No point in flying with 40% load factors, might as well halve services.

[winner69]

Cheap fuel and their super efficient fleet will be helping the bottom line

[winner69]

if Parliament and Caucus goes into lockdown and MPs dont travel that'll be a big dent in AIRs passenger numbers

[BlackPeter]

if Parliament and Caucus goes into lockdown and MPs dont travel that'll be a big dent in AIRs passenger numbers

But look at the bright side ... less fuel consumption and with that less global warming (planes which don't fly don't excrete carbon) and a nice little saver for the tax payer :t_up:

[GR8DAY]

..........dont think I'd touch AIR even at $1.50 ATM ........... (cant believe it'd still HOVERING around 2buks TBH)

[unhuman]

Ex dividend on Thursday, just wait.

[see weed]

..........dont think I'd touch AIR even at $1.50 ATM ........... (cant believe it'd still HOVERING around 2buks TBH)
It will drop like a rock after div..... 80c to $1 sounds good to me. Remember the good old day 19/9/16, when they paid out a 10c+25c div all on the same day....a silly move. The sp dropped $1 within a few days.

[Beagle]

I think this might have a wee rest around the $1.70-$1.80 mark for a couple of weeks after the dividend. After that as the sheer brutality of the way demand is falling off the face of a cliff becomes even more readily apparent it will resume its downward trajectory. Happy to stay short for the foreseeable future. There's a very real chance this ends in tears and another Govt bailout.

[Preston]

A fly in the ointment for short sellers will be when competitors announce they are withdrawing NZ longhaul services and AIR picks up those customers and then returns to a monopoly on those routes. I believe that will dampen the blow somewhat, although a blow it will still be to the SP.

[Beagle]

QAN down 6.4% already as I type, AIR after guidance withdrawal down just 2.4%...ask yourself which is the more rational response.

[bull....]

hong kong airlines is asking air china to bail it out today otherwise bust

[Beagle]

QAN now down ~ 10%, Australian market crashing, down 5.3% and its only been open for less than an hour :eek2:

[Leftfield]

Oil down some 30% may help AIR a little?? All depends on AIR's hedging I guess. (not that I hold AIR - just watching with interest.)

[winner69]

QAN now down ~ 10%, Australian market crashing, down 5.3% and its only been open for less than an hour :eek2:

Please don’t use the word crash on airline threads ...you’d feel really bad if a plane crashed today.

[Beagle]

I wasn't referring to airlines or any specific airline mate...but I know you are superstitious about these things so will try and be sensitive to your idiosyncrasies :p (thank goodness for spell checker with that last word)

Interesting article behind the paywall on N.Z. Herald just released by well respected aviation sector journalist Grant Bradley
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12314920
Copyright limits me to one or two sentences as I understand it from what Vince has mentioned before.

Best sentence is this which gives a very interesting insight into the degree of demand collapse. "Last week one carrier was reporting 50 per cent no-shows; passengers not turning up. While those are tickets sold, it illustrates the fear of flying".

If a whopping 50% of people are not turning up when they have already paid for their tickets it begs the question how new sales are going :eek2:

[Beagle]

Oil down some 30% may help AIR a little?? All depends on AIR's hedging I guess. (not that I hold AIR - just watching with interest.)

AIR has about 80 per cent of its fuel hedged at between $54 and $64 a barrel for the rest of the FY20 year.

[stoploss]

AIR has about 80 per cent of its fuel hedged at between $54 and $64 a barrel for the rest of the FY20 year.

Was that 80 % of what they thought they would use pre virus ? If you haven't adjusted that they will effectively be more than 100 % hedged ....

[BlackPeter]

Was that 80 % of what they thought they would use pre virus ? If you haven't adjusted that they will effectively be more than 100 % hedged ....

Good point. Might call for more trouble :scared:.

[Beagle]

Was that 80 % of what they thought they would use pre virus ? If you haven't adjusted that they will effectively be more than 100 % hedged ....

Good point, yes it was. Hmmm

[winner69]

AIR has about 80 per cent of its fuel hedged at between $54 and $64 a barrel for the rest of the FY20 year.

