AIR - Air NZ.

[Beagle]

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

Interestingly for 2009 and the three subsequent years after the GFC eps averaged just 5.9 cps. L shaped recovery.
Put a PE of even 13 on that and you're around 75 cents...which funnily enough even though there was no bailout, this was where the share price was for some of that time.

History never repeats, or does it ?

Here's the chart 11108 No idea what future eps is going to be so I will stick with TA and will need to see a 3 day break above the 30 day MA before putting on a half sized long position and the same with the 100 day MA to put back on a full position which might be twice the normal size because by then this cyclical will be bounding away on its next up cycle. I am sure the key to this stock is working the cycles. I'll leave others to try and bottom pick with no TA signals and good luck to them, they'll need it !

[winner69]

Interestingly for 2009 and the three subsequent years after the GFC eps averaged just 5.9 cps. L shaped recovery.
Put a PE of even 13 on that and you're around 75 cents...which funnily enough even though there was no bailout, this was where the share price was for some of that time.

History never repeats, or does it ?

With AIR low EPS means high PE ...and vice versa

So EPS of 6 cents could see a share price of $1

Even that’s half of where it is today

[biker]

AIR NZ is now quite a nimble airline with some very skilled management.
The current slow down is almost convenient with 787s already on the ground.
Eventually this too will pass.
Bookings will come back, cash flow will return strongly as travellers catch up with postponed travel, and Company insurance cover will be encouraging reluctant travellers already.
If fuel prices settle at a lower level than last year, significant cost savings will come through as hedges and collars expire and are re- established.
Yes, there will be a significant short term hit to profits, and yes this is a business with fine margins but with an emphasis on short term, when this passes, profit will return rapidly. Yes, reduced dividends are highly possible but a share price of $1 and a 1:1 cash issue is absurd.
AIR have many levers to pull on cost reduction and they really haven’t even started internally yet.
They will also be adjusting to other operator’s withdrawal of services and capitalising where possible.
I’m not invested in AIR. Just entertained by the strident and dare I say it, extreme, views on this forum dependant on whether individuals are long or short.

[BlackPeter]

AIR NZ is now quite a nimble airline with some very skilled management.


Interesting statement. Just wondering how you are measuring "Nimble with very skilled management"

Based on a huge number of well overpaid managers and staff and some recent changes in the management team would I think that "overweight and losing experience" might be a more appropriate description.

[causecelebre]

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

AIR have a long standing relationship with Covermore. AIR just clip the ticket (and the social media kudos apparently)

[Beagle]

Just because some can't foresee it doesn't mean its absurd. Some rather inconvenient facts is AIR were well below $1 in the GFC. The last bailout in 2001 required $885m ($1,344m in today's money), and resulted from a short sharp shock to demand from 9/11. The shock to demand this time is shaping up to be far more enduring and a 1:1 cash issue at $1 would raise just $1,123m in today's money, 16% less in real inflation adjusted terms than last time in 2001. (Pretty obvious their cost structure has gone up by just a "little bit" in the last 19 years !)

AIR operations are primarily very high fixed cost and no amount of lever pulling, (AKA rearranging the deck chairs on the Titanic), will help if they hit the iceberg of demand falling of the face of a cliff and staying there for many, many months on end.

But no worries because Cindy said she's going to help business's affected by this virus so we can trust her and everything is going to be fine :rolleyes: Where's my Tui ?

CDC now telling at risk people to avoid air travel ! https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12315665

[biker]

Interesting statement. Just wondering how you are measuring "Nimble with very skilled management"

Based on a huge number of well overpaid managers and staff and some recent changes in the management team would I think that "overweight and losing experience" might be a more appropriate description.

You have edited my post to suit your argument.
You removed ‘some’ from my original post. I wrote some and I meant some. Please don’t misquote me.

[biker]

Just because some can't foresee it doesn't mean its absurd. Some rather inconvenient facts is AIR were well below $1 in the GFC. The last bailout in 2001 required $885m ($1,344m in today's money), and resulted from a short sharp shock to demand from 9/11. The shock to demand this time is shaping up to be far more enduring and a 1:1 cash issue at $1 would raise just $1,123m in today's money, 16% less in real inflation adjusted terms than last time in 2001. (Pretty obvious their cost structure has gone up by just a "little bit" in the last 19 years !)

AIR operations are primarily very high fixed cost and no amount of lever pulling, (AKA rearranging the deck chairs on the Titanic), will help if they hit the iceberg of demand falling of the face of a cliff and staying there for many, many months on end.

But no worries because Cindy said she's going to help business's affected by this virus so we can trust her and everything is going to be fine :rolleyes: Where's my Tui ?

This is simply not true Beagle and you know it. The bailout resulted from AIR owning 100% of Ansett and Ansett going broke. Air NZ itself subsequently went broke.
Granted 9/11 didn’t help but absolutely no similarity to the Airline of today or the crisis of today.
Quite a misleading post I’m afraid.

[winner69]

Just because some can't foresee it doesn't mean its absurd. Some rather inconvenient facts is AIR were well below $1 in the GFC. The last bailout in 2001 required $885m ($1,344m in today's money), and resulted from a short sharp shock to demand from 9/11. The shock to demand this time is shaping up to be far more enduring and a 1:1 cash issue at $1 would raise just $1,123m in today's money, 16% less in real inflation adjusted terms than last time in 2001. (Pretty obvious their cost structure has gone up by just a "little bit" in the last 19 years !)

AIR operations are primarily very high fixed cost and no amount of lever pulling, (AKA rearranging the deck chairs on the Titanic), will help if they hit the iceberg of demand falling of the face of a cliff and staying there for many, many months on end.

But no worries because Cindy said she's going to help business's affected by this virus so we can trust her and everything is going to be fine :rolleyes: Where's my Tui ?

CDC now telling at risk people to avoid air travel ! https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12315665

Jeez Beagle ..you trying really really hard to get the price down eh ....you’ll put the fear of god into everybody ....I had to read that long article to very end to see mention of planes ....and then it was only a pretty general common sense warning

[Blue Skies]

AIR NZ is now quite a nimble airline with some very skilled management.
The current slow down is almost convenient with 787s already on the ground.
Eventually this too will pass.
Bookings will come back, cash flow will return strongly as travellers catch up with postponed travel, and Company insurance cover will be encouraging reluctant travellers already.
If fuel prices settle at a lower level than last year, significant cost savings will come through as hedges and collars expire and are re- established.
Yes, there will be a significant short term hit to profits, and yes this is a business with fine margins but with an emphasis on short term, when this passes, profit will return rapidly. Yes, reduced dividends are highly possible but a share price of $1 and a 1:1 cash issue is absurd.
AIR have many levers to pull on cost reduction and they really haven’t even started internally yet.
They will also be adjusting to other operator’s withdrawal of services and capitalising where possible.
I’m not invested in AIR. Just entertained by the strident and dare I say it, extreme, views on this forum dependant on whether individuals are long or short.


Great post Biker.

[BlackPeter]

You have edited my post to suit your argument.
You removed ‘some’ from my original post. I wrote some and I meant some. Please don’t misquote me.

Your original sentence is in the same post and clearly visible to anybody who reads my response.

I used quotation marks as part of my answer to indicate which part of the statement I was referring to (not to copy the text of the same statement from 2 cm above - again). The "some" would not have changed my question anyway.

Your response is laughable and your accusation of me editing your post is pretty outrageous and obviously false. I hope you are ashamed of yourself.

Do you have anything positive to contribute to this discussion as well?

[blackcap]

You have edited my post to suit your argument.
You removed ‘some’ from my original post. I wrote some and I meant some. Please don’t misquote me.

Yeah its annoying when people do that isn't it.

[biker]

Your original sentence is in the same post and clearly visible to anybody who reads my response.

I used quotation marks as part of my answer to indicate which part of the statement I was referring to (not to copy the text of the same statement from 2 cm above - again). The "some" would not have changed my question anyway.

Your response is laughable and your accusation of me editing your post is pretty outrageous and obviously false. I hope you are ashamed of yourself.

Do you have anything positive to contribute to this discussion as well?

I thought my post earlier today (#15782) was fairly positive

[Beagle]

Jeez Beagle ..you trying really really hard to get the price down eh ....you’ll put the fear of god into everybody ....I had to read that long article to very end to see mention of planes ....and then it was only a pretty general common sense warning

QAN down 10% a few minutes ago when I looked. Dow futures currently down over 600 points. Fill ya boots if you think there's value here mate and good luck !

[winner69]

QAN down 10% a few minutes ago when I looked. Dow futures currently down over 600 points. Fill ya boots if you think there's value here mate and good luck !


...and Webjet and Helloworld say all this travel down so much that they won’t even try to guess the damage to their bottom line this year

8 day cruise to Fiji for $495 sounds attractive ...might have the boat to yourself

[winner69]

Things change fast as the apocalypse gets nearer

Only a few weeks ago when AIR was flying Beagle told me ‘your $2.50 (for AIR), pipe dream mate .... never in a month of Sunday’s’ :):p

[BIRMANBOY]

It would be informative, and dare I say it, illuminating if posters on this particular thread would disclose their position in regards AIR. Not pointing to anyone in particular, woof woof, but the strident and urgent nature of some posters could be understood in a more informed manner if a disclaimer as to current position and intentions was added to the bottom of the post. :confused: DISCLAIMER Holding and looking to accumulate when appropriate.

[stoploss]

Heard in the barbers tonight. “Air New Zealand has those new planes with beds . Shares are cheap at the moment , better get them in before they shoot up “
Disc : Short

[Beagle]

It would be informative, and dare I say it, illuminating if posters on this particular thread would disclose their position in regards AIR. Not pointing to anyone in particular, woof woof, but the strident and urgent nature of some posters could be understood in a more informed manner if a disclaimer as to current position and intentions was added to the bottom of the post. :confused: DISCLAIMER Holding and looking to accumulate when appropriate.

I have lost count of the number of times I have stated I have a short position, its so many, (not kidding).

[Raz]

Things change fast as the apocalypse gets nearer

Only a few weeks ago when AIR was flying Beagle told me ‘your $2.50 (for AIR), pipe dream mate .... never in a month of Sunday’s’ :):p

Yes, i remember that time well, rather funny:) Everyone around me are relaxed on their shares, it will just bounce back up:)

[winner69]

Another shocking day on the NZX but AIR is up

That’s good

[Marilyn Munroe]

If once each generation the national airline needs taxpayer money to keep going politicians should act to break the cycle or at least limit the liability.

I propose if this scenario arises from the present crisis politicians should revive NAC the former domestic carrier and commit to only rescuing domestic flying in the future.

International flying can be undertaken by private parties without the burden on the taxpayers of the Cullen Put or flag airlines of other nations. If one of the international carriers falls over there are plenty of others who can fill the gap.

Boop boop de do
Marilyn

[BIRMANBOY]

Well it was a waste of 30 minutes valuable time but what the hey....yes five times over a post span of 374 (#15424 through #15667). Yes so many...so, so many, not kidding...so many. LOL starting to channel Trump are we? :p
I have lost count of the number of times I have stated I have a short position, its so many, (not kidding).

[Lease]

For cyclical companies like AIR, you can only make fortune to buy at cycle low. Surely nobody knows how low is low. One solution may be dollar cost average. I have started to buy at $2, and plan to buy more when SP drop every 15%.

At current price, AIR is less than its book value. Looks attractive.

[Beagle]

For cyclical companies like AIR, you can only make fortune to buy at cycle low. Surely nobody knows how low is low. One solution may be dollar cost average. I have started to buy at $2, and plan to buy more when SP drop every 15%.

At current price, AIR is less than its book value. Looks attractive.

The best information we have is that current net tangible asset backing as at 31 December 2019 was $1.63. After payment of the pending dividend this will reduce to $1.52.

[Lease]

The best information we have is that current net tangible asset backing as at 31 December 2019 was $1.63. After payment of the pending dividend this will reduce to $1.52.

I'm saying book value. Not net tangible asset.

[BlackPeter]

I'm saying book value. Not net tangible asset.

Book value might be hard to realize, though ... who would need these days a handful of spare dream liners?

[Lease]

Book value might be hard to realize, though ... who would need these days a handful of spare dream liners?

Well, probably some people you don't know:)

[Beagle]

I'm saying book value. Not net tangible asset.

Okay, Total Equity as at 31/12/19 was $2,014m on 1,123m shares = total book value of $1.79. They did not accrue the 11 cent dividend in these financials so adjusting for that, which is about to be paid total book value per share = $1.68. http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/AIR/349043/317644.pdf

[Lease]

Okay, Total Equity as at 31/12/19 was $2,014m on 1,123m shares = total book value of $1.79. They did not accrue the 11 cent dividend in these financials so adjusting for that, which is about to be paid total book value per share = $1.68. http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/AIR/349043/317644.pdf

So far today's low is $1.785<$1.79, so SP is less than BV. I have said nothing wrong.