That's good isn't it?

[Baa_Baa]

Will be helpful longterm (post hedging period). But jet fuel prices dropping well below hedging rates will result in massive mark to market write downs at 30 June.

Can't they just buy at market when under the hedge price and right-off the hedge premium? Either way, there's big saving in fuel costs from reduced flights.

[Snow Leopard]

Can't they just buy at market when under the hedge price and right-off the hedge premium? ....

And be sued for breach of contract.

[Baa_Baa]

And be sued for breach of contract.

So you're saying they're obliged to draw from the hedging contract, can't buy on market without breach, sorry I don't know exactly? If so, Mogul is correct they'll be shafted by the mark to market difference which is already quite a large percent price above market price - and going lower by the look of it.

Still, they will require a lot less fuel at the current rate of cancelled flights. Will they have a minimum 'take' on the hedge contracts as well, furthering the pain, or is it discretionary?

[Beagle]

AIR's most recent fuel hedge position is here http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/AIR/349043/317650.pdf

Put you guys a bit crook earlier. Actually 91% of estimated fuel use to 30 June 2020 is headged at between 53.68 and 65.16. With overall capacity cuts to date they have effectivly now hedged more than 100% of remaining oil consumption through to 30 June 2020.
In recent years AIR has primarily moved to hedging through the use of "Collars". As the term suggests what a collar does is try and collar the price within a specific range. If oil is outside that range, higher, AIR is in the money with its collar, if its lower, its out of the money i.e. cost. With the current spot price of Brent about $32 today they will be out of the money by at least $21.68 per barrel plus the cost of the collar.
They have also used some Brent call spreads and a small percentage, about 15% of consumption for the rest of this year, they have hedged the jet fuel crack spread...oil is one risk, the cost to crack it to jet fuel, another.

The bad news for the first half of FY21 is they have already hedged 70% of estimated oil consumption for Q1, (probably 90%+ with capacity reductions by then), at $53 and even 43% of FY21 Q2 has been hedged at similar levels.

For a look at how collars work here's a good article.
https://www.mercatusenergy.com/blog/bid/67423/Fuel-Hedging-With-Three-Way-Collars

Bottom lining this for the time poor, AIR will not get any meaningful gain from lower oil prices until at least October 2020.

QAN down 10.9% today, AIR down 5.3%. Tomorrow could be a very interesting day for AIR shareholders.

[Independent Observer AUNZ]

AIR's most recent fuel hedge position is here http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/AIR/349043/317650.pdf
QAN down 10.9% today, AIR down about only half that. I expect tomorrow will be catchup for AIR.

More likely Thursday will see the large correction Beagle? That's when the shares go ex-div and the slide might extend as a result? 11c suddenly looks like a huge div.

[Beagle]

More likely Thursday will see the large correction Beagle? That's when the shares go ex-div and the slide might extend as a result? 11c suddenly looks like a huge div.

Yeap, there's that coming later in the week as well. It amounts to a reckless amount in the current circumstances.

[BlackPeter]

More likely Thursday will see the large correction Beagle? That's when the shares go ex-div and the slide might extend as a result? 11c suddenly looks like a huge div.

Gain 11 cents in dividends but loose (already now) nearly a dollar in capital? And this is just the beginning. Could be another dollar to loose or more. Sometimes the logic of dividend hunters is just amazing ... :);

[winner69]

Besides the 23,000 odd shareholders with less than 5,000 shares there,’s stuff all other shareholders anyway

Being so tightly held maybe one reason share price isn’t collapsing as much as some think it should be.

[winner69]

If you’re interested in current airline global capacity

https://www.oag.com/blog/coronavirus-capacity-update-week-eight?utm_source=hs_email&utm_medium=email&utm_content=84469601&_hsenc=p2ANqtz-_eDfCd0-01jXshUQDY1FdjqoQUGeSKoeLwGSm3YYDt-oZMBCiJds5MSJOijoi9jHCBItFXej1tNxP5yYbs_cS7P0OFKw&_hsmi=84469601

[iceman]

Some European airlines are flying empty planes to keep slots, particularly into Heathrow. How mad is that ? The Transport Minister in the UK has written to the corporation running the airports and asked them to be reasonable !

[Entrep]

Who's honestly buying this right now? You'd have to be mad

[Beagle]

Who's honestly buying this right now? You'd have to be mad

Hopefully everyone on here has already read my very vocal warnings about the severe risk with this one.

[williethewaiter]

Who's honestly buying this right now? You'd have to be mad

might be people reading recommendations like this - from Morningside on ASB . Updated last night.

Accumulate
Shares in Air New Zealand Fall Out of the Sky, but Rout Looks Overdone
We lower our fair value estimate for shares in no-moat Air New Zealand to NZD 2.30, from NZD 2.50 previously, as capacity restrictions cut deeper than expected across the airline's network. The impact of the coronavirus is weighing on air travel demand across the globe, and Air New Zealand is not immune. Indicative of the volatility of the situation, the firm has withdrawn guidance previously reconfirmed at its interim results on Feb. 27, 2020. We lower our fiscal 2020 profit before tax, or PBT, forecast to NZD 318 million, from our previous estimate of NZD 350 million, representing a 15% drop compared with fiscal 2019. But we don't expect this to persist longer term and anticipate air travel demand to start recovering from fiscal 2021.

The firm is restricting capacity across its network in line with stifled demand, particularly on Asian routes. Air New Zealand is now reducing capacity on its Asian routes by 26% through June 2020, more than the initial 17% cut flagged on Feb. 24, 2020. This is a marked reversal from strong capacity growth in the region of 17% over the first seven months of fiscal 2020. We now forecast fiscal 2020 capacity to decline 4% across the group on a full-year basis. While this weighs on near-term earnings, we don't expect the impact to be protracted. We anticipate a U-shaped impact on demand from the coronavirus, similar to the impact experienced during SARS in 2002, and forecast a return to capacity growth from fiscal 2021.

We anticipate Air New Zealand's labour costs, which constitute about 30% of operating costs, are principally fixed, weighing on near-term earnings. Nonetheless, there are some levers the firm can pull to reduce the impact: executive pay cuts and freezes (new CEO Greg Foran is taking a 15% pay cut), hiring freezes, and voluntary unpaid leave for employees. We also expect a reduction in the fuel bill--from lower consumption due to cuts in capacity and the lower jet fuel price--will offset some of the impact.

[allfromacell]

At NTA I'll start buying, the SP will definitely be higher in 12 months imo. The flights I've been on the past 10 days(LAX - > AKL, AKL - > Nelson, Nelson -> AKL) all had fairly normal capacity, anecdotal obviously but I don't see the sky falling, AIR will be around for a long time yet and pay plenty more dividends.

[Beagle]

Forsyth Barr very recently came out and called AIR as "outperform". It beggars belief where they find these so called "professional analysts" ?
Good luck buying at NTA (which FYI is $1.52 ex divvy). AIR could very easily be going to the Govt for a massive bailout later this year, quite possibly a lot earlier than some on here might imagine ! At what price would those new shares be issued ?, that's the $64,000 question...

The only clue we have is that the last big rights issue after the bailout in 2001 was at $1.30 if my memory serves me correctly. Could easily be a completely different figure this time to actually get the market's support for such an issue. $1.00 anyone ?

[BlackPeter]

Forsyth Barr very recently came out and called AIR as "outperform". It beggars belief where they find these so called "professional analysts" ?

"outperform" is obviously a relative measure. Maybe they know something about the future of the rest of the NZX we don't yet :):

[Onion]

The last time I bought AIR they were $1.94 per share (back in 2016). The SP bounced back aggressively following that drop and gave a nice return on investment when sold above $3.

The drop this time is much much broader across the whole market. A current buying opportunity for the very brave!