[Beagle]

So far today's low is $1.785<$1.79, so SP is less than BV. I have said nothing wrong.

Not saying you have but the shares are trading ex divvy today so accounting convention would have it you need to adjust book value for the dividend so adjusted book value ex divvy is $1.68...but you are of course free to use whatever figure makes you feel happy :)

[Lease]

Not saying you have but the shares are trading ex divvy today so accounting convention would have it you need to adjust book value for the dividend so adjusted book value ex divvy is $1.68...but you are of course free to use whatever figure makes you feel happy :)

Hahahaha, I just don't know why I still reply you. Such a meaningless communication!

[williethewaiter]

Trump banned travel to US from Europe.. surely that's going to see airline shares take a hit

[Traderx]

Well the die is cast - AIR has gone ex-Div, the CFO will be sweating, staring anxiously at the cashflow spreadsheets and the daily sales summaries.

[Raz]

Well a lot can still happen to AIR and NZ... yet we are already at this SP....

[Entrep]

15% drop today IMO

[winner69]

15% drop today IMO

…..probably more than 20%

[skid]

dang!! Im a traveler at heart.....heard the other daY with not many passengers they were spaceing them apart with gaps in between



If they stay healthy they can get a better nights sleep with the extra seats

[Beagle]

https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12316342 Look out if AIR has to stop flying to the US...this **** gets very real then !

QAN down 15% today already...just saying.

[blackcap]

https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12316342 Look out if AIR has to stop flying to the US...this **** gets very real then !

QAN down 15% today already...just saying.

At what price are you looking to exit your short Beagle? And would you be going long at that price or just locking in profits?

[Beagle]

At what price are you looking to exit your short Beagle? And would you be going long at that price or just locking in profits?

Hi mate. I am 90%+ sure this ends with a bailout by the Govt so to answer that question one ends to look at the theoretical price the Govt would effect this.

I need to do some work on this and reexamine the detailed terms of the last bailout as its quite likely they will use that as a starting point for the new blueprint.

I'm more than 90% confident this all happens under $1. If anyone can find the all the specifics of the last bailout and post a link to it that would be greatly appreciated.

Pacifica festival cancelled. Thank goodness common-sense has prevailed. https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12316342

[ordop]

Blackcap, remember the last time AIR went through the bailout? I was short AIR at the time as Ansett was down and out - AIR stock went into halt at 23cps after Helen Clark says on the news "at these levels i wouldn't be selling AIR". Can't remember what price the market reopened again, several days later - 60 or 70 cps but that profitable short became a loss for me and was the cause for a few sleepless nights.....

[samjaynz]

This is a bit of a "dumb question" from someone who was primary school age when Air NZ got bailed out last time (and it's also a terribly "entitled millennial" question).

Let's say Air NZ does require bailing out again. What would likely happen to one's balance of Airpoint dollars? Owing to a lot of work-related travel over the last few years - all on ice now! - I've amassed a decent sum. Not going to be using it for any bookings any time soon, so trying to decide if it's worth ripping down to Mitre 10 to use them there for some new tools, garden furniture etc ... I presume they may be reduced to worthlessness if a bailout is required?

[blackcap]

Blackcap, remember the last time AIR went through the bailout? I was short AIR at the time as Ansett was down and out - AIR stock went into halt at 23cps after Helen Clark says on the news "at these levels i wouldn't be selling AIR". Can't remember what price the market reopened again, several days later - 60 or 70 cps but that profitable short became a loss for me and was the cause for a few sleepless nights.....

I can vividly remember the last time that AIR went through their troubles. Can remember trading it in large parcels as there were A and B shares at that time too with the B shares for foreign holders and the A shares for NZ residents. I know it was trading in the 19-24 range for a bit. However I cannot remember what the govt bail out price was. It did however mean that it was a going concern and that may have given the market a boost. Did AIR not have a largish consolidation not long afterwards so that these prices now have to be divided by 5 or 10 to get the pre consolidation effective price?

[Beagle]

I can vividly remember the last time that AIR went through their troubles. Can remember trading it in large parcels as there were A and B shares at that time too with the B shares for foreign holders and the A shares for NZ residents. I know it was trading in the 19-24 range for a bit. However I cannot remember what the govt bail out price was. It did however mean that it was a going concern and that may have given the market a boost. Did AIR not have a largish consolidation not long afterwards so that these prices now have to be divided by 5 or 10 to get the pre consolidation effective price?

The bailout was at 25 cents and there was a share consolidation afterwards but I cannot recall the exact terms with any certainty. From vague memory it was a 1:5 share consolidation. I need to find this out somehow ? So far I have this https://www.wsws.org/en/articles/2001/11/nz-n03.html

[cyclist]

Too soon to worry, I would have thought samjay. I suspect if it ends up getting in that direction, there will be another warning or three along the path to that outcome.

[samjaynz]

Too soon to worry, I would have thought samjay. I suspect if it ends up getting in that direction, there will be another warning or three along the path to that outcome.

Thanks. This is my first rodeo in terms of a big market dip (I was still at high school in '08) so a lot of learning to do. Trying to cover my bases from all aspects ... would hate to lose out on using them for something useful.

[ordop]

1:5 consolidation (23 August 2004)
1:6 Ren Rights @ NZ$1.30 (8 Nov 2004)

[oldtech]

The bailout was at 25 cents and there was a share consolidation afterwards but I cannot recall the exact terms with any certainty. From vague memory it was a 1:5 share consolidation. I need to find this out somehow ?

I made two notes at the time that are relevant:

21 Dec 2001 - Previously Air NZ "A" & "B" shares, they are now combined and are Air NZ Ordinary Shares
23 Aug 2004 - Share Consolidation (every 5 share consolidated into 1 share, fractional entitlement rounded up)

I will have a hunt through the paperwork tonight and see if I can find any more details

Edit: I see ordop beat me to it :t_up:

[blackcap]

1:5 consolidation (23 August 2004)
1:6 Ren Rights @ NZ$1.30 (8 Nov 2004)

Thanks, yes that makes sense. And Beagle did just post that the govt got in at 25 cents.

Which would make $1.25 or thereabouts the same sort of price it was at back in 2004 when the Govt had to step in. Well we are not far off that now.

[cyclist]

Thanks. This is my first rodeo in terms of a big market dip (I was still at high school in '08) so a lot of learning to do. Trying to cover my bases from all aspects ... would hate to lose out on using them for something useful.

Just one person's view, so keep your eyes and ears open 😀. P.s. much more important is that this is probably the best buying opportunity (still unfolding however) that you have perhaps seen since you started investing. A great time to look at financial independence blogs, the quick summary of which is to save a good chunk of what you earn and invest it.

[ordop]

2 points.... Samjaynz - if airpoints means that much USE them now and get what you can from them. Loyalty schemes are unsecured and whilst there would be public backlash if they were binned it wouldn't be outside the realms of possibility.

As the NZ Govt are already a 52% shareholder in AIR one would have to think that a rights issue would be the way forward here sometime when the dust starts to settle. So all you holders out there catching falling knives at the moment....leave a bit of spare change in your pockets for those rights issues that will inevitably get announced.

[blackcap]

2 points.... Samjaynz - if airpoints means that much USE them now and get what you can from them. Loyalty schemes are unsecured and whilst there would be public backlash if they were binned it wouldn't be outside the realms of possibility. .

Good point. I have 5,500 + points collected and am seriously thinking of going to Mitre 10 now that you mention it. Ironically that will just hasten the AIR demise as I am half certain that Mitre10 will demanding cash from AIR in return?

[Beagle]

1:5 consolidation (23 August 2004)
1:6 Ren Rights @ NZ$1.30 (8 Nov 2004)

Thanks, that's how I recall it and agree, that's not far off the current price. Doesn't mean it can't go under $1 his time though. or maybe it goes to 25 cents again and they do another bailout and another share consolidation and right issue !

[samjaynz]

2 points.... Samjaynz - if airpoints means that much USE them now and get what you can from them. Loyalty schemes are unsecured and whilst there would be public backlash if they were binned it wouldn't be outside the realms of possibility.

As the NZ Govt are already a 52% shareholder in AIR one would have to think that a rights issue would be the way forward here sometime when the dust starts to settle. So all you holders out there catching falling knives at the moment....leave a bit of spare change in your pockets for those rights issues that will inevitably get announced.

Good advice. It suddenly dawned on me this afternoon that I should probably look into using them for something ... even making a future holiday booking is probably better than leaving them sitting there.

[BlackPeter]

This is a bit of a "dumb question" from someone who was primary school age when Air NZ got bailed out last time (and it's also a terribly "entitled millennial" question).

Let's say Air NZ does require bailing out again. What would likely happen to one's balance of Airpoint dollars? Owing to a lot of work-related travel over the last few years - all on ice now! - I've amassed a decent sum. Not going to be using it for any bookings any time soon, so trying to decide if it's worth ripping down to Mitre 10 to use them there for some new tools, garden furniture etc ... I presume they may be reduced to worthlessness if a bailout is required?

I don't think anybody can answer the question what happens with loyality schemes if AIR goes kaputt.

However - if it is just a capital rise (no matter whether everybody contributes or only the government) then I would not see any impact on Airpoints or similar loyalty schemes.

Take your pick. Actually - the finance minister might have the answer :):

[Beagle]

Dug back into history on MSN money and what I found is concerning. The chart there is adjusted right back in time for the 1:5 share consolidation.
I will adjust there prices before the share consolidation and then readjust back to make another interesting point to conclude this post.

Sorry I would love to cut and paste a chart but don't know how too from that site, maybe someone else can oblige ?

So adjusted back to pre-share consolidation prices AIR's share price hit a peak of $2.47 on 31/05/1999 before rapidly descending to 79 cents on 31/08/2001 just before 9/11 whereupon things really went bad and it fell to under 25 cents, happy to accept some may have traded it as low as 19 cents. The point is the shares fell to only 10% of what they were before the Govt stepped in. Just because there's been a subsequent share price consolidation is no guarantee whatsoever that the Govt won't wait until they have no other choice but to bail out the airline again so it could easily go back to 25 cents again ! History never repeats, right ?...or does it ?

Adjusting the above prices for the subsequent share consolidation reveals an alarming fact about the amount of shareholder value AIR has destroyed in the last 20 years.
On 31/05/1999 the price adjusted for the 1:5 subsequent share consolidation was $12.34 so in the last 21 years with the share price at $1.76 now, AIR has destroyed more than 85% of shareholder value. It has been suggested to me there are FAR TOO MANY FAT AND GREEDY PIGS at this airline and its basically un-investable. Its clear over all this time the real winners at AIR have been those fat pigs with first dibs on scoffing at the trough...how many hundred are paid more than quarter of a million ? More worrying is there a huge number of people paid more than $400K !

Effectively the facts support the truly alarming contention (as outrageous as this might sound), that effectively AIR as a company is not unlike a charitable organisation wherein shareholders very gradually donate 85% of their money to overpaid staff ! Now that folks, is a very alarming thought !!

I think this gives a useful insight into the long term perils of airline investment. You simply HAVE to work the cycles to be a successful investor in AIR.

[peat]

11121

Is that what you wanted Beagle?

I have now closed my second AIR short from $2 mark.
I am still watching my small portfolio fall hard though so these gains are only mitigating things to some extent.

[Beagle]

11121

Is that what you wanted Beagle?

I have now closed my second AIR short from $2 mark.
I am still watching my small portfolio fall hard though so these gains are only mitigating things to some extent.

Thanks Peat. Over the long haul look at the percentage of value destroyed in the 27 years since 1993 ! AIR is a systemic destroyer of shareholder capital.

[winner69]

government sold down in 2013 at $1.65

[allfromacell]

Took my first nible (since the crash) today at close, can't wait till the next dividend :)

[Scrunch]

Thanks Peat. Over the long haul look at the percentage of value destroyed in the 27 years since 1993 ! AIR is a systemic destroyer of shareholder capital.

Unfortunately those charts are slightly misleading as they rescale the earlier prices by 5x but don't factor in the changes in issued capital between the before and after scenarios. Noting that AIR now has slighly over 1b shares on issue, the chart makes it look like they were a $12b+ market cap company. They weren't.

[allfromacell]

Plus it doesn't take into account all the dividends paid over the years

[James108]

Not sure if it’s still true after a few years of super profits but the airline industry has net lost money since its inception. I wonder if it will continue to do so or has it structurally changed recently.

[Sideshow Bob]

Took my first nible (since the crash) today at close, can't wait till the next dividend :)

The way they have been hit, can't see divvies in the near future.....

[BIRMANBOY]

Maybe not in the next year, but no reason to expect they cannot get back within a year to 18 months to similar results and dividends from 2014 to 2019 of 20 to 22 cents. At 1.54 SP at close today that would be 14% +/- dividend yield plus highly probable SP resurgence in the 2.70 area. Looks like a good move to me. :t_up:
The way they have been hit, can't see divvies in the near future.....