[Beagle]

"outperform" is obviously a relative measure. Maybe they know something about the future of the rest of the NZX we don't yet :):

I don't like their balance sheet "strength" at all. I've been a bean counter for nearly 40 years. I wonder how long Forsyth Barr's analyst has been assessing balance sheets seeing as they think it is strong. Their implied reported opinion was sort of along the lines of "The strength to withstand any financial conditions" Pretty sure I remember a notorious finance company that used that statement in their marketing ;)

The startling thing about recommendations from Moaningside and Forsyth Barr is that many Kiwisaver providers use and rely on the recommendations of these "research houses" This possibly explains how the shares haven't really got smashed as they should have. (Some US carriers are down just short of 50% in 2020 already).

But these professionals are expert epidemiologists you see and know this will all blow over very shortly :rolleyes:

[Beagle]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12315377

There was talk yesterday in a behind the paywall article that AIR are struggling to think of places to park their planes up with their worse case contingency planning.
I guess they have to start thinking about Ohakea and Whenuapai air bases. Lean on the Govt to help them with use of military airbases for parking ?

[winner69]

Alan Joyce cutting pay to zilch for rest of year

Other execs / directors cutting pay by 30% ...and no bonuses this year

C’mon AIR ....follow suit ...some call you troughers anyway

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12315366

[peat]

Alan Joyce cutting pay to zilch for rest of year


poor dude only got 23.8mil last year.

[skid]

At NTA I'll start buying, the SP will definitely be higher in 12 months imo. The flights I've been on the past 10 days(LAX - > AKL, AKL - > Nelson, Nelson -> AKL) all had fairly normal capacity, anecdotal obviously but I don't see the sky falling, AIR will be around for a long time yet and pay plenty more dividends.

Im sure they will be around for a long time.....although they have been bailed once before...its just unfortunate that this virus situation effects airlines in a major way...so their value (SP) could still take a beating.....its not unreasonable to think there will be significant revaluation....Its an unusual situation...........This means it is more situation related than company fundamentals related.....................some have to fly and some choose to fly...the latter is taking a beating atm.....the juries still out on the former............................In just talked to an electrical technician who works for a relatively large firm.at the airport area(Im not sure if its actually in the airport)....they have sent them all home to work because of the risk.

[Beagle]

CDC tells at risk people not to fly...among other things https://www.cnbc.com/2020/03/09/many-americans-will-be-exposed-to-coronavirus-through-2021-cdc-says.html

[Beagle]

QAN grounding most of its fuel hungry and hard to fill A380's and senior executives taking a 30% pay cut.
Sorry you troughers at AIR but a simple extension to a pay freeze when you're already paid a King's ransom and the airline is facing this enormous challenge is looking really pathetic. Take a break from gorging yourselves at the trough for goodness sake.

My sense is the Kiwisaver funds relying on mind numbingly dumb recommendations from Forbar and Morningstar are in for a real belting.
This extremely tumultuous catastrophe has only just begun.

[Beagle]

Beagle, don’t hold back, tell us how you really feel about Forbar and Morningstar.

:lol: Beagles don't know how to bark at half volume :lol: https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12315533

[RupertBear]

QAN grounding most of its fuel hungry and hard to fill A380's and senior executives taking a 30% pay cut.
Sorry you troughers at AIR but a simple extension to a pay freeze when you're already paid a King's ransom and the airline is facing this enormous challenge is looking really pathetic. Take a break from gorging yourselves at the trough for goodness sake.

My sense is the Kiwisaver funds relying on mind numbingly dumb recommendations from Forbar and Morningstar are in for a real belting.
This extremely tumultuous catastrophe has only just begun.

:eek2: Geepers Mr Beagle the sun will still come up tomorrow for most of us :p

[Beagle]

LOL I must learn to temper my enthusiasm for a good train "wreck" (don't want to use the word "crash" as that upsets out friend winner)

[whome]

Good on you Beagle. Keep barking at full volume with reasoned logic. I like it. Sure is better information than the emotion driven media. If so called investors cannot understand ‘Act, don’t just react’ then ..? .Disclos. 80% cash since 20 Feb and looking fwd to some ‘investment’ opportunities that TA should reveal in time be it 1 mth, 3 mths or 6 mths.

[BlackPeter]

Just found an email from Air New Zealand in my inbox, explaining what they are doing to keep the travelling public during these exciting times safe. They mentioned a couple of things (below) I think are pretty clever ... by providing flexibility and - more importantly - provide insurance cover (obviously only if you buy travel insurance through them, and if there is no negative travel advise) where others don't. This might well make the difference for customers to use the plane again and to prefer AIR to other carriers.

11106

Great move - well done, team! I start to like the new CEO.

[Blue Skies]

Just found an email from Air New Zealand in my inbox, explaining what they are doing to keep the travelling public during these exciting times safe. They mentioned a couple of things (below) I think are pretty clever ... by providing flexibility and - more importantly - provide insurance cover (obviously only if you buy travel insurance through them, and if there is no negative travel advise) where others don't. This might well make the difference for customers to use the plane again and to prefer AIR to other carriers.

11106

Great move - well done, team! I start to like the new CEO.

Wow that is a great reassurance, hope this gets wide publicity. Might have to start buying back in sooner rather than later.

[Raz]

Wow that is a great reassurance, hope this gets wide publicity. Might have to start buying back in sooner rather than later.

Its a helpful part of the puzzle for sure, still only part of the puzzle. At least they are sorting and problem solving what they can control.

[Marilyn Munroe]

Oh dear the share price has gone under two bucks.

Taxpayers should be worried. Maybe Cullen Airlines will call in the Cullen Put which will have to be dealt with by Cabinet Ministers who struggle and so will have to rely on advice from the Ministry of Transport.

Boop boop de do
Marilyn

[biker]

Air up almost 8%. Ouch to the shorters

[Beagle]

Air up almost 8%. Ouch to the shorters

Not at all...I am so far in the money I can very easily absorb this irrational temporary bounce.

[causecelebre]

I was on the Sharesies FB page and there is unbridled buy-the-dip enthusiasm for AIR - heart leading the brain I fear - one fellow even asked for a couple weeks holiday pay in advance to invest. Heaven forbid they use any sort of leverage; re-mortgage for shares anyone? Good luck them all. Most of these guys have only been on the game for a couple months and have never experienced any sort of real correction

[peat]

Not at all...I am so far in the money I can very easily absorb this irrational temporary bounce.

yeh reinstigating short position !

[biker]

Oh dear. Up 10%

[Beagle]

No stopping a beagle when on the scent. Long may you keep up the good work.

Thanks mate, I always enjoy your well thought out posts too !


Good on you Beagle. Keep barking at full volume with reasoned logic. I like it. Sure is better information than the emotion driven media. If so called investors cannot understand ‘Act, don’t just react’ then ..? .Disclos. 80% cash since 20 Feb and looking fwd to some ‘investment’ opportunities that TA should reveal in time be it 1 mth, 3 mths or 6 mths.
Thanks, Same for you mate, I just wish you had more time to post. (I know you're a very hard working and very busy man).


yeh reinstigating short position !

Welcome back to the dark side :D

[bottomfeeder]

Very brave to buy back into air new Zealand when the fallout looks to continue for some time, and the effect on the company could be far reaching. This is one company where the panic selling was justified.

[biker]

Very brave to buy back into air new Zealand when the fallout looks to continue for some time, and the effect on the company could be far reaching. This is one company where the panic selling was justified.

Only in your opinion of course

[bottomfeeder]

Of course, my opinion. But something for everyone to consider. Nothing has changed to the company for the better. The company itself has forward planned its reduced flights up to September. Europe has so many borders, the virus will be difficult to contain. So it would appear travel restrictions for travellers coming from overseas hasn't even begun to be extended. This is one company that unfortunately is going nowhere fast. I know its hard to accept when you are invested, I've been there with other companies in the past. But just where is the good news.