[James108]

Will they need to raise capital between now and 12 to 18 months though? That is the big question and I am interested to hear from anyone that has done some sums.

[Scrunch]

Plus it doesn't take into account all the dividends paid over the years

From Air NZ's dividend page Air NZ has paid $2.15 in dividends since 2005. Air NZ had 1.05b shares on issue in 2007 (the earliest AR on their website) which has increased to 1.12b by 2020. Air NZ has therefore paid out about $2.3b in dividends over the last 15 years. The government did do a bailout of $885m but in terms of value creation, dividends paid have exceeded this several times over.
https://www.airnewzealand.co.nz/dividend-history

Interim Final Special Total
2005 2.5 2.5 5
2006 2.5 2.5 5
2007 3 5 10 18
2008 5 3.5 8.5
2009 3 3.5 6.5
2010 3 4 7
2011 3 2.5 5.5
2012 2 3.5 5.5
2013 3 5 8
2014 4.5 5.5 10 20
2015 6.5 9.5 16
2016 10 10 25 45
2017 10 11 21
2018 11 11 22
2019 11 11 22
Total 80 90 45 215

[aquaman]

Does AIR have ability to cancel airpoints dollars as way of delivering company balance sheet credit... just a thought in drastic times

[Beagle]

The Govt's real dividend is they are partners in the debauchery with all the overpaid staff in that they collect PAYE from all their grossly excessive salaries before they even get them so actually the lead and by far the biggest pig at the trough is the Govt itself ! I estimate they would be collecting over $300m in PAYE every year so this is the real reason they won't let the airline fail, lets not pretend its any other reason. Then there's the tax from the company itself and of course the GST from all domestic travel and last, and actually least of all is their dividends....the airline is an absolute goldmine for the Govt !

Yes James108, I believe they will needs to raise capital within the next 12-18 months.

History suggests after the GFC the company only made an average of 5.9 cps for the next 4 years so I expect an L shaped recovery and AIR not being capable of paying the level of dividends previously paid for ~ 5 years and then on perhaps double the number of shares currently on issue after the capital raise so a reasonable expectation for decent dividend paying might be low single digits for a few years and then ramping up to perhaps 10 cps after that...until inevitably as the cycle rolls around again, they hit their next crisis and shareholders cough up another billion or two to keep the staff in the luxury and comfort they've come to expect.

[Raz]

The Govt's real dividend is they are partners in the debauchery with all the overpaid staff in that they collect PAYE from all their grossly excessive salaries before they even get them so actually the lead and by far the biggest pig at the trough is the Govt itself ! I estimate they would be collecting over $300m in PAYE every year so this is the real reason they won't let the airline fail, lets not pretend its any other reason. Then there's the tax from the company itself and of course the GST from all domestic travel and last, and actually least of all is their dividends....the airline is an absolute goldmine for the Govt !

Yes James108, I believe they will needs to raise capital within the next 12-18 months.

History suggests after the GFC the company only made an average of 5.9 cps for the next 4 years so I expect an L shaped recovery and AIR not being capable of paying the level of dividends previously paid for ~ 5 years and then on perhaps double the number of shares currently on issue after the capital raise so a reasonable expectation for decent dividend paying might be low single digits for a few years and then ramping up to perhaps 10 cps after that...until inevitably as the cycle rolls around again, they hit their next crisis and shareholders cough up another billion or two to keep the staff in the luxury and comfort they've come to expect.

Well said, in my mind that requires a very long investment outlook...in a volatile world not very realistic to me. Trading this share may be the only option left in my work life!

[Blue Skies]

Some positive news for a change & some balance.

In Fridays bounce in US, airline stocks rising, Delta up 9%, Southwest up 7%.

Big increases & obviously market saying oversold & long term outlook for travel positive, which of course it is once effective anti viral Covad-19 medication or vaccine produced.

AIR down a whopping 47% since I sold out most of holding at 3.03 in January.

Prior to Covad-19, projected increase in air travel was huge with biggest increase coming in the Asia Pacific region.

Time to get back in?

[Beagle]

Time to get back in ? Have a read of this very interesting article that Winner69 kindly sent me. https://www.linkedin.com/pulse/worlds-first-global-911-martin-lindstrom/
ands this https://www.msn.com/en-nz/news/world/majority-of-uk-needs-to-get-coronavirus-for-herd-immunity-chief-scientist-says/ar-BB1195At?ocid=spartanntp

As I have mentioned previously, the recovery in travel patterns after the GFC and 9/11 was very slow. I expect that to repeat and believe we are a long way off from a vaccine.

AIR pays unusually large dividends for this industry so to normalise their fall, 11 cents of it is because it just gone ex divvy so $3.03 down to $1.65 ($1.54 + 11 cents divvy) = 45% fall. How does AIR's fall, peak to trough in 2020, of 45% compare to a random selection of other airlines I looked at this morning, (including the bounce on the US markets overnight) ?
Delta 39%
American Airlines 53%
United airlines 54%
Alaska Air Group 45%
And finally and arguably the most relevant comparative in this part of the world, Qantas 56%
Average fall of peer group 49.4%

Conclusion, AIR's fall is somewhat lower than its peer group and consistent with a fundamental shift in the attractiveness of flying. I expect heightened fear to be an enduring response and I think the share price falls are reflecting that.

AIR's balance sheet is not strong and I am not impressed with management's very modest response to the virus to date. Continuation of a salary freeze for senior executives that only started last year...when they are already on such bloated salaries is totally underwhelming. The only one doing the right thing so far is Greg Foran with his 15% salary cut but I note many other CEO's of other airlines are talking much deeper cuts or forgoing salary altogether !

I might add to my short position if it bounces hard on Monday.

Safe travels back here Raz. I look forward to you having more time to comment on this forum.

[allfromacell]

I suspect Mr Foran and co will be preparing the layoff plan as we speak. Hopefully he aims high at all the bloated high salary earners first.

I'm confident air travel will start bouncing back in around 6 months which is why I feel comfortable buying here at around NTA.

[BlackPeter]

Lufthansa indicated today that they consider to apply for government money in order to survive. Thinking as well about shutting down flights completely until the worst is over. Just saying, maybe the worst for the airline industry is not over yet.

Didn't found an Anglo Saxon link, but if you understand the original - here we are:

https://www.airliners.de/lufthansa-staatshilfen/54207

[boysy]

Latest news has to be the worst possible news for air nz can’t see any tourists wanting to come to NZ to self isolate for 14 days .....

[IAK]

Latest news has to be the worst possible news for air nz can’t see any tourists wanting to come to NZ to self isolate for 14 days .....
And Auckland Airport.

[Blue Skies]

Yes but the silver lining is domestic travel will increase. Already friends who normally take overseas holidays are talking about flying to South Island destinations for holidays & expect there will be a lot of great domestic deals & holiday packages.

[Grimy]

If only they had more seating in the domestic terminal...….

[Beagle]

Jacinda has done the right thing for the health of five million Kiwi's and I am very pleased for all Kiwi's that this is likely to significantly slow down the spread of the virus here such that hopefully our healthcare system can cope.

Unfortunately there will be dramatic effects on the economy as 20% of overseas earnings come from Tourism and almost no tourist will be prepared to come here and self isolate for 14 days before beginning their holiday.

This will place enormous pressure on tourism operators right across the country including listed operators AIA, AIR, THL, SKC and Skyline enterprises as well as thousands of privately owned companies. The downstream effect of this will almost certainly throw the N.Z. economy into a very deep recession but the main thing is it greatly enhances the chances of vulnerable people to get through this and that has to be the Govt's first consideration and I for one am very grateful the Govt have done the right thing by all Kiwi's.

Some serious bailouts will be required down the track. Fortunately the Govt books are in very good shape and their debt to GDP is one of the lowest in the developed world.

Financial Year to date according to the latest available statistics for the 7 months to the end of January 2020 AIR flew a total of 23.493m revenue passenger kilometres. Of this 3,393m or 14.4% were for domestic passenger services. (Source January 2020 year to date Operating statistics) Some pacific island services will remain. AIR do not provide separate operating statistics for the pacific islands but under the heading Tasman / Pacific YTD RPK's were 6,756m. I would think its likely the vast majority of those are on the Tasman given the relative population there compared to the pacific islands. I would think at a best guess they might have something like 3393 domestic + 25% of 6756 Tasman Pacific + perhaps 15% of other capacity remaining = 7083 / 23,493 = about 30% of their business left in terms of RPK's. We know domestic RPK's generate a lot of revenue but are also higher cost and I for one think domestic travel is going to also take a massive hit with almost no tourists, many business's banning non essential business travel and a lot of Kiwi's figuring its safer to travel in their own car.

Jacinda has done the right thing by all New Zealanders but I am sorry that this is simply not (in my opinion anyway), a survivable event for AIR in its current form without massive Government support. What form that support takes is anyone's guess but if its a no interest loan to see them through then if the loan is big enough that's fine but all operational losses for the foreseeable future will sheet home to shareholders. Covid 19 is only going to spread much further overseas as the world-wide pandemic runs its course until a vaccine is finally widely available, (sometime in 2021 ?), so the chances of these restrictions being lifted anytime soon seem extremely remote. Greg Foran has got the job of his life to right size the airline to get through this as best as they can. I can see them walking away from many of their future aircraft orders, (don't see any choice) and losing the progress payments and deposits.

https://www.stuff.co.nz/national/health/coronavirus/120284213/covid19s-tourism-wipe-out-fears-as-travel-restrictions-ramped-up

[Preston]

Time to get back in ? Have a read of this very interesting article that Winner69 kindly sent me. https://www.linkedin.com/pulse/worlds-first-global-911-martin-lindstrom/
ands this https://www.msn.com/en-nz/news/world/majority-of-uk-needs-to-get-coronavirus-for-herd-immunity-chief-scientist-says/ar-BB1195At?ocid=spartanntp

As I have mentioned previously, the recovery in travel patterns after the GFC and 9/11 was very slow. I expect that to repeat and believe we are a long way off from a vaccine.

AIR pays unusually large dividends for this industry so to normalise their fall, 11 cents of it is because it just gone ex divvy so $3.03 down to $1.65 ($1.54 + 11 cents divvy) = 45% fall. How does AIR's fall, peak to trough in 2020, of 45% compare to a random selection of other airlines I looked at this morning, (including the bounce on the US markets overnight) ?
Delta 39%
American Airlines 53%
United airlines 54%
Alaska Air Group 45%
And finally and arguably the most relevant comparative in this part of the world, Qantas 56%
Average fall of peer group 49.4%

Conclusion, AIR's fall is somewhat lower than its peer group and consistent with a fundamental shift in the attractiveness of flying. I expect heightened fear to be an enduring response and I think the share price falls are reflecting that.

AIR's balance sheet is not strong and I am not impressed with management's very modest response to the virus to date. Continuation of a salary freeze for senior executives that only started last year...when they are already on such bloated salaries is totally underwhelming. The only one doing the right thing so far is Greg Foran with his 15% salary cut but I note many other CEO's of other airlines are talking much deeper cuts or forgoing salary altogether !

I might add to my short position if it bounces hard on Monday.

Safe travels back here Raz. I look forward to you having more time to comment on this forum.

My broker is showing buy orders at $1.50 of around 400k+ shares. That could be fuel for your bounce and I do believe this ski slope needs a breather and a pie before continuing this powder run. But as you say, there is zero positive news here for AirNZ for a while yet. No growth, surely no dividends for a long while and an already “skinny-ish” model thanks to CL. I just hope all of those people have jobs to come back to at some stage.

[bull....]

41% of air business is international travel , so they will survive without this in a leaner form. share price wont look pretty though for a long time

[winner69]

41% of air business is international travel , so they will survive without this in a leaner form. share price wont look pretty though for a long time

and international apparently a percentage much lower than 41% of their profits

[Blue Skies]

and international apparently a percentage much lower than 41% of their profits


Yes, & anyone know exactly what NAPT figures are for Domestic V International split are?

[winner69]

Yes, & anyone know exactly what NAPT figures are for Domestic V International split are?

Top secret I think

Loss making London leg gone.

[bull....]

Yes, & anyone know exactly what NAPT figures are for Domestic V International split are?

good point need to take that % of revenue and profits out as well. worst case senario now is if the virus got really bad in NZ they might stop domestic travel as well at some point that would be bail out material unfortunately.

[Lola]

Jacinda has done the right thing for the health of five million Kiwi's and I am very pleased for all Kiwi's that this is likely to significantly slow down the spread of the virus here such that hopefully our healthcare system can cope.

Unfortunately there will be dramatic effects on the economy as 20% of overseas earnings come from Tourism and almost no tourist will be prepared to come here and self isolate for 14 days before beginning their holiday.

This will place enormous pressure on tourism operators right across the country including listed operators AIA, AIR, THL, SKC and Skyline enterprises as well as thousands of privately owned companies. The downstream effect of this will almost certainly throw the N.Z. economy into a very deep recession but the main thing is it greatly enhances the chances of vulnerable people to get through this and that has to be the Govt's first consideration and I for one am very grateful the Govt have done the right thing by all Kiwi's.

Some serious bailouts will be required down the track. Fortunately the Govt books are in very good shape and their debt to GDP is one of the lowest in the developed world.

Financial Year to date according to the latest available statistics for the 7 months to the end of January 2020 AIR flew a total of 23.493m revenue passenger kilometres. Of this 3,393m or 14.4% were for domestic passenger services. (Source January 2020 year to date Operating statistics) Some pacific island services will remain. AIR do not provide separate operating statistics for the pacific islands but under the heading Tasman / Pacific YTD RPK's were 6,756m. I would think its likely the vast majority of those are on the Tasman given the relative population there compared to the pacific islands. I would think at a best guess they might have something like 3393 domestic + 25% of 6756 Tasman Pacific + perhaps 15% of other capacity remaining = 7083 / 23,493 = about 30% of their business left in terms of RPK's. We know domestic RPK's generate a lot of revenue but are also higher cost and I for one think domestic travel is going to also take a massive hit with almost no tourists, many business's banning non essential business travel and a lot of Kiwi's figuring its safer to travel in their own car.

Jacinda has done the right thing by all New Zealanders but I am sorry that this is simply not (in my opinion anyway), a survivable event for AIR in its current form without massive Government support. What form that support takes is anyone's guess but if its a no interest loan to see them through then if the loan is big enough that's fine but all operational losses for the foreseeable future will sheet home to shareholders. Covid 19 is only going to spread much further overseas as the world-wide pandemic runs its course until a vaccine is finally widely available, (sometime in 2021 ?), so the chances of these restrictions being lifted anytime soon seem extremely remote. Greg Foran has got the job of his life to right size the airline to get through this as best as they can. I can see them walking away from many of their future aircraft orders, (don't see any choice) and losing the progress payments and deposits.

https://www.stuff.co.nz/national/health/coronavirus/120284213/covid19s-tourism-wipe-out-fears-as-travel-restrictions-ramped-up

Not sure why the Pacific Islands are exempt from these measures....unless of course we are going to teach them all to ski. Now thats a thought.

[Benny1]

So the international fleet will undoubtedly to suspended from operating reasonably quickly I would imagine, they will run out of pilots and crew to operate the aircraft quite quickly if they all have to self isolate for two weeks after every flight! while a scaled back domestic operation should continue for the time being...
Can AIR announce a trading halt for it's shares on the NZX and ASX while these decisions are made and implemented and announced to the market, and if so how long could this halt possibly last?

[Poet]

Number 1 order of business should be to cancel the upcoming dividend. If they don't do this pronto then they wont have a show of getting political (or public) support for government help.

[Blue Skies]

Number 1 order of business should be to cancel the upcoming dividend. If they don't do this pronto then they wont have a show of getting political (or public) support for government help.


Yep, these are extraordinary times, & call for extraordinary measures.

[Beagle]

Air NZ have said in previous briefings that international tourists coming to NZ take on average 2 domestic flights while here. So those domestic flights will go. Will also lose domestic legs of Kiwis cancelled international journeys. Plus there will be a lot of people choosing not to fly domestically while this is going on. So while international will be poleaxed, domestic will also be seriously down for as long as this goes on. Air NZ may want to raise capital soon, when the can get a rights issue away at $1.
Spot on and I for one do not believe the 41% figure quoted in the media. Based on distance flown only 14.4% of AIR capacity is domestic and a lot of that is flown by international tourists as you point out. Last week it was reported that 95% of N.Z. business's have amended their travel policy for health and safety reasons. Companies have to make an effort to protect their staff from untoward risk. Conferences around the country are being cancelled en-masse and a lot of domestic business travel being suspended in favour of meetings via skype or other electronic means. Frankly, travel by one's own vehicle has never looked so good !!
Yes I think it makes good commercial sense to do a 1:1 rights issue ASAP at ~ $1.00 with the Govt underwriting it. Get it done while they still can.


Not sure why the Pacific Islands are exempt from these measures....unless of course we are going to teach them all to ski. Now thats a thought.
Virus isn't there yet. Expect that exemption to be amended when it is.


So the international fleet will undoubtedly to suspended from operating reasonably quickly I would imagine, they will run out of pilots and crew to operate the aircraft quite quickly if they all have to self isolate for two weeks after every flight! while a scaled back domestic operation should continue for the time being...
Can AIR announce a trading halt for it's shares on the NZX and ASX while these decisions are made and implemented and announced to the market, and if so how long could this halt possibly last? Air crew are exempt. Yes they can announce a trading halt for as long as is reasonable. Word I am hearing from AIR staff today is they are really going to struggle to find enough space to park up their planes. Christchurch and Whenuapai being talked about but may have to use Ohakea and other airports as well. 777-200's to be parked up first is what I hear.


Number 1 order of business should be to cancel the upcoming dividend. If they don't do this pronto then they wont have a show of getting political (or public) support for government help. Have to agree 100%. When facing an existential threat all resources should be brought to bear and paying out ~ $124m at this time is gross negligence in my opinion when the directors are charged with their primary obligation of ensuring the long run survival of the business. These are indeed extraordinary times which call for extraordinary measures and shareholders being paid their full dividend as though things are normal, as others have noted, sends a very bad message that's totally inappropriate.

On a more positive note I believe it is fairly likely JetStar will temporarily withdraw from N.Z. in the foreseeable future. Most of their passengers are tourists, they are known to have very poor cleaning of their aircraft and with tourists not coming in any volume it makes no sense for them to continue flying here in the short term. Qantas couldn't care less about maintaining essential domestic travel infrastructure in N.Z., (something to think about when you choose which airline with whom to book your next flight), they are only here to milk Kiwi's with their filthy old planes and as soon as they foresee a sustained period of operational losses they will suspend main trunk services just like they did with regional services.

[Balance]

Number 1 order of business should be to cancel the upcoming dividend. If they don't do this pronto then they wont have a show of getting political (or public) support for government help.

You are a shareholder?

[Beagle]

Latest Update - As COVID-19 continues to develop we wanted to update you on what we are doing to serve our clients and staff and how we are responding to the situation.
We have a dedicated team working on our response and managing developments. This team is actively listening and responding to the shifting nature of this virus. Our business continuity plan ensures we are equipped with all the tools we need to service our clients in the event we are required to close an office. The safety of our staff, and clients who visit our offices, is a priority. We have health and safety policies in place to keep offices clean and safe. We are reducing in-person meetings, restricting non-business critical travel and following health department guidelines. Should you have any questions, please don't hesitate to contact our Client Experience team.

Latest headline message on direct broking website. Make no mistake, this is going on right across business's in N.Z. I hear that for example from a friend this weekend, with Sleepyhead who are obviously a major business in N.Z., all non essential business travel and conferences are now banned and even domestic travel even if considered absolutely necessary must be approved by the general manager first. Impact, high value business travel often booked at short notice at very high prices will take a massive hit both international and domestic.

[850man]

SP at $1 looking more likely by the minute

[Beagle]

https://www.cnbc.com/2020/03/14/delta-pilot-union-agree-on-partially-paid-time-off-as-coronavirus-forces-cuts.html

“The speed of the demand fall-off is unlike anything we’ve seen – and we’ve seen a lot in our business,” Delta’s CEO Ed Bastian wrote to employees on Friday.

If Delta think they are in unchartered waters, AIR are most certainly going to be several level's up from that after yesterday's tough travel restrictions.
I read earlier this week that staff who weren't busy were being reassigned to the refund call centre. If they're refunding fares left right and centre and paying out that dividend and cutting services dramatically, after a truly unprecedented collapse in demand that's literally going to fall off the face of a cliff, how long before they run out of cash ?

Don't want to use my airpoints for travel...I might use them up on other stuff this week.

https://www.msn.com/en-nz/news/national/ardern-reveals-how-mass-self-isolation-will-be-enforced/ar-BB11cbHW?ocid=spartandhp

8 cases now, be careful out there folks. Probably many more that are currently asymptomatic. https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12316824

[Raz]

https://www.cnbc.com/2020/03/14/delta-pilot-union-agree-on-partially-paid-time-off-as-coronavirus-forces-cuts.html

“The speed of the demand fall-off is unlike anything we’ve seen – and we’ve seen a lot in our business,” Delta’s CEO Ed Bastian wrote to employees on Friday.

If Delta think they are in unchartered waters, AIR are most certainly going to be several level's up from that after yesterday's tough travel restrictions.
I read earlier this week that staff who weren't busy were being reassigned to the refund call centre. If they're refunding fares left right and centre and paying out that dividend and cutting services dramatically, after a truly unprecedented collapse in demand that's literally going to fall off the face of a cliff, how long before they run out of cash ?

Don't want to use my airpoints for travel...I might use them up on other stuff this week.

https://www.msn.com/en-nz/news/national/ardern-reveals-how-mass-self-isolation-will-be-enforced/ar-BB11cbHW?ocid=spartandhp

8 cases now, be careful out there folks. Probably many more that are currently asymptomatic. https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12316824

If it is worse demand drop than GFC with Delta, then that does make me pause on the economic consequences.

[Poet]

You are a shareholder?

I was a shareholder until late January, sold out then at $3 as the writing was on the wall by then

[BlackPeter]

Latest headline message on direct broking website. Make no mistake, this is going on right across business's in N.Z. I hear that for example from a friend this weekend, with Sleepyhead who are obviously a major business in N.Z., all non essential business travel and conferences are now banned and even domestic travel even if considered absolutely necessary must be approved by the general manager first. Impact, high value business travel often booked at short notice at very high prices will take a massive hit both international and domestic.

I guess there is a silver lining ... just imagine how much less CO2 we will pump this year into the atmosphere ... maybe the planet even gets a chance for a breather ...

[Beagle]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12316759

Air New Zealand executives are working today on what are shaping up as radical cuts to its network following the Government's new restrictions on travel....
Aside from the Pacific Islands, the airline's international network has effectively been wiped out by the new restrictions requiring passengers to self-isolate for 14 days.

A couple of fairly senior AIR staff I spoke with this morning seemed to be in denial about the seriousness of the situation and their response was rather blasé.
Disruption will only be short term and they can't afford to lose the huge experience we provide was their view. They're exceptionally nice people, I didn't want to wreck their day so I kept my opinionated barking to a minimum, (yeah, I know that's a rare thing for me :lol:)..

[Balance]

I guess there is a silver lining ... just imagine how much less CO2 we will pump this year into the atmosphere ... maybe the planet even gets a chance for a breather ...

Good point, BP.

The virus is nature's revenge on pollution?

[levin123]

Good point, BP.

The virus is nature's revenge on pollution?

I've been told the sky is blue in Beijing for the first time in years so silver lining for sure

[winner69]

Australia imposes 14 day self isolation for arriving travellers like nz

That won’t help AIR

[Lease]

AIR has been full of bad news at moment, and I like it:)

[Beagle]

Australia imposes 14 day self isolation for arriving travellers like nz

That won’t help AIR

WOW...QAN to get a savage bashing with the ugly stick tomorrow too. They're already down more than 50% :eek2:

[Beagle]

For cyclical companies like AIR, you can only make fortune to buy at cycle low. Surely nobody knows how low is low. One solution may be dollar cost average. I have started to buy at $2, and plan to buy more when SP drop every 15%.

At current price, AIR is less than its book value. Looks attractive.


AIR has been full of bad news at moment, and I like it:)

Lets see how much you like it tomorrow at the close :eek2: Good luck, you're going to need it !!

I might double my short tomorrow...this could go down to 25 cents over the next few months, if not earlier....history never repeats...or does it ?

By May 2020, unless there is a bailout or capital raise beforehand, the company will be truly desperate for cash.

[Lease]

Lets see how much you like it tomorrow at the close :eek2: Good luck, you're going to need it !!

I might double my short tomorrow...this could go down to 25 cents over the next few months, if not earlier....history never repeats...or does it ?

By May 2020, unless there is a bailout or capital raise beforehand, the company will be truly desperate for cash.

Let's see if SP can drop to 25C. If it does, I may sell my house to buy all AIR shares:)

[Beagle]

Let's see if SP can drop to 25C. If it does, I may sell my house to buy all AIR shares:)

Its not going to happen in one day or one week but you will get a very serious belting tomorrow, that much you can be absolutely certain about, unless the company puts its shares in a trading halt or unless the Govt announces a 9 figure support package as a non-repayable support grant. They can afford it as they probably get a total of in excess of $500m per annum out of AIR in PAYE, GST, tax and dividends.

Its time to cough that amount back up Cindy.

[Lease]

Its not going to happen in one day or one week but you will get a very serious belting tomorrow, that much you can be absolutely certain about, unless the company puts its shares in a trading halt or unless the Govt announces a 9 figure support package as a non-repayable support grant. They can afford it as they probably get a total of in excess of $500m per annum out of AIR in PAYE, GST, tax and dividends.