[blackcap]

Of course, my opinion. But something for everyone to consider. Nothing has changed to the company for the better. The company itself has forward planned its reduced flights up to September. Europe has do many borders, the virus will be difficult to contain. So it would appear travel restrictions for travellers coming from overseas hasn't even begun to be extended. This is one company that unfortunately is going nowhere fast. I know its hard to accept when you are invested, I've been there with other companies in the past. But just where is the good news.

I could offer a totally different picture if you like. Whether I believe it or not does not matter. The virus will be about a half year blip. So AIR profit will be devastated for this half year period. However some competition is going to fail, meaning larger market share for AIR post this half year period. Air will also profit from the oil price plunge when they forward risk their 2021/22 fuel futures. Since the discount rate is currently so low, the DCF valuation of Air will not be adversely impacted by negative half year earnings, let alone negative FY earnings, if you believe AIR has a future post 2021.

[bottomfeeder]

Well blackcap, I think you are right, there is a real possibility if they can weather the current storm for six months, then this will be a recovery stock. But it will get worse before it gets better. The question is can they financially sustain the unprecedented situation for six months without going back to shareholders for substantial capital injection. Really money down the drain to maintain the brand and infrastructure. Too many unknowns. So any recovery of earnings will be on a much larger capital base. The government will not let it go under. The bad news is also that its not just Air New Zealand's problem. It belongs to the whole airline industry worldwide. Excess planes will have no market value. Airline manufacturers will take many years to increase their depleted manufacturing levels.

[Lease]

Believe or not, AIR NZ will come back.

AIR NZ is one of the best airline companies in the world. As per my research, its operating performance(EBITDA) has not made loss over the last 20 years(1999-2019). During the period, many airline companies made huge loss. Some of them filed bankruptcy, ie, Japan Airline, Southeast Airline, etc.

So we need to put our faith on AIR.

[BlackPeter]

Believe or not, AIR NZ will come back.

AIR NZ is one of the best airline companies in the world. As per my research, its operating performance(EBITDA) has not made loss over the last 20 years(1999-2019). During the period, many airline companies made huge loss. Some of them filed bankruptcy, ie, Japan Airline, Southeast Airline, etc.

So we need to put our faith on AIR.

Absolutely - AIR will be back. However - faith (as well as hope) is not a good investment strategy, and we don't know whether they will need a cash injection (quite likely in my view) - and how much dilution this will provide.

As some of the other posters - I think that it will get worse before it gets better. What is unclear, is whether the current price levels will look a good BUY when reviewing the decision in say 2 or 5 years.

I think however that it is a rather safe bet to predict that the share price will be lower in a month or 2 from now.

[Beagle]

I could offer a totally different picture if you like. Whether I believe it or not does not matter. I love a good debate so lets go mate !

The virus will be about a half year blip. Most commentators are saying a vaccine won't be available until 2021, perhaps well into 2021 so your viewpoint is based on what ?

So AIR profit will be devastated for this half year period. As above, but I add that anecdotal evidence after 9/11 suggests it takes people a long time to return to full confidence of flying...funny how the prospect of death does that to people isn't it ! In could be calendar year 2022 before business returns to normal

However some competition is going to fail, meaning larger market share for AIR post this half year period. There is no question many airlines will fail but AIR's balance sheet is weak and they are a very likely candidate for a bailout

Air will also profit from the oil price plunge when they forward risk their 2021/22 fuel futures. No meaningful benifet until October 2020 at earliest based on current future hedging. I doubt they will make it to that point without a bailout

Since the discount rate is currently so low, the DCF valuation of Air will not be adversely impacted by negative half year earnings, DCF valuation will be dramatically affected by 2 years of major losses
let alone negative FY earnings, if you believe AIR has a future post 2021. It definitely has a future all right. Its just a question of at what price a new massive tranche of shares are issued to the Govt and other shareholders after the desperately needed major capital injection later this year


Some reports suggest up to 50% of people are not turning up to check in for their flights. When some of these flights and forward accommodation bookings run to many thousands of dollars what does that suggest about the level of fear out there ? New bookings have, according to Grant Bradley aviation commentator for the N.Z.Herald, "fallen off the face of a cliff" The company has just withdrawn guidance because it cannot possibly measure the extent of this virus.
Nobody can predict the future with any great certainty but what we do know is that AIR is an incredibly low margin business with very high fixed costs and is facing a prolonged collapse in demand because people fear, (not their financial situation like in the GFC), but Death !

[Lease]

AIR NZ












Share Price

EPS

PE Ratio




Low
High



Low
High













2019

2.23
3.41

0.24

9.29
14.21


2018

2.86
3.82

0.347

8.24
11.01


2017

1.71
3.3

0.34

5.03
9.71


2016

2.02
3.26

0.413

4.89
7.89


2015

1.75
3.02

0.292

5.99
10.34


2014

1.32
2.29

0.239

5.52
9.58


2013

0.86
1.55

0.166

5.18
9.34


2012

0.84
1.2

0.065

12.92
18.46


2011

1.01
1.54

0.075

13.47
20.53


2010

0.86
1.5

0.076

11.32
19.74


2009

0.75
1.3

0.02





2008

1.07
2.7

0.21

5.10
12.86


2007

1.08
3.13

0.205

5.27
15.27


2006

1.03
1.43

0.094

10.96
15.21


2005

1.3
2.05

0.21

6.19
9.76


2004

0.48
3.13

0.24

2.00
13.04








































3.232

111.37
196.95







/15

/15
/15
















Average EPS
0.21547
Average PE
7.42

13.13




I have worked out AIR average eps is 0.215 over the last 15 years. PE range between 7-13. Take the midpoint of PE at 10. The current SP is probably the fair value. So I started to buy AIR under $2 at small parcel. And the more it drops, the more I'll buy.

[Beagle]

Thank you for your analysis but to assume the current situation is in any way average or normal seems "extremely brave".
Its clear the company is facing an unprecedented challenge to its survival. PE of 10 is fine but what is the E ? and when you've worked out what earnings are for FY22, assuming things settle down by then, how many shares are going to be on issue after a massive capital raise so what is eps ?

Just for fun lets assume a 1:1 capital raise later this year at $1 to keep the ship afloat. Eps would then be 21.5 / 2 = 10.75 cps and applying a PE of 10 gives $1.08.
I expect the board will run a much tighter ship in the future after this massive shock so they might pay out only half future earnings or about 5 cps per annum.

Hope the dividend hounds enjoy the forthcoming dividend. Its their last big one for a very long time, in my opinion.

[peat]

2.09 didn’t last long haha

[Blue Horseshoe]

Just found an email from Air New Zealand in my inbox, explaining what they are doing to keep the travelling public during these exciting times safe. They mentioned a couple of things (below) I think are pretty clever ... by providing flexibility and - more importantly - provide insurance cover (obviously only if you buy travel insurance through them, and if there is no negative travel advise) where others don't. This might well make the difference for customers to use the plane again and to prefer AIR to other carriers.

11106

Great move - well done, team! I start to like the new CEO.
This could cost them dearly, what does it cost for treatment in a US hospital icu bed per night.

[blackcap]

Thank you for your analysis but to assume the current situation is in any way average or normal seems "extremely brave".
Its clear the company is facing an unprecedented challenge to its survival. PE of 10 is fine but what is the E ? and when you've worked out what earnings are for FY22, assuming things settle down by then, how many shares are going to be on issue after a massive capital raise so what is eps ?

Just for fun lets assume a 1:1 capital raise later this year at $1 to keep the ship afloat. Eps would then be 21.5 / 2 = 10.75 cps and applying a PE of 10 gives $1.08.
I expect the board will run a much tighter ship in the future after this massive shock so they might pay out only half future earnings or about 5 cps per annum.

Hope the dividend hounds enjoy the forthcoming dividend. Its their last big one for a very long time, in my opinion.