Its time to cough that amount back up Cindy.

You sound it's end of the world. Oh, probably it is. But that's fine. Everything finish.:)

[BlackPeter]

Let's see if SP can drop to 25C. If it does, I may sell my house to buy all AIR shares:)

Take care ... its a dangerous world out there. Never ever bet the farm!

[Beagle]

You sound it's end of the world. Oh, probably it is. But that's fine. Everything finish.:)

Its not the end of the world. The Govt has to bail them out so as critical transport infrastructure is maintained in and to and from N.Z. (for example many essential pharmaceutical supplies arrive via air freight) With the unprecedented cuts coming to services they no longer have a viable business model, that's clear to anyone with an in-depth understanding of this company. They do not have the reserves to survive until a vaccine is developed. The only question in my mind is what form the Govt support will take and when will it be forthcoming ?
Last time in 2001 they waited until the share price was completely in the toilet and just one tenth of what it was before stepping in at 25 cents.

My base case assumption is they will step in earlier this time, perhaps at about 75 cents, half NTA, but anything can happen. The trouble is its sets up a precedent. Where do you draw the line this time ? Help THL as well, what about SKC, AIA, Skyline Enterprises and private successful companies that have been enjoying boom times for years like Real Journey's in Queenstown ? Shouldn't some of these companies have built up substantial reserves to handle a temporary downturn already ? Why should taxpayers step in when they should have built their own financial strength by now ?....talk about a fiscal dilemma !

[Lease]

Take care ... its a dangerous world out there. Never ever bet the farm!

No worries BP, I actually take very small position on AIR. The company won't disappear, and will recover once the world return to normal.

[bottomfeeder]

Let's see if SP can drop to 25C. If it does, I may sell my house to buy all AIR shares:)

Your house is worth 20% less in the last week.

[Lease]

Its not the end of the world. The Govt has to bail them out so as critical transport infrastructure is maintained in and to and from N.Z. (for example many essential pharmaceutical supplies arrive via air freight) With the unprecedented cuts coming to services they no longer have a viable business model, that's clear to anyone with an in-depth understanding of this company. They do not have the reserves to survive until a vaccine is developed. The only question in my mind is what form the Govt support will take and when will it be forthcoming ?
Last time in 2001 they waited until the share price was completely in the toilet and just one tenth of what it was before stepping in at 25 cents.

My base case assumption is they will step in earlier this time, perhaps at about 75 cents, half NTA, but anything can happen.

How did they survive after Sep 11? and oil price over $100 per barrel prior to GFC? and during GFC? It's not the first time AIR face challenges, but they went through and SP reached new high at $3.83 in August 2017.

I love everyone like you, extremely pessimistic, and knock down SP to 25C.

[Beagle]

How did they survive after Sep 11? and oil price over $100 per barrel prior to GFC? and during GFC? It's not the first time AIR face challenges, but they went through and SP reached new high at $3.83 in August 2017.

I love everyone like you, extremely pessimistic, and knock down SP to 25C.

Are you aware the Govt had to bail them out after 9/11 at 25 cents per share or that during the GFC they went down to under 70 cents per share ?
Do you understand that about 2/3rds of their network will be shut down over the next few weeks ?

[Lease]

Are you aware the Govt had to bail them out after 9/11 at 25 cents per share or that during the GFC they went down to under 70 cents per share ?

2001 bailout was not because of AIR performance, actually they still made operating profit that year. But failed investment on Ansett. GFC down to 70C so what? If you bought at 70C at GFC, you would sell at $3.83 in 2017, not bad return.

[Beagle]

2001 bailout was not because of AIR performance, actually they still made operating profit that year. But failed investment on Ansett. GFC down to 70C so what? If you bought at 70C at GFC, you would sell at $3.83 in 2017, not bad return.

Investment in Ansett weakened their balance sheet but the real issue was the collapse in demand after 9/11. Demand is collapsing worse this time and will be more sustained.
Delta CEO just came out on Friday this week and said they'd never seen a demand collapse like they're experiencing at present, not after 9/11, not during GFC, NEVER before.
Yeah, buying at the bottom of the cycle is smart, that's the one thing we seem to agree on. Good luck for tomorrow.

[winner69]

No worries - the rich and famous are going to be looked after

@CamWallace_NZ
As part of our response to the current travel restrictions our loyalty team are looking at options to ensure that high frequency customers retain status with @FlyAirNZ

[Lease]

Investment in Ansett weakened their balance sheet but the real issue was the collapse in demand after 9/11. Demand is collapsing worse this time and will be more sustained.
Delta CEO just came out on Friday this week and said they'd never seen a demand collapse like they're experiencing at present, not after 9/11, not during GFC, NEVER before.
Yeah, buying at the bottom of the cycle is smart, that's the one thing we seem to agree on. Good luck for tomorrow.

I know tomorrow AIR SP will collapse, and I'm happy to see it as so far my position on it has been very small.

[Arthur]

In the last two months in China around 44,000 have died in car accidents and 3,000 with CV19.

[Beagle]

https://www.rnz.co.nz/news/national/411753/travellers-self-isolation-warning-tens-of-thousands-of-tourism-jobs-in-jeopardy

[Sideshow Bob]

In the last two months in China around 44,000 have died in car accidents and 3,000 with CV19.

Yeah the driving over there isn't exactly quality......

[winner69]

Lease — AIR heard you and have halted the trading if their shares

Good for you because you won’t be buying ‘expensive ones’ today so will have more dosh to buy ‘cheaper’ ones in a few days time.

[Raz]

take a look at their announcement...

[winner69]

take a look at their announcement...

Pretty ominious


BackAir New Zealand capacity reductions
16/3/2020, 8:37 am MKTUPDTE

Air New Zealand is further reducing capacity across its network as a result of the impact of Covid-19 on travel demand.

The airline placed itself into a trading halt today to allow it time to more fully assess the operational and financial impacts of global travel restrictions.

On its long haul network Air New Zealand will be reducing its capacity by 85 percent over the coming months and will operate a minimal schedule to allow Kiwis to return home and to keep trade corridors with Asia and North America open. Full details of this schedule will be advised in the coming days.

Among the long haul network capacity reductions, the airline can advise it is suspending flights between Auckland and Chicago, San Francisco, Houston, Buenos Aires, Vancouver, Tokyo Narita, Honolulu, Denpasar and Taipei from 30 March to 30 June. It is also suspending its London-Los Angeles service from 20 March (ex LAX) and 21 March (ex LHR) through to 30 June.

The Tasman and Pacific Island network capacity will significantly reduce between April and June. Details of these schedule changes will be announced later this week.

On the domestic network, capacity will be reduced by around 30% percent in April and May but no routes will be suspended.

Customers are advised that due to the unprecedented level of schedule changes they should not contact the airline unless they are due to fly within the next 48 hours or need immediate repatriation to New Zealand or their home country.

Chief Executive Officer Greg Foran says that while airlines face an unprecedented challenge, Air New Zealand is better placed than most to navigate its way through it.

“The resilience of our people is exceptional and I am consistently amazed by their dedication and passion for our customers,” Mr Foran says.

“We are a nimble airline with a lean cost base, strong balance sheet, good cash reserves, an outstanding brand and a team going above and beyond every day. We also have supportive partners. We are also in discussions with the Government at this time.”

As a result of the downturn in travel Air New Zealand continues to review its cost base and will need to start the process of redundancies for permanent positions acknowledging the important role partnering with unions has in this process.

“We are now accepting that for the coming months at least Air New Zealand will be a smaller airline requiring fewer resources, including people. We have deployed a range of measures, such as leave without pay and asking those with excess leave to take it, but these only go so far. We are working on redeployment opportunities for some of our staff within the airline and also to support other organisations”.

Mr Foran says the airline is working constructively with the heads of the four main unions representing more than 8,000 of its workforce to ensure the right outcome for all staff.

“I would like to thank the leadership teams at Etu, AMEA, NZALPA and Federation of Air New Zealand Pilots for the way in which they are engaging with the airline and positively representing the interests of their members. These are unprecedented times that we are all having to navigate. And it is clear that if we don’t take all the appropriate measures to lower costs and to drive revenue, our airline won’t be in the best position to accelerate forward once we are through the worst of the impact of Covid-19.”

As part of Air New Zealand’s cost savings initiatives the Board of Directors will take a 15% pay cut until the end of this calendar year.

The trading halt continues to be in place after this announcement

[Blue Skies]

AIR - Trading Halt of Securities16/3/2020, 8:35 am HALTMemorandum
To: Market Participants
From: NZX Product Operations
Date: Monday, 16 March 2020
Subject: Air New Zealand Limited (“AIR”) - Trading Halt of Securities

Message:
NZX Regulation (“NZXR”) advises that, at the request of the company, it has placed a trading halt on Air New Zealand Limited (“AIR”) ordinary shares, and (“AIR020”) bonds. The trading halt was placed pre-market open this morning.
The trading halt was requested to allow AIR time to assess the operational and financial impact of the Government’s new travel restrictions and to prepare an announcement to the market. The trading halt has been put in place pending the release of an announcement by the company.
The halt will remain in place until the earlier of:
• An announcement made by the issuer; or
• Market open on Wednesday, 18 March 2020.

[blackcap]

AIR - Trading Halt of Securities16/3/2020, 8:35 am HALTMemorandum
To: Market Participants
From: NZX Product Operations
Date: Monday, 16 March 2020
Subject: Air New Zealand Limited (“AIR”) - Trading Halt of Securities

Message:
NZX Regulation (“NZXR”) advises that, at the request of the company, it has placed a trading halt on Air New Zealand Limited (“AIR”) ordinary shares, and (“AIR020”) bonds. The trading halt was placed pre-market open this morning.
The trading halt was requested to allow AIR time to assess the operational and financial impact of the Government’s new travel restrictions and to prepare an announcement to the market. The trading halt has been put in place pending the release of an announcement by the company.
The halt will remain in place until the earlier of:
• An announcement made by the issuer; or
• Market open on Wednesday, 18 March 2020.

"We are in discussions with the Governement" Capital injection?

[peat]

the ultimate iiliquidity... a closed market. and could stay shut till Wed.
glad I'm out

[Lego_Man]

It'll be an interest free loan from the government. They want to stay halted until Wednesday so the SP doesn't get cremated pre-Robertson's bazooka.

RIP capitalism.

[trader_jackson]

They want to stay halted to try figure out some positive spins and attempt to prevent a dramatic fall in share price so much so they'd breach covenants etc

[Beagle]

On its long haul network Air New Zealand will be reducing its capacity by 85 percent over the coming months

My estimate of retailed long haul capacity was 15%. They are talking with the Govt because technically they are already insolvent, current liabilities exceed current assets.

What a mess. At least they did the right thing an issued a trading halt. Feel sorry for THL, SKC and AIA shareholders today though....they're up for a savage belting.

[Snow Leopard]

...They are talking with the Govt because technically they are already insolvent, current liabilities exceed current assets....

NOT the definition of insolvency. An accountant should know that. :p

[blackcap]

NOT the definition of insolvency. An accountant should know that. :p

Although when current liabilities exceed current assets, questions about going concern are raised by auditors...

[Tomtom]

I'm quite surprised, there have only been flight restrictions in place for a week or two to most destinations?

[Snow Leopard]

Although when current liabilities exceed current assets, questions about going concern are raised by auditors...

Also wrong.

Really you guys have a lot to learn.

But I am sure we can all agree currently world aviation is deep in it. :(

[blackcap]

Also wrong.

Really you guys have a lot to learn.

But I am sure we can all agree currently world aviation is deep in it. :(

I guess my accountancy degree taught some inaccuracies then?

[Toddy]

Where is the Government going to get all of the money from to hand around.

[Blue Skies]

On a more positive note, Foran now seems like a brilliant appointment to get AIR through this temporary crisis & obviously they are not delaying in going hard out to slash costs while their revenue stream dwindles.
Previous CEO's might have been slower to respond.

Also aware both China & US are now frantically competing against each other to be first to develop a vaccine in record time, such are the high stakes, & the experts worst case scenario of up to 18 months is looking like being too pessimistic with each passing week. ( latest, Trump currently trying to buy exclusive rights for the US to a German Companies well advanced vaccine ).
This crisis could be over more quickly than we think, and once the virus is dealt with, travel will recover quickly.
Everyone will need a damm good holiday :)

[Beagle]

Board and CEO taking a paycut of 15% is not good enough.
Earn over $500K - 50% pay cut
Earn over $300K - 33% pay cut
Earn over $130K - 20% pay cut
All others, except those earning less than $50K - 15% paycut.
Never waste a good recession.
Those that retain their jobs after the redundancies should be pleased they have a job.

These sort of cuts will never happen because although the vast majority of people who work for AIR are very nice people, they don't understand the economic reality of the situation and there is an expectation the Govt and other shareholders will simply cough up to support their comfortable lifestyles.

[Snow Leopard]

I guess my accountancy degree taught some inaccuracies then?