What I meant with my DCF and low discount rates is that they tend to make short term "now" shocks less costly in the long run than in the past with high WACC. So even if 2 years of zero profit, it does not affect the 20+ year DCF that much. But I was only offering up an alternative. I did premise it by saying I do not necessarily believe in it. If they are going to require a capital injection then that off course changes the picture completely. I will not be buying at these levels just yet. As for the virus, there is no vaccine yet and for some time to come, but it seems the symptoms are mild in 90% of cases and the mortality rate is higher than normal in the elderly but those elderly do not normally fly anyway. Will be interesting to see if AIR will require new capital. For what its worth, I am flying AIR to Europe via Shanghai and Hong Kong on the way back in August and still planning to go.

[Lease]

Thank you for your analysis but to assume the current situation is in any way average or normal seems "extremely brave".
Its clear the company is facing an unprecedented challenge to its survival. PE of 10 is fine but what is the E ? and when you've worked out what earnings are for FY22, assuming things settle down by then, how many shares are going to be on issue after a massive capital raise so what is eps ?

Just for fun lets assume a 1:1 capital raise later this year at $1 to keep the ship afloat. Eps would then be 21.5 / 2 = 10.75 cps and applying a PE of 10 gives $1.08.
I expect the board will run a much tighter ship in the future after this massive shock so they might pay out only half future earnings or about 5 cps per annum.

Hope the dividend hounds enjoy the forthcoming dividend. Its their last big one for a very long time, in my opinion.

No, Beagle, I didn't assume the current situation is average or normal. I'm looking AIR in five years time and I believe the decision I started to accumulate under $2 will be right.

[peat]

And the more it drops, the more I'll buy.

hope you are loaded this is not a company individuals can affect the price

[bottomfeeder]

Good move by selling travel insurance. But I bet it must be expensive to buy, or losses could just make the company go down the gurgler faster.

[Independent Observer AUNZ]

PE range between 7-13. Take the midpoint of PE at 10.
Interesting, the PE range I see from that data is 2.00 - 20.53... and when you consider the dividend about to paid (ex div tomorrow)... that is an example of stupid skewing for the analysis of the real current position of this stock using only PE.

[winner69]

Lease ...would you change your view if EPS coming up is around the 2011/2012 mark

[Lease]

Interesting, the PE range I see from that data is 2.00 - 20.53... and when you consider the dividend about to paid (ex div tomorrow)... that is an example of stupid skewing for the analysis of the real current position of this stock using only PE.

Its average PE range over the last 15 years. If you have smarter way to analyse, please share with us.:)

[Independent Observer AUNZ]

Its average PE range over the last 15 years. If you have smarter way to analyse, please share with us.:)

My approach is fairly simple; Past performance is not an indicator of future performance; I'd prefer to take a look at the current balance sheet, risks, fixed overhead, and earnings potential. All of these point to a few years of difficulty. Then add climate change to the mix. I'm not as pessimistic as Beagle, especially noting the government guarantee backstop, but I'm certainly not buying any time soon.

[Lease]

Lease ...would you change your view if EPS coming up is around the 2011/2012 mark

No, as I said, I'm looking AIR in five years time. So if eps come down that level, SP may drop under $1, and I'll be happy to buy more.

Very important to have cash on hand when cheap shares are on the street.

[Lease]

My approach is fairly simple; Past performance is not an indicator of future performance; I'd prefer to take a look at the current balance sheet, risks, fixed overhead, and earnings potential. All of these point to a few years of difficulty. Then add climate change to the mix. I'm not as pessimistic as Beagle, especially noting the government guarantee backstop, but I'm certainly not buying any time soon.

Well I'm not saying AIR NZ won't experience a few years difficulty. Rather I'm happy with that as SP can only drop during the difficult period, and I can take the chance to accumulate.

And I don't think your way is smart enough.:)

[Independent Observer AUNZ]

Well I'm not saying AIR NZ won't experience a few years difficulty. Rather I'm happy with that as SP can only drop during the difficult period, and I can take the chance to accumulate.

Yep - I hope it works out for you - NZ needs a strong national airline.

[BlackPeter]

This could cost them dearly, what does it cost for treatment in a US hospital icu bed per night.

I don't think that AIR is underwriting this insurance ... however it found an insurer who does :):