Either that or you were not paying attention :confused:

[blackcap]

Either that or you were not paying attention :confused:

Haha quite possibly the latter. Although if you cannot service your debts you are in trouble. If current assets < current liabilities it can often spell danger for companies. Especially in times when they cannot get other forms of financing. I always look to the balance sheet and check the current ration and if less than 1, I have questions about going concern. Then I look deeper and see why this is so, and make sure that they can get finance to cover upcoming commitments. The accounts receivable, although a current asset, can also be tainted and not always relied upon. More so in turbulent times.

[Snow Leopard]

The definition of an airline is essentially 'current assets less than current liabilities' EVEN Singapore Airlines :eek2:.

Cashflow is King for most businesses it is a question of how much of a time buffer they have when the s*** hits the turbo-fan.

[biker]

Board and CEO taking a paycut of 15% is not good enough.
Earn over $500K - 50% pay cut
Earn over $300K - 33% pay cut
Earn over $130K - 20% pay cut
All others, except those earning less than $50K - 15% paycut.
Never waste a good recession.
Those that retain their jobs after the redundancies should be pleased they have a job.

These sort of cuts will never happen because although the vast majority of people who work for AIR are very nice people, they don't understand the economic reality of the situation and there is an expectation the Govt and other shareholders will simply cough up to support their comfortable lifestyles.

On that basis then, there is obviously an expectation from shareholders and the corporate machine that employees will slash their hard earned incomes to support their comfortable dividends.
While shareholders are very nice people, they don’t understand the functional reality that excellence and expertise is required to make airlines operable, profitable and above all, safe.
Slash the salaries and watch the quality of service, operation and safety record evaporate.
Be careful what you wish for Beagle

[Independent Observer AUNZ]

Wednesday open is going to be a bloodbath, surely? Something drastic has to happen now. Foran about to either earn or lose his stripes on this one.

[Mr Slothbear]

On that basis then, there is obviously an expectation from shareholders and the corporate machine that employees will slash their hard earned incomes to support their comfortable dividends.
While shareholders are very nice people, they don’t understand the functional reality that excellence and expertise is required to make airlines operable, profitable and above all, safe.
Slash the salaries and watch the quality of service, operation and safety record evaporate.
Be careful what you wish for Beagle


and where are they going to go if they don’t like having their paycut? Another airline?

this is going to be happening world wide.

better they get a paycut than have no job.

and somehow I doubt going from 300k to 250k is going to impact how hard they work or someones ability to land a plane.

there is no question the dividend will be cut heavily or entirely

[Independent Observer AUNZ]

there is no question the dividend will be cut heavily or entirely

There shouldn't have even been one last week. Absolute folly.

[Sideshow Bob]

There shouldn't have even been one last week. Absolute folly.

Govt banked approx. $70m out of them last week in dividends (not to mention tax). Should give it back to them as an interest-free loan.

[BlackPeter]

On that basis then, there is obviously an expectation from shareholders and the corporate machine that employees will slash their hard earned incomes to support their comfortable dividends.
While shareholders are very nice people, they don’t understand the functional reality that excellence and expertise is required to make airlines operable, profitable and above all, safe.
Slash the salaries and watch the quality of service, operation and safety record evaporate.
Be careful what you wish for Beagle

Last time I remember a very unreasonable bunch of employees fighting their struggling airline was with the strikes around Ansett. Staff succeeded in bringing their company to its knees. Ansett got broke and everybody lost their job.

I know one of the pilots working for Ansett. Enormous sense of entitlement - and he did continue to strike to the very end. He never ever managed to get another job in the airline industry and I understand he is now operating harvesting machines.

Lets hope the good staff at Air NZ are more reasonable - not sure our farmers need currently so many more machine operators :), though there might be some vacancies for picking apples and digging potatoes. Not sure, though whether farmers pay 6 digit salaries.

[bottomfeeder]

Except no one will have money to pay for a holiday after all this is over. So it will take airlines a lot longer to recover.

[Independent Observer AUNZ]

not sure our farmers need currently so many more machine operators :), though there might be some vacancies for picking apples and digging potatoes. Not sure, though whether farmers pay 6 digit salaries.

Depends on how well they meet their KPIs (Potatoes per hour).

[Bobdn]

I'm down a depressing amount of money during this sell off *sigh* However, fortunately I sold out of my 44,000 Air shares not long after the strike action of December 2018. It just really freaked me out at the time and rattled me out of my position. At that point I realized what a fragile position airlines are in. Everything needs to go perfectly 110 per cent of the time just to have an outside chance of keeping the show on the road. If it wasn't this crisis, I'm guessing it would have been another.

https://www.odt.co.nz/business/air-nz-engineers-strike-just-christmas

Weirdly, I feel grateful for the Union action for giving me a dose of reality when I needed it.

[Jaa]

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

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

[macduffy]

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

[Beagle]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12317117

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

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

Revenue $1000m

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

Net Forecast Loss - $1,585m

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

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

Will await the Govt's support proposal with interest.

[BlackPeter]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12317117

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

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

Revenue $1000m

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

Net Forecast Loss - $1,585m

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

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

Will await the Govt's support proposal with interest.

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

[Mr Slothbear]

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


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

[Beagle]

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

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

[Jaa]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12317117

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

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

Revenue $1000m

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

Net Forecast Loss - $1,585m

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

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

Will await the Govt's support proposal with interest.

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

[James108]

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

[Jaa]

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

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

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

[Dassets]

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

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

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

[Blue Skies]

Couple of people I know have been allowed to postpone their AIR travel to much later in the year, but they haven't got a refund from their tickets. Don't think there's much refunding going on.

[Dassets]

Couple of people I know have been allowed to postpone their AIR travel to much later in the year, but they haven't got a refund from their tickets. Don't think there's much refunding going on.

Those are the non-refundable fares

[Jaa]

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

This is too pessimistic, lots of people in the last month scrambling to get home. So they will be ok till today pretty much. Also most existing bookings can only reschedule so Air NZ keeps the cash.

Renouncable rights issue the logical path forward with the government underwriting the issue and subsidising some international routes to keep commerce flowing. Who here would invest in a 1:2 rights issue at $1?

That would raise $561m which would plug my modified version of Beagle's loss for 1 year.

[Beagle]

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

See note 9 in their financial statements regarding depreciation.
In brief Depreciation is calculated to write down the cost of assets to an estimated residual value over their economic lives, examples provided....airframes 18 years...engines 6-15 years...
I have already reduced fuel cost by 85%, do you think they can make the remaining flights on fumes :)

Its clear this is a very serious existential threat to the company. It won't take long to wipe out $2b in shareholder's equity unless a really radical approach is taken.

[Beagle]

This is too pessimistic, lots of people in the last month scrambling to get home. So they will be ok till today pretty much. Also most existing bookings can only reschedule so Air NZ keeps the cash.

Renouncable rights issue the logical path forward with the government underwriting the issue and subsidising some international routes to keep commerce flowing. Who here would invest in a 1:2 rights issue at $1?

That would raise $561m which would plug my modified version of Beagle's loss for 1 year.

Not me, I like my own back of the envelope calculation and I genuinely think their loss will be higher than $5m per day once they work their way through pre existing bookings which won't take long.

Then there's the question of how long these travel restrictions will remain in force ? https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12316929

[kiwico]

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

They can't yet as their normal process seems to be to make an announcement that an announcement will be made, and we haven't had the first announcement yet.

[Beagle]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12317079

Oh dear, its just goes from bad to worse. AIR having to refund heaps of the (as at 31/12/2019 $1,380m) in prepaid tickets because of international flight cancellations.
AIR now in a desperate battle for their own survival.

Shareholders will be hoping they are still able to pay out the 11 cent dividend totalling ~ $124m on 25 March. Surely this should be cancelled for the sake of helping the chances of the airlines survival ?

1:1 rights issue coming at $1 with Govt underwriting the issue ? Get in now before the public realise the full extent of how dire the situation is. No point in waiting till the share price is 25 cents or the airline goes broke....or is there ?

[Balance]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12317079

Oh dear, its just goes from bad to worse. AIR having to refund heaps of the (as at 31/12/2019 $1,380m) in prepaid tickets because of international flight cancellations.
AIR now in a desperate battle for their own survival.

Shareholders will be hoping they are still able to pay out the 11 cent dividend totalling ~ $124m on 25 March. Surely this should be cancelled for the sake of helping the chances of the airlines survival ?

1:1 rights issue coming at $1 with Govt underwriting the issue ? Get in now before the public realise the full extent of how dire the situation is. No point in waiting till the share price is 25 cents or the airline goes broke....or is there ?

It has gone ex-dividend so I would have thought that AIR will be legally required to pay the dividend as those who bought cum-dividend are legally entitled to getting the dividend.

But does not really matter, does it as $124m is neither here nor there when $500m or more capital will be required to stabilize the balance sheet in the short term.

One option is for the NZ government to provide $500m to $750m one year loan via a convertible note issue with condition attached of a pro-rata rights issue to be made on maturity if conditions have not returned to normal.

Bet you that's being considered - hence, the extended trading halt.

Probably one of the safest airline to invest in with NZ government ownership.

[Dassets]

They can't pay the dividend if they are insolvent. I remember a company years ago, maybe Fortex/CBL, that had the same issue.

[Balance]

They can't pay the dividend if they are insolvent. I remember a company years ago, maybe Fortex, that had the same issue.

Air NZ is not insolvent - yet! And NZ Government will make sure it stays solvent given that it is the government's inconsistent response to the virus which has caused the airline to get to this point.

[Lego_Man]

Qantas was only down 5% today. Governments must have something in the pipeline.

[Dassets]

International Consolidated, British Airways owner, is down 28% in early trading

[Balance]

Reality is that the airline industry is going to require massive co-ordinated rescue packages from governments around the world.

[peat]

Reality is that the airline industry is going to require massive co-ordinated rescue packages from governments around the world.

there should be some sort of international law that a govt can only rescue its flag-carrier

[ratkin]

Reality is that the airline industry is going to require massive co-ordinated rescue packages from governments around the world.

Only fair as it is the governments preventing them from carrying out their trade

[Raz]

Note from the current EU discussion on travel bands, most airlines in the world expect to be bankrupt by May.

[Independent Observer AUNZ]

Note from the current EU discussion on travel bands, most airlines in the world expect to be bankrupt by May.

:scared:


Air NZ is not insolvent - yet! And NZ Government will make sure it stays solvent given that it is the government's inconsistent response to the virus which has caused the airline to get to this point.

Do we want Air NZ dragging the Govt down with it? I know there aren't many options, but wow this is ugly. I can only see a scenario where the shareholders end up taking the entire hit - the thing goes bankrupt and the govt picks up the assets and starts again as "Air Aoteroa". I genuinely hope not, but not sure there is another way clear of this without many billions of dollars going down the drain.

[bull....]

:scared:



Do we want Air NZ dragging the Govt down with it? I know there aren't many options, but wow this is ugly. I can only see a scenario where the shareholders end up taking the entire hit - the thing goes bankrupt and the govt picks up the assets and starts again as "Air Aoteroa". I genuinely hope not, but not sure there is another way clear of this without many billions of dollars going down the drain.

shareholders will need to lose all first before public bailout

[Balance]

:scared:



Do we want Air NZ dragging the Govt down with it? I know there aren't many options, but wow this is ugly. I can only see a scenario where the shareholders end up taking the entire hit - the thing goes bankrupt and the govt picks up the assets and starts again as "Air Aoteroa". I genuinely hope not, but not sure there is another way clear of this without many billions of dollars going down the drain.

Don't exaggerate - Air NZ only needs $500m to $750m. South Canterbury Finance cost NZ $1.4 billion.

[Balance]

shareholders will need to lose all first before public bailout


Suspect we will see a stabilization package from government this afternoon for Air NZ - short term loan. Hence, the extended trading halt.

[Beagle]

The cost base of their business model is far too high and the sense of entitlement of some of their higher paid staff is wrong, (notwithstanding those employees that I know are very nice people).

The proposed amended business model simply won't work, its conceptually flawed.

I think a full reset of their business model and cost structure is needed and the airline should be nationalised. Perhaps Shane Jones could put his regional lolly scramble money to proper use....

I think you are right Balance but that's just going to delay the inevitable.

[Dassets]

Directors have to sign a solvency cert to pay a div. That cert requires them to say they can pay debts as they fall due in the next 12 months. No div.

[bull....]

Directors have to sign a solvency cert to pay a div. That cert requires them to say they can pay debts as they fall due in the next 12 months. No div.

yep they need to cancel dividend , if they were in aus they would face a class action for paying one if there technically insolvent now

[causecelebre]

AIR cuts 80% Tasman routes

[Beagle]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12317350 Looks very grim. Grant Bradley now admitting they are in a battle for their very survival.

[bull....]

shareholders should lose first before public bail out or do a massive rights issue

[Biscuit]

shareholders should lose first before public bail out or do a massive rights issue

NZ public are the principal shareholder aren't they?

[Beagle]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12317372

[Balance]

Why the clamour to put Air NZ on the hock? It is an excellent airline going through a short term crisis (not of its making) and simply needs some breathing space.

Heck, if NZ can bail out South Canterbury Finance depositors to the tune of $1.4 billion and keep throwing & increasing money by the tens of millions of dollars on re-opening Pike River to appease a few families, we can jolly well lend Air NZ $1 billion.

[Beagle]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12317444

Govt still in talks with AIR. I expect the trading halt to be extended until talks are concluded.

[Balance]

Doomsday merchants having a bad day.

[mcdongle]

Govt will need every vote in September

[Jaa]

$600m aviation support package announced. Edit this is for airports?!? Still talking to Air NZ.

[Blue Skies]

Why the clamour to put Air NZ on the hock? It is an excellent airline going through a short term crisis (not of its making) and simply needs some breathing space.

Heck, if NZ can bail out South Canterbury Finance depositors to the tune of $1.4 billion and keep throwing & increasing money by the tens of millions of dollars on re-opening Pike River to appease a few families, we can jolly well lend Air NZ $1 billion.


Great post, well said.

Reminds me of the GM bailout in the US, within a few years back in profit & paid back the loan with interest.

[dobby41]

$600m aviation support package announced.

Doesn't cover AIR though - for the rest of the space.

[Jaa]

Yup, the last companies I would help out would be the airports!

[Chinesekiwi]

Dividend - is up in the air.

Undecided - legal options will decide it, morally should not be paid but that is not relevant.

This is from Greg Foran just now.

[Balance]

Dividend - is up in the air.

Undecided - legal options will decide it, morally should not be paid but that is not relevant.

This is from Greg Foran just now.

Legally, I would be very peeved off if one had bought the stock cum-dividend. Means one am out of pocket vs those who bought ex-dividend the next day for eg.

Pay out first and then, if required, get back via a convertible or capital raising.

[Jaa]

Legally, I would be very peeved off if one had bought the stock cum-dividend. Means one am out of pocket vs those who bought ex-dividend the next day for eg.

Pay out first and then, if required, get back via a convertible or capital raising.

I agree balance. You either have rule of law or you don't. The dividend should be paid. Deeply discounted rights issue and government support package will keep the company airborne.

Directors could be personally liable either way and I guess they deserve to be. Should have suspended it.

[Beagle]

Legally, I would be very peeved off if one had bought the stock cum-dividend. Means one am out of pocket vs those who bought ex-dividend the next day for eg.

Pay out first and then, if required, get back via a convertible or capital raising.

Yeap, I think you would have a strong case if you bought the shares within a very tight timeframe before it went ex divvy, the tighter the timeframe the stronger you case BUT litigation is heinously expensive so unless you bought a massive amount of shares... the only real winner will be your lawyer.

I have never heard of a dividend being declared, it trading ex dividend and then being cancelled by the directors. I guess there's a first time for everything ? I guess they could get out of it on solvency concerns ?

Its probably academic anyway as I suspect a Govt underwritten, large and deeply discounted rights issue is imminent so they'll want the money back one way or the other.

My pick, is it stays in a trading halt and comes out only when the 1:1 Govt underwritten rights issue is announced at $1 share. That would raise about $1,100m and might see them through this thing, perhaps in tandem with a Govt loan further down the track if necessary.

[peat]

a dividend is a bit like an inheritance isnt it?
you're not entitled to it until you get it.
shorters who have had it deducted on account (this can occur on ex date) should get it refunded if it is cancelled
and vice versa ,
I reckon anyway.
Of course they should pull it if the period they need to look forward (to determine their ability to meet committements) is more than a week or two. If its 12 months then not a shadow of a doubt it should be pulled. UNLESS of course they already have a committment by the state to cover their arse in which case they could continue to pay it - they may know a lot more than we do.

[Beagle]

QAN down from $7.46 to $2.86 in 2020 (those figures are not typo's), that a whopping 62% fall in 2.5 months !
If AIR falls by the same percentage when trading resumes that would have it at just $1.17 !
1:1 Cash Issue at $1 underwritten by the Govt raising about $1,100m...the dog barked it first. That might get them through to Christmas and then maybe a loan from the Govt if more time is needed. Don't think I will partake...I estimate all that $1,100m capital will be eaten up in 2020.

[Benny1]

Greg was rather insistent today that this Wasn't the same as last time and would not involve another Govt bail out. Instead they have been talking to the banks..
No 777's flying in April. Wide body fleet to consist of 7 787's with a couple of spares.
No 777 to be parked at AKL if at all possible.. AIAL too expensive... They will use CHC as well as Ohakea and possibly Whenuapai.

[stoploss]

Greg was rather insistent today that this Wasn't the same as last time and would not involve another Govt bail out. Instead they have been talking to the banks..
No 777's flying in April. Wide body fleet to consist of 7 787's with a couple of spares.
No 777 to be parked at AKL if at all possible.. AIAL too expensive... They will use CHC as well as Ohakea and possibly Whenuapai.

If he tipped in $ 50 mil of his own money when/if they have a cash issue be a good signal .....
DISC: Short

[Chinesekiwi]

Greg was rather insistent today that this Wasn't the same as last time and would not involve another Govt bail out. Instead they have been talking to the banks..
No 777's flying in April. Wide body fleet to consist of 7 787's with a couple of spares.
No 777 to be parked at AKL if at all possible.. AIAL too expensive... They will use CHC as well as Ohakea and possibly Whenuapai.


Hey Benny - I am pretty sure he said both options are essentially in play.

For sure he did say banks and lines of credit and I am pretty sure he said the govt. will play a part also, not a bail our per se - but money shall be forthcoming in some form.

[Balance]

Hey Benny - I am pretty sure he said both options are essentially in play.

For sure he did say banks and lines of credit and I am pretty sure he said the govt. will play a part also, not a bail our per se - but money shall be forthcoming in some form.

Jacinda screwed up big time in handling this crisis and in the process, is screwing up the NZ economy and will send many companies to the wall.

Air NZ is particularly vulnerable due to its high fixed operating costs and we will all pay the price if Air NZ is not assisted through this (hopefully short term) crisis.

Government will come to the party - just a question of how and how much.

[Beagle]

Greg was rather insistent today that this Wasn't the same as last time and would not involve another Govt bail out. Instead they have been talking to the banks..
No 777's flying in April. Wide body fleet to consist of 7 787's with a couple of spares.
No 777 to be parked at AKL if at all possible.. AIAL too expensive... They will use CHC as well as Ohakea and possibly Whenuapai.

By all accounts he's made a good first impression but he and the board need to set a much more serious tone to their pay cuts. 15% pay cut when revenue is projected to fall from $6b to $1b, an 83% reduction...I am underwhelmed and it does not set the right tone for the battle ahead. He and the board need to signal the company is on an "economic war footing" A 50% pay cut would send the appropriate message in my view, (not suggesting you or others can afford a pay cut that severe but it is essential the right message is sent).

[winner69]

Trading halt for a few more days

If AIR go broke I suppose those dastardly shorters make a killing?

[Beagle]

No difference between people who take a short or a long position. Yes.
Trading halt extended is code for Roberston saying - Oh my goodness your revised business plan will lose nearly $2 billion a year. This does not work. Go away and start with a clean sheet of paper and do a much more thorough job of cutting costs.

[Balance]

No difference between people who take a short or a long position. Yes.
Trading halt extended is code for Roberston saying - Oh my goodness your revised business plan will lose nearly $2 billion a year. This does not work. Go away and start with a clean sheet of paper and do a much more thorough job of cutting costs.

Who blinks first?

I would say Jacinda & her 'compassionate & caring' government - it's election year & it's not her money.

Note that she has just thrown another $15m for the bottomless pit Pike River Recovery?

https://www.stuff.co.nz/national/120338629/government-approves-another-15-million-for-pike-river-recovery

[Beagle]

Who blinks first?

I would say Jacinda & her 'compassionate & caring' government - it's election year & it's not her money.

Note that she has just thrown another $15m for the bottomless pit Pike River Recovery?

https://www.stuff.co.nz/national/120338629/government-approves-another-15-million-for-pike-river-recovery

Grant Robertson is the AIR N.Z. Govt appointed representative as you probably know. Of all the crowd in this labour Govt he probably has his head screwed on the best.
It will become obvious a major rights issue is the best way forward but it might take some time for him to get his head around it and work out the optimum methodology behind pricing. Yet another extension to the trading halt so all this can be ironed out first, wouldn't surprise me.

[bull....]

well boeing is on the verge of collapse requesting billions in aid

[dobby41]

Jacinda screwed up big time in handling this crisis and in the process, is screwing up the NZ economy and will send many companies to the wall.


More suited to the virus thread but how would you have handled it?
Seems we have progressed as things changed and the end becomes more apparent rather than knee jerk reaction but I gather you see it differently.

[Balance]

More suited to the virus thread but how would you have handled it?
Seems we have progressed as things changed and the end becomes more apparent rather than knee jerk reaction but I gather you see it differently.

Should have implemented border controls on all the other countries when they started having virus outbreak, and/or follow the HK, Taiwan and South Korean model.

Instead she followed US & Oz model - now it's all a bit too late but thank goodness we have the stimulus package to cushion the economic fall. Not so for Air NZ.

[dobby41]

Should have implemented border controls on all the other countries when they started having virus outbreak, and/or follow the HK, Taiwan and South Korean model.

Instead she followed US & Oz model - now it's all a bit too late but thank goodness we have the stimulus package to cushion the economic fall. Not so for Air NZ.

Would have needed the stimulus package whichever way you go.
Interesting how much criticism they got for the control that they did put in place.
AIR will get sorted seperately once they work out what it will really need.

You weren't the old fella I heard on the radio this morning (talkback) with exactly the same view?

[silverblizzard888]

When history repeats, you'd think companies had a more soundproof plan than less than 12 months finances before bankruptcy. A lot of quality will be undone during this halt which of course includes the firing of 30% of their staff (some of extraordinary quality). Everyone seems to be predicting this to fall below a dollar on friday and all eager to be buying for a strong recovery. Given its majority owned by government it will likely be bailout out, but that rebuild to those peaks of $3 will take at least couple years to get back.

[macduffy]

Organising an equity capital raising takes more than a few days. I still expect something, underwritten by the big shareholder, to be announced before the weekend. I don't hold.

[Beagle]

Organising an equity capital raising takes more than a few days. I still expect something, underwritten by the big shareholder, to be announced before the weekend. I don't hold.

Makes me wonder why they didn't extend the trading halt until next Monday and give themselves the weekend to finalise all the details. Maybe two days is the maximum trading halt allowable, (anyone know for sure ?), and if you need longer you have to keep issuing extensions. My money is on another extension to the halt to be announced Friday morning and a capital raise announced to the market on Monday next week. It could even take longer for the Govt to approve this if they don't like the forecasts and information contained in AIR's revised business plan. "Go back to the drawing board guys and come up with a plan that's operationally more feasible".

Virgin just announced the grounding of its entire international fleet.

[Bobdn]

I do think it's interesting that for decades most of us believed that airlines are a terrible investment and that they mostly end up going bankrupt or in need of a massive bail out resulting in the almost complete destruction of shareholder wealth.

And then we, including me and Warren Buffet, started thinking that maybe things are different now. I don't things are different.

https://www.forbes.com/sites/greatspeculations/2020/03/09/warren-buffett-bets-big-on-airlines/#7635599d2653

[Beagle]

I do think it's interesting that for decades most of us understood that airlines are always, without exception, a terrible investment and that they always, without exception, end up going bankrupt or in need of a massive bail out resulting in the almost complete destruction of shareholder wealth.

And then we, including me and Warren Buffet, started thinking that maybe things are different now. Nah, no different.

https://www.forbes.com/sites/greatspeculations/2020/03/09/warren-buffett-bets-big-on-airlines/#7635599d2653

This is its a one way bet for the Government, they cannot lose. I estimate between PAYE on wages and salaries, GST on domestic flights, tax and the dividends each year the Government nets well north of $500m per annum from AIR. If once every decade or two they have to tip in a billion or two its no big deal, they are so far ahead it doesn't matter. Joe Bloggs investor on the other hand, faces quite a different situation.

[Biscuit]

I do think it's interesting that for decades most of us believed that airlines are a terrible investment ......

They are a great cyclical investment. Get in early and then get out early.

[peat]

I do think it's interesting that for decades most of us believed that airlines are a terrible investment and that they mostly end up going bankrupt or in need of a massive bail out resulting in the almost complete destruction of shareholder wealth.

And then we, including me and Warren Buffet, started thinking that maybe things are different now. I don't things are different.

https://www.forbes.com/sites/greatspeculations/2020/03/09/warren-buffett-bets-big-on-airlines/#7635599d2653


yes indeed Bobdn, I definitely questioned this change of heart and never got duped into placing AIR in my l/t portfolio ( I may have traded it a couple of times)
Nothing really ever changes in the world of finance market because it is based on human psychology.
And , as I have said before I saw the P+L's for all the AIR business units when I worked there for 10 years. Such thin lines between profit and loss.....

[trackers]

Makes me wonder why they didn't extend the trading halt until next Monday and give themselves the weekend to finalise all the details. Maybe two days is the maximum trading halt allowable, (anyone know for sure ?), and if you need longer you have to keep issuing extensions. My money is on another extension to the halt to be announced Friday morning and a capital raise announced to the market on Monday next week. It could even take longer for the Govt to approve this if they don't like the forecasts and information contained in AIR's revised business plan. "Go back to the drawing board guys and come up with a plan that's operationally more feasible".

Virgin just announced the grounding of its entire international fleet.

Can't lose money if you're not trading...good ploy but doubt it would work.

I believe over 3 days and shares move from trading halt, to full suspension, and that has some ramifications and requires a please explain...from memory.

[winner69]

Can't lose money if you're not trading...good ploy but doubt it would work.

I believe over 3 days and shares move from trading halt, to full suspension, and that has some ramifications and requires a please explain...from memory.

That’s right

Possibly AIR shares will be suspended from trading for quite a while

Hope any govt bailout is highly dilutionery to those holding.....that way the taxpayer has a better chance of getting a decent return for being noble enough to save them again.

[Tomtom]

well boeing is on the verge of collapse requesting billions in aid The risk of a Boeing collapse is small for AirNZ. The US Government is heavily reliant upon Boeing.

Like many companies in this sector Boeing has been the victim of financial engineering by it's executive team which left the company without adequate reserves (FT article from August, 2019 (https://www.ft.com/content/f3e640ee-b537-11e9-8cb2-799a3a8cf37b).) It seems to have become a regular feature of aviation for governments to offer support at the end of business cycles so aviation businesses purposefully operate (https://www.bloomberg.com/news/articles/2020-03-16/u-s-airlines-spent-96-of-free-cash-flow-on-buybacks-chart) to exploit the support. I'm not sure exactly why we do this and yet display such little concern for supporting other cyclical industries that are instead forced to hold appropriate reserves.

[winner69]

This is its a one way bet for the Government, they cannot lose. I estimate between PAYE on wages and salaries, GST on domestic flights, tax and the dividends each year the Government nets well north of $500m per annum from AIR. If once every decade or two they have to tip in a billion or two its no big deal, they are so far ahead it doesn't matter. Joe Bloggs investor on the other hand, faces quite a different situation.

That sort of logic sort of says the likes of Fletcher Building deserved to be bailed out every now and again

[skid]

Should have implemented border controls on all the other countries when they started having virus outbreak, and/or follow the HK, Taiwan and South Korean model.

Instead she followed US & Oz model - now it's all a bit too late but thank goodness we have the stimulus package to cushion the economic fall. Not so for Air NZ.

we get it....you dont like Jacinda or labor.................but it is not to late...It may prove to be....but as we speak,all cases
have been ''imports'' and if they are contained we could still avoid scenarios like Europe and the States....so lets not get carried away

[Balance]

we get it....you dont like Jacinda or labor.................but it is not to late...It may prove to be....but as we speak,all cases
have been ''imports'' and if they are contained we could still avoid scenarios like Europe and the States....so lets not get carried away

If we avoid scenarios like Europe and the States, would only be our good luck!

Nothing to do with good proactive and progressive management of the unfolding virus situation by this incompetent government over the last 2 months!

A lot written about Air NZ needing a second bailout etc etc.

I was there when Air NZ needed the bailout way back in 2001 - the fault then was 100% Air NZ as management & board stuffed up paying mega dollars using debt for Ansett Australia.

This time round, anyone will accept that Air NZ has been a well managed successful airline and in common with most of the other airlines around the world, has unfortunately been caught up in circumstances NOT of its making.

https://www.stuff.co.nz/national/health/coronavirus/120363138/air-new-zealand-trading-halt-extended-government-cash-injection-expected-analysts-say

As for billions of dollars required for bail-out - good example of why Air NZ should be on trading halt to stop the wild and imo, inaccurate alarmist speculations.

[winner69]

I reckon the government should be generous and give shareholders 20 cents and take over AIR lock stop and barrel.

Even 20 cents a share is generous ...better than nothing

Stop airlines like AIR running the way they do knowing that every decade or so they’ll get a bailout.

[bull....]

air will be virtually idle for the rest of the year easy , so i agree govt should just take them over at 1c

[macduffy]

What a lot of nonsense is being written about AIR! Would we prefer the alternative - no airline in NZ and back to road, rail and sea transport until some brave soul takes a risk on trying again?
;)

[Beagle]

If we avoid scenarios like Europe and the States, would only be our good luck!

Nothing to do with good proactive and progressive management of the unfolding virus situation by this incompetent government over the last 2 months!

A lot written about Air NZ needing a second bailout etc etc.

I was there when Air NZ needed the bailout way back in 2001 - the fault then was 100% Air NZ as management & board stuffed up paying mega dollars using debt for Ansett Australia.

This time round, anyone will accept that Air NZ has been a well managed successful airline and in common with most of the other airlines around the world, has unfortunately been caught up in circumstances NOT of its making.

https://www.stuff.co.nz/national/health/coronavirus/120363138/air-new-zealand-trading-halt-extended-government-cash-injection-expected-analysts-say

As for billions of dollars required for bail-out - good example of why Air NZ should be on trading halt to stop the wild and imo, inaccurate alarmist speculations.

Not alarmist at all. Quick back of the envelope calculation the other day showed me they will be losing $5m+ a day and are un-investable even if there's a massive capital raise. The proposed new structure simply doesn't work. Its complete madness they are still talking about just "up to 30% job losses" when shortly they will only be making around 10-15% of their normal revenue.
Analyst Marcus Curley has impressed me with his searching questions whenever I have tuned into investor briefings that AIR run after each result. His suggestion they are burning through about $211m a month from April looks about right to me.

If professional analysts are suggesting the bailout needs to be $2-3b and they're burning $211m a month and I have come up with very similar figures based on my knowledge of the airline and its operating costs, then maybe the sort of numbers being talked about are simply reality, not alarmist at all.


A bailout would need to include staff wage subsidies because Air New Zealand could not afford to make mass layoffs due to costly redundancy clauses many workers would have in their contracts, she said. This is the real problem, the cost of redundancies. I am sorry but the culture on entitlement must be broken if the airline is to survive.

A full reset of the cost structure of the airline is desperately required. The only way to effect this is to let the airline collapse and nationalise the airline.

[skid]

not sure who is to blame...the government or the airline(s) ...or both...........but from what Im reading (and hearing) passengers are not getting well informed about this problem...............toursts are still landing ,grabbing tourist brochures ,and heading off knowing none the better.... they really need to fix that

[Beagle]

Climate of fear https://www.stuff.co.nz/national/health/coronavirus/120331624/coronavirus-air-nzs-secrecy-over-passengers-sickness-slammed

[skid]

Climate of fear https://www.stuff.co.nz/national/health/coronavirus/120331624/coronavirus-air-nzs-secrecy-over-passengers-sickness-slammed

They dont seem to get the message that a bit of reassurance helps with panic....not just letting the mind create senarios.....everyone wants to feel their airline staff are being straight with them.....goes for doctors and the government as well......I hope they remedy this

[stoploss]

Qantas just stood down 2/3 of its workforce and scrapped all international flights late march till at least end of May ( source Bloomberg)

[silverblizzard888]

The year is 2023, Jetstar is the main airline, that tangy orange flare now the kiwi pride of aviation and the now 100% owned Government run Air New Zealand has slowly drifted from its premium ideals and Air NZ now prides itself as the communities airline, flying on minimum margins across large cities and townships. Grant Robertson has assured the people never again will expensive flights happen under his watch and that it will be as well run and funded as kiwi rail!

[Beagle]

https://www.msn.com/en-nz/news/world/qantas-jetstar-to-stand-down-20000-staff-halt-international-travel/ar-BB11nKJN?ocid=spartandhp

Here's the link. AIR are just "playing with it" thinking they can keep 70% or more of their workforce employed when nearly 90% of revenue has disappeared.
Grant Robertson needs to tell Greg Foran he's not running a social welfare department.

[Beagle]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12317978 Rob Fyfe - AIR's fixed costs $450m a month !

[Balance]

https://www.msn.com/en-nz/news/world/qantas-jetstar-to-stand-down-20000-staff-halt-international-travel/ar-BB11nKJN?ocid=spartandhp

Here's the link. AIR are just "playing with it" thinking they can keep 70% or more of their workforce employed when nearly 90% of revenue has disappeared.
Grant Robertson needs to tell Greg Foran he's not running a social welfare department.

Wrong message! Grant IS running a social welfare department!

[Beagle]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12318016

Funding deal within a week. "Like any loan it will need to be repaid" Good luck with managing that !
I think they are in complete denial about the seriousness of the situation, its probably longevity and the level of losses the airline is likely to face in the foreseeable future.
Cuts to costs don't go nearly far enough yet and if the support is a loan then the equity that's currently in the company is almost certainly going to be reduced at an extremely fast rate of knots.

[Balance]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12318016

Funding deal within a week. "Like any loan it will need to be repaid" Good luck with managing that !
I think they are in complete denial about the seriousness of the situation, its probably longevity and the level of losses the airline is likely to face in the foreseeable future.
Cuts to costs don't go nearly far enough yet and if the support is a loan then the equity that's currently in the company is almost certainly going to be reduced at an extremely fast rate of knots.

Realistically, will have to be voluntary stand down by most AIR international staff on unpaid leave until such time as when they are needed again.

Let's see what happens.

[bull....]

qantas standing down 2/3 of workforce is a sample of whats to come for the whole travel and related industries

[bull....]

NZD collapsing , that must surely be the nail in the coffin , travel costs be skyrocketing

[Beagle]

https://www.asx.com.au/asxpdf/20200319/pdf/44g63pr22trj3x.pdf Good example for AIR to follow.

Key points. CEO, Board and senior management all working without any pay whatsoever until at least 30 June. All bonus's cancelled. (Its payback time for the troughers at AIR too and if they don't like it they know where the exit door is).
2/3rds of staff to be stood down.
Dividend deferred from 9 April to 1 September.

Greg Foran really needs to lift his game to a whole new level and stop tinkering around the edges.

[winner69]

US airlines need zillions now

From an article I read about how airlines have made zillions in the last decade

Suppose this applies to AIR as well

The first question—where’s the money?—is also not so complicated. Over the past decade, according to Bloomberg, U.S. airlines spent 96 percent of their cash profits on stock buybacks to enrich investors and their own executives, whose positions often come with stock holdings.*

[trackers]

https://www.asx.com.au/asxpdf/20200319/pdf/44g63pr22trj3x.pdf Good example for AIR to follow.

Key points. CEO, Board and senior management all working without any pay whatsoever until at least 30 June. All bonus's cancelled. (Its payback time for the troughers at AIR too and if they don't like it they know where the exit door is).
2/3rds of staff to be stood down.
Dividend deferred from 9 April to 1 September.

Greg Foran really needs to lift his game to a whole new level and stop tinkering around the edges.

Well I think AIR's hand will be forced somewhat, they simply will have to let go of a lot of chiefs to afford the indians doing the work.... Foran is extremely new so shouldn't be entrenched in the executive 'pat each other on the pat and protect each other' circle that goes on in so many of these sorts of places... maybe?

[Beagle]

He comes as very calm https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12317977

Not sure if he's too calm and doesn't appreciate the full extent of the problem ?

[Balance]

He comes as very calm https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12317977

Not sure if he's too calm and doesn't appreciate the full extent of the problem ?

Just imagine him across the negotiating table with Grant Robertson - guess who will come out with the better deal?

Greg has nothing to lose - he is new and it's all too bad if NZ government wants Air NZ to go belly up.

As the ad goes 'I WALK AWAY!':t_up:

[Beagle]

Just imagine him across the negotiating table with Grant Robertson - guess who will come out with the better deal?

Greg has nothing to lose - he is new and it's all too bad if NZ government wants Air NZ to go belly up.

As the ad goes 'I WALK AWAY!':t_up:

I think the fact that Grant Robertson spent most of today in Rotorua talking to business's he's helped with the existing $12.1b stimulus package speaks volumes.
I think he's told AIR's bean counters to go back to the drawing board and come up with a far more realistic and feasible plan. If they need a dose of reality, (which it appears they do), they should have a look at the outline of the plan Qantas have announced today, I already posted a link above. If a week is a long time in politics then 3 hours is a long time in the Aviation sector ! https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12318157

I expect the trading halt to be extended again tomorrow as AIR's executives continue to muddle their way through to eventually finding they collide with the reality of the situation they find themselves in. They're presently in fantasy land thinking they can shed just 30% of staff when they face losing ~ 90% of their revenue.